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Home My WebLink AboutO 217Other Order 217 Docket Number: OTH-24-040 1. September 3, 2019 Background information 2. December 12, 2024 AOGCC Proposed enforcement action 3. December 27, 2024 Nabors response to proposed enforcement action 4. January 3, 2025 AVCG response to proposed enforcement action 5. March 4, 2025 AOGCC response to AVCG 6. March 4, 2025 AOGCC response to Nabors STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage Alaska 99501 Re: Failure to plug and abandon Beechey Point Unit wells prior to losing rights to the properties ) ) ) ) ) ) Docket Number: OTH-24-040 Other Order 217 Beechey Point Unit (BPU) March 7, 2025 DECISION AND ORDER On December 12, 2024, the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Proposed Enforcement Action (Notice) to Brooks Range Petroleum Corporation (BRPC). The Notice was sent via certified mail and was delivered and signed for on December 16, 2024. The Notice proposed a $6,194,500 civil penalty under AS 31.05.150(a). The Notice also informed BRPC, however, that the AOGCC’s primary goal was to ensure that BRPC’s wells were properly plugged and abandoned and that the AOGCC would lower the fine to $150,000 if the wells were plugged and abandoned by June 30, 2025. BRPC failed to respond or otherwise contest the Notice. This decision and order now follow. SUMMARY OF PROPOSED ENFORCEMENT ACTION: The Notice identified that BRPC violated 20 AAC 25.072(d) when it failed to plug and abandon (P&A) the North Shore 1 well (PTD 206-188) before its Temporary Operations Shutdown expired, and 20 AAC 25.105(a) when it failed to P&A the North Shore 3 (PTD 208-204) and Sak River 1A (PTD 209-152) wells in the former BPU before BRPC lost the rights to conduct operations on the leases on which the wells are located. North Shore 1 Well The North Shore 1 (NS1) well was spudded by BRPC on February 8, 2007. In accordance with 20 AAC 25.072(a), the AOGCC approved a temporary shutdown of drilling and completion operations (Temporary Operations Shutdown) for the well in April 2007 and operations were resumed the following winter drilling season. The well reached total depth (TD) on January 21, 2008, and was completed as an oil well on February 6, 2008. The well was again put in Temporary Operations Shutdown status on May 7, 2008. Activity has never resumed on the well and AOGCC well records show it has not been P&A’d. The surface location of the well is on ADL 0390429 and the top of the productive interval and TD of the well are on ADL 0047468. A Temporary Operations Shutdown allows drilling and/or completion operations to be suspended for up to 12 months. Pursuant to 20 AAC 25.072(d), if drilling or completion activities are not resumed within 12 months, the well must be P&A’d, approved for suspended status or approved for an extension of the Temporary Operations Shutdown. None of these events occurred. Thus, Other Order 217 March 7, 2025 Page 2 of 4 since May 7, 2009, the NS1 well has been in violation of 20 AAC 25.072(d) and should have been P&A’d by that date. Sak River 1A Well The Sak River 1A (SR1A) well was spudded by BRPC on January 23, 2010. The well reached TD on February 9, 2010. The well was suspended on April 6, 2010, and AOGCC well records show it has remained in suspended status since and has not been P&A’d. The surface location of the well is on ADL 0390429 and the top of the productive interval and TD of the well are on ADL 0390431. Both leases referenced above were part of the BPU, which was formed on August 31, 2009. Effective August 29, 2012, the BPU was contracted such that ADL 0390431 was no longer part of the unit and the lease expired. As of August 29, 2012, BRPC has been in violation of 20 AAC 25.105(a) because it has not P&A’d the SR1A well before the lease expired and BRPC lost its rights to drilling on the leased acreage. North Shore 3 Well The North Shore 3 (NS3) well was spudded by BRPC on March 3, 2010. The well reached TD on March 24, 2010. The well was suspended on March 29, 2010, and AOGCC well records show it has remained in suspended status since and has not been P&A’d. The surface location and TD of the well are on ADL 0390429 and the well crossed ADL 0047468. On September 5, 2014, the Alaska Department of Natural Resources (DNR) notified BRPC that the BPU automatically terminated on August 31, 2014, due to not meeting conditions of the unit agreement within 5 years of the formation of the unit. The unit termination decision was appealed but it was reaffirmed by the DNR commissioner on May 24, 2019. ADL 0390429 expired on September 1, 2019. ADL 0047468 was extended after termination of the BPU by a certified well. The well was later decertified and the lease expired effective August 22, 2019. As of August 22, 2019, BRPC has been in violation of 20 AAC 25.105(a) because it has not P&A’d the NS3 well before a lease the well is located on expired and BRPC lost its rights to drilling on the leased acreage. Enforcement Each well that was not properly P&A’d prior to the Temporary Operations Shutdown or lease expiration is a violation of AOGCC regulations 20 AAC 25.072(d) and 20 AAC 25.105(a). The Notice considered the required factors in AS 31.05.150(g) and determined that an appropriate civil penalty would be $50,000 for each initial violation and $500 per day for each day the violations have gone uncorrected.1 The Notice proposed a total civil penalty of $6,194,500 as follows. 