For first time state receives no Cook Inlet areawide sale bids

The state received no bids for a Cook Inlet areawide oil and gas lease sale scheduled for May 4, the first time a Cook Inlet areawide sale has failed to attract bidder interest. The Alaska Department of Natural Resources Division of Oil and Gas said May 3 that it also received no bids for the Alaska Peninsula areawide sale, but that has been common in recent years as state acreage there is remote. Alaska Peninsula acreage last drew a bid in 2007.

The North Slope has been the area of the state which has most consistently drawn bidders, followed by Cook Inlet and state acreage in the Beaufort Sea. There has been little interest in North Slope Foothills leases in recent years. The North Slope, Beaufort Sea and Foothills are offered in a joint lease sale in the fall.

State leasing has occurred in the Cook Inlet basin since 1959 and considerable acreage is under lease, either in production and development or prospective for exploration.

Over the last 10 years interest in Cook Inlet areawide sales has varied widely, from a low of 5,733 acres leased in 2009 to a high of 449,164 acres in 2011, with total high bids for the sales ranging from $80,678 in 2009 to $8,214,181 in 2011, and the average winning price per acre ranging from a low of $11.95 per acre in a 2008 sale which brought in $172,374 on 10,989 acres to a high of $48.42 per acre in a 2014 sale which brought in $4,044,467 for 83,521 acres.

The price of oil has varied considerably over that period, with the West Coast Alaska North Slope crude oil price on the first reporting day in May (chosen to correspond with the May sale date) ranging from a current low in the mid-$40s to a 2012 high in the low $120s. With the current price at a low for the 10-year period, oil prospects would be less attractive. On the natural gas side, the basin has gone from a situation of under supply to one of oversupply, with new natural gas developers having to wait for natural gas sales contracts to open up before developing current discoveries.

The minimum bid the state charges for Cook Inlet acreage has also varied, starting the period at $10 per acre, jumping to $25 per acre in 2012 and then returning to $10 per acre for this year’s sale.

The Legislature is discussing changing oil and gas tax credits, with a focus on reducing credits in Cook Inlet, which along with current low oil prices could be having an impact on interest in acreage in the area. Cook Inlet also recently lost a large prospective developer, with Apache, which had held considerable basin acreage, pulling out of the state.

- KRISTEN NELSON