The board of the public corporation of the State of Alaska voted unanimously today to enter into a Joint Ownership Agreement with Australian independent Buccaneer Energy Limited and Ezion Holdings.

AIDEA will invest up to $30 million to buy and outfit a jack-up rig and ship it to Alaska so long as Buccaneer and Ezion meet 15 conditions over the next few months.

Those “conditions precedent” require Buccaneer and Ezion to contribute at least $5 million to the project and to secure a term loan for the remaining $50 million in financing needed to fund the $85 million drilling venture, to execute a contract to buy a jack-up rig from Transocean Limited and contracts to upgrade the rig for use in Alaska, and a commitment from Buccaneer to drill four wells in the Cook Inlet using the rig.

If those conditions aren’t met, AIDEA is not obligated to fund its portion of the project.

The agreement also includes six “conditions subsequent” that Buccaneer and Ezion must meet after entering the agreement to keep the deal from going into default. Those include contracting a company to bring the rig to the Cook Inlet, drafting organizational and management documents and fully permitting a drilling program by Aug. 31, 2011.

The deal requires that AIDEA be repaid within six years and “and establishes other conditions to protect the [AIDEA’s] investment and interests” in the rig.

The AIDEA board voted on the deal after spending an hour in executive session.

While the board voted unanimously to move forward and praised the work of AIDEA staff in negotiating the deal, several members noted the riskiness of the venture. “I’m suitably uncomfortable, and that’s probably good,” board member Gary Wilken said.

The vote increases the competition between two independent oil companies looking to bring a jack-up rig to use in the waters of the Cook Inlet: Buccaneer and Escopeta Oil, which is a privately funded U.S. company.

“Escopeta is currently transporting a jack-up rig to Cook Inlet and we intend to make it available to companies that are interested in using it in drilling for oil or gas,” Steve Sutherlin, a contractor for Escopeta, told the board during a public comment period.

Escopeta President Danny Davis has expressed concern that his firm will be in direct competition in a limited market with a state agency that has “deep pockets.”

Sutherlin is a former Petroleum News writer and minority owner in the company.

The board expressed concern that Escopeta did not have a suitable Jones Act waiver allowing it to move goods on a foreign flagged vessel between two domestic ports.

Sutherlin said that Escopeta received a waiver in 2006 that is not rig specific and is looking to get a “fresh waiver” from federal authorities, but noted that when a previous operator brought a jack-up rig to Cook Inlet without the waiver, it simply paid a fine.

See full story in the next edition of Petroleum News.