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BlueCrest requests delay in bond payments
Asks AOGCC to defer for 2 years additional bonding under 2019 increases; notes financial strains, especially on small companies Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission has scheduled a public hearing at its Anchorage offices Nov. 17 at 10 a.m. on a request from BlueCrest Alaska Operating for a reconsideration of bonding requirements for its wells at Cosmopolitan.
The company has also requested deferral of payments of the increased bonding amounts required by the commission.
BlueCrest President John Martineck reviewed the company’s bonding in an Aug. 27 letter to the commission: $750,000 in bonding in favor of AOGCC; $500,000 in bonding in favor the Alaska Department of Natural Resources; and a $5 million cash deposit with Pioneer Natural Resources, the previous field owner, $3 million for abandonment and $2 million for reclamation.
In an April email, BlueCrest’s Andrew Buchanan, the company’s vice president Alaska, requested a two-year deferral of the payments required to bring the company’s bonds up to AOGCC’s current requirements, established in May 2019.
BlueCrest’s existing bond payment schedule, and the requested deferral dates:
*Aug. 16, 2020, bond requirement of $500,000, requested to be deferred to Aug. 16, 2022.
*Aug. 16, 2021, bond requirement of $500,000, requested to be deferred to Aug. 16, 2023.
*Aug. 16, 2022, bond requirement of the remaining balance to be deferred to Aug. 16, 2024.
Oil price collapse “As the Commission is aware, the recent collapse in oil prices and the economic downturn resulting from the covid-19 response has placed unprecedented financial strains on all the oil and gas companies operating in Alaska,” Buchanan said in the April email request. “That strain is particularly acute for smaller companies like BlueCrest, who operate on very close margins and whose access to capital is significantly limited in the current economic environment,” he said.
Buchanan said that providing this relief to BlueCrest would “have a material, positive impact for our ongoing operations, yet it will not create any unreasonable risk for the state,” since the company is not seeking a waiver but only a deferral of the bonding requirements, a deferral which “would only run through 2024 on a project that has 25 years of economic life ahead of it.”
The company produces from wells in the Hansen oil pool at the Cosmopolitan unit on the Kenai Peninsula. In August, the most recent month for which the commission has posted data, there were five wells in production, and oil production for the month averaged 1,022 barrels per day.
BlueCrest became operator at Cosmopolitan in 2014 and regular production began from the Hansen oil pool in April 2016, AOGCC said in its pool statistics, with average oil production at the field peaking at 1,713 bpd in May 2019.
Recent decisions The commission raised its bonding requirements for plugging and abandoning wells in May 2019 from $100,000 for a single well and $200,000 for multiple wells to $400,000 per well for one to 10 wells; $6 million for 11-40 wells; $10 million for 41-100 wells, $20 million for 101-1,000 wells; and $30 million for more than 1,000 wells.
In July 2019 the commission notified companies with permitted wellheads of new bonding requirements.
A number requested reconsideration: AIX Energy, Alaskan Crude, Amaroq Resources, Cook Inlet Energy, Malamute Energy and Savant Alaska.
The commission issued a decision on the AIX appeal earlier in the year, accepting the company’s existing AOGCC bond because of a bond for plugging and abandoning wells that is in place with the landowner, the Alaska Mental Health Trust Land Office.
In late September AOGCC issued decisions on the CIE and Malamute requests (see story in Oct. 4 issue of Petroleum News), partially accepting a bonding reconsideration request from CIE and denying a request from Malamute Energy.
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