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Alaska offshore oil lease draws bids, protesters

Shell Oil led a handful of petroleum companies in robust bidding Wednesday for outer continental shelf leases in the Chukchi Sea off Alaska's northwest shore.
/ Source: The Associated Press

Shell Oil led a handful of petroleum companies in robust bidding Wednesday for outer continental shelf leases in the Chukchi Sea off Alaska's northwest shore.

The sale went forward over the protest of conservation and Native Alaska groups plus objections by some U.S. congressional members outside the state, who said the Minerals Management Service should have held up the sale until a decision is made on protections for polar bears under the Endangered Species Act.

Annell Bay, Shell vice president of exploration for the Americas, said the lease sale was an opportunity to move into an undeveloped hydrocarbon base that could help meet an increasing demand for energy and blunt the import of petroleum.

"There's not many areas like this in the United States," she said.

Seven companies offered bids totaling nearly $3.4 billion. High bids added up to nearly $2.7 billion on 2.76 million acres.

Shell, bidding as Shelf Gulf of Mexico Inc., submitted 275 high bids adding up to $2.1 billion. Shell bid $105 million for one tract that worked out to be $18,497 per acre.

ConocoPhillips submitted 98 high bids adding up to $506 million and competed with Shell for dozens of other. ConocoPhillips was unsuccessful on 47 tracts for which it bid $593.6 million. Shell was unsuccessful on 27 tracts for which it had bid another $82 million.

The MMS will take about 90 days to review bids. The agency can reject bids that do not meet fair market value.

'Chill the Drills' protest
The sale was within an area offered slightly smaller than Pennsylvania in marine habitat used by one of two of Alaska's polar bear populations.

Protesters braved temperatures of 13 degrees below zero, holding signs that read, "Chill the Drills," "Don't spoil my dinner" and "I prefer whale oil."

"My worst fear is that they have an oil spill," said George Kingik, the former mayor of Point Hope, an Inupiat Eskimo community of 737 about 330 miles southwest of Barrow.

Now retired, Kingik has hunted since he was a child for walrus, seals and whales and still relies on ocean bounty for his subsistence diet. He is skeptical that an oil spill could be cleaned in the harsh environment of the Chukchi Sea.

"They wouldn't be able to put people out there if we had a storm," he said.

Conservation groups say development of offshore oil fields would add stress to a rapidly changing environment hammered by global warming and record summer ice loss.

"It's irresponsible to move ahead with the lease sale in light of global warming and it's immediate effect on the Arctic," said Trish Rolfe, Alaska region representative of the Sierra Club.

Sen. John Kerry, D-Mass., who introduced legislation to delay the lease sale until the U.S. Fish & Wildlife Service makes a decision on polar bears, vowed to fight the sale "with every available tool."

"The administration has decided to spend their last eleven months selling off this threatened habitat to the highest bidder," he said in a statement. "These lease sales are a mistake, and we can't wait for the next administration to end them because when it comes to vanishing species, time isn't on our side."

Corridor along coast
Randall Luthi, MMS director, said he was confident development could occur without harm to the environment.

Wildlife managers will review both exploration plans and development plans submitted by successful bidders. Companies were told they may have to account for polar bears if the animals are listed as threatened under the Endangered Species Act laws, he said.

MMS kept a coastal corridor up to 50 miles wide out of the sale, he said. The area is used by migrating whales and subsistence hunters. The closest bid Wednesday was 54 miles off shore, he said.

The MMS estimates the sale area contains 15 billion barrels of conventionally recoverable oil and 77 trillion cubic feet of conventionally recoverable natural gas.

Under the sale scenario, the agency envisioned oil moving to market by a pipeline built from northwest Alaska to the trans-Alaska pipeline, which moves North Slope oil to tankers in Valdez.

Five other companies had high bids. Repsol E&P USA Inc. had 93 high bids that added up to $14.4 million. Eni Petroleum US LLC had 17 for $8.9 million and Statoil Hydro USA E&P, Inc., had 16 high bids for $14.4 million. Iona Energy Co. (US) Limited and North American Civil Recoveries Arbitrage had one each for $61,000 and $400 respectively.