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AOGCC denies BlueCrest request for reconsideration on bonding
Kristen Nelson Petroleum News
In a March 17 order the Alaska Oil and Gas Conservation Commission has denied a request from BlueCrest Alaska Operating LLC for reconsideration in the company’s request for reduction in bonding required under regulations the commission adopted in 2019.
BlueCrest has six permitted wellheads at Cosmopolitan on the Kenai Peninsula. The company had a $200,000 bond in place with the commission when the bonding regulations were first revised in 2019, and an additional $2.2 million was required. The commission made that amount payable in four annual installments of $550,000.
BlueCrest paid the first $550,000 installment in August 2019.
In April 2020 the company requested deferral of the remaining bond payment installments for two years, a request which the commission denied.
When the commission revised its bonding amounts late last year, some bonding requirements were reduced: For six wells the new amount was $2.25 million, rather than the original $2.4 million.
Reconsideration request In August 2020 BlueCrest requested reconsideration, seeking a reduction in its required bonding, based on bonding in place with the Alaska Department of Natural Resources, and on $5 million in an escrow account, controlled by Pioneer Natural Resources Co., $3 million of which is for plugging and abandonment of wells and $2 million of which is for land reclamation; the escrow account was included in the purchase of the Cosmopolitan unit.
AOGCC said in its March 17 order that the language of the purchase and sale agreement is confidential and was not shared with the commission. After a Dec. 8 hearing, the commission left the record open until Jan. 4 to determine if a portion of the purchase and sale agreement could be shared with AOGCC.
The commission said the $5 million bond held in escrow by Pioneer “cannot be accessed by AOGCC in the event of a BlueCrest bankruptcy,” and said it requires a bond, certificate of deposit or irrevocable letter of credit in the sole favor of AOGCC.
On the bond held by DNR, AOGCC said it “is for the return of DNR’s leases, including the surface, to a condition acceptable to DNR,” and said BlueCrest offered “no evidence as to the amount of the DR&R funding that is dedicated to the costs to properly P&A BlueCrest’s wells.”
The company’s bonding requirement will not be reduced, the commission said.
AOGCC said BlueCrest’s bonding requirement is $2.25 million, less the existing amount of $750,000, leaving $1.5 million owing.
- KRISTEN NELSON
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