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State reverses Holitna license decision Overturning a 2006 decision, DNR finds that a gas exploration license in Southwest Alaska is in the best interest of the state Eric Lidji For Petroleum News
Alaska officials have again decided that an exploration license in the Holitna basin is in the best interests of the state, returning in a 2005 ruling that had previously been overturned.
In a decision released Dec. 9, Department of Natural Resources Commissioner Tom Irwin and Division of Oil and Gas Director Kevin Banks decided that the potential benefits of allowing exploration in the Holitna basin outweigh possible adverse impacts.
An exploration license would allow Holitna Energy Co. LLC to explore exclusively for natural gas in a 26,791-acre area of state land near the confluence of the Holitna River and Basket Creek, about 10 miles southeast of Sleetmute, in Southwest Alaska.
Although actual drilling in the remote region is likely some ways off, and the likelihood of natural gas in the region remains uncertain, a sizeable discovery could heat and power communities in a section of the state with notoriously high fuel costs, and could also give power to the proposed Donlin Creek Mine, which would need considerable electricity.
A large enough find could theoretically also supply power to the proposed Pebble Mine.
State skeptical The state is skeptical about the natural gas prospects in the Holitna Basin, calling the potential “poor to fair,” but acknowledged that the whole point of the licensing program is to encourage exploration in areas where very little is known about resource potential.
The state also said that Holitna Energy “submitted new information that stated the potential for conventional gas was higher than previously thought.”
The decision is the latest is a series of rulings and appeals made over the past six years.
After signaling plans to approve the license back in 2005, the state received considerable opposition and concern from local communities and ultimately denied the application.
Holitna Energy provided additional information, hoping the state would reverse that ruling. When the state ultimately upheld its decision, Holitna Energy appealed the case to the state superior court. The state eventually asked the court to remand the appeal.
This new ruling is the result of that remand, and considers the additional information Holitna Energy brought about concerns over the scope, size and support of the project.
State turns on three points In the reconsideration, the state said that Holitna Energy’s decision to give up any rights to drill for coalbed methane in the area “significantly reduces the scope of the license application and avoids many potential environmental effects in the license area.”
The state also dismissed its previous concerns about the size of the licensing area. The state originally worried that buffers and protective measures required in the area would cover the entirety of the relatively small licensing area, effectively negating the license.
According to the state regulations, an exploration license must be between 10,000 and 500,000 acres. At 26,791, the proposed Holitna basin exploration license fell within that spectrum, but the state worried that its location would “make it difficult to condition the license in a manner that allowed exploration activities to occur harmoniously with the other uses in the area and without impact to sensitive fish and wildlife resources.”
In asking the state to reconsider its ruling, Holitna Energy claimed that the acreage remaining after taking mitigation measures into account is enough for developing enough natural gas to serve “the Donlin Creek Mine and the regional population for many generations.”
The state ultimately agreed, saying that its original decision “did not explain why it found the license area adequate in size to successfully implement mitigation strategies in the preliminary finding, but then found the license area ‘too small’ in the final finding.”
Finally, the state said it had been “premature” to say the project didn’t have enough community support, because it failed to consider Holitna Energy’s “commitment to working with local residents.” When the state denied the application, it also denied Holitna Energy’s request for 120 days to “to develop and document local support.”
In the most recent ruling, the state addressed public concerns by saying, “future public involvement will continue to shape the project, and concerns of local residents will be taken into account during permitting that occurs in phases subsequent to licensing.”
Project dates to May 2003 Holitna Energy’s efforts to explore the Holitna basin date to May 2003, when it applied for the right to shoot seismic and drill in potential shallow gas deposits in the area.
The company made that application under the Shallow Gas Leasing Program, which the state Legislature repealed in January 2004. In getting rid of the program, though, state lawmakers let companies convert their applications into requests for exploration licenses.
The state created the exploration license program to encourage companies to look for oil and natural gas in parts of the state not traditionally known to be resource basins.
Since the state began the program, companies have asked for permission to explore basins from Houston to Circle to Glennallen, and this past summer, Rampart Energy actually drilled for natural gas in the Nenana area using an exploration license.
An early step in the licensing process requires the Department of Natural Resources to determine whether or not a proposed license serves the best interest of the state.
In its preliminary finding in August 2005, the state decided that an exploration license in the Holitna basin did serve the interests of the state. But DNR reversed that decision in its final finding in October 2006, after reconsidering the application in light of concerns that emerged in public hearings held in several communities around Southwest Alaska.
Holitna Energy appealed that decision, and asked for time to bring more information to the table that might bolster its case for a license. The state agreed to take another look, but in June 2007 ultimately decided to uphold its decision to deny the application.
In July 2007, Holitna Energy appealed the case to the state Superior Court, arguing that the denial lacked a “reasonable basis” and asking that the case be remanded, or sent back to DNR for another look. The court agreed to remand the case in March 2008.
The Dec. 9, 2009, ruling is the final finding in the case, and can be appealed for 30 days.
The finding does not guarantee drilling.
“Licensees must obtain approval of a detailed plan of operations from the director before conducting exploration, development, or production activities,” the state wrote.
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