Hilcorp spends $3.95M on Inlet leases

Hilcorp Alaska LLC was the big, and only, winner in both the state and federal Cook Inlet oil and gas lease sales June 21.

The company spent $3.95 million on combined 20 tracts on state land and in state and federal waters.

Hilcorp was also the only bidder in both sales and is the primary producer of oil and gas in the Inlet.

In the state Inlet sale it picked up six leases: two onshore tracts just to the north of the Beluga gas field it operates on behalf of the Anchorage electric utilities, another split onshore-offshore lease between the Ninilchik and Cosmopolitan units on the southern Kenai Peninsula and three more along the shore of Kalgin Island west of Kenai.

State Division of Oil and Gas Director Chantal Walsh said it appears Hilcorp is mostly trying to fill in gaps in the state territory it holds.

“We’re excited to see Hilcorp is interested in exploring Cook Inlet,” she said.

Hilcorp kept its plans for its new acreage guarded in a statement to the Journal.

"The leases we acquired today (June 21) help strengthen our ability to continue to provide energy and jobs for Alaskans," spokeswoman Lori Nelson wrote in an email.

Hilcorp spent $922,000 on its state leases and $3.03 million on the federal tracts.

The 14 federal leases Hilcorp won are just offshore from the Ninilchik and Cosmopolitan units, which are in state territory, and in the middle of the Inlet in front of Kachemak Bay.

The state’s 2016 Inlet lease sale drew no bids and industry representatives said that was due in large part to the state Legislature debating whether or not to end its oil and gas tax credit program for work in the basin at the time, which it did. Companies used the credits to offset their exploration and development costs.

There is also limited interest in Inlet natural gas, as production from the basin supplies the relatively small demand from Southcentral gas and electric utilities and low global LNG prices have killed the economics of exporting Inlet gas.

This was also the first time in years the federal waters of Cook Inlet drew any attention from industry.

According to the Bureau of Ocean Energy Management, the Inlet sale was the first federal offshore lease sale in Alaska since 2008.

State and federal managers don’t hold sales if they don’t receive interest from industry prior to the public sale.

Environmental groups have also lobbied the feds to quit proposing Inlet lease sales, citing the lack of interest and a fear activity could harm Cook Inlet’s endangered Beluga whales and other marine life.

A state sale of Alaska Peninsula land and water did not draw any bids, which is common for the remote region.

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Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
06/22/2017 - 9:55am

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