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Vol. 15, No. 46 Week of November 14, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

The Explorers 2010: Interior Alaska basins

Alan Bailey

Petroleum News Senior Staff Writer

Although analysts think that the majority of Alaska’s oil and gas resources lie within the major basins of northern Alaska, Cook Inlet and the Bristol Bay area, there are several other basins around the state that have attracted the attention of oil and gas explorers.

These basins typically consist of huge faulted blocks that have sunk, as forces deep within the Earth have bent and stretched the Alaska landmass during the past 60 million years or so. The deepening inland basins have progressively filled with an accumulation of river-borne sand, gravel and pebbles, interspersed with finer-grained material deposited in freshwater lakes, and often with coal seams that mark periods of luxuriant vegetation growth. These assemblages of terrestrial sediments are typically Tertiary in age.

Although some rock samples from the basins contain material conducive to oil formation, the nonmarine rocks in most of the basins contain coal and other material that would more likely favor the production of natural gas.

In Southcentral Alaska and the northern Interior there are also extensive areas of older Mesozoic rocks, typically formed from the detritus of volcanic arcs that were prevalent features of a dominantly marine landscape at the time. These Mesozoic strata sometimes form the lower sections of the Tertiary basins such as the Cook Inlet basin. In the Cook Inlet and Alaska Peninsula regions the Mesozoic strata have formed petroleum systems that are active and obvious, but so far sub-economic; elsewhere in Alaska, with the possible exception of the Copper River Valley, the Mesozoic rocks appear more problematic as exploration targets.

In this section of “Explorers” we review exploration activity in those Interior basins that has attracted recent exploration interest.

Copper River basin

The Copper River basin sits in a lowland area due north of the Gulf of Alaska and bounded by the Alaska Range, the Wrangell Mountains and the Chugach Mountains. The geology of the basin bears many similarities to that of the Cook Inlet basin, especially in the Mesozoic section — during Mesozoic times the Copper River and Cook Inlet areas formed part of a huge marine region.

The age of the Mesozoic marine sediments around the Copper River Valley ranges from middle Jurassic to late Cretaceous, with a sequence of rocks strikingly similar to the Mesozoic of Cook Inlet. The sequence includes rocks that are age-equivalent to the source rock of most of the oil found in the Cook Inlet oil fields, but they differ somewhat in their composition and are reportedly less oil prone. One Copper River Mesozoic limestone formation exhibits oil stains and petroliferous odors. Coal in one part of the section may have generated natural gas.

The Tertiary section that occupies the basin is typical of rock of that age in Alaska, having terrestrial sediments interspersed with coal seams in a geologic setting conducive to the formation of biogenic gas — gas that has formed from the bacterial decomposition of organic material.

Limited exploration

Some limited oil and gas exploration of the area was done prior to the mid-1980s, with geophysical surveys and 11 wildcat wells. Several of the wells encountered oil and gas shows. The wells also encountered overpressured zones, especially in a distinctive Mesozoic limestone horizon. Mud volcanoes in the Tolsona area emit gas containing a high percentage of methane.

A more recent resurgence of interest in the area resulted in the issue of a State of Alaska exploration license in October 2000 to Anschutz Exploration, on 398,445 acres of state land west of the town of Glennallen. The area of interest also encompassed some Native land owned by Ahtna Inc., the Alaska Native regional corporation for the Copper River Valley.

After the shooting of some 2-D seismic in the exploration area, and following some shuffling of business deals around the funding of exploration activities, Texas-based Rutter and Wilbanks, with Anschutz and Forest Oil as minority partners, spudded a wildcat gas well on Native land in early 2005, in a structure near an Amoco well drilled about 25 years earlier.

The Rutter and Wilbanks well, the Ahtna 1-19, was drilled to its target depth of 7,500 feet, apparently without finding any gas. But because of a high pressure zone at a depth of 1,200 feet, the company had to use heavy drilling mud that damaged a potential gas reservoir partway down the well.

In October 2005, with the original Glennallen exploration license set to expire, Forest Oil, the company that by then owned the license along with Anschutz, filed a successful application to convert part of the license area to standard state oil and gas leases in the neighborhood of the Native land where Rutter and Wilbanks had drilled the Ahtna 1-19 well. Anschutz and Pacific Energy Resources, the company that bought Forest Oil’s Alaska properties in 2007, still own these leases, but Pacific Energy has been trying to dispose of its Alaska assets in bankruptcy court in Delaware.

