State contracting Redoubt Shoal unit

Alaska’s Division of Oil and Gas said May 27 that it is contracting the Pacific Energy Resources-operated Redoubt unit on the west side of Cook Inlet from 23,526 acres to 15,206 acres by removing two of the five state leases originally in the unit. The decision followed a Feb. 9 letter from division Director Kevin Banks to Pacific Energy notifying the company of the proposed unit contraction and requiring comments on the proposal by March 13.

In a May 27 letter announcing the division decision, Banks said that division had already agreed with Pacific Energy on the termination of the G-0 gas-only participating area, one of two participating areas within the unit, because that participating area had not produced gas since 2005. The other participating area, the Hemlock participating area, sources oil for the still-producing Redoubt oil field but will be reduced in size as a consequence of the division decision.

In his Feb. 9 letter Banks said that, although Pacific Energy’s latest Redoubt plan of development specifies the re-drilling of four existing wells and the drilling of two new wells in the Hemlock participating area, the plan of development “does not provide specific commitments to the development activities,” nor does it propose any development activities within the two leases that division has now decided to remove from the unit. And, under the terms of the Hemlock participating area approval, the state could reduce the size of the participating area to 160 acres around the development wells that were in place on Dec. 1, 2008, Banks said.

Banks said the division had declined a request from Pacific Energy to defer the final redetermination of the Hemlock participating area until the two new wells had been drilled because, he said, Pacific Energy had not committed to a drill-by date or bottom-hole locations for the wells.

“Without specific commitments for additional Hemlock PA wells, there is no basis to further postpone the redetermination,” Banks said.

And, in issuing the unit contraction decision, Banks said that since Feb. 9 the division had discussed the proposed final redetermination with Pacific Energy “numerous times” and had also met with the company in April, but that Pacific Energy “neither responded nor submitted proposed redetermination tract allocations.”

Anyone impacted by the unit contraction can appeal the decision within 20 days of the decision being issued.

—Alan Bailey