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NordAq has P&A’d Tiger Eye; disputes AOGCC fines, bonding
NordAq, an independent oil and gas exploration company, has been in discussions with the Alaska Oil and Gas Conservation Commission over fines and bonding the commission proposed because NordAq failed to plug and abandon two exploration wells, Shadura and Tiger Eye, prior to expiration of its leases at the wells.
Following an April hearing the commission reduced proposed fines of $771,000 for the two wells to $100,000 each, and required bonding for the P&A work.
NordAq asked for reconsideration and an opportunity for oral argument, which occurred Sept. 20.
Attorney Robin Brena of Brena, Bell & Clarkson, representing NordAq, told the commission that the Tiger Eye well has now been plugged and abandoned, and asked that the bonding requirement for that work be lifted.
In a Sept. 13 application for reconsideration of the $800,000 surety bond the commission had required for the Tiger Eye, Brena said plugging and abandonment of the Tiger Eye was complete, including clearance of the location, and said a commission inspector had approved the work.
P&A issues Brena said Sept. 20 that NordAq was requesting flexibility for bonding on the Shadura well; he said the commission was flexible with the company on Tiger Eye, and said the company had done what it said it would do at that well.
An AFE, authorization for expenditures, has been approved for Shadura and permitting and contracting are complete, Brena said. The company is just waiting for the weather to allow construction of the needed snow road, and plans to have the P&A work at Shadura done by the end of February.
The Tiger Eye AFE was some $667,000, because the well was on the west side of Cook Inlet, off the road system. Brena said the cost ended up being more than $700,000 because an 800-foot ice plug in the well had to be addressed, requiring a special tool and an expert to be brought in.
Without that, he said, the P&A work at Tiger Eye would have come in under the AFE.
The AFE for Shadura, he said, is $483,826. The well is 2.1 miles from the road on the east side, and is a simple well, a straight hole, not as complex as Tiger Eye, which was a deviated well requiring more plugs.
Bonding issues Brena said, the commission is requiring a $1.2 million bond for the Shadura P&A work. The commission said NordAq provided no evidence that the bond should be lower, Brena said, but the AFE for Shadura, provided to the commission, was not recognized.
The company is asking for reduced bonding, he said, and to have until the end of February to get the Shadura P&A work done before the bond is imposed. He said the company was in the middle of getting the work done.
As an alternative, he said, NordAq has a $500,000 bond at Tiger Eye and with a couple of months that could be freed up and that amount is more than the AFE for Shadura.
Penalty issue Brena did not address the fact that the commission had already reduced the proposed fines.
He said the $100,000 proposed fine for each well was the maximum, and said the commission was required to consider mitigating factors; he requested that the fines be reduced to $10,000 for each well.
The problems with the delay in P&A work were based on NordAq’s belief that there were other uses for the wells, Brena said: with Tiger Eye the company thought other people were interested in using it, and there was a similar situation at Shadura, with the potential that the well bore could be used for additional drilling.
He acknowledged that NordAq had not communicated well with the commission, but said the company’s goal was to find a way to make the wells work commercially.
Commission questions Commissioner Dan Seamount asked Brena if snow road construction and mobilization and demobilization were included in the AFE.
Bob Warthen, special consultant to NordAq, told the commission that the AFE included those items.
Asked if the equipment and crews were in place to do the P&A at Shadura, Warthen said they were.
Commission Chair Hollis French asked about the timeline for the return of the $500,000 Tiger Eye bond NordAq has with the Department of Natural Resources.
Brena said availability of that bond was estimated to be 30 to 60 days.
Commissioner Cathy Foerster asked if NordAq could demonstrate that contracts are in place. Warthen said the company has a master service agreement with All American Oilfield which subcontracts for the work.
Brena noted that affidavits, including one from All American Oilfield, were included in the company’s filing with the commission.
Forester asked if the AFE would go away at the end of the budget cycle and Warthen said no, that the NordAq board had approved the AFE, which had been submitted to the commission.
Brena said funds were in place, but that if the commission required a separate account for the Shadura work the company would be happy to do that, as long as that account could be drawn down to pay for the Shadura work.
- KRISTEN NELSON
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