page 6 l EXPLORATION & PRODUCTION l NATURAL GAS l UTILITIES Vol. 25, No. 35 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of August 30, 2020 • $2.50 see FEDERAL SUPPORT page 9 see OIL PRICES page 8 July Cook Inlet gas production up marginally, averaging 198,905 mcf GOM facilities shut-in as Laura looms; temporary price spike likely As Petroleum News went to press Aug. 26, category 4 Hurricane Laura was bearing down on the north coast of the Gulf of Mexico. The National Hurricane Center warned that an “unsurviv- able storm surge with large and destructive waves will cause catastrophic damage from Sea Rim State Park, Texas, to Intracoastal City, Louisiana, including Calcasieu and Sabine Lakes.” “This surge could penetrate up to 40 miles inland from the immediate coastline, and flood waters will not fully recede for several days after the storm,” the NHC said. The storm will make landfall in an area that accounts for Aid on its way in Canada, again; key new Trudeau cabinet minister As Canada started its descent into the depths of COVID-19, Finance Minister Bill Morneau made a statement that will hang over the governing Liberal Party for years. He promised on March 25 that federal help for the hard-hit energy sector would be on the way in “hours, potentially days.” Despite an investment of C$1.7 billion to clean up abandoned wells, C$750 mil- lion to lower methane emissions and the offer of direct financial support, nothing emerged from the government of Prime Stories inside the latest annual edition of The Explorers magazine include the following: 88 NPR-A exploration plans a game-chang- er; Tax uncertainty, ConocoPhillips Alaska’s investment at risk; Eni trying again at Nikaitchuq North; Exploration not Hilcorp’s forte, but then there’s Whiskey Gulch, Lower Cook Inlet; Great Bear Pantheon gears up to drill Talitha; Jade advancing 2021-22 Sourdough well; Borealis drilling Castle North first; Oil Search leads in hunt for Nanushuk. 2020 Explorers inside Explorers The Oil & gas companies investing in Alaska’s future Explorers The Explorers, an annual publication from Petroleum News Redesigning Pikka Oil Search finds way to advance project in volatile oil price environment By KAY CASHMAN Petroleum News I n addition to asking AIDEA to finance surface infrastructure for the Pikka project, operator Oil Search Alaska and its partner Repsol have switched to a phased approach for the North Slope unit that will reduce upfront development costs and allow cash flow from Phase 1 oil production to fund the subsequent two phases. Although all details were not yet available as planning and discussions continue between the Pikka partners, on Aug. 25 from Sydney, Australia, Keiran Wulff, top executive of Oil Search Ltd., told Petroleum News that Phase 1 will involve one drilling pad ver- sus three drilling pads, a smaller modular processing facility that can be expanded for subsequent phases and a flowline connecting to existing North Slope infra- structure. Neither Wulff nor the half year results released Aug. 25 in Sydney (Aug. 24 in Alaska) said whether the phased approach will alter the peak oil production of the development, which Oil Search previously said Nov. 1 Seaview target Hilcorp applies to AOGCC for permission to produce; other applications to DNR By KRISTEN NELSON Petroleum News H ilcorp Alaska is targeting Nov. 1 for the start of natural gas production from the Seaview No. 8 exploratory well at its Seaview field south of Anchor Point on the Kenai Peninsula. The company has applied to the Alaska Oil and Gas Conservation Commission to amend a 2018 conservation order which allowed it to drill, com- plete and test the Seaview No. 8 well, but didn’t allow it to produce the well without written per- mission from AOGCC. The commission set a potential hearing date on the application for Sept. 22 and said if it does not receive a timely request for a hearing and if infor- mation from Hilcorp is sufficient it may issue an order without a hearing. In the Aug. 11 application to AOGCC Hilcorp said it applied to the Alaska Department of Natural Resources for the Seaview unit on July 31, and on Aug. 6, applied to DNR to form the Clark partici- pating area within the Seaview unit. The company said the Clark PA includes one DNR lease and var- ious private leases as well as unleased private lands, a total of 640 acres. Hilcorp said DNR is reviewing the unit and par- ticipating area applications. Hilcorp told the commission that, subject to Deal nearing completion Chugach Electric now expects its purchase of ML&P to close on Oct. 30 By ALAN BAILEY For Petroleum News O n Aug.24 the Municipality of Anchorage and Chugach Electric Association announced that they anticipate closing the purchase of electric utility Municipal Light & Power by Chugach Electric on Oct. 30. The purchase will consolidate the two Anchorage based utilities into a single entity, with the objective of achieving improved operational efficien- cies and economies of scale. ML&P is currently owned by the municipality. Both utilities are based in Anchorage. Following closure of the purchase, existing ML&P customers will begin receiving electric serv- ices from Chugach Electric. Lengthy process The process of negotiating the purchase deal and obtaining regulatory approval for the utility consoli- dation has proven lengthy and complex — the municipality originally proposed the sale of ML&P see PIKKA PROJECT page 11 see SEAVIEW TARGET page 10 see ML&P PURCHASE page 10 KEIRAN WULFF The process of negotiating the purchase deal and obtaining regulatory approval for the utility consolidation has proven lengthy and complex — the municipality originally proposed the sale of ML&P to Chugach Electric in December 2017. CHRYSTIA FREELAND
12
Embed
l EXPLORATION & PRODUCTION Redesigning Pikka ...Pikka partners, on Aug. 25 from Sydney, Australia, Keiran Wulff, top executive of Oil Search Ltd., told Petroleum News that Phase 1
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l E X P L O R A T I O N & P R O D U C T I O N
l N A T U R A L G A S
l U T I L I T I E S
Vol. 25, No. 35 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of August 30, 2020 • $2.50
see FEDERAL SUPPORT page 9
see OIL PRICES page 8
July Cook Inlet gas production up marginally, averaging 198,905 mcf
GOM facilities shut-in as Laura looms; temporary price spike likely
As Petroleum News went to press Aug. 26, category 4
Hurricane Laura was bearing down on the north coast of the
Gulf of Mexico.
The National Hurricane Center warned that an “unsurviv-
able storm surge with large and destructive waves will cause
catastrophic damage from Sea Rim State Park, Texas, to
Intracoastal City, Louisiana, including Calcasieu and Sabine
Lakes.”
“This surge could penetrate up to 40 miles inland from the
immediate coastline, and flood waters will not fully recede for
several days after the storm,” the NHC said.
The storm will make landfall in an area that accounts for
Aid on its way in Canada, again; key new Trudeau cabinet minister
As Canada started its descent into the
depths of COVID-19, Finance Minister
Bill Morneau made a statement that will
hang over the governing Liberal Party for
years.
He promised on March 25 that federal
help for the hard-hit energy sector would
be on the way in “hours, potentially
days.”
