On Dec. 7, the state of Alaska received more than 300 bids from more than 15 bidders for oil and gas lease tracts on the North Slope and the Beaufort Sea with high bids totaling more than $20.9 million.

On the same day, the U.S. Bureau of Land Management (BLM) held a lease sale for acreage in the National Petroleum Reserve in Alaska (NPR-A). Three companies -- 70 & 148 LLC, Woodstone Resources LLC and ConocoPhillips Alaska Inc. -- submitted winning bids of $3.64 million.

The Alaska state lease sale covered three areas: North Slope Foothills; North Slope and state waters in the Beaufort Sea. The Foothills acreage drew a blank with no bids. The North Slope received high bids on 178 tracts totaling 334,969 acres. Another 78 tracts covering 281,095 acres in the Beaufort Sea had high bids.

Interest in shale formations on the North Slope drove the bidding by some smaller companies in the sale. According to the Fairbanks Daily News-Miner, Royale Energy, San Diego, had more than 50 high bids on acreage on the North Slope. The company was targeting liquids-rich shales in the region that are known hydrocarbon sources for the Prudhoe Bay and Kuparuk fields.

An official with the Alaska Division of Oil and Gas confirmed the high level of bidding in areas with shale potential. Some of the acreage had been leased in the past, but the new emphasis on shale exploration renewed interest.

Alaska Gov. Sean Parnell was pleased with the sale. "Today’s lease sale was an important, positive step that attracted additional investment to the North Slope. Reversing the declining flow of oil through TAPS (Trans-Alaskan Pipeline System) and getting to one million barrels per day is critical to our economy and the nation's energy security.”

This year, the Parnell administration announced a “Secure Alaska’s Future” strategy. As part of the strategy, the Department of Natural Resources has been promoting the North Slope lease sale and the positive attributes of the region's hydrocarbon basin to local, national, and international markets. This effort has included outreach to a wide array of stakeholders, including energy companies, investors, federal agencies, community groups and journalists.

"One of our immediate goals for this lease sale was to increase the number and type of investors and companies investing in Alaska,” said Dan Sullivan, Natural Resources commissioner.

The major oil companies were also well represented in the sale. Shell focused on the Beaufort Sea with high bids on 18 tracts in Harrison Bay. Repsol E&P USA bid on 26 leases on the North Slope and five in the Beaufort Sea.

For Shell, it was the first time the company had participated in a state lease sale since re-entering Alaska in 2005.

Pete Slaiby, Alaska venture vice president, said, “While there could be commercial synergies between Shell’s current offshore acreage and the state leases we bid for, our clear focus remains exploring our federal leases in the Beaufort and Chukchi Seas in July 2012.”

Pioneer Resources had the highest bid in the sale of $826 per acre for two leases in the Beaufort Sea.

For the federal lease sale, BLM offered 283 tracts comprising approximately 3,060,176 acres. The tracts covered land available for oil and gas leasing within Northeast and Northwest NPR-A planning areas and included 178 tracts (1,817,186 acres) within Northeast NPR-A and 105 tracts (1,242,990 acres) in Northwest NPR-A.

Winning bids totaled $3,637,477 and covered 17 tracts on about 141,739 acres.

According to BLM, the sale demonstrated industry interest in areas with high-resource potential adjacent to state of Alaska lease tracts along the Colville River on the North Slope.

The sale followed the recent announcement that two federal agencies have reached an agreement in principle with ConocoPhillips regarding the company’s proposed Alpine Satellite Development Plan (CD-5) in the NPR-A, which supports the construction of a pipeline and bridge over the Nigliq Channel of the Colville River.

This proposed infrastructure would be the first pipeline and all-weather road into the NPR-A, which is expected to spur further exploration and development of the 23 million-acre reserve managed by the BLM. The U.S. Army Corps of Engineers is expected to carry out the remaining steps associated with the permit review in the coming weeks, stated BLM.

The single highest bid was $490,299, or $101.03 per acre from 70 & 148 LLC for tract H-160, which is located near the Colville River.

The state will receive 50% of the bid receipts, or $1,818,738.50, generated by the lease sale as well as 50% of the annual rental revenue generated from the individual leases. After the sale, an economic evaluation of bids will be conducted and the leases will be issued by mid-April.

Presently, there are 169 leases covering 1,361,105 acres in the Northeast and Northwest planning areas. Two units have been approved in Northeast NPR-A: the Greater Mooses Tooth; and the Bear Tooth. Both units are operated by ConocoPhillips Alaska, Inc.

The Colville bridge-pipeline agreement in principle with ConocoPhillips was announced on Dec. 5 and fulfilled a request from the U.S. Army Corps of Engineers that the U.S. Fish & Wildlife Service and the Environmental Protection Agency evaluate the environmental impacts associated with ConocoPhillips’ revised project.

The agreement in principle confirms that the construction of a pipeline and bridge over the Nigliq Channel of the Colville River is acceptable to the resource agencies so long as the permit application includes conditions that reflect agreements reached among the company and federal resource management agencies, stated BLM. The conditions include engineering changes and substantial mitigation proposed by the company based on consultations with the resource agencies. The company has also agreed to allow other companies that develop leases in the NPR-A to use the same crossing, rather than seek approval for additional crossings in the area.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.