Alaska Court Suspends Cook Inlet Lease Sale

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--A federal court in Alaska suspended a lease sale for rights to drill for oil and gas, arguing the government failed to adequately assess the impact on the environment.

The Interior Department in 2022 balked on a lease sale on the Cook Inlet, citing a lack of industry interest. Congress later called for the lease to take place as part of a compromise for passage of the Inflation Reduction Act.

The United States District Court of Alaska in a ruling published Tuesday found the Interior Department failed to consider alternative areas, as mandated by the National Environmental Policy Act.

Nor did the government consider the impact of vessel noise on Beluga whales, a protected species. It also neglected to evaluate the full impact on the environment from the proposed sale.

"We're celebrating the fact that this destructive lease sale has been sent back to the drawing board, and we will continue to push for a transition away from fossil fuels and toward a brighter and healthier energy future," said Carole Holley, an attorney for plaintiff Earthjustice.

The court suspended the lease sale pending a supplemental environmental review, rather than vacating the lease as conservation groups had petitioned.

Hilcorp Alaska (Anchorage, Alaska) was the lone bidder for the Cook Inlet lease. Its high bid of a meager $64,000 for a 2,304-acre parcel was just a small slice of the 1 million acres put on the auction block by the Department of Interior.

Hilcorp inherited BP plc's (NYSE:BP) (London, England) entire upstream and midstream portfolio in Alaska in 2019 for $5.6 billion. The sale included assets in Prudhoe Bay, once considered one of the most prolific oil basins in the country with billions of barrels of output since operations began in the late 1960s.

In April, the federal government already restricted about 13.3 million acres of the National Petroleum Reserve in Alaska (NPR-A) from new oil and gas leasing, citing the need to protect aboriginal communities and the wildlife in the area.

But last week, the Bureau of Land Management (BLM) opened a 60-day comment period for the public to weigh in on whether to update the boundaries of the protected areas, including the boundaries of the NPR-A, or even to create new ones.

Alaska's 3.2 billion barrels of proved oil reserves are the fourth largest in the country, though production is nowhere near rival basins. Production peaked at 2 million barrels per day (BBL/d) in 1988, but it has since declined as state fields mature.

Over the four-week period to July 5, Alaska averaged 397,000 BBL/d, compared to 12.9 million BBL/d for the Lower 48 states.

Hilcorp had no public comment on the court decision. The case was Cook Inletkeeper et al v. U.S. Department of the Interior et al.

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