Despite an investment of C$1.7 billion
to clean up abandoned wells, C$750 mil-
lion to lower methane emissions and the offer of direct financial
support, nothing emerged from the government of Prime
Stories inside the latest annual edition of The Explorers magazine include the following: 88 NPR-A exploration plans a game-chang-er; Tax uncertainty, ConocoPhillips Alaska’s investment at risk; Eni trying again at Nikaitchuq North; Exploration not Hilcorp’s forte, but then there’s Whiskey Gulch, Lower Cook Inlet; Great Bear Pantheon gears up to drill Talitha; Jade advancing 2021-22 Sourdough well; Borealis drilling Castle North first; Oil Search leads in hunt for Nanushuk.
2020 Explorers inside
ExplorersThe
Oil & gas companies investing in Alaska’s future
Explorers
The Explorers, an annual publication from Petroleum News
Redesigning Pikka Oil Search finds way to advance project in volatile oil price environment
By KAY CASHMAN Petroleum News
In addition to asking AIDEA to finance
surface infrastructure for the Pikka
project, operator Oil Search Alaska and
its partner Repsol have switched to a
phased approach for the North Slope unit
that will reduce upfront development
costs and allow cash flow from Phase 1
oil production to fund the subsequent
two phases.
Although all details were not yet available as
planning and discussions continue between the
Pikka partners, on Aug. 25 from Sydney, Australia,
Keiran Wulff, top executive of Oil
Search Ltd., told Petroleum News that
Phase 1 will involve one drilling pad ver-
sus three drilling pads, a smaller modular
processing facility that can be expanded
for subsequent phases and a flowline
connecting to existing North Slope infra-
structure.
Neither Wulff nor the half year results
released Aug. 25 in Sydney (Aug. 24 in
Alaska) said whether the phased
approach will alter the peak oil production of the
development, which Oil Search previously said
Nov. 1 Seaview target Hilcorp applies to AOGCC for permission to produce; other applications to DNR
By KRISTEN NELSON Petroleum News
Hilcorp Alaska is targeting Nov. 1 for the start
of natural gas production from the Seaview
No. 8 exploratory well at its Seaview field south of
Anchor Point on the Kenai Peninsula.
The company has applied to the Alaska Oil and
Gas Conservation Commission to amend a 2018
conservation order which allowed it to drill, com-
plete and test the Seaview No. 8 well, but didn’t
allow it to produce the well without written per-
mission from AOGCC.
The commission set a potential hearing date on
the application for Sept. 22 and said if it does not
receive a timely request for a hearing and if infor-
mation from Hilcorp is sufficient it may issue an
order without a hearing.
In the Aug. 11 application to AOGCC Hilcorp
said it applied to the Alaska Department of Natural
Resources for the Seaview unit on July 31, and on
Aug. 6, applied to DNR to form the Clark partici-
pating area within the Seaview unit. The company
said the Clark PA includes one DNR lease and var-
ious private leases as well as unleased private
lands, a total of 640 acres.
Hilcorp said DNR is reviewing the unit and par-
ticipating area applications.
Hilcorp told the commission that, subject to
Deal nearing completion Chugach Electric now expects its purchase of ML&P to close on Oct. 30
By ALAN BAILEY For Petroleum News
On Aug.24 the Municipality of Anchorage and
Chugach Electric Association announced that
they anticipate closing the purchase of electric utility
Municipal Light & Power by Chugach Electric on
Oct. 30. The purchase will consolidate the two
Anchorage based utilities into a single entity, with the
objective of achieving improved operational efficien-
cies and economies of scale. ML&P is currently
owned by the municipality. Both utilities are based in
Anchorage.
Following closure of the purchase, existing
ML&P customers will begin receiving electric serv-
ices from Chugach Electric.
Lengthy process The process of negotiating the purchase deal and
obtaining regulatory approval for the utility consoli-
dation has proven lengthy and complex — the
municipality originally proposed the sale of ML&P
see PIKKA PROJECT page 11
see SEAVIEW TARGET page 10
see ML&P PURCHASE page 10
KEIRAN WULFF
The process of negotiating the purchase deal and obtaining regulatory approval for the utility consolidation has proven
lengthy and complex — the municipality originally proposed the sale of ML&P to
Chugach Electric is offering rebates for residential and commercial customers who install electric vehicle charging systems
4 AGDC board OKs AFE, hears warning on funds
DOE has given final approval for Alaska LNG to export to non-free trade countries; earlier approval was conditional on FERC order
7 Two lawsuits filed against ANWR leasing
Total of 17 organizations seek to halt federal agencies from holding sale in Arctic National Wildlife Refuge Coastal Plain area
ALTERNATIVE ENERGY
Redesigning Pikka Oil Search advances project in volatile oil price environment
Nov. 1 Seaview target Hilcorp applies to AOGCC for permission to produce
Deal nearing completion Chugach Electric expects its purchase of ML&P to close on Oct. 30
ON THE COVER
2020 Explorers insideGOM facilities shut-in as Laura looms; temporary price spike likelyAid on its way in Canada, again; key new Trudeau cabinet minister
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l A L T E R N A T I V E E N E R G Y
Incentives for electric vehicle use Chugach Electric is offering rebates for residential and commercial customers who install electric vehicle charging systems
By ALAN BAILEY For Petroleum News
Anchorage-based utility Chugach Electric
Association is offering incentives to promote the
use of electric vehicles in Alaska. Essentially, the incen-
tives consist of rebates paid to customers who install
electric vehicle charging equipment. The utility says
that, in addition to encouraging electric vehicle use, the
incentive program will help build an understanding of
the use of the vehicles in the state and of the impacts of
vehicle charging on the electricity grid. Information
gained from the program may also help in the design of
electricity rate options for electric vehicle charging, the
utility says.
Under the incentive scheme residential customers can
obtain a $200 credit for each 240-volt electric vehicle
charger installed. Chugach Electric will grant up to 50
credits. The utility has also budgeted for up to 10 credits
for higher voltage “level 2” chargers, installed by com-
mercial customers. Up to three hotels in 2020 can be
reimbursed for up to $2,500 in costs for the installation
of charging equipment available to guests. There is a
similar incentive program for car rental companies, with
future possibilities for the expansion of this program.
Electricity is generally cheaper than liquid hydrocar-
bon fuels for powering road vehicles. In addition, elec-
tric vehicles, with having relatively few moving parts,
are generally relatively cheap to maintain. And, depend-
ing on how the electricity is generated, the use of electric
vehicles creates low levels of emissions.
Growing Alaska use In Alaska the use of electric vehicles has been grow-
ing, albeit from a low level — Chugach Electric says that
at the end of June nearly 1,200 electric vehicles were
registered in the state, more than half of them registered
in the Railbelt.
