Cook Inlet lease sale flops, but state plans to do it again for benefit of Dunleavy campaign

Four months ago the state held a big oil and gas lease sale in Cook Inlet and the oil industry looked the other way.

Now, just in time for the Dunleavy reelection campaign, the state is getting ready to do it all again, keeping with an overall Dunleavy pattern of using state resources to benefit the Dunleavy campaign.

The state is going to claim that we need another lease sale and a burst of campaign publicity about the lease sale before the election, with the sale in late December.

Lease sales aren’t free. The state has to set up the sale, check all the documents, seek bids, review the bids and make sure everything is in order. Weeks of work by state employees are required, regardless of whether there are any bids. When there is clear documentation that the industry is not interested—which is what happened four months ago—this exercise becomes a political show for the Dunleavy campaign.

In May, the state offered more than 3.3 million acres of state-owned land in 833 tracts ranging from 640 to 5,760 acres in Cook Inlet.. The state offered lands onshore and offshore for minimum bids of $15 per acre, with an annual rental rate of $5 per acre for the first five years.

Only one company bid on any of the tracts. Furie bid and acquired two tracts that had been relinquished by the previous owner of the company. . The two bids covered 5,000 acres. There were no bids on 3.3 million acres.

“It was indeed an absolute bust (the sale) but the fact is that there just aren’t very many companies operating in Cook Inlet,” Mary Ann Pease, an energy consultant, told Tim Bradner, a veteran Alaska reporter.

The lack of interest from the oil and gas industry followed warnings by Hilcorp, which didn’t bid this time, that future gas supplies for Southcentral Alaska are in doubt.

In January, the state told legislators that there would be one Cook Inlet lease sale in 2022 and another one in the spring of 2023. A consistent process and timeline are important, the state Division of Oil and Gas said in its annual report to legislators, for a stable, predictable leasing program that allows companies and the public to plan.

In August, the state announced that it wanted another sale of the same millions of acres in December, contrary to the statement it made to legislators about the need for a stable and consistent process.

About 1.5 million acres that could be leased are onshore and 1.8 million acres are offshore. The state will likely conclude that the justification for the new sale is that the federal government is going to hold a lease sale of its own in December, thanks to the new so-called Inflation Reduction Act signed by President Biden.

The federal sale will offer 224 Outer Continental Shelf blocks of “approximately 1.09 million acres of seafloor, stretching roughly from Kalgin Island in the north to Augustine Island in the south,” the Bureau of Ocean Energy Management says.

The Cook Inlet federal sale has been canceled earlier this year by the Biden administration, which said there was a lack of industry interest in Cook Inlet, a reasonable claim given what has happened in recent years.

Dunleavy, along with Murkowski and Sen. Dan Sullivan all complained about the decision and claimed the oil and gas industry can’t wait to drill for more oil and gas in Cook Inlet. The failed state lease sale says they are completely wrong.

Dunleavy went on Fox News to attack Biden and make the absurd claim that gasoline prices would be higher because the Cook Inlet lease sale had been stopped. He said Earthjustice and the Sierra Club are “running the country now.”

“You can’t make this stuff up,” said Dunleavy, who made this stuff up.

The language requiring that the Biden administration hold a Cook Inlet lease sale this year was inserted in the bill as an attempt to get the backing of Sen. Lisa Murkowski and other Republicans. They opposed the bill.

Passage of the new federal law mandating a sale before the end of this year does not warrant another state sale when the same millions of onshore and offshore acres drew zero interest in the spring.

Dunleavy wants the state acreage offered for lease before the election as a campaign stunt to show that he wants more oil and gas drilling and is taking action to make it happen.

But what Dunleavy is really offering is empty talk about more oil and gas drilling in Cook Inlet.

Rather than stage a political show, Dunleavy should have led an effort since 2019 to find out why companies aren’t interested in drilling for oil and gas in Cook Inlet and what it would take to make that change. What would the state have to give up? Should the state be giving up anything? What are the consequences if Hilcorp’s warning is right? There is a lot at stake here. And a lot for a governor to do.

Dunleavy is doing nothing to solve these real problems with our energy future. He prefers empty gestures designed to generate publicity for his campaign.