Energy

Federal government plans Alaska Cook Inlet oil and gas lease sale by year’s end

Steelhead and Grayling platforms in the Cook Inlet

The federal government on Wednesday announced its schedule to reinstate a controversial oil and gas lease sale this year in federal waters in Cook Inlet, prompting a conservation group to warn that the plans are “legally vulnerable.”

The Biden administration earlier this year canceled the anticipated 1 million-acre sale, citing a lack of industry interest. But Democrats’ landmark climate bill in August, known as the Inflation Reduction Act, put the sale back on the table.

A federal sale in the region was last held in 2017, and Hilcorp Alaska was the lone bidder, securing 14 tracts for over $3 million. Lease sales in state and federal waters over recent decades have generally sparked little to no interest. This year’s sale will offer 10-year lease periods that could lead to exploration and drilling.

The administration’s cancellation of the sale angered industry supporters and Alaska politicians who said a lease sale could boost questionable future supplies of natural gas to heat and power much of Alaska.

The climate bill, a compromise between conservative Democrat Sen. Joe Manchin of West Virginia and Democratic Senate Majority Leader Chuck Schumer of New York, was celebrated nationally by conservation groups. But it drew concern among environmentalists in Alaska in part because of the Cook Inlet sale requirement and other measures favoring resource extraction. The groups say drilling in Cook Inlet threatens the climate and endangered beluga whales.

The Center for Biological Diversity said in a statement Thursday that the courts can stop the sale but stopped short of directly threatening a lawsuit.

[Alaska congressional delegation pushes for quick approval of big North Slope drilling project]

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“We’ll fight this reckless oil lease sale in Cook Inlet’s beautiful, fragile ecosystem,” said Kristen Monsell, an attorney with the group.

Monsell added in an email: “We see this sale as legally vulnerable because the federal environmental analysis is woefully inadequate. Congress didn’t exempt Cook Inlet leasing from the National Environmental Policy Act, and Interior still has to thoroughly analyze the risks of offshore drilling in this fragile environment. That didn’t happen here, which is a huge legal problem and a major threat to the environment.”

The Bureau of Ocean Energy Management said the sale will offer up to 224 blocks, from roughly Kalgin Island in the north to Augustine Island, in waters as deep as 260 feet. The agency plans to open any bids submitted by industry by Dec. 30, announcing the winning oil and gas companies.

The agency released a draft environmental impact statement analyzing the sale’s potential impacts a year ago. It will issue a final report later this year, giving 30 days notice before the sale is held.

Hilcorp has warned several utilities that it does not have enough reserves in Cook Inlet to renew gas supply contracts that will be coming due in the next several years, starting with the Homer Electric Association in 2024. But Hilcorp said its ongoing drilling and continued investments could change that picture.

In response to the concerns, the utilities and other entities have teamed up to start planning for long-term energy needs, including by bringing more renewable power onto power grids from Homer to Fairbanks.

Luke Miller, with Hilcorp, said the oil and gas company “anticipates spending hundreds of millions of dollars in the next few years focused primarily on producing additional natural gas for Alaskan homes and businesses. Hilcorp is committed to continuing our investment into the future and satisfying the commitments we have made to local end users.”

Erik Grafe, with Earthjustice in Alaska, said the conservation group is disappointed that the Biden administration did not reduce the size of the reinstated lease sale from its original plan, or add new restrictions to help protect the environment.

“A lease sale takes us backward on the climate,” he said.


Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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