In the fall of 2006, Rutter and Wilbanks made an unsuccessful attempt to penetrate the damaged section of reservoir rock in the Ahtna 1-19 well, using a Cad Pressure Central snubbing unit. The company returned in 2007 to drill the Ahtna 1-19A sidetrack well into the reservoir using a Schlumberger coiled tubing unit. And in June 2007 the company announced a gas find at a depth of 4,300 feet.

But the well was producing excessive amounts of water along with the gas, even though resistivity logs suggested that relatively little of this water originated in the reservoir.

And Rutter and Wilbanks Vice President Bill Rutter Jr. was convinced of a significant gas resource in the Ahtna prospect, perhaps with a gas volume in the range 50 billion to 150 billion cubic feet.

So, after a two-year hiatus while the company tried to secure the use of a suitable drilling rig, Rutter and Wilbanks returned to Glennallen in the summer of 2009 with the Schlumberger coiled tubing unit to try to plug with cement the source of water flowing into the well bore and then drill a second sidetrack well. The idea was to determine whether gas could be produced without excessive water production and to evaluate the size of the resource.

But, defeated by excessive downhole pressure and a continuing flow of water into the well, Rutter and Wilbanks finally gave up in late September, plugging and abandoning the well after something in excess of $20 million had been sunk into the Glennallen venture over the years.

With no further Alaska exploration plans, Rutter and Wilbanks’ lease position in the state has now dropped from 1,580 acres to just 320 acres.

Nenana and Middle Tanana basins

The Nenana basin and the Middle Tanana basin underlie swampy lowland areas south and west of Fairbanks. The Tanana and Nenana rivers drain the area. The Nenana basin forms an elongated north-south trough west of the town of Nenana. The Middle Tanana basin occupies a broad area immediately south of Fairbanks.

The basins exhibit many of the characteristic features of Alaska Tertiary basins, with varying thicknesses of Tertiary nonmarine fill. The early Tertiary section has been strongly deformed and eroded. The Ruby-Rampart trough to the northwest and the Cantwell trough to the south of the Nenana basin also contain significant thicknesses of early Tertiary fill.

In the Healy basin, an offshoot from the southeast corner of the Nenana basin, the mid-Tertiary Usibelli Group contains the coal seams associated with coal mining operations near Healy. The later Tertiary sediments in this basin consist of gravels and conglomerates that probably derived from erosion of the Alaska Range.

In 2004 Usibelli Coal Mine applied for a state exploration license, in the hopes of searching for coalbed methane in the Healy area. The proposal ran into local opposition, following concerns about the potential environmental impacts of coalbed methane development. Eventually, in June 2010, the Alaska Department of Natural Resources proposed issuing a license to allow Usibelli to explore for conventional and unconventional natural gas in 208,630 acres just east of Denali National Park and Preserve, a stretch of land that traverses the Parks Highway.

However, following further comments expressing concerns about issues such as wildlife habitat, DNR has yet to make a final decision on whether to issue the license.

People have reported oil seeps at a couple of locations in the Nenana and Middle Tanana basins but these reports have not been confirmed. Coal beds and lake-formed shales are the most likely source of hydrocarbons — coal beds in the sediments have probably created gas and could act as a source of coalbed methane.

Close to infrastructure

The potential for finding natural gas, or perhaps even oil, in the 8,500-square-mile Nenana basin, close to the Parks Highway, the Alaska Railroad and the electrical intertie between Fairbanks and Anchorage, raises some interesting possibilities, such as the production of gas for Fairbanks utilities, or the use of Nenana gas for power generation. There’s also a proposal for a spur gas line, connected to a future North Slope gas pipeline and following the Parks Highway to the Anchorage area: If viable gas is discovered in the Nenana basin, gas production might hook into that line.

But past exploration of the basin has been very limited.

Unocal drilled the Nenana No. 1 well to a depth of 3,062 feet in 1962 and ARCO drilled the Totek Hills No. 1 well to a depth of 3,590 feet in 1984. Both of these wells penetrated the shallow edges of the basin and neither found oil or gas.

According to Doyon Ltd., the Native regional corporation that owns some subsurface land in the basin, the overall basin actually consists of two subbasins separated by a saddle to the southwest of Nenana: The northern subbasin attains a maximum depth of about 20,000 feet, while the more southerly subbasin is about 14,000 feet deep.

Doyon thinks that the entire basin has the potential to hold 1 trillion to 6 trillion cubic feet of natural gas.

