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State delays fall lease sales to Dec. 7 DNR Commissioner Sullivan says department allowing prospective bidders more time for due diligence; state could add acreage Kristen Nelson Petroleum News
The Alaska Department of Natural Resources has delayed its fall oil and gas lease sales, originally scheduled for Oct. 26, to Dec. 7.
The annual areawide sales include some 14.7 million acres in three sale areas: the North Slope, the Beaufort Sea and the North Slope Foothills.
DNR Commissioner Dan Sullivan said Sept. 8 that the lease sales had been pushed back to allow potential bidders more time to do due diligence on the acreage and to allow the state the opportunity to add acreage, should tracks become available from litigation settlement or lease expiration.
In discussing the two reasons for the pushback, Sullivan said there “is the possibility — it’s not for certain” that the state would “be able to include more acreage in the lease sale than … we thought was currently available due to issues relating to the settlement of litigation and expiration of certain leases.”
Sullivan said he couldn’t elaborate on what acreage could possibly be added to the sales, but said that if the state had stuck to the Oct. 26 date it would have had to publish the acreage that would be in the sales on Sept. 7.
“There’s a possibility that we won’t have any additional acreage” from what is currently available, he said, but if the state had kept the Oct. 26 date, “the possibility would have been zero.”
The Point Thomson unit on the eastern edge of the North Slope is the subject of litigation now before the Alaska Supreme Court. Sullivan would not elaborate on what litigation might be settled prior to the sale, but he told legislators Aug. 15 that the state and ExxonMobil, the Point Thomson unit operator, had reached “resolution in principle” in the legal conflict, and said ExxonMobil was discussing provisions of the settlement with other working interest owners at Point Thomson.
Potential bidders The other reason for delaying the sale, to give potential bidders more time, is based on aggressive marketing of resources the state has been doing as part of a five-part strategy to reach Gov. Sean Parnell’s goal of 1 million barrels per day of throughput in the trans-Alaska oil pipeline within 10 years.
In addition to explaining to policymakers in Washington, D.C., what the state is doing, state officials have also been getting out to companies to talk about the state’s oil and gas basins and the resources the state and others, like the U.S. Geological Survey, believe Alaska’s basins hold, Sullivan said.
DNR has been describing the acreage being offered, and has also offered to have its geologists and technical teams brief companies further, Sullivan said.
While it is possible that no one will show up for the fall lease sale, he said if that’s the case, “it won’t be from a lack of effort on the state’s part.”
There have been “indications from certain companies” of some interest, Sullivan said, and expressions of interest in follow-up meetings.
“And we want to make sure that whether it’s companies that are already here, whether it’s companies that are new, that they have ample time to do the due diligence.”
An additional six weeks might not be enough time, Sullivan said, “but we thought there’s very little downside to providing more time if there’s companies on the fence that are looking at possibly bidding but don’t have enough time between now and the end of October.”
Cook Inlet delayed Sullivan noted that the state delayed its Cook Inlet areawide sale earlier in the year.
That sale was postponed from late May to June 22, and the state said at the time that the deferral was to give potential bidders more time to evaluate prospects in tracts to be offered, particularly in three tracts that were formerly part of the Cosmopolitan unit.
Those tracts — and 91 others — were acquired by Apache Alaska Corp., the dominant bidder in the Cook Inlet sale, with almost $9 million of high bids in a sale with $11.1 million in high bids on 109 tracts. Last year’s North Slope oil and gas lease sale was dominated by Great Bear Petroleum, new to the state, which took 99 tracts of 123, bidding $7.7 million of $8.3 million in high bids.
Along with announcing the acreage for the fall sales, DNR will be announcing the terms, and it said in June that it expected to change some terms for the fall sales.
“Consistent with the state’s effort to boost oil development, the lease sale terms are expected to include conditions and options not previously seen in lease sales for these areas,” the department said, including aggressively marketing its offerings, among them tracts bordering the 1002 area of the Arctic National Wildlife Refuge.
In a Sept. 9 statement on the date of the fall sales, 9 a.m., Dec. 7, at the Dena’ina Civic and Convention Center in Anchorage, DNR said sale terms are being finalized and will be announced soon. The statutory deadline for publishing the public notice and accompanying documents for the Dec. 7 date is Oct. 23.
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