However, concerns about the mileage range of the
vehicles and the availability of charging stations have
In Alaska the use of electric vehicles has been growing, albeit from a low level — Chugach Electric says that at the end of June nearly
1,200 electric vehicles were registered in the state, more than half of them registered
Alaska has been a state the last 60+ years. Since Alaska became a state some 60 years ago, not one sole resident Alaskan has been able to explore or produce a single drop of oil or gas from his or her property. As a result, the immense wealth generated by Alaska’s oil and gas has gone outside the state rather than staying in the hands of individual Alaskans. Something is terribly wrong with this “result.” So, let’s try to get to the heart of how we got here and what we can do to change it. After buying Alaska from Russia coaxing more citizens to come to the new territory of Alaska to homestead became a strategic necessity for the defense of the lower 48 states of America. Following world war II, the US government desperately needed to have more new settlers to come, reside and settle in the new territory of Alaska to attempt to provide needed local civilian contract personnel in Alaska and produce fresh food and milk to service the thousands of sol-diers and sailors who were being stationed in the territory of Alaska that were providing the 1st line of defense to protect the lower 48 states from any threats of any foreign nation. Since Alaska’s gold rush, the US had been trying to entice new citizens to come to the territory of Alaska. The US government promise to any new settler was that they could come pick a new homestead in the ter-ritory of Alaska. The US Interior Department rules were clearly under-standable by any new Alaskan homesteader. If he or she lived on that homestead for two years and made certain improvements on the land, then they could keep the land and all the oil or gas that might be pro-duced beneath it. That was how the Katalla Oil Field, Alaska’s first oil field, was developed and was the enabling fact that allowed the Kennecott Copper mine to profitably produce and sell Alaska’s copper for the next 30 years. To this day, this shallow oil field of wells less than 1000 feet deep is still owned by private citizens. Many lower 48 citizens came up to the frigid new territory of Alaska to attempt to prove-up a new Alaskan homestead. These new folks soon found out living in the Alaskan brush was an arduous task that required some cash, but a whole lot of extreme physical work, extreme privation, and a lot of ingenuity just to prove up his new homestead and survive for the two year requirement. To be awarded a homestead they had to live in an area having few if any roads, few neighbors, a lot of big bears, and no electricity or running water. But they knew if they toughed it out, they would end up owning the land and everything below it to call their own. This all changed when Swanson River Oil Field was discovered on the Kenai Peninsula in 1957. Suddenly there was a major push to stop any homesteader anywhere in Alaska from being able to own their oil and gas beneath their property. It took an act of congress to ensure that the pre-1957 homesteaders got to keep their oil and gas, but everyone else was out of luck. Those that homesteaded their property after 1957 did not even get to keep the gravel, much less the oil and gas beneath their land. The state government could clear the trees off their proper-ty and take the gravel if they needed it to build a road. But the pre-1957 homesteaders were different; they owned the oil or gas beneath their lands ONLY IF they could get it to the surface and could cash in on it. The bottom line is this, if you cannot get the oil or gas beneath your property to the surface, you don’t frickin own it.
In the 1970’s the federal government only required a $10,000 bond to drill on federal lands. On homesteader’s land, the state of Alaska in its infinite wisdom set a bonding requirement that was ten times higher. Before any homesteader could even think about drilling even a shallow oil or gas well on their own land they would have to come up with $100,000 cash bond. How many homesteaders do you know had an extra $100,000 laying around in 1970? It is important to note that there are thousands of oil and gas wells in the lower 48 that produce from less than a couple hundred feet below the surface. But wait, it gets even better. The state of Alaska has now raised the homesteader’s bonding requirement from $100,000 to $400,000! Even though the homesteader or their heirs technically own their oil and gas if they can get it to the surface, the high bonding requirements deprives them of their ability to get it to the surface where it can actual-ly be sold and put into their bank account. Another thing, the high $400,000 drilling bond cost is just another form of state-imposed taxation. Unfair taxation was the premise that caused the 1770-settlers of Boston to dump all its English tea into the Boston Harbor. This is a double whammy! The land is already required by law to be pledged as collateral to pay all well plugging costs beneath his own homestead regardless, even if someone else had drilled the well. Even though there are only a couple of hundred of pre-1957 homesteaders, the state of Alaska bureaucrats who are pushing for higher bonding amounts are effectively throwing the homesteader who helped create this great state of Alaska under the bus. The end result of these unreasonable excessive drilling bonds is that not one Alaskan resident has ever been able to produce or sell a single drop of Alaska’s oil or gas since Alaska became a state some 60 years ago. You might be thinking, “But what about the environment? If we let people drill on their own land, won’t they trash it?” This land is their life. The homesteaders love their land more than anyone. They and their heirs know the tremendous sacrifice and effort they had to put in to get this land. It is preposterous to say they don’t care about what happens to their land. This writer believes that the current elected governmental officials are trying to do their best to restore equity back to the individual citizens of Alaska. We just need to make sure they do the right thing by lowering the bonding requirements so that individual Alaskans can be capable to rightfully explore for oil or gas on their own property. Please again carefully remember, it is only when the oil or gas has come to the surface of the homestead can any homesteader be able to con-vert this produced oil and gas to cash-in-hand, and be deposited in the homesteader’s own bank account. The state should be compelled to disclose all its findings for these dras-tic measures penalizing and depriving pre-statehood homesteaders of the option to convert any or all of their oil and gas beneath their pre-statehood homestead to the homesteader’s ownership.
-Jim White
THE TRUE BACKBONES OF ALASKA ARE THE ALASKA NATIVES, PRE-STATEHOOD RESIDENTS AND
HOMESTEADERS THAT VOTED AND CREATED THIS GREAT STATE OF ALASKA. THEY ARE THE
FORGOTTEN REAL HEROES OF ALASKA.
“RESULTS ALWAYS DEFINE INTENT”
P A I D M E S S A G E T O G O V . D U N L E A V Y , L E G I S L A T O R S & A O G C C C O M M I S S I O N E R S
F R O M O I L M A N J I M W H I T E
By KRISTEN NELSON Petroleum News
The Alaska Gasline Development
Corp. continues to work toward a
year-end goal of designating a new proj-
ect sponsor and transitioning to new proj-
ect leadership by June 30, and as its board
approved an authorization for expendi-
ture through June 30, it heard a warning
voiced by ex-officio board member Sen.
Cathy Giessel, R-Anchorage, that in the
state’s present dire economic circum-
stances, the funds which AGDC has from
the state may not be secure.
The Legislature and administration
may reduce the funds available to AGDC,
she told an Aug. 25 board meeting, sug-
gesting it would be appropriate to have
contingencies in place to deal with that
eventuality.
AGDC did note this issue in its Aug.
24 authorization for expenditure for capi-
tal projects for fiscal year 2021, July 1,
2020, through June 30, 2021.
The last on a list of project risks is:
“Alaska Legislature can appropriate
AGDC’s funds to apply to other State pri-
orities or can re-define AGDC’s abilities
through new legislation.”
DOE approval On Aug. 20 the U.S. Department of
Energy issued a final order authorizing
Alaska LNG to export liquefied natural
gas to non-free trade nations. AGDC had
received a 30-year authorization from
DOE previously, AGDC President Frank
Richards told the board, but it was con-
ditioned on receipt of Federal Energy
Regulatory Commission authority to
build the project, which was received in
May.
AGDC received export authorization
to free trade nations in November 2014;
the conditional non-free trade agreement
was issued in May 2015.
