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Mustang Holding opines
Firm AIDEA owns submits comments on Pikka Pipeline; as does Oil Search
Kay Cashman Petroleum News
There were two comments received during the public notice period for the proposed Pikka Sales Oil Pipeline decision presented on Oct. 7 by Tammas Brown, NRS IV, State Pipeline Coordinator’s Section, Division of Oil and Gas, Alaska Department of Natural Resources.
The comments were submitted by Oil Search (USA) on Oct. 4, and Mustang Holding LLC, or MHLLC, on Oct. 7.
MHLLC filed its comments, “in order to protect its interests in the Mustang Road, Mustang Road Easement, and SMU.”
According to the Alaska Department of Commerce’s Division of Corporations Alan Weitzner holds both a 100% ownership and is the agent of MHLLC.
MHLLC’s latest biennial report, filed Oct. 19, 2021, was signed by Weitzner, who is also AIDEA’s executive director.
MHLLC currently operates the North Slope unit, keeping the Mustang project and its assets in a regulatory compliant cold shut-down status.
The Mustang field is thought to hold some 21.2 million barrels of proven oil in place. Mustang began producing oil in early November 2019, per the Alaska Oil and Gas Conservation Commission. The field produced 10,999 barrels of oil that month, averaging 478 barrels a day for the 23 days it was in production.
Due to then-operator Brooks Range Petroleum Corp.’s financial difficulties the field has been offline ever since. Those financial difficulties were primarily with lender AIDEA’s foreclosure and the previous gubernatorial administration’s refusal to pay millions in approved oil and gas tax credits designed to offset exploration expenses.
(See related story in the Oct. 9 issue of Petroleum News, titled “Finnex, Mustang Holding make deal to make a deal; A.O. No. 340.”)
The Southern Miluveach unit, or SMU, lies between the Kuparuk River and Colville River units and is adjacent to the Quokka unit on Alaska’s North Slope. MHLLC told Tony Strupulis, state pipeline coordinator, in its comments that it is the current grantee under ADL 419880 (the Mustang Road Easement) i.e. - owner of the Mustang Road.
“Although not specifically discussed in the Commissioner’s Analysis” the applicant, Oil Search (USA) Inc., “appears to contemplate use of the Mustang Road in order to construct and/or operate and maintain the proposed project,” MHLLC said.
The DNR commissioner is required to consider whether or not the proposed use of the right-of-way will unreasonably conflict with existing uses of the land, MHLLC told Strupulis, stating: “The Commissioner’s Analysis’s discussion of existing uses relating to both access and third party interests are cursory, incomplete, and conclusory.”
Regarding access With regard to access, MHLLC said the Commissioner’s Analysis concludes that the proposed Pikka Sales Oil Pipeline “does not unreasonably conflict with access in the area.”
The Commissioner’s Analysis “bases this conclusion on the following: the pipeline design placing the pipeline at least 7 feet above tundra surface; the ‘lack of a gravel pad,’ the use of only one support member in a waterway; and undefined language within the Pikka ROW lease that will confirm that access across the Pikka Pipeline, to and along any public water will not be impacted,” MHLLC said.
Note: In OSU’s comments it corrects the gravel pad language in the Commissioner’s Analysis, saying that the parking pad along the Spine Road is a permanent gravel component needed for operations and maintenance of the Pikka Pipeline.
The discussion, MHLLC said in its comments, “fails to address potential impacts on access by others with land use rights and other interests in the area, including holders of easements and owners and operators of infrastructure, such as Mustang Holding, that the applicant appears to intend to use in connection with the construction, operation, and maintenance of the proposed project,” MHLLC said, noting that the discussion of access under “land status of proposed leasehold” similarly does not address the applicant’s plans for access in connection with project construction, operation, and maintenance.
The Proposed Pikka Pipeline Project Overview included in the Commissioner’s Analysis states that: “During construction, temporary ice roads and pads will be accessed through existing gravel pads, roads, and temporary ice roads,” MHLLC noted.
The Commissioner’s Analysis further states, MHLLC said, that: “No permanent gravel pads for access to the pipeline will be built and access during operations and maintenance will make use of existing pads and roads, or if necessary, construction of temporary pads or roads at the time for specific purpose.”
Per Oil Search (USA)’s application, “Access to the Pikka Sales Oil Pipeline during construction will be over existing gravel roads and temporary ice roads built for the construction work. During operation, access will be over existing gravel roads, valve pads, and pipeline crossings that bisect and parallel the pipeline. Temporary ice roads may also be used during operations, as necessary,” MHLLC said, noting that the application further states:
“Gravel roads will parallel the proposed pipelines for a majority of the pipeline length to facilitate year-round access for maintenance, repair, monitoring, and, if necessary, emergency response. During construction, an ice road will be constructed along the pipeline alignment to allow crews to install the Pikka Pipe Rack and Pikka pipelines.
