Washington (Platts)--23May2007

The US Bureau of Land Management has proposed an amendment to
regulations governing oil and natural gas leasing in the National Petroleum
Reserve in Alaska. 

     The proposed rule, which will now enter a 60-day comment period, would
give BLM some discretion in waiving royalties and rental fees on NPR-A leases
if it determines incentives are necessary to spur production. Any such
decisions would have to be cleared with local authorities. 

     In addition to royalty relief, the rule, released Tuesday, would allow
for extensions beyond the usual 10-year leasing term. There would be virtually
no limit to the number of 10-year extensions a lessee could apply for if his
lease was producing and royalties were being paid, but non-producing leases
would be limited to a total of 30 years unless the lack of production was the
result of natural conditions. 

     The rulemaking is required under the Energy Policy Act of 2005.

     The 23-million-acre NPR-A is remote and there is currently no gas
pipeline to transport the product to a collection site. Oil drilling is only
permitted in the winter, when roads can be built on ice without disrupting the
landscape. 

     In a warm winter like the one that just ended, BLM spokeswoman Sharon
Wilson said drilling could be limited to less than three months. This short
season makes it difficult to develop a lease in the 10 years usually allotted,
said Wilson. Flexibility in time and royalty payments is necessary to
encourage production, she said.

     The rule would also encourage unitization--or the ability of more than
one partner to lease the land and share costs and benefits. It has further
provisions concerning Alaska Natives' ownership rights.

		--Jean Chemnick, jean_chemnick@platts.com