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Cook Inlet rentals mirror North Slope Rates of $10 an acre for first 7 years go to $250 an acre in years 8 through 10, encouraging diligence in exploration, development Kristen Nelson Petroleum News
The Alaska Division of Oil and Gas said March 14 that bids will be opened for its Cook Inlet and Alaska Peninsula areawide sales on May 16 at 9 a.m. at the Dena’ina Civic and Convention Center in Anchorage.
Terms for the Cook Inlet leases will be different from previous years.
“Over the past year, we’ve seen a renaissance of oil and gas activity in Cook Inlet,” Department of Natural Resources Commissioner Dan Sullivan said in a statement. “The terms of this lease sale are meant to encourage diligent operators who are interested in producing off their leases,” he said.
All tracts in the Cook Inlet sale will have a minimum bid of $25 an acre and a fixed royalty rate of 12.5 percent.
Rental terms for the Cook Inlet leases mirror those for the state’s 2011 North Slope oil and gas lease sale.
All Cook Inlet leases will have a 10-year primary term, with a lease rental rate of $10 an acre through year seven rising to $250 an acre in years eight through 10. DNR said annual rentals may revert to $10 an acre after sustained production or at the state’s discretion after the lessee meets certain conditions.
DNR said the state may determine “in its sole discretion, upon request, that the lessee has exercised reasonable diligence in exploring and developing this lease” and “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” in making a determination that the rental rate can remain at $10 following the seventh year.
Incentives in Cook Inlet DNR said that to incentivize new exploration and production in the state’s 4 million acre Cook Inlet lease sale area, the state offers tax credits for new exploration and production wells, and for seismic work. Operators pay a reduced royalty for the first 10 years on any new discovery in Cook Inlet, and they pay no production tax on oil.
Terms for the Alaska Peninsula lease sale remain unchanged from previous year, DNR said, with a minimum bid of $5 an acre; a royalty rate of 12.5 percent; a 10-year primary term; and rental rates of $1 an acre in the first year, $1.50 an acre in the second year, $2 an acre in the third year, $2.50 an acre in the fourth year and $3 an acre in the fifth and following years.
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