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Strategically positioned North Fork exploration project back on track Independent North Star Energy hopes to take advantage of proximity to proposed Kenai-Kachemak gasline; decides not to drill water well due to area landowners’ concerns, will haul in water Kay Cashman PNA Publisher
Gas-Pro Alaska LLC’s plan for a North Fork well on the lower Kenai Peninsula was on hold for a few weeks after investors raised concerns about the time it was taking to permit the exploratory well, project geologist Keith Summar told PNA.
Summar is vice president of exploration for North Star Energy Group Inc. of Tulsa, which purchased Alaska-based Gas-Pro last year.
“We dropped off the radar screen for awhile, but it was just a matter of regrouping,” he explained in an Oct. 10 interview.
“North Star is a very small company and privately funded. … We thought Alaska was supposed to be a friendly place for independents but … the permitting process here is very formidable and daunting to a small company like ours. It takes a tremendous amount of time compared to projects in the Lower 48 and internationally. And time is money. … Investors don’t like that kind of uncertainty,” Summar said.
Hence the hold up. But the project is back on track, he said, and moving forward.
How fast it will move will depend on whether Summar and his partners decide to drill an oil well or a gas well.
Oil well requires contingency plan An oil well requires an oil spill contingency plan that must be approved by the Alaska Department of Environmental Conservation, which in the last year has adopted new policies that other state and federal permitting agencies describe as allowing close to “zero tolerance” or “zero risk.” The costs associated with meeting DEC’s new policies also alarmed North Star’s investors.
A gas well “tremendously simplifies things for us because we don’t need a spill plan. But there’s no market for gas right now — not until there is a pipeline. Oil doesn’t need a pipeline. It can be trucked to the Nikiski refinery,” he said.
Most independents can’t afford to spend $3 million to drill a well that they can’t put into production.
The decision on which type of well to drill will likely be made in the next few days, Summar said. There will be “less urgency if we decide to drill a gas well because there’s no market and right now, that’s what we expect we’ll be doing.”
Near proposed Kenai-Kachemak gasline route Despite permitting challenges and a delay in drilling (initially expected to happen this month), North Star’s principals are excited about the North Fork prospect.
“We think it has significant gas and oil reserves,” Summar said, “and it’s in a good position geographically because it’s near the proposed Kenai-Homer gas pipeline. … We’re not directly in its path but it won’t cost much to lay a gathering line to us.”
Summar believes the 75-mile gas pipeline will be built in the next few years and so do its owners, the Kenai-Kachemak Pipeline Project consortium — Marathon Oil Co., Unocal Alaska, Alaska Electric Generation and Transmission, of which Homer Electric Association is the primary owner, and Alaska Pipeline Co., a subsidiary of Enstar.
Last month, the consortium told PNA that construction on portions of the pipeline could begin as early as fall 2002. Permitting was expected to begin this month.
“The fact that Marathon recently joined the group, we see as a very positive sign,” Summar said. “We have been watching the activity in the area. Unocal is permitting two more well locations. … Phillips’ new Cosmopolitan project is about eight miles west of us on the Sterling Highway (see news brief in the On Deadline section of this issue). Marathon’s been actively exploring. All of this is going to provide impetus for that line to be laid.”
Permitting started Feb. 9 According to Glenn Gray of the state Division of Governmental Coordination, his agency started a review of the North Fork project — referred to by DGC as the “Nikolaevsk Gas Exploration Wells (Northstar Energy) (AK 0102-01OG)” — on Feb. 9.
DGC and North Star held a public meeting on the project in Anchor Point on Feb. 28. They told attendees that development would involve building 250 feet of new road and a 1.5 acre gravel drill pad. North Star also expressed a desire to drill a water well near the drill site.
DGC extended the review deadlines on March 5, Gray reported in writing, “for information requests from review participants including the Cook Inlet Citizen’s Advisory Council, the DEC/Spill Prevention and Response Division and the Alaska Department of Fish and Game.”
Since that time North Star has changed drilling locations at the request of the Alaska Department of Fish and Game.
“We worked with Mark Fink from Fish and Game and Matt Rader from the Division of Oil and Gas to select a new drilling spot. They were both very helpful,” Summar said.
Water will be hauled in Most recently, North Star decided not to drill a water well for the project but instead to haul water in.
“When we had our meeting in Anchor Point and announced the project, the people who came were concerned about us drilling a water well. We decided recently that we’re not going to drill a water well. We’ll haul water in because that’s what the local residents want and we want to be good neighbors,” Summar said.
Editor’s note: Summar invited people who are interested in the project to call Gas-Pro’s phone number in Soldotna, (907) 262 4291, or North Star’s Tulsa office, (918) 748-8775. North Star’s fax number is (918) 748 8891.
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