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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2022

Vol. 27, No.34 Week of August 21, 2022

AOGCC confirms $200,000 bond for Amaroq

Kristen Nelson

Petroleum News

On July 25, following decisions by the Alaska Oil and Gas Conservation Commission and appeals by Amaroq Resources, the Alaska Superior Court reversed an AOGCC decision on the bonding required for wells at Nicolai Creek (see story in July 31, 2022, issue of Petroleum News).

In an Aug. 15 order, the commission said:

“On remand from the superior court and consistent with its order, AOGCC’s Other Order 176 is amended. Amaroq’s bonding requirement for the six NCU wells is $200,000. Amaroq has already posted a $200,000 bond for the six NCU wells, therefore no additional bond is required to be posted for the six NCU wells.”

The court’s reversal of the commission’s Other Order 176 “was solely based on its finding that the 2017 settlement agreement between AOGCC and Amaroq” prohibited the commission from modifying the bonding it accepted under the settlement for the six wells at Nicolai Creek, AOGCC said. That settlement grew out of bonding issues when Amaroq took over as Nicolai Creek operator.

The superior court remanded the matter back to the commission for proceedings consistent with its order, and the commission has now ordered that the $200,000 bond in place was all the was required for the six Nicolai Creek unit well.

Decision based on contract

In a July 25 decision, Alaska Superior Court Judge Dani Crosby reversed a commission decision setting Amaroq’s Nicolai Creek bonding at $900,000, remanding the decision to the commission.

While Amaroq raised several issues in its appeal to superior court, the first was that Other Order 176, setting the new bonding requirement, violated the 2017 settlement agreement between the commission and Amaroq.

“The threshold issue,” Crosby said, “is whether AOGCC’s decision to modify Amaroq’s bonding amount violates the existing settlement between the parties. If so, the court need not address other issues Amaroq raises.”

She said Amaroq interprets the settlement agreement as resolving the bonding amount for Nicolai Creek while the commission interpreted it to mean it can modify the bonding amount in the future.

“The court concludes that the plain language of the settlement agreement prevents AOGCC from modifying Amaroq’s bonding amount with respect to the NCU wells under future regulations. The court also concludes that the agreement may not be interpreted to give later enacted bonding regulations retroactive effect,” Cosby said.

Settlement agreements are interpreted by courts as contracts, the judge said.

Other issues Amaroq raised - not considered because the court ruled the modified bonding violates the existing settlement agreement - include that the revised bonding was applied in an impermissible retroactive manner; that Amaroq is not subject to the bonding regulation under the language of the regulation; that AOGCC’s application of the revised bonding constituted a regulatory taking; that the commission’s decision deprives Amaroq of equal protection of the law; that Other Order 176 is duplicative of Amaroq’s bonding obligations to the Alaska Department of Natural Resources.

In a prehearing brief, in addition to arguing violation of the 2017 settlement agreement, Amaroq said the bonding requirement was unreasonable, was a mandatory taking and that the 2019 bonding regulation disproportionately affected small scale producers.






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