Donkel files Badami expansion appeal

Claiming 6.25% working interest in unit, investor seeks opportunity to be heard in hearing de novo before DNR commissioner

Steve Sutherlin

Petroleum News

Daniel K. Donkel filed an appeal Jan. 11 with the Alaska Department of Natural Resources, challenging the Jan. 22 decision of Director of the Division of Oil and Gas Tom Stokes denying an application from operator Savant Alaska to expand the eastern North Slope Badami unit.

Donkel recently acquired a 6.25% working interest in the Badami unit, in leases ADL 391001, ADL 390825, ADL 391284, ADL 391285, ADL 391376 and ADL 391378, according to the notice of appeal which was hand delivered to DNR. The grouping is otherwise known as the Telemark leases.

Donkel holds an overriding royalty interest in one of the leases - ADL 390825 - “contained within and comprising the Badami unit,” the notice said.

DNR denied the Badami unit expansion to include the Telemark leases, and the denial to include the Telemark leases was a reversal of its previous decision, the notice said, adding that the denial to include the leases was not grounded in fact or law, was a violation of Donkel’s due process of law, and was an ex post facto decision made without notice, an opportunity to be heard, or to submit new data.

Donkel has requested a hearing de novo before the commissioner.

The commissioner determined that confidential geologic information filed by Savant was “insufficient to support (Savant’s) application,” but the decision did not discuss the “material aspects of that information,” Donkel said in the notice, adding that review of the decision is not possible without access to confidential information submitted by Savant, or the commissioner’s review of publicly available information regarding the unit.

“The current production from the Killian sands outside of the Badami unit in the proposed expansion area are additional lands determined to overlay the reservoir, part of which is in the Badami unit,” Donkel said, adding that the leases that are proposed to be added to the unit overlay the existing unit, and are in communication with the proposed expansion area.

“The decision ignores that unitization advances the state’s economic interest by improving the economics of the BU,” Donkel said, adding, “Unitization will allow for implementation of economic reservoir pressure maintenance efforts as the wells are produced, and minimizes the effects of smaller accumulations to share existing facilities and infrastructure.”

Unitization is critical for securing corporate support for funding for exploration and expansion of development activities, and the expansion will promote the efficient, prudent and environmentally sound industry practice related to the development of the unit, Donkel said.

“DNR found that Savant is operating under an approved plan of operations in plan of development and satisfied the environmental issues concerning the operation of the unit,” Donkel said. “DNR found the geologic engineering characteristics that the operations conducted by Savant met the criteria for increased production for the Badami reservoir as well as explored deeper targets such as the Paleozoic Kekikutuk Formation and the Cretaceous Killian sands.”

Donkel said Savant notified DNR that it had fully restarted production on the unit and began shipping oil on Oct. 7, and as evidenced in the decision, the B1-38 well continued to produce through November with sustained production from the Brooks and Killian interval.

“The decision’s conclusion without data supporting the connection between the Killian reservoir existing inside the unit and any Killian reservoir or potential hydrocarbon accumulations outside the unit does not support the expansion of the BU is incorrect,” he said.