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Vol. 20, No. 39 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of September 27, 2015 • $2.50

page14

www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of September 27, 2015 l C O L U M NNORTHERN NEIGHBORS

Compiled by Shane Lasley

Alexco drills bonanza resultsat Bermingham silver deposit

Drilling results in robust Coffee resourceKaminak Gold Corp. Sept. 23 reported that its recently com-

pleted 70,000-meter infill drill program nearly quadrupled theindicated resource tonnage at its Coffee gold project in YukonTerritory. Coffee now hosts 52.4 million metric tons of indicat-ed resource averaging 1.68 grams per metric ton (2.82 millionounces) gold. In addition to the nearly four-fold increase in ton-nage, the grade of the indicated resource has increased by eightpercent. Coffee also hosts 42.7 million metric tons of inferredresource averaging 1.52 g/t (2.09 million oz) gold, representinga 12 percent increase in grade for this category. Kaminak said itremains on-track to complete a feasibility study for Coffee inthe first quarter of 2016. “Coffee remains a strong project andone of the few development track gold projects located inCanada that can deliver sizeable, high-margin production inexcess of 160,000 ounces per annum in the current gold priceenvironment,” said Kaminak CEO Eira Thomas.

Pretium taps new zones near Valley of the KingsPretium Resources Inc. Sept. 21 reported initial results from

exploration drilling at the Flow Dome Zone, located east of theValley of the Kings deposit at its Brucejack Project inNorthwest British Columbia. Hole SU-654 cut 1.5 meters of16.9 grams of gold per metric ton at a depth of 877.5 meters,followed immediately by a 33-meter intercept of 0.55 g/t gold;hole SU-657 cut 21.87 g/t gold over nine meters, from a depthof 932 meters; and hole SU-658 cut 2.35 meters of 6.2 g/t goldfrom a depth of 778.65 meters, immediately followed by 0.26g/t gold over 90 meters. Hole 657 was drilled about 650 meterseast of the Valley of the Kings, and holes 654 and 658 are about1,000 meters east of the high-grade gold deposit. Pretium saidthese high-grade intersections along with long intervals of low-grade mineralization suggest a new stockwork zone or an exten-sion of the Valley of the Kings deposit. Roughly 10,000 to15,000 meters of drilling is planned for Flow Dome and theKitchenview Zone, located northeast of the Valley of the Kings,during the 2015 program.

see NORTHERN NEIGHBORS page 14

For more than a century Foss has successfully navigated Alaska’s most extreme environments.

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Winter a perennial surpriseUptick in acquisitions brightens gloomy reality of Alaska minerals sector

By CURT FREEMANFor Mining News

By the time this summary

reaches your eyes, termi-nation dust (aka “snow”) willhave started to cover mineralprojects across Alaska. At arecent project site visit, one ofthe project owner’s represen-tatives was listening to localAlaskans talk about not beingready for winter, how manythings planned for the sum-mer remained un-done, etc.After some cogitation on this,he asked me “Does everyonein Alaska get surprised bywinter every year?” My

response was simple: When you are in denial,everything is a surprise!

While we might be in denial about the coming ofwinter, Alaska’s mineral industry swallowed a dis-tasteful spoonful of reality over the first three quar-ters of 2015. Exploration expenditures for Alaska’ssummer season were few and far between, likelycoming in at the same levels as our most recentmarket bottom in 2002. At mine sites, continueddepressed metals prices resulted in belt tightening,deferral of some capital costs and reduced mineexploration programs as the mines look to establishnew cost structures that will allow them to weatherthe price storm. One bright spot in the sea of gloomwas the rapid increase in the number of new projectacquisitions. Some of these acquisitions have beenannounced and some have not, while still others arenearing completion and are likely to be announced

before year-end. This sort ofacquisition activity normallypresages an uptick in the mar-kets, a re-stocking of the

shelves in anticipation of

growing demand to convertmineral resources into minedproducts. I don’t think it is outof line to say that Alaska’s

mineral industry is ready, will-ing and able to meet that

demand for new resources.

Interior AlaskaNORTHERN EMPIRE

RESOURCES CORP. and

SONORO METALS CORP.

announced results from theirphase-1 exploration program

on the Hilltop project in the Richardson District.The program confirmed and expanded the knowngold footprint, with channel samples grading up to19.45 grams per metric ton gold and rock grab sam-ples grading as high as 26.55 g/t gold. The workincluded collecting 61 confirmation soil samples,336 expansion soil samples, 228 rock samples, and213 meters of trenching. Soil sample results outlineda 400-meter-by-1,000-meter soil anomaly with val-ues above the 85th percentile, ranging from 13 to480 parts-per-billion gold. More widely spaced soilsampling expanded the zone of previously definedanomalous gold results 400 meters to the west anddefined a zone of interest measuring 2.4 kilometersby 2.4 kilometers. Significant channel sampleresults from five trenches included 7 meters at 1.41

TheauthorThe author

Curt Freeman,CPG #6901, is awell-known geol-ogist who lives inFairbanks. He pre-pared this column CURT FREEMANSept. 21. Freeman can be reached bymail at P.O. Box 80268, Fairbanks, AK99708. His work phone number atAvalon Development is (907) 457-5159and his fax is (907) 455-8069. His emailis [email protected] and his website iswww.avalonalaska.com.

see FREEMAN page 12

This week’s Mining News

Columnist Curt Freeman says an uptick in acquisitions has bright-ened a gloomy reality of the Alaska minerals sector. See page 11.

Q&A: Hawker — decision on roleof TransCanada in AKLNG needed

page5

Liberty starting lineFeds deem Liberty application complete; in-depth review officially begins

By ERIC LIDJIFor Petroleum News

Hilcorp Alaska LLC has officially submitted its

development plan for Liberty.

The U.S. Bureau of Ocean Energy Management

said Sept. 18 that the independent oil company had

submitted a completed plan to develop the offshore

oil field in the federal waters of the Beaufort Sea. The

distinction formally starts a 60-day review period.

While Hilcorp actually filed the “development

and production plan,” or DPP, with the federal

agency in the final days of 2014, federal guidelines

require a preliminary review to determine that a plan

has met the basic eligibility requirements for consid-

eration. In a general, a DPP describes proposed well

and infrastructure locations, drilling methods, a pro-

jected timeline for activities and impacts on both

onshore and offshore resources.

“BOEM will conduct a rigorous evaluation of this

DPP, recognizing the significant environmental,

social and ecological resources in the region and hon-

oring our responsibility to protect this critical ecosys-

tem, our Arctic communities, and the subsistence

needs and cultural traditions of Alaska Natives,”

BOEM Director Abigail Ross Hopper said in a state-

ment. “Any activity proposed offshore Alaska is scru-

tinized using the highest safety, environmental pro-

tection, and emergency response standards.”

The federal agency is taking comments on the

DPP through Nov. 17.

Before the Bureau of Ocean Energy Management

can approve, deny or request modifications of the

State certifies KLU No. 3DOG determines that exploration well discovered four gas pools; reduces royalty

By ERIC LIDJIFor Petroleum News

The state has certified Kitchen Lights Unit No.

3 as a discovery well.

With a Sept. 16 decision from Division of Oil

and Gas Director Corri Feige, the exploration well

became the official discovery well for four previ-

ously undiscovered natural gas pools in the Cook

Inlet basin. Now, operator Furie Operating Alaska

LLC and its working interest owners will pay a

reduced royalty rate on production from the well.

Under the new scheme, the companies will pay

a 5 percent royalty rate for all natural gas produced

at lease ADL 389197 from those four previously

undiscovered pools, rather than the traditional 12.5

percent royalty rate. The decision begins retroac-

tive to June 30, 2013 (at 7 p.m., Alaska Standard

Time, to be specific) and runs through June 29,

2023.

The determination is a three-step process: Are

the pools really pools? Are those pools really undis-

In or out of gameCAPP to next federal government: Unless pipelines built, oil sector in jeopardy

By GARY PARKFor Petroleum News

The Canadian petroleum industry’s top lobby

group has surfaced in the midst of Canada’s

federal election campaign, laying out a vigorous

case for oil and natural gas to generate national

prosperity.

Going head-on against the powerful forces that

have knocked the industry off its once-comfortable

and untouchable perch, the Canadian Association

of Petroleum Producers has issued a tightly framed

policy paper and sent its top executive to spread

the message across Canada.

Noting that Canada has the world’s third-largest

reserves of oil, yet accounts for only 4 percent of

global production, while exporting its natural gas

to only the United States, CAPP has argued for

developing those resources to “their full potential,

through leadership and fair, balanced policies to

make the country attractive for investment.”

It said producers believe their industry can

see LIBERTY PLAN page 24

see WELL CERTIFIED page 22

see CAPP’S CASE page 23

AKLNG to study 48-inch lineThe Alaska LNG project partners have agreed to Gov. Bill

Walker’s request that they study a 48-inch line.

The Alaska Dispatch News is reporting that the decision

was announced Sept. 23 at an Alaska Gasline Development

Corp. board meeting.

When the project gave legislators a quarterly update Sept.

9, Steve Butt, AKLNG project manager, said a study of a 48-

inch line was out for approval by sponsors. He said there was

Icewine well wins DNR approvalThe Alaska Department of Natural Resources, Division of Oil

and Gas, has approved an amended and modified lease plan of

operations by Accumulate Energy Alaska for the Icewine No. 1

exploration well.

The well will be drilled from the Franklin Bluffs gravel pad

adjacent to the Dalton Highway some 30 miles south of

Deadhorse.

The Sept. 16 decision lists a number of conditions of approval,

Companies argue for inlet creditsFour companies exploring, developing and/or producing in

Alaska’s Cook Inlet described the value of tax credits to their

operations — and to the state.

Officials from Apache, BlueCrest, Furie and Hilcorp told

the Senate Oil and Gas Tax Credit Working Group Sept. 22

that credits are part of the financing which enables them to

look for and find Cook Inlet natural gas and crude oil.

Tax credits are expected to come up for review by the

The determination is a three-step process:Are the pools really pools? Are those poolsreally undiscovered? Are the pools really

capable of producing in paying quantities?

The failure to introduce more pipelineshas undercut the crude prices fetched by

Canadian producers by an averageUS$13 per barrel lower than U.S. crudethis year, further squeezing the margins

in a depressed oil price environment.

see 48-INCH LINE page 22

see ICEWINE WELL page 24

see INLET CREDITS page 16

http://www.petroleumnews.com

http://www.miningnewsnorth.com

2 PETROLEUM NEWS • WEEK OF SEPTEMBER 27, 2015

Petroleum News North America’s source for oil and gas newscontents

ENVIRONMENT & SAFETY

EXPLORATION & PRODUCTION

FINANCE & ECONOMY

GOVERNMENT

PIPELINES & DOWNSTREAM8 Top priority, little hope

Push by Canada’s socialist politicians to revive upgraders, refineries for value-added processingdeemed uneconomic by industry

5 Hawker: TransCan decision needed soon

Anchorage Republican says progress on AKLNG projectbeing made, but administration has pressing matters that need addressing

NATURAL GAS6 Audit rattles Malaysia-based Petronas

Energy giant’s safety record censured by internal report,but BC government defends standards

10 Great Bear planning more exploration

Deciding on testing of Alkaid well; going to conducta fifth 3-D seismic survey in leased acreage south of Prudhoe and Kuparuk

15 Weekly US rig count falls by 6 to 842

7 PWSRCAC calls for EVOS agreement

4 Suncor Energy deploys piggybank

AKLNG to study 48-inch line

Icewine well wins DNR approval

Companies argue for inlet credits

Liberty starting line

Feds deem Liberty application complete; in-depth review officially begins

State certifies KLU No. 3

DOG determines that exploration well discovered four gas pools; reduces royalty

In or out of game

CAPP to next federal government: Unlesspipelines built, oil sector in jeopardy

ON THE COVER

Alaska’sOil and GasConsultants

GeoscienceEngineeringProject ManagementSeismic and Well Data

3601 C Street, Suite 1424Anchorage, AK 99503

(907) 272-1232(907) 272-1344

[email protected]

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PETROLEUM NEWS • WEEK OF SEPTEMBER 27, 2015 3


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CORRECTIONTheodore River well correction

The Alaska Division of Oil and Gas has issued a correction to an Aurora

Exploration LLC exploration plan currently under review for the Hanna prospect

on the west side of Cook Inlet.

The proposed Theodore River No. 1 well pad would actually be on ADL

391620, rather than ADL 391618, as mentioned in original permitting documents

published online.

The state is still taking comments through Oct. 10.

—ERIC LIDJI

l F I N A N C E & E C O N O M Y

Suncor Energydeploys piggybank


Suncor Energy has scooped C$310

million out of its cash stash to add a

10 percent stake to the 40.8 percent share

it has as operator of the next big oil sands

project due on stream in Alberta.

The seller is Total E&P Canada, a

wholly owned division of France’s Total,

which will keep 29.2 percent of the Fort

Hills project, leaving 20 percent with the

mining conglomerate Teck Resources.

