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State bond covers required GRI work Plug and abandon work complete on five coalbed methane wells drilled in Houston, Alaska, area between 1998, 2000 Kristen Nelson Petroleum News Editor-in-Chief
The Alaska Oil and Gas Conservation Commission said Oct. 21 that work has been completed to plug and abandon five coalbed methane wells on state oil and gas leases in the vicinity of Houston, Alaska. The work was performed under contract by Fairweather E&P Services.
These were wells drilled between 1998 and 2000 by GRI Inc., a small coalbed methane exploration company that was the first company to attempt coalbed methane production in Alaska, the commission said in a statement.
The commission requires all applicants for oil and gas drilling permits to post a bond to insure wells are drilled, maintained and abandoned in accordance with the commission’s regulations.
“Several years into operations GRI Inc. became insolvent, ceased operations and the Houston area oil and gas leases expired,” the commission said, and it then used the GRI bond to contract with Fairweather for plugging, abandonment and location clearance of all five wells. Initial results reported as positive Dave Lappi was president of GRI at the time the wells were drilled and in 1998 he talked to the Alaska Support Industry Alliance about the first four coalbed methane wells.
“We’re very impressed” by the results so far at the Houston gas field, he said in October 1998. “We think it’s commercial. In fact, we’ve been so impressed by what we’ve seen in the wells that we’ve permitted the next 50 holes through the coastal zone management process.” He said GRI was talking to coalbed methane operators in the Lower 48 about participating in the 50-well program.
Lappi had returned to Alaska from 10 years in Australia in 1991 and looked for an exploration project he could develop.
“And the coalbed gas opportunities here in Alaska seemed like they were ready to be investigated,” he said. Lappi believed coalbed methane could provide an energy source in rural Alaska, and that a demonstration project in Cook Inlet could be used as a model “for development in less populated, more expensive to operate areas.” He worked with state agencies and the Alaska Legislature on regulations and leasing for coalbed methane, and found backers in Australia for drilling the wells near Houston.
But in early 2000 Lappi told Petroleum News that Perth, Australia-based Growth Resources, the parent company of GRI, was in negotiations, from Perth, to sell the field. Lappi said Growth Resources, originally a gold mining company in Australia before it acquired his leases for the Houston coalbed methane field, had changed its focus to high tech in late 1998, early 1999.
“We have a gas field in Alaska that doesn’t really fit into their company, so they are looking for a buyer,” he said.
The fifth well, Houston No. 22, was drilled in 2000 to hold the lease, which had an expiration date of March 31, 2000. By that time, Lappi was out of the picture and Dave Johnston was handling permitting for GRI. Working with GRI, and surface owners The commission had been trying to get the wells plugged for several years.
Commission senior petroleum geologist Bob Crandall told Petroleum News that one of the reasons it took a while to get the work done was that the commission “wanted to work with GRI to the degree possible.” The commission’s file for one of the wells, Houston No. 4, includes a number of letters between the commission and GRI about that well, which the surface owner was at one time interested in converting to a water well, although that conversion was never made.
Working with GRI was complicated, Crandall said, when the company declared bankruptcy and the commission then had to collect the bond from the company’s surety.
The plugging and abandonment work included cutting off the wells four feet below ground level, welding a marker plate on the casing, filling in the hole and then doing surface restoration.
Crandall said the commission worked with the surface owners and made changes in its program to meet their needs. For example, one of the wells was cut off eight feet below the surface to accommodate the surface owner’s plans for the property. Learning experience for commission This was also a learning experience for the commission in working with a small operator, Crandall said.
“Alaska is unique,” he said, because the “number of operators is very small in comparison to other states” and those operators “tend to be major companies.”
In Oklahoma, for example, where there are many orphan wells — wells for whom the responsible operator can no longer be identified — a tax on oil and gas companies is used as a plugging fund, and plugging orphan wells is an ongoing effort.
Alaska, he said, is more like the North Sea as far as its operators go. As Alaska’s “population of operators begins to change, we’re going to be very conscious of looking for potential trouble spots, because it’s a big issue when an operator goes broke.”
Based on what happened with GRI, Crandall said, “I think that we’ll be able to recognize an operator that is approaching insolvency more readily now and … we may be able to take steps that could help us perform all this in a shorter timeframe.”
Since the wells were not very deep — the deepest was not even 2,000 feet — were on the road system and close together, the work to plug and abandon them could be done for the amount of the bond, Crandall said.
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