In 2002 the State of Alaska awarded Andex Resources, based in Denver and Houston, an exploration license with a seven-year term on 500,000 acres of state land in the basin. The company also negotiated oil and gas leases on about 41,000 acres of Doyon land and on about 9,500 acres owned by the Alaska Mental Health Trust.

Then in 2004 Andex formed a Nenana basin exploration partnership with Doyon, Arctic Slope Regional Corp. and Usibelli Energy, leading to the shooting of a 2-D seismic survey west of Nenana in the spring of 2005. Andex proceeded with the analysis of the new seismic data, to determine a site for a 10,000- to 12,000-foot wildcat well.

But in the spring of 2006, amid concerns about proposed changes to Alaska’s gas production tax, Andex started to lose interest in its Nenana venture, eventually pulling out of the project in late 2007.

Forward again

In 2008 with the Nenana exploration license set to expire in September of 2009, the State of Alaska approved an extension of the license term to 10 years, allowing the time necessary for the Doyon partnership to regroup.

In November 2008, exploration activity in the Nenana basin started to move forward again when Denver-based Babcock & Brown Energy, later to be renamed Rampart Energy, joined the exploration partnership.

On July 8 Rampart Energy spudded the Nunivak No. 1 well using the Doyon Drilling Arctic Wolf No. 2 rig from a gravel pad constructed in woodland a few miles west of Nenana. The well was targeting a 2,000-acre prospect consisting of a domelike, three-way closure on the saddle between the two Nenana subbasins, with the expectation that gas rising from a deeper part of the basin would have become trapped in the closure.

By the end of July the drill bit had reached a depth of 7,000 feet, on its way to its target at between 11,000 to 11,500 feet. However, the exploration partnership has not announced the final results of the drilling, although the rig was subsequently removed from the drilling pad.

Doyon has since expressed an intention to conduct a seismic survey in the northern part of the basin, a part of the basin where only gravity data are currently available. However, in September 2010 the Native corporation said that it had placed a hold on its plans for Nenana basin seismic data acquisition pending the resolution of some Alaska Railbelt energy supply issues that impact local gas markets in the Fairbanks region.

Holitna, Minchumina & Innoko basins

The Holitna basin is a small Tertiary basin that straddles a major fault zone, next to the Kuskokwim River and west of the Alaska Range. The Minchumina basin is a larger basin between the central Alaska Range and the Kuskokwim Mountains.

Both basins have formed as a result of fault activity and contain coal-bearing Tertiary rocks. Although the extent of the deeper sections of the basins is fairly limited, coal in the sediments may have generated gas; sandstones within the sedimentary sequence could act as reservoirs. There is also the potential for extracting coalbed methane.

In 2006, following concerns raised by local communities about potential impacts on subsistence and cultural resources, the Alaska Department of Natural Resources denied an exploration license to Holitna Energy Co. for the exploration for natural gas in part of the Holitna basin, to supply energy for the nearby Donlin Creek gold mine project, as well as for local villages. However, following an administrative appeal in Alaska Superior Court by Holitna Energy, DNR agreed to reconsider its finding and in 2009 reversed its earlier decision by issuing the license.

But the Native Village of Sleetmute has now appealed that decision in Superior Court, saying that the decision was made without adequate notice and opportunity for comment, and that there had been substantial changes to the terms of the license.

Paleozoic oil?

Up to 12,000 feet of older Paleozoic shales and limestones under the Holitna basin may be oil prone. Potential reservoirs exist both in this Paleozoic sequence and in the overlying Tertiary strata. The Paleozoic rocks may be overly mature for oil generation and any oil formed during the early history of the rocks may have escaped during later folding, faulting and uplift.

However, a petroliferous odor from some of the rocks and the existence of lumps of bitumen at the surface in some locations provide evidence of oil generation and migration. ARCO, Chevron, Sohio, Unocal and Alaska’s Division of Geological and Geophysical Surveys all sent field parties to the area in the early 1980s, but interest waned along with the collapsing price of oil shortly afterward.

The Innoko basin is another small Tertiary basin lying in a lowland area within the Kuskokwim Mountains.

Yukon Flats basin

The Yukon Flats consist of an approximately 15,000- square-mile lowland area around the Yukon River, between the trans-Alaska oil pipeline and the Canadian border. The flats lie over a deep sedimentary basin bounded by faults on the north and south sides. The basin is thought to contain up to about 25,000 feet of Tertiary nonmarine sediments.

The Tintina fault system that marks the southern boundary of the Yukon Flats basin extends southeast from the basin. A series of narrow, subsiding basins occurs along this fault system.