Major permits from the National
Marine Fisheries Service, the U.S. Fish
and Wildlife Service, the U.S. Coast
Guard, the Alaska Department of
Environmental Conservation and the
Alaska Department of Natural
Resources are in progress, with some
proposed or final rules published and
estimated dates for receipt ranging from
September to the fourth quarter.
New project sponsor(s) The goal of the current board,
appointed by Gov. Mike Dunleavy, is to
move the Alaska LNG project from state
leadership to private leadership. The
strategic plan which the AGDC board
approved earlier in the year calls for des-
ignating a new project sponsor or spon-
sors by the end of the year and a transi-
tion by June 30, 2021.
AGDC has been working with
unnamed strategic parties to obtain
increasing commitment and is responsi-
ble for drafting and approval of coopera-
tion and funding agreements between
the parties to cover the fiscal year 21
period.
AGDC said it will be seeking addi-
tional project sponsors as necessary
through a request for proposals process
in the second half of FY21.
AGDC established 8-Star, a limited
liability company, in 2018, providing a
vehicle for the corporation to transfer
project ownership to the private sector.
AGDC said it will establish an initial 8-
Star operating agreement to guide transi-
tion activities through FY21 and will
complete an equity option agreement to
be offered to strategic parties by the end
of the year. AGDC will also develop an
optimal longer-term 8-Star equity struc-
ture and finalize ownership and structure
and designation of a project sponsor or
sponsors by the end of the year.
Activities The Committee on Foreign Investment
in the United States, CFIUS, reviews cer-
tain transactions involving foreign invest-
ment and certain real estate transactions
by foreigners to determine impact on U.S.
national security. “Since the Alaska LNG
Project may lead to ownership by foreign
entities, AGDC will work with strategic
parties to complete the CFIUS process,”
AGDC said.
Work isn’t completely done, with a
spring 2021 field program for “further
investigation of cultural resource sites,”
focused on gaps in current data for
planned areas of disturbance along the
mainline pipeline.
AGDC said it will be completing state
and federal right-of-way negotiations
and update detailed Alaska LNG project
land plans for handover to FEED, front
end engineering and design.
Because of schedule uncertainty,
“AGDC plans to defer acquiring remain-
ing private land (real property) for the
LNG Plant,” including roughly 200-220
acres of proposed acquisition and 30-50
acres of established ROW and utility
easements within the planned plant
boundary, along the proposed re-route of
the Kenai Spur Highway and remaining
portions of the mainline ROW.
FERC challenges AGDC is anticipated that interveners
may initiate legal challenges to FERC’s
final order, following FERC’s July 22
denial of rehearing requests from the
Matanuska-Susitna Borough and the
Center for Biologic Diversity and
Earthjustice and said it would work with
legal counsel “to identify potential inter-
vener legal strategies and take preemp-
tive actions to mitigate intervener delay
or adverse effect to the Project.” l
l N A T U R A L G A S
AGDC board OKs AFE, hears warning on funds DOE has given final approval for Alaska LNG to export to non-free trade countries; earlier approval was conditional on FERC order
OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 25, No. 35 • Week of August 30, 2020
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Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of the individuals
listed above work for independent companies that contract services to Petroleum Newspapers of Alaska
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Kay Cashman PUBLISHER & FOUNDER
Mary Mack CEO & GENERAL MANAGER
Kristen Nelson EDITOR-IN-CHIEF
Susan Crane ADVERTISING DIRECTOR
Heather Yates BOOKKEEPER
Marti Reeve SPECIAL PUBLICATIONS DIRECTOR
Steven Merritt PRODUCTION DIRECTOR
Alan Bailey CONTRIBUTING WRITER
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Judy Patrick Photography CONTRACT PHOTOGRAPHER
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Renee Garbutt CIRCULATION MANAGER
CORRECTIONCumulative GMPA production 805 million
A story in the Aug. 23 issue of Petroleum News, “Greater Point McIntyre area
POD approved,” said cumulative production at GMPA through March of this year
was 316 million barrels.
The correct volume for cumulative production at GMPA is 805 million barrels.
Thanks to an observant reader for pointing out that 316 million didn’t sound
right!
been obstacles to more widespread use.
Chugach Electric says that the increased
use of the vehicles would expand the
electricity load, thus spreading the fixed
costs of the electrical system across more
electricity sales and hence lowering the
unit cost of electricity.
Under an electric vehicle research pro-
gram initiated in 2019 Chugach Electric
is helping commercial customers install
publicly available charging stations in
exchange for information about charging
station usage. To date charging stations
have been installed at Alyeska Resort in
Girdwood and at a south Anchorage mall.
There is a plan to install two other charg-
ing stations in Anchorage later this year.
The Alaska Energy Authority is also
interested in the potential for increased
electric vehicle use. The agency formed a
working group for monitoring the charg-
ing infrastructure in the state and for
channeling funds for charging station
installation at state facilities. The agency
is also planning to use money from the
settlement with Volkswagen over false
emissions testing from the company’s
diesel vehicles to help fund a commercial
grade charging station infrastructure in
the state. l
continued from page 2
ELECTRIC VEHICLES
“Since the Alaska LNG Project may lead to ownership by foreign
entities, AGDC will work with strategic parties to complete the
CFIUS process,” AGDC said.
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EXPLORATION & PRODUCTIONSlight turnaround in rig count, up by 10
The Baker Hughes U.S. rotary rig count made a slight correction the week end-
ing Aug. 21, up 10 rigs from the previous week for a count of 254, but down 662
from 916 a year ago.
Beginning May 8, when the count dropped
to 374 rigs, it dropped for 12 consecutive
weeks, hitting 251 on July 24 and maintaining
that count for a week before dropping again the
first two weeks of August.
The Houston oilfield services company has
issued a weekly rig count since 1944.
Prior to this year, the low was 404 rigs in
May 2016.
The increase was in rigs targeting oil, up 11
to 183 from the previous week, although still
down 571 from a count of 754 a year ago. There
were 69 rigs targeting natural gas, down one
from the previous week, and down 93 from 162 a year ago. Two rigs were listed
as miscellaneous, unchanged from last week and up two from a year ago.
Twenty of the holes were directional, 221 were horizontal and 13 were vertical.
Alaska count unchanged The rig count in Texas, which has the most active rigs, was 108, up eight from
100 last week (but down 338 from 446 a year ago).
West Virginia (8) was up by three rigs from the previous week, New Mexico
(47) was up by two rigs and Louisiana (32) was up by one.
Rig counts were unchanged for Alaska (3), California (4), Colorado (5),
Oklahoma (11) and Wyoming (1).
North Dakota (10) and Ohio (5) were each down by one rig from the previous
week; Pennsylvania (18) was down by two.
Baker Hughes shows Alaska with three active rigs Aug. 21, unchanged from
the previous week and down by five from a year ago.
The rig count in the nation’s most active basin, the Permian (127), was up by
10 rigs from the previous week and down by 307 from a count of 434 a year ago.
Baker Hughes has issued weekly rig counts for the U.S. and Canada since 1944
and began issuing international rig counts in 1975.
The U.S. rig count peaked at 4,530 in 1981. The low count, 244, was set the
week ending Aug. 14; prior to declines which began in May of this year, the pre-
vious low was 404 rigs in May 2016.
—KRISTEN NELSON
Beginning May 8, when the count dropped to 374
rigs, it dropped for 12 consecutive weeks, hitting
251 on July 24 and maintaining that count for
a week before dropping again the first two weeks
of August.
l E N V I R O N M E N T & S A F E T Y
Emissions double trouble for Canada Sudden surge in methane emissions ahead of output haven’t forced Canada, Alberta to rethink hopes of being carbon-neutral by 2050
By GARY PARK For Petroleum News
Just three months after the Canadian and
Alberta governments resolved years of
bickering over developing national
methane regulations they have been rocked
by updated statistics showing greenhouse
gas emissions from the petroleum industry
have more than doubled in the past year.
But none of the key players has yet
issued warnings that Canada may be forced
to revise its goals for lowering methane
output, rated as one of the most toxic
human-triggered gases.
Vented emissions, mainly methane,
soared to 175 million cubic meters in the
first half of 2020 compared with 75 million
cubic meters in the same period of 2019,
according to Petrinex, an industry-govern-
ment data-gathering partnership.
If that trend continues it could test the
target set by the federal administration of
Prime Minister Justin Trudeau to make
Canada carbon-neutral by 2050.
Canada-wide program The national government launched a
Canada-wide program on Jan. 1 to better
measure and reduce methane emissions —
which are estimated at 25 times greater
than carbon dioxide output.
Some provinces, including Alberta,
implemented their own methane regula-
tions to match the federal goal, but it wasn’t
until mid-May that Alberta agreed to bring
its controls into line with the Trudeau gov-
ernment’s minimum standards after what it
described as a period of “aggressive nego-
tiations.”
The federal plan aims to cut national
methane emissions from the oil and gas
sector by 40 to 45% from 2012 levels by
2025, but that target was meaningless with-
out the participation of Alberta whose oil
and gas industry accounts for 70% of
provincial methane emissions, of which
25% come from upstream activity.
Stricter than US program Canada’s petroleum industry says the
program, if fully implemented, will be the
strictest approach to global methane emis-
sions, contrasting with the United States,
where the Trump administration is rolling
back methane curbs.
During pandemic-induced oil produc-
tion cuts, energy producers have been
forced to reduce capital spending to sur-
vive.
But the sudden surge in estimated GHG
output during a period of downturn is
expected to compound the challenges fac-
ing governments.
“The fact that we are spending less on
technology and adoption means the (gov-
ernment) goals and targets are meaning-
less,” Audrey Macarenhas, chief executive
officer of Questor Technology, which
develops technologies to help companies
meet emissions targets, told Reuters. “We
don’t have a clear idea of how step by step
we’re going to get there.”
However, Terry Abel, executive vice
president of the Canadian Association of
Petroleum Producers, said it is too early to
say that the new emissions statistics will
cause Canada to miss its 2025 target.
“We always expected that if the regula-
tions didn’t achieve the desired outcome,
the regulations would perhaps become
even more stringent,” he said.
Canada’s Environment Minister
Jonathan Wilkinson said his government
hopes that federal loans to help the industry
achieve GHG reductions will be in place
“within weeks.”
Spokesmen for Canadian Natural
Resources and Cenovus Energy, two of
Canada’s leading oil and gas producers, say
the bigger operators are ahead of schedule,
while the Alberta Energy Regulator is set-
ting up a surveillance program to ensure
compliance with the methane targets. l
Vented emissions, mainly methane, soared to 175 million cubic meters in the first half of 2020 compared with 75 million
cubic meters in the same period of 2019, according to Petrinex, an
Largest gas fields Hilcorp’s Kenai field averaged 32,414
mcf per day in July, down 2.4%, 811 mcf,
from a June average of 33,225 mcf but up
10.2% from a July 2019 average of
29,408 mcf per day.
Hilcorp’s Ninilchik field averaged
31,833 mcf per day in July, up 4.8%,
1,469 mcf, from a June average of 30,364
mcf, but down 18.1% from a July 2019
average of 38,857 mcf per day.
Hilcorp’s Swanson River averaged
24,797 mcf per day in July, up 11.2%,
2,491 mcf, from a June average of 22,306
mcf, but down 20.8% from a July 2019
average of 31,304 mcf per day.
Hilcorp’s McArthur River field, the
inlet’s largest oil producer, averaged
24,353 mcf per day in July, up 4.2%, 973
mcf, from a June average of 23,380 mcf
and up 8.3% from a July 2019 average of
22,497 mcf per day.
The Beluga River field, which Hilcorp
operates and in which it has a one-third
interest, averaged 16,262 mcf per day in
July, down 4.6%, 790 mcf, from a June
average of 17,053 mcf and down 35.9%
from a July 2019 average of 25,385 mcf
per day.
Hilcorp’s North Cook Inlet field aver-
aged 15,249 mcf per day in July, up 8.4%,
1,180 mcf, from a June average of 14,069
mcf and up 44% from a July 2019 aver-
age of 10,589 mcf per day.
HEX LLC’s Kitchen Lights averaged
12,678 mcf per day in July, down 4.8%,
638 mcf, from a June average of 13,316
mcf and down 32% from a July 2019
average of 18,646 mcf per day.
Smaller fields There are 15 smaller fields producing
gas in Cook Inlet, two of which, Redoubt
Shoal and West McArthur River, both
operated by Cook Inlet Energy, a Glacier
Oil and Gas Corp. company, went offline
in June, with the company requesting
suspensions of operations from the
Alaska Department of Natural
Resources’ Division of Oil and Gas
based on global low oil prices and lack of
demand.
Hilcorp’s Beaver Creek averaged
9,118 mcf per day in July, down 7.4%,
734 mcf, from a June average of 9,851
mcf, but up 42.7% from a July 2019
average of 6,389 mcf per day.
Hilcorp’s Cannery Loop averaged
5,328 mcf per day in July, down 9.9%,
583 mcf, from a June average of 5,911
mcf but up 65.2% from a July 2019 aver-
age of 3,224 mcf per day.
AIX’s Kenai Loop field averaged
4,895 mcf per day, up 1.7%, 83 mcf,
from a June average of 4,813 mcf, but
down 8.9% from a July 2019 average of
5,376 mcf per day.
Hilcorp’s Deep Creek averaged 3,906
mcf per day in July, down 2%, 79 mcf,
from a June average of 3,986 mcf, and
down 16.8% from a July 2019 average of
4,694 mcf per day.
Hilcorp’s Granite Point averaged
3,741 mcf per day in July, up 1.7%, 63
mcf, from a June average of 3,678 mcf,
and up 34.1% from a July 2019 average
of 2,790 mcf per day.
