North Slope lease sale pulls in 16 bids

As oil lease sales go, it seemed a bust.

The federal government’s lease sale Wednesday in the National Petroleum Reserve-Alaska, on the North Slope, pulled in 16 bids from three companies. But Joe Balash, Assistant Secretary of the Interior, looked at the upside.

“It was better than last year, when we got only seven bids,” Balash told reporters after the sale.

The results seemed dismal compared the $28 million the state of Alaska pulled in a month ago when it auctioned off oil tracts on state-owned lands a few miles to the east, across the Colville River. The river is the boundary between the federal petroleum reserve and state lands on the North Slope.

BLM’s acting Alaska director Ted Murphy said ConocoPhillips and two independent companies offered up $1.53 million in bonus bids in Wednesday’s sale for 16 tracts on 174,440 acres in the area of the reserve open to bidding. The agency had made 254 tracts totaling 2.85 million acres available for bidding.

The reserve, which is west of the large producing fields on the North Slope totals 23 million acres but most of it is not available for exploration including lands that are the most prospective for oil discoveries, he said.

ConocoPhillips acquired five tracts in the Wednesday sale; independent Emerald House LLC acquired 10 and Nordaq Energy, another independent, won rights to one tract.

Balash also said ConocoPhillips’ bids were a positive sign because the company already has a strong lease position in the area with tracts acquired in the 2016 NPR-A sale, and its desire to add to its land position reflects confidence.

The company has been exploring and has made three discoveries including Willow, a prospect that could hold up to 750 million barrels of recoverable reserves.

Balash said the light bidding for the acreage available was not a surprise to Interior officials because the more prospective acreage, which is further north near the “Barrow Arch,” a geologic formation that is highly productive across the North Slope, is not available for exploration.

The U.S. Bureau of Land Management, which managed the NPR-A, hopes some of this area might be made available in the 2020 NPR-A sale following possible changes in BLM’s Integrated Activity Plan for the reserve, which governs leasing.

“There are significant parts of the NPR-A that are not available (to exploration) and it’s no secret that the most prospective areas for oil are along the Barrow Arch,” along the northern coast of the reserve, Balash said. These areas are now closed.

Some coastal wetlands in the northeastern part of the reserve have always been off-limits to exploration because of their ecological sensitivity, but the previous federal administration, under President Barak Obama, significantly expanded the restricted areas in the current land management plan to include lands with relatively low habitat value, but which have significant oil potential, state of Alaska officials have said.

Federal officials were frustrated in seeing the state of Alaska garner high bids for state-owned lands just east of the petroleum reserve in a state lease sale held in November, Balash said.

“We are in the middle of a scoping process for an Environmental Impact Statement for revisions to the plan. If we can follow our policy of completing EIS documents within a year, some of the more prospective areas might be offered next year, Balash said.

Conservation groups are likely to mount a vigorous challenge because of the environmental sensitivity of lands important to birds and caribou near Teshepuk Lake, but BLM’s success in completing EIS documents on two major ConocoPhillips projects in the reserve shows that most issues raised by oil development in the area can be dealt with, he said.

Most of the bids in Wednesday’s sale were for tracts south of existing leases in the area and north of Umiat, the site of a small 1950s-era oil discovery by the U.S. Navy on the Colville River at the southeast corner of the NPR-A. The reserve was formerly Naval Petroleum Reserve No. 4 under management by the Navy until it was transferred to the BLM by Congress in 1976 and renamed as National Petroleum Reserve-Alaska.

Conservation groups said they are worried about BLM’s move to revise the land management plan, which will imperil sensitive habitat near Teshekpuk Lake. “It is part of the Trump administration’s irresponsible agenda of gutting protections for pristine landscapes and high-value wildlife habitat as a gift to the oil industry,” said David Krause, Arctic lands specialist for The Wilderness Society, in a statement.