Providing coverage of Alaska and northern Canada's oil and gas industry
October 2018

Vol. 23, No.43 Week of October 28, 2018

Oil Patch Insider: Conoco approves GMT-2 project; Hilcorp Anchor Point lease proposed;

Kay Cashman

Petroleum News

North Slope leasing news: A ConocoPhillips Securities and Exchange Commission filing the morning of Oct. 25, said the company has sanctioned the Greater Mooses Tooth-2 development in the northeastern National Petroleum Reserve-Alaska, noting GMT-2 leverages existing infrastructure to lower its cost of supply and minimize the environmental footprint. GMT-1 recently started producing oil on Oct. 5. Both are Alpine satellites.

An Oct. 16, Bureau of Land Management joint record of decision with the U.S. Army Corps of Engineers for GMT-2 said the preferred option is the company’s plan to build a 14-acre drill pad that could hold up to 48 wells and produce some 40,000 barrels of oil per day, which the company has previously said would cost some $1.5 billion.

Kenai Peninsula leasing news: The Kenai Peninsula Borough is considering an ordinance that would grant an oil and natural gas lease on borough lands in Anchor Point to Hilcorp Alaska LLC. It was introduced to the assembly Oct. 23.

The lease carries a negotiated 12.5 percent royalty rate to the borough and covers five parcels scattered about the unincorporated community on the Lower Kenai Peninsula, according to borough documents. The primary term of the lease is five years and as long thereafter as operations are conducted within the subsurface with no cessation for more than 180 consecutive days.

The proposed lease area is 19.1 acres, more or less (see map in pdf and print versions of this issue). The largest parcel of 15.92 acres, which incorporates the Anchor Point refuse transfer site, is located along the south side of School Street - aka School Avenue - across from and ranging south to southwest from the Chapman Elementary School. A small parcel lies east of the Sterling Highway on North Fork Road. West of the Sterling Highway a one-acre parcel is on tidewater off Anchor Point Road near the Halibut Campground.

Funds for Fire and Rescue

Two parcels on Milo Fritz Avenue consist of the 1.7-acre site of the Anchor Point Volunteer Fire Dept. and Rescue - and across the street, the 0.69-acre site of the Anchor Point Fire and EMS training facility.

Lease royalty payments attributable to the two fire and rescue locations would be distributed at 9.7 percent to the Anchor Point Fire & Emergency Medical Service Area, and the remainder would be received by the Land Trust Fund, according to the ordinance and associated memos.

The borough said the anticipated funds represent a vital revenue stream to the Land Trust Fund.

The borough said that as Hilcorp currently has oil and gas leasehold interests near Anchor Point and is planning to develop the infrastructure necessary to extract natural gas and/or oil from the lands, the borough responded when Hilcorp approached it. The parties subsequently negotiated a lease for subsurface oil and gas extraction operations.

The proposed lease would be subject to surface limitations whereby the lessee will conduct no operations on the surface of the lease lands. The lessee would have the right to drill and operate directional wells through and under the land, irrespective of the bottomhole locations of its wells.

The lessor would grant to lessee a subsurface easement for all purposes associated with such directional wells. The subsurface easement would commence at and continue below the depth of 500 feet.

Marcus Mueller, borough land management officers told KBBI radio that Hilcorp’s proposal to lease would allow for both oil and gas extraction, adding that Hilcorp would most likely be extracting gas.

Mueller said there would be no infrastructure above ground at any of the lease sites.

“These would be contributing to wells that would be (on) an off-site location,” he told KBBI.

Local drilling program

As previously reported in Petroleum News, Hilcorp has been active in the area, most recently having applied to the state of Alaska’s Division of Oil and Gas in May to construct the new Seaview pad on a private parcel south of Anchor Point off the Old Sterling Highway. The company told the division it planned to drill two exploration wells from the pad. Hilcorp previously drilled seven shallow stratigraphic test wells in the Anchor Point area.

The proposal for the new pad with two proposed wells - Seaview 8 and 9 - was approved Aug. 24; the wells would be drilled within ADL 392667.

The division said the wellbore locations for the two wells “were derived from stratigraphic wells drilled on private lands near ADL 392667 and other prior wells drilled in the surrounding area.” The Seaview 8 will extend beyond ADL 392667, the state said, exploring for oil on fee simple land.

The Kenai Peninsula Borough Planning Commission will consider the proposed oil and gas lease ordinance - Kenai Peninsula Borough Ordinance number 2018-34 - Nov. 13 at its regularly scheduled meeting.

The assembly will hold a hearing on the measure November 20.


Lisa Parker speaks out against salmon initiative

An op-ed from Soldotna City Council member Lisa Parker that opposes Ballot Measure 1 was recently submitted to Petroleum News.

PN doesn’t run opinion pieces, even from citizens such as Parker who have nearly 50 years of experience in industry and community development in Alaska.

The op-ed can be requested directly from Parker by emailing her at [email protected]. Following are excerpts from the document.

* “Salmon have always been an integral part of our economy, as well as a fundamental part of our identity as Alaskans. We measure the value of salmon not only in escapement numbers and dollars, but also in their ability to enrich our lives and connect us with the land we cherish and call home.”

* “Alaskans have long supported salmon-friendly policies and regulations. And that support has paid off in the most robust wild salmon runs in the world,” noting Alaska has more than 18 state and federal policies that address salmon habitat protections.

* Supporters of the “Stand for Salmon initiative, want to throw out a system that has worked for decades and replace it with one that is overly cumbersome, too rigid, too expensive and too time-consuming. For communities like ours, it adds costs we can ill afford for little to no gain.”

* Pointing out a resolution recently adopted by the Soldotna City Council, Parker the city thinks “a legislative process which allows for intense public input and review, rather than the proposed ballot initiative, would be a better approach to developing a new regulatory framework for salmon protection and development permitting….”

* A Kenai Chamber of Commerce resolution said the “ballot initiative places unattainable protection standards on community and village development, both large and small. Under the proposed permitting process, road projects, water projects, wastewater treatment projects in our communities would require a major permit as described by the initiative language.”

* Soldotna’s “immediate concern,” is re-permitting its wastewater treatment facility because “under Proposition 1, existing operations would only be exempt until their current permits expire. After that, they would be required to reapply for permits under the new regulations. Many operations or projects, potentially … would not be able to comply.”

* The current permitting process for Soldotna’s wastewater facility “applies science-based standards specific to our unique operation and location. These standards are designed to avoid adverse impacts to water quality and aquatic life, including salmon, and the city has invested significant resources to ensure that these standards are met.”


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