Lease sales in Cook Inlet draw nearly zero interest from oil and gas companies

Despite President Donald Trump’s promise to “drill, baby, drill,” a federal oil and gas auction in Cook Inlet generated zero offers from bidders on Wednesday.

Also on Wednesday, an Alaska oil and gas lease sale in the near-shore state waters of the Inlet generated just one small bid for a single tract.

Conservation groups cheered the federal goose egg, saying it showed the oil industry has scant interest in exploring the waters off the Kenai Peninsula, even as Southcentral Alaska faces a looming shortage of natural gas from the Inlet.

For years, state and federal lease sales in the Inlet have also been duds, with limited bidding.

“Like so many previous Trump ventures, this lease sale was a big, fat failure,” said Athan Manuel, director of Sierra Club’s Lands Protection Program, in a statement. “Even oil and gas companies recognize that leasing in dangerous, undeveloped areas is all risk and little reward.”

Trump’s One Big Beautiful Bill Act mandated at least six lease sales in Cook Inlet through 2032. Alaska’s congressional delegation praised the planned sales as important to developing resources in Cook Inlet.

Conservation groups and an Alaska tribal government, the Chickaloon Village Traditional Council, recently filed a lawsuit over the federal auction finalized on Wednesday.

The federal sale offered 1 million acres for lease.

The groups argue that the Trump administration held the sale without evaluating the possible harm from potential oil and gas production to the endangered Cook Inlet beluga whale, the northern sea otter, Steller’s eider and other species protected under federal law.

Hannah Payne-Foster, attorney for Earthjustice, which filed the lawsuit on behalf of the groups, said in a statement Wednesday that the lease sale was “unlawful.”

“This is great news for all who live in and around the Inlet, and particularly critically endangered Cook Inlet beluga whales,” Payne-Foster said of the sale’s result.

The Cook Inlet basin was once Alaska’s major oil and gas region.

But a long decline in natural gas production there now has utilities in Southcentral Alaska scrambling to find new sources of energy.

The weak lease sales come as utilities are looking to use imported liquefied natural gas, or LNG, from outside Alaska as early as next year, amid a looming supply gap.

Hilcorp, the top gas producer in the region, warned utilities in 2022 that it cannot guarantee gas supply after contracts end, including for Chugach Electric Association in 2028 and Enstar Natural Gas in 2033.

[Alaska lawmakers and regulators question need for 2 gas import facilities in Southcentral]

In the state lease sale offering 2.9 million acres of state-owned land in more than 700 tracts, Three Mountain Oil was the only bidder.

The company, owned by Jim Winegarner, bid $600 for 20 acres in an area west of Anchor Point.

The tract consists of small, unleased state-owned lots located inside and outside the Seaview oil and gas unit owned by Hilcorp, said Winegarner, a former Alaska landman with ConocoPhillips and other oil companies.

Winegarner said he’s hopeful he can participate in future development at Seaview.

He said he hadn’t yet talked to Hilcorp.

”Before the sale, you don’t discuss things like that,” he said.

Winegarner said he doesn’t know why there was virtually no bidding.

“I left a lot on the table obviously, since I was the only bidder,” he said.

Matt Shuckerow, a spokesperson for Hilcorp, did not immediately return requests for comment on Wednesday.

Sean Clifton, a policy and program specialist with the Alaska Division of Oil and Gas, which holds the lease sales, declined to speculate on potential factors affecting bidding Wednesday.

For several years, bidders in the state lease sale have typically snatched up just a handful of tracts, among hundreds offered.

The low interest has even come as the state has offered new, attractive terms.

The state has attempted to increase bidding in the basin by eliminating royalties and allowing net profit sharing with the state after capital and operating expenses are covered.

“It’s a pretty good deal,” Clifton said. “We will continue to evaluate our lease sale terms and conditions before each sale, as we always do, and see what else we have within the statutes we operate under.”

John Hendrix, who owns Furie, an Inlet gas producer, said his company did not bid on Wednesday in part because it is focused on existing prospects in the Inlet.

The company has said it hopes to drill two to three wells in the Inlet this year to bring on additional production. It also has signed a five-year contract to provide gas to Enstar through 2031.