Hilcorp wins 1 federal, 6 state exploration tracts in Cook Inlet

Hilcorp Alaska LLC won an exploration tract Dec. 30 in the federal waters of Cook Inlet, Alaska, after submitting the only lease bid to the Bureau of Ocean Energy Management (BOEM) for the delayed sale.

Hilcorp bid $63,983 for Lease Sale 258 block 6255, a tract not adjacent to the company’s existing leases.

A lease sale by the Alaska Department of Natural Resources for tracts in the state waters of Cook Inlet drew more action. Hilcorp again was the only bidder, but for six leases that netted the state more than $359,000 in estimated bonus bids. The bids in the state sale, as in the BOEM sale, were opened Dec. 30.

In May, the last lease state sale in Cook Inlet drew only two bids totaling more than $100,000, both bids coming from independent Furie Operating Alaska LLC.

Important to Alaska

Hilcorp is the leading natural gas producer in Cook Inlet, which is the exclusive source of gas for what Alaskans call the Railbelt region, stretching from Homer on the coast through Anchorage and its neighboring population centers to Fairbanks inland. The gas is centrally important to electricity production and the heating of homes and businesses in the region. None of the gas leaves Alaska.

Because gas output from Cook Inlet is declining, utilities with contracts for the gas have begun talking of what to do if at some point the output declines mean that new contracts must be negotiated at diminished volumes. No pipeline has been built to carry gas away from the Alaska North Slope, though a very expensive export plan has been discussed for years.

The federal plan for a Cook Inlet sale became somewhat controversial when the Biden administration canceled it in May 2021, ostensibly because of a lack of interest. Sen. Lisa Murkowski (R-Alas.) dispute that claim, and Sen. Joe Manchin (D-W.Va.) negotiated inclusion of a Cook Inlet lease sale into the Inflation Reduction Act, a tax and spending bill passed in August 2022.

The Inflation Reduction Act also requires Gulf of Mexico Lease Sale 259 to be held no later than Mar. 31 and Lease Sale 261, also in the gulf, be held no later than Sept. 30.