Friday, September 2, 2011

State looks to streamline new oil development

By Tim Bradner
Alaska Journal of Commerce

The state Division of Oil and Gas is working on ideas for regulatory reforms and other steps that will boost oil and gas exploration and remove roadblocks to development of small oil accumulations, Bill Barron, the division director, told Anchorage business leaders in a briefing.

Possible changes are still being discussed internally and would have to be put into effect in regulations and possibly legislation, Barron told the Anchorage Chamber of Commerce Aug. 22.

One change under consideration would provide for approval of a company's multi-year plan of development in lieu of approvals of specific permits for field-related activities done on an annual basis.

"We're looking at whether we can approve the plan as a whole rather than approving project-by-project," Barron said.

There are some complications with the idea, "but we're working through these," he said.

The idea is to give companies engaged in field development, particularly independents working on smaller projects, more confidence that projects will not be delayed because of a complex incremental permitting system.

"This is something we're giving a lot of thought to. There are a lot of permits that are similar, for example permits for field development wells on adjacent pads. We're looking at whether we can issue permits based more on overall field development rather than for specific projects," in a way that would save time, Barron said.

A second initiative being discussed, he said, is a change to lease terms to guarantee access to field pipelines, production and processing facilities to developers of small deposits near larger fields where the owners are not part of the owners of the existing facilities. This would be in new leases issued by the state Department of Natural Resources, and would not affect existing leases, Barron said.

Facility access has been a knotty issue for explorers on the North Slope and for producers of existing fields. Companies exploring and making discoveries of smaller fields want some assurances that they can get access to existing infrastructure without onerous terms being imposed.

Owners of the facilities, on the other hand, want to make sure they aren't financially disadvantaged by allowing others to process and ship oil through existing facilities.

"This is something with which we haven't come to grips with even internally (in terms of specific ideas) but even if we can do something in broad terms, such as in access to roads or pads, it could be something of great value," to explorers, Barron said.

Facility access has been a problem on the North Slope. It look a long time, but Pioneer Natural Resources was able to successfully negotiate a facility access agreement with ConocoPhillips and other Kuparuk River field owners to process and ship its oil from the small Oooguruk field through Kuparuk field processing plants and pipelines. However, it took Pioneer several years to get an agreement.

Looking at Pioneer's experience, Eni Oil and Gas decided to build its own small processing plant and a pipeline for the company's Nikaitchuq field, which was developed more recently, rather than try to work out an arrangement to use spare capacity in the Kuparuk infrastructure, which is the path Pioneer took.

Barron said the state is also looking at ideas of changing rules on bonding and financial guarantees for and post-production abandonment and reclamation, problems that have also been cited by independents exploring on the North Slope.

"We want to make sure the state's interest is protected, too, when assets are bought or sold," Barron said.

There have been concerns expressed about the state's current requirements by many parties, he said.

Republished with the permission of the Alaska Journal of Commerce.
Tim Bradner can be reached at