1 AS 31.05.150(a) provides for not more than $100,000 for the initial violation and not more than $10,000 for each day thereafter on which the violation continues. Other Order 217 March 7, 2025 Page 3 of 4 Well Name Violation Began Penalty for Initial Violation Duration of Violation as of 11/30/20024 Total Daily Penalty Through 11/30/2024 Total Penalty North Shore 1 5/7/2009 $50,000 5,686 Days $2,843,000 $2,893,000 Sak River 1A 8/29/2012 $50,000 4,477 Days $2,238,500 $2,288,500 North Shore 3 8/22/2019 $50,000 1,926 Days $963,000 $1,013,000 Total $150,000 12,089 Days $6,044,500 $6,194,500 In addition, the Notice provided that daily penalties will continue to accrue at $500 per day per violation until violations are corrected. The proposed enforcement action was based on the violations continuing through November 30, 2024. Since then, an additional 97 days have lapsed without the violations being cured, thus the penalties have increased by $48,500 per well for a total increase of $145,500. As such, the new penalty amount is $6,340,000. FINDINGS AND CONCLUSIONS: BRPC was unresponsive and did not dispute the alleged violation in the Notice. BRPC was informed in the Notice that if a timely response was not filed, the proposed enforcement action would be deemed accepted by default. Pursuant to 20 AAC 25.535(c), the AOGCC finds that BRPC has accepted by default the proposed enforcement action contained in the Notice. The AOGCC adopts and incorporates by reference all findings and conclusions from the Notice which is attached to this Order. The AOGCC finds that BRPC committed the violations as initially alleged in the Notice and restated in the “Summary of Proposed Enforcement Action” above. The AOGCC finds that due to BRPC’s failure to P&A these wells, BRPC received a significant benefit by avoiding the burden and significant expense to properly P&A the wells and that the $6,340,000 civil penalty is appropriate under AS 31.05.150(g). NOW THEREFORE IT IS ORDERED THAT: BRPC is assessed a civil penalty in the amount of $6,340,000 for the violations detailed within this Order. If this Order is not appealed, the fine must be paid within 30 days of issuance. If appealed, the fine will be held in abeyance until the appeal process is complete. As an Operator involved in an enforcement action, BRPC is required to preserve documents concerning the above action until after resolution of the proceeding. DONE at Anchorage, Alaska and Dated March 7, 2025. Jessie L. Chmielowski Gregory C. Wilson Commissioner Commissioner Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2025.03.07 08:36:38 -09'00' Gregory C. Wilson Digitally signed by Gregory C. Wilson Date: 2025.03.07 09:06:10 -09'00' Other Order 217 March 7, 2025 Page 4 of 4 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. From:Coldiron, Samantha J (OGC) To:AOGCC_Public_Notices Subject:Other Order 217 (Brooks Range Petroleum Corporation) Date:Friday, March 7, 2025 1:41:00 PM Attachments:OTHER217.pdf BPU proposed enforcement action.pdf Failure to plug and abandon Beechey Point Unit wells prior to losing rights to the properties. Samantha Coldiron AOGCC Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Harry Bockmeulen To:Coldiron, Samantha J (OGC) Subject:Re: Other Order 217 (Brooks Range Petroleum Corporation) Date:Monday, March 10, 2025 9:44:24 PM Attachments:image001.png To acknowledge receipt last Friday 3/7. Forwarded to the WIOs. Harry Bockmeulen On behalf of: 301 Calista Court, Suite 103 Anchorage, AK 99518 On 07/03/2025, 13:30, "Coldiron, Samantha J (OGC)" <samantha.coldiron@alaska.gov> wrote: Failure to plug and abandon Beechey Point Unit wells prior to losing rights to the properties. Samantha Coldiron AOGCC Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 6 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov March 4, 2025 Sent via Email (William.Conroy@nabors.com) William C. Conroy Vice President Nabors Corporate Services, Inc. 515 West Greens Rd, Suite 1200 Houston, TX 77067 Re: Docket Number: OTH-24-040 Dear Mr. Conroy: The Alaska Oil and Gas Conservation Commission (AOGCC) received your letter dated December 27, 2024 regarding a Notice of Proposed Enforcement Action (Notice) the AOGCC directed to Brooks Range Petroleum Corporation (BRPC). The Notice was directed to BRPC to comply with 20 AAC 25.535(b) notice requirements in order to start a formal enforcement action against BRPC. The Notice did not start a formal enforcement action against your company. Your company was Cc’d on the Notice as a courtesy because your company is believed to be a working interest owner of the lease(s) where the wells subject to enforcement action are located. If you have any questions regarding the contents of this letter, please contact Samantha Coldiron at Samantha.Coldiron@alaska.gov. Sincerely, Jessie L. Chmielowski Gregory C. Wilson Commissioner Commissioner Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2025.03.04 14:22:16 -09'00' Gregory C. Wilson Digitally signed by Gregory C. Wilson Date: 2025.03.04 15:48:07 -09'00' 5 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov March 4, 2025 Sent via Email (brito@brito.kscoxmail.com) Raul F. Brito Managing Director AVCG, LLC 8100 E. 22nd St., N Bldg. 600-R Wichita, KS 67226 Re: Docket Number: OTH-24-040 Dear Mr. Brito: The Alaska Oil and Gas Conservation Commission (AOGCC) received your letter dated January 3, 2025 regarding a Notice of Proposed Enforcement Action (Notice) the AOGCC directed to Brooks Range Petroleum Corporation (BRPC). The Notice was directed to BRPC to comply with 20 AAC 25.535(b) notice requirements in order to start a formal enforcement action against BRPC. The Notice did not start a formal enforcement action against your company. Your company was Cc’d on the Notice as a courtesy because your company is believed to be a working interest owner of the lease(s) where the wells subject to enforcement action are located. If you have any questions regarding the contents of this letter, please contact Samantha Coldiron at Samantha.Coldiron@alaska.gov. Sincerely, Jessie L. Chmielowski Gregory C. Wilson Commissioner Commissioner Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2025.03.04 14:21:47 -09'00' Gregory C. Wilson Digitally signed by Gregory C. Wilson Date: 2025.03.04 15:42:54 -09'00' 4 January 3, 2025 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Re: Docket Number: OTH-24-040 Notice of Proposed Enforcement Action Against Brooks Range Petroleum Corporation Dear Commissioners: This letter is AVCG, LLC's response to the Alaska Oil and Gas Conservation Commission's ("AOGCC") December 12, 2024, notice to Brooks Range Petroleum Corporation's ("BRPC") of a proposed enforcement action ("Notice") related to BRPC's role as the Operator of three suspended wells: (1) North Shore #1; (2) Sak River #IA; and (3) North Shore 43. 1. Request for Clarification and Notice of Due Process Issues The Notice is directed solely at BRPC as the Operator of the wells and informs BRPC that it "may file with the AOGCC a written response ... to the proposed action request informal review, or request a hearing" within 15 days. Notice at p. 4. While the Notice is directed solely to BRPC, other parties (including AVCG) were ce'd on the Notice. These copied parties include some, but not all, of the entities that were either (1) a working interest owner in at least one of the three Alaska Division of Land (ADL) leases linked to the wells; and/or (2) a working interest owner identified in the Beechey Point Unit (BPU) Agreement.1 AOGCC's intent in copying AVCG and others on the Notice is unclear. While AVCG does not at present take a position regarding AOGCC's proposed enforcement action against BRPC as the Operator of the subject wells, AVCG is concerned that AOGCC may intend to pursue only BRPC for the purposes of determining liability for its proposed enforcement action regarding these three wells, but then seek to allocate that liability to some or all of the parties that were copied on the Notice. This would be improper and would not comport with AVCG's due process rights. As discussed below, the ownership and operating structure for these wells has changed significantly over time, and the issue of who holds responsibility for the actions addressed by AOGCC's letter is complex. There remain serious questions to be resolved about the identity of working interest owners responsible for plugging and abandoning the three wells, and about the allocation of liability among those working interest owners. Such serious issues should not be dealt with by default through a 15-day notice sent over the holidays and copied to only a partial list of potentially interested parties. AVCG requests that AOGCC inform it in writing as to its intent regarding AVCG in this matter, in compliance with AVCG's due process rights, so that AVCG may create an appropriate record if necessary regarding its role and responsibility as to any issues addressed by the Notice. "The relevant leases are: ADL 47468; ADL 390429; and ADL 390431. 4910-2950-1451\1 2. Apportionment of Any Liability for BRPC's P&A Obligations Would Not Be Appropriate Under The Facts Here As noted above, the ownership and responsibility structure of the BPU is complex and has changed significantly over time. While AVCG originally had a significant role in the BPU, that has not been true for over a decade, and assignment to AVCG of responsibility for P&A obligations is therefore inappropriate. The BPU was formed through the BPU Agreement that was signed on April 27, 2009, by AVCG, LLC; TG World Energy, Inc.; Ramshom Investments, Inc.; ExxonMobil Oil Corporation; Chevron U.S.A. Inc.; and ConocoPhillips Alaska, Inc. The BPU Agreement identified BRPC as the Operator. The Alaska Department of Natural Resources ("DNR") formally approved the formation of the BPU, which included 52,876 acres, on August 31, 2009. Three years later, on August 31, 2012, DNR approved a contraction of the BPU, reducing the size of the unit to 10,757 acres. On September 5, 2014, DNR automatically terminated the BPU. BRPC appealed that decision. While the appeal was pending in 2019, the current majority Working Interest Owners ("WIO")2 applied for an extension of the BPU. In the May 24, 2019, decision, DNR affirmed its September 5, 2014, decision that the BPU Agreement had automatically terminated on August 31, 2014. DNR separately rejected the WIO's request for extension of the BPU. Through an Agreement of Sale and Purchase dated July 1, 2014, between AVCG and TP North Slope Development, LLC, MEP Alaska LLC, and Caracol Petroleum, LLC, ("Purchasers"), the Purchasers acquired the Beechey Point Leases and assumed the ultimate P&A liability for the Beechey Point Wells. AVCG sold 100% of AVCG's