Legislature(2005 - 2006)BUTROVICH 205
04/13/2005 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB163 | |
| SCR6 | |
| SCR7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 53 | TELECONFERENCED | |
| *+ | SB 163 | TELECONFERENCED | |
| *+ | SCR 6 | TELECONFERENCED | |
| *+ | SCR 7 | TELECONFERENCED | |
SCR 6-COOK INLET OIL & GAS PLATFORM ABANDONMENT
CHAIR WAGONER announced SCR 6 to be up for consideration.
MARY JACKSON, staff to Senator Wagoner, sponsor, said the two
resolutions coming before the committee are part of the results
of the February Kenai meeting about abandonment of the platforms
in Cook Inlet, a serious issue since 1996. This resolution urges
the governor to ask the department to promulgate regulations.
There was some question about whether the Department of Natural
Resources or the Alaska Oil and Gas Conservation Commission
(AOGCC) had precedence over that and it was found that the
department does.
4:02:03 PM
MARK MYERS, Director, Division of Oil and Gas, Department of
Natural Resources (DNR) said abandonment is really a big deal.
Many wells are ending their lives; some have been "lighthoused"
and some have been partially abandoned. It involves a lot of
stakeholders and has issues like navigability. The leases
require full-abandonment - full removal and back to original
condition.
However, there are questions of whether there might be better
and higher uses for the platforms and who retains the liability
at the point of abandonment. The state has historically relied
on parent company guarantees and the deep pockets of the
original lessee. "It's not a liability you can sign away. That's
a very strong incentive, again, a very strong protection in the
process."
Smaller companies can take over some of the platforms and that
has happened, but the state wants to make sure it's protected
from liability. With all that said, the liability becomes an
issue when folks want to sell the platforms and they should be
entitled to some certainty about how, in fact, and what standard
the state is going to hold the lessee to.
In the end, we fully need a process. We need a series
of regulations about how we deal with these things and
quite honestly, since statehood, really we haven't
gone through full abandonment of these platforms. So,
we're into new territory. We expect to hold a full set
of procedures this year on this issue, but until we
have our act together, but until we have all the
participants at the table, all the stakeholders
involved, we haven't been prepared to do it. This
urges us to do it. We recognize in fairness to all
parties we need to do it; we recognize there are a lot
of stakeholders involved and we are the lead agency.
He supported the resolution, but admitted it is a daunting task.
4:04:39 PM
DAN SEAMOUNT, Alaska Oil and Gas Conservation Commission
(AOGCC), said he really supports the goal of future oil and gas
exploration and development. He said there is potential for
undiscovered oil within reach of the Cook Inlet platforms
because the known reservoirs still have a lot of oil. Recovery
of the original oil in place has been relatively slow off a
number of the platforms - less than 30 percent compared to other
field such as Prudhoe Bay with recoveries of greater than 50
percent of the original oil in place.
We believe there are hundreds of millions of barrels
of oil left in the produced fields of Cook Inlet in
known reservoirs. With this, motivated and energized
production companies such as Crosstimber should be
encouraged to use technology to recover more of the
known oil - that's the oil that's reachable from the
platforms. Also, there's exploration potential left
within reach. There are fewer than 300 exploration
wells and 1,000 total wells that have been drilled in
the entire history of the 10,000 square mile basin.
MR. SEAMOUNT said that he knows of similar size basins such as
the San Juan Basin in New Mexico, which has 29,000 wells and
discoveries are still being made there.
Leslie Lagoon with the USGS - expert geologist and
geochemist - has concluded that only four percent of
the total oil generated in Cook Inlet Basin has ever
been found. We don't know yet if condensing oil has
escaped to the surface or it's still trapped in
undiscovered oil fields or both, but there is a lot of
oil that has not been accounted for yet. As Mark Myers
was saying, there are untested fault blocks within
reach and under exploratory prospects that there's
been identified by many petroleum explorationists over
the last 50 years.
Possibly the highest potential play is the Pre-
tertiary, Cretaceous and Jurassic rocks that we've
been hearing about lately in the news and Mr. Myers
mentioned. The Jurassic rocks is where almost all the
oil is generated. To date, only 55 wells have been
drilled in this section and most have been drilled
only into the very top. Little is known of its
productive potential. We feel the existing offshore
platforms represent viable infrastructure and it makes
sense to reenter their idle well bores and deepen or
sidetrack to test the Pre-tertiary section of 5,000
ft. extra depth below the Tertiary. It's an arbitrary
number, but it really comes close to fully evaluating
the Pre-tertiary sections potential. You could also
drill to see the new fault blocks and the other
prospects before abandoning the platforms.
As I've alluded to, there are four tiers of potential
that are within reach of the platforms. There's the
unproduced oil in known reservoirs; there are new
fault blocks. There are many identified exploration
prospects and there's the Pre-tertiary play. These
plays would most likely be uneconomic and unreachable
if it were not [indisc.] to existing platforms.
Our new commissioner, Kathy Forester, pointed out to
me - she's got a lot of experience on the North
Slope.... She pointed out to us that the situation at
Cook Inlet is analogous to that of the North Slope
where ConocoPhillips and BP are already using idle
well bores on existing pads to deepen or sidetrack for
small accumulations of reservoirs that would be
uneconomic if not for the existing infrastructure. In
other words, it's possible that Cook Inlet has already
been shown to be successful by the success on the
North Slope.
We feel the platforms should be viewed as assets and
we recommend that all stakeholders be very careful
when considering abandonment and do everything they
can to have all of the potential oil and gas reserves
tested before abandonment. There's a window of
opportunity right now to capture additional reserves.
Platform abandonment would close that window. Once the
window closes, much of the state's resources and Kenai
Peninsula's economic potential could be lost.
4:10:34 PM
CHAIR WAGONER added that currently there are over 300 jobs
directly related to Cook Inlet platforms. "It's a very important
part of the overall oil and gas economy that we have based in
Cook Inlet right now."
4:11:05 PM
MIKE MONGER, Executive Director, Cook Inlet Regional Citizens
Advisory Council (CIRCAC), said the council has similar
interests in the Cook Inlet platform removal. Their research has
revealed that DNR has no specific regulations or statutes
governing lessee's obligations and determines their obligations
on a case-by-case basis. He said the council's research paper
will be released in May and he would be happy to share it with
them.
4:13:28 PM
CHAIR WAGONER closed the public hearing.
4:13:33 PM
SENATOR GRETCHEN GUESS moved Amendment 1.
24-Ls0775\A.1
Chenoweth
4/12/05
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR WAGONER
TO: SCR 6
1 Page 2, line 6:
2 Delete "smaller"
3 Insert "growing, independent"
SENATOR ELTON objected to ask if using the word "growing" limits
the intent.
MS. JACKSON explained that this paragraph references XTO Energy
that is no longer in a smaller bracket. "They are a growing
independent company."
CHAIR WAGONER said it is growing worldwide since taking over the
Shell platforms.
SENATOR ELTON removed his objection.
4:15:32 PM
SENATOR SEEKINS moved CSSCR 6(RES) from committee with
individual recommendations. There were no objections and it was
so ordered.
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