Suncor said the transaction, which can

be completed within its current capital

budget for 2015 of C$5.8 billion to C$6.4

billion, demonstrates its continuing con-

fidence in the oil sands sector.

“With engineering over 90 percent

complete and construction surpassing 40

percent, Fort Hills is on track, with first

oil expected in the fourth quarter of

2017,” said Suncor Chief Executive

Officer Steve Williams.

The C$13.5 billion Fort Hills mine is

designed to reach an eventual peak of

180,000 barrels per day.

Total said the deal further shrinks its

exposure to the high-cost oil sands. Last

year it abandoned Joslyn, a separate C$6

billion mining venture that once targeted

100,000 bpd, with first oil due in 2017.

Total held 28.75 percent of that project,

with Suncor at 36.75 percent, followed

by Occidental Petroleum with 15 percent

and Inpex Canada at 10 percent.

Cash for ‘distressed assets’Earlier in September Williams said his

company’s cash holdings of C$5 billion

could be used to buy “distressed assets

(in) fire sales.”

“We have too much cash on our bal-

ance sheet,” he said. “We’ve been gener-

ating more cash than we anticipated

when we put that C$5 billion in the

bank.”

Williams said the slump in oil prices

put the squeeze on some companies,

indicating there could be acquisition

opportunities that didn’t exist six months

ago.

He said the spread between what buy-

ers like Suncor are willing to pay and

what distressed sellers are willing to

accept has narrowed significantly.

“Clearly prices are coming down

(while) time is on our side in terms of

waiting,” Williams said.

He also said that allocating new capi-

tal to new internal projects would be

unwise in this period of low oil prices.

What frustrates Suncor is the “stupid-

ity” of pipeline politics in the United

States and Canada, he told an energy

conference in New York.

There is “no monopoly on that stupid-

ity in the United States, though we have

a fair amount of it (in Canada) as well,”

Williams said.

Suncor currently has contracts in

place to ship 600,000 bpd through exist-

ing pipelines, but progress is needed on

new pipeline projects if there is to be any

hope of further growth in the oil sands

sector, he said. l

The C$13.5 billion Fort Hills mineis designed to reach an eventualpeak of 180,000 barrels per day.

http://www.det-tronics.com

http://www.colvilleinc.com

By STEVE QUINNFor Petroleum News

L egislative Budget & Audit Chair

Rep. Mike Hawker says he’d like to

have consultants help the Legislature

examine a deal among the producers and

the state of Alaska for a large-diameter

pipeline shipping natural gas to an LNG

export facility.

But he needs a deal first.

Hawker, an Anchorage Republican

who also serves on the Resources

Committee, issued caution against hold-

ing North Slope leaseholders to a hard-

and-fast schedule for a project this big

while identifying priority areas he

believes needs addressing during a spe-

cial session and the upcoming regular

session.

Hawker discussed his take on the

project with Petroleum News.

Petroleum News: Let’s start with theAKLNG project, say from a 30,000-footview. What are your impressions thus farwith any progress?

Hawker: From the 30,000-foot view,

there is always progress being made.

Every single day the people who need to

be talking to each other are actively

engaged in dialogue. They are engaged

in negotiations and every time you talk

you make some degree of progress.

Petroleum News: And how about asget closer to ground level? Is there moreprogress or do concerns emerge?

Hawker: I think that the Legislature

and the public had been conditioned to

anticipate that there would be a fall 2015

special session that would have a fully

papered agreement for an up or down

vote. I do not believe that there will be a

fully papered agreement available for a

2015 special session. I believe there are

certain matters that necessarily need to

be dealt with in a fall 2015 special ses-

sion. That is specifically our relationship

with TransCanada. If the governor wish-

es to exit that relationship, he needs to

convince the Legislature that it’s the

right thing to do. The Legislature, in

turn, needs to appropriate a little over

$100 million to him for the buyout and

substantially more money for the state to

continue on its own without the financ-

ing TransCanada had brought to the

table.

Petroleum News:So are you disap-pointed that hewon’t likely have afully papered agree-ment or would yourather have it readywhen it’s ready.

Hawker:

Megaproject science

demonstrates over

and over again that schedule driven

megaprojects have a much higher proba-

bility of failure than those projects that

are driven by and developed on their

merits. To that end, I absolutely want to

see this project developed on its merits

and not be driven by an artificial sched-

ule.

The schedule I foresee us on current-

ly, which would involve having a fully

papered agreement in front of the

Legislature sometime next year as

opposed to this fall, are well within the

time parameters that were anticipated

and established when we passed SB 138.

So while the fall special session date is

slipping somewhat, it is still well within

the parameters of SB 138. So you can’t

call the slippage a failure of achievement

but it’s simply recognizing a more realis-

tic expected date.

Petroleum News: So you still expectFEED to be the second quarter of nextyear?

Hawker: I think that

decision, it needs to be

made sometime within next

year, necessarily the second

quarter, the third quarter,

the fourth quarter. So sometimes next

year would be the anticipated date would

be for making the decision to move into

FEED.

Petroleum News: OK, on toTransCanada. What are your thoughtson the prospects of buying outTransCanada?

Hawker: When Gov. Parnell intro-

duced the MOU with TransCanada

describing the continued relationship

with them, what they would provide the

state in expertise and financing in

exchange for an equity position for the

pipeline segment of the project, it was a

hard sell for the administration. They

really had to come to the table and con-

vince legislators that it was the right and

best thing to do. They did that success-

fully. I’m certainly one of those legisla-

tors. I was certainly leery of

TransCanada’s role as

defined in the Parnell

administration’s MOU.

But through the course

of a legislative session, the

many, many hearings and

hundreds of hours we had in SB 138, I

became a believer that TransCanada

brought to the table a great deal of sup-

port for the project, but both financing

and technically and that their take from

the project — their share of the econom-

ic pie — was extremely small. I came to

believe that it really was the best and

right thing for the state to do to bring

TransCanada into the transaction as it

was contemplated.

Gov. Walker campaigned that he did

not want TransCanada in the project.

l G O V E R N M E N T

Hawker: TransCanada decision needed soonAnchorage Republican says progress on AKLNG project being made, but administration has pressing matters that need addressing


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Already struggling against a growing tide, British

Columbia’s Pacific NorthWest LNG venture now

faces problems originating within Petronas, the lead partner

in an Asian consortium that underpins the C$36 billion plan.

A 732-page internal audit submitted to senior manage-

ment two years ago and obtained by the Vancouver Sun pin-

pointed an array of problems at the Malaysian company’s

global oil and gas operations.

The newspaper said the auditors concluded that the safe-

ty issues were “almost certain (to result) in catastrophic”

events.

The report said that a failure to take prompt action could

result in “multiple fatalities,” “extensive damage” to facili-

ties, “massive” harm to the environment and a “major” blow

to the state-owned company’s reputation.

It said many of the deficiencies dated back many years,

with even Petronas citing its concern about a number of

accidents and deaths in the two years leading up to the 2013

audit.

Inadequate training citedThe company said the asset-audit, which pinpointed

inadequate training of employees and corrosion threatening

the structural integrity of facilities, resulted in immediate

action.

Executive Vice President Wee Yiaw Hin said Petronas

has “acknowledged the gaps identified in the report and we

have executed a comprehensive program to resolve the

issues and ensure the safety of our people, environment and

our facilities.”

Rich Coleman, British Columbia’s deputy premier and

natural gas development minister, told the Vancouver Sun

that although the audit caught him off-guard he was not con-

cerned about the ability of Petronas and its Pacific

NorthWest partners from China, South Korea, Japan and

Brunei, “to meet the highest standards in the world” that

have been set by the British Columbia government and the

“strict” regulatory regime operated by the B.C. Oil and Gas

Commission.

Coleman indicated he was reassured that Petronas had

commissioned the audit and claimed the company’s record

in the LNG sector “is impeccable.”

He also found comfort in the fact that the other partners

in Pacific NorthWest have reputations they will want to

safeguard and that Petronas’ stake in the project will be

overseen by Progress Energy, the Calgary-based gas pro-

ducer which was acquired for C$6 billion by Petronas in

2012.

In addition, Petronas has noted that its pipeline from the

Progress gas fields in northeastern British Columbia to the

liquefaction plant and tanker port near Prince Rupert will be

built and operated by TransCanada, which Petronas

describes as an “experienced major pipeline company.”

Petronas most aggressiveMore than any of the British Columbia LNG proponents,

Petronas has taken the most openly aggressive stance,

squeezing the Canadian and British Columbia governments

to provide tax breaks and assurances to protect it from any

future tax increases.

Far from being shaken by the audit findings, Coleman

said he remains “bullish” about the Pacific NorthWest pro-

posal.

But John Horgan, leader of the British Columbia’s New

Democratic Party, which conditionally endorses the concept

of LNG development, was disturbed by the audit findings.

“It’s jaw-dropping that a company that has been doing

business with the government of British Columbia for the

past number of years would have a track record like this,”

he said. “If the government didn’t know about this record,

they should have. And if they did know and they didn’t tell

people, why is that?”

Horgan said the audit shows that Petronas “is a state-

owned company that clearly has been cutting corners when

it comes to the environment and safety.”

Andrew Weaver, the only Green Party member in the

British Columbia legislature, said the Vancouver Sun’s

reporting was devastating for a project that is on shaky

ground due to global LNG prices and First Nations opposi-

tion.

He said “it’s going to be enormously hard (for Petronas)

to get public trust” and secure a “social license” to proceed.

Horgan said he is primarily concerned that the govern-

ment of Premier Christy Clark has “bent over backwards to

try and accommodate Petronas with respect to taxation and

royalties and spent no time” examining the company’s envi-

ronmental, health and safety records.

“That lack of due diligence is shocking to me and should

be shocking to British Columbians,” he said.

Petronas reviewing engineeringIn an effort to deflect attention from the audit, Petronas

said it is reviewing the engineering for its terminal, as well

as the location of a bridge and jetty connecting to the pro-

posed berth for LNG carriers on Lelu Island.

A spokesman for Pacific NorthWest said “significant

consultation has taken place with local First Nations,” who

have warned about the impact on fish habitat.

l N A T U R A L G A S

Audit rattles Malaysia-based PetronasEnergy giant’s safety record censured by internal report, but BC government defends standards; First Nation claims title to key land

see INTERNAL AUDIT page 7

http://www.foodontheway.com

http://www.nordic-calista.com

Of the five Tsimshian First Nations con-

sulted last year, two have signed impact

benefit agreements, two have yet to make a

decision and the Lax Kw’alaams tribe has

set up an occupation camp on Lelu Island.

“It is important to take our time and hear

from all interested parties as we move

through the design phase of our proposed

facility,” the spokesman said.

But the Lax Kw’alaams have signaled

that they are not much interested in negoti-

ating by filing a notice of civil claim that

makes their case in the British Columbia

Supreme Court to gain title to Lelu Island.

The tribe’s Mayor Garry Reece said an

award of ownership is needed for his com-

munity to “protect crucial salmon habitat,

protect our food security and ensure that

governments and industry are obligated to

seek our consent.”

The defendants in the legal action

include the British Columbia and Canadian

governments, the Prince Rupert Port

Authority and Pacific NorthWest.

Analyst: Redesign a challengeAltaCorp Capital analyst Mark Westby,

the co-author of a new report on British

Columbia’s chances of launching an LNG

industry, said the challenge facing Pacific

NorthWest is how to redesign infrastruc-

ture to move it farther away from the eco-

logically sensitive area.

He cautioned that if the New

Democratic Party wins the Canadian elec-

tion on Oct. 19 it is likely to order more

detailed environmental assessments that

could further delay the project.

The AltaCorp report said that of the 20

LNG proposals on the table in British

Columbia, four have the best chance of

proceeding — Pacific NorthWest, LNG

Canada led by Royal Dutch Shell, WCC

LNG co-owned by ExxonMobil and

Imperial Oil, and a small joint venture

backed by AltaGas.

A report by investment dealer Peters &

Co. said there could be delays and cancel-

lations involving projects, but it believes

that LNG exports are likely to take place

from the British Columbia coast.

“The coming 12 months will prove piv-

otal for LNG development on the Canadian

West Coast,” the Calgary-based firm said.

“High capital costs, the required devel-

opment of infrastructure, the extended reg-

ulatory approval process and weakness in

Asian LNG prices increase the risk of

deferral or cancellation of projects in the

near term,” the 21-page study said.

Kitimat LNG ‘substantially started’Peters & Co. said Kitimat LNG, co-

owned by Chevron and Australia’s

Woodside Petroleum, “has been substan-

tially started” which means the project will

not lose the environmental assessment cer-

tificate it received in 2006.

It said Pacific NorthWest appears to

lead the British Columbia field, although it

may not receive a federal environmental

ruling until early 2016.

The firm also believes that Aurora LNG,

led by Nexen (which is wholly owned by

China’s CNOOC Ltd.) with Japan’s

INPEX and JPG as partners, remains in the

running.

