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State seeking comments on Katalla exploration license application
The state is evaluating an exploration license proposed for a region of the Gulf of Alaska thought to be the site of the first commercial oil development in the state of Alaska.
The Division of Oil and Gas has received a request for a license along the Gulf of Alaska coastline between the Copper River Delta and the Canadian border. The proposed area stretches from Controller Bay to Icy Bay and includes the Katalla and Yakataga area (see map page 18).
The exploration license program creates the means for the state to allow exploration activities on lands excluded from the regular state lease sales. The exploration license program allows companies to nominate sections of state lands for exploration activity.
To approximate the competitive climate of a lease sale, the state initially hides the identity of the company requesting a license while it seeks competing proposals.
The state is accepting public comments on the existing proposal and notices of intent to submit a competing proposal until June 20; competing proposals are due by July 20.
Seeps found in 1896 Expeditions reported oil seeps in the Katalla region and the north side of Controller Bay as early as 1896. Commercial activity began in 1900, when Sir Thomas Boverton Redwood encouraged a British consortium to drill an exploration well near Katalla Meadows, according to an account in “Crude Dreams,” a 1997 history by Jack Roderick.
The syndicate had dreams of converting the coal-fired Royal Navy to oil.
The team drilled numerous wells over the course of a decade. The 365-foot No. 1 well in 1901 peaked at 50 barrels per day. The approximately 800-foot No. 2 well produced 25 barrels per day. The deeper No. 3 well produced 30 barrels per day. The No. 4 well was dry. A series of other production wells, including Redwood No. 1, yielded similar results.
Unsatisfied, the British group sold its 74 claims and four producing wells to Amalgamated Development Corp. out of Washington state about 1910. Bringing on a group of partners, Amalgamated spent a year or so unsuccessfully attempting to improve production before selling the claims to Chilkat Oil Co., which built a small refinery. The oil was loaded into wooden barrels and transported to Cordova on a horse-drawn railway.
By 1913, production had fallen to some 45 barrels per day. Production increased slightly with additional drilling after 1920 but fell short of the high initial expectations. Even so, the Kennecott Copper Corp. bought the claims in 1922 and a Mobil field party that summer reported: “If the same area with the same geology were located in California, a deep well would unhesitantly be recommended.” That might be the first expression of a hopeful yet frustrated sentiment that bedevils the Alaska oil industry to this day.
Even though various owners had drilled at least 44 wells in the region, only about 154,000 cumulative barrels had been produced by 1934, when the on-site refinery burned. After visiting in 1938, Chevron geologist G. Dallas Hanna wrote, “This history of the region has been filled with countless blasted hopes and bitter disappointments. Millions of dollars have been spent fruitlessly on projects which doubtlessly seemed commercially feasible at the time, but which were destined to fail for one reason or another. Probably no other equal area in Alaska has had so sad a fate.” That didn’t keep Chevron, Union and Tidewater Associated from quickly buying the claims, though.
Colorful Mr. Foran The most ambitious push in the Gulf of Alaska came in 1950, when William T. Foran and Ben Gellenbeck discovered an obscure provision of federal statute allowing the Interior Department to grant development contracts to encourage oil and gas development in “frontier” basins. Working as the Northern Development Co., the partners convinced more than 100 applicants to lease more than 1 million acres in the area near Icy Bay.
Sen. Robert Kerr of Oklahoma used the large lease block to entice Phillips Petroleum Corp. to commit $1.2 million over five years to exploring the area in a 50-50 partnership with his company, Kerr-McGee Oil Industries. The deal passed muster with the Interior Department, which awarded the Katalla-Yakataga contract in 1951.
Phillips Petroleum drilled a stratigraphic well and two development wells between 1954 and 1956. Phillips imposed an information blackout on the operation, which caused rumors to swirl. “Laundry coming into Anchorage from Icy Bay was said to have been soaked with oil. ‘Special fluids’ were seen being flown to Icy Bay to stop a ‘blowout,’” Roderick wrote. But despite encouraging shows, results were weak and Phillips left.
Foran and Gellenbeck quickly created a new consortium called the Yakutat Development Co., which organized another 1 million-acre block of leases. This time, they assigned the acreage to the Colorado Oil and Gas Corp. out of Denver. A well and a sidetrack in 1957 also encountered good oil shows but failed to find any commercial quantities of oil.
Undaunted, Foran went even bigger. Working with new partners, he leased acreage at Malaspina Glacier. “Foran told leaseholders that huge crude reserves lay beneath the Samovar Hills at the upper reaches of the glacier, and he declared that as many as five hundred producing wells could be drilled there,” Roderick wrote. “What he didn’t stress was that the glacier, as glaciers do, was moving, slowly inching its way to the open waters of the Gulf of Alaska.” The leases were issued but expired without any drilling.
Another push The region continued to pass from hand to hand over the following decades, and even hosted some exploration activity. A 1982 agreement with the federal government gave Chugach Alaska Corp. the exclusive right to explore for oil and natural gas in the area until the end of 2004 and exclusive right to develop any commercial discoveries it made.
In 2000-01, Chugach and partner Cassandra Energy Corp. acquired 10,134 acres over the Katalla field and submitted a plan of operations for a three-well exploration program.
The U.S. Forest Service approved the program in late 2002, although a subsequent lawsuit by a coalition of environmental groups delayed the project further. As the 2004 deadline approached, Chugach cancelled its agreement and Cassandra first scaled back and then quietly ended its efforts after 2005, as a search for additional investors failed.
- Eric Lidji
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