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State denies Angel unit for Linc Energy State claims Aussie independent hadn’t sufficiently delineated hydrocarbon accumulation on its expiring Cook Inlet leases Eric Lidji For Petroleum News
State officials won’t form the Angel unit, saying leaseholder Linc Energy (Alaska) Inc. hadn’t sufficiently defined the Cook Inlet hydrocarbon accumulation it would explore.
“The proposed (plan of exploration) does not propose activity that would result in greater economic benefit to the state if leases were unitized than if the activities were conducted on a lease-by-lease basis,” Division of Oil and Gas Director Bill Barron wrote Sept. 10.
If Linc accepts the ruling or fails to win an appeal, the leases would retroactively expire.
The Australian independent proposed the nearly 1,700 acre unit in May, asking to combine one state and one Alaska Mental Health Trust lease in the region around Point MacKenzie. Both leases reached the end of their primary terms on May 31.
Linc drilled the LEA No. 1 well nearly 2.5 miles north of the proposed unit in November 2010, just nine months after arriving in Alaska. The well encountered several gas-bearing coal seams, but after subsequent tests Linc decided the structure was “too tight.” Previous exploration history in the region includes the Alaska Gulf No. 1 in 1955, the Susitna State Unit No. 1 in 1964 and the Pan Am Big Lake USA No. 1 in 1968 — all drilled outside the proposed unit boundaries and all plugged and abandoned without testing.
All four of those wells are outside the proposed Angel unit boundaries. The closest, the Pan Am Big Lake USA No. 1, encountered gas shows in coals of the Tyonek formation.
Geologic feature of interest In requesting the unit, Linc said its exploration model of the region revealed a geologic feature of the Pittman Anticline worth investigating. That didn’t satisfy the state, though.
“At this time,” Barron concluded in his ruling, “Linc Energy has not presented a structural trap that is reasonably defined and delineated, and therefore has not identified a potential hydrocarbon accumulation for the proposed Angel unit.” Linc proposed a seismic work for the region, but Barron said seismic work does not require unitization.
In its plan of exploration for Angel, Linc proposed a 2-D and 3-D seismic campaign in the first year, an exploration well in the second year and initial development activity in the third year, if drilling results merited going forward. “Unitizing the leases is not necessary to conduct the activities proposed in the plan of exploration,” Barron concluded, saying both the seismic and drilling could be done on a lease-by-lease basis.
In a Sept. 13 email to Petroleum News, Linc’s general manager of Alaska operations, Corri Feige, said: “Linc Energy respectfully disagrees with the State of Alaska’s decision regarding the Angel Unit, and we do plan to appeal.”
Similarities to Cohoe In a case with some similarities to the proposed Angel unit, the Division of Oil and Gas also upheld its denial of the proposed Cohoe unit in the Cook Inlet earlier this year.
In that case, leaseholder Aurora Gas also wanted to head off expiration and the state also said the company had not adequately delineated a hydrocarbon accumulation in the area.
Among its arguments, Aurora Gas said the combination of state and Cook Inlet Region Inc. leases in the Cohoe area required unitization. Linc Energy made a similar argument in support of combining its state and Alaska Mental Health Trust leases at Angel.
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