State cancels Cook Inlet, Alaska Peninsula oi lease sale

With no stated interest from oil companies, the Alaska Division of Oil and Gas announced Tuesday that it would cancel its 2016 lease sale bid opening in Cook Inlet and the Alaska Peninsula.

The department did not receive a single bid for state-owned tracts offered in the Cook Inlet or Alaska Peninsula this year, according to a press release issued Tuesday from the Division of Oil and Gas. The division still has plans for a Northern Alaska Areawide oil and gas lease sale in fall 2016, according to the release.

It sometimes happens that the division receives no bids, said Diane Hunt, the special projects and external relations coordinator for the Division of Oil and Gas. It’s common that no offers come in for the Alaska Peninsula, and last fall, no bids came in for the North Slope Foothills or the Beaufort Sea, she said.

It is possible that one reason the Cook Inlet lacked bidders because of the land that was offered, she said.

“We think that with the oil prices low and the land that is available, there is no infrastructure near it,” Hunt said. “We would have to have high oil prices to see that (development).”

She said the Division of Oil and Gas tends to get less interest when oil prices are lower. In 2014, when oil prices were more than $100 per barrel, the state received 39 bids for leases in Cook Inlet and the Alaska Peninsula, the majority of which were in Cook Inlet. However, when oil prices were lower in 2009, the state only received four bids in Cook Inlet, she said.

“Right now, the oil industry is just waiting to see what oil prices are doing,” Hunt said. “And right now, the companies don’t have excess funds to expand their acreage positions, and they’re all in a holding pattern.”

Kara Moriarty, the president and CEO of the Alaska Oil and Gas Association, said in a statement that the lack of bids in Cook Inlet was likely connected to the oil and gas industry’s hesitance to invest in Alaska because of the ongoing debate about industry tax credits.

“The message being heard by the oil and gas industry is loud and clear: Alaska is an unpredictable, unstable, and uncertain place in which to do business,” Moriarty said in a statement. “If the governor and sympathetic members of the legislature make it even harder for companies to invest in Alaska, this canceled lease sale is likely just the beginning in a series of similar announcements. Either way, Alaska loses.”

The Legislature has heard multiple iterations of bills to alter the current oil and gas tax credit incentive program in the state, including one version that would zero out the tax credits in Cook Inlet by 2018. The Legislature has not made any formal decision yet.

There are currently three oil and gas producers operating in Cook Inlet — Hilcorp, BlueCrest Energy and Furie Alaska Operating. Hunt noted that even though no new bids came in for 2016, there is activity going on in the Inlet. BlueCrest recently began producing oil, Hilcorp is exploring for new assets on the southern Kenai Peninsula and Furie Operating Alaska recently inked a deal with Homer Electric Association to sell natural gas.

Cook Inlet gas still receives some of the best prices in the world for its natural gas, Hunt said.

“Though we didn’t receive any bids, there’s still lots of activity in Cook Inlet,” Hunt said. “We’re just going to wait and see (how the year goes).”

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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