Despite being ‘disappointed’ by the results, the Alaska Department of Natural Resources’ commissioner defends the idea of royalty reductions to encourage more inlet drilling.
A state oil and gas auction that offered royalty-free leases in the Cook Inlet basin as an incentive for new exploration drew only three bids, according tofor the 725 tracts covering 3 million offshore and onshore acres in the basin: A set $40-per-acre price and a requirement that buyers share the profits from any future production in exchange for a complete elimination of state royalties that are typically set at 12.5%.
The head of the Department of Natural Resources conceded in a statement that this year’s sale fell flat. “I’m not convinced that royalty relief is the answer,” she said during a brief interview at the Resource Development Council for Alaska annual luncheon in Anchorage.of a hired consulting firm, GaffneyCline, that listed numerous factors as disincentives to Cook Inlet oil and gas investment. Among the factors GaffneyCline cited are the isolated and relatively small market, the aged infrastructure, the lack of support service and some difficult environmental conditions.
“We already have existing leases and existing units where there’s known resources but there’s not development or the required amount of investment to bring that into development,” he said.
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