But even if only a handful of projects go

ahead, Peters & Co. said that would bolster

the operation of natural gas producers in

British Columbia’s Montney formation and

Alberta’s Deep basin. l


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on implementation of the 2006 restoration plan under the Exxon Valdez oil spill

reopener for unknown injury.

The council passed a resolution Sept. 18 “Supporting Habitat Restoration

Pursuant to Damages Caused by the 1989 Exxon Valdez Oil Spill.” The Exxon

Valdez Settlement Agreement contains a reopener clause allowing the state or fed-

eral government to request additional monies from Exxon “due to unanticipated

remaining oil in the environment and subsequent failure of species to recover

within Prince William Sound,” the resolution states.

The provision in the settlement, entitled “Reopener for Unknown Injury,”

would require Exxon to make additional payments for specific restoration proj-

ects if specific conditions are met, the council said.

The state and federal governments presented Exxon Mobil Corp. with a com-

prehensive plan pursuant to the reopener clause in June 2006 which provided for

cleanup of lingering oil at an estimated cost of $92 million.

ExxonMobil has maintained that EVOS cleanup has been completed while

environmental groups have argued that oil from the spill has been degrading at

slower rates than expected. An environmental group following the issue has said

that under the settlement claims under the reopener expire in June 2016.

The council cited recently published research for which it was one of the spon-

sors which found that even low levels of Alaska North Slope crude oil impacted

embryonic salmon and herring producing heart damage and resulting in reduced

swimming ability and reduced survival.

—PETROLEUM NEWS

continued from page 6

INTERNAL AUDIT

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If Canadian voters opt for a second electoral upheaval

of 2015 and follow Alberta’s stunning lead by handing

power to the socialist New Democratic Party one thing is

certain for the petroleum industry.

All bets are off.

The already fading hopes for domestic and export

pipelines to deliver oil sands bitumen to markets in North

America, Asia and Europe would likely be even shakier.

But, in what would be an about face for political parties

that are invariably at cross-purposes with the oil and nat-

ural gas sector, the two NDP administrations could find

themselves tackling one of the costliest, most intimidating

challenges within the industry.

Push for upgraders, refineriesBoth the Alberta and the federal NDP are certain they

can extract better value from Canada’s natural resources

and create jobs by rewarding those who establish

upgraders (to convert raw bitumen into synthetic crude for

refining into fuels) and conventional refineries.

Alberta Premier Rachel Notley is committed to devel-

oping a royalty structure that would keep more of the

upgrading and refining operations in Alberta.

She said the 44-year Conservative party rule in Alberta

had “squandered our wealth with a fire sale of our

resources. We’ll stop the fire sale and start rewarding busi-

nesses that create upgrading and refining jobs here at

home.”

The new Alberta government insists that the province’s

“current royalty regime rewards extraction, rather than

promoting value-added processing.”

It said a report commissioned by the Alberta Energy

Department has concluded that upgrading bitumen in

Alberta “results in approximately four times the value per

barrel of bitumen processed.”

The government said that reviving four of the

upgraders that were scrapped in 2008 would have helped

create 4,000 permanent operations jobs and an additional

12,000 service, supply and maintenance jobs, while gen-

erating C$400 million a year in provincial corporate tax

revenues.

It argues that the drop in oil prices has lowered con-

struction costs, while increasing the potential for greater

profits from refined products.

The federal NDP under Thomas Mulcair, having

pledged to change Canada’s energy landscape, has given

priority to working with provincial governments to

“upgrade and refine our raw resources here in Canada.”

Obvious leversThe obvious levers at the disposal of an NDP adminis-

tration would be: 1) preferential tax treatment, even

though Mulcair has insisted he will remove C$240 million

a year in subsidies from the industry; 2) placing limits on

exports of bitumen, which would put the government on a

collision course with the North American Free Trade

Agreement; and 3) direct government involvement in the

refining sector.

Mulcair has hinted he wants to apply the model which

has allowed Norway to “leverage its resources to create

value-added jobs,” although that country is still only pro-

cessing 300,000 barrels per day of the 1.8 million bpd of

crude it produces, while Canada refines a far higher per-

centage of its production — 1.9 million bpd of 3 million

bpd (with 1.2 million bpd of unprocessed bitumen current-

ly being shipped to the United States).

Issue of industry supportWhat neither branch of the NDP — Alberta or federal

— has explained is how it hopes to gain industry support

to reverse a pullback from refining that has stretched over

more than 30 years.

l P I P E L I N E S & D O W N S T R E A M

Top priority, little hopePush by Canada’s socialist politicians to revive upgraders, refineries for value-added processing deemed uneconomic by industry


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A North West Upgrading facility near

Edmonton is scheduled to start operations

in two years, making it the first new refin-

ery in Canada since 1984, while a North

Dakota refinery that opened earlier this

year was the first to be built in the U.S.

since 1976 — reflecting the reluctance by

companies to make massive investments in

a volatile sector.

Playing in the big leagues is not for the

faint of heart, as oil sands giant Suncor

Energy and its French partner Total discov-

ered two years ago.

They finally took the unprecedented,

but not unexpected step of abandoning

their C$11.6 billion Voyageur upgrader

after spending C$3.5 billion on the initial

construction phases, after deciding that the

venture did not make economic sense and

getting caught off-balance by a dramatic

shift in the North American crude market.

The upgrader, designed to process

200,000 bpd of bitumen, had long been

presented as a key plank in Suncor’s plan

to raise its production by 120 percent from

2004 to 550,000 bpd in 2016.

Mike Dunn, director, institutional

research, with FirstEnergy Capital, said the

decision was inevitable “because these

projects don’t make money.”

North West has government supportBackstopped by the Alberta govern-

ment, North West has been able to battle

through headwinds, despite swallowing

the usual dose of cost overruns which have

raised its price tag by 50 percent to C$8.5

billion and despite a delay of one year in its

planned startup of commercial operations.

North West Chief Executive Officer Ian

MacGregor has consistently argued that if

Alberta wants to build schools and hospi-

tals and infrastructure and stem the flow of

taxes, jobs and economic activity to the

United States it needs an expanded refin-

ing business.

Judith Dwarkin, chief energy economist

at ITG Investment Research, refuses to

accept the idea that spending billions of

dollars to increase refining capacity in

Canada will be an economic benefit, not-

ing that the Alberta government has been

forced to supply 37,500 bpd of its own

marketable bitumen and pay fees for pro-

cessing to keep North West alive.

She argued that rather than being a

commercially based venture, the upgrader

has required an infusion of public funds.

Ted Morton, a former Alberta finance

minister and now a senior fellow at the

University of Calgary School of Public

Policy, has described North West as a

“boondoggle with high risks for Alberta

taxpayers,” costing them C$26 billion.

Refineries proposed for BC coastWith other proposed upgraders and

refineries for Alberta now on the shelf, the

only slender hope for advancing where

Alberta has faltered rests with three

refineries that have been proposed for the

British Columbia coast, mostly tied to the

wavering chances of accessing Asian mar-

kets with oil sands production.

Two of them — Pacific Future Energy

and Kitimat Clean — require pipelines

from Alberta (with Pacific Future also

exploring the possibility of moving the

crude by rail) to the plants on the British

Columbia coast, where the bitumen would

be converted into refined products that the

proponents claim would be more accept-

able than loading tankers with raw bitu-

men.

The third scheme, Eagle Spirit Energy,

would refine bitumen in either Alberta or

northeastern British Columbia before pip-

ing the products to the Pacific Coast for

export.

Among the obstacles to be overcome —

securing financial backers and Asian cus-

tomers, gaining support from First Nations

and environmentalists and obtaining regu-

latory approval — there has been no enthu-

siasm in Asia for giving preference to

Canadian refineries.

Ultimate barrier economicsIan Anderson, president of Kinder

Morgan Canada, which plans to triple

capacity on its Trans Mountain pipeline

from the oil sands to the Pacific Coast, also

points to the ultimate barrier.

“If it were economic to have a new

refinery, I assure you there would be one,”

he said.

Almost from the initial announcement,

the proposed C$25 billion, 550,000 bpd

Kitimat facility was scorned, with Michael

Ervin, principal of MJ Ervin & Associates,

suggesting the chances of moving to the

construction phase were almost nil.

“It makes no sense to build a refinery of

that size on the West Coast, especially

when you consider that China is adding

refineries that will be able to process 3 mil-

lion bpd of crude (by 2018),” he said.

Ervin said the price differential between

the price of crude and the petroleum prod-

ucts extracted from it will never work,

even before capital and operating costs

were included.

Even if opponents succeeding in scut-

tling Enbridge’s Northern Gateway

pipeline plans to export 525,000 bpd

through Kitimat, he said there are enough

other options to move crude bitumen to

market to render plans for new refineries in

Canada suspect.

And that assessment could be the even-

tual downfall for any NDP governments

that attempt to use the public purse to

entice industrial partners to take a path that

others have long since rejected. l


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ROYALTY STRUCTUREAmong the obstacles to be

overcome — securing financialbackers and Asian customers,

gaining support from First Nationsand environmentalists and

obtaining regulatory approval —there has been no enthusiasm in

Asia for giving preference toCanadian refineries.

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By ALAN BAILEYPetroleum News

Great Bear Petroleum Operating LLC

is currently evaluating opportunities

to test the Alkaid No. 1 exploration well

that it drilled on the North Slope last win-

ter, Patrick Galvin, Great Bear executive

vice president, told the Alaska Oil and Gas

Congress on Sept. 23. And the company

plans to shoot a fifth 3-D seismic survey in

its North Slope acreage in the coming win-

ter, thus establishing an extremely compre-

hensive 3-D dataset across the company’s

leases, Galvin said.

Great Bear’s current plan of operations

envisages the drilling of three exploration

wells, including the Alkaid well, all in the

same general area to the west of the Dalton

Highway, south of Prudhoe Bay. But

because of operational difficulties, the

company was only able to drill one well,

the Alkaid well, during the past winter, and

had run out of time to conduct testing after

completing the well, Galvin said. In partic-

ular, the flooding of the Dalton Highway

during the winter created logistical prob-

lems for the drilling operation, especially

given the highway closure between the

drilling site and Deadhorse, the source of

supplies for field operations, he said.

Evolving strategyReflecting on what Great Bear has

achieved since purchasing more than

500,000 acres in state leases in 2010

across a broad swath of the central North

Slope, Galvin said that the company’s

exploration strategy has evolved as it has

discovered more about its lease holdings.

Initially the company had embarked

on a program designed to exploit the pos-

sibility of extracting oil directly from the

North Slope’s prolific oil source rocks,

using techniques such as horizontal

drilling and hydraulic fracturing, along

the lines of shale oil development that has

been carried out with great success in the

Lower 48. The three primary source rock

intervals on the North Slope are stacked

one above the other, thus opening up the

possibility of investigating all three at the

same location, Galvin said.

In the summer and fall of 2012 Great

Bear drilled two wells off the Dalton

Highway, having identified six potential

well locations with year-round access

near the highway. The company acquired

about 650 linear feet of rock core from

the source rocks penetrated by these

wells, Galvin said.

The company also embarked on a

major program of 3-D seismic surveying

across its acreage, for the identification of

optimum places to drill. But that seismic

enabled the company to discover conven-

tional drilling prospects within the major

rock intervals of the North Slope petrole-

um system, Galvin said. And, as thinking

about so-called conventional and uncon-

ventional oil development has evolved in

the oil industry, Great Bear’s view of its

exploration opportunities has morphed

into seeing more of a spectrum of oppor-

tunities, ranging from pure source rock

development at one extreme to, on the

other hand, the development of tradition-

al oil reservoirs.

Oil migrationGreat Bear purchased leases in an area

where the source rocks are believed to

have generated oil, with that oil under-

stood to have migrated north into the

reservoir rocks of oil fields such as

Prudhoe Bay and Kuparuk River. Under

Great Bear’s exploration concept, much

of the generated oil would have remained

in the oil source rocks, while some of the

oil would have become trapped in various

underground rock structures in the

process of migrating north. Great Bear is

using its 3-D seismic data to find those

potential trapping structures, thus

enabling the company to drill in search of

oil in the structures as well as seeking oil

left in the source rock intervals, Galvin

explained.

In addition to conducting seismic sur-

veys, Great Bear has carried out LIDAR

— light detection and ranging — surveys

in its acreage, to develop detailed topo-

graphic maps for the planning of surface

developments such as the construction of

ice roads. The three exploration wells in

Great Bear’s current operations plan all

require winter drilling, with site access by

ice road.

Exploration challengesReflecting on the challenges facing oil

explorers working on the North Slope,

Galvin commented on the general short-

age of data in areas outside the existing

oil fields. For example, no previous wells

had penetrated the Shublik, a key oil

source rock in Great Bear’s exploration

acreage, he said. The annual winter

exploration season, which depends on the

freezing of the ground and on the snow

cover, is short and unpredictable in length

— it is difficult to predict when drilling

can start and how many wells can be

drilled in a season. There can also be sig-

nificant permitting challenges — Great

Bear’s relatively simple 2015 winter

drilling operation required 19 permits and

involved 16 different government agency

contacts, Galvin said.

