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NEWS BULLETIN

September 22, 2009 --- Vol. 15, No. 74September 2009

Armstrong signs contract with Enstar for gas from North Fork

Armstrong Cook Inlet, operator of the North Fork unit in the southern Kenai Peninsula, has signed a contract with Enstar Natural Gas Co. for the supply of gas from North Fork into the Southcentral Alaska gas network, Armstrong CEO Bill Armstrong told Petroleum News today. The agreement involves the construction by Enstar of a pipeline south to Anchor Point on the Cook Inlet coast northwest of Homer, and the construction of an 8-mile line by Armstrong from Anchor Point east to North Fork.

“We do have a contract signed between us and Enstar to get a pipeline built down to our North Fork unit,” Armstrong said.

Armstrong has also agreed to drill two new gas wells at North Fork before the North Fork gas goes on line, he said.

But the contract between Armstrong Cook Inlet and Enstar will require approval by the Regulatory Commission of Alaska before any construction work or drilling can commence.

If everything proceeds smoothly, North Fork gas could start flowing north by early 2011, Armstrong said.

Following the drilling of a North Fork appraisal well by Armstrong Cook Inlet in the summer of 2008, the second well to be drilled in the gas field, the company said that the field could hold between 7.5 billion and 12.5 billion cubic feet of natural gas. Armstrong now thinks that reserves in the field are towards the upper end of that range.

BP to pay $1.7 million to state to settle spill containment violations

BP Exploration (Alaska) Inc. has agreed to pay more than $1.7 million in “compensatory fines” to settle oil spill containment violations on the North Slope.

The settlement covers facilities at the Greater Prudhoe Bay, Endicott and Badami fields, says a state press release issued today. BP operates all the fields.

“Secondary containment is a key line of defense. In the event of a spill, the enclosed space can stop oil from reaching the tundra,” said Larry Hartig, commissioner of the state Department of Environmental Conservation.

By state law, major oil facilities must be situated within a containment area designed to capture oil in the event of a spill, the state press release says. The size of the area is specified in the law.

DEC inspections in October 2007 found that at least three BP secondary containment areas in the Greater Prudhoe Bay field failed to meet size requirement, the press release says.

“Some were significantly smaller than represented to the agency in BP’s approved Oil Discharge Prevention and Contingency plan,” the release says.

BP and DEC have signed two compliance orders by consent to correct the problems, and BP has agreed to pay $1,709,498 in civil assessments, the state says.

“As part of the settlement negotiation, BP surveyed all of its regulated North Slope secondary containment areas and identified 16 additional problematic sites,” the press release says. “These areas also failed to meet size requirements set out by law. Some were built too small; others had lost useable space due to poor maintenance.

“BP has repaired most of the inadequate facilities. The remainder of the work will be completed in 2010.”

Alaska Attorney General Daniel S. Sullivan said the state “takes these types of pollution prevention violations very seriously. This settlement demonstrates our resolve to recover substantial civil assessments when those requirements are not met.”

Petroleum News invited comment from a BP spokesman and was awaiting a reply.

See stories in Sept. 27 issue, available online at noon Alaska time Friday Sept. 25 at www.PetroleumNews.com

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