DNR approves Colville River unit lease extension, contraction delay
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Kay Cashman Petroleum News
On Feb. 12 the Alaska Department of Natural Resources' Division of Oil and Gas notified ConocoPhillips Alaska Inc., or CPAI, by certified mail that the company's Nov. 26 application for the fifth amendment to request for lease extension and deferral of unit contraction of the Colville River unit, or CRU, has been approved.
The approval letter was addressed to Jason Parker at CPAI and signed by Division of Oil and Gas Director Derek Nottingham.
The application describes the background of the original agreement approving the delay of contraction of the Fiord West leases from the CRU, as well as the four subsequent amendments. Collectively, the Sept. 14, 2015, Fiord West agreement decision and the four amendments required the drilling of three wells and commencement of production from the subject lands by Nov. 30, 2023. Any subject lands that do not qualify, in whole or in part, for inclusion in a participating area, or that do not otherwise qualify for lease extension (including through continuous drilling, a certified well, shut-in production, or being held by production), will terminate on Nov. 30, 2025.
To date, CPAI has satisfied all drilling and other obligations under the Fiord West agreement.
The application further seeks to extend certain dates associated with development of the Fiord West area by an additional three years. Currently, CPAI is evaluating potential future development in the area and therefore is requesting a three-year extension of the contraction date under the Fiord West agreement, from Nov. 30, 2025, to Nov. 30, 2028. This extension will allow CPAI to assess further development opportunities based on recently acquired 3D data that is currently being reprocessed.
When considering an amendment to a unit agreement or any other unit action, the division must consider the criteria in 11 AAC 83.303(a) and (b).
Accordingly, Nottingham wrote, the division considered the public interest, conservation of natural resources, prevention of economic and physical waste, protection of all interested parties including the State of Alaska, environmental costs and benefits, geological and engineering characteristics of reservoirs or potential hydrocarbon accumulations, prior exploration activities, plans for exploration or development, economic costs and benefits to the State, and any other relevant factors, including mitigation measures. 11 AAC 83.303(a), (b).
"The public has an interest in diligent exploration and development of the State's resources within the CRU," Nottingham wrote. "Approval of the amendment protects all parties by providing additional time to further evaluate the Fiord West area and encourage continued exploration and development. This amendment promotes efficient evaluation and development of the State's resources and minimizes impacts to the area's cultural, biological, and environmental resources. The application therefore is necessary and advisable to protect those respective interests. The fifth amendment to request for lease extension and deferral of unit contraction -- Colville River unit is approved."
The Sept. 14, 2015, decision, which incorporated the Fiord West agreement as revised in CPAI's Sept. 8, 2015, request was amended to replace paragraphs eight and 10 with the following text.
Paragraph 8. Extension to 11/30/2028: If by 06/30/2022 CPAI shall have spud one well with a planned bottom hole location on the subject Lands to objective depth, lessors will extend the leases for all of the subject lands through 1/30/2028.
Paragraph 10. Two additional wells: In addition to the first well referred to in paragraph 8 above, CPAI shall drill and complete two additional wells to objective depth within the subject lands by 11/30/2024. No additional wells beyond the total 3 well drilling commitment set out herein will be required to hold any or all of the subject lands through 11/30/2028.
Questions regarding this decision should be sent to Mark Villarreal with the division at 907-269-6799, or by email at [email protected].
--KAY CASHMAN
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