And, especially given a lack of compe-

tition within the industry service sector

and a tendency to execute one-off explo-

ration drilling programs, the costs of con-

ducting exploration are high.

Great Bear plans to address these chal-

lenges by completing the 3-D seismic

coverage across the company’s explo-

ration acreage, expanding its inventory of


Great Bear planning more explorationDeciding on testing of Alkaid well; going to conduct a fifth 3-D seismic survey in leased acreage south of Prudhoe and Kuparuk


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Better.

Great Bear purchased leases in anarea where the source rocks arebelieved to have generated oil,

with that oil understood to havemigrated north into the reservoirrocks of oil fields such as Prudhoe

Bay and Kuparuk River.

see GREAT BEAR page 15

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www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of September 27, 2015

l C O L U M N

NORTHERN NEIGHBORSCompiled by Shane Lasley

Alexco drills bonanza resultsat Bermingham silver deposit

Drilling results in robust Coffee resource

Kaminak Gold Corp. Sept. 23 reported that its recently com-

pleted 70,000-meter infill drill program nearly quadrupled the

indicated resource tonnage at its Coffee gold project in Yukon

Territory. Coffee now hosts 52.4 million metric tons of indicat-

ed resource averaging 1.68 grams per metric ton (2.82 million

ounces) gold. In addition to the nearly four-fold increase in ton-

nage, the grade of the indicated resource has increased by eight

percent. Coffee also hosts 42.7 million metric tons of inferred

resource averaging 1.52 g/t (2.09 million oz) gold, representing

a 12 percent increase in grade for this category. Kaminak said it

remains on-track to complete a feasibility study for Coffee in

the first quarter of 2016. “Coffee remains a strong project and

one of the few development track gold projects located in

Canada that can deliver sizeable, high-margin production in

excess of 160,000 ounces per annum in the current gold price

environment,” said Kaminak CEO Eira Thomas.

Pretium taps new zones near Valley of the Kings

Pretium Resources Inc. Sept. 21 reported initial results from

exploration drilling at the Flow Dome Zone, located east of the

Valley of the Kings deposit at its Brucejack Project in

Northwest British Columbia. Hole SU-654 cut 1.5 meters of

16.9 grams of gold per metric ton at a depth of 877.5 meters,

followed immediately by a 33-meter intercept of 0.55 g/t gold;

hole SU-657 cut 21.87 g/t gold over nine meters, from a depth

of 932 meters; and hole SU-658 cut 2.35 meters of 6.2 g/t gold

from a depth of 778.65 meters, immediately followed by 0.26

g/t gold over 90 meters. Hole 657 was drilled about 650 meters

east of the Valley of the Kings, and holes 654 and 658 are about

1,000 meters east of the high-grade gold deposit. Pretium said

these high-grade intersections along with long intervals of low-

grade mineralization suggest a new stockwork zone or an exten-

sion of the Valley of the Kings deposit. Roughly 10,000 to

15,000 meters of drilling is planned for Flow Dome and the

Kitchenview Zone, located northeast of the Valley of the Kings,

during the 2015 program.

see NORTHERN NEIGHBORS page 14

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Winter a perennial surpriseUptick in acquisitions brightens gloomy reality of Alaska minerals sector

By CURT FREEMANFor Mining News

By the time this summary

reaches your eyes, termi-

nation dust (aka “snow”) will

have started to cover mineral

projects across Alaska. At a

recent project site visit, one of

the project owner’s represen-

tatives was listening to local

Alaskans talk about not being

ready for winter, how many

things planned for the sum-

mer remained un-done, etc.

After some cogitation on this,

he asked me “Does everyone

in Alaska get surprised by

winter every year?” My

response was simple: When you are in denial,

everything is a surprise!

While we might be in denial about the coming of

winter, Alaska’s mineral industry swallowed a dis-

tasteful spoonful of reality over the first three quar-

ters of 2015. Exploration expenditures for Alaska’s

summer season were few and far between, likely

coming in at the same levels as our most recent

market bottom in 2002. At mine sites, continued

depressed metals prices resulted in belt tightening,

deferral of some capital costs and reduced mine

exploration programs as the mines look to establish

new cost structures that will allow them to weather

the price storm. One bright spot in the sea of gloom

was the rapid increase in the number of new project

acquisitions. Some of these acquisitions have been

announced and some have not, while still others are

nearing completion and are likely to be announced

before year-end. This sort of

acquisition activity normally

presages an uptick in the mar-

kets, a re-stocking of the

shelves in anticipation of

growing demand to convert

mineral resources into mined

products. I don’t think it is out

of line to say that Alaska’s

mineral industry is ready, will-

ing and able to meet that

demand for new resources.

Interior AlaskaNORTHERN EMPIRE

RESOURCES CORP. and

SONORO METALS CORP.

announced results from their

phase-1 exploration program

on the Hilltop project in the Richardson District.

The program confirmed and expanded the known

gold footprint, with channel samples grading up to

19.45 grams per metric ton gold and rock grab sam-

ples grading as high as 26.55 g/t gold. The work

included collecting 61 confirmation soil samples,

336 expansion soil samples, 228 rock samples, and

213 meters of trenching. Soil sample results outlined

a 400-meter-by-1,000-meter soil anomaly with val-

ues above the 85th percentile, ranging from 13 to

480 parts-per-billion gold. More widely spaced soil

sampling expanded the zone of previously defined

anomalous gold results 400 meters to the west and

defined a zone of interest measuring 2.4 kilometers

by 2.4 kilometers. Significant channel sample

results from five trenches included 7 meters at 1.41

TheauthorThe author

Curt Freeman,CPG #6901, is awell-known geol-ogist who lives inFairbanks. He pre-pared this column CURT FREEMANSept. 21. Freeman can be reached bymail at P.O. Box 80268, Fairbanks, AK99708. His work phone number atAvalon Development is (907) 457-5159and his fax is (907) 455-8069. His emailis [email protected] and his website iswww.avalonalaska.com.

see FREEMAN page 12



http://www.foss.com

12NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF SEPTEMBER 27, 2015

Shane Lasley PUBLISHER & NEWS EDITOR

Rose Ragsdale CONTRIBUTING EDITOR

Mary Mack CEO & GENERAL MANAGER

Susan Crane ADVERTISING DIRECTOR

Heather Yates BOOKKEEPER

Bonnie Yonker AK / INTERNATIONAL ADVERTISING

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Steven Merritt PRODUCTION DIRECTOR

Curt Freeman COLUMNIST

J.P. Tangen COLUMNIST

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Forrest Crane CONTRACT PHOTOGRAPHER

Tom Kearney ADVERTISING DESIGN MANAGER

Renee Garbutt CIRCULATION MANAGER

Mapmakers Alaska CARTOGRAPHY

ADDRESS • P.O. Box 231647Anchorage, AK 99523-1647

NEWS • [email protected]

CIRCULATION • 907.522.9469 [email protected]

ADVERTISING Susan Crane • [email protected] Yonker • [email protected]

FAX FOR ALL DEPARTMENTS907.522.9583

NORTH OF 60 MINING NEWS is a weekly supplement of Petroleum News, a weekly newspaper.To subscribe to North of 60 Mining News,

call (907) 522-9469 or sign-up online at www.miningnewsnorth.com.

Several of the individualslisted above are

independent contractors

North of 60 Mining News is a weekly supplement of the weekly newspaper, Petroleum News.

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g/t gold in trench 3 and 10 meters at 2.29

g/t gold in trench 5, with the best 1 meter

sample grading 19.45 g/t gold. Rock grab

samples from trenches returned values as

high as 26.55 g/t gold. Gold was strongly

correlative with arsenic, bismuth and tel-

lurium. Other anomalous associated ele-

ments included lead, antimony and tung-

sten, suggesting a possible intrusive-hosted

affinity similar to other gold prospects in

the Tintina Gold Belt of Alaska – Yukon.

Results of the subsequently approved

phase-2 work program are pending.

CONTANGO ORE INC. announced

today that its joint venture with a sub-

sidiary of ROYAL GOLD INC. has

approved a phase-2 exploration program at

its Tetlin gold project near Tok. The proj-

ect is located on lands leased from Tetlin

Village. Phase 1 was completed in August

and consisted of 7,500 meters of new core

drilling, primarily on locations outside of

the previously discovered Peak gold

deposit. Phase 2 will provide up to 6,000

meters of core drilling to follow up results

from phase 1. This second phase of work,

budgeted at US$4 million, will bring 2015

expenditures to about $9 million. At a 0.5

grams of gold per metric ton cutoff, previ-

ously published indicated resources

include 5.97 million metric tons grading

3.46 g/t gold, 11.0 g/t silver and 0.25 per-

cent copper. Using the same cutoff,

inferred resources include 3.85 million

metric tons grading 2.07 g/t gold, 14.28 g/t

silver and 0.235 percent copper.

Alaska RangeBRAZIL RESOURCES INC.

announced an updated mineral resource

estimate for its 100 percent-owned

Whistler gold-copper project The Whistler

deposit hosts an indicated resource of 79.2

million metric tons grading 0.51 g/t gold,

1.97 g/t silver and 0.17 percent copper. In

addition, the deposit contains an inferred

resource of 145.8 million metric tons grad-

ing 0.40 g/t gold, 1.75 g/t silver, 0.15 per-

cent copper. This new estimate largely

agrees with previously conducted esti-

mates published by KISKA METALS

CORP., from whom the project was

acquired earlier this year. The resource

estimate is based on 48 diamond drill holes

(19,870 meters). The Whistler deposit is a

structurally controlled porphyry copper-

gold deposit with gold, copper and silver

as the primary economic metals. There

have been three major intrusive episodes

that define the mineralization with the ear-

liest diorite phase being associated with

the majority of the mineralization. A major

northwest trending fault (“Divide Fault”)

separates the mineralization into two

domains, which were modeled separately

during the resource estimate. The concep-

tual pit delineated resource is reported

within a conceptual pit shell with 45-

degree pit slope angles, resulting in a strip-

ping ratio of 1.3 metric tons of waste for

every 1 metric ton of ore.

COVENTRY RESOURCES INC.

announced additional diamond core

drilling results from its Caribou Dome

copper project in the Valdez Creek District.

Drill holes CD15-12 and CD15-13 were

confirmatory holes drilled to evaluate shal-

low mineralization at Lenses 5 and 6.

Significant results include 8.9 meters at 5.0

percent copper from 33.6 meters in CD15-

12 and 3.3 meters at 10.1 percent copper

from 5.9 meters and an additional 10.6

meters at 5.4 percent copper starting at

30.6 meters in hole CD15-13. Hole CD15-

11 was a 40-meter step-out of previously

drilled holes designed to test a 250-meter-

long corridor where outcropping mineral-

ization coincides with a strong induced

polarization geophysical anomaly at Lense

2. Significant results include 0.3 meters at

3.0 percent copper from 100.7 meters in

CD15-11. The company also reported

thick, high-grade mineralization in the first

holes drilled to evaluate the Lense 7/8 tar-

get. Significant results include 0.8 meters

at 12.4 percent copper from 128.7 meters,

14.1 meters at 9.9 percent copper from

134.6, 2.4 meters at 3.7 percent copper

from 159.8 meters and 0.4 meters at 13.6

percent copper from 167.4 meters in

CD15-14. The mineralization in hole 14 is

thought to be part of a new, previously

undiscovered, lense of mineralization. A

phase two 4,000-meter drilling program

has been approved and will focus on first-

pass exploration of five very-high-priority

IP anomalies – the Lense 2, Lense 6 East,

Lense 4 West, Caribou South and Lense

7/8 targets. Additional drill results are

pending.

Northern AlaskaGOLDRICH MINING CO. announced

that placer gold production commenced at

the Little Squaw placer deposit at its

Chandalar gold project in the Brooks

Range. Updates to plant and facilities were

completed by the company and its partner

in late July and production began in early

August, continuing through Sept. 12.

Average daily production rose to about

103 ounces per day of fine gold for the

see FREEMAN page 14


FREEMAN

http://www.solsticeadvertising.com

Mining Companies

Kinross Fort Knox/Fairbanks GoldMining Inc.Fairbanks, AK 99707Contact: Anna Atchison, Manager, Community and Government RelationsPhone: (907) 490-2218 Fax: (907) 490-2290E-mail: [email protected]: www.kinross.comLocated 25 miles northeast of Fairbanks,Fort Knox is Alaska’s largest producing goldmine; during 2011, Fort Knox achieved 5million ounces of gold produced, a modernrecord in Alaska mining.

Usibelli Coal MineFairbanks, AK 99701Contact: Bill Brophy, VP Customer RelationsPhone: (907) 452-2625 • Fax: (907) 451-6543Email: [email protected]: www.usibelli.comOther OfficePO Box 1000Healy, AK 99743Phone: (907) 683-2226Usibelli Coal Mine is headquartered inHealy, Alaska and has 700 million tons ofcoal reserves. UCM produces an average of2 million tons of sub-bituminous coal eachyear.

