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Right on schedule Andex to get seven year license to explore 482,942 acres in Nenana basin at a buck per acre; conversion to seven year lease triggers rent plus 12.5% royalty Steve Sutherlin PNA Managing Editor
The Department of Natural Resources gave notice Aug. 22 that it will issue an oil and gas exploration license for the Nenana basin to Andex Resources LLC of Denver and Houston. The basin is thought to hold 250 billion cubic feet to 1 trillion cubic feet of recoverable natural gas to feed the energy needs of Fairbanks and other rail belt locations, said Jim Dodson, Andex executive vice president. Dodson is responsible for Alaska operations.
“Needless to say, we are very happy with this,” Dodson told PNA shortly after the notice of the oil & gas exploration license was released by DNR, and he added that his company was delighted that the department was able to deliver the license in 138 days, right on schedule.
“As far as E&P, Nenana is our whole focus going forward,” he told PNA in an interview last month.
Not only is the project a major concern for Andex, time is of the essence because the company has seismic work scheduled the winter of 2002-2003.
“It’s tight, but we still think we can do it.” Dodson said. He said things would have to go almost exactly as planned for the schedule to work out, adding that the margin of error is a couple of days.
“We’ll lay out the grid in September and shoot through the winter,” he said. “Shooting in January or February is the target.”
The Division of Oil and Gas wrapped up the public comment period on the company’s exploration license in June. The license could be issued as early as Oct.1.
The license contains 482,942 acres located west of the Parks Highway, extending from Anderson to approximately eight miles south of Minto. Only lands with state owned mineral estate are included.
The license will have a primary term of seven years, at a licensing fee of $1 per acre. There is no annual rental fee for an exploration license.
Upon completion of required work all or a portion of the license area can be converted into oil and gas leases with a primary term of seven years. Upon conversion to oil and gas leases, annual rental is $3 per acre, plus a fixed royalty of 12.5 percent.
Andex must post bond The state is requiring an oil and gas bond of a minimum of $10,000 per operation, or as an alternative, a statewide oil and gas bond of a minimum of $500,000 for multiple operations. In addition, the Alaska Oil and Gas Conservation Commission requires a bond of at least $100,000 for a single well or a bond of at least $200,000 to cover wells statewide, and the Department of Environmental Conservation has its own bonding requirements.
The Division of Oil and Gas issued a final finding containing facts, policies, and applicable laws upon which the determination was made. The division said in the statement signed by Mark Myers, division director, that exploration activities resulting from the offering may affect the communities of Fairbanks, Nenana, Anderson and Minto.
The finding, with a map of the license area, is being made available at public libraries in the affected communities and in Anchorage.
Local support strong Local support for the project is strong. The state received eight resolutions in favor of granting Andex its license — from the Tanana Chiefs Council, Minto Village Council, North Slope Borough Assembly, the cities of Nenana and Fairbanks, Denali Borough Assembly, Fairbanks Chamber of Commerce and the Fairbanks Builders and Construction Trade Council.
Doyon Ltd., the area Native regional corporation, is dealing with Andex to explore and develop the oil and gas resources on a strategically located 38,000 acres Doyon owns within the license area.
A 1994 state gas exploration incentive program has been instrumental in making exploration of the Nenana basin economic to pursue, according to Andex and Doyon.
The program allows the commissioner of DNR to approve credits against royalties and taxes for exploration data, if the information gained would be beneficial to the state. The program was set to expire in 2004, the year Andex planned to start drilling in Nenana, but the expiration date was extended to 2007 by House Bill 307, which was signed into law July 5 by Gov. Tony Knowles.
“Although the Nenana Basin is a good place to look for gas, the exploration risks are still very high,” said Jim Mery, Doyon.’s vice president of lands and natural resources. “The credits help temper those risks, including the ‘Alaska factor’ of high costs, compared to opportunities in the Lower 48.”
Dodson told the House Special Committee on Oil and Gas in January that the company expects to spend $24 million on the project before the pipeline is built including $500,000 for the exploration license and $6 million each for three wells.
Seismic for the project is anticipated to be predominately two-dimensional, although some 3-D would also be shot, putting total seismic costs at about $6 million.
The license is subject to mitigation measures to protect biological, cultural and archeological resources as well as to mitigate social impacts during the license period and the term of any oil and gas leases.
For more information call Suzanne Gaguzis at (907) 269-8803, or visit the Division of Oil and Gas web site: www.dog.dnr.state.ak.us/oil
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