RAPID/Roadmap/3-AK-a
Alaska State Competitive Mineral Leasing (3-AK-a)
The Alaska Division of Oil and Gas (ADOG) within the Alaska Department of Natural Resources (ADNR) oversees the geothermal resource leasing process in the State of Alaska. The process is essentially a two-pronged approach to leasing lands: competitive and noncompetitive. Competitive leasing occurs when multiple parties are bidding for the development of a certain tract of land. Noncompetitive leasing occurs through a geothermal prospecting permit when there is little interest in the initial call for applications by the ADOG. In either process, the surface owner (if other than the state) will have a preferential right to either match the high bid or to obtain their own prospecting permit should they choose to do so.
More information on the geothermal leasing process and information on current lease sales by ADOG, including public notice of applications, can be found on the ADNR Geothermal Leasing webpage.
State Competitive Mineral Leasing Process
3-AK-a.1 to 3-AK-a.2 - Has a Best Interest Finding Been Made for the State Land?
Any disposal of geothermal resources must be preceded by a determination that the disposal is in the best interest of the State of Alaska AS 38.05.035(e); 11 AAC 84.700. The ADOG Director determines in a written finding that such action is in the state’s interest. In the written finding, known as a "best interest finding," the Director considers certain topics required by law, such as the reasonably foreseeable effects of the disposal on the area's fish and wildlife, historic and cultural resources, and communities. The Director also considers comments received during the public comment period and applicable laws and regulations. The Director takes a hard look at the relevant facts and issues known at the time and uses a reasoned approach to balance the potential positive and negative effects of the disposal given the mitigation measures and other protections in effect. The Director then makes a finding of whether or not, on balance, the lease, sale, or disposal is or is not in the state's best interest.
The best interest finding is a part of the state environmental process in Alaska and the developer should ensure that the steps in the following flowchart are met before proceeding in the leasing process. For more information on the best interest finding process, see:
Best Interest Finding Process:
3-AK-i
The following findings and supplements have been recently issued by the ADOG: Best Interest Findings - Exploration & Geothermal Licenses.
3-AK-a.3 - Is there Substantial Geologic Indication of Geothermal Resources?
If ADOG finds that there are substantial geologic indications of geothermal resources, a call for applications may not be necessary. The ADOG may, in its discretion, designate areas for disposal by competitive lease and conduct a disposal without a call for applications if all available geologic information indicates a substantial likelihood of commercial geothermal resources in the area 11 AAC 84.720(d).
According to Alaska Stat. § 41.06.060(4), "geothermal fluid" means liquids and steam at temperatures greater than 120 degrees Celsius or any commercial use of liquids and steam naturally present in a geothermal system at temperatures less than 120 degrees Celsius. Water at temperatures below 120 degrees Celsius must be acquired through appropriation.
3-AK-a.4 - Call for Applications
In the absence of substantial geologic indications of viable geothermal resources, a disposal of geothermal resource will be preceded by a call for applications. To commence a call for applications, the ADOG will designate a proposed geothermal disposal area, comprised of identified tracts which must be compact, contiguous, and consistent with acreage limitations in AS 38.05.181. The call for applications will be open for a specified period of time and open to the general public. 11 AAC 84.710.
Prospecting permits and geothermal leases must be issues for at least 40 acres but not more than 2,560 acres. A developer may not own or hold an interest in leases covering more than 51,200 acres; geothermal leases in commercial production do not count against the acreage limitation. Alaskas Stat. § 38.05.181(e).
3-AK-a.5 to 3-AK-a.6 - Is Disposal of Lands Through Competitive Process?
After collecting all calls for application, ADOG will determine which specific tracts will be disposed of through a competitive lease process and which will be disposed of through a noncompetitive prospecting permit. Any tracts receiving two or more applications in response to the call for applications must be competitively leased. 11 AAC 84.720(b). Any tracts which are not designated for competitive leasing but have still received an application during the call for application period will be subject to determination by the DO&G for issuing a prospecting permit. 11 AAC 84.720(c).
For more information on the noncompetitive mineral leasing process, see:
State Noncompetitive Mineral Leasing Process:
3-AK-d
3-AK-a.7 - Select Method of Bidding
The competitive bidding procedures established in Alaska Admin. Code tit. 11 § 82.400–82.475 apply to areas designated as competitive geothermal areas. Competitive bidding may be done either by sealed bid or at public outcry auction and will be chosen by the Commissioner of ADOG. 11 AAC 82.405. The Commissioner may also prescribe the minimum bid, but the minimum bid does not prevent the rejection of a bid that meets the minimum bid. Alaska Admin. Code tit. 11 § 82.410
3-AK-a.8 - Public Notice and Comment
ADOG will provide public notice of the competitive bidding process selected and any applicable limitations that a successful bidder must follow. The notice must describe the land and interests in land to be offered for disposal, note public availability of any preliminary analysis, and contain any other information necessary to inform the public about the disposal. The notice should also provide the public an opportunity to comment regarding the proposed disposal of State lands. 11 AAC 82.415.