Comparisons with other Tertiary basins in Alaska suggest that the Yukon Flats basin probably contains at least some biogenic gas. However, with modern lake and river deposits obscuring the bedrock there is little means other than drilling to find evidence of an active petroleum system in the flats. A 1,281-foot core hole drilled at Fort Yukon in 1994 discovered gas bubbling from coal. A consortium of federal and state agencies and others drilled a well to a depth of 2,287 feet at the same site in 2004. The 2004 well encountered two coal seams, both of which contained methane but exhibited rather low gas saturations.

Three wells were drilled to the east of the basin in the 1970s but failed to find any oil or gas shows.

Oil shale

It has long been known that loose pieces of oil shale lie in the uplands northeast of the flats. Geologists have speculated about the possibility that this shale could form an oil source under the basin but there is no direct evidence to support this possibility.

Oil companies have shot 10 seismic lines in the flats. Five of the lines dating from 1972 can be purchased through a broker. The other five lines, shot in 1988, remain confidential. In 2001 the Alaska Division of Geological and Geophysical Surveys in conjunction with the Kansas Geological Survey shot 8.5 line-miles of seismic at Fort Yukon that detected some shallow coal beds but did not penetrate the deeper rocks.

In a 2004 U.S. Geological Survey assessment of the basin, investigations of surface rock exposures, comparisons with similar geology elsewhere and estimates of thermal maturities at depth within the basin all pointed to a gas-prone basin with some potential for oil. USGS has suggested that gas reserves in the basin could prove comparable to the volumes of gas in Cook Inlet.

In that same year Doyon Ltd., the Native regional corporation for the Yukon Flats area, proposed the swap of some Native lands for prospective land in the Yukon Flats National Wildlife Refuge, refuge land that includes some of the deepest sections of the Yukon Flats basin. Doyon wants to see oil and gas development in the Yukon Flats to generate income for its shareholders and to create economic opportunities for local communities; the corporation saw the acquisition of the deep sections of the basin as a means of encouraging development.


But the land swap proposal generated considerable controversy. Some local residents saw the potential for oil and gas development to bring economic benefit to a region hard-hit by escalating fuel costs; others viewed oil and gas development as a threat to their traditional subsistence way of life and worried about the potential for environmental damage; some worried about access to surface land for subsistence hunting.

In the summer of 2005, faced with a barrage of questions about the land swap, the U.S. Fish and Wildlife Service, the agency that administers the refuge, decided to prepare an environmental impact statement for the swap. Doyon said that it supported the Fish and Wildlife decision — the EIS would provide an opportunity to address the concerns that people had raised, the Native corporation said.

But in July 2009 Fish and Wildlife announced that the result of the EIS would be a decision to take no action over the land swap proposal, thus killing any possibility of the swap taking place.

New data

Meantime, however, new geologic data, including the results of a USGS gravity survey in the basin, pointed to some existing Doyon land as being more prospective than the Native corporation had originally thought and, in fact, threw into question the value of the original land swap plan.

In particular, the gravity survey indicated the presence of a series of subbasins within the overall Yukon Flats basin, with most of these subbasins having depths in excess of 8,000 feet. A subsequent oil and gas assessment by Petrotechnical Resources of Alaska estimated the possible existence of 300 million to 1 billion barrels of oil in the basin, and perhaps 1 trillion cubic feet of natural gas, an assessment that opened the possibility of an oil field equivalent in size to the North Slope Alpine field under the forests and marshes of the Yukon Flats.

And with some of the prospective subbasins not too distant from the trans-Alaska oil pipeline, Doyon says that it will now focus on oil and gas exploration opportunities in its existing Yukon Flats lands, working with the communities that support development.

In 2010 Doyon acquired 96 miles of 2-D seismic, and some soil samples and gravity data, over one of the Yukon Flats subbasins near Stevens Village. The corporation is analyzing the new data and merging it with some older data before deciding whether to do further appraisal work or to seek a Yukon Flats exploration partner.

Exploration license

In December 2007, BGI North America LLC applied for a state oil and gas exploration license covering around 72,443 acres of state land in the Crooked Creek-Circle basin, located east of the community of Central and south of the community of Circle, and forming one of the small basins along the Tintina fault system to the southeast of the main Yukon Flats basin. Alaska’s Division of Oil and Gas is in the process of developing a best interest finding for this exploration license.

In its 2004 assessment of the Yukon Flats, USGS estimated that the Crooked Creek area could contain 160 billion cubic feet of technically recoverable natural gas and 6.47 million barrels of technically recoverable oil.

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