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Vol. 20, No. 23 Week of June 07, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

Furie applies for discovery royalty

Furie Operating Alaska has applied to the Alaska Department of Natural Resources for a discovery royalty for gas produced from its Kitchen Lights unit in the Cook Inlet. The company is in the process of developing the field, with first production anticipated at the beginning of 2015.

If granted, the state royalties on Kitchen Lights gas production would be reduced from the customary 12.5 percent of wellhead value to 5 percent for the first 10 years from field discovery.

The granting of a Cook Inlet discovery royalty is contingent on the applicant for the royalty reduction filing a public statement of discovery for the oil or gas pool in question. Furie filed a statement of discovery for its Kitchen Light unit No. 3 well in July 2013 and made its discovery royalty application in June of the following year. DNR now wants public comments on the application.

In the early years of the Alaska oil and gas industry, a discovery royalty of this type applied across the state. However, the statute for this royalty reduction was repealed in 1969 after the establishment of major oil fields in the state. In 1996 the state Legislature re-instated the discovery royalty arrangement for the Cook Inlet basin, to encourage new oil and gas development in the basin.

- Alan Bailey



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