Revised Greater Point Thompson Unit formation approved for Donkel

Kay Cashman

Petroleum News

On Jan. 8 Alaska Division of Oil and Gas Director Derek Nottingham notified Daniel K. Donkel of Donkel Oil & Gas LLC that the division has approved a revised Greater Point Thomoson Unit formation.

In the approval notification the Alaska Department of Natural Resources' Division of Oil and Gas said it had approved the formation of the Greater Point Thomson Unit, or GPTU, on June 25. The approved unit covers approximately 35,122 acres.

On July 30, applicant Donkel Oil and Gas, the unit operator, met with the division to discuss five of the eight leases, ADLs 392117, 392116, 392115, 393573 and 393574, that were excluded from the June 25 GPTU formation decision. Four of the five leases were excluded because geophysical analysis did not indicate the presence of a hydrocarbon reservoir or potential hydrocarbon accumulation. The remaining lease, ADL 393574, was not included because the working interest owner of that lease had not ratified either the GPTU Agreement or the GPTU Operating Agreement.

During the July 30 meeting, the Division of Oil and Gas outlined the technical data required to reconsider the five excluded leases for inclusion in the GPTU. On Oct. 27, the applicant submitted the requested information to the division.

Upon review, the agency determined that the data support extending the potential hydrocarbon accumulatios, or PHAs, associated with the Pre-Mississippian reservoirs encountered in the Stinson 1 well to the leases 392117, 392116, 392115, and 393573, positioned east and south of the Stinson 1 well location.

Through the supplemental technical data, the applicant demonstrated the potential presence of a hydrocarbon reservoir underlying leases 392117, 392116, 392115, and 393573. Further, the applicant submitted a transfer of working interest for lease 393574 from J.A. Bachner and K.C. Forsgren to Daniel K. Donkel and Samuel H. Cade, which the division approved on Dec. 26.

The June 25 GPTU Decision Section IV Findings and Decision was therefore revised as follows: "Except for the revised paragraphs set forth below, all other discussions, descriptions, terms and conditions as set forth within the division's June 25, 2025 decision remain in effect and are incorporated herein.

"The following amended provisions to the division's June 25, 2025 decision replace and supersede those paragraphs set forth in that same decision and immediately take effect upon issuance of this decision."

Prevention of economic and physical waste

Division technical staff determined that portions of the proposed GPTU area encompass all or part of one or more PHAs.

Nottingham wrote on Jan. 8 that "the available geological, geophysical, and engineering data justify including only the proposed lands, as described in Section III, A.2. of the June 25, 2025 decision, and only ADLs 392117, 392116, 392115, 393573, and 393574 discussed herein and for the reasons described previously."

Protection of all parties' interests

"1. The GPTU formation as modified herein and approved protects all parties' interests including the people of Alaska who have an interest in the development of the State's oil and gas resources to maximize the economic and physical recovery of the resources.

"2. The geological, geophysical, and engineering data that the applicant provided reasonably justify the inclusion of the GPTU following acreage (1) western area leases 393893, 393894, 392134, 393577, 392133, 393892, and 393891; and (2) eastern area leases 393890, 393889, 393576, 393575, 392123, 392120, 392121, 392122, 392119, 392118, 39211, 392116, 392115, 393573, and 393574. Combined these leased lands total approximately 49,562 acres, and are subject to the terms of the applicable regulations governing formation, expansion, and operation of oil and gas units and participating areas (11 AAC 83.301--395) and the terms and conditions under which these lands were leased from the State.

"3. The division, however, excludes ADLs 392132, 392128, and 392127 from the unit formation as those leases, after additional geophysical analysis, fail to show the presence of either a hydrocarbon reservoir or potential hydrocarbon accumulation.

"4. The applicant holds sufficient interest in the unit area to give reasonably effective control of operations.

"5. The GPTU formation as approved herein meets the requirements of 11 AAC 83.303.

