Oil Patch Insider: Davis asks State of Alaska for guarantee Escopeta’s leases can be drilled in beluga habitat

In light of the imminent creation by the federal government of a critical habitat for beluga whales in upper Cook Inlet, Escopeta Oil and Gas President Danny Davis has asked the State of Alaska for assurances that his company will be able to drill and develop the offshore state leases it holds in the area.

In a letter dated Dec. 16 to state Division of Oil and Gas Director Kevin Banks, Davis said he was ready to execute contracts that would result in a jack-up rig arriving in Cook Inlet in April at Escopeta’s Kitchen Lights unit.

But an e-mail from an official with Escopeta’s primary investor in the project, Vetra Group, dated the same day and attached to Davis’ letter, expressed concern about the beluga whale situation and asked Davis to consider asking the state for a 12-month extension. (As part of its agreement with the State of Alaska to hold onto its Kitchen Light leases, Escopeta has to drill an exploration well in the unit by the end of 2010.)

Vetra official Steve Newton said in the e-mail that the “issue of the beluga whales is really causing major issues, both with the investors in Vetra and possible partners. … Given the tight time-frames and the uncertainty … is there any way to get an extension, at least 12 months … so that we can be confident of being able to both drill the well(s) and develop a discovery?”

Davis immediately wrote to Banks for a guarantee the state would not allow the federal government to stand in the way of Kitchen Light exploration and development.

“Escopeta well understands the executed and recorded oil and gas leases we have with the State of Alaska to be a legal contract between us. I do not see anywhere in these contracts where the federal government has the right to supersede the State of Alaska in the obligations and operations under these oil and gas leases to Escopeta and its partners,” Davis wrote.

He told Banks that it was “imperative and very urgent that Escopeta and its partners know what guarantees the State of Alaska can give us today, that we can move our jack-up rig, begin drilling in late April, and fully develop the Kitchen Lights unit, as scheduled, without federal interference.”

Davis asked for a response from Banks in the next 10 days, reminding the director that there was a “serious supply shortage of natural gas for Anchorage and the surrounding rail belt area.”

The Kitchen Lights unit, he said, had the reserves to meet those needs.

For details about the beluga critical habitat process, see the article titled “Beluga territory” in the Dec. 6 edition of Petroleum News. It is online at www.petroleumnews.com/pnads/249277950.shtml.

—Kay Cashman