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Providing remote power Comment period ends for Holitna Basin shallow gas lease application, Holitna Energy seeks funding for February seismic, drilling Patricia Jones Petroleum News Contributing Writer
A recently formed shallow gas exploration company is working to fast-track an unexplored, remote region of western Alaska into a gas-producing project, one that could provide energy for local electric generation.
Holitna Energy President Phil St. George left a 24-year career as a minerals geologist to start a shallow gas project in the remote region of the upper Kuskokwim River, location of one of the world’s largest undeveloped gold deposits.
Producing gold from the 28-million ounce Donlin Creek deposit will require substantial electric power — a resource that, so far, is lacking in that part of Alaska.
St. George believes that coal-bearing land in the Holitna Basin near Donlin Creek could provide the mine’s energy answer as well as power local villages along the Upper Kuskokwim River that now depend on diesel generators for electricity.
His company, called Holitna Energy, applied in May for four shallow gas leases in the region and hopes to explore for coalbed methane and free-flowing gas starting in February 2004.
“Right now we’re trying to raise money to complete 30 miles of seismic survey and drill about 6,000 feet of core to determine how much coal there is, how gaseous the coal is and how much gas could be there,” he told Petroleum News July 28. $1.5 million needed St. George estimates his company needs about $1.5 million for that exploration work, in addition to approval of shallow gas leases and exploration permits from state regulators.
The public comment period for the non-competitive state leases closed July 30. James Hansen, lease sales manager at the Alaska Division of Oil and Gas, said the agency now must develop mitigation measures to issue the leases, a process that could conclude by mid-December.
“That’s banking on there being no problems with the lease to be issued,” he said. “It may slip, depending on our workload.”
Terms of Alaska’s shallow gas leasing program require the director to issue leases if discovery of shallow gas can benefit the local community, Hansen said. “There’s no discretion … the law was written to expedite the process.”
He also said that the state agency would “endeavor the best we can to expedite the process … we try to accommodate,” if a company has a specific plan and timeline for fieldwork. “The permitting process does not take that long for shallow gas (compared to conventional oil leasing and exploration).” Few comments received Hansen said he received four letters on the last two days of the public comment period. All expressed general concern about the potential for environmental impact on migrating salmon and moose populations by shallow gas development, he said.
Some of the letters requested a public meeting to discuss the process, Hansen added. “There’s just not a lot known about the shallow gas program — it’s relatively new,” he said. “It has its own noticing and comment periods, much different from conventional leasing — not near the public process, which is intentional to get applications for shallow gas approved.”
Because two of the four letters represented community groups, one in Sleetmute and one in Bethel, a number of people are interested in the development, he said. The division may hold a teleconference to provide additional information on the Holitna Basin leases, he said. Unexplored rural region Holitna Energy, composed of St. George, long-time Alaskan oil field geologist Eugene Piekenbrock and four other investors, is seeking 19,840 acres of state land for shallow gas leasing.
The seven-mile long, six-mile wide section is located east of the Holitna River, southeast of the Kuskokwim River village of Sleetmute and about 50 miles southeast of the Donlin Creek gold deposit.
The region, long prospected by gold miners, has not been of much interest to oil and gas developers despite favorable geology contained in the sedimentary basin intersected by the Farewell Fault.
State-produced geological and geochemical reports on the Holitna Basin published in the last two years caught the attention of St. George, who worked as NovaGold’s project manager of Donlin Creek for the last two years. LePain report out this fall In addition, he heard about the potential for shallow gas from the company’s Native corporation partner, Calista Corp.
“I saw no fatal flaws and all the public information made it look very positive,” St. George said, referring to state-funded gravity and magnetic surveys conducted in the region. “We spent a bit of time and effort delving into it — we got the raw data and did some geophysical tweaking.”
In an interview with Petroleum News in May, state geologist Dave LePain said field samples gathered in 2000 and 2002 in the Holitna Basin showed potential for sources of gas, as well as the ability to generate liquid hydrocarbons.
LePain’s follow-up geological report is due out this fall. Significant coal Rock outcrops to the east of the Holitna Basin show significant seams of coal, several hundred feet thick in places. St. George said he thinks buried coal in the lease area could be as much as 500 feet thick, more than enough to generate enough methane gas for a power plant.
“We’re hoping to hit free-flowing gas in one of these holes,” he said. “We’ll drill one or two, just confirming the coal.”
The fast-track exploration program is driven in part by advancement of the Donlin Creek project. “Placer Dome needs to know if they can use this — they need to know pretty quickly to incorporate it in their feasibility study,” St. George said.
During his tenure at Donlin Creek, St. George realized the project’s main obstacle was not the amount of gold, but the lack of electric power to process the sulfide mineralization. “It was not going to go without solving the power problem,” he said.
In fact, developers of Donlin Creek could use natural gas to directly fire compressors needed in the oxidation process, rather than using electric-driven machines, St. George said.
“Placer Dome is interested in running a gas line to the project,” he said. “They would use less electricity and more natural gas, but would not lose the efficiency of the conversion.”
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