interest in BRPC to the Purchasers, and the Sale and Purchase Agreement provides that the new Purchasers assumed 100% of the liabilities of BPRC and also 90% of the liabilities of AVCG's prior obligations as to the working interest in all leases, the BPU, and other interests encompassed in the Purchase. The State approved this arrangement, as evidenced by the recorded assignments of these new ownership interests. AVCG's understanding at the time of the July 2014 sale was that the Purchasers were considering more drilling or other activity in the Beechey Point Unit and therefore did not want the wells plugged at that time. This understanding is supported by the 2019 request by the majority WIOs for extension of the BPU. AVCG had no decision -making authority or control over BRPC's actions related to the BPU at any relevant time, and so assignment to AVCG of responsibility for P&A obligations is therefore inappropriate. 3. If Any Responsibility Were to Be Allocated To AVCG, Alaska Law Requires That It Be Apportioned As Per Its Current WIO Interest 2 The present majority W10s on the Beechey Point leases are: Caracol Petroleum, LLC (4725%), TP North Slope Development, LLC (29.250%), and Brooks Range Petroleum Corp (13.50%). AVCG retains only a small minority interest of 3.5%. 4910-2950-1451\1 If AOGCC believes that AVCG may be responsible for P&A obligations on the wells because the applicable leases were part of the BPU, then AVCG's responsibility should be apportioned based on the BPU Agreement. As noted above, the BPU has been a unitized field since DNR approved the BPU in 2009, and Alaska law does not contemplate joint liability when interests are unitized. Instead, AS 31.05.110 states: The obligation or liability of the lessees or other owners of the oil and gas rights in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective .... As such, any responsibility for operations relating to the former BPU should be apportioned based upon the BPU Agreement. As AVCG's working interest is 3.5%, any obligations it has must be limited to that percentage as well. 4. Conclusion Although the Notice does not expressly address any effort to allocate or apportion any responsibility for BRPC's P&A obligations to AVCG, AVCG notes that further process is necessary to deal with the complex issues encompassed by any such effort. AVCG is not responsible — directly or indirectly — for any failure by BRPC to comply with the AOGCC's statutory and regulatory requirements relating to the North Shore #1, Sak River #lA, and North Shore #3 wells, nor for any corrective action relating to these wells. Insofar as any apportionment of responsibility to AVCG may be appropriate, Alaska law requires that "unit expenses shall at all times be several and not joint or collective," and so expenses should be apportioned according to AVCG's limited 3.5% WIO under the BPU Operating Agreement. AVCG believes, however, that the better use of our collective time and effort would be to avoid any need for such further process. AVCG is willing to work with AOGCC to discuss how best to facilitate efforts for BRPC to meet its statutory and regulatory obligations and welcomes the opportunity to discuss these issues with the AOGCC. Sincerely, AVCG,LLC ulDanaging Director 'AS 31.05. 110(g). 4910-2950-1451\1 3 4111I NABORS December 27, 2024 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, AK 99501-3572 Nabors Corporate Services, Inc. 515 West Greens Road Suite 1200 Houston, Texas 77067-4536 Phone: 281.874.0035 Fax: 281.775.8431 www.nabors'.com Re: Docket Number: OTH-24-040 Notice of Proposed Enforcement Action Against Brooks Range Petroleum Corporation Dear Commissioners: This letter is Nabors Drilling Technologies USA, Inc.'s (Nabors) response to the Alaska Oil and Gas Conservation Commission's (AOGCC) December 12, 2024 notice to Brooks Range Petroleum Corporation's (BRPC) of a proposed enforcement action (Notice). The proposed enforcement action stems from BRPC's role as the Operator of three suspended wells: (1) North Shore #1; (2) Sak River #IA; and (3) North Shore #3. Nabors submits this letter without prejudice to any right, argument, or claim. I. Nabors Requests the AOGCC Confirm if the 15-Day Deadline to Exercise Riehts Afforded Under Alaska Law that is Identified in the Notice Applies Solely to BRPC The Notice is directed solely at BRPC as the Operator of the wells, and informs BRPC that it "may file with the AOGCC a written response ... to the proposed action .... requests informal review, or requests a hearing." See Notice, p. 4. The plain language of the Notice appears to indicate that only BRPC's rights and responsibilities are at issue here; however, the AOGCC also mailed copies of the notice to other entities, including Nabors, that were either (1) a working interest owner in at least one of the three Alaska Division of Land (ADL) leases linked to the wells; and/or (2) a working interest owner identified in the Beechey Point Unit (BPU) Agreement.' If the AOGCC's intention was to send the Notice to all working interest owners meeting at least one of these criteria, then this list of recipients is incomplete. Nabors does not take a position regarding the AOGCC's proposed enforcement action against BRPC as the Operator of the North Shore #1, Sak River #IA, and North Shore 93 wells. The matter of ownership and responsibility for the wells is complex, and Nabors is