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AOGCC posts 2 bonding appeal decisions
Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission has partially accepted a bonding reconsideration request from Cook Inlet Energy and denied a bonding reconsideration request from Malamute Energy.
In May 2019, AOGCC raised its bonding requirements for plugging and abandoning wells, formerly $100,000 for a single well and $200,000 for multiple wells, to $400,000 per well for one to 10 wells; $6 million for 11-40 wells; $10 million for 41-100 wells, $20 million for 101-1,000 wells; and $30 million for more than 1,000 wells.
Companies with permitted wellheads received notification last July of new bonding requirements and a number requested reconsideration: AIX Energy, Alaskan Crude, Amaroq Resources, Cook Inlet Energy, Malamute Energy and Savant Alaska.
The commission issued a decision on the AIX appeal earlier in the year.
On Sept. 28 it issued decisions on the Cook Inlet Energy and Malamute Energy requests.
Cook Inlet Energy CIE agreed that the new bond amount of $6 million would be the cost to plug and abandon its wells, AOGCC said, and requested an offset because its $500,000 dismantlement, removal and restoration bond with the Alaska Department of Natural Resources includes an unspecified amount for P&A of the wells.
It also requested an offset for a $324,000 bond it has in place with the U.S. Environmental Protection Agency, a bond dedicated to P&A of two disposal wells.
The commission denied a reduction for the DNR bonding, saying it “is for the DR&R of the surface of DNR’s leases to a condition acceptable to DNR. As of the date of this order, no evidence has been offered that any of the DNR bond is exclusively dedicated to the costs to properly P&A CIE’s wells.”
But the commission did accept an offset for the $324,000 EPA bond because it is exclusively dedicated to P&A.
CIE has an existing $200,000 bond with AOGCC, and that amount, along with the $324,000 for the EPA bond, is deducted from the $6 million, leaving CIE with a revised additional bond requirement of $5,476,000, the commission said in its order.
Malamute Energy Malamute Energy has two permitted wellheads at Umiat in the National Petroleum Reserve-Alaska; its new bonding requirement is $800,000. The company has a $200,000 bond in place with the Bureau of Land Management; AOGCC is requiring an additional $600,000.
The company told AOGCC its total cost to P&A the wells would be $2.9 million.
Malamute’s BLM bond has been increased to $1.25 million, exceeding the $800,000 bonding level AOGCC is requiring. Because of that Malamute requested a reduction of $600,000, leaving it with the $200,000 bond already in place.
AOGCC said Malamute has not yet posted the new BLM bond, leaving its bonding at the existing BLM $200,000 bond. Because of that the commission is requiring the additional $600,000 bond.
AIX In a March 31 order, the commission reduced the bonding required for four AIX wells at the Kenai Loop field from $1.6 million to $200,000.
AIX has a $500,000 DR&R bond with DNR, but the commission found, as it did with CIE, that the DNR bond “is for the DR&R of the surface of DNR’s leases to a condition acceptable to DNR. No evidence was offered that any of that bond is irrevocably restricted to the costs to properly P&A AIX’s wells,” the commission said.
AIX submitted a third-party engineering cost estimate of $1,037,166 to P&A the Kenai Loop wells and the commission said it found that estimate reasonable.
But AIX also has a $950,000 certificate of deposit in place with the Mental Health Trust Office, the landowner at Kenai Loop, and that certificate is dedicated to P&A of AIX’s four wells and does not secure any other DR&R obligations, AOGCC said.
It ruled that because the certificate of deposit is dedicated to P&A, AIX’s bonding requirement “stands at $200,000 and no increase is required at this time.”
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