March 11, 2002 --- Vol. 8, No. 28March 2002

Phillips could begin production at Starichkof in late 2003

Phillips Alaska Inc. has submitted a field plan to the Alaska Oil and Gas Conservation Commission for the Starichkof field the Cosmopolitan unit on the lower Kenai Peninsula where the company has been drilling the Hansen No. 1 exploration well.

A field plan, with voluntary agreement by the lessee to use its best efforts to employ residents of Alaska and to contract for work with firms in Alaska, is required for the Cook Inlet royalty reduction. The Legislature created a royalty reduction for fields in the Cook Inlet sedimentary basin discovered before Jan. 1, 1988, and undeveloped or shut in from at least Jan. 1, 1988, through Dec. 31, 1997, including: Falls Creek; Nicolai Creek; North Fork; Point Starichkof; Redoubt Shoal; and West Foreland.

Subject to commission approval of a field plan, the royalty is 5 percent on the first 25 million barrels of oil and the first 35 billion cubic feet of gas produced in the 10 years following the beginning of production for sale.

Phillips said in its Feb. 25 plan submittal that it has drilled the Hansen No. 1 and is evaluating it. The well was spud in October and reached total depth in early January.

A first plan of production or second plan of exploration would be submitted to the state in the third quarter of 2003. Production could begin in the fourth quarter of 2003.

Donkel shallow Tyonek gas reservoir appeal remanded to DNR

Dan Donkel is getting an opportunity to argue for inclusion of a lease in which he has a royalty interest in a gas participating area of the North Middle Ground Shoals unit.

In a March 4 order, Alaska Superior Court Judge Sigurd Murphy remanded a decision to the Department of Natural Resources "with directions to reconsider whether the Shallow Tyonek Gas Reservoir Participating Area originally proposed by Unocal should be approved."

The court said DNR did not hold a hearing as required under the department's regulations to give overriding royalty owners an opportunity to be heard. The DNR commissioner did give working interest owners an opportunity to be heard, the court said, "but he did not do this with respect to the royalty owners of ADL 369116."

The DNR decision was appealed in 2000 by Daniel Donkel, Robert Bolt, George Kasper and John Does 1 through 91.

The court remanded the matter to DNR "with directions to reconsider whether the Shallow Tyonek Gas Reservoir Participating Area proposed by Unocal should be approved. If DNR does not intend to approve the Participating Area proposed by Unocal, then before making a final decision rejecting Unocal's proposed Participating Area, DNR must provide notice and hearing to all working interest, royalty and overriding royalty owners in accordance with 11 AAC 83.371."

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