Donkel challenges production suspensions

Kristen Nelson

Petroleum News

Daniel K. Donkel, who holds overriding royalty interests in leases at the Redoubt and West McArthur River units, is appealing the June 4 approvals of suspensions of operation and production for the units by the Alaska Department of Natural Resources’ Division of Oil and Gas (see story in June 14 issue of Petroleum News).

The units are operated by Cook Inlet Energy, a Glacier Oil & Gas Corp. company.

In its May 28 applications for the suspensions, Glacier cited low oil prices and a lack of demand as reasons for the suspensions, which are requested through April 30, 2021.

Donkel, through attorneys Bankston Gronning Brecht, has appealed the division’s decisions to DNR Commissioner Corri Feige, citing a lack of supporting evidence for the requests by the operator, and questioning the reasons Glacier cites for the suspension.

The appeal also said public comment was not solicited by the division and that neither Donkel, nor to his knowledge any other royalty interest owners, aside from the state, were notified prior to the division’s decision.

The state has a royalty interest of 12.5% in all the leases in both units.

Deducting the state’s royalty, CIE, the 100% working interest owner, has a royalty interest at the five Redoubt leases ranging from 79.3% to 83.4%.

There are combined overriding royalty interests of 4.1% to 8.2%.

At the three West McArthur River leases, deducting the state’s royalty, CIE has royalties of 75% to 85.8%; combined overriding royalty interests total 1.7% to 12.7%.

In addition to questioning oil price and demand as reasons for the suspension, the appeal said there is no evidence the division considered potential harm to the reservoirs from shutting in the wells.

Donkel is asking that the suspension be stayed pending review of possible impact to the reservoirs and “full disclosure to all interested parties and a meaningful opportunity to be heard.”

In April, the last month for which the Alaska Oil and Gas Conservation Commission shows a full month of production from the units, Redoubt averaged 1,676 barrels per day and West McArthur River averaged 374 bpd.

- KRISTEN NELSON