Service, Supply & Equipment

Alaska Analytical Laboratory1956 Richardson HighwayNorth Pole, AK 99705Phone: (907) 488-1266ax: (907) 488-077E-mail: [email protected] analytical soil testing forGRO, DRO, RRO, and UTEX. Field screeningand phase 1 and 2 site assessments alsoavailable.

Alaska Rubber & Rigging Supply5811 Old Seward Hwy.Anchorage, AK 99518Contact: Mike Mortensen, GeneralManagerPhone: (907) 562-2200Fax: (907) 561-7600E-mail: [email protected]: www.alaskarubber.com.Alaska’s largest supplier of hydraulic andindustrial hose sold in bulk or assembled tospec. We also stock a large selection orwire rope, crane rope, lifting and trans-portation chain, sold in bulk or assembledto spec. We fabricate synthetic liftingslings, and supply shackles & rigging hard-ware. We sell and perform field installs ofconveyor belting. We are Arctic Gradeproduct specialists. We sell and service awide variety of hydraulic, lubrication, fuel-ing and pressure washing equipment. Wesell high pressure stainless instrumentationfittings and tube, sheet rubber, v-belts,pumps, Enerpac equipment, Kamlocks,plumbing fittings, and much more. Weperform hydro testing up to thirty thou-sand psi, & pull testing up to 350 thousandpounds. All testing comes standard withcertification & RFID certification trackingcapabilities.

Alaska Steel Co.6180 Electron DriveAnchorage, AK 99518Contact: Joe Pavlas, outside sales managerPhone: (907) 561-1188Toll free: (800) 770-0969 (AK only)Fax: (907) 561-2935E-mail: [email protected] Full-line steel and aluminum distributor.Complete processing capabilities, statewideservice. Specializing in low temperaturesteel and wear plate.

Arctic Wire Rope & Supply6407 Arctic Spur Rd. Anchorage, AK 99518Contact: Mark LamoureuxPhone: (907) 562-0707Fax: (907) 562-2426Email: [email protected]: www.arcticwirerope.comArctic Wire Rope & Supply is Alaska largestand most complete rigging supply source.Our fabrication facility is located inAnchorage with distribution Fairbanks. Wespecialize in custom fabrication of slings inwire rope, synthetic webbing/yarn , chain

and rope. Radio-Frequency Identification(RFID) is available for all of our fabricatedproducts. In addition, we offer on-siteinspection and splicing services. We carry alarge inventory of tire chains for trucks andheavy equipment.

Austin Powder CompanyP.O. Box 8236Ketchikan, AK 99901Contact: Tony Barajas, Alaska managerPhone: (907) 225-8236Fax: (907) 225-8237E-mail: [email protected] site: www.austinpowder.comIn business since 1833, Austin Powder pro-vides statewide prepackaged and onsitemanufactured explosives and drilling sup-plies with a commitment to safety andunmatched customer service.

Calista Corp.5015 Business Park BlvdSuite 3000Anchorage, AK 99503Phone: (907) 275-2800Fax: (907) 275-2919Website: www.calistacorp.com

Construction Machinery Industrial, LLC 5400 Homer Dr.Anchorage, AK 99518Phone: (907) 563-3822Fax: (907) 563-1381Website: www.cmiak.comFairbanks officePhone: 907-455-9600 Juneau officePhone: 907-780-4030 Ketchikan officePhone: 907-247-2228 Sales and service for heavy equipment forconstruction, logging, aggregate, mining,oilfield and agricultural industries through-out Alaska. CMI represents more than 40vendors, including Volvo, Hitachi, AtlasCopco, and Ingersoll-Rand.

GCI Industrial Telecom Anchorage:11260 Old Seward Highway Ste. 105

Anchorage, AK 99515Phone: (907) 868-0400Fax: (907) 868-9528Toll free: (877) 411-1484Web site: www.gci.com/industrialtelecomRick Hansen, [email protected] Johnson, Business [email protected]:Aurora Hotel #205Deadhorse, Alaska 99734Phone: (907) 771-1090Mike Stanford, Senior Manager [email protected], Texas:8588 Katy Freeway, Suite 226Houston, Texas 77024Phone: (713) 589-4456Hillary McIntosh, Account [email protected] Industrial Telecom provides innovativesolutions to the most complex communica-tion issues facing industrial clientele. Wedeliver competitive services, reputableexpertise and safely operate under themost severe working conditions for the oil,gas and natural resource industries. GCI-your best choice for full life cycle, expert,proven, industrial communications.

Greer Tank and Welding Inc. 3140 Lakeview DrivePO Box 71193Fairbanks, AK 99707Contact: Mark Greer, General ManagerPhone: (907) 452-1711Fax: (907) 456-5808Email: [email protected] offices: Anchorage, AK; Lakewood, WAWebsite: www.greertank.comGreer Tank & Welding are the premiertank and welding specialists of Alaskaand Washington. In business for over 57years, they have a long history of provid-ing an array of products and services forall contracting and custom fabricationneeds – all from their highly trained and

experienced staff.

HDR Alaska Inc. 2525 C St., Ste 305Anchorage, AK 99503Contact: Jaci Mellott, MarketingCoordinatorPhone: (907) 644-2091Fax: (907) 644-2022Email: [email protected]: www.hdrinc.comHDR Alaska provides engineering, environ-mental, planning, and consultation servicesfor mining and mineral exploration clients.Services include: biological studies; culturalresources; project permitting; NEPA; stake-holder outreach; agency consultation; andenvironmental, civil, transportation, energy,and heavy structural engineering.

Judy Patrick Photography511 W. 41st Ave, Suite 101Anchorage, AK 99503Contact: Judy PatrickPhone: (907) 258-4704Fax: (907) 258-4706E-mail: [email protected]:www.judypatrickphotography.comCreative images for the resource develop-ment industry.

Last Frontier Air Ventures1415 N Local 302 Rd., Ste CPalmer, AK 99645Contact: Dave King, ownerPhone: (907) 745-5701Fax: (907) 745-5711Email: [email protected] Base (907) 272-8300Website: www.LFAV.comHelicopter support statewide for mineralexploration, survey research and develop-ment, slung cargo, video/film projects, tele-com support, tours, crew transport, heli ski-ing. Short and long term contracts.

LyndenAlaska Marine LinesAlaska West Express

13NORTH OF 60 MINING

PETROLEUM NEWS • WEEK OF SEPTEMBER 27, 2015

Fort Knox and Sam Kirstein, the director of Fairbanks Community Food Bank, are partners in improving our community.

At Fort Knox, stewardship means helping our neighbors and community, and protecting our land and water resources, too. That’s why we’re committed to the food bank.

Sam modestly says, “Good happens in the community, and I get to see it happen.” We like to think that Sam is one of the many generous individuals in the community out there making good things happen every day.

And we’re mighty glad she does.

xOur People. Our Community.

Fairbanks Gold Mining Inc.A Kinross company

Mining News Directory

see DIRECTORY page 14

http://www.kinross.com

Pretium also said it has closed a

US$540 million construction financing

package with the Orion Mine Finance

Group and Blackstone Tactical

Opportunities. The company was advanced

US$340 million at closing, which will be

used to continue development of the

Brucejack Mine. First production at this

high-grade underground gold mine is tar-

geted for 2017.

Hyland drilling confirmsBanyan hypothesis

Banyan Gold Corp. Sept. 17 said results

from drilling at its Hyland Gold project in

eastern Yukon Territory confirm its

hypothesis that the property hosts carbon-

ate replacement-style gold and base-metals

mineralization akin to Atac Resources’

Rau Trend to the north. Highlights from

the three holes drilled at Hyland include:

31.08 meters of 0.4 grams per metric ton

gold in hole HY-15-45; 76.34 meters of

0.32 g/t gold in hole HY-15-46; and 88.7

meters of 0.24 g/t gold in hole Hy-15-47.

Banyan said the drilling intercepted a min-

eralized lower limestone unit of the

Hyland Group Formation metasedimentary

package and elevated base metal values

were encountered at depth. Banyan said

the indications of carbonate replacement

style mineralization intersected in the 2015

drilling have become a new focus for

exploration at Hyland. The 2015 program

also included trenching at the Montrose

Ridge zone. Highlights include six meters

of 4.4 g/t gold and 24 meters of 0.47 g/t

gold in Trench MT-15-01.

Alexco cuts bonanza silver at Bermingham

Alexco Resource Corp. Sept. 17 report-

ed results from its 2015 drilling program at

the Bermingham deposit of its Keno Hill

Silver District project in Yukon Territory.

Significant true-width intercepts from this

2,595-meter program include: 4.98 meters

grading 7,462 grams per metric ton silver;

4.76 meters grading 2,357 g/t silver; and

2.35 meters of 3,774 g/t. silver. Together

with the high-grade discovery intercept

from the 2014 drill program – 6.39 meters

grading 5,667 g/t silver, Alexco said the

2015 drilling has now identified a high-

grade silver and gold-bearing zone over at

least 140 meters down-plunge across a

width of about 40 meters. The zone aver-

ages 3.7 meters thickness and remains

open both up-dip and down-dip. Alexco

President and CEO Clynt Nauman said

this discovery “may be a game changer for

the future of Keno Hill.”

Prairie Creek M&I resourcesget 32% upgrade

Canadian Zinc Corp. Sept. 17 reported

a significant increase in mineral resource

tonnages at its Prairie Creek lead-zinc-sil-

ver project in the Northwest Territories.

Incorporating the results from 5,484

meters of drilling completed in 21 holes

this year, the company said the tonnage of

the measured and indicated resources at

the mine project increased 32 percent com-

pared with a resource calculation complet-

ed in March. Prairie Creek now hosts 8.7

million metric tons of measured and indi-

cated resources, averaging 9.5 percent

zinc, 8.9 percent lead and 136 g/t silver.

Additionally, the Prairie Creek project

hosts 7 million metric tons of inferred

resource, averaging 11.3 percent zinc, 7.7

percent lead and 166 g/t silver. The

expanded resource will form the basis for

an optimized mine plan and upgraded min-

eral reserve. l

14NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF SEPTEMBER 27, 2015

Bering Marine CorporationLynden Air CargoLynden InternationalLynden LogisticsLynden TransportAnchorage, AK 99502Contact: Jeanine St. JohnPhone: (907) 245-1544Fax: (907) 245-1744Toll Free: 1-888-596-3361E-mail: [email protected] is a family of transportation com-panies with the combined capabilities oftruckload and less-than-truckload trans-portation, scheduled and charter barges,rail barges, intermodal bulk chemicalhauls, scheduled and chartered airfreighters, domestic and international airforwarding, international ocean for-warding, customs brokerage, sanitarybulk commodities hauling, and multi-modal logistics.

Pacific Rim Geological ConsultingFairbanks, AK 99708Contact: Thomas Bundtzen, presidentPhone: (907) 458-8951Fax: (907) 458-8511Email: [email protected] mapping, metallic mineralsexploration and industrial mineralsanalysis or assessment.

TTT Environmental LLC 4201 “B” St.Anchorage, AK 99503Contact: Tom Tompkins,

general managerPhone: 907-770-9041Fax: 907-770-9046Email: [email protected]: www.tttenviro.comAlaska’s preferred source for instrumentrentals, sales, service and supplies. Wesupply equipment for air monitoring,water sampling, field screening, PPE andmore.

Taiga Ventures2700 S. CushmanFairbanks, AK 99701Mike Tolbert - presidentPhone: 907-452-6631Fax: 907-451-8632Other offices:Airport Business Park2000 W. International Airport Rd, #D-2Anchorage, AK 99502Phone: 907-245-3123Email: [email protected] site: www.taigaventures.comRemote site logistics firm specializing inturnkey portable shelter camps – all sea-sons.

Usibelli Coal Mine100 Cushman St., Ste. 210Fairbanks, AK 99701Contact: Bill Brophy, VP CustomerRelationsPhone: (907) 452-2625Fax: (907) 451-6543E-mail: [email protected]: www.usibelli.comUsibelli Coal Mine is headquartered inHealy, Alaska and has 700 million tons ofcoal reserves. UCM produces 1 to 2 mil-lion tons of sub-bituminous coal eachyear.


DIRECTORYproduction season. The 2015 production

season was 35 days but the normal produc-

tion season is about 107 days, subject to

weather. A total of roughly 4,400 ounces of

alluvial gold, equivalent to some 3,600

ounces of gold, were produced. To date the

partners have completed about 15,000 feet

of drilling at Little Squaw and outlined

10.5 million cubic yards of mineralized

material at an average head grade of 0.025

ounces of gold per cubic yard for an esti-

mated total of roughly 250,000 contained

ounces.

