May 04, 2001 --- Vol. 7, No. 52May 2001

State approves Slugger unit

The Slugger exploration unit south of Point Thomson has been approved by the state Division of Oil and Gas, state officials told PNA today.

The state and unit operator BP Exploration (Alaska) Inc. had been in disagreement on how much drilling would be required for approval of the unit. The final agreement is “a blend of the two proposals,” DO&G’s petroleum manager Bill Van Dyke told PNA.

BP and partners Chevron U.S.A. Inc. and Phillips Alaska Inc. had wanted to commit to drilling just one exploration well in the 79,508 acre area that would be included in the unit. The state's proposal called for two exploration wells.

Van Dyke said that the final agreement involved a “two well drilling commitment” but additional details were not available.

BP’s partners in the unit are Chevron U.S.A. Inc. and Phillips Alaska Inc.

Watch for a follow up news bulletin on Monday, May 7.

Phillips halts permitting for McCovey

Phillips Alaska Inc. has halted permitting for drilling an offshore exploration well at its McCovey prospect, Phillips spokeswoman Dawn Patience told PNA today. The decision followed the state Division of Governmental Coordination’s proposed consistency determination which included some stipulations requested by the Alaska Department of Environmental Conservation that Phillips thought could adversely impact the economic feasibility of the project.

“We asked them to stop the review for our final permit in order to evaluate our options for the project,” Patience said.

All but one of the four permits needed to proceed had been issued. The fourth permit would have been issued by the Minerals Management Service, she said.

DGC’s Glenn Gray told PNA that the North Slope Borough had appealed his agency’s consistency determination: “They felt that even if MMS agreed to our stipulations the project would not be consistent” with state policy.

The McCovey unit is located in the central Beaufort Sea about five miles northeast of Reindeer Island and 12 miles east of the Northstar field. MMS and the state of Alaska approved the unit in August.

Phillips partners in the project are Alberta Energy Company Ltd. And Chevron USA Inc.

Gas reserve tax bill stalled

House Bill 190, which would levy a substantial tax on undeveloped North Slope natural gas reserves, is dead for this legislative session, according to Linda Hay, Oil and Gas Committee aide for committee chair Rep. Scott Ogan.

Testimony at a two hour House Oil & Gas Committee hearing April 27 was overwhelmingly in opposition to the tax, she said.

The staff of the sponsor of the bill learned at the hearing of a number of its problem areas, which will likely prompt revisions prior to any further action on the bill, Hay said.

The bill, which seeks to force development of natural gas, could re-appear next session.

Billion-dollar data center proposed for North Slope

Netricity LLC, an Alaska company, has asked to purchase a portion of the state’s royalty gas to generate stable power for a $1 billion data center the company wants to build on the North Slope.

When completed the center would provide an estimated 300 year-round jobs located in the North Slope borough, according to Mike Caskey, vice president of Fidelity Exploration and Production Co., one of two partners in the venture.

The facility, commonly known as a server farm, would provide web-hosting services and would be connected to clients and users by the fiber optic system that runs the length of the trans-Alaska oil pipeline.

Proponents say the facility would offer the state a chance to market a portion of its royalty share of North Slope gas prior to construction of a gas line.

The Netricity plant would use approximately 25 percent of the state’s gas with a value of $1 billion to $2 billion, a huge amount, so the state must proceed carefully, said Mark Myers, director of the state Division of Oil and Gas.

Myers said the division has asked for a special appropriation of $75,000 to study the value of the state’s royalty gas.

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