Hilcorp is sole bidder in controversial Cook Inlet lease sale

Industry watchers say the lukewarm response to the hotly contested sale points to a long-term trend of low interest in the inlet’s federal waters. (Photo by Sabine Poux/KDLL)

After months of back and forth over a high-profile oil and gas lease sale in Cook Inlet, just one company placed bids last week.

Hilcorp Alaska was the sole bidder in the Dec. 30 federal sale, bidding $63,983 on one tract in Lower Cook Inlet. The 2,304-acre tract is a small sliver of the nearly 1 million acres the Department of the Interior put up for bid.

Economist Roger Marks has been watching Cook Inlet’s oil and gas industry for decades and said he’s not surprised. He said there’s always been lethargic interest from companies in that part of the inlet.

“This was the market speaking,” he said. “And the market is pretty knowledgeable. And I think it just indicates that the federal outer continental shelf is just a poor place to think about developing oil and gas because of the geology.”

Friday’s announcement rounded out a long saga of cancellations and rescheduling for the hotly contested sale. Ultimately, the sale was written into federal law in the Inflation Reduction Act and squeezed in just before the clock wound down on 2022.

The tract Hilcorp bought is not far from Chinitna Bay in Lower Cook Inlet. It doesn’t border existing Hilcorp properties, and it’s unclear what the company wants with the tract. Hilcorp would not answer specific questions about the sale.

A statement provided by company spokesperson Luke Miller said, “Hilcorp is proud of our work to revitalize Cook Inlet natural gas production – an energy source that nearly two-thirds of Alaskans depend on to heat and power their homes and businesses. We look forward to continuing to responsibly produce Alaskan oil and natural gas, create Alaskan jobs and contribute to the state’s economy for decades to come.”

Oil and gas companies play their cards close to their chests, so it’s hard to know what they’re finding when they look for gas in places like Cook Inlet.

But Marks said the long-time lack of interest — even back in Cook Inlet’s heyday — shows that the geology of the area is probably just not good.

“All the production that’s ever occurred in Cook Inlet going back to the 1950s has been on state acreage,” he said. “So the geology on state acreage is good. Just under federal acreage, not good.”

Hilcorp was the sole bidder in a state sale last week, where it picked up six leases in the upper part of the inlet totaling 22,783 acres.

Sue Mauger is executive director of Cook Inletkeeper, one of the environmental groups that sued the feds over the sale last month based on what they said was an incomplete environmental review process.

She called the federal sale a flop and said the lack of new industry interest in federal and state sales both shows there are environmental and economic reasons to not hold auctions there. She said that’s a good thing for Alaska.

“We have a win in that we won’t have new emissions coming out of Cook Inlet with new development,” she said. “However, we have to figure out what the future is for heating our homes. And so the financial resources we’ve spent as a country and a state can now be clearly shifted to solving the problem with non-fossil fuel options.”

Hilcorp provides Southcentral with most of its natural gas supply, used to heat homes and generate electricity. Last year, it warned its buyers it might not have the supply to renew their contracts into the future.

Mauger said the plaintiffs are continuing with the suit and that they’ll keep asking the Biden Administration not to go forward with awarding the lease to Hilcorp. The feds have a 90-day evaluation process before they formally award a lease. Long-term, Mauger said they hope that the feds don’t hold any more lease sales in the inlet.

KDLL - Kenai

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