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Stump Lake unit terminated; leases will be offered in Cook Inlet sale
Hilcorp Alaska has requested, and the Alaska Division of Oil and Gas has approved, termination of the Stump Lake unit. The division’s goal is to get tracts which have been part of the unit into the 2018 Cook Inlet areawide lease sale. Stump Lake, on the west side of Cook Inlet northeast of Beluga, is a natural gas field. Hilcorp suspended production in 2012 when it encountered mechanical issues as it was attempting to add perforations to the SLU 41-33RD well.
By taking over operatorship of the Beluga River unit in early 2016, Hilcorp created an opportunity for four marginally economic fields it operated on the west side - Ivan River, Lewis River, Pretty Creek and Stump Lake. The greatest opportunity was at the suspended Stump Lake unit.
When it took over operating Beluga, Hilcorp told the state that the larger unit created opportunities for reviving production at Stump Lake, which otherwise was likely no longer economic to operate.
The state mandated a study at Stump Lake, but after completion of that study, Hilcorp said in its March 2017 that conventional production at Stump Lake had reached its economic limit.
The company did include Stump Lake in its regional study but told the state that if it could not restart production by the third quarter of 2017 it would commit to plugging and abandoning the SLU 41-33RD in its 2018 plan year.
Termination proposal Hilcorp submitted a proposal for Stump Lake unit termination Dec. 6, after consulting with Department of Natural Resources land managers, the company said in its proposal.
Hilcorp said that as of Sept. 30 it had been unable to resume production from Stump Lake, and said it had begun work to plug and abandon the SLU 41-33RD well, planning to complete the work before Jan. 1. The well has been cemented to the surface and is no longer capable of production, but Hilcorp said there were permitting and weather delays on the remaining P&A work required by the Alaska Oil and Gas Conservation Commission for location clearance, and that work can’t be completed until spring.
Hilcorp said DNR wants to terminate the unit, allowing the unit leases to be included in the spring 2018 Cook Inlet areawide lease sale.
“Hilcorp does not object to unit termination,” the company told the division, “but we are concerned about Hilcorp’s obligations regarding lease expiration,” which include onshore location clearance before the leases expire. The company said its leases allow the company six months from the time of lease expiration to remove all equipment and improvements, and requires that the lease lands be delivered “in good order and condition,” but without clarity on what is considered “good order and condition.” Hilcorp said it is apparent that six months “is not a reasonable amount of time to perform the required remediation measures and vacate the premises.”
2018 Cook Inlet sale Hilcorp proposed terminating the unit effective Dec. 1, with the leases held by the unit remaining in effect for 90 days, until March 1, as provided in regulations.
“This action will allow DNR the opportunity to offer said leases in the 2018 Cook Inlet Lease Sale,” Hilcorp said.
Because location clearance cannot be completed prior to March 1, Hilcorp proposed that DNR grant an extension to Hilcorp to complete the clearance until May 1.
Upon receipt of a grant of extension Hilcorp said it would apply to AOGCC to extend the time for Hilcorp to complete onshore location clearance under commission regulations.
Hilcorp said it committed to complete location clearance no later than May 1, and said DNR would provide “specific detailed remediation requirements for the remediation of pads, roads, and pipelines” on DNR lands within six months of lease expiration, but also said it “suggests leaving all pads, roads, and pipelines for future development and to minimize any environmental impacts that the remediation measures may have.”
The company said DNR would allow two years from the date of Hilcorp’s remediation plan for the company to start remediation, and should the area be leased, “Hilcorp may, upon approval by DNR, transfer all or any portion of roads, pads, and pipelines to the new Lessee for use in their development operations,” and to the extent those assets were transferred, the new lessee would assume responsibility for removal.
In a Dec. 7 letter DNR Division of Oil and Gas approved Hilcorp’s proposal, noting that the SLU 41-33RD was the only well in the unit capable of production.
- KRISTEN NELSON
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