MMS issues Beaufort sale notice

Kay Cashman

Petroleum News Publisher & Managing Editor

The Minerals Management Service published its final sale notice Aug. 21 for the Beaufort Sea OCS Lease Sale 186, announcing it would offer the entire sale area for lease, deferring only two areas. The sale, which will be held Sept. 24 at the Loussac Public Library in Anchorage, will offer 1,794 whole or partial blocks from the Canadian border on the east to near Barrow, Alaska on the west, encompassing approximately 9.4 million acres in the outer continental shelf offshore Alaska’s northern coast.

Attractive list of incentives offered

MMS is offering the tracts at the reduced bid amounts and sliding scale rentals it announced in July: Minimum bid for Zone A blocks $37.50 a hectare; $25 a hectare minimum bid for Zone B blocks.

The agency is also offering royalty suspension for first oil production, with suspension volumes varying by zone.

Sale 186 will include several drilled prospects, including Kuvlum, Hammerhead and Sandpiper. MMS estimates Kuvlum reserves at 100 to 300 million barrels, Hammerhead at 100 to 200 million barrels, and Sandpiper at 20 to 70 million barrels.

The McCovey prospect, drilled by EnCana a year ago, might also be included in the sale, MMS spokesperson Robin Cacy told Petroleum News Aug. 21.

At the request of Alaska Gov. Frank Murkowski, MMS will defer 26 blocks off Barrow and 28 blocks offshore Kaktovik used for subsistence whaling by those communities.

“The Beaufort Sea continues to hold the best near-term potential for offshore petroleum reserves on the Alaska OCS,” said MMS Director Johnnie Burton. “We must, however, protect those areas vital to North Slope communities that rely on subsistence whaling.”

Seven lease stipulations

“The stipulations call for protection of biological resources, including spectacled and Steller’s eiders, use of pipelines rather than tankers, and methods to minimize interference with subsistence whaling and other subsistence harvesting activities,” MMS said.

“We believe that these stipulations have in the past and will continue to reduce environmental effects and conflicts with the bowhead subsistence hunts and other subsistence activities,” MMS Regional Director John Goll said. “MMS will continue to work closely with North Slope communities, tribes, the Alaska Eskimo Whaling Commission, local, state and federal agencies, and the industry whenever activity occurs.”

Bids for four tracts in the U.S.-Canada disputed part of the Beaufort Sea will be accepted, MMS said, and it will determine on or before Sept. 24 whether it is in the best interest of the United States to open those bids or return the bids unopened (see sidebar).

Editor’s note: Kristen Nelson, Petroleum News editor-in-chief, contributed to this article.

Canada disputes 16,000 acres of lease block

Gary Park

Petroleum News Calgary correspondent

The property at issue is 16,000 acres of land that Canada claims as part of its sovereign territory and covers only four blocks of a much larger petroleum lease.

Canada’s Natural Resources Minister Herb Dhaliwal said Aug. 20 that he is hopeful Washington will wait for a resolution before its leases out the contested offshore parcels.

He said no leases have been committed to the area and Canada is counting on the United States to continue that practice.

Officials in Dhaliwal’s department told Petroleum News that Canada understands that industry interest in the area is only minimal, but a diplomatic objection has been lodged to keep the matter alive.

Robin Lee Cacy, with the U.S. Minerals Management Service in Alaska, told the Toronto Globe and Mail she was unable to explain why the disputed land was included in the auction, which is scheduled to end Sept. 24.

But she said the U.S. will not open or process any bids for the land for the time being, although that could change if Washington decides “it’s in the best interests of the United States to open them.”