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Home My WebLink AboutO 125OTHER ORDER 125 Docket Number: OTH-17-024 1. August 31, 2017 AOGCC Decision and Order 125 2. September 15, 2017 Aurora Exploration LLC Request for Reconsideration of Other Order 125 3. September 21, 2017 Notice of Public Hearing, Affidavit of Publication, and mailings 4. October 4, 2017 Aurora Exploration Motion for Non-Adjudicatory Determination for Transfer of Operator’s Agreement 5. October 9, 2017 Transcript, Exhibits and Sign-in Sheet (confidential exhibits held in secure storage) STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Change of Operator Form (Form 10-411) ) Other Order 125 Docket Number: OTH-17-024 October 25, 2017 DECISION AND ORDER Aurora Gas, LLC (Aurora Gas) is the operator of record for six producing wells in the Nicolai Creek Gas Field: Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-13, NCU 02, NCU 03, NCU 10 and NCU 11. Aurora Exploration, LLC (Aurora Exploration) filed a change of operator form (Form 10-411) seeking to substitute itself for Aurora Gas as operator of record for the Nicolai Creek Gas Field. With the change of operator form, Aurora Exploration filed a document captioned "Transactional Justification." The Transactional Justification seeks to have the Alaska Oil and Gas Conservation Commission (AOGCC) require a minimal $200,000 bond of Aurora Exploration as the new operator. Because the cost to properly plug and abandon the six NCU wells would be substantially more than $200,000, on August 31, 2017 AOGCC denied Aurora Exploration's request for a $200,000 bond. Aurora Exploration moved for reconsideration and requested a hearing be held on shortened time to allow it to present evidence. In support Aurora Exploration offered the affidavit of Edward Jones stating the costs to plug 10 nearby wells on land owned by Cook Inlet Region, Inc. (CIRI) was estimated to be between $100,000 and $250,000 per well. On September 19, 2017 AOGCC granted Aurora Exploration's request and set a public hearing for October 9, 2017. On the afternoon of October 5, 2017, Aurora Exploration filed a "Motion for Non -Adjudicatory Determination for Transfer of Operator's Agreement." The motion revised Jones' estimate of the costs to plug and abandon the CIRI wells to between $100,000 and $205,000. The motion also proposed AOGCC require a $200,000 bond and enter a contract to set up a trust account whereby Aurora would begin funding the account in July 2019 in order to cover the projected costs of Other Order 125 October 25, 2017 Page 2 of 4 plugging and abandoning the six NCU wells. Aurora Exploration also withdrew its request for "any hearing, order, or decision by the AOGCC ..." AOGCC declined to vacate the hearing. At the October 9, 2017 hearing four witnesses testified: AOGCC Senior Petroleum Engineer Mike Quick and three witnesses offered by Aurora Exploration, Scott Koff, Paul Craig and Edward Jones, President of Aurora Gas. Mr. Pfoff and Mr. Craig neither testified as experts nor offered any material evidence regarding the estimated cost to the state if it was required to undertake to plug and abandon the six wells. Mr. Jones testified as an engineer. Mr. Jones' estimates of between $100,000 and $205,000 per well to plug and abandon the six wells were based on Mr. Jones' estimates of the costs to plug and abandon 10 wells on CIRI land. Mr. Jones' estimates on the CIRI wells were based on a combination of cost estimates from contractors and his experience. Mr. Jones' underlying assumptions included one mobilization, one demobilization, everything going as planned and the work being performed in non -winter weather. The manner in which the CIRI wells will be plugged and abandoned is essentially to cement the wells back to the surface. Mr. Jones stated his belief that the six wells at issue here are similar to the CIRI wells and that