concerned that the AOGCC may intend to decide and allocate liability for these three wells to the list of working interest owners who received a copy of the Notice based on BRPC's 15-day response I The relevant leases are: ADL 47468; ADL 390429; and ADL 390431. deadline. There are serious questions about the identity of working interest owners responsible for plugging and abandoning the three wells, and the allocation of liability among those working interest owners. For example, there appear to be working interest owners who did not receive a copy of the Notice but who were a working interest owner in one or more of the ADL leases or in the BPU. Accordingly, if the AOGCC intends for the Notice to also trigger any procedural deadlines beyond that narrow scope, Nabors requests that the AOGCC clarify its intent via an updated Notice so it (and others) may exercise due process rights and evaluate whether to put before the AGOCC additional factual and legal issues material to this matter. I1. Overview of the Beechey Point Unit and the Three Suspended Wells Nabors currently does not have any information indicating that the summary regarding the three wells set forth in the Notice is inaccurate, and at this time Nabors does not dispute the summary for the purposes of this letter. As to the BPU, it came into existence in 2009, and BRPC was identified as the Operator as part of the BPU Agreement that was signed on April 27, 2009, by AVCG, LLC; TG World Energy, Inc.; Ramshorn Investments, Inc.; ExxonMobil Oil Corporation; Chevron U.S.A. Inc.; and ConocoPhillips Alaska, Inc. Later that year, on August 31, 2009, the Alaska Department of Natural Resources (DNR) approved the formation of the BPU, which included 52,876 acres. Three years later, on August 31, 2012, DNR approved the contraction of the BPU, reducing the size of the unit to 10,757 acres. On September 5, 2014, DNR automatically terminated the BPU. BRPC appealed that decision, and in a May 24, 2019 decision, DNR affirmed its September 5, 2014 decision that the BPU Agreement automatically terminated on August 31, 2014. III. Nabors is Not Responsible for BRPC's Penalties Nor is Nabors Responsible for Any Corrective Action Notwithstanding the above, and without waiving any right afforded to it under Alaskan law, Nabors wants to generally note the following issues with the Notice. A. Nabors has a Nominal Working Interest Only in ADL 390429 Nabors only owns a working interest in ADL 390429, but not ADL 390431 or ADL 47468. Under Alaska law, the productive interval and total depth for a well is critical because it determines whether an entity has "the right to drill into and produce from a pool and to appropriate the oil and gas the person produces from a pool for that person and others." AS 31.05.170(10). On July 13, 2017, DNR approved the assignment of a 5.38461% working interest to Nabors in ADL 390429. This lease is the surface location of the three wells, but the productive interval and total depth for at least two of the wells are not within ADL 390429. In turn, this means Nabors cannot be considered an owner in those wells, and Nabors is not responsible for any required corrective action or for any of the penalties identified in the Notice. 1d.; see also 20 AAC 25.990(47) (expressly adopts the definition of "owner" under AS 31.05.170) B. If the AOGCC Believes Nabors is Res onsible for the Three Wells Because the Leases were Unitized Then Any Responsibility Should be Apportioned Based on the BPU Agreement The Notice does not address potential liability beyond BRPC as the Operator. However, if the AOGCC believes that Nabors is responsible for the wells because the applicable leases were part of the BPU, then Nabors' responsibility should be apportioned based on the BPU Agreement because Alaska law does not contemplate joint liability when interests are unitized. Alaska Statute 31.05.110 applies when interests are unitized, such as when DNR approved the BPU, and states: The obligation or liability of the lessees or other owners of the oil and gas rights in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective ....2 This statute shows a commonsense interpretation of potential responsibility by working interest holders and that any responsibility for operations relating to the former BPU should be apportioned based upon the BPU Agreement. IV. Conclusion Nabors is not responsible —directly or indirectly —for BRPC's failure to comply with the AOGCC's statutory and regulatory requirements relating to the North Shore #1, Sak River #IA, and North Shore #3 wells. Nabors is also not responsible for any corrective action relating to these three wells. Although Nabors is not responsible for BRPC's compliance, Nabors understands the importance of ensuring that wells are plugged and abandoned. To that end, Nabors is willing to work collaboratively with the AOGCC to discuss and consider potential ways to facilitate efforts for BRPC to meet its statutory and regulatory obligations, and welcomes the opportunity to discuss these issues with the AOGCC. Sincerely, William C. Conroy Vice President Corporate Development & Investor Relations Nabors Corporate Services 2 AS 31.05.110(g). 