Providing coverage of Alaska and northern Canada's oil and gas industry
May 2018

Vol. 23, No.19 Week of May 13, 2018

State approves Willow exploration license

Cade and Donkel application is for area north of Houston, east of Parks Highway; 5-year license granted for $750,000 work commitment

Kristen Nelson

Petroleum News

The Alaska Division of Oil and Gas has offered an exploration license in the Houston area to Samuel H. Cade and Daniel E. Donkel. In a May 1 decision, division Director Chantal Walsh found that the license would be in the best interest of the state. The license would give the licensee the exclusive right to explore for oil and gas.

Exploration licenses require a work commitment. This license is for a $750,000 work commitment, covers some 18,698 acres and has a term of five years. If the licensee accepts the license and meets the work commitment, the license may be converted to a lease.

Cade and Donkel do not hold any other exploration licenses in the state, but according to the most recent data available from the division, Cade holds 39,299 acres of state oil and gas leases; Donkel holds 24,361 acres.

Initial applicants, in 2007, were Cade, Donkel and LAPP Resources Inc. A 10-year license covering some 21,240 acres, was requested at that time. The division said LAPP resources has been removed from the application because it was dissolved as a corporation in the state in 2012.

David Lappi, president of LAPP Resources, died in 2011. He had been working to develop natural gas in the Matanuska-Susitna area since the 1990s.

Walsh said the division contacted Donkel and Cade in 2012 and confirmed that they were still interested in the pursuing the application. In 2015, Donkel and Cade submitted a written request to amend the application to include oil - the original application had been for natural gas only.

Licensees have 30 days from issuance of the findings to accept or reject the license.

Exploration license terms

Exploration licenses require a one-time $1 per acre license fee and the posting of an annual bond equal to the work commitment, in this case $750,000, less the cumulative amount expended and divided by the years remaining in the license term.

Once the work commitment is fulfilled, the bond is released; if the work commitment is not fulfilled, the bond is forfeited to the state.

An annual report is due on the license showing direct expenditures.

By the fourth anniversary of the license, at least 25 percent of the total work commitment must be completed or the license will be terminated and the remainder of the security will be forfeited to the state.

If the licensee has completed less than 50 percent of the total work commitment by the fourth anniversary of the license, 25 percent of the licensed area would be relinquished, with an additional 10 percent relinquished each successive year until half of the original acreage has been relinquished.

Once the work commitment has been met, all or a portion of the license - at the licensee request - can be converted to a standard oil and gas lease.

License area

The Willow Houston license area covers some 18,698 acres north of Houston and generally east of the Parks Highway, and consists of state-owned, unencumbered land.

In its decision the division said this license area is near the southeast corner of the Susitna sedimentary basin. Some 22 exploratory wells, stratigraphic tests and core hole wells have been drilled in the Susitna basin, the division said, 13 clustered near Houston and Willow at the southeastern margin of the basin. Most of these were drilled to evaluate shallow gas and coalbed methane potential.

Exploration for energy resources began in the Houston-Willow area in 1917, when excavations for the Alaska Railroad exposed subbituminous coal, the division said, with coal mined intermittently and supplying military bases until at least 1955.

The U.S. Bureau of Mines drilled three Houston core holes in 1951-52, with reports of methane and brackish water. Anchorage Oil and Gas completed a fourth Houston core hole in 1955, but there is no information on what that well encountered.

Anchorage Gas and Oil Development and Hackathorn Drilling completed five Rosetta oil and gas exploration wells between 1956 and 1962.

Then between 1998 and 2004, Growth Resource International and Evergreen Resources completed six coalbed methane exploratory wells in the Houston area.

“To date,” the division said, “drilling in the area has encountered no oil shows, and only noncommercial quantities of gas.”

The division said that based on geological, geophysical and engineering information currently available “and considering the exploration history and proximity to known hydrocarbon accumulations,” its resource evaluation staff “currently evaluate the Houston-Willow area of the Susitna basin as having minimal oil potential and moderate to low potential for commercial gas production.”

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