Division of Oil & Gas reviewing Pioneer sale

Alaska’s Division of Oil and Gas, or DO&G, is reviewing the purchase agreement between Pioneer Natural Resources and Caelus Energy for the purchase by Caelus of Pioneer’s Alaska assets, Bill Barron, director of DO&G, confirmed with Petroleum News on Oct. 29. The idea is to ensure that nothing in the agreement would be detrimental to the state’s interests, Barron said.

In response to the purchase, the division will need to transfer Pioneer’s interests in state leases to Caelus. Although DO&G regularly carries out this type of lease title transfer the agency needs to check, for example, that the companies have agreed to transfer the dismantlement and rehabilitation obligations for oilfield facilities from Pioneer to Caelus — a state lease contains an obligation for the leaseholder to restore the land within the lease boundary to its original condition after oilfield equipment is decommissioned.

“That is part of our normal lease assignment language,” Barron said. “The responsibility transfers to the new owner.”

The division also needs to verify that the purchase agreement appropriately accounts for any easement arrangements for pipelines which the leaseholder operates but which traverse land outside the leases and connect to external oil and gas infrastructure, Barron explained.

DO&G is also discussing with the companies royalty relief arrangements which were granted to Pioneer in 2005 for some of the leases in its Beaufort Sea Oooguruk field.

“Royalty modification is not assignable without the (Department of Natural Resources) commissioner’s approval,” Barron said. “We are trying to work through some language with the parties to see if it is transferrable.”

—Alan Bailey