Morning Headlamp — Walker’s Veto Threatens More Than He Realizes

Cause and effect. The Alaska Journal of Commerce published an editorial on Gov. Walker’s decision to veto more than $600 million in credits owed to independent explorers and producers in the last two years. BlueCrest, for example, is owed nearly $17 million of that sum via rebates for prior spending on exploration and development. According to the Journal, “Walker has not only damaged Alaska’s reputation in financial circles through his credit veto, but he has also sharply tilted the state’s playing field to the majors’ advantage at the expense of the independent companies he once said he wanted to see 50 of on the North Slope. Had Walker made good on the state’s debts, that money would have circulated back into the Alaska economy as projects continued to develop and attract investment from the private sector while the Legislature pursued a more sustainable solution that wouldn’t harm potentially large discoveries on the Slope by Caelus and Armstrong.”

Headlamp agrees. The vetoes and the instability they have created in the Alaska oil and gas market undoubtedly will deter new investments and likely keep new companies from coming to the state. Let’s not forget those credits have to be paid off at some point in the future…we can’t kick the can down the road forever.

Tim Bradner examined President-elect Trump’s policies and impact on Alaska in a Petroleum News column. According to Bradner, “Trump is unpredictable and is even showing signs of waffling on some campaign positions, even on climate change – the president-elect says he is now “open” to the issue.” However, Bradner does note that the appointment of Scott Pruitt to head of the EPA seems to contradict that fact. Bradner suspects that Alaska OCS leases would be a target for Trump. Finally, “there could also be changes in the Interior Department’s rules establishing large protected areas in the National Petroleum Reserve-Alaska, particularly those along the northeast coast of the reserve where there are very good prospects for discoveries.”

According to Petroleum News, BlueCrest spudded its first new development well in the company’s Cosmopolitan oil field on Nov. 28, per John Martineck, president and CEO of BlueCrest Alaska. In April, the company started producing oil from the field, using a converted exploration well, but is now using a new powerful rig to directionally drill from an onshore pad into the field’s offshore oil reservoir. The well should go into operation around the end of March, Martineck said.

Ahtna said Tuesday it has finished drilling a natural gas exploration well and will soon conduct tests to determine if gas exists in the targeted zone Tolsona No. 1. The well, located about 12 miles west of the company’s Glennallen headquarters in the Interior, proved to be very tricky and was slightly delayed by challenging geology and zones of high-pressure water. It had to be drilled 700 feet deeper than planned, but the company was able to isolate the potential gas-bearing zone from the water about a mile beneath the surface. Despite the challenges, the drilling phase was safely completed in 70 days with zero Occupational Safety and Health Administration (OSHA) recordable incidents.

Headlamp applauds Ahtna for its efforts to find natural gas and for the safe completion of the well. We hope the flow testing produces good results!

 

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First Reads

Slope oil giants set to prosper as veto fallout continues
Alaska Journal of Commerce, Andrew Jensen, December 8, 2016

Trump on Alaska?
Petroleum News, Tim Bradner, December 8, 2016

This much is certain: Exxon wants fiscal certainty from Alaskans
Alaska Dispatch News, Dermot Cole, December 8, 2016

BlueCrest drilling ahead
Petroleum News, Alan Bailey, December 8, 2016

Ahtna completes drilling a natural gas well near Glennallen, set to begin testing
Alaska Dispatch News, Alex DeMarban, December 8, 2016