North Fork, operated by Glacier’s
Cook Inlet Energy, averaged 3,403 mcf
per day in July, down 1%, 34 mcf, from
a June average of 3,437 mcf and down
17.5% from a July 2019 average of 4,127
mcf per day.
BlueCrest’s Hansen field, the
Cosmopolitan project, averaged 3,366
mcf per day in July, down 3.6%, 125
mcf, from a June average of 3,491 mcf,
and down 51.4% from a July 2019 aver-
age of 6,918 mcf per day.
Hilcorp’s Trading Bay averaged 2,995
mcf per day in July, up 11.1%, 300 mcf,
from a June average of 2,695 mcf, and up
16.8% from a July 2019 average of 2,565
mcf per day.
Hilcorp’s Ivan River averaged 2,449
mcf per day in July, up 808.8%, 2,179
mcf, from a June average of 269 mcf, and
up 451.8% from a July 2019 average of
444 mcf per day.
Hilcorp’s Lewis River averaged 1,067
mcf per day in July, up 0.5%, 5 mcf, from
a June average of 1,062 mcf, and up
322.1% from a July 2019 average of 253
mcf per day.
Hilcorp’s Nikolaevsk averaged 387
mcf per day in July, down 16.6%, 77
mcf, from a June average of 464 mcf, and
down 26.4% from a July 2019 average of
526 mcf per day.
Amaroq’s Nicolai Creek averaged 365
mcf per day in July, up 8.5%, 28 mcf,
from a June average of 336 mcf, but
down 0.7% from a July 2019 average of
367 mcf per day.
Hilcorp’s Middle Ground Shoal aver-
aged 300 mcf per day in July, up 26.5%,
63 mcf, from a June average of 238 mcf,
and up 0.9% from a July 2019 average of
298 mcf per day.
Cook Inlet natural gas production
peaked in the mid-1990s at more than
850,000 mcf per day. l
l E X P L O R A T I O N & P R O D U C T I O N
July inlet gas production up marginally Cook Inlet natural gas averaged 198,905 mcf per day, up 0.2% from June, but down 7.5% from a July 2019 average of 214,954 mcf
6 PETROLEUM NEWS • WEEK OF AUGUST 30, 2020
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Vol. 23, No. 37 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of September 16, 2018 • $2.50
page2
Newfield looking at Alaska;Begich, Dunleavy weigh in;L48 shale boom tapering off TEXAS-BASED INDEPENDENT
NEWFIELD EXPLORATION has people visit-ing Alaska to look at the North Slope’s geo-logic potential.
Headquartered in The Woodlands, Texas,the visiting scientists are not handing out busi-ness cards to everyone they meet, so the visitis very hush-hush.
Per the big independent’s website,Newfield is an oil company focused on profitably growing liq-uids-rich unconventional resource plays in the Anadarko andArkoma basins of Oklahoma, the Williston basin (Bakken) of
State looks for RIK gas interest;includes Prudhoe, Point ThomsonThe Alaska Department of Natural Resources, Division of Oiland Gas, is soliciting interest in potential royalty in-kind naturalgas from the Prudhoe Bay and Point Thomson units. The solicitation, dated Aug. 31, asks for expressions of interestby letter within 30 days.
DNR said it is considering whether to take the state’s royaltyon future natural gas production from Prudhoe Bay and PointThomson in value or in kind. “If DNR takes the royalty in kind, it is currently considering anoncompetitive contract,” solicitation says. The department saidthat to consider a noncompetitive contract it “first considerswhether there is a lack of competition and whether a noncompet-
GAO questions lack of preliminarydesign review for polar icebreakersThe U.S. Government Accountability Office has issued areport raising questions over the reliability of the estimatedcost and schedule for developing new heavy polar icebreakersfor the U.S. Coast Guard. The Department of HomelandSecurity, the agency that includes the Coast Guard, hasaccepted the GAO’s findings.
Currently the Coast Guard only operates two polar capableicebreakers: the Healy, a medium duty icebreaker, much usedas a base for polar research, and the Polar Star, which is aheavy-duty icebreaker but is 41 years old. A third icebreaker,the Polar Sea, sister ship to the Polar Star, is laid up in port andhas become a source of spare parts for the Polar Star.
Colville barges diesel to SlopeTransportation company Colville has transported 2 milliongallons of diesel fuel by barge to Prudhoe Bay on the NorthSlope, the company has announced. This was the first bulkdelivery of fuel to the Slope by barge since the 1990s, andpossibly the largest shipment of its type ever, the companysaid. The supply barge, owned and operated by CrowleyMarine, arrived at Deadhorse on Sept. 6. Because of the shal-low water depths, the barge had to be moored 3 miles off-shore, with the fuel being carried to shore in smaller vessels.Onshore, the fuel was pumped into tanker trucks for transferto Colville’s tank farm in Deadhorse.
The U.S. Coast Guard and BP oversaw the operation, saidDave Pfeifer, Colville president and chief executive officer.More typically, fuel for use on the North Slope is deliveredto Deadhorse from a refinery in Valdez, using tanker trucks
see INSIDER page 10
see GAS INTEREST page 8
see POLAR ICEBREAKERS page 8
see DIESEL DELIVERY page 7
EIA: Brent averaged $73/barrel inAugust; US crude 10.9 million bpd
Pt Thomson extensionState stays 2019 date in 2012 settlement on Alaska LNG project progress
By KRISTEN NELSONPetroleum News
The state has stayed a deadline in its 2012 set-tlement with Point Thomson operatorExxonMobil Production Co. The settlement required a plan for expansion ofPoint Thomson production by the end of 2019 if amajor gas sale hadn’t been sanctioned by June2016. Late last year the state and ExxonMobilreached agreement on the company’s expansionplan. The settlement required either increasingproduction to 30,000 barrels per day of condensate(the current facilities support 10,000 bpd, althoughthat rate has rarely been achieved) or moving nat-ural gas to Prudhoe Bay for injection there (requir-ing an agreement with the Prudhoe Bay working
interest owners and construction of a gas pipelinebetween the fields). Moving natural gas to Prudhoe wasExxonMobil’s choice. That work has now been deferred.
An optimistic outlookConocoPhillips ups GMT-2 forecast; moves ahead on Willow, further explorationBy ALAN BAILEY
Petroleum News
In a highly upbeat presentation to ajoint meeting of the Alaska House and
Senate Resources committees on Sept.10, Scott Jepsen, ConocoPhillips Alaskavice president of external affairs andtransportation, overviewed his compa-ny’s current exploration and develop-ment plans in Alaska, and the resultingmajor uptick in the company’s expectations for itsfuture Alaska oil production.
Increased production estimateJepsen said that his company has upped the esti-
mated peak production for its GreaterMooses Tooth 2 development in thenortheastern National PetroleumReserve-Alaska from 30,000 barrels ofoil per day to 38,000 bpd. The federalBureau of Land Management has pub-lished a final environmental impact state-ment for the project, with a record ofdecision anticipated in October. Thatcould lead to a final investment decisionfor the project later this year, Jepsen said.Meanwhile the Greater Mooses Tooth 1 devel-opment is moving ahead, with first oil anticipatedby the end of the year. Peak production is expectedto run at about 30,000 bpd.
