US holds Alaska offshore oil and gas auction – one bidder

The current US administration continued its stream of offshore auctions with the first offshore oil lease auction for the past five years in Alaska’s Cook Inlet being held late last week on December 30th.

President Biden had pledged to end new leasing for offshore drilling in his administration but as part of a compromise for the passage of the Inflation Reduction Act agreed to conduct three new lease auctions, including one in Alaska, despite vocal opposition from environmental groups.

The Department of the Interior had previously withdrawn a proposed sale in the Cook Inlet region. In May 2022 it had reported that there was little interest from the industry. However, the legislation passed by the US Congress and signed into law in August required the Bureau of Ocean Energy Management (BOEM) to conduct the lease auction by December 31st, so it was a case of use it or lose it.

BOEM therefore published in November the details of Cook Inlet Outer Continental Shelf Oil & Gas Lease Sale 258. The sale was part of a 2017 plan for the outer continental shelf offered for lease 193 blocks in the northern part of the Cook Inlet Planning Area, stretching roughly from Kalgin Island in the north to Augustine Island in the south.

However, the “little interest” prognosis proved correct. BOEM received just one bid for only one of the 193 blocks. That bid, for $63,983, was submitted by Hilcorp Alaska, a division of a Texas-based independent exploration and production company that invests in legacy assets. It currently has 14 active federal leases in Cook Inlet, which it purchased at the last auction for the region in 2017.

No production however has ever begun in any of the federal waters at Cook Inlet since it was first offered to the industry in the 1970s.

In addition to the Alaska leases, the act also required BOEM to proceed with an Environmental Impact Statement for two Gulf of Mexico oil and gas lease sales, Lease Sales 259 and 261. Congress directed that Lease Sale 259 be held by March 31st 2023, and Lease Sale 261 by September 30th 2023.

The US Department of the Interior was reported to be moving forward on a new Five-Year Leasing Plan. The two sides of the issue are wither asking for new lease areas, or for the imposition of an outright ban.

While President Biden’s legislation included a focus on energy transition, in the small print was the inclusion of the oil leases and also links between new offshore wind leasing and offshore oil and gas leases. The act required that, in order to hold a new offshore wind lease sale, at least one offshore oil and gas lease sale that offered at least 60m acres be held within the year prior to the new offshore wind sale.