3-AK-a.9 - Bid for Geothermal Lease Form
Example bid forms can be found on ADOG’s Geothermal Program webpage under Previous Lease Sales.
The bid must be signed and submitted in the bid form designated by DO&G. Any bids containing or accompanied by any condition, qualification, or material alternation of the form will not be considered. 11 AAC 82.420. Bidders must also comply with all of the relevant requirements in 11 AAC 82.200 and 11 AAC 82.205 to be qualified bidders. To meet the qualification requirements, the bidder must submit, along with their Bid Form, a statement that the bidder has met all relevant qualifications and requirements set forth in 11 AAC 82.200 and 11 AC 82.205. Developers may look to the Mt. Spurr Geothermal Sales documents for some of the relevant pre-qualification requirements and guidance for future projects.
3-AK-a.10 - Select Successful Bidder
If there are two or more equal bids that are the highest bids received at the lease sale, ADOG will notify the bidders and invite them to submit new bids, not lower than the original bids. If the new bids fail to break the tie, ADOG will issue new invitations until the tie is broken. 11 AAC 82.455.
The surface owner of the parcel, if held by a person other than the state, may exercise their preference right within 60 days after receiving notice of the acceptance of the bid for a lease. AS § 38.05.181(a). If the surface owner agrees to meet the terms of the successful bid, they will be awarded the final bid.
3-AK-a.11 - Geothermal Lease
ADOG will notify all interested parties when the right to a lease is awarded. The successful bidder must wire transfer funds in the amount of the cash bonus, first year’s annual rental, submit two copies of the completed lease form, and, if required, file a bond or pay accrued interest within the period specified in the award notice. 11 AAC 82.465(a). The successful bidder must also submit a bond required under 11 AAC 84.790. The bond amount will be determined by ADOG, but will be no less than $10/acre or $10,000, whichever is greater. The bond covers any potential surface-damage and will be released back to the developer under the following conditions:
- the geothermal prospecting permit or lease is expired or relinquished, and
- the area is rehabilitated to the satisfaction of the ADOG.
Statewide bonds do not satisfy the requirement of the surface-damage bond required for geothermal operation here but may be considered by DO&G when setting any amount of additional bond required. 11 AAC 84.790(d). If any bidder fails to submit any of the required forms, bonds, etc. the amount deposited with the bid is forfeited to the state. 11 AAC 82.465(a).
ADOG will also return the bid deposits of all unsuccessful bidders within 5 working days after a lease sale of the awarding of a geothermal prospecting permit. If the selected bidder is disqualified, the Commissioner may award the second and third highest bidders the opportunity to restore their bids and deposits within 10 days after receipt of the notice of the award. 11 AAC 82.475.
Lease Term Geothermal lease terms are issued for a primary term of 10 years and may be renewed for an additional term of 5 years if the lessee is engaged in drilling operations. A geothermal lease is also valid for the duration of commercial production. Twenty years after the initial commercial production, and at 10-year intervals thereafter, the ADOG may renegotiate the rentals and royalties due on the geothermal lease. AS § 38.05.181(f).
Royalties & Payments All geothermal leases are subject to an annual rental, payable in advance, of $3/acre. The rental for the year will be credited against royalties during that year as a minimum payment for the geothermal lease. AS § 38.05.181(e).
Every geothermal lease will be conditioned upon the lessee’s payment of a royalty of 1.75 percent of the gross revenues derived from the production, sale, or use of geothermal resources under the lease during the first 10 years immediately following the date the geothermal resource first generates gross income, and 3.5 percent of the gross revenues derived from the production, sale, or use of geothermal resources under the lease after that first 10-year period. Royalties may be taken in kind, rather than in value if ADOG determines that it would be in the best interest of the state. AS § 38.05.181(g).
3-AK-a.12 - Generate Required Plans Under 11 AAC 84 Before Conducting any Activities on Lease
A Plan of Operations, Plan of Exploration, and Plan of Development must be completed before any of the associated activities are conducted on leased lands. Alaska Admin. Code tit. 11 § 84.750–760. The developer should consult the ADOG and the appropriate regulations in 11 AAC 84.700 to determine the requirements for each of these plan submittals. The developer should also consider the state exploration process flowchart before conducting any exploratory activities.
For more information on the state exploration process, see:
Contact Information
Suggest a contact using the Feedback button above.Suggest edits using the Feedback button above.
Regulations
- Alaska Stat. § 41.06.060 - Geothermal Resources Definitions
- Alaska Statutes Chapter 38.05 Alaska Land Act
- Title 11 Alaska Administrative Code 84.700 Geothermal Leasing
- Title 11 Alaska Administrative Code 82.400 - 82.475 Competitive Bidding
- Title 11 Alaska Administrative Code 82 Mineral Leasing Procedures
References
Edit
Alaska Department of Natural Resources
Geothermal Contact
(907) 465-3427
Edit
Alaska Division of Oil and Gas
Geothermal Contact
(907) 465-3427
joanneabbazabbaschmidt@alaskaabbazabbagov
Visit Website
Edit
Alaska Division of Oil and Gas
State Mineral Leasing Process Contact
907.269.8776
Visit Website