Arctic drilling rights sale draws record bids

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) - A contentious sale of offshore oil and gas drilling rights in the Chukchi Sea off the northwestern coast of Alaska has drawn a record 667 bids, the U.S. government agency running the auction said.

"We do have, for the Alaska OCS, a record number of bids that were received," said John Goll, the Alaska director for the federal Minerals Management Service (MMS).

Heavy bidding by Royal Dutch Shell Plc and ConocoPhillips Inc, who each were offering tens of millions of dollars for some blocks, meant the federal government's take from the sale would dramatically exceed the last lease sale in the Chukchi held in 1991, which brought in only $7.4 million for 30 blocks.

The MMS believes up to 15 billion barrels of recoverable oil reserves and 77 trillion cubic feet of recoverable gas reserves lie beneath the Chukchi Sea, although the harsh Arctic weather and the long distance from existing infrastructure would make developing any finds costly.

The auction of 5,355 exploration blocks covering 29.4 million acres in federal waters 25 to 50 miles offshore has been opposed by environmentalists who say too little is known about the possible impact of drilling on populations of polar bears and walruses in the area.

Allegations that the U.S. Fish and Wildlife Service deliberately delayed its final decision on the possible listing of the polar bear as an endangered species to ensure the sale was able to proceed have added further controversy.

A small group of protesters, some dressed in polar bear costumes, braved temperatures of -24 degrees Celsius (-11 Fahrenheit) outside a public library in Anchorage where the lease sale was being held.

In some of the early bidding, Shell, which has been an aggressive bidder for Arctic exploration acreage in recent bidding rounds, bid $51 million for a single block.

Shell's plans to drill up to four exploration wells on other properties it owns in the adjacent Beaufort Sea in the summer of 2007 were disrupted when a federal appeals court ordered a halt to exploration while a challenge to the MMS's environmental impact assessment study brought by environmentalists and Alaska native groups was heard.

Further details from the lease sale were expected to emerge later on Wednesday.

(Reporting by Yereth Rosen, editing by Robert Campbell and Matthew Lewis)