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State approves Placer expansion
After a lengthy and complicated appeals process, the state is reversing an earlier decision and allowing ASRC Exploration LLC to expand the Placer unit on the North Slope.
The ruling requires the exploration arm of Arctic Slope Regional Corp. to file a new plan of exploration by the end of the year, post a $2.5 million performance bond by mid-January 2015 and meet a series of work commitments culminating in an exploration well by May 2016. The Placer unit would keep its original expiration date of Sept. 8, 2016.
The Nov. 13 decision helps resolve a three-year dispute between the company and the Alaska Department of Natural Resources over the best way to explore the Placer unit.
Shrunken unit The Division of Oil and Gas formed the 1,480-acre unit over segments of four leases in September 2011. The company had wanted a unit covering some 8,769 acres. Instead, the state restricted the unit boundaries to the drainage radius of the Placer No. 1 well, segmented the additional acreage and extended the terms of those segmented leases. The unit size approved in the Nov. 13 decision is the 8,769 acres originally requested.
The unit agreement set deadlines for ASRC Exploration to re-process seismic data by the end of 2011 and to drill a follow-up well or re-enter Placer No. 1 by June 2013. After reprocessing the seismic, the company asked to expand the unit to its original size.
The Division of Oil and Gas denied the request. ASRC Exploration appealed the denial to the Department of Natural Resources. That appeal is the basis for the current decision.
The unit went into default when ASRC Exploration failed to drill the exploration well by June 2013. The state gave the company a year to cure the default by drilling the well.
Potential joint venture
In a private meeting with the state on September 2013, officials from ASRC Exploration and Brooks Range Petroleum Corp. offered four options for exploring Placer. Brooks Range Petroleum became involved because the two companies believed the Placer unit might extend into Brooks Range Petroleum’s Appaloosa prospect, located to the south.
All four proposals involved ASRC Exploration farming-out exploration to Brooks Range Petroleum. The exploration would have occurred in the proposed expansion acreage.
To allow that plan to proceed, ASRC Exploration asked the state to rule on the appeal.
The Department of Natural Resources sent the case back to the division in September 2013, asking the division to approve the expansion, pending certain conditions. Those conditions were: drilling an exploration well by 2014, keeping the existing five-year term of the unit, posting a performance bond and providing a copy of the farm out agreement.
The Division of Oil and Gas agreed. A November 2013 ruling gave ASRC Exploration until Dec. 15, 2013, to post the bond and provide the agreement. ASRC Exploration never compiled, even after the division extended the deadline twice, according to the state.
Near termination As such, the Placer unit remained in default.
When ASRC Exploration failed to cure the default by drilling, the state solicited potential remedies for curing the default, which is one of the final steps before unit termination.
In an August 2014 hearing, ASRC Exploration “insisted” that the state expand the unit and allow the company to drill an exploration well in the expansion acreage. The company proposed drilling by May 31, 2016. After the meeting, the company submitted a new plan of exploration. The state denied the plan. The company appealed the denial.
The Department of Natural Resources sent the case back to the division in October, this time requiring an exploration well by May 2016 and a $2.5 million performance bond. Regional exploration The Placer unit is part of larger efforts to explore the region between the Kuparuk River and Colville River units, an undeveloped tract known as the “billion dollar fairway.”
To the south, Brooks Range Petroleum is developing the Mustang field at the Southern Miluveach unit. The state recently terminated the company’s Kachemach unit, which was between Southern Miluveach and Placer and had been discussed as a corollary to Placer.
To the north, Repsol intends to drill three exploration wells this winter. Earlier this year, Repsol proposed the Tapqaq unit, which would have included some of the proposed Placer unit acreage. The unit application has yet to be published for public comment.
To the east, ConocoPhillips Alaska Inc. is planning an appraisal program at the Palm satellite at Kuparuk River unit Drill Site 3S. The appraisal could lead to a new drill site.
- Eric Lidji
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