The federal government received no bids Wednesday in what it called the “Big Beautiful Cook Inlet Oil and Gas Lease Sale.”
It was the first of six auctions for offshore Cook Inlet drilling rights that Congress mandated in President Trump’s reconciliation bill last summer, called the One Big Beautiful Bill. They are part of his campaign to produce more energy from fossil fuels and establish “energy dominance.”
The lack of bids did not surprise economist Brett Watson at the University of Alaska’s Institute of Social and Economic Research. Watson said companies were able to produce Cook Inlet oil and gas for a long time at relatively low costs.
“However, as that basin has matured and production costs have risen pretty considerably, and other opportunities have opened up in other places in the world, that interest has really waned,” he said.
Environmental advocates are pleased with the outcome.
“What an embarrassment for Trump's Alaska fossil fuel fantasy,” said Cooper Freeman, Alaska director of the Center for Biological Diversity. “And what a relief for the inlet’s waters and fish and wildlife.”
Cook Inlet wells produce natural gas for the Southcentral region, but so far those wells have all been in state waters, nearer to shore.
Sen. Dan Sullivan has celebrated the One Big Beautiful Bill, which he says will “unleash” Alaska’s resource potential and transform the economy. His office sent a statement attributing the lack of bids on environmental activism, years of regulatory uncertainty and the Biden administration’s “outright hostility” to resource development.
Watson, though, doesn’t think swings in federal policy are preventing investment in Cook Inlet, because the same lack of enthusiasm is mirrored in lackluster state lease sales.
“Generally speaking, first and foremost, investors are responsive to market conditions,” he said.
The state of Alaska held its own auction Wednesday of oil and gas drilling rights in the Cook Inlet area, on- and off-shore. It drew just one bid of $600.
Hilcorp, the primary oil and gas leaseholder in Cook Inlet, did not respond to an interview request.
Earthjustice attorney Hannah Foster was preparing to sue to block the federal lease sale, to protect the endangered Cook Inlet beluga whales. She said the government sunk a lot of administrative costs in Wednesday’s auction.
“To no end. And they are gearing up to do that 11 times in Cook Inlet over the next several years,” she said.
The budget reconciliation bill calls for one lease sale nearly every year through 2032. A separate plan proposes to add five more lease sales for the inlet.
Watson said he doesn’t expect companies will summon much enthusiasm because, unless there’s some kind of technological breakthrough, Cook Inlet production costs are likely to remain high. That leaves producers reluctant to sign new long-term contracts committing to supply gas at a fixed price, he said..
“The price that Cook Inlet producers are willing to sell their gas for is now starting to look like it might soon exceed alternative sources of gas for the Southcentral utilities,” he said.
Alternatives include importing liquified natural gas by tanker from Canada, or building a pipeline to deliver gas from the North Slope, he said.
One of the utilities that has relied on Cook Inlet gas is Chugach Electric Association. Its main contract to buy gas ends in two years. Spokeswoman Julie Hasquet said the utility is adding gas storage and signing gas exchange agreements.
“We're continuing to build our members a cushion as we wait to find out — is there going to be a gas line? Should we be importing LNG?” she said. “So those questions are still to be answered, but in the meantime, we are working on opportunities to make sure that we're not out of gas on March 31, 2028.”
The possibility that Southcentral utilities will have alternative sources of energy, Watson said, is another disincentive for Cook Inlet producers to bid in the next offshore lease sale.