2 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov December 12, 2024 CERTIFIED MAIL RETURN RECEIPT REQUESTED 7018 0680 0002 2052 9938 Henricus Bockmeulen Vice President Brooks Range Petroleum Corporation 301 Calista Ct, Suite 103 Anchorage, AK 99518 Re: Docket Number: OTH-24-040 Notice of Proposed Enforcement Action Failure to plug and abandon (P&A) Beechey Point Unit (BPU) wells prior to losing rights to the properties Beechey Point Unit (BPU) Dear Mr. Bockmeulen: The Alaska Oil and Gas Conservation Commission (AOGCC) hereby notifies Brooks Range Petroleum Corporation (BRPC) of a proposed enforcement action. Nature of the Apparent Violation or Noncompliance (20 AAC 25.535(b)(1)). BRPC violated 20 AAC 25.072(d) when it failed to P&A North Shore 1 well (PTD 206-188) before its Temporary Operations Shutdown expired, and 20 AAC 25.105(a) when it failed to P&A North Shore 3 (PTD 208-204) and Sak River 1A (PTD 209-152) wells in the former BPU before BRPC lost the rights to conduct operations on the leases on which the wells are located. Basis for Finding the Violation or Noncompliance (20 AAC 25.535(b)(2)). North Shore 1 Well The North Shore 1 (NS1) well was spudded by BRPC on February 8, 2007. In accordance with 20 AAC 25.072(a), the AOGCC approved a temporary shutdown of drilling and completion operations (Temporary Operations Shutdown) for the well in April 2007 and operations were resumed the following winter drilling season. The well reached total depth (TD) on January 21, 2008, and was completed as an oil well on February 6, 2008. The well was again put in Temporary Operations Shutdown status on May 7, 2008. Activity has never resumed on the well. The surface location of the well is on ADL 0390429 and the top of the productive interval and TD of the well are on ADL 0047468. Docket Number: OTH-24-040 December 12, 2024 Page 2 of 5 A Temporary Operations Shutdown allows drilling and/or completion operations to be suspended for up to 12 months. Pursuant to 20 AAC 25.072(d), if drilling or completion activities are not resumed within 12 months, the well must be plugged and abandoned (P&A’d), approved for suspended status or approved for an extension of the Temporary Operations Shutdown. None of these events occurred. Thus, since May 7, 2009, the NS1 well has been in violation of 20 AAC 25.072(d) and should have been P&A’d by that date. Sak River 1A Well The Sak River 1A (SR1A) well was spudded by BRPC on January 23, 2010. The well reached total depth (TD) on February 9, 2010. The well was suspended on April 6, 2010, and has remained in suspended status since. The surface location of the well is on ADL 0390429 and the top of the productive interval and TD of the well are on ADL 0390431. Both leases referenced above were part of the BPU, which was formed on August 31, 2009. Effective August 29, 2012, the BPU was contracted such that ADL 0390431 was no longer part of the unit and the lease expired. At that time BRPC was in violation of 20 AAC 25.105(a) because it had not P&A’d the SR1A well before the lease expired and BRPC lost its rights to drilling on the leased acreage. North Shore 3 Well The North Shore 3 (NS3) well was spudded by BRPC on March 3, 2010. The well reached TD on March 24, 2010, was suspended on March 29, 2010, and has remained in suspended status since. The surface location and TD of the well are on ADL 0390429 and the well crossed ADL 0047468. On September 5, 2014, the Alaska Department of Natural Resources (DNR) notified BRPC that the BPU automatically terminated on August 31, 2014, due to not meeting conditions of the unit agreement within 5 years of the formation of the unit. The unit termination decision was appealed but it was reaffirmed by the DNR commissioner on May 24, 2019. ADL 0390429 expired on September 1, 2019. ADL 0047468 was extended after termination of the BPU by a certified well. The well was later decertified and the lease expired effective August 22, 2019. As of August 22, 2019, BRPC was in violation of 20 AAC 25.105(a) because it had not P&A’d the NS3 well before a lease the well is located on expired and BRPC lost its rights to drilling on the leased acreage. Proposed Action (20 AAC 25.535(b)(3)). Each well that was not properly P&A’d prior to the Temporary Operations Shutdown or lease expiration is a violation of AOGCC regulations 20 AAC 25.072(d) and 20 AAC 25.105(a). Pursuant to AS 31.05.150(a), penalties for violating AOGCC regulations can be up to $100,000 per violation and up to $10,000 per day for each day the violation continues. Pursuant to AS 31.05.150(g), in setting a civil penalty amount the AOGCC must consider the items in the following table: Docket Number: OTH-24-040 December 12, 2024 Page 3 of 5 Factor to consider How the factor applies in this case The extent to which the person committing the violation was acting in good faith in attempting to comply. BRPC has not shown any effort to attempt to comply with the regulations. The extent to which the person committing the violation acted in a willful or knowing manner. In addition to these three wells BRPC has drilled four other wells in the state and successfully P&A’d those wells, so they are or should be aware of the AOGCC’s requirement to P&A wells. The extent and seriousness of the violation and the actual or potential threat to public health or the environment. Wells that are P&A’d improperly or not at all, as in this case, pose a potential threat to public health and the environment due to the potential for the well to leak hydrocarbons. The injury to the public resulting from the violation. Should BRPC not properly P&A the wells, this