The Alaska Oil and Gas Conservation Commission took public comments Nov. 4 on proposed changes to its bonding regulations but only Furie Operating Alaska/HEX commented, briefly at the hearing, but primarily in a Nov. 2 letter from its Chief Operating Officer Rick Dusenbery.
Furie/HEX is the operator at the Kitchen Lights unit in Cook Inlet where 10 wells have been drilled, of which three are plugged and abandoned, three are suspended and four are producing.
The proposed changes (see story in Oct. 25 issue of Petroleum News) include reduction in overall bonding for fewer than 40 wells - although the amount for one to five wells remains $400,000 each - additions to the reasons the commission will consider for increasing or decreasing bonding amounts and an extension of the time to pay increases in bonding.
The commission will accept comments on the proposed regulation changes in writing through Nov. 20.
Furie told the commission in its Nov. 2 letter that it supports the commission’s additions to the section on reasons it may increase or decrease bonding amounts, the extension of payment installments from four to seven years and agrees with the “nominal reduction in bonding requirements” for its seven wells from $2.8 million to $2.5 million, but, Dusenbery said, “we still feel that this level of bonding is counterproductive to exploration and development in the Cook Inlet during these economically distressed times.”
He said the company has been in discussions with AOGCC staff and wants to see bonding required for only the four producing wells.
“The remaining wells have been suspended or are currently awaiting AOGCC’s final determination that they have been properly suspended and will not fall under the bonding requirements,” Dusenbery said.
Other bonds in place
The letter also requests a bonding reduction based on bonds or securities in place totaling more than $1.7 million.
The company’s existing bonds include $650,000 with AOGCC, an AOGCC blanket well bond of $200,000 (this was the requirement covering all of an operator’s wells in the state prior to 2019 bonding requirement changes), a statewide oil and gas bond of $500,000 with the Alaska Department of Natural Resources, $228,375 in pipeline DR&R (dismantling, removal and restoration) with DNR’s Division of Mining, Land and Water, with whom the company also has a $50,000 bond for pipeline survey, and a $100,000 DR&R sinking fund with DNR as part of a DNR P&A Agreement.
Furie said the bond and financing plan it has in place with DNR is dedicated to the company’s P&A obligations, and said the deposits into the DR&R sinking fund should be considered part of the security under the new regulations.
Dusenbery said the company supports AOGCC’s effort to reduce redundant bonding “and undue financial burdens on small independent operators in the Cook Inlet” during the current challenging economic conditions. “Ensuring continued investment and production from Cook Inlet will allow the Railbelt Utilities and the Interior to provide reliable energy for a sustainable economy.”
The commission has considered or is considering bond reduction requests from other small operators, primarily in Cook Inlet. The state’s large producers have not appealed the bonding increases.
To date, the commission has found in favor of two operators: AIX, operator of the Kenai Loop field, which has a bond with that field’s landowner, the Alaska Mental Health Trust Land Office, specifically dedicated to P&A of the field’s wells, did not have to increase its existing AOGCC bond. Cook Inlet Energy, a Glacier Oil and Gas company, won some reduction in its bonding increase because of a bond in place specifically for P&A of two disposal wells with the U.S. Environmental Protection Agency.
- KRISTEN NELSON
