State nets $28.1 million in Slope, Beaufort Sea lease sales

  • A drill rig works for Repsol at its Colville Delta operations in 2014. Repsol won a dozen leases at the annual state North Slope lease sale with bids released Nov. 15. The company along with Armstrong Energy discovered the promising Pikka prospect in 2014 that's now under development. (Photo/Courtesy/Repsol)

Exploration interest remained high in the state’s North Slope and Beaufort Sea annual lease sales held Thursday morning, which netted $28.1 million for the state treasury.

Winning bids for the North Slope portion of the sale totaled about $27.3 million, the third highest amount since 1998, according to Division of Oil and Gas Director Chantal Walsh.

Successful bidders spent about $848,000 for near shore Beaufort Sea leases, which is in line with historical averages, Walsh said.

The state received bids on 133 tracts covering 223,680 onshore North Slope acres and eight Beaufort Sea tracts totaling 20,270 acres garnered bids, according to division officials.

“We have a lot to be happy about — a very good lease sale,” Walsh said.

A new player to Alaska, Lagniappe Alaska LLC, dominated the sealed-bid sale by winning rights to 120 leases over a large area south of Deadhorse along the Dalton Highway. State officials present at the sale knew little about Lagniappe and audience members speculated amongst themselves how to spell it (pronounced lan-yap) as the bids were read aloud.

Lagniappe Alaska LLC was formed in the state on Nov. 7 and is based in Lafayette, Louisiana, according to filings with the state Division of Corporations, Business and Professional Licensing.

No one came forward when Deputy Oil and Gas Director Jim Beckham asked if a Lagniappe representative was present at the bid opening.

“We appreciate our new player,” Walsh said.

Overall, Lagniappe spent $14.1 million to secure rights to 195,200 acres of state land, according to a division report of the North Slope sale.

Not to be outdone, Spanish major Repsol, which along with Armstrong Energy discovered the large Pikka prospect, spent between $175 and $586 per acre on the few remaining available leases just to the south and east of the Pikka Unit.

“Repsol is definitely here to play,” Walsh commented.

Repsol committed just more than $13 million for 12 leases covering 26,560 acres, according to the lease sale summary.

Caracol Petroleum and ASRC Exploration also bid on several of the dozen leases Repsol won.

Australian-based Oil Search, which recently took over as operator of the Pikka Unit and is advancing the Nanushuk project, won several Beaufort Sea leases just offshore from Pikka.

"The interest in unexplored areas and in the Nanushuk formation are both positive trends for the state," DNR Commissioner Andy Mack said in a formal statement.

The one minor disappointment for state officials was a lack of interest in the three Special Alaska Lease Sale Areas, or SALSAs, the Division of Oil and Gas put up for bid for the first time.

Despite coming with publicly available geologic data, the SALSAs — each covering multiple lease tracts — garnered no bids.

Walsh said she is still happy the division took the time to compile and advertise the areas as it directed more traffic to the division’s website than ever before and gave officials insight into how to better direct interested parties to publicly available oil and gas geologic and well data.

She added the concept of selling multiple leases in blocks is something the state will continue to evaluate but it’s too soon to tell if the current SALSAs will be put up for bid again in their current form.

The Bureau of Land Management’s annual lease sale for the National Petroleum Reserve-Alaska is scheduled for Dec. 12 and will cover 2.8 million acres, according to a BLM release.

Additionally, the Bureau of Ocean Energy Management issued a notice of intent Nov. 15 laying out the agency's plans to draft an environmental impact statement ahead of a potential lease sale for federal outer continental shelf, or OCS, areas of the Beaufort Sea in late 2019. However, BOEM Alaska spokesman John Callahan noted that starting the EIS process does not assure a lease sale will be held as there are still numerous reasons the Interior Department could cancel the plan. The agency is taking public comment on the Beaufort OCS leasing proposal through Dec. 17.

In late 2016 President Barack Obama's administration withdrew 115 million federally-controlled acres of Arctic OCS waters from leasing over concerns about the impacts oil and gas activity could have on the area's senstive ecosystem. President Donald Trump, in April 2017, issued an executive order to modify the language of the Obama administration's actions and deleted references to the Arctic OCS withdrawals.

A coalition of environmental groups, led by Earthjustice, subsequently sued the Trump administration in federal Alaska District Court alleging the president exceeded his authority in his April 2017 order. A ruling on the case is pending and could prevent a 2019 Beaufort OCS sale.

Editor's note: The original version of this story listed the net proceeds at $28.9 million, with $28.1 million of that from the North Slope portion. The headline and story have been updated to reflect the correct totals of $28.1 million total and $27.3 million from the Slope portion.

Elwood Brehmer can be reached at [email protected].

11/16/2018 - 11:18am