Hotly debated federal Cook Inlet oil and gas lease sale draws only 1 bid

A controversial auction for rights to drill for oil and gas in the federal waters of Alaska’s Cook Inlet drew only a single bid, according to results released Friday.

Hilcorp Alaska LLC, the dominant oil and gas operator in the Cook Inlet basin, submitted the sole bid in the lease sale held by the Department of the Interior’s Bureau of Ocean Energy Management. Nearly 1 million acres, broken into 193 blocks, had been offered in the auction, called Lease Sale 258. Hilcorp’s bid totaled $63,983, BOEM said.

Hilcorp, a unit of the privately held, Texas-based Hilcorp Energy Company, already holds 14 federal leases in the inlet. They were acquired in a 2017 sale held by BOEM in which Hilcorp was also the only bidder.

Hilcorp also submitted the only six bids received in a special Alaska Division of Oil and Gas lease sale for state territory in Cook Inlet, according to results released Friday. That state sale, which offered 721 tracts spread over 2.8 million acres, was added to the division’s schedule to coincide with the federal lease sale. Hilcorp’s submitted bids totaled about $360,000, according to preliminary results.

The federal lease sale, previously canceled, was held under congressional mandate. It drew a lawsuit last week that seeks to overturn the decision to hold it.

The sale was originally scheduled for earlier in the year, but BOEM in May called it off, citing lack of industry interest. That cancellation drew rebukes from Alaska politicians and from other pro-oil politicians. Among those objecting to the cancellation was Sen. Joe Manchin, a West Virginia Democrat. At his insistence, the Inflation Reduction Act, which was signed by President Joe Biden in August, included a provision mandating that Lease Sale 258 be resurrected and held by the end of 2022.

The revival of Lease Sale 258, in turn, drew angry responses from environmentalists and from organizations and some residents of the region.

The lawsuit filed on Dec. 21 in U.S. District Court in Anchorage alleges that environmental studies leading up to it were rushed and inadequate and that BOEM neglected to consider the required wide range of options. The lawsuit cites climate-warming greenhouse gas emissions, dangers for the endangered Cook Inlet beluga whale population and other negative impacts it says would result from the sale.

The lawsuit remains active, said Erik Grafe, an Earthjustice attorney who is representing some of the plaintiffs.

In a statement, he called the sale a “flop” and “good news for the climate and those who call Cook Inlet home, like the endangered beluga whale.” Interior should use its administrative powers to refrain from issuing that sole lease to Hilcorp, he said. “It is a troubled operator with a long history of violations, the lease on which it bid is in important habitat for endangered belugas, and there should be no more oil leasing in the Inlet for Hilcorp or any other company.”

Under federal rules, the bid is subject to a 90-day legal review before the lease may be transferred to Hilcorp, BOEM said.

Friday’s lease sale results were consistent with past years’ results. The industry has shown little interest in recent years in leasing new exploration territory in federal or state waters of Cook Inlet.

Prior to the 2017 federal lease sale, in which Hilcorp submitted 14 bids, a 2004 federal lease sale drew no bids and a 1997 federal sale drew only two bids.

Hilcorp has not submitted any exploration plan for the federal Cook Inlet leases that it currently holds.

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There has been only light bidding in recent years in the state’s Cook Inlet sales, which are held annually. Since 2015, no state Cook Inlet lease sale has drawn more than eight bids.

The near-total absence of bidding for the federal lease sale is evidence that it should not have been held, said representatives of the groups suing to overturn the auction.

“It’s a shame our government is willing to sell out the environment for so little. The Biden administration is wasting government time and resources to make political deals and appease Manchin, while throwing Cook Inlet communities and critically endangered Cook Inlet beluga whales under the bus,” Kristin Monsell, a senior attorney with the Center for Biological Diversity, said by email. “Even one new lease will worsen the environment with more oil spills and greenhouse gas emissions already cooking our climate.”

Hilcorp spokesman Luke Miller declined to specify the company’s plans for new leases, but he emphasized Hilcorp’s role as a producer of natural gas that fuels Anchorage and the Southcentral region.

“Hilcorp is proud of our work to revitalize Cook Inlet natural gas production – an energy source that nearly two-thirds of Alaskans depend on to heat and power their homes and businesses. We look forward to continuing to responsibly produce Alaskan oil and natural gas, create Alaskan jobs and contribute to the state’s economy for decades to come.”

Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.