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AOGCC hears 2nd reconsideration request
Attorney for Alaskan Crude raises constitutional, statutory issues; commission asks for plans for wells, all dating from 1980s Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission heard another bond amount reconsideration request Jan. 23, this one from attorney Jim Gottstein, representing James White, president of Alaskan Crude Corp.
The commission’s new bonding requirements went into effect May 18, replacing bonding requirements of $100,000 for a single well and $200,000 for blanket coverage of all an operator’s wells in the state.
A number of companies requested reconsideration. This is the second hearing the commission has held.
The first was on a request from Malamute Energy (see story in Jan. 26 issue of Petroleum News). In that request Malamute focused on duplication of bonding - its two suspended wells are on National Petroleum Reserve-Alaska leases managed by the Bureau of Land Management, which has recently raised its own bonding requirement for the two wells from $200,000 to $1.25 million.
Three wells Alaskan Crude has three wells, Burglin 33-1, Mike Pelch 1 and Katalla KS-01, all three drilled in the mid-1980s.
Burglin 33-1 is a 9,458-foot vertical hole on the North Slope. AOGCC records show it as a suspended exploration well.
The Katalla KS-01, a 1,834-foot vertical hole, is onshore in the Gulf of Alaska basin; AOGCC records show it was drilled as a development well, currently shut-in.
Mike Pelch 1 is a Cook Inlet basin exploratory well, shown in commission records as a gas well with a single completion. It is a 10,731-foot vertical hole.
The company has a $200,000 bond and under the new requirements, $400,000 per well for one to 10 wells, the company’s total bonding requirement would be $1.2 million, $200,000 of that covered by its existing bond.
Legal issues In July the commission sent letters to operators notifying them of additional bonding amounts.
In a July letter to the commission Gottstein said the commission was requiring $500,000 per year over two years to bring Alaskan Crude’s bonding up to the new $1.2 million.
Gottstein argued in the July letter that the increase in bonding was illegal under the Alaska Constitution and also said the commission’s new regulations went beyond the scope of its authorizing statute.
On the constitutional issue, Gottstein said in his July 25 letter to the commission: “It is simply not legal to increase the bonding/security requirements for existing permit holders.”
Citing Alaska statutes, Gottstein said July 25 that “the new regulations go beyond the scope of the authorizing statute.” AS 31.05.030, he said, provides that AOGCC may require “the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste.”
The commission’s new regulations, he said, “go far beyond that allowed in the statute, requiring, ‘security to ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared in accordance with this chapter.’”
Jan. 23 hearing In the Jan. 23 hearing, and in a Jan. 22 letter, Gottstein made the same arguments, telling the commission that ex post facto application of an increase in bonding for “existing permit holders” is illegal under Article 1, section 15 of the Alaska Constitution.
On the regulations themselves, he said: “The Alaska Supreme Court has long and repeatedly held that a regulation which exceeds its statutory authority is void.”
“The Legislature only authorized the Commission to require a bond to secure … ‘the duty to plug each dry or abandoned well or the repair of wells causing waste,’” Gottstein said, citing AS 31.05.030(d).
He said the new regulation “clearly exceeds the Commission’s authority and makes the regulation invalid.”
Commission Chair Jeremy Price asked Gottstein, in reference to his AS 31.05.030(d) cite, what Gottstein thought was the meaning of subsection c of that section (“(c) The commission shall adopt regulations and orders and take other appropriate action to carry out the purposes of this chapter”).
Gottstein said the commission can adopt regulations but is limited to bonding wells for plugging and abandonment.
Commissioner Jessie Chmielowski asked Gottstein if he had any information on the three wells and noted that the lease has been terminated on the Burglin well location, which requires plugging and abandonment.
Chmielowski asked for information on future plans for all three wells, including P&A plans for the Burglin well and said the record for the hearing would be left open for four weeks to allow for receipt of that information.
-KRISTEN NELSON
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