Trudeau treads carefullyAdministration examining options to salvage Trans Mountain, including an appeal
By GARY PARKFor Petroleum News
T he future of large-scale resourceprojects in Canada depends heavily
on how his government responds to afederal court ruling that has stalledprogress on the Trans Mountain pipelineexpansion, said Prime Minister JustinTrudeau.
“What we need is not just thispipeline. We need to be able to build resource proj-ects of all different types with appropriate sociallicense,” he told reporters.
He said the objective is to ensure that TransMountain and other projects do not get “bogged”down in endless court battles.
Trudeau, firing back at his critics,noted that TransCanada’s Keystone XLproject was long ago approved inCanada, but has become entangled in theUnited States over a failure to engage indetailed consultations with communitiesalong the pipeline right of way.
“This is the way that the world isgoing and if we can demonstrate clarityand certainty for businesses through theprocess to the investors we will be ableto get more built,” he said.
Decision impacts communitiesTrudeau called the court decision on TransMountain “frustrating and devastating” for com-
see POINT THOMSON page 12
see CONOCO OUTLOOK page 11
see TRANS MOUNTAIN page 9
Also Sept. 10, the Alaska GaslineDevelopment Corp. announced thatExxonMobil and AGDC had agreed towhat the corporation called “certain keyterms including price and a volume basisfor a Gas Sales Agreement,” captured ina “Gas Sales Precedent Agreement”
signed Sept. 10.
SCOTT JEPSEN
JUSTIN TRUDEAU
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Minister Justin Trudeau that will protect Alberta from the
economic fallout of COVID-19 or set Canada’s energy
stronghold on a path to sustainable prosperity.
Only one taker In the five months since Morneau’s infamous commit-
ment, only one company has taken advantage of the fed-
eral support — InPlay Oil, with daily output of less than
5,000 barrels of oil equivalent — through an agreement
with the government-owned Business Development
Bank of Canada, BDC, for a four-year term facility of
C$25 million.
Ben Brennen, vice president of the Canadian
Association of Petroleum Producers, told the Calgary
Herald that although the InPlay deal was “positive ... we
remain concerned that companies needing liquidity still
might not get it, and, even if they do, will it be enough to
support them?”
In addition, InPlay Chief Executive Officer Doug
Bartole said his company pursued assistance for months,
resolving to dog the BDC and Export Development
Canada, EDC, “to the end, and we did.” Three other
companies have been approved for EDC funding, but not
a penny has been distributed.
The results have been even bleaker for companies try-
ing to tap the government’s Large Employer Emergency
Financing Facility, with one of them — Painted Pony
Energy — forced to avoid bankruptcy by accepting a
C$461 million takeover offer from Canadian Natural
Resources.
Cabinet upheaval The biggest hope of a workable rescue plan occurred
Aug. 18, stemming from one of the greatest upheavals
within a federal government in recent memory.
With his pockets bulging from a fortune accumulated
in a family-run human resources firm, Morneau was
never expected to remain indefinitely in his job as
Canada’s finance minister.
But no one expected his departure to be so sudden and
his explanation to be so implausible.
In fact, no one bought his howler of a claim that his
“resignation” from Trudeau’s cabinet and as a Member
of Parliament was “voluntary.”
Without Trudeau even observing the normal courtesy
of standing alongside Morneau, the finance minister cut
himself adrift when he told a news conference that he
had never intended to remain in politics beyond two
terms.
In the middle of the worst economic crisis in
Canadian history, he said the time was appropriate for
him to step aside and apply for his “dream job” as secre-
tary-general of the Organization of Economic
Cooperation and Development.
That came only 10 months into his second term and
more than three years short of the latest possible deadline
for Trudeau to call an election.
Morneau said he told Trudeau a new finance minister
should be chosen to “fight against the pandemic and pave
the road toward economic recovery,” a journey that “will
take many years.”
Without even making an attempt to camouflage the
obvious, politicians from all federal parties agreed the
bombshell was clear proof of a bitter relationship
between Trudeau and Morneau over the strategy needed
to rescue the Canadian economy.
Freeland named Other than a token expression of gratitude for
Morneau’s role in his government, Trudeau wasted no
time in elevating Chrystia Freeland into the finance min-
ister’s portfolio, while retaining her as his deputy prime
minister.
Freeland, who steered Canada to a revised North
American free trade agreement, despite insults hurled at
her by President Donald Trump, has built a growing rep-
utation as a fence-mender with Canada’s provincial pre-
miers.
And she was quick out of the blocks with the bare
bones of an economic recovery plan, due to be released
later in August.
Freeland said the Trudeau administration’s plan will
restart the national economy with a “green” emphasis
and address the impact of a pandemic “that is hitting
women particularly hard.”
Born in northern Alberta 52 years ago, she is well
acquainted with the vital role played by that province’s
oil and gas industry. Under a federal equalization pro-
gram Alberta’s federal taxes have contributed C$630 bil-
lion (C$240 billion in the last 11 years alone) to the fed-
eral treasury since 1961 for redistribution across the rest
of Canada.
Alberta Premier Jason Kenney, who has had three
meetings with Freeland since the October 2015 election,
has yet to say whether his hopes in the Trudeau govern-
ment have been restored by the cabinet shuffle.
However, he may have drawn a shred of optimism
when newly appointed Intergovernmental Affairs
Minister Dominic LeBlanc visited Newfoundland
Premier Andrew Furey on Aug. 20 and pledged that the
thousands of Atlantic Canadians who depend directly or
indirectly on the oil and gas sector will soon be presented
with a “series of policy instruments ... to ensure there’s a
sustainable, long-term future in this industry.”
Only this time LeBlanc sidestepped Morneau’s blun-
der of promising an announcement in “hours, potentially
days.” Instead the best he would offer was “soon.”
At the least, the western oil and gas producing
provinces — Alberta, Saskatchewan, British Columbia
and Manitoba — are counting on nothing less than what-
ever the Trudeau administration serves up to
Newfoundland, while mindful of what happened in
March.
—GARY PARK
continued from page 1
FEDERAL SUPPORTFreeland, who steered Canada to a revised
North American free trade agreement, despite insults hurled at her by President Donald
Trump, has built a growing reputation as a fence-mender with Canada’s provincial
premiers.
10 PETROLEUM NEWS • WEEK OF AUGUST 30, 2020
approval from the commission and DNR, it plans to
bring Seaview 8 online Nov. 1, allowing delivery of gas
for winter use and for storage in the summer.
In its DNR participating area application the company
said it has been actively exploring the Seaview area for six
years, with seismic, stratigraphic well tests and “other
confidential surveying of the area.”
The discovery well, Seaview No. 8, was drilled in
2018, resulting in the discovery of commercial gas vol-
umes.
Hilcorp told DNR’s Division of Oil and Gas that it
anticipates drilling a second delineation well in the fourth
quarter of this year or the first quarter of 2021.
