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Oil and gas leasing open to little guys, too, say Fairbanks investors
Steve Sutherlin
In part one of this series, “Land speculator — parasite or propellant?” — PNA interviewed Ken Boyd, former director of the state’s Oil and Gas Division, and Jack Roderick, author of “Crude Dreams” and a former oil and gas land speculator in Alaska.
Boyd said land speculators tie up valuable oil and gas leases and unduly occupy the courts and state agencies; Roderick disagreed, saying speculators add to the competition for leases which, in turn, accelerates the pace of prospecting and leasing.
Throughout the history of oil and gas leasing in Alaska, a number of Fairbanks residents have invested in oil and gas leases in both the Cook Inlet Basin and North Slope.
Fairbanksan Richard Wagner was involved in the West McArthur River discovery in Cook Inlet and holds a total of 23,000 acres of oil and gas leases in the state.
“Oil and gas laws are written for anybody to get into the game,” Wagner said. “It doesn’t say you have to be a Fortune 500 company.”
In the state’s second Beaufort Sea and fourth North Slope areawide sales Oct. 24, a bidding group including Wagner and Paul Gavora of Fairbanks took three tracts in the Colville River delta for $47,539.20.
Wagner took seven of eight tracts on which he bid in the state’s May 9 Cook Inlet areawide sale for $125,049.60, 10.3 percent of apparent high bid dollars.
Wagner’s tracts were scattered about the area, adjacent to larger blocks held by larger companies. He picked up one offshore tract at Anchor Point on the lower peninsula, and another, the farthest north tract in the sale, southeast of Wasilla. He took another tract on the east side which straddles the shoreline north of the Birch Hill gas field.
He also was awarded two tracts off the East Forelands west and south of the Dillon platform in Cook Inlet. On the west side of the inlet, he took one tract south of the Pretty Creek gas field and one tract northwest of the Lewis River gas field. (See story in the May edition of Petroleum News Alaska.)
To date, he has not done any drilling on his leases. Alaska needs independents “We need independents; anytime you hit oil and gas it has to be commercial,” Wagner said. Large oil companies, which traditionally have high overhead costs, might consider a small or low-production discovery uneconomic, he said, but smaller companies — independents — could make a profit.
“You and I could go in there and earn a lot of money on a smaller oil play,” he said.
Perseverance may pay “In the last 35 years the entire North Slope has been leased at one time or another by various groups from Fairbanks,” Dan Gilbertson, Fairbanks oil and gas lease investor told PNA.
Gilbertson grew up in Fairbanks; his dad was a pilot who flew oilmen around the state in the early days.
He developed his interest in oil at an early age. As a boy, Gilbertson caught a ride on a C130 Hercules with his father to Deadhorse. While the freight was being unloaded, he and his dad ate lunch and chatted with workers who said Gilbertson was the first kid they had seen on the North Slope near the drilling camps.
His neighbor, Cliff Burglin was one of the early North Slope speculators. Gilbertson remembers when Burglin received money on a lease and suddenly was driving new cars.
“At 10 years old I knew I wanted to buy North Slope oil and gas leases,” he said. “We talked about it as kids.” Big payoff yet to come Gilbertson holds more than 11,000 acres of state leases and has been investing for 20 years, but his big payoff has yet to come. Still, he is enthusiastic about the prospects for the future and the part that speculators will play in coming developments.
Hanging in there is a big part of success, he said. In one case, he said, a Fairbanks investor held North Slope leases, but decided to let them lapse. The investor’s name was still on lease maps as leaseholder for the field, so the investor was approached by a larger company with an offer of several million dollars for the property. It was too late; the leases had already reverted to the state.
There is plenty of opportunity left in the oil patch, according to Gilbertson.
“Between the Canning River and the Colville River there’s plenty of oil and lots of opportunities,” he said. “I hope in the next few years that the small independents will produce oil on the slope.” Small players want better treatment Both Wagner and Gilbertson said they thought the state did not always treat the speculators and smaller oil companies – independent – as well as they treated the larger oil companies.
Gilbertson said he and other investors that he knows have had leases rejected for reasons he believes were questionable.
On one Cook Inlet lease, he thought he had a deal with the state but time proved differently.
“I had a lease issued, and one year later a rejection letter showed up with a refund check,” he said.
Wagner said that in a 1998 lease sale the state rejected a small investor’s bid of more than $7 per acre on a parcel because the state said the property was worth more. In 2000, the same property received a bid from another party of just over $5 and that bid was accepted.
Small investors have stimulated the industry and their successes justify their inclusion in the industry, Gilbertson said.
For example, he claims the efforts of independent investor Dan Donkel contributed to the recent Redoubt Shoal discovery in Cook Inlet.
“Calling us lease hounds, that’s not fair,” Gilbertson said.
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