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THE INDEPENDENTS 2003: Shallow gas pioneer in quiet mode Lapp Resources drops 333,419 acre Delta Junction project, keeps two leases near Homer Kay Cashman Petroleum News
Alaska shallow gas pioneer Dave Lappi is down to 5,000 acres of shallow gas leases in Alaska from more than 300,000 acres a year ago when his company, Lapp Resources, controlled a chunk of leases in the Interior near Delta Junction. Lappi had hoped to see gas produced and delivered from Delta Junction to Fairbanks using the right of way of an abandoned military fuel pipeline between the two communities.
“A month before the anniversary of the second year on those leases — just before the annual rent payment was due — Evergreen Resources backed out of the farm-in agreement,” Lappi said.
“Evergreen decided to concentrate on other activities. They just acquired a Canadian company and are reevaluating all of their positions and reshuffling the deck, so I’m looking for a new partner,” he said at the time.
Unable to find a partner, Lappi let the three-year leases, totaling 333,419 acres, expire. The annual rent on the property would have been $165,000, he said, and not worth the risk to him, especially with the possibility of a gas pipeline being built from the North Slope down through Fairbanks.
“If an Alaska Highway gas pipeline got built, it would be able to supply Fairbanks, the main market for the Delta gas. No investor wanted to take that kind of risk,” he said.
Gas for Homer But Lappi wasn’t down to zero acres. In late May the state had assigned Lapp Resources approximately 21,000 acres in eight shallow gas leases. The property was just north of Homer on Alaska’s Kenai Peninsula.
Unocal, Lappi said, had taken an option to farm into the acreage shortly after he had applied for the leases in early 2000.
“But by the time the leases were actually assigned to me, Unocal had decided to take just six of the eight leases. They said they had drilled some wells on the southern peninsula in the last couple of years and better understood the geology,” Lappi said.
Although state records (and the map on page 52) still show Lapp Resources as the holder of all eight leases, Unocal has 100 percent working interest in six leases and Lapp Resources has the remaining two leases, which encompass about 5,000 acres.
Lappi’s company was left with the western-most lease. Unocal took the adjoining lease to the east; then left Lapp Resources with the lease to the east of it.
“You could say I kept the western leases of the group except Unocal kept one lease sandwiched between my two leases,” he said.
Helped draft early CMB regs in Alaska Lappi, a long-time Alaskan, earned a bachelor of science in geology from the University of Alaska Fairbanks and a postgraduate diploma in geosciences from Macquarie University in Sydney, Australia.
After working with resource firms in Australia, Lappi returned to Alaska in the early 1990s to explore for shallow gas in the Cook Inlet basin. He was instrumental in the establishment of Alaska’s shallow gas leasing program and he assisted the Alaska Oil and Gas Conservation Commission in developing early drilling requirements for coalbed methane wells.
Lappi, who is based out of Anchorage, has worked to identify shallow gas prospects by aerial mapping so that rural communities in Alaska could find gas. The state’s shallow gas leasing program is targeted for such use, with royalties set at 6.25 percent for gas used in the immediate area versus the standard 12.5 percent.
While private companies provide technology, Lappi sees a need for government involvement to find gas for small communities off Alaska’s road system where residents have to import fuel by aircraft or barge.
“It’s difficult for private companies to take the risk for such small markets,” he said.
Matanuska Valley drilling Lappi obtained conventional state oil and gas leases near Houston, Alaska, north of Anchorage, and in 1997 Lapp Resources assigned its working interest in the acreage to an Australian company.
In early 1998, Lappi was project manager for Alaska’s first coalbed gas production wells into coal seams on the up-thrown block of the major Castle Mountain fault.
The wells pioneered drilling techniques, including the use of compressed air instead of mud as the drilling fluid.
In 2000, the Australian company lost interest in the acreage, he said. Evergreen Resources now holds the leases.
Lappi is still looking at shallow gas opportunities around the state.
“I have some things in mind, but I’m not ready to talk about them yet,” he said in October.
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