Alaska Industrial Development Authority apparent high bidder in ANWR auction

Houston — The Alaska Industrial Development and Export Authority was the high bidder, by far the most active bidder, and saw little competition in Alaska's Arctic National Wildlife Refuge Coastal Plain lease sale Jan. 6.

Although NYMEX front-month crude futures have recently risen above $50/b operators have reined in their capital spending and their attraction to longer-lead projects.

As a result, "it [was] highly unlikely that big operators such as ConocoPhillips, ExxonMobil, Hilcorp and Eni" would be drawn to bid in the sale, S&P Global Platts Analytics analyst Parker Fawcett said.

"For operators it seems clear, the political and regulatory risk under a Biden administration, along with minimal appetite for expensive exploration in the most controversial region in North America, did not currently outweigh the potential huge upside in resource development," Fawcett said.

Producers also face a "more interesting" upcoming National Petroleum Reserve-Alaska sale, Fawcett said.

"Long-term viability of any development in ANWR is on life-support, but at least not dead," said Fawcett. "I think it's fair to say environmentalists can rest easy tonight that big oil does not have its eye on the ANWR currently right now, and there should be no drilling there for years to come if ever within the ANWR."

Seismic runs in region

Potentially, the smaller bidders could attempt to run updated seismic within the region, he said.

"But even this would face significant hurdles" under the administration of president-elect Joe Biden, he said.

AIDEA, the state's development finance corporation, submitted apparent high bids on nine of the 11 tracts receiving bids during the Jan. 6 sale, which was sponsored by the US Bureau of Land Management (BLM).

AIDEA's bids, the bulk of them uncontested by rivals, totaled about $13 million of more than $14 million in collective high bids from the auction, according to US Interior Department Deputy Secretary Kate McGregor, who presided over the sale.

Tracts offered in the sale spanned a total of nearly 600,000 acres of the Refuge's 1.5-million-acre coastal plain area, which geologists have long felt has the potential for significant oil and gas finds. BLM estimates oil and gas resources on the coastal plain at 4.25 billion to 11.8 billion barrels of technically recoverable oil.

Individual bids made by AIDEA, as well as two other participants, ranged from just below $600,000 to just over $1.6 million.

The other two bidders were Knik Arm LLC, which offered the highest dollar amount of $1.6 million in the auction, besting AIDEA's $1.2 million for one tract, and Regenerate Alaska, which out-elbowed AIDEA for another lease with a smaller sub-$1 million figure.

Heading into the sale, it was believed that AIDEA would participate in the auction as it sought approval last month from its board to place up to $20 million in bids for acreage.

Judge rules against conservation, tribal groups

The auction was controversial. A federal judge in Alaska late Jan. 5 ruled against a coalition of US conservation and tribal groups in a lawsuit to stop oil and gas leasing in ANWR.

US District Court Judge Sharon Gleason said she may revisit her decision if an exploration plans are submitted, however, so the litigation over ANWR could continue.

A separate part of Gleason's decision allowed a proposed winter seismic program to proceed in the coastal plain. SA Exploration, an Alaska-based geophysical company, submitted its plan for winter seismic testing to the BLM in 2020.

The company is likely to approach winning bidders from the Jan. 6 sale to share in the seismic data and costs.

It's possible also that some of the bidders may have secured information from the only exploration well drilled in ANWR, a test by Chevron and BP in the early 1990s on a 91,000-acre inholding. That area is privately owned by Kaktovik Inupiat Corp., the Native village corporation for Kaktovik, an Inupiat community on Barter Island just offshore ANWR's northern coast, and Arctic Slope Regional Corp., or ASRC, the regional Inupiat development corporation, which is based in Utqiagvik.

Results of the Chevron-BP well, KIC No. 1, have been held confidential since the drilling and while there have been reports that data from the well were not encouraging, geologists say that any information from an initial well in a large, unknown area is of value.

Since the well was drilled both Chevron and BP have left Alaska and while Chevron has retained its ownership of the information, BP sold its rights to Hilcorp Energy, a Houston-based major independent, as a part of Hilcorp's purchase of BP's Alaska holdings.

ASRC, as owner of the subsurface mineral rights in the inholding, also has rights to the well data and may have made it available to some bidders.

Discoveries have been made on state-owned lands immediately west of the refuge's coastal plain. ExxonMobil and BP made a large gas and condensate discovery in the 1970s at Point Thomson, on state lands west of the Canning River border of the refuge, which is now producing.