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AOGCC to look at increasing bonding Foerster tells House Resources commission taking to operators, other parties on bonding; working with DNR on lease relinquishment KRISTEN NELSON Petroleum News
The Alaska Oil and Gas Conservation Commission is addressing a number of issues related to bonding, lease relinquishment and blowout contingency planning, Chair Cathy Foerster told the House Resources Committee Feb. 8.
There are three commissioners, appointed to six-year terms, she said, with Hollis French appointed in July to fill the last four and a half years of the vacant public seat and Dan Seamount in the last 20 days of his appointment to the geology seat on the commission. Foerster, who was appointed in 2005, said her term ends in “two years and 20 days” and said she would not be seeking reappointment. She said she hopes the Legislature will confirm French and that the governor will reappoint Seamount because of his institutional knowledge - he has served on the commission since 2000.
Foerster noted that the commission is funded by a regulatory cost charge assessed to regulated industry based on barrels produced and barrels injected, not by the general fund.
The regulatory framework Foerster said the commission constantly evaluates its regulatory framework and proposed several modifications in 2016, received substantial feedback and has a hearing scheduled to decide whether to adopt the changes, which were made to stay current with technology and operations, fill gaps identified or clarify something misunderstood by operators.
The commission has spent a lot of time working on its hydraulic fracturing regulations and a review by a national panel, reported in early 2016, gave the commission really good marks, Foerster said, with Alaska considered to have the most stringent and comprehensive regulations in the country for hydraulic fracturing. In spite of that, the commission has received a request for hearing and public notice before hydraulic fracturing takes place, has proposed a small tweak to its regulations and has a hearing scheduled for March.
This year the commission is working with the Department of Environmental Conservation to transfer regulatory responsibility for blowout contingency planning from DEC to the commission, which has the well control expertise, leaving DEC with the cleanup planning for which they have the expertise.
Orphan and legacy wells Orphan wells- those that haven’t been properly plugged and abandoned and where there is no operator responsible, are a big problem in parts of the Lower 48, Forester said. There aren’t many of those in Alaska, she said, just a handful, and whoever drilled them has gone bankrupt and disappeared. Another category, legacy wells, were drilled by the federal government. The only problem there is getting the federal government to take responsibility for the mess they created, Forester said. Sen. Lisa Murkowski got $50 million allocated in 2014 to clean up some of the mess and in 2015 BLM started work, and continued it in 2015.
But in doing the 2016 work on the worst wells, one leaking natural gas and the other capable of flowing oil to the surface, BLM did not follow its approved plan or state regulations, Foerster said.
They were unsuccessful at plugging either well and left both in “such a state of disrepair” that the ability to re-enter them is compromised. BLM has to go back and complete the work, but it will cost a lot more and may not even be doable, Forester said.
AOGCC signed a memorandum of understanding with BLM last week (week ending Feb. 3), Foerster said, and BLM will be working under that, assuring it will seek and follow the commission’s guidance and the laws of the state.
Bonding issue The current bonding required for downhole cleanup is $100,000 for the first well - and an additional $100,000 for all additional wells a company drills, a total of $200,000, Foerster said.
As oil fields mature, and new and smaller companies come to the state, the threat of orphan wells grows, she said, noting that for years the state had the luxury of only dealing with large publicly traded companies with large balance sheets and long track records. It was hard for them to sneak away in the dark of night, Foerster said.
But things are changing with smaller companies coming to the state, and in 2016 two operating companies went bankrupt, which has the potential to leave the landowner holding the bag for the plugging and abandoning liability.
The commission is now considering changing its bonding requirement, and is in the process of letting everyone know. Foerster said the commission will probably spend the summer, fall and winter letting all affected parties be heard through public meetings and hearings.
“I don’t know what we’ll do as a result of that, but we will be doing something,” she said.
Lease relinquishment is a related issue.
Department of Natural Resources regulations say relinquishment occurs when an operator says the lease is relinquished, while AOGCC requires an operator to plug and abandon wells before relinquishment.
She said the commission is working closely with DNR to improve the process so leases aren’t relinquished before wells are properly plugged and abandoned.
The commission is also starting to look at shut-in wells on the North Slope, working with BP, to identify wells with no future utility. It’s an issue, she said, because if it had required all shut-in wells to be plugged and abandoned 25 years ago, those well bores wouldn’t have been available when changes in technology- coiled tubing drilling and horizontal drilling - enabled some wells to be put back to use to produce resources that couldn’t be produced when the wells were originally shut-in.
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