Southeast AlaskaPURE NICKEL INC. has indicated

that it is seeking to joint venture or sell

its 100 percent -owned Salt Chuck cop-

per-palladium project on Prince of Wales

Island. The property covers a northeast-

trending mafic-ultramafic igneous com-

plex covering a seven by 1.6-kilometer

area. The mafic-ultramafic complex

occurs in a folded succession of

Paleozoic sedimentary and volcanic

rocks and Paleozoic to Mesozoic intru-

sive rocks, which are part of the

Alexander Terrane. Reported production

from 1916 through 1941 was 296,000

metric tons of copper sulfide ore grading

0.95 percent copper, 2.0 g/t palladium,

1.1 g/t gold and 5.7 g/t silver with recov-

ery of 2.81 million kilograms of copper

and 9,000 kilograms of palladium with

credits in gold and silver. There has been

no production from the complex since

1941. In 2012 the company conducted a

six-hole drilling program that encoun-

tered high-grade gold mineralization in a

previously unidentified gold-bearing

structure in the western part of the prop-

erty, an area known locally as North Pole

Hill. High-grade intersections include

127.8 g /t gold, 57.6 g/t silver and 2.78

percent copper over 0.35 meters apparent

width. Follow-up drilling was conducted

in 2014 but no new results have been

released. Additional drilling targets have

been outlined within the area of the old

copper-palladium mine workings, partic-

ularly at depth below previous mine

workings. l


FREEMAN


NORTHERN NEIGHBORS

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potential high-impact prospects and then

screening and prioritizing the prospects,

Galvin said. The company anticipates

executing a multi-well exploration pro-

gram that will achieve economic efficien-

cy by securing a large amount of work

over multiple years, he said. Ultimately

there could be a number of development

projects within the Great Bear acreage,

he said.

State can helpGiven the difficult exploration envi-

ronment, the state can act as a catalyst for

accelerating exploration and facilitating

moves towards the execution of develop-

ment projects, Galvin said. With a need

for more well and exploration data, the

state’s exploration incentive program has

proved to be of significant assistance in

easing the amount of capital needed at the

high-risk end of the exploration and

development life cycle. Commenting that

the value of state participation in that

high-risk component of the investment

cycle cannot be overstated, especially

given the challenges of new exploration

in an area with little existing data and no

support infrastructure, Galvin said that

Great Bear is particularly anxious that the

state should extend the credit program

that is currently set to expire in June

2016.

The state can also improve the coordi-

nation of the permitting process, elimi-

nating some redundancy in the process,

Galvin said. And the state needs to

engage with the U.S. Army Corps of

Engineers, to try to establish a reasonable

approach to wetlands dredge and fill per-

mitting, a permitting process that can

trigger the need for an environmental

impact statement and, hence, lead to sig-

nificant development timescale uncer-

tainty, he said.

With the exploration season on the

North Slope tending to shorten over the

years, additional support infrastructure

will be critical in the future, Galvin said.

Appropriate infrastructure in key explo-

ration areas could minimize the need to

construct ice roads over long distances

and would help reduce the uncertainty

over the opening dates for exploration

seasons, he said. l


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EXPLORATION & PRODUCTIONWeekly US rig count falls by 6 to 842

Oilfield services company Baker Hughes Inc. says the number of rigs drilling

for oil and natural gas in the U.S. the week ending Sept. 18 declined by six to 842.

Houston-based Baker Hughes said 644 rigs were drilling for oil and 198 for

natural gas. A year ago, with oil prices about double the prices now, 1,931 rigs

were active.

Among major oil- and gas-producing states, Colorado, New Mexico, Ohio and

Utah each gained one rig.

Louisiana and North Dakota lost three rigs apiece, Pennsylvania declined by

two and Kansas and Texas were down one each.

Alaska, Arkansas, California, Oklahoma, West Virginia and Wyoming all were

unchanged.

The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

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Legislature next year, and the working

group is listening to affected parties in

advance of the 2016 session.

Spending money to make moneyJohn Barnes of Hilcorp told legislators

the state’s investment tax credits demon-

strate that you have to spend money before

you get money. Since Jan. 1, 2012, when

Hilcorp closed on Chevron’s Cook Inlet

properties, the company has spent about a

billion dollars in Cook Inlet and produced

some 45 million barrels of oil equivalent,

he said. The company closed on

Marathon’s Cook Inlet properties in 2013,

and in 2014 acquired three BP properties

on the North Slope.

The investment Hilcorp has made in

Cook Inlet has resulted in more activity and

more wells on production, Barnes said. All

Hilcorp crude oil is sold to the Tesoro refin-

ery in Nikiski and used to produce products

such as gasoline, jet fuel and diesel, he said.

When Hilcorp took over operations in

Cook Inlet oil production from its proper-

ties was some 6,000 barrels per day; today

that production is more than 12,000 bpd,

Barnes said. When Hilcorp took over gas

production the properties produced some

60 million cubic feet per day; today that

production is about 140 million cubic feet

per day.

Changed playing fieldBarnes said the investment credits

changed the playing field in the inlet.

The inlet was dying, he said, with warn-

ings we could run out of natural gas and

have to import it to meet local needs.

Companies had essentially stopped drilling,

and Barnes said it was amazing how fast

Cook Inlet production declined, once peo-

ple stopped drilling. Major producers —

Chevron and Marathon — were looking

elsewhere, with Cook Inlet no longer

deemed crucial to their business, and were

in something of a caretaker mode, he said.

With investment credits, companies

came into the inlet, acquired other compa-

nies and leases and drilled wells, Barnes

said.

Hilcorp was attracted to Alaska because

the company looks for places it can acquire

legacy fields with potential at a reasonable

price — and acquire those fields directly

from major producers. That’s important,

Barnes said, because if others had bought

the fields from the majors they would have

been worked hard before Hilcorp acquired

them.

Since it came to Alaska, Hilcorp has

drilled some 55 wells onshore, he said.

Asked if the state’s tax credits were

more generous than they needed to be,

Barnes said he really didn’t know. When

Hilcorp looked at coming in there was a tax

structure in place, he said, and the company

looked at the value of the opportunity,

which included good investment tax cred-

its.

He said the cost of operations, product

price and tax structure are linked, and cost

of operations is the only area Hilcorp can

control.

As for the suspension in payment of

$200 million in tax credits, Barnes said that

just puts uncertainty into the equation.

Asked if a change in the credit system is a

change to the overall tax system, Barnes

said absolutely, that any change in the tax

climate as you try to make long-term finan-

cial decisions has an impact.

The exploration sideJohn Hendrix, general manager of

Apache in Alaska, said Apache is explor-

ing, which poses risks and requires

investment patience, and the right timing,

which means stability is important.

He referred to the credits passed for

Cook Inlet in 2010 as rebates, because, he

said, you have to spend money to get

money back.

Apache purchased existing leases in

2010 and acquired significant acreage in

2011. The company has since been shoot-

ing seismic, with 1,100 miles of data

acquired from 2011 through 2014. And

yes, he said, the tax credits helped.

He also said the seismic Apache has

shot is the state’s data and provides the

state and Apache and its partners the abil-

ity to have a subsurface road to resources.

The nodal technology Apache brought

to the inlet enabled the company to shoot

seismic and tie in marine and onshore

seismic. This is the first seismic shot in

the inlet that ties onshore and offshore

together, he said.

Work done so far has enabled Apache

to generate a few prospects he said,

adding that the company is waiting on

permits right now.

Seismic workHendrix said seismic doesn’t tell you

there’s oil. You also have to look at corre-

lations with existing wells and at out-

crops, which Apache is doing.

He said predictive regional reservoir

maps have been completed for the

Hemlock and Tyonek formations and that

Beluga and Sterling evaluations are in

progress.

He said Apache still hasn’t received a

permit it applied for last fall for a road

and the oil price continues to drop.

Hendrix warned legislators about doing a

bait and switch, changing the rules from


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when the company did a large lease pur-

chase.

He said the challenge now is cranking

out an economic model, and since Apache

isn’t solely an Alaska investor, the com-

pany will invest where there is a stable

situation.

We need to have tax credits, he said,

but also said he didn’t think it was right

for someone to apply for tax credits if

they haven’t paid invoices. People should

be here to drill for oil, not to drill for tax

credits, he said.

Hendrix said that if tax credits went

away this year he thought Apache would

be looking very hard at investing at all; a

change over three years would give the

company a chance to plan, he said.

He characterized exploration as build-

ing wealth for Alaskans by finding

resources; production, he said, brings

income but doesn’t add wealth.

BlueCrest: Time neededJ. Benjamin Johnson of BlueCrest

Energy said the Cook Inlet tax credit pro-

gram has been effective, but it will take

time to bring on more natural gas

resources or there will be a crisis in the

future.

Southcentral doesn’t have a way to

bring natural gas in, he said, although

there is an opportunity to get some gas

out. The ability to handle excess gas sup-

ply is important because it can’t be turned

off and on immediately, he said.

If tax credits were eliminated immedi-

ately there would be a problem for

BlueCrest, which has committed a lot of

money, and without credits there would

be a shortfall in the company’s ability to

pay, and would also result in the loss of

the Spartan 151 jack-up drilling rig.

Pending gas sales agreements would be

delayed or abandoned, with resulting

higher natural gas prices and a lower

diversity of gas supply, he said.

Johnson said that discoveries do not

guarantee production and noted that there

have been some good discoveries in Cook

Inlet, but not all have been developed.

Long time to breakevenJohnson noted that there is a long cash-

flow cycle for discoveries, with money

pumped in for exploration and then for

development. Cash flow is negative, he

said, until production begins, but

breakeven doesn’t occur until the compa-

ny has recovered all of the money it’s

spent.

The Cosmopolitan project BlueCrest is

developing is about two-thirds finished

with construction, he said, and the com-

pany is about to bring up a big drilling rig.

First production is projected for April of

next year. Crude oil from Cosmopolitan

will go to Tesoro, which is importing

about two-thirds of the crude oil it

processes.

Johnson said without tax credits there

would already be a significant natural gas

shortage in Cook Inlet. And, he said, new

gas needs to be developed now to prepare

for the future.

Tax credits were crucial to BlueCrest,

he said, and with the current uncertainty

about credits development of the shallow

natural gas at Cosmopolitan is on hold.

The Spartan 151 is the only jack-up rig

in Cook Inlet and is in Seward, but if gas

drilling at Cosmopolitan does not begin in

2016, the rig will leave the inlet, he said.

And BlueCrest can’t commit to natural

gas development unless it has existing tax

credits or a reasonable alternative, he

said. Commitments were made by folks

like BlueCrest based on tax credits; if

there are changes, there should be reason-

able time to allow ongoing projects like

Cosmopolitan to adjust.

The company has no confidence in

what will happen next year, he said, and

has decisions it needs to make before the

end of the year.

Asked about the possibility that exist-

ing credits could be continued and pro-

duction taxes increased, Johnson said

BlueCrest understands that production

taxes may need to rise and has factored

that into the company’s future plans.

There is currently no production tax on

Cook Inlet crude oil.

No Furie without tax creditsBruce Webb of Furie Operating Alaska

told legislators that the company

wouldn’t be here without the tax credit

program; they were a selling point for

European investors in the project, he said.

Furie couldn’t have raised the first 100

million euros without the tax credits

because those credits meant investment

was backed by the state.

It’s been a bumpy road for Furie, he

said, which had raised initial capital and

started to talk to utilities when Hilcorp

swallowed the natural gas utility market

in 2012, leaving the company with what

Webb called a tough decision on whether

to stay and hope that the gas utility mar-

ket opened up.

He said Furie is now on the cusp: It has

development, but it’s not completely paid

for and its first natural gas contract

doesn’t start until April.

The company had to take a $200 mil-

lion loan, which was pretty expensive

money, and requires sale of 10 million

cubic feet a year just for debt service. The

contract it has with Homer Electric

Association is some 4.4 million cubic feet

a year, so for the first few years the com-

pany will be operating at a deficit, he

said.

Right now the company has commit-

ted tax credits for the next several years to

help finance future wells, Webb said. The

company was in discussion with finan-

ciers when the $200 million in credit pay-

ments was stalled, which impacted

financing discussions.

Furie wouldn’t be here without the tax

credits, he said. If those credits go away

the company is stubborn enough to stay

and work through it, but without credits

future development would be decelerated

and the company’s breakeven would

move farther down the road.

—KRISTEN NELSON


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He now has to come to the

Legislature and un-convince us of what

we became convinced of in the prior

administration. A lot of legislators were

in the same position I was in, very skep-

tical but at the end of the day becoming

convinced it was the right thing to do by

bringing in TransCanada. Gov. Walker

now needs to convince us we made the

wrong decision.

Petroleum News: What concerns, ifany, do you have with this buyout plan?

Hawker: My current concern is that

the Legislature has received no analytic

information on which to base a judg-

ment. Right now it’s just a popularity

poll. Do you like TransCanada or don’t

you. The administration has provided us

nothing on which to base a sound eco-

nomic judgment.

We heard in the quarterly briefing

that the administration has had a secret

study conducted by Black & Veatch that

gave them their reasons for wanting out

of the transaction. But that study could

not be made available. I think that is

problematic. I think the governor is

going to have to find a way to remove

the veil of confidentiality of that study

so the Legislature and the public have a

basis for the decision.

Petroleum News: Why would this beconsidered confidential? It’s easy tounderstand when it comes to the AKLNGpartners.

