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The Explorers 2017: State managing 5 exploration licenses
Eric Lidji For Petroleum News
The state of Alaska launched the exploration license program to create a pathway for companies to explore corners of the state excluded from the regular cycle of lease sales.
And although no production in the state can yet be traced to the program, exploration licensing can take credit for a range of drilling programs, especially in the Interior.
The program creates a system that mimics the competitive aspects of lease sales, which are designed to fulfill the “maximum benefit” clause in the state constitution. Every April, the Alaska Department of Natural Resources accepts applications for potential exploration licenses covering areas between 10,000 and 500,000 acres. The applicant proposes the geographic area, a work commitment and a term limit. The process allows other companies to make competing bids, in an effort to get the best deal for the state.
As of early 2017, according to information available on the Alaska Division of Oil and Gas website, the state was overseeing three current licenses (Healy, North Nenana, and Tolsona basins) and two pending requests (Gulf of Alaska and Houston-Willow basins).
Healy The three current licenses cover activities in the Interior region.
Usibelli Coal Mine Inc. applied for an exploration license in the Healy area in April 2004, looking to add natural gas exploration to its traditional coal mining operations.
The state issued a favorable review of the project, but local groups challenged the project on environmental grounds, leading to a decade of cases that were resolved in 2014.
The state eventually approved the 204,883-acre Healy basin exploration license for a 10-year term starting at the beginning of 2011, which gave Usibelli until the end of 2020 to conduct exploration activities. The license required a $500,000 work commitment.
Usibelli met the work commitment by drilling the 1,265-foot HC No. 1 coal-bed methane test well in mid-2014. The company initially permitted a four-well program, to provide operational flexibility, but has only drilled one well to date. “It was successful in confirming the existence of gas in the basin, but it’s inconclusive on a commercial level,” Usibelli company representative Mitch Usibelli told Petroleum News in January 2017.
By satisfying the work commitment, Usibelli was able to create some space to decide what to do next. The company is still deciding whether to drill a follow-up well.
North Nenana and Tolsona The state issued a five-year license for the North Nenana basin to Rocky Riley of Tolovana Construction Co. in early July 2015. The license covers 25,294 acres in the Minto Flats State Game Refuge and includes a $500,000 initial work commitment.
The region is located some 35 miles west of Fairbanks and just north of the Nenana basin where Doyon Ltd. has been exploring for natural gas over the past decade. According to the state, the North Nenana region has “low to moderate potential for discovery of conventional and unconventional natural gas” and oil potential “is also considered low.”
As of March 2017, no work plan had been publically announced for the license area.
The active Tolsona exploration license, located in the Copper River region near Glennallen, is discussed more fully elsewhere in this issue, in the profile of Ahtna Inc.
Inactive licenses In addition to the five active or pending licenses, the exploration license program has also been responsible for many licenses that are not active. Those include two rejected applications (Susitna Basin III and Susitna Basin IV), two expired licenses (Copper River Basin and Susitna Basin II), two terminated licenses (Susitna Basin I and Holitna Basin), three relinquished licenses (Susitna Basin IV, Susitna Basin V and Southwest Cook Inlet) and one license that has been converted to traditional leases (Nenana Basin).
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