Preliminary licenses for Susitna gas exploration issued by DNR
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Kay Cashman Petroleum News
On Aug. 27, the director of the Alaska Department of Natural Resources' Division of Oil and Gas issued a preliminary written finding for two adjacent Susitna Valley gas exploration licenses to Alaska Natural Gas Corp.
(See map in the online issue PDF)
The Anchorage-based corporation is privately held and in state corporations' filings, Robert Fowler is listed as president and Jean-Robert Pronovost as secretary and treasurer.
The license areas cover approximately 567,359 acres (263,983 acres in License Area 1 and 303,376 acres in License Area 2). Only lands in which the state owns the subsurface are included in exploration licenses.
Alaska Natural Gas Corp., the licensee, applied for two licenses because the total initial proposed area exceeded the statutory maximum of 500,000 acres per license.
The preliminary finding, signed by DO&G Director Derek Nottingham recommends disposing of both Susitna Valley gas exploration licenses to Alaska Natural Gas Corp.
Exploration licenses give the licensee the exclusive right to explore for deposits of oil and gas. The director may limit exploration licenses to explore for the recovery of gas only, which Nottingham did for these licenses.
The director said that the potential benefits outweigh the possible negative effects, and that issuance of the Susitna Valley gas exploration licenses for a 10-year term for the two licenses best serves the interest of the State of Alaska.
If the licensee accepts the licenses and meets the work commitment obligations described in the license the licensee may request a conversion of the exploration licenses to a lease or leases with no other written finding.
The director has established a $3 million work commitment for each of the exploration licenses to reflect the work proposed by the licensee.
License areas The license areas are in the Susitna basin in the Matanuska-Susitna Borough west of the George Parks Highway. The areas are mostly forested and undeveloped except along the eastern boundaries.
Transportation systems within the license areas include a few gravel roads and a complex network of summer and winter trails.
Natural hazards include wildland fires, flooding, erosion, and earthquakes.
The boundaries of the license areas have been adjusted and reduced in comparison to the original proposal to eliminate the Susitna River and land to the east of the river.
These lands were excluded to reduce conflict with private landowners, conflicts with recreational use, as well as to reduce impacts to the important fisheries associated with the Susitna River.
Another significant amount of acreage was eliminated from the initial proposed license areas in the southwest portion of License Area 1 because the Susitna basin is bound by the Beluga fault, which now forms a boundary for that license area.
A significant amount of acreage was eliminated from the western portion of License Area 2 as the known geology of the region does not have great potential for gas exploration. Also excluded was the community of Skwentna.
The significantly smaller license areas match the proposed exploration plan of the applicant, and it was determined to be more feasible to conduct exploration over this reduced footprint in the 10-year term of the exploration licenses.
Additionally, the existing geologic data suggests that the highest potential for this exploration project exists within the smaller footprint defined in these adjusted license area boundaries.
Unconventional gas Unconventional gas resources, such as biogenic gas-charged coals and carbonaceous shales, are more likely to occur in the Susitna basin than conventional gas resources, such as thermogenic gas-charged sandstone reservoirs.
In 2017, a U.S. Geological Survey assessment estimated the mean total undiscovered microbial gas resources in the Susitna basin of southern Alaska to be 1.67 trillion cubic feet.
The Cook Inlet basin has served as southcentral and interior Alaska's exclusive source of natural gas for nearly 60 years. Cook Inlet natural gas generates 70% of the Railbelt's electricity, heats more than 140,000 homes and businesses, and supplies fuel for industrial users.
Demand for Cook Inlet natural gas is expected to remain around 80 billion cubic feet per year, while the supply from baseline production is supplemented by continued investment and development in currently producing fields, and is projected to meet these demand levels through about 2030.
Investment in exploration and delineation of natural gas resources therefore is crucial for the continued security of gas supplies for the Railbelt.
The Susitna basin remains extremely underexplored and is considered to have low-to-moderate potential for conventional and unconventional gas plays based on basin geology, limited exploration history, limited available seismic, well, and engineering data, and distance from other proven hydrocarbon accumulations.
If coalbed methane could be economically produced there it would provide an attractive alternative to diesel fuel for home heating and power generation in rural areas accessible by road or rail.
Exploration history Since the early 1950's, approximately 30 wells have been drilled in the Matanuska-Susitna Borough in search of oil and gas. These wells have targeted both conventional oil and gas resources and coalbed methane.
In 1996, the Alaska legislature passed legislation authorizing a shallow natural gas leasing program.
The Pioneer Unit was formed in 1998 which had a mix of conventional and coalbed methane resource targets. A total of 270 leases were applied for through the shallow natural gas leasing program, 162 of which were in the Matanuska-Susitna Borough.
In February 2003, 60 leases were issued.
In 2004, the legislature repealed the shallow natural gas leasing program through House Bill 531.
