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Back to Katalla for oil
State issues preliminary finding on Gulf of Alaska exploration license for Cassandra
Kay Cashman Petroleum News
The Alaska Department of Natural Resources' Division of Oil and Gas issued a preliminary written finding Aug. 2 in favor of granting a 10-year oil and gas exploration license to Cassandra Energy Corp. on 65,773 state-owned acres along the Gulf of Alaska coastline.
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 exploration license area consists of free and unencumbered state-owned surface and mineral estate within Township 19-21 S., Range 5-8 E., 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 license area boundary includes the eastern edge of the Copper River Delta State Critical Habitat area, as well as Kanak Island and waters around the mouths of the Bering, Nichawak, Campbell and Edwards rivers.
$1 million work commitment The proposed 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.
After the license is issued, Cassandra must pay a one-time, $1 per acre license fee, as well as annually post a bond equal to the work commitment, less the cumulative expended, divided by the years of the remaining license term.
Upon fulfilling the work, the bond is released.
An annual report for the license is due on or before the anniversary date of the effective date of the license. Among other things, the report satisfies a statutory requirement for submitting geologic or geophysical data to the division.
There are no additional charges during the 10-year term of the license.
Under the terms of the exploration license, it will be terminated, and the remainder of the security forfeited to the state if Cassandra does not complete at least 25% of the total work commitment by the fourth anniversary of the license.
Twenty-five percent of the licensed area will be relinquished if the company completes less than 50% of the total work, and an additional 10% relinquished each successive year until half of the original acreage has been relinquished.
Four-year-plus review Received on April 23, 2015, the exploration license has undergone a lengthy and thorough agency and public review, resulting in the 265-page preliminary finding.
The final public comment period ends Oct. 4.
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 the area became a ghost town.
There were other attempt in the next century to develop the region, including the famous Katalla-Yakataga contract of 1951, when a group of investors and an Oklahoma oilman and senator used an obscure provision of federal law to convince the Interior Department to issue a development contract over a large area near Icy Bay.
A push in the early 2000s by Stevens, who at the time was also safety and health program coordinator for Inlet Drilling Alaska, 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 data old The proposed license, which can be found on the division’s website, has a description of the region’s geology.
Regarding petroleum potential, the document says, “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 says.
“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 says, noting “current drilling and completion technologies would likely yield better flow rates and ultimate recovery than were achievable in the early 1900s.”
Cordova nearest city The primary access route to the license area is by marine vessel, although there are airports and a port at Cordova, the nearest community, which is approximately 35 miles west.
With a population of 2,279, Cordova is linked to the North Pacific Ocean shipping lanes through the Gulf of Alaska and receives barge and state ferry services year-round, per 2018 city records. Cordova’s port has three large docks, along with a small boat harbor.
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