CIRI commission hearing moved to January

Mental Health Trust needs time to find expert; Buccaneer objects to CIRI request that wells be shut-in, responds to CIRI appeal

Kristen Nelson

Petroleum News

Issues between Cook Inlet Region Inc. and Buccaneer Alaska LLC over the Kenai Loop natural gas field remain unresolved, with a December hearing before the Alaska Oil and Gas Conservation Commission rescheduled to the end of January. The Alaska Department of Natural Resources and the Alaska Mental Health Trust Land Office formally joined the proceedings, with the Trust Land Office requesting an extension from the Dec. 4 hearing date originally set.

The Trust Land Office, or TLO, needed the extra time to obtain “expert technical advice,” its attorneys told the commission in a Nov. 18 filing.

The TLO has “significant” interests in the matter, the filing said, because CIRI has proposed putting 31.5 percent of the royalty income TLO receives from Kenai Loop field production into escrow and potentially taking it all permanently. The Alaska Mental Health Trust “has a significant fiduciary obligation to its beneficiaries and the stakes in this case are particularly high,” requiring TLO to obtain technical advice. Normally TLO would rely on DNR’s Division of Oil and Gas for such technical geological and reservoir advice, but since the division is a party to the matter, TLO must obtain technical advice from an independent third-party contractor.

“The delay sought here by TLO will also provide time for the parties to refine and possibly settle the issues currently before them,” the filing said.

CIRI petitioned the commission for relief in October; in August it protested spacing exceptions the commission had granted for Kenai Loop Nos. 1-1 and 1-3 wells, claiming drainage from its adjacent acreage. (See stories in Sept. 29 and Nov. 3 issues of Petroleum News.)

Buccaneer is currently producing from leases it holds from TLO. The state and CIRI hold adjacent subsurface acreage.

In a Nov. 27 response to CIRI’s petitions to the commission, Buccaneer’s attorneys objected to a November request by CIRI that the commission shut-in production from the Kenai Loop wells if the hearing date was moved, arguing that CIRI has not presented evidence that natural gas from the Kenai Loop wells comes from its property, and “has offered no compelling explanation for why it believes it is legally entitled to this percentage of production, let alone why it does not need to pay any share of the costs.”

The Buccaneer response said its operations comply with state law and that the commission “has found that Buccaneer is not violating CIRI’s correlative rights.” The filing called CIRI’s petition to have the wells shut-in “meritless,” called the request “reckless,” and said it may result in less ultimate recovery and would violate correlative rights.

In addition to the appeal before the commission, CIRI has sued Buccaneer in Alaska Superior Court over a CIRI oil and gas lease Buccaneer acquired in 2011 (see story in Nov. 17 issue of Petroleum News).