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State sets May 8 date for spring sales Augustine geothermal competitive sale added to schedule; Cook Inlet, Alaska Peninsula areawide oil and gas sales offered annually Kristen Nelson Petroleum News
Bids will be opened beginning at 9 a.m. May 8 for three state competitive lease sales — two oil and gas and the third geothermal.
The Alaska Department of Natural Resources, Division of Oil and Gas, said in Feb. 1 notices of sale that the Alaska Peninsula areawide 2013 and Cook Inlet areawide 2013 oil and gas lease sales, and the Augustine Island geothermal competitive bid sale will take place at the Dena’ina Civic and Convention Center in Anchorage.
Detailed sale information is available on the division’s website at http://dog.dnr.alaska.gov. The division said a tract maps for the three sales will be released after March 18.
Fourth geothermal sale In a Feb. 4 press release on the upcoming sales the division said the Augustine Island sale is the fourth geothermal lease sale the state has held. The most recent sale was in 2008 for acreage on Mount Spurr on the west side of Cook Inlet.
The Augustine geothermal sale, the first geothermal sale in the Augustine area of Cook Inlet, has a minimum bid of $1 per acre; the primary term of leases will be 10 years, renewable for an additional five years; the annual rent will be $3 an acre; and the royalty rate will be 1.75 percent of gross revenues from production, sale or use of geothermal resources during the first 10 years the resource generates gross income and 3.5 percent of gross revenues after that first 10-year period. Rent and royalties will be renegotiated 20 years after initiation of commercial production.
The 65,992-acre area is divided into 26 tracts from 2,489 to 2,560 acres covering the entire Augustine Island including some tidelands and adjacent waters.
(There is a story on the Augustine leasing proposal in Jan. 27 issue of Petroleum News.)
Alaska Peninsula sale For the Alaska Peninsula areawide 2013 oil and gas lease sale the minimum bid is $5 per acre with a fixed royalty rate of 12.5 percent and a 10-year term for all tracts.
There are 1,047 tracts in the Alaska Peninsula sale, ranging in size from 1,280 to 5,760 acres of state-owned uplands and tide and submerged lands on the north side of the Alaska Peninsula from the Nushagak Peninsula to just north of Cold Bay.
The 2005 Alaska Peninsula areawide sale drew $1.15 million in high bids from Shell Offshore Inc. and Hewitt Mineral Corp. on 37 tracts, some 190,494 acres. Hewitt picked up an additional tract in the 2007 sale; sales held annually in 2008 through 2012 drew no bidders and there are no remaining active leases in the area.
Cook Inlet sale The division noted that “the Cook Inlet hydrocarbon basin has seen a resurgence in investment by small, medium-sized and large energy companies” in the past two years.
“Cook Inlet still holds significant resources and we are hoping for a continued trend of successful lease sales and increased drilling activity,” division Director Bill Barron said Feb. 4.
There are 815 tracts ranging from 1,280 to 5,760 acres in the Cook Inlet sale with a minimum bonus bid of $25 an acre for all tracts, a fixed royalty of 12.5 percent and a lease term of 10 years.
Cook Inlet lease rental rates are $10 an acre for the first through the seventh years of the lease and $250 an acre for the eighth through the 10th years of the lease. Annual rentals may revert to $10 an acre after sustained production or “at the state’s discretion after the lessee meets certain conditions.”
The division said that after sustained production has begun “or the state otherwise determines in its sole discretion, upon request, that the lessee has exercised reasonable diligence in exploring and developing this lease” the annual rental may be set at $10 per acre or fraction of acre.
In its Cook Inlet sale announcement the division said: “In evaluating a request to decrease rental based on the exercise of reasonable diligence, the state will consider the funds expended by the lessee to explore and develop this lease and the types of work completed by or on behalf of the lessee on this lease.”
The state first set these variable-rent lease terms in its fall 2011 lease sales, and Barron said at that time that the state’s goal was to “encourage people to prudently and responsibly explore and delineate their acreage within the primary lease term.”
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