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Pioneer Natural Resources drops Mat-Su Company relinquishes Pioneer unit, all state and private fee leases in Matanuska-Susitna Borough in Southcentral Alaska Kristen Nelson Petroleum News Editor-in-Chief
Several companies have worked at developing coalbed methane production in the Matanuska-Susitna Borough northeast of Anchorage. Evergreen Resources, a major Lower 48 coalbed methane producer, most recently tried to bring its expertise to Alaska.
But after Evergreen Resources merged into Pioneer Natural Resources last year, Pioneer relinquished the bulk of Evergreen’s Mat-Su area holdings, and will soon relinquish what remains — the Pioneer unit established by Unocal.
The total acreage Pioneer is relinquishing is nearly 100,000 acres, of which a little more than 70,000 acres is in the Pioneer unit, Pioneer Natural Resources’ Pat Foley told Petroleum News April 18. The leases include state of Alaska and Alaska Mental Health Trust conventional oil and gas leases and private fee leases, said Foley, the company’s Alaska manager of land, commercial and regulatory affairs.
Pioneer Natural Resources relinquished Evergreen’s shallow gas leases in the Mat-Su Borough last fall.
The Pioneer unit, some 30 miles northeast of Anchorage between the communities of Wasilla and Houston, is an asset Pioneer acquired as part of its May, 2004, $2.1 billion acquisition of Evergreen Resources.
Evergreen, a Rocky Mountain coalbed methane producer, acquired the Pioneer unit from Ocean Energy Resources and Unocal in May 2001. Evergreen said at the time it believed the prospect contained up to 500 billion cubic feet of coalbed methane, along with deeper pay potential in traditional gas reservoirs.
When Evergreen acquired the acreage, Ocean had completed work on four wells: a water disposal well, two shallow gas development wells and a reentry of the ARCO Big Lake BLT No. 1, a conventional vertical exploration well drilled by ARCO Alaska in 1992. ARCO was reported to be looking for oil and plugged and abandoned the 6,200-foot well south of Houston off the Big Lake Road. In April 2004, just before Evergreen merged with Pioneer Natural Resources, an Evergreen representative said Evergreen had drilled two four-hole coalbed methane pilots in 2002 and 2003 and was completing a five-well core program. Shallow gas leases already released Last September Pioneer released all of the Mat-Su shallow gas leases it had acquired as part of its merger with Evergreen. Alaska Gov. Frank Murkowski said at the time that the relinquishment, some 235,500 acres, including farm-outs and a Mental Health Trust lease, was a result of the merger and of negotiations with the state. The governor noted that the shallow gas leasing program, which had been abolished by the Legislature, was a program that his administration inherited.
Pioneer said in a statement in September that it decided to relinquish the non-conventional leases and withdraw an Evergreen exploration license application for 30,000 acres as a part of its strategic planning and due diligence associated with the merger. Shallow gas leasing controversial Coalbed methane was a concern to residents of the Mat-Su Borough when Unocal and Ocean Energy began describing their plans and drilling conventional leases in 1999. It became controversial when residents realized the extent of Evergreen’s shallow natural gas lease holdings.
The shallow gas leasing program was established as a modest over-the-counter, first-come, first-served leasing program, with the goal of providing energy in rural Alaska. The Legislature later expanded the amount of shallow gas acreage an individual or company could hold because commercial coalbed methane operations require large acreage.
The over-the-counter program was repealed after it became controversial and shallow gas leasing applications were put under the state’s exploration licensing program, which requires a best interest finding before a license can be issued.
Shallow gas leasing applications had been on hold and applicants were given the option to convert to exploration license applications, which Evergreen did with the 30,000 acres.
In response to public concern about how Mat-Su shallow gas operations would be run, the Alaska Department of Natural Resources established enforceable standards for coalbed methane development in the Mat-Su Borough. Pioneer did an internal review Foley said that after the Pioneer-Evergreen merger closed, two former Evergreen employees became consultants and helped coordinate an evaluation of the Mat-Su coalbed methane prospect. He said the internal review looked at geological and technical issues, as well as economics, and at the end of the review Pioneer “just determined it was business that we did not wish to continue.”
The leases that will be relinquished include 28 to 30 state and Mental Health Trust leases and nearly 400 private fee leases.
Foley said Pioneer hopes that it can file a single release document with the state, with exhibits, for state leases, and file another that will surrender the fee leases.
Once that paperwork is complete, Foley said, Pioneer will be completely out of the Matanuska and Susitna valleys.
Ken Sheffield, president of Pioneer in Alaska, said: “While we recognize that there's a potentially commercial gas resource in the Mat-Su, we've chosen to focus our limited staff on our North Slope portfolio,” where the company is the operator of the central North Slope Oooguruk unit and has interest in hundreds of thousands of acres near the Kuparuk unit, in the Beaufort Sea, and in the National Petroleum Reserve-Alaska.
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