task and the expenses associated with it, could fall on the State of Alaska as the landowner. The benefits derived by the person committing the violation from the violation. By not P&A’ing the wells as required, BRPC has saved the cost of P&A’ing the wells. The history of compliance or noncompliance by the person committing the violation with the provisions of this chapter, the regulations adopted under this chapter, and the orders, stipulations or terms of permits issued by the commission. BRPC does not have an extensive history of noncompliance with AOGCC statutes and regulations. The need to deter similar behavior by the person committing the violation and others similarly situated at the time of the violation in the future. If the AOGCC does not penalize BRPC, other operators could see that as a sign that there are not repercussions to not P&A’ing wells as required by the regulations. The effort made by the person committing the violation to correct the violation and prevent future violations. The AOGCC has seen no effort by BRPC to attempt to correct the violations. Other factors considered relevant to the assessment that are adopted by the commission in regulation. No other relevant factors to consider. Docket Number: OTH-24-040 December 12, 2024 Page 4 of 5 Based on these criteria, the AOGCC has determined an appropriate civil penalty would be $50,000 for each initial violation and $500 per day for each day those violations have gone uncorrected. Below is a table showing when the violation began for each well, how many days the violation has continued, and the resulting proposed civil penalties: Well Name Violation Began Penalty for Initial Violation Duration of Violation as of 11/30/20024 Total Daily Penalty Through 11/30/2024 Total Penalty North Shore 1 5/7/2009 $50,000 5,686 Days $2,843,000 $2,893,000 Sak River 1A 8/29/2012 $50,000 4,477 Days $2,238,500 $2,288,500 North Shore 3 8/22/2019/ $50,000 1,926 Days $963,000 $1,113,000 Total $150,000 12,089 Days $6,044,500 $6,194,500 Note: Daily penalties will continue to accrue at $500 per day per violation until violations are corrected. The AOGCC’s primary goal is to ensure these wells are properly P&A’d. As such, if the wells are P&A’d by June 30, 2025, and the sites cleared by September 30, 2025, the AOGCC will waive the daily penalties. Rights and Liabilities (20 AAC 25.535(b)(4)). Within 15 days after receipt of this notification – unless the AOGCC, in its discretion, grants an extension for good cause shown – BRPC may file with the AOGCC a written response that concurs in whole or in part with the proposed action described herein, requests informal review, or requests a hearing under 20 AAC 25.540. If a timely response is not filed, the proposed action will be deemed accepted by default. If informal review is requested, the AOGCC will provide BRPC an opportunity to submit documentary material and make a written or oral statement. If BRPC disagrees with the AOGCC’s proposed decision or order after that review, it may file a written request for a hearing within 10 days after the proposed decision or order is issued. If such a request is not filed within that 10-day period, the proposed decision or order will become final on the 11th day after it was issued. If such a request is timely filed, the AOGCC will hold its decision in abeyance and schedule a hearing. If BRPC does not concur in the proposed action described herein, and the AOGCC finds that BRPC violated a provision of AS 31.05, 20 AAC 25, or an AOGCC order, permit or other approval, then the AOGCC may take any action authorized by the applicable law including ordering one or more of the following: (i) corrective action; (ii) suspension or revocation of a permit or other approval; and (iii) imposition of penalties under AS 31.05.150. In taking action after an informal review or hearing, the AOGCC is not limited to ordering the proposed action described herein, as long as BRPC received reasonable notice and opportunity to be heard with respect to the AOGCC’s action. Any action described herein or taken after an informal review or hearing does not limit the action the AOGCC may take under AS 31.05.160. Docket Number: OTH-24-040 December 12, 2024 Page 5 of 5 Sincerely, Jessie L. Chmielowski Gregory C. Wilson Commissioner Commissioner Cc: Henricus Bockmeulen TP North Slope Development, LLC 301 Calista Ct, Suite 103 Anchorage, AK 99518 Henricus Bockmeulen CaraCol Petroleum, LLC 301 Calista Ct, Suite 103 Anchorage, AK 99518 Mark Steinmetz MEP Alaska, LLC 29 Vanderbilt Drive Livingston, NJ 07039 Ramshorn Investments, Inc. 515 West Greens Rd, Suite 1000 Houston, TX 77607 Raul F. Brito AVCG, LLC 1625 N. Waterfront Pkwy, Suite 200 Wichita, KS 67206 Nabors Drilling Technologies USA, Inc. 515 West Greens Rd, Suite 1000 Houston, TX 77067 Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2024.12.12 15:23:06 -09'00' Gregory C. Wilson Digitally signed by Gregory C. Wilson Date: 2024.12.12 16:04:48 -09'00' --_--._r. ■ Complete items 1, 2, and 3. ■ Print your name and address on the reverse so that we can return the card to you. ■ Attach this card to the back of the mailplece, or on the front if spaceon the front if space permits 1. AdiLlis AAdreSendJn: Henricus Bockmeulen It Vice President Brooks Range Petroleum Corporation i_ •301 Calista Ct, Suite 103 A. 5ignaulre 0 Agent x 0 Addre B. R eived by (Prime Name CI ^at��°f Deli