Lease sale nets modest returns

Posted: Friday, May 11, 2001

Officials say natural gas was the likely target of those who bid more than $1.2 million for 30 tracts in the state's annual Cook Inlet oil and gas lease sale.

"Most of the bids were offshore north of Nikiski," said Jim Hansen, lease sale manager for the Alaska Division of Oil and Gas. "I'm sure it's gas, because if there was a large oil pool there, it probably would have been found by now. But you never know."

Escopeta Production-Alaska Inc., which lists offices in Anchorage and Houston, Texas, was the biggest buyer, with winning bids totaling more than $776,000 for 14 tracts. All 14 are just offshore in Cook Inlet and just north of Nikiski, Hansen said. Now, Escopeta controls most of that area.

"The only tracts they didn't get were the Forest Oil tract and one, part onshore and part offshore, that Paul Craig got," Hansen said.

Paul Craig, of Anchorage, bid nearly $39,000 for two tracts, including one straddling the shoreline near the Escopeta tracts.

Forest Oil Corp., which bought Forcenergy Inc. last year and recently struck oil with its first well from the new Osprey Platform near West Foreland, bid $30,355 to lease one tract in the Middle Ground Shoal area in eastern Cook Inlet about 10 miles north of Nikiski, Hansen said.

Unocal bid $29,664 for one tract near the end of East End Road by Homer, Hansen said.

Richard Wagner, who previously has participated in North Slope and Cook Inlet sales, bid $125,000 for the seven tracts he won. Saddleback Resources LLC, which Hansen said he knows nothing about, bid nearly $215,000 for five tracts.

By preliminary results, the state leased 30 tracts totaling 135,040 acres for a total of $1.215 million. However, the actual acreage leased and the revenue for the state will be less -- the state may not own all of some onshore tracts, and parts of some tracts already may be leased.

With all available Cook Inlet tracts up for lease, doing title searches for every tract before the sale would be cost-prohibitive. So, the state does title searches after a sale, and only on tracts that drew bids. During the state's 1999 Cook Inlet sale, the preliminary total of the winning bids was $2.5 million. That dropped to $1.4 million after title searches eliminated some of the acreage that drew bids.

Hansen said this year's sale probably will not change too much, since of the 30 tracts leased, 22 are completely offshore, where the state owns all of the subsurface rights. Only four tracts are completely onshore. Four include both onshore and offshore areas.

Once the title searches are done, the total to the state may drop by a couple hundred thousand dollars, he said.

The state has been offering all available unleased tracts in Cook Inlet once per year since 1999. Many of the 4.2 million acres in the lease area already are under lease, he said, and many belong to Cook Inlet Region Inc. or to private parties, and cannot be leased. A court order bans the state from leasing more than 120 tracts in critical beluga whale habitat. Hansen estimated that less than half the 4.2 million acres actually is available for lease.

He said the level of interest Wednesday was near what he expected.

"It's about on par with previous sales," he said. "We expect these Cook Inlet sales are going to be chugging on at about $1 million each. The last sale was just under $1 million. The year before was $1.4 million."

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