“Gravel access roads constructed to support the Pikka pipelines include the Pikka Access Road, the Mustang Road, and the Spine Road that will provide all-season ground transportation between the NPF (Nanushuk Processing Facility) and the KPE (Kuparuk Pipeline Extension Tie-in. … All roads are designed to accommodate two-way traffic and will be used during facility construction, drilling, and operations for mobilization of construction material, drill rigs and drilling materials, supplies, personnel, and, if necessary, emergency spill response equipment.”
MHLLC told Strupulis that “despite the applicant’s stated intended use of lands and infrastructure in which third parties hold existing interests, however, the Commissioner’s Analysis’s ‘fit, willing, and able’ determination nowhere considers potential conflicts with these existing uses or the protection of these property interests. The Commissioner must consider and address these issues before it can grant the requested right-of-way lease.”
Old issues, anomalies On June 29, MHLLC said it submitted to DNR’s commissioner “supplemental information in support of an appeal of the January 2, 2020, decision of the DNR’s Division of Oil and Gas to grant Oil Search (Alaska) (“OSA”) a private non-exclusive easement to construct the Nanushuk Access Road for the Nanushuk Development Project southeast of the East Channel of the Colville River Delta and west of Kuparuk River Unit, ADL 421218.
“Supplement to … Appeal No. 20-003” OSA’s Nanushuk Project (ADL 421218) (June 29, 2022), “that appeal was originally filed by Brooks Range Petroleum Corporation” on Jan. 23, 2020. “On June 10, DNR granted Mustang Holding’s request to assume appellate standing in that pending appeal and for an opportunity to submit additional written information,” MHLLC said.
In that filing, MHLLC said it expressed its concern with DNR’s decision to grant OSA authorization to “use and make improvements or alterations to Mustang Road infrastructure constructed, operated, and maintained by BRPC and now Mustang Holding without requiring OSA to first enter into a road use agreement with Mustang Holding.”
“The Commissioner’s Analysis once again raises concerns with regard to appearing to ‘approve’ the use of Mustang Road in support of third party projects without first requiring such an agreement,” MHLLC said.
In additional comments MHLLC appears to be taking up the case for other leaseholders along the right of way or near it, although though it does not name all of them.
MHLLC’s comments were not signed by an individual representing it, which is the norm. The signature is simply “MHLLC.”
OSU comments Oil Search (USA)’s comments were addressed to Tammas Brown and were signed by Patrick Conway, OSU’s senior environmental and permitting manager.
Following are some of OSU’s comments - clarifications, corrections and requests - preceded by language from the Commissioner’s Analysis and Proposed Decision. “Pikka Pipeline” refers to the Pikka Sales Oil Pipeline.
* Commissioner’s Analysis: Except for gravel roads within the Kuparuk River unit in the east, much of the area along the proposed Pikka Pipeline Project is roadless.
OSU: This is not accurate; the Pikka Access Road parallels most of the proposed ROW.
* Commissioner’s Analysis: The Pikka Pipeline will begin within the Pikka Oil and Gas Unit, crossing un-unitized state lands, the newly formed Quokka Unit, the Southern Miluveach and Kuparuk River units.
OSU: There are not parts of the Pikka Sales Oil Pipeline located within the Pikka unit. The Pikka Sales Oil Pipeline originates at the Nanushuk Processing Facility, which is outside the current Pikka unit boundary.
* Commissioner’s Analysis: The proposed 16-inch Pikka Pipeline is expected to deliver approximately 87 thousand barrels of sales oil per day … though that rate may be increased in the future.
OSU: To clarify, it is anticipated the Pikka Pipeline will transport 80,000 BOPD during Pikka Phase I. The design flow rate is 87,000.
* Commissioner’s Analysis: No permanent gravel pads for access to the pipeline will be built and access during operations and maintenance will make use of existing pads and roads, or if necessary, construction of temporary pads or roads at the time for specific purpose.
OSU: The road pullout and parking pad along the Spine Road is a permanent gravel component needed for operations and maintenance of the Pikka Pipeline.
* Commissioner’s Analysis: Dramatic changes are occurring across the North Slope due to a warming climate trend, which are affecting the ground cover, permafrost and water resources habitat, and wildlife throughout the area and this is anticipated to continue, and possibly increase.
OSU: OSU requests DNR include a citation for this statement.
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