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THE EXPLORERS 2006 - Small firms, investors seek reg changes Long-timers Paul Craig, Dave Lappi turning to other opportunities, such as Interior wind power and Uganda Rose Ragsdale For Petroleum News
The smallest explorers in Alaska’s oil patch spent a quiet year considering their options and looking for opportunities in an investment regime they say needs an overhaul.
Throughout the history of oil and gas leasing in Alaska, small companies and individual investors have participated in state lease sales both in Cook Inlet and on the North Slope.
Recently, longtime Fairbanks residents Cliff, Burglin, Paul Gavora, Dan Gilbertson and Richard Wagner, as well as Dan Donkel, Monte Allen, Kenneth Mehaffey, George Kasper, Douglas Barr, Peter Zamarello and Jim White of Alaskan Crude have led the way.
In late 2005, the group, including Paul Craig, owner of Trading Bay Oil & Gas LLC and its affiliates, and
State tough on small investors
Dave Lappi of Lapp Resources, outlined problems they face to a special committee on oil and gas in the Alaska Legislature.
They said the state’s regulatory and bonding requirements are unrealistically stringent and make Alaska uneconomic for small investors.
Craig called the bonding requirements for exploration drilling “the great wall of Alaska.” He told the committee that in 1996 he needed $1.11 million in bonding for one onshore well in Cook Inlet, and said he could find no company in Alaska that sold the required bonds.
In contrast, bonding requirements in other states for comparable 10,000-foot vertical exploration wells range from zero (in Louisiana, Kansas and Mississippi) to a maximum of $55,000 in Oklahoma, he said.
It also costs $100,000 or more over several months to permit a well in Alaska, Craig added.
Lappi, a longtime proponent of shallow gas development, told the committee that access to land is also a big hurdle in Alaska, and suggested that the state reduce bonus bids for leases and shorten lease terms so small companies can afford to test their ideas.
“The unexplored nature, lack of reasonably priced drilling and completion services and remoteness of many areas means” land will attract lower prices than more developed areas of the Lower 48, he said.
Lappi turning to wind Lappi and Craig have spent the past year downsizing their Alaska oil and gas assets, allowing leases to expire and focusing on other interests.
Lappi said he allowed the last of the coalbed methane gas leases he acquired in 2003 near Homer to expire last spring. Though the acreage held promise for substantial gas resources, lack of community support squashed his efforts. Earlier, Lapp Resources had entered a farm-out agreement for some of his leases with Unocal, now part of Chevron, but that deal expired with the leases.
Though Lappi would like to re-enter the oil and gas arena, he has spent recent months working on a wind energy project with partner Alaska Power and Telephone Co.
“I hope to be in a position in a couple of years to sell wind-generated electricity,” he said Oct. 11.
Recalling the stiff winds he encountered in the Delta Junction area during a bicycle trip in 1971, Lappi has proposed a three-year study to gauge the feasibility of building a wind energy project in the area. The Bureau of Land Management issued a scoping notice seeking public comment on plans to equip five 200-foot towers on Coal Mine Road with anemometers. The comments were due Oct. 18.
Craig looking at Uganda Craig has placed his prospects with other players, including the Hanna prospect, which lies between Pretty Creek and Lewis River on the west side of Cook Inlet. The prospect has been transferred to Aurora Gas, an independent Cook Inlet gas producer, he said Oct. 12.
On the North Slope, Craig shares 50-50 interest in a lease with Zamarello that covers the northern half of the Umiat oil field in the National Petroleum Reserve-Alaska. That lease is currently being transferred to a development company, he said. Craig declined to identify the company.
Earlier this year, Craig acquired an oil and gas lease in the state’s Beaufort Sea oil and gas lease sale that is contiguous with the Oooguruk oil field currently being developed by Pioneer Natural Resources.
“Time will tell what will happen,” he said of the acquisition.
Craig said he also has turned his attention to oil prospects in Uganda.
Though he would like to invest in Alaska’s oil patch in the future, it depends on the next administration recognizing the importance of creating a user-friendly bonding and regulatory environment in Alaska for independents, Craig added.
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