Hawker: I asked that question in the

quarterly briefing. The response I

received was that in order to perform

that analysis, they had to rely on and

incorporate information that was propri-

etary to TransCanada. I personally ques-

tion that conclusion because the analysis

should be performed on all of the publi-

cally available information and perform-

ing economic analysis as to whether the

economics inherent in the MOU we are

working under are valid, are sound, then

compare those economics with the eco-

nomics of going at it alone, which

involves nothing from TransCanada, so I

do not understand why this information

is confidential at the moment.

Petroleum News: Also, it looks asthough Walker’s newly minted consultantRigdon Boykin is getting a stronger role.Are you comfortable with this at$100,000 a month?

Hawker: Actually, it’s $120,000 a

month. The Legislature was formally

informed for the very first time last

Wednesday that Mr. Boykin was the lead

in all project negotiations and activities.

Mr. Fauske was identified as our point

of contact for daily questions and con-

cerns.

At that meeting, I raised a question

and concern — and I think it remains

valid — and that is, is it right and best

for the state of Alaska to have a third

party in charge of these critical negotia-

tions and a third party who is not

accountable to the citizens of the state of

Alaska through either being elected to

office or being a commissioner who is

appointed by the governor, confirmed by

the Legislature and statutorially obligat-

ed to support the state’s constitution and

perform the duties that are statutorially

imposed on those agencies? A third-

party consultant has none of those con-

straints, and that’s, I think, problematic

right now.

Petroleum News: So would you


HAWKER Q&A


http://www.utulsa.edu/meb

http://www.nature.org/alaska

rather have this point person be some-one from say, AGDC?

Hawker: When the previous adminis-

tration proposed SB 138 and the

Legislature ultimately passed it, the con-

clusion was to vest the commissioners of

Natural Resources and Revenue very

specific and strong responsibilities for

project management and execution. The

approach taken with Mr. Boykin has

minimized that participation and trans-

ferred those responsibilities to this third-

party contractor. Also AGDC, through

HB 4 a number of years ago that I basi-

cally sponsored and wrote, has many

responsibilities. AGDC has been made,

as necessary, a very powerful organiza-

tion, but AGDC was never given the

authority to negotiate on behalf of the

Department of Natural Resources, the

regulator; the Department of Revenue,

the tax collector; or the Department of

Law. AGDC was created to work with

those organizations and be an entity to

have very strong and clear powers to

build a project. We made it very clear —

we were not transferring that constitu-

tional authority from the state agencies

where we continue to vest that authority

again for resource management, resource

regulation.

Petroleum News: So where would youlike to see the lead negotiation comefrom. A chief of staff? DNR? Revenue? Acollaboration?

Hawker: What I would do myself or

what I would want to see is really not a

relevant question because the public has

elected Gov. Walker, has told him they

want him to pursue this his way and he

is doing the right thing by that. He is

pursuing this project the right way. As a

legislator, what I want to see is success. I

want to see his people doing it his way:

bring a project to the Legislature that is

viable, that we have a means of financ-

ing, that we have ready, willing and able

to execute.

Petroleum News: That meeting inPalmer was a six-hour hearing that wentinto the morning the next day. What wasyour take on that meeting?

Hawker: In the six-hour hearing that

ended about 1:30 in the morning, we

covered the entire agenda. I think the

meeting got off to a rough start with the

administration’s very strong indicting

statements with the industry’s lack of

progress. I think the administration

thought that was going to turn the

Legislature against the industry players

who were there. It kind of backfired. I

don’t think we took that tone very well

because we do understand that schedule-

driven projects are prone to failure. We

don’t want a schedule-driven project. We

want to talk about the merits. These are

complex, difficult negotiations and can

be expected to take a long time to

resolve.

Petroleum News: What do you thinkbrought it around to a dialogue and anupdate from the administration?

Hawker: Every time one meets and

every discussion is progress in the dia-

logue. It was very important for the

Legislature to get an understanding from

the administration of who is in charge,

who is discussing negotiations, how are

they fulfilling the expectations we had

under SB 138. That was part of the dia-

logue.

We were also able to listen to the

individual producers and ask them about

their role in these negotiations. We were

able to get a much more clear under-

standing of just who is in fact negotiat-

ing on behalf of the state of Alaska. We

were able to get some clarity of what

will not be discussed in the coming spe-

cial session, specifically that the admin-

istration is not willing to introduce a

constitutional amendment until such time

as they have a completely papered proj-

ect to introduce along with it. That was

an important question for us so we can

plan what we need to plan for in a fall

special session.

We got clarity from the administration

on TransCanada. And I think it’s the first

time it’s been said on the record that

they want out of the TransCanada

arrangement. I don’t think that’s ever

been officially on the record and here we

are less than a month from a special ses-

sion. We needed to force some clarity

from the administration and we got that.

Petroleum News: As LB&A chair, doyou have any plans for assisting theLegislature in understanding what’sahead, particularly with AKLNG, by hir-ing consultants?

Hawker: Absolutely. The Legislative

Budget & Audit Committee is the leg-

islative entity who is provided the neces-

sary budgetary authority to engage con-

sultants in the Legislature in all of our

activities. We’ve got education consult-

ants on board. We’ve got Medicaid con-

sultants on board. We currently have

consultants on board that supported the

production tax debates and the AKLNG

development to the state, and that’s ena-

lytica. They have truly provided out-


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business customers, but does not have data limits, according to ACS spokeswoman HannahBlankenship. The company has no plans to move into the high-speed consumer market.

Global Geophysical announces key leadership changeGlobal Geophysical Services Inc. announced that Richard White has retired as president and

CEO and as a member of the board of directors after nearly three years of service to the com-pany. The board has selected Ross Peebles as interim CEO, effective immediately.

“I have complete confidence and trust that Ross will continue to place the company in thebest position to fully realize its potential by capitalizing on our unique technology and the

diverse and extensive experience of our employees,” said White. Prior to this promotion, Peebles was senior vice president and chief

operations officer overseeing Global’s North America, Latin Americaand Eastern Hemisphere operations in addition to the company’s seis-mic data library and E&P Services group.

“I am grateful to have had the opportunity to work with Richardand congratulate him on his retirement,” said Peebles. “While the cur-rent oil and gas environment remains challenging, innovation, excep-tional operational performance, and strong customer relationships willbring us through these tough times and position us to be a leader inproviding fast, actionable and affordable seismic to the E&P industry.”

Crowley opens two new centers in JacksonvilleCrowley Maritime Corp.’s logistics group is opening two new warehouses in Jacksonville,

Florida, to better serve the needs of its full and less-than-container load customers shippingcargo through, or within the northeast Florida area.

The first of the two facilities opened Sept. 15 and is located at 1350 Tradeport Drive, on thecity’s northside near Jacksonville International Airport. It replaces the company’s former 3700Port Jacksonville Parkway location, and offers customers increased capacity and yard spacealong with 12 dock-high doors for faster cargo handling. The 49,702-square foot facility willoperate Monday through Friday from 8 a.m. to 5 p.m. and offers various warehousing and dis-

see OIL PATCH BITS page 22

ROSS PEEBLES

standing service to the state but their

services have tended to be limited to

economic analysis and comparisons of

tax regimes and economic analysis of the

proposed AKLNG project.

That consulting group does not neces-

sarily bring to the table a full spectrum

of experience in the entire value chain

and the documentation of a complex

international LNG project that involves a

sovereign entity, the sovereign being the

state.

I have been investigating, identifying

and talking to consulting firms that bring

that latter experience to the table. I’m

currently in conversations with those

folks. Before we have fully papered

agreement in front of us with all of the

necessary commercial agreements being

considered I expect to have a qualified

consultant on board who can help us

wade through that level of a project.

Petroleum News: Speaking of some-one who understands the value chain,there is one person in the state, thoughhe works for the Kenai PeninsulaBorough and he used to work for you.Larry Persily. Even as he does work forthe borough what kind of statewide valueis there to having Larry back in Alaska?

Hawker: I have great respect for Mr.

Persily. Mr. Persily is the go-to guy in

the state of Alaska for these sort of

things. He’s extremely competent. He’s

extremely versed in these subjects. He

puts a great deal of his personal career

into it. He brings a non-partisan credibil-

ity to the debate and dialogue.

To that end, it’s one of the reasons

why Mr. Persily is in such demand on

these issues. It’s a very good thing to

have him full-time in this state with a

primary focus of his relationship with

the Kenai Peninsula Borough to help

facilitate the advancement of this project.

Petroleum News: Looking furtherahead to the coming regular session nextyear, there will certainly be discussionsand a bill to rewrite how the stateemploys tax credits in its tax code. Howdo you feel about that?

Hawker: The devil will be in the

details. I think it is always incumbent on

the Legislature to review the incentives

that we provide for economic develop-

ment in this state. We look at the incredi-

ble success that was achieved with the

Cook Inlet Recovery Act in getting a

natural gas storage facility established, a

storage facility that is used almost every

day in the winter to keep gas flowing in

Anchorage, a bill that inspired a resur-

gence of investment in Cook Inlet. We

accomplished the mission.

It’s absolutely incumbent upon us to

take a look and ask are those economic

incentives still the right incentives for

the right amount and do they target the

right activities. It’s a constant process the

Legislature needs to go through. I cer-

tainly expect to see that occur next ses-

sion, both for Cook Inlet and the North

Slope. I think it’s inevitable there will be

some changes that come out of that. But

we really can’t evaluate what’s right and

what’s wrong until we sit down and put

all the pieces on the table and have an

economic discussion and not simply a

partisan political discussion.

Petroleum News: Do you think itbecame partisan when the new adminis-tration took over?

Hawker: I don’t think it’s any more or

less partisan than it has been in the past.

It’s always been good sport to beat up

the oil industry in the state. They are the

biggest kid on the block. The state is in

fact dependent on them. They are obvi-

ously targets for the political process

here.

Petroleum News: Circling back to thespecial session, what would your goalsor priorities be for the coming specialsession for advancing a gas line?

Hawker: The Legislature and the gov-

ernor must resolve the TransCanada

issue. Are they in or are they out.

In order to paper a project, all the

sponsors need to know who the partners

are. Is TransCanada a member of this or

not? And if they are not does the state

have the money to continue as a partner

in this? So these things need to be

resolved up front. Between now and the

end of the year the thing we can resolve

is the TransCanada agreement. We need

to make that decision: in or out. If they

are out, then how are we going to

finance our share of the money required

up to FEED. We’ve heard that being up

to $1 billion up to FEED.

A major hurdle, which has become a

stumbling block in AKLNG negotiations,

is whether or not the state exercises its

ability to permanently lock in royalty in

kind in order to support this project. That

is a decision that is vested with the com-



HAWKER Q&A


http://www.cruzconstruct.com

http://www.vioninv.com

covered? Are the pools really capable of

producing in paying quantities?

In its July 30, 2013, discovery state-

ment, Furie claimed that the KLU No. 3

well had encountered 29 horizons in the

Sterling and Beluga formations that the

company believed to be previously undis-

covered gas pools. Of those 29 potential

horizons, the company said that it had

conducted modular formation dynamic

testing on 28 and flow tests on six.

When state officials reviewed a

Schlumberger report attached to the dis-

covery statement, they found “no evi-

dence of MDT or flow testing” for 10 of

those horizons and eliminated those 10

from consideration. Even if the testing had

occurred, the state determined that only a

flow test could conclusively define a “gas

pool” as required under state regulations.

Only flow tests consideredOf the six horizons that Furie flow test-

ed, the state found two to be “water-bear-

ing, not an accumulation of oil or gas.”

The four remaining horizons met the defi-

nition of a “pool.”

They are: Horizon 6 in the Sterling

from 4,190 feet to 4,225 feet, Horizon 25

in the Beluga from 5,941 feet to 5,959 feet,

Horizon 26 in the Beluga from 5,999 feet

to 6,005 feet and Horizon 28 from 6,964

feet to 6,998 feet, using measured depths

in the well.

While those four pools may have been

encountered by previous wells, the state

determined that “no credible well tests

were found to have been performed on

those horizons in any surrounding well,”

which meets the standard for “undiscov-

ered.”

Using third-party reserve estimates and

projected natural gas prices, the state deter-

mined that the natural gas contained in the

four pools would be commercial viable.

The state originally provided a lower

royalty rate for discovery wells but

repealed the reduction in 1969, after the

discovery of the Prudhoe Bay field. The

state re-instated the reduction through the

Cook Inlet Discovery Royalty program

enacted in 1996 and 1997.

The KLU No. 3 exploration well was

drilled into the Corsair structure, which

had been penetrated by seven prior explo-

ration wells, according to the Division of

Oil and Gas.

Of those seven wells, four encountered

gas-bearing intervals: State SRS No.1

drilled by Shell in 1965, Tern A SRS No. 1

drilled by Phillips in 1982, South Cook

Inlet State No. 2 drilled by ARCO in 1993

and Kitchen Lights Unit No.1 drilled by

Furie in 2012.

