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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2021

Vol. 26, No.43 Week of October 24, 2021

AOGCC further reduces CIE bond requirement, based on an EPA bond

Kristen Nelson

Petroleum News

In an Oct. 20 order the Alaska Oil and Gas Conservation Commission has made a second reduction in plugging and abandonment bonding requirements for Cook Inlet Energy, based on bonding in place with the U.S. Environmental Protection Agency. The bond CIE has with EPA covers P&A of a Class I disposal well under EPA’s underground injection control program.

The bonding requirement reduction in this order is based on the bond in place for the UIC Class 1 disposal well at Badami.

The commission said Savant Alaska LLC, the owner and previous operator of the Badami unit, appointed CIE as operator of the unit effective March 1, 2021.

CIE and Savant are Glacier Oil & Gas companies.

CIE applied to the commission on Aug. 12, 2021, for a reduction in bonding due to the bonding in place with EPA to cover P&A of the Class 1 disposal well at Badami.

Under the commission’s new bonding requirements, based on the number of permitted wellheads a company has, CIE with wells 29 fell within the 21-40 well tier, equating to a $6 million bonding requirement. Even if the three UIC Class 1 disposal wells, the Badami well and two in Cook Inlet, are dropped from the company’s well count, that count still falls in the 21-40 well category, the commission said.

CIE had a $200,000 bond in place with the commission, meeting the earlier bonding requirement for all of a company’s wells.

Previous reduction

In 2020 the commission reduced CIE’s bonding requirement under the new regulations based on a $324,000 bond the company has with EPA, dedicated to P&A of the West McArthur River unit 4D and Redoubt unit D1 disposal wells.

The commission denied a request to reduce bonding because of a dismantlement, removal and restoration bond CIE has with the Department of Natural Resources, saying of the $500,000 DR&R bond that there is no evidence “that any of the DNR bond is exclusively dedicated to the costs to properly P&A CIE’s wells.”

In its 2021 order the commission said it requested more detailed information on actual cost to P&A the UIC Class 1 disposal well at Badami.

CIE submitted a third-party P&A cost estimate to P&A the Badami disposal well, and the commission said it “has determined that the $470,000 average well abandonment cost is reasonable and would be reflective of the actual cost to P&A the UIC Class 1 disposal well at Badami,” and has determined that CIE’s total bonding “should be reduced by an additional $470,000 on top of the $324,000 reduction approved” in the 2020 order.

CIE currently has an active bond with AOGCC of $2,690,000, the commission said, and less the $794,000 EPA bonding in place, the remaining bonding obligation is $2,516,000.

The commission said the company has five installments remaining to increase its bonding to the total obligation of $5,206,000. The next four installments would be a minimum of $504,000, the commission said, with the fifth and final installment $500,000. Installments are due by Aug. 16 of each year starting in 2022 and running through 2026, the commission said.

- KRISTEN NELSON






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