Assembly approves Anchor Point lease for Hilcorp

Nov 26, 2018

Oil and gas exploration on the southern peninsula has picked up considerably the past several years. Hilcorp has been responsible for much of the activity. The company recently leased nearly 20 acres from the Kenai Peninsula Borough near Anchor Point.

At issue during last week’s borough assembly meeting was the royalty rate Hilcorp will pay the borough. Typically, the state receives oil and gas royalties, but the borough owns the subsurface mineral rights to the five parcels that will be developed. That entitles the borough, by code, to a 12.5 percent royalty. But it could be more, says assembly member Willy Dunne.

“Considering the impacts of the oil exploration there, we heard lots of people talk about the inability to sleep at night with the lights and the noise. There’s still questions about the surface activities. The existing exploration pad cannot reach the Kenai Peninsula Borough subsurface areas from its location, so if they do plan to expand their operations to reach the borough subsurface properties, it would require another pad, an additional facility, additional disruption to the residential and recreational area.”

Dunne would eventually be the lone no vote on the ordinance. Kelly Cooper said she had a tough time supporting the measure.

“When we look at whether we vote this up or down, I think the majority of the constituents understand that if we vote this down, it occurs anyway and the revenue goes to the state. My decision in voting yes for this is as we go through this process, I want to be at the table. If we do not approve this lease, we do not have a seat at the table.

What the borough’s full take could eventually be isn’t known, as the wells have not yet been proven up. But of the 12.5 percent in royalties due, nearly 10 percent will go to the Anchor Point Fire and Emergency Medical Service Area. The remainder will go into the borough’s Land Trust Fund.