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THE EXPLORERS 2004: Eradicating poverty with natural gas Bristol Bay residents ask state of Alaska to open poverty-stricken region to exploration and development Kay Cashman Petroleum News
In 2003, the people living in the Bristol Bay region of Southwestern Alaska asked Alaska Gov. Frank Murkowski to open their area to oil and gas leasing. Their goal was to eradicate the poverty brought on by the decline of the Bristol Bay fisheries by creating new jobs and finding local sources of cheap energy in what was considered a gas-prone geological area of Alaska.
The governor responded with enthusiasm, as did Alaska’s congressional delegation. A number of things began to happen. The state Division of Oil and Gas designated a study area in the northern portion of the Bristol Bay geological basin in July 2003, and solicited exploration license proposals for 3 million acres in the area.
Four Native elders from the Dillingham area formed Bristol Shores LLC and filed for a 329,113 acre, 10-year license with a $3.2 million work commitment. The area included part of Nushagak Bay and a substantial area of land east of Dillingham.
George Shade, president of Bristol Shores, told the state that the four owners of his company planned to help the environment as well as the economy, “to boost jobs and basically concentrate on local hire and concentrate on producing.”
Evergreen Resources also submitted a proposal, but for a different area of the basin and for half the work commitment. That proposal was withdrawn when Pioneer Natural Resources moved to purchase the company.
In the division’s March 2004 preliminary best interest finding on Bristol Shores proposed license, the agency proposed amending a 1996 ruling by the Alaska Department of Natural Resources that excluded “all submerged land in and around Bristol Bay, from Ugashik Bay north to the western boundary of Kulukak Bay…” from exploration licensing — a ruling which excluded what some industry observers believe is a prospective area for gas, and possibly oil.
A portion of Nushagak Bay was in the exclusion area in the 1996 ruling, and was included in Bristol Shores’ proposed exploration license.
The division proposed to allow exploration licensing within the bay, but with the stipulation that exploratory drilling could only be conducted “directionally” from onshore locations.
Area believed to be gas prone The area of Bristol Shores proposed license, the Bristol Bay lowlands, has the greatest potential as a gas province, the division said. No petroleum exploratory wells have been drilled in the Bristol Bay/Nushagak lowlands, although 10 wells have been drilled farther to the southwest along the Alaska Peninsula into the onshore extension of the Bristol Bay basin.
None of the wells was a commercial success, “but most had fair to moderate shows to gas and/or oil.” The division said it would seem reasonable to hypothesize a natural gas resource in the multiple billions of cubic feet up to 1 trillion cubic feet in the area.
A world of possibilities While the state reviews a Sept. 27 request from an environmental law firm for reconsideration of Bristol Shore’s exploration license, Bristol Shores is assessing the relative merits of joint venturing the exploration work versus having a major oil company carry out the exploration and development.
“We’re currently talking to a major integrated oil company,” said Jere Allan, president of the Bay Group, a management firm working for Bristol Shores.
Shade expected Bristol Shore’s profits to come initially from natural gas liquids sales — the company was looking at building an NGL plant at a convenient and suitable location.
Shade also talked about the possibility of exporting liquefied natural gas.
“You’ve got to understand, because of where we’re sitting … we virtually have the whole Asian market at our fingertips,” he said. Allan said they had already located potential markets.
“We are talking to a Japanese trading company, LNG Japan USA — they’re interested in all the LNG (liquefied natural gas) that we could get,” he said.
Bristol Shores would also allocate some of the gas for local use in the Bristol Bay area, to replace the use of diesel fuel in power plants, for example.
Shade also saw possibilities for piping natural gas to other parts of Alaska. He had already researched a route for a pipeline from Portage Creek near Dillingham to Bruin Bay on the Cook Inlet and had submitted his plan for this route to the state. From Bruin Bay that pipeline could connect with the pipeline systems in the Cook Inlet, he said.
There was also a possibility of supplying gas to the Alaska Interior by building a pipeline north to McGrath and then, from there, down the Iditarod trail, Shade said.
He was also investigating other clean forms of energy, such as gas-driven fuel cells.
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