In the most recent plan of development

for the unit, from November 2014, Furie

said that the KLU No. 3 well — drilled in

2013 — had produced 15.83 million cubic

feet during a four-point test and that gas

samples taken during the test were 99 per-

cent methane.

After several years of drilling and sev-

eral years of construction, Furie has said it

expects to bring the Kitchen Lights unit

into production from the KLU No. 3 well

as soon as November 2015, in time to

meet contractual commitments that begin

in January 2016. l


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OIL PATCH BITS


WELL CERTIFIED

a purchase order for some $1 million

of 48-inch pipe for testing, and that

pipe was expected to arrive early

next year. (See story in Sept. 20

issue.)

Butt said a 48-inch line would

cost more to build than the 42-inch

line AKLNG has been studying, but

would cost less to operate. He also

said that because of the extra weight

in the line — a much thicker pipe is

required to handle natural gas pres-

sures than that used for the 48-inch

trans-Alaska oil pipeline — there

were concerns about laying the 48-

inch line across Cook Inlet.

The federal Pipeline and

Hazardous Materials Safety

Administration will need to have

confidence that a 48-inch line will

work, Butt said, estimating that it

will take six to eight months of test-

ing the 48-inch pipe to get to the

same level the project is with tests of

the 42-inch line.

Another issue at the Sept. 9

update was discussions the state is

having with TransCanada about buy-

ing out the pipeline company so the

state would have a full 25 percent

interest in the project and what the

governor has described as a seat at

the table.

The governor said Sept. 23 that

he would call a special session to

address the TransCanada buyout

issue, but details had not been

announced when Petroleum News

went to print with this issue.

—KRISTEN NELSON


48-INCH LINE

After several years of drilling andseveral years of construction,

Furie has said it expects to bringthe Kitchen Lights unit into

production from the KLU No. 3well as soon as November 2015, in

time to meet contractualcommitments that begin in

January 2016.

http://www.doyon.com

achieve growth and collective prosperity

by concentrating on four key areas: eco-

nomic and fiscal competitiveness;

enhanced market access; environmental

sustainability; and aboriginal engage-

ment.

Call for pipeline projectsMarket access was the primary trust

when CAPP President Tim McMillan

argued that whoever wins the election on

Oct. 19 — the governing Conservatives,

Liberals or New Democratic Party —

must take an active role in advancing

pipeline projects, or risk putting the

national economy in jeopardy.

He told the National Post said the log-

jam of major export pipelines must be

freed up to secure the industry’s competi-

tive position.

“If not ... we are out of the game,” he

warned.

The failure to introduce more pipelines

has undercut the crude prices fetched by

Canadian producers by an average US$13

per barrel lower than U.S. crude this year,

further squeezing the margins in a

depressed oil price environment.

The CAPP paper said strong growth in

Canadian and U.S. oil production will

become “constrained in the next few

years” without new and expanded

pipelines.

Despite the hammering commodity

prices have taken and the “on-going car-

bon reduction movement,” CAPP said oil

and gas “will continue to be in demand for

the foreseeable future,” which puts pres-

sure on the industry to find new ways to

link supplies with domestic and interna-

tional markets.

The organization also said improved

infrastructure will enable Canada to dis-

place oil imports, which account for 80

percent of consumption in Quebec and

Atlantic Canada, reinforcing the indus-

try’s economic role, which currently

includes 550,000 direct and indirect jobs

and C$18 billion in annual payments to

the federal and provincial governments.

Production target downBut the combination of stalled

upstream and pipeline projects has forced

CAPP to lower its production target by 1.1

million barrels per day to 5.3 million bpd

by 2030, although a fundamental change

could see some revisions, McMillan said.

However, he suggested the economics

have become even worse since June, forc-

ing CAPP to “make a judgment call on

whether this is a meaningful change.”

For now, oil has been pushed off top

rung of Canada’s export contributors,

returning that role to the automotive

industry, while capital investment has

tumbled to C$45 billion from C$74 billion

last year, with the oil sands sector drop-

ping by 25 percent.

“As the big projects drop off and noth-

ing picks up the slack, we could see more

cuts,” McMillan said, referring to the loss

of 35,000 jobs in the current slump.

He said the industry is now coming to

terms with the prospect of a “lower for

longer” oil price outlook.

‘Heavily engaged’ in AlbertaMcMillan said CAPP is “heavily

engaged” with the New Democratic Party

government in Alberta as it prepares to

deal with panels appointed to make rec-

ommendations on climate change and

royalties.

The organization is also gearing up to

make its case to the United Nations

Climate Change Conference in Paris that

starts in late November that of all the

countries exporting crude to the United

States only Canada imposes carbon pric-

ing, he said.

McMillan also argued that despite the

opposition in Canada to export pipelines,

Canada believes it can lift 2 billion people

in emerging economies from energy

poverty by supplying LNG and crude oil.

CAPP, in responding to the common

wisdom, said oil and gas producers are

“committed to developing solutions the

world needs for a cleaner energy future.”

In its own defense, CAPP also noted

that Canada is responsible for only 2 per-

cent of the world’s greenhouse gas emis-

sions, compared with 10 percent in the

European Union, 15 percent in the United

States and 24 percent in China.

Of Canada’s emissions, 25 percent

were attributed to transportation and 21

percent to the producing sector and 4 per-

cent to pipelines and refineries.

The paper said the oil sands industry,

widely deemed to be the major culprit, has

invested C$1 billion to share 777 tech-

nologies and best practices to find innova-

tive ways to reduce GHGs, minimize the

impact on land, reduce water use and

improve the management of often-toxic

tailings from mining operations.

CAPP said climate change is “a global

challenge that needs to be addressed with

broadly-based policies that consider pro-

duction and consumption,” adding that

“everyone has a role to play.”

On the sensitive issue of industry rela-

tions with First Nations, the paper noted

that in 2013 and 2014 CAPP oil sands

members had direct business dealings

estimated at C$3.7 billion with 327 abo-

riginal companies in Alberta.

It said the industry is committed to

building “positive and beneficial relation-

ships” with aboriginal communities

“where we work.” l


CAPP’S CASE


missioner with the Department of

Natural Resources (Mark Myers).

We hear industry telling us that the

decision needs to be made now as was

contemplated when we passed SB 138

so that they have the ability to go for-

ward and construct all of the gas balanc-

ing off take and governance agreements

that the project needs to have. They have

to know if the state owns gas and will

have gas to be co-equal partner in the

project.

They understandably need to know

this in order to progress negotiations. We

heard from the Department of Natural

Resources that they were extremely reti-

cent to make any RIK decision until

after any project is fully papered and

proposed to them. So we’ve got a chick-

en and the egg situation. DNR wants a

fully papered project before they make

an RIK decision; the partners, the stake-

holders, the sponsors of the project want

an RIK decision so they know what kind

of project to endorse. So we’ve got a

major stumbling block here that some-

what has to get resolved in order to

break the deadlock of negotiations.

The state needs to have a conversa-

tion about the RIK commitment. I’d like

to see both of those issues resolved by

the end of the year. I’d like to see an

agreement fully papered and brought to

the Legislature sometime during the 90-

day legislative session, so we can have

our consultants start working on it in

anticipation of an AKLNG special ses-

sion that would occur shortly after the

conclusion of the legislative session.

That would be the perfect world accord-

ing to Mike Hawker. l


HAWKER Q&A

http://www.kasvcs.com

http://www.procommak.com

including status reports on activity to be

filed May 1 and Nov. 1 of each year until a

final completion report is filed and provi-

sion of a certified as-built survey of all

improvements within one year of place-

ment.

Accumulate Energy is a wholly owned

subsidiary of Australian-based 88 Energy,

which said in a Sept. 17 statement that two

key permits remain to be closed out for the

project, an oil discharge prevention and

contingency plan and a permit to drill.

This will be the first well in the state for

Accumulate Energy.

The well will be drilled on a tract

acquired at a state oil and gas lease sale by

Burgundy Xploration, with joint venture

partner Accumulate Energy Alaska as oper-

ator. Burgundy acquired 98,182 contiguous

acres of state oil and gas leases near White

Hills in 2013 and 2014, an area where

Unocal drilled five wells beginning in 2008.

Burgundy took two tracts in the state’s

2013 North Slope areawide lease sale, was

assigned four other While Hills leases in

late 2013 and took 90,720 acres in the

state’s 2014 North Slope areawide sale.

Current state lease records show

Accumulate Energy Alaska as working

interest owner of 85,909 acres and

Burgundy as WIO of 12,273 acres.

The company said in its application that

it would use Nabors rig 105AC or a rig with

similar specifications, but 88 Energy said in

a Sept. 10 statement that it had executed a

rig contract with Kuukpik Drilling for the

well.

The company said in an August state-

ment that “definitive binding documenta-

tion has been executed with Bank of

America” for funding the Icewine project

up to $50 million.

The division said in its decision that the

dates in Accumulate Energy’s application

are approximate and may change due to

weather, logistics requirements or regulato-

ry decisions, but said it expects that while

earlier dates may change, dates for finishing

drilling, demobilization and cleanup would

remain the same.

Accumulate’s schedule listed pre-season

reconnaissance in July; permitting from

February through mid-September; potential

maintenance of pad and access roads in the

second half of August; mobilization of

camp and drilling rig in the second half of

September; exploration drilling from mid-

October through mid-December, and demo-

bilization in the second half of December.

The Division of Oil and Gas said the

plan of operations for the project describes

one vertical well “to core potentially petro-

liferous zones in both unconventional and

conventional reservoirs,” with the goal of

the pilot drilling program “to analyze the

potential productivity, deliverability, and

commerciality of the greater Icewine proj-

ect area.”

The division also said that depending on

results from initial drilling and time remain-

ing in the season, Accumulate “may drill a

lateral well, sidetracks, or additional pene-

trations from the same exploration pad.”

The division said Accumulate plans to

use the existing Franklin Bluffs pad and

White Hills staging area, but that the final

location of the Icewine No. 1 well will

ensure that it does not intersect with the drill

path of the Franklin Bluffs No. 1, a shallow

well drilled in 2005 by the federal Bureau of

Land Management.

The division said the well is planned “as

a single vertical well drilled into an uncon-

ventional shale oil zone and potential liquid

conventional hydrocarbon zones.”

—KRISTEN NELSON


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DPP, it must prepare an environmental impact statement for

the development program Hilcorp is proposing for Liberty.

The federal agency said it intended the issue a notice of

intent to prepare an EIS Sept. 25, after Petroleum News

went to print. According to the agency, the EIS will likely

take “several years” to prepare and “will be closely coordi-

nated with numerous federal and state agencies and consul-

tations with appropriate federally recognized tribes.”

Gravel islandHilcorp is proposing to develop the Liberty prospect

from an artificial 9.3-acre gravel island constructed in 19

feet of water some 5 miles off the North Slope coast.

A revised version of the plan from September 2015

describes a project capable of processing and exporting

between 60,000 and 70,000 barrels of oil per day. The

island would have slots for 16 wells, with the expectation of

drilling five to eight production wells, four to six injection

wells and as many as two disposal wells at 15-foot intervals.

While natural gas would be used for field activities and

reinjection, oil would be shipped through a new 12-inch

pipeline to the existing Badami Sales Oil Pipeline. The new

pipeline would be approximately 7.1 miles long, of which

5.6 miles would be offshore.

In its plan, Hilcorp described Liberty as the “largest

delineated but undeveloped light oil reservoir on the North

Slope,” capable of producing between 80 million and 150

million barrels over a 15- to 20-year field life and reaching

peak production within two years.

Another attemptShell Oil Co. discovered the Liberty field between 1982

and 1987, through a four-well delineation campaign into the

Kekiktuk formation from Tern Island and Goose Island.

BP Exploration (Alaska) Inc. acquired tract OCS-Y1650

in a September 1996 federal lease sale and began permitting

the Liberty No. 1 exploration well. The company drilled the

well in February 1997 later confirmed a 120 million barrel

discovery at the field.

The company submitted a DPP to the U.S. Minerals

Management Service, BOEM’s predecessor, in February

1998 calling for an offshore gravel island but suspended the

project in July 2001. After several years of additional study,

BP proposed a new plan in August 2005. The ambitious

plan would have used ultra-extended-reach drilling to reach

the reservoir from an onshore pad at the satellite drilling

island on the Endicott causeway. The idea was to harness

recent advances in drilling technology to avoid the potential

environmental impacts of an island.

With federal approval of the proposal, BP expanded the

Endicott facilities and commissioned a drilling rig, although

a review of the program following the Deepwater Horizon

blowout in the Gulf of Mexico created additional uncertain-

ty. BP suspended the project in November 2010, abandoned

the ultra-extended-reach drilling proposal in June 2012 and

revived the idea of an artificial gravel island in late 2013. By

suspending the project in 2012, the federal government

gave the company until the end of 2014 to submit a new

DPP, by which time Hilcorp had acquired a 50 percent inter-

est in Liberty.

As operator, Hilcorp filed the new DPP and will lead the

project going forward. l


LIBERTY PLAN


ICEWINE WELL

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