D. Is delivery ss different from item 1T 0 Yes if YES, enter delivery address below: ❑ No Anchorage, AK 99518 9 _ ypa 6 pdodty Mall Ezprese® M'ij� IIILNiFtestIctedDeliverY [3 Adult signature ture Restricted Delivery istered ❑ Re�egglste d Mail Restricted Dd'rvery IIIIIII'I IIII I'lllllllll ll'I'IIIII�IIIIIIII li® il Restricted Delivery ❑ Return Receipt for Merenare 9590 9402 4351 81901895 26 onelivery Ft sMcled Delivery Signature Conflnnatbn•" Co a Number (Transfer from service law!) 7018 0680 0002 2052 PS Form 3811, July 2015 PSN 7530-02-000-9053 ❑ Collect on Delivery e 0 Signature CoMinoation ")all Restricted Delii 9938 an Restricted Delivery Postal Service'"TIFIED r MAIL® RECEIPT stic Mail oniy.ivery at www.usps.coma. information, visit our website .1 OdMalail FeeNces8Fe ipr(I,m VY) POSMark ruacelpt(ded-nM $ Here r3i Madre Rl tad Delivery s'Iq -N C3gneture Req Ia $IBnaWre ResVicted OelWery $ E3`°Henricus Bockmeulen C3$ Vice President 0 a S' Brooks Range Petroleum Corporation o 81 301 Calista Ct, Suite 103 Anchorage, AK 99518 1 k THE STATE Departnietit of Natural Resources GovuRNOR SKAN PARNEI.L Division ofOii & Gas Anchorage Office 550 W. 7'f Avenue Suite 1100 Anchorage, Aloska 99501-3560 Moin: 907.269.8800 Fax: 907.269.8939 CERTIFIED MAIL 7011 3500 0003 1912 4450 RETURN RECEIPT REQUESTED August 31, 2012 AVCG, LLC Attn: Land Department 510 L Street, Suite 601 Anchorage, AK 99501 Oil and Gas Leases ADLs 389948, 39M73, 390074, 390428,(5^430^390431, 390432, 390'508r390509, 390851,391152,391153, 391155,391156,391157, 391158, 391159,391208, 391287, 391780,391781, 391782 and 391783 .VOUJiJTARY CONTRACTION OF THE BEECHEY-POINT UNIT The Alaska Department of Natural Resources, Division of Oil and Gas (Division) approved the Beechey Point Unit (BPU) on August 31, 2009. The original BPU, containing 52,875.57 acres, comprised 30 state leases. On August 30, 2012, Brooks Range Petroleiim Corporation (BRPC), as operator of the BPU, applied to voluntarily contract the BPU. BRPC notified the Division that the working interest owners affirmatively voted to voluntarily contract the BPU to seven leases containing 10,757.00 acres. BRPC further agreed to waive the extension provisions of 11 AAC 83.140. ADLs 389948, 390073, 390074, 390428, 390430, 390432, 390508, 390509, 390851, 391780, 391781, and 391782 will expire immediately since they are past their primary term. ADLs 391152, 391153,|,391155, 391156, 391157, 391158, 391159, 391208, and 391783 will expire effective August 31^ 2012 at 11:59 PM. ADL 390431 will expire immediately smce it is past its primary term but the expiration does not relieve BRPC of its obligations including to remove all machinery, equipment, tools and materials, and to deliver up the leased area in good condition. ADL 391287 is due to expire July 31,2013. Under Article 13.4 of the BPU Agreement, the working interest owners who are parties to the agreement may voluntarily contract the unit with an affirmative vote of the working interest owners 'To responsibly develop Alaska's resources by making them available for maximum use and benefit consistent with the public interest" Beechey Point Unit Voluntary Contraction August'31,2012 Page 2 of2 and approval from the Commissioner. The Commissioner has delegated the authority to approve a voluntary contraction to the Director of the Division. The contracted BPU comprises the following state leases in their entirety: ADLs 47468, 389947, 390425, 390426, 390427, 390429, and 391779; and contains 10,757.00 acres. I These actions have been included in the Division's records. Please contact Dianna Lewis at (907) 269-8110 or via email at dianna.lewis@alaska.gbv if you have any questions. Sincerely, W. C. Barron Director UNITED STATES POSTAL SERVICE First-Class Mall Postage & Fees Paid Penmft No. G-10 • Sender Please print your name, address, and ZIP+4 in this box State of Alaska Department of Natural Resources Division ofOH and Gas 550 West 7th Avenue, Suite 1100 Anchorage AK 99501-3565 1 • Compi8tettism8l,2,aihd3. Ate6<»m[Mete ttenn 4 tf Reacted Delivery ts desired: i K Print your ri^he and address oh the reverse i so that we can return the card to you. . I R Attach ttds card to the back of tti»rnaM«»> i or oh tiid front If apace permtts. 1. Article Addressed to: AVCG LLC ATTN LAND MANAGER 510:L STREET SUITE 601 ANCHORAC3E AK 99501 ^COMPLEfETHIS SECTION ON DELIVERY'-: • Agent • Addressee 0. DatBof tJeUvery -5-/Z. D. Is deliveiy ^KSS diRmmt fttm Item 1? O Yes If YES, enter delivery address bslow: • No 2, Sa^ '^pe > EIXieitffiedMall • B . • Reglstned • Return Receipt for Merch^ise • imuiedMai) • C^.D. •. • ' 4,: Restricted Delivery? ^Mra 0Yes j 2. AracSe hkMrtl^r; i 7011 :3SDQ . QDI)3- PS Form 3811, Februaiy 2004 ppmestic RatiAn Recdpt 102595-02^-1540 312798 312799 312808 312809 393965 393966 393967 394153 394164 394165 394166 28256 2825728258 28275 28276 282772827828279 28298 28299 47448 47466 47469 390431 47468 390429 SAK RIVER 1 SAK RIVER 1A NORTH SHORE 1 NORTH SHORE 3 SAK RIVER 1SAK RIVER 1A NORTH SHORE 1 NORTH SHORE 3 Northstar Prudhoe Bay State of Alaska, Esri, TomTom, Garmin, SafeGraph, METI/NASA, USGS, EPA, NPS, USDA, USFWS, Esri, USGS Suspended Beechey Point Wells Affected BPU Leases Former Beechey Point Unit Unit Boundary Well Surface Location Well Bottom Hole Location NotificationLessee Hilcorp Alaska, LLC Hilcorp North Slope, LLC ConocoPhillips Alaska, Inc. 0 1.5 30.75 Miles ¯