Members of the Alaska House and Senate Resource committees went to Kenai in February and asked the oil and gas industry what the Legislature could do to help increase exploration and production on the peninsula.
The meeting produced a bill for Cook Inlet exploration incentives (see story on page 17) and three Senate resolutions.
The resolutions, all from Senate Resources, urge the administration to develop oil and gas platform abandonment regulations, endorse ongoing programs to streamline oil and gas permitting and encourage the Regulatory Commission of Alaska to “expeditiously” complete its investigation of how the Cook Inlet Gas Gathering System, known as CIGGS, should be regulated.
The RCA resolution was heard in Senate State Affairs April 12; the other two resolutions were heard in Senate Resources April 13.
Sen. Tom Wagoner, R-Kenai, is chair of Senate Resources and vice-chair of Senate State Affairs, and said in his sponsor’s statement for the RCA resolution that it “should not be construed as a position statement for or against any party” identified with the CIGGS case before the commission.
Asked by State Affairs Chair Gene Therriault, R-North Pole, if she saw anything in the resolution that caused her “any concern that either side of the complaint or docket will be able to wave this as a justification for their particular argument,” RCA Chair Kate Giard told the committee: “As long as I keep within the yellow lines, I think you guys are free to wander as you will, but I don’t believe that you do in this.”
Giard noted that there were highly respected entities on both sides in the CIGGS dispute, both with significant economic impact on Cook Inlet. “The issues, when those two clash, can be quite divisive and quite technical in nature.” Giard said she thinks “the resolution as it’s drafted is respectful of the complexity of those issues.”
Therriault also asked if time sensitivities in the issue were such that just by weighing in the Legislature “benefited one side over the other?”
“No,” Giard responded, “because we’ll ignore you if we feel that what you are doing is going to put this case into conflict with due process. Respectfully, though.”
She said that what she hears legislators saying is “that you want us to act expeditiously but carefully. … Consider the matter, don’t let it sit, too much is at stake. And we hear you.”
Giard noted that the commission adopted an expedited schedule for the CIGGS dispute early in March, “so as a result of conversations we had earlier in the year, down on the Kenai, we had a sense of urgency as well.”
Therriault asked if the issues in CIGGS will impact “gas pipelines from the slope and spur lines to Southcentral?”
Giard said the RCA’s order will address “the statutory and decisional process that we went through.” What generally happens, she said, is that parties take a decision and interpret it and look for precedents.
Review of Cook Inlet platforms urged
A separate resolution urges the governor to direct the Department of Natural Resources to review Cook Inlet oil and gas platform abandonment and develop abandonment regulations.
Mark Myers, director of the Division of Oil and Gas, told the committee that with the exception of the Osprey platform most of the inlet’s 16 platforms have been there for many years, many are nearing the end of their usefulness and some have already been partially abandoned. The issue of abandonment involves a lot of stakeholders: those concerned about navigation, the Department of Environmental Conservation for pipeline abandonment, the Alaska Oil and Gas Conservation Commission for downhole abandonment and DNR for facilities removal: “should they be removed; what condition should the environment be brought back to?” Leases require “full abandonment, full removal, and back to original condition,” Myers said.
Another question is, are there “better or higher” uses for the platforms? And who retains liability at point of abandonment?
Some of the platforms, he said, “may have extended life if small operators can take over the platforms and operate them at lower costs” and that has already happened with XTO taking over old Shell platforms. But, he said, the state needs to make sure that if there is a change of platform ownership, it is “fully protected on the liability.”
Liability is also an issue, he said, when companies want to sell platforms, and companies “are entitled to some certainty” about what standards the state will hold the lessee to. We need a regulatory process: The state has never gone through full abandonment of platforms, so this is new territory, he said, and the state expects to go through the procedure to develop regulations this year.
It will take some time to prepare, and all stakeholders need to be at the table, but Myers said the department expects to begin the process of developing regulations this fall.
Commission wants more drilling
Dan Seamount, one of three commissioners on the Alaska Oil and Gas Conservation Commission, told the committee the commission looks at the platform issue “from the aspect of conservation of resources” and wants to see platforms used to develop oil remaining in the inlet. There is, he said, “a lot of oil left in the known reservoirs,” with less than 30 percent recovery from some areas, compared to fields like Prudhoe Bay where recovery is more than 50 percent of original oil in place.
“We believe that there are hundreds of millions of barrels of oil left in the produced fields at Cook Inlet in known reservoirs,” Seamount said. Companies should be encouraged to use new technology to recover known resources reachable from the platforms.
There is also “exploration potential left within reach,” he said. There have been fewer than 300 exploration wells drilled in the Cook Inlet basin and only a thousand total wells drilled in the 10,000-square-mile Cook Inlet basin.
Seamount, a geologist, said he worked in a similar-sized basin in the Rocky Mountains which has 29,000 wells and where discoveries are still being made.
Jurassic needs exploration
A USGS expert geologist and geochemist “concluded that only 4 percent of the total oil generated in the Cook Inlet basin has ever been found,” Seamount said. That missing oil could have escaped to the surface, he said, or could still be trapped in undiscovered oil fields or both, “but there’s a lot of oil that has not been accounted for yet.”
In addition to “untested fault blocks” within reach of the platforms, there are also “exploratory prospects that have been identified by many petroleum explorationists over the last 50 years.”
Seamount said the pre-Tertiary Cretaceous, the Jurassic rocks where almost all the oil was generated, may have the highest potential.
“To date,” he said, “only 55 wells have been drilled to this section and most have been drilled only to the very top,” so little is known of the productive potential of these rocks.
The offshore platforms “represent viable infrastructure” with idle well bores that can be used to drill deeper. Five thousand feet is an arbitrary number, he said, “but it probably comes close to fully evaluating the pre-Tertiary section potential.”
The commission wants all parties to be “very careful when considering abandonment and do everything they can to have all potential oil and gas reserves tested before abandonment. There’s a window of opportunity right now to capture additional reserves. Platform abandonment would close that window,” Seamount said.
Wagoner said there is another angle: more than 300 jobs are now directly related to the Cook Inlet platforms.
Mike Munger, executive director of the Cook Inlet Regional Citizens’ Advisory Council, said the council has been taking a detailed look at dismantlement, removal and restoration of the platforms, and will have a white paper available on DR&R issues in May.
