Legislature(2005 - 2006)BUTROVICH 205
04/13/2005 03:30 PM RESOURCES
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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.