The Interior Department’s Minerals Management Service (MMS) has finalized Cook Inlet Lease Sale 191 scheduled for May 19 in conjunction with an Alaska state lease sale in the area. MMS estimates the region may contain up to 1 Tcf of recoverable natural gas.

The agency noted that gas demand in the south-central area of Alaska continues to grow and Cook Inlet is ideally situated to provide supply. Industries within the Kenai Peninsula Borough rely heavily on oil and gas reserves, and are an important source of employment and municipal revenues for the region. Likewise Anchorage depends on Cook Inlet gas for much of its home heating and electricity generation.

The state annually holds sales onshore in the area, where oil and gas companies are now exploring. But the offshore area is so far relatively unexplored. MMS said exploratory drilling in Cook Inlet “supports the president’s national energy policy to expand the search for and development of new sources of energy for the nation while protecting the environment.”

The sale area is located in federal waters between three and 30 nautical miles offshore. The area covers about two million acres extending from just south of Kalgin Island to just northwest of Shuyak Island, in water depths ranging from about 30 to 650 feet. Shelikof Strait is not included in the proposed sale area. MMS removed from the sale proposal a band of blocks offshore the lower Kenai Peninsula and the Barren Islands, which include critical habitat for the endangered Stellar sea lion, and areas identified as special by the Kenai Peninsula Borough. These areas are also used for subsistence by the residents of Port Graham, Nanwalek, Seldovia and others, the agency said.

Several new requirements have been attached to the sale to supplement MMS rules, including provisions for protection of fisheries, biological resources, and use of pipelines to transport any discovered production. A fishing stipulation requires companies to work with local fishing groups to avoid conflicts between exploration equipment and fishing gear.

The sale also offers for the first time in the federal waters of Cook Inlet a package of economic incentives for industry activity. These include a longer primary term of eight years, lower minimum bids of $25 per hectare ($10 per acre), annual rental rates of $5 per hectare ($2 per acre), and royalty suspension volumes. The RSV’s would relieve royalty payments on a producing lease up to the first 30 million barrels of oil equivalent. The suspension applies to both oil and natural gas, and includes price floor and ceiling thresholds for oil. There is no ceiling or floor for gas at this time.

The state of Alaska receives 27% of all revenues generated as a result of federal leases that lie within three to six miles offshore the Alaska coast, and 50% of this money goes into the Alaska Permanent Fund Account.

For more details on the Cook Inlet lease sale go to https://www.mms.gov/alaska/.

©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.