|
Evergreen converts shallow gas applications to Alaska exploration license apps Holitna Energy, Usibelli license applications already under review; shallow gas acreage near Fairbanks and Delta has already lapsed Kristen Nelson Petroleum News Editor-in-Chief
Alaska’s non-competitive, first-come first-served, shallow gas leasing program started in the mid-1990s with the goal of providing access to natural gas resources in isolated rural areas of the state with the hope of replacing diesel. But after the Alaska Legislature approved the program in 1996 and the Department of Natural Resources started taking applications for the over-the-counter leasing program, it became evident that much of the interest was not in small blocks in rural areas, but in large blocks on the state’s road system.
The Legislature amended the program to better cover the state’s leasing costs and to accommodate the larger blocks of land needed for commercial development. But, unlike the state’s competitive leasing programs, shallow gas did not require a best interest finding and the large amount of shallow gas acreage in the Matanuska-Susitna Borough created public concerns about surface use issues.
In response to these concerns, the Legislature abolished the state’s shallow gas leasing program in May, and included a one-time opportunity for conversion of shallow gas lease applications to exploration license applications.
Pat Galvin, the Division of Oil and Gas permitting and leasing manager, told Petroleum News Sept. 14 that some of the existing applications for shallow gas leases were from the summer of 2003, and the one-time conversion opportunity was provided to handle applications the division had on hand. Evergreen does partial conversion Evergreen Resources notified the Alaska Division of Oil and Gas on the deadline, Aug. 31, that it was converting shallow gas lease applications for approximately 33,000 acres of land into an application for an exploration license. The remainder of the company’s shallow gas lease applications, which totaled some 80,000 acres, expired.
Two other companies have also gone with exploration licensing.
Galvin said Holitna Energy Corp. has already applied to convert its shallow gas lease applications in the Holitna area to a license. Usibelli Coal Mine Inc. had applied for shallow gas leases in the Healy area and also submitted an exploration license application for some of the same acreage and some additional land in April, during the state’s annual open period for license applications. Galvin said that after House Bill 531 was passed, eliminating the shallow gas leasing program, Usibelli decided to proceed with its license application, rather than converting its shallow gas applications to a license application.
While work has just begun on the Evergreen exploration license application, Galvin said requests for proposals have already gone out for background work on the Holitna and Healy exploration license applications. Leases can be issued for gas only Galvin noted that under the 2004 legislation eliminating over-the-counter shallow gas leasing, the division now has the option to issue gas-only exploration licenses and gas-only leases. There could be gas-only leases in an areawide lease sale, Galvin said, but “more likely the gas-only would become relevant through the exploration licensing program.” Acreage in a gas-only exploration license could be converted into a gas-only lease, he said.Shallow gas existing leases only The shallow gas program is now confined to existing leases only, “and we’ll see how those evolve and if there’s really any development,” Galvin said.
In the Matanuska-Susitna area there are a mix of conventional oil and gas leases, shallow gas leases and the new exploration license application. There is an existing unit, Pioneer, which Evergreen operates, and Galvin said unitizing leases if the area moves into production will be the state’s primary opportunity to ensure that surface management is done in a coherent fashion.
The public comment period has closed on the department’s final enforceable standards for coalbed methane development on state-owned resources in the Matanuska-Susitna Borough, and Galvin said work is under way on preparing a final standard for the commissioner’s signature. There is a lot of work involved in responding to public comments, he said, and the hope is to have the final standards out in the next few weeks, but certainly by the end of the year. Shallow gas leases in three areas State records show eight active shallow gas leases in the Homer area (22,637 acres) and 60 in the Matanuska-Susitna area (229,609 acres). The three-year leases were issued in 2003.
There were a large number of shallow gas leases in the Fairbanks and Delta area, issued under the original program. Galvin said none of those leases remain. Either they were not accepted when the state issued them or they were relinquished. The state received applications for 270 leases in various areas of the state from 36 applicants when the program went into operation in February 2000.
In the Red Dog area there are four leases (23,040 acres) issued in 2000 for a project which illustrates the purpose of the 1996 legislation. Galvin said the work on the leases is an attempt to find a “localized source of energy” for the Red Dog Mine. The Red Dog leases have been extended for three years, a one-time option in the original legislation. Red Dog Mine operator Teck Cominco is in the process of evaluating the leases for shale gas potential, and Division of Oil and Gas Director Mark Myers said in the October 2003 extension decision that the division was approving the lease extensions “based upon the exploration activity already conducted on the leased and adjacent areas, and the likely prospect of further exploration activities and possible development and production…”
Under the 2004 legislation, Galvin said, extensions of shallow gas leases are not at the discretion of the Department of Natural Resources but must meet specific standards for extension.
| 