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January 2011

Vol. 16, No. 5 Week of January 30, 2011

AOGCC to look at need for 2nd jack-up

Alaska Oil and Gas Conservation Commission also sees similarities between Liberty and Macondo, will exercise increased vigilance

Kristen Nelson

Petroleum News

Alaska Oil and Gas Conservation Commissioner Cathy Foerster told House Resources Jan. 21 that in reaction to the Macondo well disaster in the Gulf of Mexico last year the commission is exercising increased vigilance.

She said the commission has been reviewing its regulations and statutes, plans to hold public hearings late this spring and will adopt or amend regulations and statutes if the need is identified.

In response to a question from House Resources co-Chair Paul Seaton, R-Homer, Foerster said one of the things the commission would consider in its public hearings is whether a second jack-up is needed in Cook Inlet to drill a relief well in the event of a blowout.

Seaton referred to a 1962 blowout at Cook Inlet State No. 1, a Pan American-operated gas well. While this is one of only 18 blowouts which have occurred in the state, the gas was flared and because it took more than a year to bring the well under control, the burning gas became a beacon for pilots in Cook Inlet.

Forester said the commission is reviewing all of its offshore regulations and requirements and “one of the primary questions we have to answer is do we need to have two jack-ups in the inlet in order to allow one of them to be drilling.”

Extra scrutiny for Liberty

The commission has already hired a sixth field inspector in response to concerns that arose after the Macondo explosion in the Gulf of Mexico, and is hoping to get a seventh inspector later this year, Foerster said, as well as an additional petroleum engineer “for better oversight of complicated operations” the commission regulates.

Foerster said BP Exploration (Alaska)’s proposed Liberty project has some characteristics similar to BP’s Gulf of Mexico ultra-deep Macondo well — although Liberty’s length will be primarily horizontal.

Liberty “will be a very, very, very highly extended reach drilling operation and we intend to apply more stringent oversights than normal because of the similarities,” she said.

One of the issues with the Macondo well in the Gulf of Mexico was that it was in deep water and the blowout preventer was on the seafloor.

“That will not be the case with Liberty. In fact the blowout preventer for the Liberty well will be on the Endicott island and so that’s a big difference,” she said.

The similarity is in the distance drilled, although the distance at Liberty is more horizontal, Foerster said.

Asked what authority the commission would have over Shell’s proposed outer continental shelf drilling, she said the commission has “no jurisdiction in the federal waters, but we won’t be shy about asking to look at what they’re going to do and offering our input.”

Suspended wells

Foerster said the commission has recently updated its regulations on suspended wells, to clarify language.

Operators are required to report on the status of suspended wells every five years.

Most suspended wells on state lands are on “active pads and platforms that are visited frequently by the operator, so those really don’t post a problem to us,” she said.

And the commission has pushed in the last year to identify and address suspended wells that aren’t on active pads and platforms.

Where the commission has its biggest concern, she said, is with wells on federal lands, Bureau of Land Management-managed lands primarily in the National Petroleum Reserve-Alaska.

Foerster said there are more than 100 wells on BLM-managed land that “aren’t in compliance with our regulations. They’re not even in compliance with BLM’s regulations.”

The commission has jurisdiction over all land in Alaska, so it has jurisdiction over wells in NPR-A, but “it’s hard to assert authority over the federal government when you’re the state government,” she said.

The commission has been working hard “to figure out what we can do to get the BLM to follow their own rules in our state.”

BLM prioritizing

In response to an inquiry on suspended wells, Ruth McCoard, communications chief for BLM’s Alaska state office, told Petroleum News in a Jan. 25 e-mail that BLM has plugged and remediated 15 legacy wells in NPR-A since 2002.

The agency refers to suspended wells as legacy wells, she said.

BLM “is responsible for surface and subsurface management of 136 legacy wells, test holes and reserve pits” in the 23 million acres the agency manages in NPR-A, McCoard said.

The condition of those legacy wells varies greatly, she said, and “BLM is remediating high-priority sites that pose an immediate risk to the environment and monitoring other well sites.”

BLM has plugged and remediated 15 legacy wells in NPR-A since 2002 and in 2004 issued a report assessing the risk posed by the wells. The agency completed site characterization assessments and excavation plans on the J.W. Dalton, East Teshekpuk, Atigaru and Drew Point sites.

The J.W. Dalton well was plugged and the pit remediated in 2005 at a cost of $8.9 million.

In 2006, five wells were plugged on the Simpson Peninsula at a cost of $1.8 million.

The 2008 plugging and pit remediation of the East Teshekpuk well cost $12 million.

Plugging and remediation of the Atigaru well in 2009 cost $14 million.

Drew Point, the last remaining coastal erosion high-priority well, was plugged and remediated in 2010 at a cost of $16.8 million.

The work listed above totals $53.5 million.

“With continued support and funding, the BLM plans to plug an additional four high-priority wells: three wells at Umiat and one at Iko Bay near Barrow,” McCoard said.

Point Thomson study near completion

The commission will need to make determinations on gas offtake rates from Prudhoe Bay and Point Thomson before gas sales can begin, and has already completed a study for Prudhoe Bay.

“We are engaged in a Point Thomson study because Point Thomson is by … the State of Alaska’s definition an oil reservoir,” and when you take gas from an oil reservoir where the oil hasn’t been extracted, “some of that oil will be at risk.”

She said the Point Thomson study is nearly complete.

Both studies will be used in determining the gas offtake rate — “how much gas you can produce per day and not re-inject,” she said.

The commission is going ahead with the studies so that when a gas offtake rate is requested it will be in a position to “make our decisions based on a good scientific analysis.”

The commission signed confidentiality agreements going into the studies, Foerster said, but there is a public summary of the Prudhoe Bay study available on the commission’s website.

Non-oil and gas drilling

The commission was given authority over geothermal drilling last year, but Foerster noted that state statutes authorize it to exercise jurisdiction over an area when there is sufficient likelihood that a drilling operation may encounter unexpected oil, gas or hazardous substances.

The commission exerted that authority on a Naknek geothermal well before it was granted authority over geothermal drilling because the well was on the edge of an oil and gas basin.

It also exerted authority over wells being drilled by Cook Inlet Region Inc. as part of its underground coal gasification project.

Forester said the first four wells in the CIRI project were drilled without incident, but they had a gas kick on the fifth well “and they did have to use their blowout prevention equipment.”

She said people don’t like it when the commission asserts jurisdiction, “but we do it for a reason and underground coal gasification is an example of where it’s a darn good thing that we did.”






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