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Integrate or investigate, petitioners tell panel Post-hearing brief for petitioners Danco Inc. and Monte Allen says AOGCC should use its authority and financial resources to support little-guy petitioners against big-guy Phillips Kristen Nelson PNA Editor-in-Chief
Things are starting to wrap up in the Alaska Oil and Gas Conservation Commission hearing on a petition from Danco Inc. and Monte Allen to add two leases to the North Cook Inlet unit.
The petitioners’ post-hearing brief, originally due July 31, reached the commission — after several extensions of the deadline — on Oct. 1. The extensions bumped the date for Phillips Alaska Inc. and Phillips Petroleum Co. to file their brief to Oct. 29. The commission then has 30 days to issue a decision.
The petition to integrate the two leases was filed in 1996 by Dan Donkel of Danco Inc. and Monte Allen. They had been unable to persuade the North Cook Inlet unit owners — then Phillips Petroleum Co. and ARCO Alaska Inc. — to integrate the leases into the unit after the state’s estimate of remaining gas reserves in the unit jumped by 1 trillion cubic feet.
Phillips and ARCO were the working interest owners in the two northern leases; Danco and Allen held overriding royalty interests. Donkel and Allen believe the additional gas is coming from the two northern leases and that they should be receiving overriding royalties.
The commission dismissed the petition and the petitioners took the matter to state court. The petition was remanded to the commission by the Alaska Supreme Court last year after the court disagreed with a commission decision dismissing the petition because it was filed Aug. 30, 1996, the day before the leases expired.
The commission had said that any decision it made would be moot because the leases expired before it could hear the matter. The court said the commission had the authority to make its decision retroactive and remanded the petition for a hearing on the merits. Petitioners want state to investigate The petitioners’ Oct. 1 post-hearing brief, from co-counsel Frederick E. Brown of Fairbanks, focused on the information available to the petitioners, as opposed to information available to Phillips Alaska Inc. and Phillips Petroleum Co. (who are opposing the Danco group before the commission) and on what role the commission should play in investigating the claims of the petitioners.
Phillips has operated the Tyonek platform at the North Cook Inlet unit since production began in the 1960s, and was a partner with ARCO Alaska Inc., whom it subsequently acquired, in deeper oil exploratory drilling in the area in the early 1990s.
Brown objected to the commission’s decision earlier in the proceedings that neither seismic from the deeper oil horizon nor seismic surrounding the leases was relevant to this decision and said that on the issue of the surrounding seismic the commission “adopted Phillips’ view” on the relevance of the data.
Dave Lappi, whom Brown noted was recognized by the commission as an expert witness for the plaintiffs, said in the post-hearing brief that information about zones below those from which gas is produced “are relevant because the state’s unitization rules should have required new discoveries to be included” in the Phillips-operated North Cook Inlet unit. Lappi said possibly the deep zones were ignored “because it would have been complicated to include” them in a field whose gas is dedicated to the liquefied natural gas plant at Nikiski.
“The fact that these (deeper oil discoveries) are not in production, or not economic, has nothing to do with unitization as evidenced by all the units the state has created that are not in production and not economic… “Lappi gave the Point Thomson unit and the Pioneer unit as examples. Commission needs to act affirmatively Brown said that participating areas — portions of units in production — are to “be revised from time to time, … whenever such action appears proper as a result of further drilling operations or otherwise…”
“Otherwise?” he asked. “By suggestions from evidence already offered in this proceeding. And, in the very last, that evidence deserves affirmative acts of this Commission in its investigative mode, as discussed below.”
The petitioners said earlier in the proceedings that the commission should acquire and evaluate data as part of its duty to protect the rights of adjacent owners. The commission responded negatively to that suggestion, refusing “to take over the petitioners’ burden of developing and presenting their case.”
But, Brown said, Alaska statute “shows that the Commission has some affirmative duties, and not just the role of a passive court.” Among those affirmative duties is the “duty of investigation.”
“While Danco may not be as impecunious as a widow looking to a lease investment in oil and gas, it — and its co-Petitioner Monte Allen, a retired Alaska Railroad employee — has no operating income from oil and gas production… Yet in one Order, the Commission speculates that Danco and Allen could do their own seismic surveying of the Cook Inlet, one of the most expensive investigative operations that the oil and gas industry experiences.”
Brown said that Danco and Allen did the best they could in the hearing with the resources available to them, and “have shown quite enough with this evidence (and their lingering questions, raised in this memorandum and others) to cause the Commission to exercise its powers of investigation which it can use to offset the resource gulf… “ Commission staff should look at materials Brown said that even though the commission has a limited staff, “at least some parties in its staff may conceivably look through at least some portions of the massive amounts of material requested to be filed …”
And the commission should use its subpoena power “to assist it further to investigate the matter…”
Brown said the statutory powers of the commission “recognize the need to protect persons with correlative rights” and give the commission a “rarely” used power and duty to investigate.
And, he said, Alaska courts have not ruled that petitioners with only correlative rights bear “a burden of proof in a proceeding of this kind.” The 1978 Legislature, in reconstituting the commission, made its role clear, he said.
“The Commission is urged to order the inclusions into the Unit; or alternatively to proceed as suggested in exercise of its authority to investigate.”
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