"6. The division complied with the public notice requirements of 11 AAC 83.311.

"7. The GPTU formation will not diminish access to public and navigable waters beyond those limitations (if any) imposed by law or already contained in the oil and gas leases covered by this decision.

"8. The GPTU Agreement provides for additional expansions and contractions of the unit area in the future, as warranted by data obtained by exploration or otherwise. The GPTU Agreement thereby protects the public interest, the rights of the parties, and the correlative rights of adjacent landowners.

"9. The GPTU as modified and approved herein is effective as of the date of this decision.

"10. Given the inclusion of the additional leased lands referenced above, and as assurance that the POE (plan of exploration) commitments as modified in the division's June 25, 2025 decision approving formation of the GPTU are completed, the division hereby amends the above referenced decision by requiring that there be posted a $3.5 million performance bond, with $1.75 million of that total to be posted no later than two years from issuance of this decision, on Jan. 8, 2028. An additional $1.75 million shall be posted no later than Jan. 8, 2030. Upon completion of drilling two exploration wells, the entire amount of the $3.5 million bond shall be returned to the applicant, Daniel K. Donkel of Donkel Oil & Gas. The division assigned no preference to the order in which the applicant drills the two exploration wells, provided that one is drilled in the western acreage and the other in the eastern acreage. If only one exploration well is drilled (either in the eastern or western section of the GPTU), the acreage where the second well has not been drilled shall be contracted from the GPTU automatically. The GPTU Agreement shall be amended to include this condition.

"11. Further, failure to post any bond payment on the dates specified in paragraph10 shall be considered a default of the terms of the GPTU Agreement. The GPTU Agreement shall be amended to include this condition.

"12. If one well is drilled (either in the eastern or western section of the GPTU as approved herein) and the second well is not drilled by the end of the fifth year of the POE as modified herein, the area (either eastern or western) where the second well has not been drilled shall be contracted from the GPTU automatically. The GPTU Agreement shall be amended to include this condition.

"13. If only one well is drilled (either in the eastern or western section of the GPTU as approved herein), and the second well is not drilled by the end of the fifth year of the POE as modified herein, one-half of the total amount of the bond shall be forfeit immediately. The area where the second well has not been drilled also shall be contracted from the GPTU automatically The GPTU Agreement shall be amended to include this condition.

"14. If the applicant makes significant capital expenditures related to the GPTU not already associated with the exploration wells (i.e., expenditures related to actual operations and not to activities like marketing), then the applicant may apply to the Department (of Natural Resources) to reallocate the amount of the performance bond to include such other capital expenditures, however such reallocation shall not increase or decrease the total amount of the performance bond due to be posted. The GPTU Agreement shall be amended to include this condition.

"15. If the applicant makes significant capital expenditures related to actual, definitive development or operations of the GPTU (e.g., conducting 3-D seismic survey), then the applicant may apply to the department for consideration of such an expenditure in lieu of drilling a second well. Any failure by the applicant to request such consideration by the department shall be considered a waiver by the applicant, and the applicant shall remain obligated to drill the second well within the GPTU. The GPTU Agreement shall be amended to include this condition.

"16. The applicant, in addition to providing the annual Plan of Development, or POD, shall provide an annual progress report discussing the exploration work being performed at the unit. This annual progress report will be provided no later than Dec. 31 of each calendar year and will be directed to the assigned unit manager.

"17. The applicant shall submit a revised GPTU Agreement with amended Article 9 to incorporate the performance bond terms as prescribed in paragraphs 1 through 15, an annual progress report and definition of well completion, as set forth herein, including revised Exhibits A, B, and G, within 30 days of the issuance of this decision. The GPTU Agreement shall be amended to include this condition.

This decision must be appended to the division's June 25 decision.

Questions regarding this decision should be sent to Mark Villarreal with the division at 907-269-6799, or by email at [email protected].

--KAY CASHMAN