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Oil patch insider: Hammer falls on Guitar unit; AK, Alberta railroads pencil deal
Kay Cashman Petroleum News
Samuel Nappi, president of Alliance Exploration, received a certified letter June 27 from Alaska Department of Natural Resources Commissioner Corri Feige that gave him 20 days to comment on his company’s failure to post a $500,000 bond to cure a default terminating the Alliance-operated Guitar unit. (See the Oil Patch Insider article “Alliance looking for partner for North Slope well next to Prudhoe” in the June 30 issue of Petroleum News.)
In a Feb.7 letter to Nappi, Feige effectively gave Alliance a one-year extension for drilling a Guitar well but also placed the unit in default: If the company does not drill the well by the March 2020 deadline, the unit could be terminated. (Alliance had requested a two-year extension to the drilling commitment.)
In its most recent plan of exploration filed with DNR on June 11, under 11 AAC 83.390 the company was to post a statewide operator bond of $500,000 by June 25, which was not done, prompting the June 27 notice.
The other major owner of Alliance, Barry Foote, told Petroleum News that although the unit could have an upside in the neighborhood of 200-300 million barrels of oil, the company’s owners had reached the limit of what they were willing to invest in the acreage ($1.5 million) without a farm-in partner.
Adjacent to the giant Prudhoe Bay unit and close to infrastructure, Foote said Guitar was the least expensive and least risky play on the North Slope today.
“I hate to see all the work we’ve done … (including) processing 3D seismic go to waste, but … we need a partner to move forward … and we need them yesterday,” he said.
Foote said Feige, part of the administration of Gov. Mike Dunleavy, “seems to be willing” to work with Alliance on curing the default and getting a well drilled, but the only real solution at this point, he said, would be a partner who is able to help shoulder the cost of drilling.
For more information contact Derek Foote, Alliance’s manager of land operations for Alaska via email at [email protected] or by phone at 907-953-5525.
The clock is ticking ...
- KAY CASHMAN
Connecting Alaska to Alberta, L48 by rail Alaska Railroad Corp. and Alaska to Alberta Railway Development Corp. said June 27 that they have signed a “master agreement of cooperation” to build a 1,500-mile connection between the Alaska Railroad and Canadian railroads that also serve the Lower 48 states.
Under the terms, the two railroad companies will cooperate in applying to the Alaska Department of Natural Resources for a right of way guaranteed under state law for a rail connection to Canada.
In addition, the two firms will develop a joint operating plan which will specify not only the new track needed to connect Alaska’s rail to Canada, but will also identify work needed to upgrade existing rail facilities, bridges and track on the Alaska Railroad’s 512-mile mainline which runs from Seward to North Pole, Alaska.
The entire project is expected to cost approximately $13 billion, with A2A bearing the project costs. If the project is completed, A2A will receive a long-term lease from Alaska Railroad to operate the new railroad.
Costs incurred by Alaska Railroad to advance the project will be reimbursed by A2A.
Construction will begin after a right of way is approved by DNR, a presidential border crossing permit is issued, environmental reviews are conducted by the U.S. and Canada, and two national agencies - the Surface Transportation Board in the U.S. and the Canadian Transportation Agency - give their approvals.
First Nations and Alaska Native entities, whose traditional lands are crossed by the route, are being consulted during this process, the railroads said.
- KAY CASHMAN
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