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July 2018

Vol. 23, No.27 Week of July 08, 2018

NordAq completes P&As; AOGCC reduces fines, all bonding dropped

Kristen Nelson

Petroleum News

The Alaska Oil and Gas Conservation Commission has issued decisions and orders on reconsideration on fines and bonding requirements for plugging and abandoning the Shadura-1 and Tiger Eye Central-1 wells.

In June 29 orders the commission reduced the fines and said bonding was no longer necessary since both wells had been plugged and abandoned.

These Cook Inlet exploration wells were drilled by NordAq Energy Inc. - the Tiger Eye-1 on the west side of Cook Inlet and Shadura-1 on Cook Inlet Region Inc. lands on the Kenai Peninsula.

The commission fined the company and required bonding for plugging and abandoning the wells because the leases on which the wells were drilled had expired and plugging and abandonment are required prior to lease expiration. NordAq told the commission that the wells had not been initially plugged and abandoned because there were other uses for the wells and the company believed that other companies were interested in using the wells.

But other companies did not take over the wells.

Shadura

In late 2016 the commission proposed the following for Shadura: a $621,000 civil penalty and a requirement that NordAq provide a $1.2 million check to the commission, the commissionís projected cost to plug and abandon the Shadura well if NordAq did not perform that work. The well was drilled in 2011.

After the commission public noticed a hearing for April 4, 2017, NordAq contacted the commission with a plan to P&A the Shadura well, a plan the commission approved in February 2017.

After the April hearing, the commission issued a revised notice of proposed enforcement action changing the requirement for the $1.2 million check to a bond in that amount in favor of the commission. The civil penalty was reduced $100,000. NordAq was required to P&A the well and have the location cleared within one year of the May 24, 2017, revised notice.

NordAq requested reconsideration and oral argument, which were held Sept. 20, 2017. At that time the company told the commission the well would be plugged and abandoned by Feb. 28, 2018.

NordAq admitted to a violation of regulations but said a $10,000 civil penalty would be more reasonable.

The commission said in its June 29 order that the Shadura well was plugged and abandoned March 19, 2018.

The commission reduced the civil penalty to $25,000 and rescinded the requirement for the $1.2 million bond.

Tiger Eye

The commission initially proposed a civil fine of $150,000 for the failure to plug and abandon Tiger Eye and required that NordAq provide a $1.3 million check, the commissionís proposed cost to plug and abandon the well if the company did not do that work. Tiger Eye was drilled in 2012 and suspended. The commission said the well, on the west side of Cook Inlet, is only accessible during summer months.

The wellís bottom hole location is on a state lease which expired in October 2016. A portion of the well crosses a CIRI lease, which was terminated in July 2015.

After the commission scheduled a public hearing for April 2017, NordAq contacted the commission with a proposed plan to P&A Tiger Eye, a plan which the commission approved in early March 2017.

After the April 2017 hearing the commission issued a revised notice of proposed enforcement action, lowering the civil penalty to $100,000 and changing the requirement for the $1.3 million check to a bond in that amount in sole favor of the commission. The notice specified that the bond would be forfeited if Tiger Eye had not been permanently plugged and abandoned and cleared the well location within a year of the revised notice.

After an informal review requested by NordAq, the commission reduced the civil penalty to $100,000 and reduced the required bond amount to $800,000, requiring proof of the bond within 30 days.

NordAq requested an extension of time to file an application to reconsider the requirement for the surety bond and later requested reconsideration and oral argument, held in September.

At the oral argument NordAq advised the commission that Tiger Eye had been plugged and abandoned earlier in September and argued for reduction of the civil penalty to $10,000.

The commission said the well was plugged and abandoned Sept. 9, 2017.

In its June 29 order the commission rescinded the requirement for the $800,000 bond and reduced the civil penalty to $25,000.

- KRISTEN NELSON






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