|
Kenai Loop case pits CIRI vs. Buccaneer Buccaneer argues Alaska Oil and Gas Conservation Commission should decide; CIRI argues drainage, says court decision required Kristen Nelson Petroleum News
Cook Inlet Region Inc. and Buccaneer Alaska are battling in Alaska Superior Court and at the Alaska Oil and Gas Conservation Commission over issues related to the Kenai Loop gas field, where Buccaneer is producing natural gas from wells on Mental Health Trust property and is in the process of drilling additional wells.
CIRI has adjacent acreage.
At the commission, a public hearing is set for Jan. 30 on a petition by CIRI requesting that AOGCC “provide relief based on a claim that Buccaneer Operations Alaska, LLC, is illegally producing gas from the Kenai Loop 1-1 and 1-3 wells.” The Trust Land Office of the Alaska Mental Health Trust Authority and the Alaska Department of Natural Resources have intervened. Witness lists for the hearing are due Jan. 16 and hearing briefs Jan. 21, with the briefs limited to eight pages and the commission requiring that the parties include statements “of any claims made by the filing party against any of the other parties as well as any relief requested from the AOGCC.”
In Alaska Superior Court, CIRI has appealed the commission’s decision permitting the drilling, testing and completion of the Kenai Loop 1-4 well and, in a separate filing, sued Buccaneer for return of a CIRI lease, C-061667, also arguing that Buccaneer is draining CIRI acreage.
Drainage issue In recent filings in the suit for return of the CIRI lease, Buccaneer asked the court to dismiss CIRI’s drainage claims, arguing that CIRI has failed to exhaust administrative remedies and telling the court that AOGCC is currently adjudicating CIRI’s claim that Buccaneer is draining natural gas from CIRI property and that CIRI is barred from seeking damages by the rule of capture.
Buccaneer told the court “CIRI’s action rests, in large part, on the assertion that Buccaneer is violating AOGCC statutes and regulations,” and argues that Buccaneer’s operations at Kenai Loop comply with the law, since it has drilling permits and spacing exceptions from AOGCC for its producing wells.
Agencies have primary jurisdiction, Buccaneer told the court, and said: “This dispute is therefore best left to the AOGCC to adjudicate because it is the agency with the jurisdiction and subject matter expertise to resolve such claims and the technical training to evaluate CIRI’s allegations.”
Oral arguments on the motion to dismiss are set for Jan. 27.
CIRI cites damage issue In its response to Buccaneer’s request for dismissal of its drainage claims, CIRI said the crux of the drainage claims is based on Buccaneer’s “failure to comply with regulatory pooling requirements” before production began at Kenai Loop “from wells that are unlawfully draining CIRI’s property.”
Only this court, CIRI said, “has jurisdiction to grant CIRI the remedy it seeks.”
CIRI told the court that while Buccaneer focused on spacing requirements in its motion to dismiss, AOGCC regulations and state statutes include “the requirement to pool certain interests within a governmental section before a gas well begins regular production when the property is smaller than the governmental section ... and the requirement to file a pooling agreement” with AOGCC before regular production begins.
Following CIRI’s objection to Buccaneer’s latest requests for spacing exemptions, the commission required filing of a pooling agreement executed by Buccaneer, CIRI, DNR and MHT before production can begin from the Kenai Loop 1-4ST well.
“CIRI, the State, and the TLO are currently negotiating a pooling agreement, and no petition for compulsory pooling of the interests in Section 33 has been filed,” CIRI told the court.
Section 33 is the area where Kenai Loop natural gas wells are in production.
In its response to CIRI’s filing Buccaneer said CIRI’s opposition demonstrates that the dispute belong before AOGCC, telling the court CIRI’s argument “boils down to a forced interpretation of a technical AOGCC regulation and a selective reading of AOGCC Conservation Orders.”
Kenai Loop Buccaneer began producing natural gas from Kenai Loop in early 2012.
CIRI owns subsurface rights nearby, including acreage in section 33 of township 6 north range 11 west, Seward Meridian.
In 2011 CIRI issued an oil and gas lease in section 33 to Buccaneer and is suing to get the lease back, telling the Alaska Superior Court that Buccaneer has not fulfilled the terms of the lease.
Buccaneer told the court it had more than met the terms of the lease, and accused CIRI of not fulfilling its part of the lease agreement.
Production is coming from wells on acreage adjacent to the CIRI lease. The most recent production figures from AOGCC, for November, show production for that month of 130 million cubic feet of natural gas from two completions, and cumulative production of 4.4 billion cubic feet.
| 