Interior official expects high interest in Alaska lease sale

By Yereth Rosen

ANCHORAGE, Alaska, Aug 14 (Reuters) - An upcoming lease sale in Alaska's National Petroleum Reserve should draw heavy bidding from energy companies hoping to explore that onshore frontier of Arctic Alaska, a U.S. Interior Department official said on Thursday.

"I think we're going to see a lot of interest," said Stephen Allred, assistant Interior Secretary for land and minerals management, after giving a speech to the Resource Development Council for Alaska, a pro-industry group. "We know there's a substantial resource up there. We also know it's a challenge to develop it."

The Sept. 24 lease sale will offer 4.8 million acres in the northeastern and northwestern parts of the 23 million acre reserve, according to documents released Thursday by the Bureau of Land Management, the Interior Department agency that manages the land unit.

The acreage with the best prospects is in the far northeastern corner of the sale area, closest to existing oil-field infrastructure, and any oil or gas produced there will bear a higher royalty rate than on less-prospective tracts.

Allred said the entire petroleum reserve, which is about the size of Indiana and is the largest federal land unit in the United States, holds potential for 10 billion barrels of recoverable oil and 70 trillion cubic feet of recoverable natural gas, according to Interior Department estimates.

In his speech, Allred said the upcoming lease sale will offer territory that could hold most of that oil. "We think that that could potentially yield up to about 8 billion barrels of additional oil," he said.

The scheduled lease sale will be the fifth held in the petroleum reserve since 1999, when heavy bidding produced $104 million in high bids.

Allred said the upcoming lease sale, which has not been opposed by environmental groups or by Inupiat Eskimo organizations, was crafted with their interests in mind. The sale area excludes specific sites considered environmentally sensitive and important to Inupiat hunters.

Allred said the BLM would like to hold annual lease sales in the petroleum reserve, but he criticized proposed legislation that would mandate such a schedule.

"Hard rules like that don't many any sense," he said after the speech.

Various complications, including legal challenges, have kept the National Petroleum Reserve lease sales on a biannual basis up to now, he said.

There is also a physical limit to how much industry can explore at one time, he said. And between the regular state lease sales and the federal offshore and onshore sales, there are several opportunities for energy companies to acquire new exploration acreage, he said.

(Editing by Phil Berlowitz)