Interest in Iniskin Bay area heats up

Hilcorp plans to shoot 2-D seismic between Chinitna Bay and Iniskin Bay; unnamed company applies for exploration license in area

Kristen Nelson

Petroleum News

While oil and gas production has occurred from the Cook Inlet basin in Southcentral Alaska for decades, there has been no production from the area which saw the earliest exploration, Cook Inlet’s southwestern shore.

The southwest coast of Cook Inlet has oil seeps and is the site of wells drilled from 1898 through the mid-20th century, but no commercial production has been established.

There is now renewed interest in the area.

Hilcorp Alaska has applied to shoot two-dimensional seismic in the Chinitna Bay and Iniskin Bay areas this year. And the Alaska Division of Oil and Gas has received an application for an exploration license in the area.

The 2-D program would cover 41 miles in the area between Chinitna Bay and Iniskin Bay starting in July, the division said, with 3.1 miles of the survey conducted on state land. The application lists local land use permits required from Tyonek Native Corp., Cook Inlet Region Inc., Salamatof Native Association Inc., Seldovia Native Corp. Inc. and Ninilchik Natives Association Inc., as well as private permits from landowners for staging areas.

The application for the permit said work would be done by SAExploration Inc. and would be completed by the end of September. This is basically an onshore program, but SAExploration said 54 marine nodes would be placed above mean low water line in the mud flats of Chinitna Bay.

Exploration license proposal

The Division of Oil and Gas accepts exploration license proposals once a year. It said in a May 30 notice that it would evaluate the exploration license proposal but was holding the name of the applicant and the provisions of the proposal confidential.

The state accepts proposals for exploration licenses each April. Exploration licenses are for areas outside the state’s areawide lease sales. A license may cover from 10,000 to 500,000 acres. A work commitment, expressed in dollars, is required and security must be posted based on the projected cost of the planned exploration work.

If a proposal is accepted, the state then solicits public comments and competing proposals.

That is the stage this proposal has reached and the state said in its May 30 notice that comments and competing proposals are due by July 1.

After the public comment a written finding will be issued determining whether the license is in the state’s best interests. If there is only one proposal, the finding must also identify the prospective licensee. If there are competing proposals the successful licensee will be determined by a sealed bid process with the license awarded based on dollar amount.

In addition to positing a bond in the amount of the work commitment the license recipient must pay a $1 per acre license fee. The term of the license can be up to 10 years and during that term, following satisfaction of the work commitment, any portion of the licensed area may be converted to oil and gas leases, with annual rentals at $3 per acre. The term of the leases can extend beyond the original term of the license.

Iniskin seeps

The early claims were abandoned but others were staked in the Chinitna district about 1896 and drilling was started during Alaska’s first oil boom at the turn of the century. The agency said several shallow wells were drilled in the Chinitna district but interest collapsed in 1904 because costs were high and there was a failure to produce oil in large quantities.

There was drilling in the Iniskin area in the late 1930s and in the mid and late 1950s, but no commercial finds resulted.

After the discovery of oil at Prudhoe Bay interest and investment moved from Southcentral to the North Slope.

The Alaska Division of Geological and Geophysical Surveys has done field work in the area recently, but the 2-D seismic and exploration license applications are the first signs of industry interest since in decades.