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Doyon enthusiastic about interior basins Schutt says the Native corporation remains committed to exploring for oil and gas in Alaska’s Nenana and Yukon Flats basins Alan Bailey Petroleum News
The board of directors for Doyon Ltd., the Native regional corporation for the Alaska Interior, continues to be committed to oil and gas exploration in the Nenana and Yukon Flats basins, and the corporation anticipates investing about $45 million this year in its ventures in the basins, Aaron Schutt, Doyon president and CEO, told the Commonwealth North Energy Action Coalition on Sept. 6.
“We’re very excited about oil and gas in our region,” Schutt said.
The corporation is currently in the process of drilling a second well, the Nunivak No. 2 well, in the Nenana basin, about 50 miles southwest of Fairbanks. The drilling operation should last for about another 10 days, Schutt said, adding that he was unable at this point to comment on any results from the drilling.
During the past winter Doyon conducted a 3-D seismic survey in the Stevens Village area of the Yukon Flats basin, to the north of Fairbanks. The data from that survey are still being processed, Schutt said.
Long history Schutt said that the history of exploration of the two basins goes back to the period before the passage in 1971 of the Alaska Native Claims Settlement Act, or ANSCA, the federal statute which brought Native corporations such as Doyon into existence. Much work was done before the enactment of ANSCA to assess the oil, gas and mineral potential of lands that might be transferred to the Native corporations. And, with people recognizing the possibility of finding oil and gas in the Nenana and Yukon Flats basins, Doyon ended up acquiring subsurface land in both basins, Schutt said.
In the years following ANSCA oil and gas companies showed interest in exploring in the basins, with Doyon licensing exploration rights in its lands. But by the late 1990s and early 2000s, with that interest apparently evaporating, Doyon decided that the time had come to take a more pro-active role in the exploration of its region of the Interior.
“We had not seen activity on our lands for oil and gas in about 15 to 20 years,” Schutt said. “At that point we started to think about doing something on our own, being more aggressive.”
In the Nenana basin the corporation entered into a partnership with some other companies to pursue an exploration program under the terms of a state exploration license. And in the Yukon Flats basin the corporation attempted to increase the exploration appeal of the area by engineering a land swap, to acquire some especially prospective land owned by the federal government as part of the Yukon Flats National Wildlife Refuge.
The Nenana basin The Nenana basin, an 8,500-square-mile depression in the Earth’s crust filled with river- and lake-borne sediments, primarily of Tertiary age, has long been thought to be prospective for natural gas, generated from coal seams within the basin. Early exploration between the 1960s and 1980s had resulted in the drilling of two shallow wells in the flanks of the basin, Schutt said.
In 2005 the partnership exploring the Nenana basin, with Andex Resources as operator at that time, conducted a 2-D seismic survey in the basin. And in 2009 the partnership, by then headed by Babcock & Brown Energy, drilled the Nunivak No. 1 well on the eastern flank of the basin, in Alaska Mental Health Trust land a few miles west of the town of Nenana.
Schutt explained that one reason that the partnership had not drilled in Doyon’s own Native land in the basin was a provision in ANSCA requiring that any regional corporation developing subsurface resources or timber in its land must share 70 percent of the revenues from that development with the other regional corporations. In effect, the other corporations would obtain revenues from an exploration and development project without contributing to the project costs, thus seriously undermining the project economics for the corporation engaged in the resource development, Schutt said.
The Nunivak No. 1 well, the first deep well in the Nenana basin, found many indications of the existence of gas in the basin, and the well encountered the kind of geology needed in an oil and gas play, Schutt said. And, intriguingly, although the well had been drilled as a gas exploration well, data obtained from the drilling suggested that oil as well as gas might have been generated from the basin’s coal seams.
“Following that well and remodeling the basin, we’ve become more optimistic that this basin could host oil … generated from the same coals (as the gas),” Schutt said.
Continuing exploration Doyon’s partners dropped out of the Nenana program after completion of that first well. But Doyon decided to continue by itself, converting part of the state exploration license into 400,000 acres of state and Alaska Mental Health Trust leases, wholly owned by Doyon. In 2011 Doyon carried out another 2-D seismic survey, covering the northern and southern parts of the basin. And, having identified several further potential drilling sites, the corporation elected to drill the Nunivak No. 2 well, to the west of the Nunivak No. 1 well. The well site, over an appropriate drilling target, was conveniently located for extending the access road constructed for the 2009 drilling while also being on dry, sandy land rather than being in wetlands, Schutt explained.
After assessing the results of the No. 2 well Doyon will have many decisions to make, including decisions over whether to shoot a 3-D seismic survey or perhaps to shoot another more broadly based 2-D survey, Schutt said.
“Certainly we’re learning a lot, as we did in 2009,” he said.
Yukon Flats In the Yukon Flats, a 15,000-square-mile lowlands area around the Yukon River, between the trans-Alaska oil pipeline and the Canadian border, the new federal administration in 2008 nixed Doyon’s attempt at a swap of land with the Yukon Flats National Wildlife Refuge.
But it turned out that the failed land swap may have worked to Doyon’s advantage: A seismic survey conducted by Doyon in early 2010 coupled with a re-assessment of geologic and geophysical data indicated the existence of a deep sub-basin within the Yukon Flats basin in the area of Stevens Village, the area of some of the land that Doyon had proposed swapping for refuge land.
“So we’re kind of happy that land exchange didn’t happen,” Schutt said.
And, with a geologic analysis of the Yukon Flats basin as a whole indicating the possibility of significant quantities of oil and gas in the subsurface, and with analyses of soil samples indicating the seepage of oil and gas to the surface, Doyon feels encouraged to pursue exploration possibilities in the basin. Last winter’s 3-D seismic survey around Stevens Village will fill in the broader coverage of the 2010 2-D survey, Schutt said.
Because the Steven’s Village area is only about 25 miles from the trans-Alaska oil pipeline and the Haul Road to the North Slope, with no intervening refuge land for a future Yukon Flats pipeline to cross, the Stevens Village area is conveniently located for an oil and gas development, he said.
However, because all land that could potentially be developed in the Yukon Flats basin belongs entirely to Doyon, the corporation faces some difficult issues relating to the ANSCA revenue sharing requirements. Although the corporation hopes that the next step in the basin will be a drilling program, the ANSCA complication means that Doyon will need to find a company interested in testing the potential of the basin. Besides, Doyon has neither the balance sheet nor the technical expertise to undertake a major oil and gas development, Schutt said.
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