AOGCC lowers proposed NordAq fine, requires abandonment within a year
The Alaska Oil and Gas Conservation Commission has reduced proposed fines for NordAq Energy’s failure to permanently abandon two Cook Inlet basin exploratory wells prior to expiration of its leases at the wells. The proposed penalties were $100,000 per well for the initial violation and $1,000 per day thereafter, bringing the penalties to $150,000 for violations at Tiger Eye Central No. 1 on the west side and $621,000 for Shadura No. 1 on the Kenai Peninsula, a total of $771,000.
In July decisions the commission reduced each fine to the $100,000 amount for failure to permanently abandon the wells before the leases expired, and changed requirements for checks in the amount of expected abandonment costs to bonds in the expected cost of abandonments, should NordAq not do that work, requiring the state to do it. The bond amount for Tiger Eye was reduced from $1.3 million to $800,000, based on available road access to that well site. The commission said the surface owner, Salamatof Native Corp., wants the existing road and pad at Tiger Eye left in place.
The Shadura bonding requirement, $1.2 million, is the same as the initial requirement for a check.
In its orders the commission noted that the delay in plugging and abandoning the wells “resulted in no hydrocarbon leakage, well integrity problems, or other problems other than a time delay.”
Delayed abandonment workIn April 4 hearings (see story in April 9 issue of Petroleum News), Bob Warthen, senior advisor to NordAq Energy, told the commission that the company had delayed abandonment work at the wells because it was trying to negotiate other uses for them. NordAq had discussions with Cook Inlet Energy about that company using the Tiger Eye well as a utility well, discussions which ended following Cook Inlet Energy’s bankruptcy when new management, now operating as Glacier Oil & Gas, said it wasn’t interested in using Tiger Eye.
On the Kenai, NordAq had discussions with Cook Inlet Region Inc. about CIRI holding onto Shadura, which is on a CIRI lease, as a cased well asset. By the end of 2016, however, CIRI said it wasn’t interested.
Tiger Eye was an oil prospect, and Warthen said while there were oil zones, the well failed to produce oil. When the well was tested for gas, it produced significant water, he said.
NordAq announced Shadura as a natural gas discovery and permitted an appraisal well, but that was never drilled.
Tiger EyeThe commission said NordAq’s effort to start plug and abandon work at Tiger Eye in June was delayed until Aug. 1 because Chevron was using a dock on the west side of Cook Inlet. Warthen discussed timing at the commission hearing in April and said the company needed to confirm that eagles weren’t nesting in the area, which could delay the work to mid-July. If there were no eagles nesting, work could begin as soon as snow was off the site and equipment could be barged in, Warthen said.
The commission cited road access to Tiger Eye from the Cook Inlet dock area in reducing the required bond for that work.
The commission required the surety bond within 30 days of the July 20 issuance of the Tiger Eye order, and said the bond would be returned to NordAq following permanent abandonment of the well and clearance of the well location.
The bond would be forfeited if the Tiger Eye well is not permanently plugged and abandoned and the well location cleared within one year of the order, the commission said.
ShaduraIn a July 21 order the commission said information from NordAq at the April public hearing and at an informal review June 27 indicated the company began operations to permanently abandon the Shadura well in March, but had to postpone further operations until December because the site has winter-only access and winter conditions were deteriorating.
The order requires NordAq to provide the commission with a surety bond for $1.2 million within 30 days of receipt of the decision. This is the amount required as a check in the proposed enforcement action issued in December and the commission said in its July 21 order that NordAq “has presented no evidence that a reduction in the bond amount is appropriate.”
The commission said the bond would be returned to NordAq following permanent abandonment of the Shadura well and clearance of the well location, and the bond would be forfeited to the commission if the well is not permanently plugged and abandoned and the well location cleared within a year of the date of the decision.
- KRISTEN NELSON