House Bill 531 allowed companies with pending lease applications to convert their lease applications into exploration license applications.
The legislation also contained provisions related to the regulation of coalbed methane activities, prohibiting coalbed methane development from an aquifer used for drinking water or agricultural purposes, and mandatory setbacks and noise restrictions for coalbed methane exploration and development activities.
This led to DNR conducting a series of public meetings in December 2004 and publishing the Enforceable Standards for Development of State Owned Coalbed Methane Resources in the Matanuska-Susitna Borough to which the Susitna Valley exploration license areas would be subject.
Beginning in 2003, Cook Inlet Energy LLC conducted an exploration program in the Susitna basin.
The program planned for two gas exploration wells at its Kroto Creek prospect near the Susitna River.
In April 2011, the company acquired the Susitna Basin Exploration License No. 4, a 10-year license covering 62,909 acres with a $2.25 million work commitment.
In April 2012, Cook Inlet Energy acquired the Susitna Basin Exploration License No. 5, a 5-year license covering 45,764 acres with a $250,000 work commitment.
They completed a winter access trail and a two-well pad at Kroto Creek and a third well farther west at Moose Creek in March and April 2013.
However, this work was not completed and Cook Inlet Energy surrendered the last of their licenses in March 2016. Alaska Natural Gas Corp. was awarded an exploration license in 2022 but the license was not issued due to non-compliance with the award notice. The previous Susitna basin exploration licenses overlapped much of the same area that the license areas cover. Currently, there are no producing oil or gas wells in the license areas.
Carbon sequestration Information from license area exploration wells could also be helpful in defining suitability of stratigraphy and coal resources for potential use for carbon dioxide capture and storage (carbon sequestration), which could be used to mitigate the impact of greenhouse gas buildup from fossil fuel-based energy generation.
Coal seam sequestration potential in the Susitna basin has been rated high.
Potential benefits In his preliminary finding, Nottingham said award of the exploration licenses will result in short-term positive initial revenue to the state.
If exploration discovers commercial quantities of gas, the exploration acreage could be converted into gas leases and positive potential effects are substantial for local and state revenues, job creation, and the potential for regional and local use of natural gas for home heating and electric generation.
Royalty and rental payments benefit all Alaska residents through payments to the General Fund and Permanent Fund. If local and Alaska residents and contractors are hired for work in the license areas the multiplier effect may benefit local and state economies.
The level and geographical distribution of the employment effect will depend on the size of any commercial resource that is identified.
If the exploration program does not find commercial quantities of natural gas, the labor market effect of the exploration licenses would likely be negligible.
Transportation Facilities for transport of equipment and crews to the two license areas include The George Parks Highway and Alaska Railroad east of the license areas, and small public airports at Willow and Skwentna.
There are also several private airstrips scattered within and in the vicinity of the license areas at Deshka Landing, Parker Lake, and Montana Creek.
Deshka Landing is road accessible and from here boats can access the Susitna River and major tributaries.
There are a few secondary and primitive roads within the license areas and a network of trails extends through the areas.
Oilwell Road extends into License Area 2 from the north, and Deshka Landing Road extends the furthest west towards License Area 1 from the east.
The network of trails would primarily be accessible during winter and many trails would probably need to be widened to allow for passage of equipment larger than snowmachines.
In addition to existing transportation resources, the proposed West Susitna Access road would cross through the western portions of License Area 1 and run adjacent to the southwest corner of License Area 2.
The Donlin Gold project would create and improve winter trails for access and construction of the Donlin Gold gas pipeline across both license areas.
Enstar transports natural gas through a 20-inch pipeline from the Beluga gas fields north and east across the Susitna Flats State Game Refuge south of the license areas.
Public comment The Aug. 27 preliminary written finding is subject to revision based on comments received by DO&G during the period set out for receipt of public comments.
Members of the public are encouraged to comment on any part of the preliminary finding.
The director asked that comments be as specific as possible.
Comments must be in writing and received by Sept. 30, to be considered and must be sent to Best Interest Findings:
By mail:
Alaska Department of Natural Resources
Division of Oil and Gas
550 W 7th Ave, Suite 1100
Anchorage AK 99501 3560
By fax: 907 269-8938
By email: [email protected]
The DO&G complies with Title II of the Americans with Disabilities Act of 1990. This publication will be made available in alternate communication formats upon request. Please contact the Best Interest Findings Group at (907) 269-8800 or [email protected].
Requests for assistance must be received at least 96 hours prior to the comment deadline to ensure that necessary accommodation can be provided.
Following review of comments on this preliminary written finding and any additional available information, the director will make a final determination whether disposal of oil and gas resources in the Susitna Valley exploration license areas is in the best interest of the state and will issue a final finding and decision.
--KAY CASHMAN
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