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Home My WebLink AboutO 173 ASTATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue Anchorage, Alaska 99501 Re: Request by Cook Inlet Energy, LLC for reduction in the bonding amount required under new regulation 20 AAC 25.025 ) ) ) ) ) ) ) ) Docket Number: OTH-21-033 Other Order 173A Cook Inlet Energy, LLC Bond Reconsideration Request October 19, 2021 DECISION AND ORDER On September 28, 2020, the Alaska Oil and Gas Conservation Commission (AOGCC) issued Other Order No. 173 (OTH 173) reducing the amount of bonding required to be posted by Cook Inlet Energy, Inc. (CIE) under 20 AAC 25.025 by $324,000 due to existing bonding with the U.S. Environmental Protection Agency (EPA) for two Underground Injection Control (UIC) program Class I disposal wells that CIE operates in the Cook Inlet Region of Alaska. On March 1, 2021, CIE was designated the operator of the Badami Unit and its UIC Class I disposal well. On August 12, 2021, CIE applied to the AOGCC to reduce its bonding obligations due to the bonding in place to cover the plugging and abandonment (P&A) of the Class I disposal well at Badami. FINDINGS: Based upon the evidence presented by CIE, AOGCC finds that: 1. CIE has 29 wells for purposes of determining its bonding liability. CIE’s well count puts CIE in the 21-40 well tier, which equates to a $6,000,000 bonding obligation. 2. Three of CIE’s wells (two in the Cook Inlet Region and one in the Badami Unit on the North Slope) are UIC Class I disposal wells subject to the EPA’s bonding requirements. If all three of these wells are dropped from CIE’s well count, CIE remains in the 21-40 well tier for bonding and its bonding obligation would not change from a reduction in well count. 3. By letter dated May 20, 2021, the EPA accepted a Trust Agreement and Financial Guarantee Bond provided by Savant Alaska, LLC1 (Savant) to replace an existing insurance policy that was provided by BP Exploration (Alaska), Inc.2 to meet the EPA’s regulatory requirements for providing financial assurances to ensure proper P&A of UIC Class I disposal wells. 1 Savant Alaska, LLC is the owner and previous operator of the Badami Unit and appointed CIE to be the operator of the unit effective March 1, 2021. 2 BP Exploration (Alaska), Inc. was the previous owner of the Badami Unit and as part of the sales agreement between BP Exploration (Alaska), Inc. and Savant Alaska, LLC agreed to retain abandonment liability for some of the wells in the Badami Unit. Other Order 173A October 19, 2021 Page 2 of 3 4. Because CIE had bonding in place for the UIC Class I disposal well at Badami, the AOGCC determined that the amount of the bond Savant has in place with the EPA far exceeds what it would actually cost to P&A the UIC Class 1 disposal well and that if the AOGCC gave CIE full credit for the amount of bonding in place with the EPA, it would reduce the amount of bonding available to the AOGCC to use to P&A the non-UIC Class I wells operated by CIE by such a large amount that there would be woefully inadequate bonding in place to cover the P&A of the wells not covered by EPA bonds. Therefore, AOGCC requested more detailed information on the actual cost to P&A the UIC Class I disposal well at Badami. 5. On August 25, 2021, CIE provided the AOGCC with a copy of a third-party P&A estimate for Badami that showed that the average cost to P&A a well at Badami was $470,000. 6. As of the date of this order, CIE has a total of $2,690,000 bonding in place with the AOGCC. CONCLUSIONS: The AOGCC grants CIE’s request for a reduction in its required bonding amount. The AOGCC reviewed the third-party P&A cost estimate and has determined that the $470,000 average well abandonment cost is reasonable and would be reflective of the actual cost to P&A the UIC Class I disposal well at Badami. As such, the AOGCC has determined that CIE’s total bonding obligation with the AOGCC should be reduced by an additional $470,000 on top of the $324,000 reduction approved in OTH 173. NOW THEREFORE IT IS ORDERED THAT: As of the date of this order, CIE’s total bonding obligation is $6,000,000. Less the $794,000 bonding in place with the EPA to cover the cost to P&A the three UIC Class I disposal wells that CIE operates and the $2,690,000 active bond with the AOGCC, CIE’s remaining bonding obligation is $2,516,000. CIE has five installments remaining to increase its bonding from the current $2,690,000 to the total obligation of $5,206,000. Provided its well count remains in its current tier and the amount of the bonds in place with the EPA do not change, CIE’s next four installments would be a minimum of $504,000, and the fifth and final installment would be $500,000. These installments would be due by August 16th of each year starting in 2022 and running through 2026. CIE must immediately notify AOGCC of any change in the amount or status of the EPA bonds. Other Order 173A October 19, 2021 Page 3 of 3 DONE at Anchorage, Alaska and dated October 19, 2021. Jeremy M. Price Daniel T. Seamount, Jr. Jessie L. Chmielowski Chair, Commissioner Commissioner Commissioner RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday.