Placer POD extended
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After DNR ruling DOG moves the end date for AEX’s current plan to July 10
Alan Bailey Petroleum News
On May 10 Alaska’s Division of Oil and Gas extended the end date for ASRC Exploration LLC’s 2018 plan of development for the Pacer unit from March 31 to July 10 of this year. The agency was responding to an April 18 decision by the Alaska Department of Natural Resources over an appeal by AEX against the March 31 deadline for the plan. AEX must now file a proposed 2019 plan by June 10. The division ruling comes as part of a complex series of interactions between AEX and state regulators regarding the timing and content of AEX’s plans for the unit.
AEX, the operator and sole working interest owner for the Placer unit, wants to develop a known oil resource in the unit. To maintain the unit, the company must conduct activities under an approved plan of development, designed to bring the unit into production. A plan of development typically runs for a year, with a further continuing plan needing to be approved before the current plan expires.
Well re-entry required In the case of the Placer unit, after AEX filed its 2018 plan, scheduled to begin in September of last year, the division only approved the plan to run for nine months, with a termination date at the end of May 2019. The rationale was that the plan included a requirement to re-enter and conduct testing in the Placer No. 3 well in the unit. Because of off-road travel restrictions on the North Slope, that testing would have to be conducted during the winter off-road travel season, which was sure to end by May 31.
Following some issues regarding the plans for the well re-entry work, the division approved a revised plan of operations, including the well re-entry, in early March. However, in a Feb. 28 letter to the division, AEX had expressed concern about whether this approval would come in time to conduct the well operations before the end of the off-road travel season. AEX had originally filed an amended plan of operations on Jan. 8, the company said. An industry source has told Petroleum News that the well re-entry was not carried out.
AEX questioned testing requirement In September AEX had appealed to DNR over the division’s original plan approval ruling, both with respect to the nine-month rather than one-year length of the plan, and with regard to the necessity of including the well testing within the plan. AEX claimed the division had no justification for approving a nine-month duration for the plan rather than the 12-months that AEX had requested. Also, AEX said that it had not viewed the testing of the Pacer No. 3 well to be necessary at this stage of the company’s plans for the unit, but that the division had insisted on inclusion of the testing in the 2018 plan of development. AEX is continuing to conduct planning and modeling work, designed to bring the Placer unit into production: There is no regulatory requirement to include “on the ground” activities in a plan of development, AEX argued.
The DNR decision The April 18 decision by DNR was the agency’s response to AEX’s appeal over the division’s plan approval ruling. DNR found that, while there is no legal requirement that a plan of development must cover a 12-month period, the division must provide an adequate justification for the shorter time period. The division had not provided a sufficient justification, DNR said. However, there is no evidence that the division had any particular bias against AEX when making its plan timing decision, DNR ruled.
DNR also agreed with a contention by AEX that state oil and gas regulations do not require a plan of operations for a unit to include “on the ground” activities - a plan simply needs to be geared towards bringing a unit into production. The division may determine that on the ground operations of some form are necessary at some point in the development but, if so, must explain why these operations are needed, DNR ruled.
The division response The division’s May 10 notice responds to the DNR ruling regarding the length of the 2018 plan of development. The division said that it was AEX, and not the division, that had limited the time to complete the Placer No. 3 well testing - AEX had indicated that the testing had to be completed by the end of the winter off-road travel season.
“Thus the division clarified in its 2018 POD approval that AEX would complete the winter operation by May 31, 2019,” the division wrote.
However, given the length of time for a ruling on AEX’s appeal, the schedule in the original plan of development is no longer feasible and the division is extending the plan until July 10, the division wrote.
The division has yet to respond to the DNR ruling on the need to justify the division’s stipulation that the well testing must be included in the plan.
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