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Beaufort lease sale results still on hold Craig and Zamarello challenging BP’s $5 million bid on tract adjacent to Liberty discovery; pair bid $40,883.20 for acreage Kristen Nelson Petroleum News
Results from the March 1 State of Alaska Beaufort Sea areawide oil and gas lease sale are still on hold due to a procedural dispute.
Three bids in the Beaufort Sea sale were mistakenly placed with bids for North Slope tracts, Bill Van Dyke, acting director of the Division of Oil and Gas, said in a March 3 statement.
Bids from both sales were read in Anchorage March 1, first bids received in the Beaufort Sea sale, and then those for the North Slope.
The error was brought to light before announcement of the North Slope bids began.
The misplaced bids, by BP Exploration (Alaska), were then announced, the division said. One of those bids exceeded the bid submitted by Paul L. Craig and Peter G. Zamarello (50 percent each), who have begun a legal challenge to BP’s bid on that tract. State acreage adjacent to Liberty BP’s bid was $1,973.33 per acre for tract 194 in the Beaufort Sea sale, a total of $5,051,724.80; Craig and Zamarello bid $15.97 per acre for the tract, a total of $40,883.20. The tract is on the northwestern edge of BP’s federal outer continental shelf leases at the company’s offshore Liberty prospect southeast of Endicott.
BP also bid $52.63 an acre, a total of $134,732.80, for tract 159, the apparent high bid on that tract, which also drew a $10 an acre bid from a bidding group of Samuel H. Cade 75 percent and Daniel K. Donkel 25 percent. BP also bid $52.63 an acre on tract 182, adjacent to tract 159 on the southeastern edge of Liberty. The apparent high bidder on that tract was Patterson Shaw of Denver, who bid $93.07 an acre, a total of $263,859 for the tract; BP bid $52.63 an acre.
BP spokesman Daren Beaudo told Petroleum News after the sale that the company’s current interpretation of Liberty reflects only discovered oil on federal leases. The leases bid for in the state sale “address upside potential.” He said technical evaluations are under way including reprocessing 3-D seismic to see how Liberty “might extend onto the state leases.” Van Dyke: Opening just one part of process While lease bid openings identify apparent high bidders, Van Dyke said they are simply one step in an extensive process in which the division solicits, receives, opens and adjudicates bids, secures the 20 percent bid deposits, then forwards its recommendations for acceptance or rejection to the commissioner prior to title verification and later award of the leases.
While Craig and Zamarello’s challenge has halted that process for the disputed tract, the division is proceeding with the normal process for the others.
“This was a simple mistake that occurred during the rapid processing of a lot of bids for a lot of tracts in two different sale areas,” Van Dyke said. “While it caused a momentary hiccup in the bid opening process, there’s no reason it should prevent the state from obtaining maximum value for its leasing rights.” Temporary restraining order issued The division said Judge Stowers of the Alaska Superior Court issued a temporary restraining order March 2, precluding the division from awarding tract 194 to BP, the apparent high bidder. The division said the dispute arose when three bids submitted by BP for tracts in the Beaufort Sea areawide sale were mistakenly placed in a folder for the North Slope areawide sale by division staff.
That mistake was not discovered until after all the other Beaufort Sea bids had been opened and read.
At that time, the division said, a BP employee alerted the director that bids the company had submitted for the Beaufort Sea sale had not been read. The still-sealed bid envelopes were then discovered in the North Slope lease sale folders on stage awaiting the opening of the North Slope bids.
The three BP bids were then added to the tract folders of the Beaufort Sea tracts for which they were intended and all the bids for those tracts were re-read, including the BP bids.
Of the three bids, BP was the apparent high bidder on two tracts, one of which was tract 194, the division said. Sales will return to October Following the March 1 sales, the North Slope and Beaufort Sea areawide lease sales will resume their normal schedule of being held every year in October, Van Dyke said. The sales had been slightly delayed to accommodate the first Alaska Peninsula areawide lease sale, held in October 2005. Starting in 2007, the Alaska Peninsula areawide sales will take place every February.
Preliminary results for the North Slope sale are available on the Division of Oil and Gas website, at: www.dog.dnr.state.ak.us. The division said preliminary results from the Beaufort Sea sale would be available in the same locations as soon as possible.
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