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Cade, Donkel get leases
Work completed on Houston-Willow license earns 6 leases, plus Trust lease
Kay Cashman Petroleum News
The Houston-Willow exploration license issued to investors Samuel Cade and Daniel Donkel on Dec. 1, 2018, was converted to six oil and gas leases in January because the partners met their $500,000 work commitment for the license.
The six 10-year leases were issued by the Alaska Department of Natural Resources' Division of Oil and Gas "for the same approximate acreage that the license covered," or 18,698 acres, Jonathan S. Schick, natural resource specialist for the division, told Petroleum News on June 24.
The leases were issued with Samuel Cade at 75% WIO (working interest owner) and Daniel Donkel at 25% WIO.
(See map in the online issue PDF)
The lease ADLs are 394297, 394298, 394299, 394300, 394301 and 394302, all effective Jan. 29.
When asked what work was done to cover the $500,000 work commitment, Schick said "the work included: a good deal of aerial imagery, magnetic and seismic surveys. It also included some surface geology studies, passive seismic data collection, processing of open source data, as well as costs for mobilization and demobilization."
These were costs that "qualified as direct expenditures and allowed them to apply to convert the license to leases," he explained.
The original license called for a five-year term with a $750,000 work commitment but was later revised to a six-year term with a $500,000 work commitment.
Shallow gas According to the Division of Oil and Gas, some 22 earlier penetrations have been drilled in the Houston-Willow basin, mostly to evaluate shallow gas and coalbed methane.
Exploration began around 1917, when excavations for the Alaska Railroad exposed subbituminous coal. The coal supplied area military bases until at least 1955.
The U.S. Bureau of Mines drilled three core holes in 1951-52, with reports of methane and brackish water. Anchorage Oil and Gas completed a sidetrack of one of these core holes in 1955, but no information exists about the results.
Anchorage Gas and Oil Development and Hackathorn Drilling separately completed five wells between 1956 and 1962.
After a period of dormancy, Growth Resource International and Evergreen Resources completed six coalbed methane wells in the Houston area between 1998 and 2004.
The division approved the Houston-Willow exploration license in 2018 with the hope that modern exploration techniques "would likely help to resolve details of the anticline's geometry and to clarify its conventional gas and CBM resource potential."
The division reported that no drilling in the area has encountered oil shows, and only non-commercial quantities of gas.
Trust lease negotiated More recently, the Alaska Mental Health Trust Authority's Trust Land office, or TLO, negotiated an oil and gas lease with Cade on approximately 1,338.20 acres of unencumbered Trust hydrocarbon estate consisting of 14 separate parcels for the exploration and development of oil and gas, adding to the land package of six state leases issued to Cade and Donkel in January.
The 14 Trust parcels are within portions of Sections 5, 7, 8, 15, 20, 21, 23, 25, 28, 35 of Township 18 North, Range 3 West, Seward Meridian.
Matanuska-Susitna Borough The exploration license area that has been converted to six state leases is located entirely within the Matanuska-Susitna Borough. It's in the Susitna River basin within the Matanuska-Susitna valleys.
The area is bounded by the Alaska Range to the northeast, the Talkeetna Mountains to the northwest, and the Chugach Mountains to the south and east.
The six state leases are generally located north of the community of Houston, south of Willow and east of the George Parks Highway.
Trust terms, conditions The Trust's negotiated terms and conditions include the following for the 14 parcels totaling a 1,338.20-acre lease.
1. A primary lease term of five years, continued indefinitely by commercial production.
2. Annual rent for Year 1, $3 per acre; Year 2, $4 per acre; Year 3, $5 per acre; Year 4, $6 per acre; Year 5, $7 per acre.
3. Production royalty is 12.5%.
Applicant Cade will be required to resolve surface use conflicts and damages, if any, in accordance with the provisions of the law applicable to private subsurface state owners.
Cade will also be required to enter into an oil and gas lease with the TLO, with the lease requiring full compliance with all applicable environmental laws. Additionally, the lease will include operating stipulations substantially the same as oil and gas leases issued on general state lands in recent years.
The TLO approved the negotiated lease on June 11 (MHT 9300102).
Opportunity for comment Notice of the TLO's Best Interest Decision to issue the lease will take place as provided under regulations. Persons who believe that the decision should be altered because it is not in the best interest of the Trust or its beneficiaries, or because the decision is inconsistent with Trust management principles set out in regulations must provide written comments to the TLO on or before 4:30 p.m., July 18.
Following the comment deadline, the Trust's executive director will consider timely written comments. He may then modify the decision in whole or in part in response to such comments or other pertinent information or affirm the Best Interest Decision without changes.
The Best Interest Decision as modified or affirmed will become the final agency action.
If no comments are received by the end of the notice period, the Best Interest Decision will be final.
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