AK licensing draws apps
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State managing 2 exploration licenses, with another in default and 2 pending
Kay Cashman Petroleum News
As of Jan. 14, the state of Alaska has two active exploration licenses, another in default and two license applications that are pending. According to the Division of Oil and Gas’s website the two pending applicants are Cassandra Energy in the Gulf of Alaska (ADL file 393173) and Alaska Natural Gas Corp. in the Susitna Valley (ADL file 393572/393888).
Administered by Alaska’s Division of Oil and Gas, which is part of the Department of Natural Resources, the exploration licensing program’s objective is to encourage oil and gas exploration in areas far from existing infrastructure; areas with unknown hydrocarbon potential, and where there is a higher investment risk to the operator.
An exploration license gives the licensee the exclusive right to explore for oil and/or gas in the license area, requiring a one-time $1 per acre fee and a specified minimum to be spent, a work commitment, on exploration. An annual report is due on the license showing direct expenditures.
License information for the Southwest Cook Inlet (ADL file 392536) remains on the division’s website even though Cook Inlet Energy abandoned its application in 2015 when its parent, Miller Energy, was in bankruptcy. The division left the final finding on its website because the area will be offered in the division’s 2020 Cook Inlet areawide lease sale and the information provides a historical reference for the area, which is on and offshore the Iniskin Peninsula on the west side of Cook Inlet, opposite Kachemak Bay.
Usibelli Coal Mine The two current exploration licenses are issued to Usibelli Coal Mine in the Healy basin (ADL file 390606), a 10-year license effective Jan. 1, 2011, with a $500,000 work commitment, and to Samuel Cade and Daniel Donkel in the Houston-Willow basin (ADL file 391282), a six-year license effective Dec. 1, 2018, with a $500,000 work commitment.
Usibelli, whose license was for 204,883 acres, drilled the 1,279-foot HC No. 1 coalbed methane test well in mid-2014, meeting its $500,000 work commitment. Although the company has been engaged primarily in coal mining operations since Emil Usibelli and his partner T.E. Sanford began operating in the region in 1943, Usibelli was interested in using nearby methane in coal seams to fuel operations.
The company permitted a four-well program seven miles east of Healy. The plan called for drilling one well toward the end of summer and returning the following summer to conduct additional testing of the initial well and drill as many as three delineation wells.
Usibelli conducted the program on land mined in the 1950s and 1970s and utilized existing roads to reach the drill site. The 150-foot by 150-foot pad was built on a fill area previously used as an airstrip to support mining operations. The pad was smaller than most gas exploration pads because shallower coalbed methane wells require smaller rigs, per the company.
The HC No. 1 well “was successful in confirming the existence of gas in the basin, but it’s inconclusive on a commercial level,” Usibelli company representative Mitch Usibelli told Petroleum News in January 2017.
As of today, with a year left on the license, no more wells have been drilled.
Samuel Cade and Dan Donkel The Willow Houston license area on state-owned land covers some 18,698 acres north of Houston and generally east of the Parks Highway.
In its decision the division said the license area was near the southeast corner of the Susitna sedimentary basin. Some 22 exploratory wells, stratigraphic tests and core hole wells have been drilled in the basin, 13 clustered near Houston and Willow at the southeastern margin of the basin. Most of these were drilled to evaluate shallow gas and coalbed methane potential.
Exploration for energy resources began in the Houston-Willow area in 1917, when excavations for the Alaska Railroad exposed subbituminous coal, the division said, with coal mined intermittently and supplying military bases until at least 1955.
The U.S. Bureau of Mines drilled three Houston core holes in 1951-52, with reports of methane and brackish water. Anchorage Oil and Gas completed a fourth Houston core hole in 1955, but there was no information on what that well encountered.
Anchorage Gas and Oil Development and Hackathorn Drilling completed five Rosetta oil and gas exploration wells between 1956 and 1962.
Then between 1998 and 2004, Growth Resource International and Evergreen Resources completed six coalbed methane exploratory wells in the Houston area.
“To date,” the division said, “drilling in the area has encountered no oil shows, and only noncommercial quantities of gas.”
Initially, in 2018, the term of the Cade-Donkel license was for 5 years but following negotiations with the licensees the division extended the term to 6 years on July 22, 2019. The work commitment is $500,000.
Pending Susitna license Very little is known about the Alaska Natural Gas Corp.’s pending exploration license other than it was applied for in April 2017 and encompasses a block of land (acres unknown), most of which is west of the Parks Highway, beginning south of Willow, ending just south of Talkeetna on the eastern edge and extending beyond Skwentna on the western edge.
The division said the solicitation area consists of state-owned land within townships 18-25 north, ranges 5-12 west, Seward Meridian.
Alaska Natural Gas Corp. has an active business license in the state and its website https://alaskanatgascorp.com/ refers visitors to R Pronovost, CFO, to “learn more about our current financing.”
The website said the firm’s “goal is to play an important economic role in Alaska by developing a new supply of natural gas for the benefit of the community and our shareholders.”
Pending Gulf of Alaska license A great deal is known about the other pending license application - a 10-year oil and gas exploration license to Cassandra Energy Corp. on 65,773 state owned acres along the Gulf of Alaska coastline.
The division issued a preliminary written finding Aug. 2 in favor of granting the license, setting an Oct. 4 deadline for comments, later extending the date to Nov. 4.
William H. Stevens, president of Cassandra, has a lease-purchase option on the nearby 465-acre Katalla oil field with the Welch family of Cordova.
The license area consists of state-owned surface and mineral estate within township 19-21 south, range 5-8 east, Copper River Meridian, encompassing land and water in and around Controller Bay from north of the Okalee Spit northwest to Katalla Bay and Point Martin.