In its current AOGCC application the company said
productive depths are between 350 feet and 5,500 feet
total vertical depth shown in the Seaview No. 8 well,
including gas reservoirs in the Lower Sterling, Beluga and
Tyonek.
2018 AOGCC decision AOGCC received no comments, protests or requests
for a hearing in response to Hilcorp’s 2018 request, and
said while it was approving the company’s request to drill,
“Seaview 8 may not be placed on regular oil or gas pro-
duction absent prior written approval from AOGCC.”
The commission said its order is premised on Hilcorp
having “valid leases for all properties through which the
wellbore passes,” and said the company was to notify
AOGCC “within 30 days whenever the status of any
uncommitted property changes.”
There is a state oil and gas lease at Seaview, but the
prospect includes private owners with subsurface rights,
more than 100 properties within 3,000 feet of Seaview
No. 8’s anticipated productive interval.
Hilcorp told the commission in 2018 that it “has made,
and is continuing to make attempts to lease all uncommit-
ted tracts within Seaview Prospect area. However, a num-
ber of landowners have yet to be located, or are unwilling
to participate in our exploration efforts.”
The company’s PA application to DNR includes a list
of mineral owners and the tract percentage attached to
each property in the Clark participating area. Hilcorp’s
tract percentage at the PA is the largest at 31.25%; the
company has leases covering just over 95% of the tract
acreage, with just under 5% of mineral owners uncommit-
ted. Hilcorp is the 100% working interest owner at
Seaview.
Correlative rights AOGCC’s duties, as described on its website, include
overseeing “oil and gas drilling, development and produc-
tion, reservoir depletion and metering operations on all
lands subject to the state’s police powers.”
The commission also “acts to prevent waste, protect
correlative rights, improve ultimate recovery and protect
underground freshwater.”
While most of the state’s major North Slope fields are
developed on land where the state is the only or the major
subsurface owner, Seaview is being developed on acreage
where there are multiple subsurface owners. This is where
correlative rights come in.
The commission is charged with ensuring that when
production occurs, it is allocated between owners of the
subsurface from which it is produced.
“Hilcorp understands there are complex ownerships
involved in the Seaview Field,” the company told the
commission in its 2020 application, “and AOGCC is
tasked with protecting all parties’ correlative rights. With
this in mind, Hilcorp commits to allocating production in
accordance with the proposed Clark participating area
schedule, or in accordance with DNR’s decision on the
Clark PA, if different.”
“All leased interests will be allocated production and
royalties based on their tract allocation percentage, miner-
al ownership, and lease royalty,” Hilcorp said.
Production and royalties will be temporarily held for
unleased mineral owners and uncommitted tracts “until
there is written order by AOGCC that determines how to
handle unleased interest and uncommitted tracts,” the
company said.
Temporary allocations Hilcorp said it would “submit an application to AOGCC
that incudes a detailed outline and methodology for how
unleased interests and uncommitted tracts should be allocat-
ed production,” allowing it to bring the Seaview No. 8 well
online “and ensure the seasonal deliverability of gas in the
winter and storage of gas in the summer, while compensat-
ing the landowners who have leased their lands, and
accounting for interests of the landowners who have not yet
chosen to participate.”
The company said it does not believe this temporary allo-
cation “is a fair and equitable long-term option,” but said it
would allow production to begin while details of production
allocation to the unleased tracts are being worked out.
Hilcorp said it or its affiliates have provided leased and
unleased landowners an opportunity to participate by leasing
and joining the unit and said all available resources have
been exhausted to find contact information for affected par-
ties.
“Hilcorp is committed to locating and contacting all
landowners within the Seaview Unit as new information
come available.”
The company said it has sent a cover letter and a copy of
the current application to all landowners within 3,000 feet of
“Seaview No. 8’s anticipated productive interval within the
Undefined Gas Pool,” in accordance with AOGCC regula-
tions.
Hilcorp noted that in its 2018 application it committed to
submitting applications for a participating area and for pool
rules prior to production of the Seaview No. 8.
The PA application, noted above, is to DNR.
The pool rules application is to AOGCC and the compa-
ny said that it is going to forego “applying for pool rules at
this time, due to the anticipated delays.”
The company said it will apply for Seaview field pool
rules following the application to amend the 2018 conserva-
tion order to allow production from the field. The current
application would allow production in the undefined gas
pool at Seaview. l
continued from page 1
SEAVIEW TARGET
to Chugach Electric in December 2017.
“This is a time to reflect on the journey
we’ve been on and to express appreciation
and gratitude to those who made it possible.
I want to thank the ML&P employees
who’ve gone above and beyond to provide
service with competitive, safe and reliable
energy,” said Anchorage Mayor Ethan
Berkowitz in an Aug. 24 release announc-
ing the anticipated closure date. “Thank you
to the teams that worked incredibly hard for
such a long period of time to sew up the
details of this complex deal.”
“After more than two years of working
on this important transaction, we are very
pleased to see the end is in sight,” said
Chugach Electric CEO Lee Thibert. “At a
time when many are facing financial chal-
lenges brought by the COVID-19 pandem-
ic, having one Anchorage electric utility
will help bring lower long-term energy
costs for our community.”
The deal, with a total cost to Chugach
Electric of around $972 million, contains
four major components: an upfront pay-
ment to close the purchase; payments in lieu
of tax to the Municipality of Anchorage
over a period of 50 years, as compensation
to the municipality for the loss of tax rev-
enue from ML&P as a municipality-owned
entity; a commitment to purchase electricity
from the Eklutna hydroelectric power facil-
ity for 35 years; and an agreement to reserve
for ratepayers in ML&P’s service area ben-
efits associated with ML&P’s part owner-
ship of the Beluga River gas field in Cook
Inlet.
Conditional approval in May In May of this year the Regulatory
Commission of Alaska approved the pur-
chase, provided that certain conditions
would be met. As one of these conditions,
the commission required the removal from
the deal of a commitment to make no
immediate change to customers’ electricity
rates as a consequence of the purchase. And
the commission mandated three new condi-
tions: the use of a single cost adjustment for
all ratepayers for power generated from gas
from the Beluga gas field; the implementa-
tion of a single rate structure for all ratepay-
ers in the consolidated utility; and a require-
ment that, prior to closure of the deal,
Chugach Electric and Matanuska Electric
Association must form an agreement for the
implementation of security constrained
merit order economic dispatch across their
service areas.
The mandate for economic dispatch then
triggered several RCA filings. On July 16
Chugach Electric filed a tariff advice speci-
fying an economic dispatch agreement with
MEA. However, on July 31 the commission
rejected the terms of the agreement, saying
that three components of the agreement
were inconsistent with the requirements that
the commission had specified in its May
order. The three components related to the
timeframe for the agreement, the need for a
balancing authority for oversight of the load
balancing area, and commission concerns
about the utilities’ potential ability to termi-
nate the agreement without necessarily
obtaining commission approval.
Finalizing the purchase On Aug. 7 Chugach Electric filed an