The administration of Alaska Governor Mike Dunleavy has issued a stern warning to BlueCrest Energy, a Texas-based oil company, regarding its long-held oil and gas leases in the Cosmopolitan Unit located in Cook Inlet, near Anchorage.
The Alaska Department of Natural Resources has placed the Cosmopolitan Unit in ‘default’ status, citing the company’s failure to fulfill its drilling commitments.
BlueCrest Energy has held its leases in this region for over a decade but has not initiated any new drilling operations since 2019, according to state records.
The company attributes its inactivity to a financial crunch resulting from the state of Alaska’s decision in 2014 to halt tax credits for oil firms that invested in drilling activities.
In addition, BlueCrest has been in discussions with Alaska’s economic development agency to secure approval for delays in repaying a $30 million state loan that had been granted to the company.
Under a recent notice issued in May by Commissioner John Boyle, BlueCrest is required to demonstrate by August 21 that it has secured the necessary investments to drill a new $55 million oil well and advance development plans for an offshore platform that could potentially target natural gas.
This essential offshore platform is estimated to cost upwards of $350 million, researchers from BlueCrest have reported.
Commissioner Boyle emphasized the urgency of the situation, stating, ‘We want to see aggressive, defined momentum towards putting our resources into active production. We need to see some drilling. We need to see some action.’
BlueCrest’s Chief Executive, Benjy Johnson, acknowledged the state’s concerns but expressed that defaulting on their leases is not a feasible solution to address the challenges they face.
According to Johnson, ‘The solution to the problem is helping us get funding to drill these wells, and to get the gas development going.’
BlueCrest is among a group of smaller companies operating in the Cook Inlet basin, where the majority of gas production is dominated by the larger independent oil company, Hilcorp.
Hilcorp has recently warned urban Alaska’s heating and electric utilities that they should not anticipate the renewal of gas supply contracts when they come due in the coming years.
In light of this impending supply shortage, utility providers are advancing their plans to import liquefied natural gas, although they also assert that increasing local gas production could delay the necessity for imports.
The current supply situation is critical enough that utilities and regulators have begun to discuss contingency measures that may include rolling blackouts.
BlueCrest asserts that its leases encompass significant ‘proved reserves’ of gas, which indicates that these deposits have been tested and validated by engineering assessments for high producvability.
However, the investment needed to develop an offshore platform for gas extraction is substantial, with estimates reaching approximately $350 million.
Another smaller player in the Cook Inlet, HEX, has reported success with gas drilling in the past two years, aided by the Dunleavy administration’s decision to lower royalty payments owed to the state.
Commissioner Boyle characterized such royalty reductions as a ‘carrot’ used to incentivize development.
Conversely, he also indicated that the administration has potential ‘sticks’ to enforce compliance if they do not observe active development from BlueCrest and other companies on their leased acreage.
If BlueCrest fails to demonstrate progress in its drilling program, multiple outcomes are possible, according to Boyle.
He noted that his agency could decide to shrink BlueCrest’s Cosmopolitan Unit or potentially terminate it entirely.
Boyle stated, ‘There are definitely companies and entities that are willing to put money there to bring that gas to market.’
Another alternative for BlueCrest is to either sell its leases to another entity or partner with another business in pursuit of advancing gas development.
Recent reports indicated that BlueCrest and Hilcorp had previously explored the possibility of a partnership to develop the gas at the Cosmopolitan Unit. However, negotiations fell through due to disagreements over cost-sharing and profit distribution.
The future of BlueCrest’s leases hinges on timely action, with the state poised to enforce its requirements as the urgency for local gas production intensifies.
image source from：https://www.adn.com/business-economy/energy/2025/06/09/amid-alaska-natural-gas-crunch-state-could-revoke-leases-from-company-whose-drilling-has-stalled/