The work commitment for the Nikiski, Alaska-based Cassandra is $1 million. Once that commitment is met, the company can request a conversion of the license to a lease with no other written finding required.
The license includes the Katalla and Yakataga area. Oil seeps were reported in the Katalla region and the north side of Controller Bay as early as 1896; in fact, the onshore Katalla area hosts at least 75 oil seeps and 11 gas seeps.
Commercial activity began in 1902, when Sir Thomas Boverton Redwood encouraged a British consortium, Alaska Development Co., to drill an exploration well near Katalla Meadows.
The population of Katalla expanded to 5,000 by 1908.
Between 1902 and 1931, there were 28 oil wells drilled in the Katalla oil field the Welch family now owns and 44 total wells drilled in the area.
In total, 154,000 barrels of oil were produced and refined in a small refinery that was completed in 1911 at the Katalla field until it burned down in 1933.
The refinery was not rebuilt, and people began leaving the area. Katalla’s post office closed in 1943 as it became a ghost town.
There were unsuccessful attempts in the next century to develop the region, including a push in the early 2000s by Stevens, who at the time was also safety and health program coordinator for Inlet Drilling Alaska. He was temporarily delayed by challenges from environmental groups and although the project did eventually receive agency approval to move ahead, a federal development contract held by Chugach Alaska Corp., which had partnered with Cassandra, expired in 2004, putting an end to that effort.
Petroleum potential Regarding the petroleum potential of the Gulf of Alaska license area, the division said, “both the Lower Tertiary and Middle Tertiary sequences contain effective oil- and gas-prone source rocks recognized as the source of numerous active petroleum seepages in the Yakutat-Gulf of Alaska basin. Unlike most regions of southern Alaska, the basin offers potential for both conventional and unconventional oil and gas resources.”
Onshore “potential conventional reservoir targets include the sandy and conglomeratic portions of most of the Tertiary formations in the Yakutat terrane. Because the source of Tertiary sediments was onshore to the north and northeast, strata become finer grained with increasing shale content toward the south and southwest.”
The license goes onto say, that “offshore, adequate porosity, permeability, and thickness to form conventional sandstone reservoirs is likely available only in the Kulthieth and Yakataga formations.” Unconventional reservoir potential is locally exemplified by the oil seeps and oil wells that formerly produced from folded and fractured black shales in a fault zone mapped by Miller in1975 in Oligocene strata equivalent to the Poul Creek formation at the Katalla oil field.
“Because the Gulf of Alaska region has experienced faulting and folding associated with compressional and strike-slip tectonics throughout the Tertiary, numerous structures were formed prior to the timing of petroleum generation and migration, and thus have the potential to form effective traps for conventional hydrocarbon accumulations. Stratigraphic traps are also likely to be present, given the lateral variations in depositional thickness, reservoir, and seal facies, and erosional truncations that are commonplace in structurally complex areas,” the document said.
“For conventional plays, exploration challenges include locating undrilled traps of sufficient size to justify economic development. … Although there is no evidence of a viable conventional petroleum system, it is likely that the unconventional shale play still holds technically recoverable oil and gas resources,” the proposed license said, noting “current drilling and completion technologies would likely yield better flow rates and ultimate recovery than were achievable in the early 1900s.”
License in default The 5-year exploration license in default, which was originally issued to Rocky Riley and since assigned by him to Tolovana Energy at the same Fairbanks address, is in North Nenana (ADL file 392535) in Alaska’s Eastern Interior, with a $500,000 work commitment.
The license covers 25,294 acres in the Minto Flats State Game Refuge and is some 35 miles south and west of Fairbanks close to the Parks Highway and on the northern margin of the Nenana basin, which is the basin where Doyon Ltd. drilled several wells over the past decade - with no commercial discoveries.
The Nenana basin is considered prospective for hydrocarbons and has been an exploration target for several oil companies including Union Oil of California and Atlantic Richfield. Most recently, activity has been conducted by Rampart Energy and Doyon and its partners.
In 1962, Union drilled the Nenana No. 1 well to a total measured depth of 3,062 feet. In1984, Atlantic Richfield drilled the Totek Hills No. 1 well to a total measured depth of 3,590 feet. Both wells were drilled along the flanks of the southern part of the Nenana basin, and both bottomed in metamorphic rocks. Gas associated with coal beds were encountered in both wells, but no oil shows were reported Both wells were plugged and abandoned.
During the 1990s and 2000s the USGS conducted petroleum resource assessments of the area, updated and digitally processed gravity data, field mapping and sampling for thermal maturity and organic richness of potential source rocks enhanced understanding of the area.
Rampart Energy drilled the Nunivak No. 1 well in a thicker portion of the Nenana basin in 2009, approximately 31 miles south of the southern boundary of the license area.
The well reached a total measured depth of 11,136 feet and never reached metamorphic basement rocks, bottoming in non-marine sediments of Late Paleocene age. This stratigraphy had not been encountered in the previous wells. The age date places these non-marine, fine grained, coal bearing rocks in the age equivalent Cantwell formation.
Nunivak No. 1 cuttings samples were analyzed for organic richness and thermal maturity. The samples indicated good oil and gas source rocks are present in some coals and micritic or fine-grained, carbonate cemented clay stones. Samples from Nunivak No. 1 were predominantly immature for hydrocarbon generation based on thermal maturation studies.
Starting in 2013, Doyon and its partners drilled five wells - three in the basin’s central saddle, and two wells in the deeper more northerly part of the basin, above the presumed oil and gas kitchen.
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