Trust Land Office leases 9,500 acres to Andex Resources near Nenana

Kristen Nelson, PNA editor-in-chief

The Alaska Mental Health Trust Land Office is completing a negotiated oil and gas lease of some 9,500 acres of trust land near Nenana to Andex Resources LLC, the agency said in a notice of decision published Dec. 30. The agency has issued a best interest finding for the lease of the parcels, which are west of the Parks Highway in sections 4-9, 17-21 and 28-32, township 4 south, range 8 west, Fairbanks Meridian.

Stephen Planchon, executive director of the Trust Land Office, said in the best interest decision, dated Dec. 17, that the trust land is adjacent to land for which the state recently issued an exploration license to Andex covering some 483,000 acres. Andex has also recently leased Doyon Inc. land in the vicinity for oil and gas exploration, making “a significant portion of the adjacent lands, both public and private, in the vicinity of the lands covered by this decision” the focus of oil and gas leasing, exploration and production, he said.

Planchon said that, with the Trust Land Office lease in place, “Andex will likely proceed with a geophysical study of the area in an effort to target the best location to drill exploration wells.”

Andex hopes to find commercial quantities of natural gas in the Nenana basin for delivery to Fairbanks. Jim Dodson, the Denver, Colo.-based executive vice president of Andex Resources LLC, told the Alaska Support Industry Alliance Dec. 19 that the company plans to shoot seismic in the winter of 2003-04 and drill a well the following winter, followed by additional wells in 2005-06 with first gas deliveries planned to Fairbanks in 2006.

The Trust Land Office lease is for five years with options to renew for two additional five-year terms. The royalty rate is 10.5 percent on production in the initial term of the lease and increases to 12.5 percent after year 7.5 of the lease. There is a one-time payment of $2 an acre for the initial term; if renewed there would be a one-time payment of $5 an acre. Renewal for a third term requires an up front one-time payment of $7.50 an acre. If, however, the lease is extended by production in any term, the annual rental will be $3 per acre per year.