the cost to plug and abandon them should be roughly the same. None of the CIRI wells has yet been plugged and abandoned. Mr. Quick prepared an estimate of the cost to the state to plug and abandon the six wells based on his experience in plugging and abandoning wells in Alaska. The estimate was based on an approach of setting a series of plugs in each well, then pressure testing each plug before moving up the well to the next plug. That estimate included logistics costs and a 20% contingency due to the uncertainty as to when the six wells would need to be plugged and the condition of those wells at that time. At the time of AOGCC's August 31, 2017 order Mr. Quick's estimate of the cost per well had been $960,000. In the interim another operator had successfully plugged and abandoned a comparable well for roughly $760,000.1 ' Shortly before that well was plugged and abandoned, AOGCC had increased the bond amount required for that well to $800,000. The $760,000 cost does not represent the final cost to plug and abandon that well. Other Order 125 October 25, 2017 Page 3 of Mr. Quick noted that Mr. Jones' method for the CIRI wells would comply with AOGCC regulations if it was successful, but that the method involved more risk of failure, an exponential increase in the cost to plug and abandon the wells if failure occurred and that AOGCC had recent experience with Mr. Jones' method failing. Mr. Jones agreed his approach involved greater risk than that proposed by Mr. Quick. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." Any bond is not used unless an operator walks away from its obligation to properly plug and abandon a well. As a result, the bond amount should reflect the cost to the state if it is required to plug and abandon the well. The AOGCC cannot, consistent with its statutory duties, accept a $200,000 blanket bond on all six wells. Nor will AOGCC accept Aurora's cost estimate, which is lower because it involves a greater risk of failure and also assumes there will be no issues with well tubing or casing integrity once P&A operations commence. Taking into account Mr. Jones' testimony regarding the good condition of the tubing combined with information received since entry of the August 31, 2017 Order, AOGCC has updated its estimate of the costs to properly plug and abandon the six wells. AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate is $600,000 per well, for a total estimated cost of $3,600,000. AOGCC will not approve the change in operator unless Aurora Exploration posts a bond of $3,600,000. The bond may be posted over a three-year period, $2,000,000 the first year, $1,000,000 the second year and $600,000 the third year. Done at Anchorage, Alaska and Dated October 25, 2017. Hollis S. French Cath P. Foerster Daniel T. Seamount, Jr. Commissioner Commissioner Commissioner Other Order 125 October 25, 2017 Page 4 of 4 APPEAL NOTICE Unless an application for reconsideration is filed, this is the AOGCC's final order or decision and any appeal must be filed in superior court within 30 days of the date this order or decision is mailed or otherwise distrbuted. 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 tiled. 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 decisiat on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to ran 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. Colornbie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Wednesday, October 25, 2017 9:47 AM To: 'wbankston@bgolaw.pro' Cc: gspfoff Subject: Other Order 125 Reconsideration Attachments: Oth 125 Reconsideration Order.pdf Jody J. Colombie AOGCC Special Assistant Alaska OilandGas Conservation Commission 333 west 7" Avenue Anchorage, Alaska 99501 Office: (907) 793-1221 _'ax: (907) 276-7542 CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete if, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Jody Colombie at 907.793.1221 or iody.colombie@olaska.gov. Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Wednesday, October 25, 2017 9:49 AM To: aogcc.inspectors@alaska.gov;'Bender, Makana K (DOA) (makana.bender@alaska.gov)';'Bettis, Patricia K (DOA) (patricia.bettis@alaska.gov)'; 'Brooks, Phoebe L (DOA) (phoebe.brooks@alaska.gov)'; Carlisle, Samantha J (DOA); 'Colombie, Jody J (DOA) Qody.colombie@alaska.gov)'; 'Davies, Stephen F (DOA) (steve.davies@alaska.gov)'; 'Foerster, Catherine P (DOA) (cathy.foerster@alaska.gov)'; 'French, Hollis (DOA)'; 'Frystacky, Michal (michal.frystacky@alaska.gov)'; 'Guhl, Meredith (DOA sponsored) (meredith.guhl@alaska.gov)'; Kair, Michael N (DOA); 'Link, Liz M (DOA)'; Loepp, Victoria T (DOA); 'Mumm, Joseph (DOA sponsored) Qoseph.mumm@alaska.gov)'; 'Paladijczuk, Tracie L (DOA) (tracie.paladijczuk@alaska.gov)'; 'Pasqua[, Maria (DOA) (maria.pasqual@alaska.gov)'; 'Quick, Michael (DOA sponsored)'; 'Regg, James B (DOA) Qim.regg@a[aska.gov)'; 'Roby, David S (DOA) (dave.roby@alaska.gov)'; 'Schwartz, Guy L (DOA) (guy.schwartz@a[aska.gov)'; 'Seamount, Dan T (DOA) (dan.seamount@alaska.gov)'; 'Singh, Angela K (DOA)'; 'Wallace, Chris D (DOA) (chris.wallace@alaska.gov)'; AK, GWO Projects Well Integrity, 'AKDCWellIntegrityCoordinator'; 'Alan Bailey'; 'Alex Demarban'; Alicia Showalter, 'Allen Huckabay'; 'Andrew VanderJack'; 'Ann Danielson'; Anna Raff; 'Barbara F Fullmer'; bbritch; Becky Bohrer; 'Ben Boettger'; 'Bill Bredar'; Bob; Brandon Viator; 'Brian Havelock'; 'Bruce Webb'; 'Caleb Conrad'; 'Candi English'; Cocklan- Vendl, Mary E; Cody Gauer; Colleen Miller, 'Connie Downing'; Crandall, Krissell; 'D Lawrence'; 'Dale Hoffman';'Darci Horner'; 'Dave Harbour'; David Boelens;'David Duffy'; David House;'David McCaleb';'David McCraine';'ddonkel@cfl.rr.com'; Diemer, Kenneth (DNR);'DNROG Units'; 'Donna Ambruz'; 'Ed Jones'; 'Elizabeth Harball'; Elowe, Kristin; 'Elwood Brehmer'; 'Evan Osborne'; Evans, John R (LDZX); Garrett Brown; 'George Pollock'; Gordon Pospisil; Greeley, Destin M (DOR); 'Gretchen Stoddard'; gspfoff, 'Hunter Cox; Hurst, Rona D (DNR); Hyun, James J (DNR); 'Jacki Rose'; Jason Brune, Jdarlington Qarlington@gmail.com); 'Jeanne McPherren'; 'Jerry Hodgden'; Jill Simek; 'Jim Watt'; Jim White; 'Joe Lastufka'; Joe Nicks, 'John Burdick'; 'John Easton'; John Larsen; 'John Stuart'; Jon Goltz; Josef Chmielowski; 'Juanita Lovett'; 'Judy Stanek'; Kari Moriarty; 'Kasper Kowalewski';'Kazeem Adegbola'; 'Keith Torrance'; Keith Wiles; Kelly Sperback; Kevin Frank; Kruse, Rebecca D (DNR); Kyla Choquette; Laura Silliphant (laura.gregersen@alaska.gov); Leslie Smith; Lori Nelson; 'Luke Keller'; 'Marc Kovak'; Mark Dalton; Mark Hanley (mark.hanley@anadarko.com); 'Mark Landt';'Mark Wedman';'MealearTauch';'Michael Bill'; Michael Calkins, 'Michael Moora'; Mike Morgan; MJ Loveland; mkm7200; 'Motteram, Luke A'; Mueller, Marta R (DNR); nelson; Nichole Saunders; 'Nick Ostrovsky'; NSK Problem Well Supv; Patty Alfaro;'Paul Craig'; Paul Decker (paul.decker@alaska.gov);'Paul Mazzolini'; Pike, Kevin W (DNR); Randall Kanady,'Renan Yanish'; 'Richard Cool'; 'Robert Brelsford'; Robert Warthen; Sara Leverette; 'Scott Griffith'; Shahla Farzan; Shannon Donnelly, 'Sharon Yarawsky'; Skutca, Joseph E (DNR); Smart Energy Universe; Smith, Kyle S (DNR); 'Stephanie Klemmer'; 'Stephen Hennigan'; Sternicki, Oliver R, Steve Moothart (steve.moothart@alaska.gov); 'Steve Quinn'; 'Suzanne Gibson'; Tamera Sheffield; 'Tanisha Gleason'; 'Ted Kramer'; Teresa Imm; Tim Jones, 'Tim Mayers'; Todd Durkee; 'Tom Maloney'; trmjrl; 'Tyler Senden'; Umekwe, Maduabuchi P (DNR); Vinnie Catalano; Well Integrity, Well Integrity; Weston Nash; Whitney Pettus; 'Aaron Gluzman'; 'Aaron Sorrell'; Ajibola Adeyeye; Alan Dennis; Andy Bond; Bajsarowicz, Caroline J; 'Bruce Williams'; Bruno, Jeff J (DNR); Casey Sullivan; Corey Munk;'Don Shaw'; Eppie Hogan ; Eric Lidji; Garrett Haag; 'Graham Smith'; Heusser, Heather A (DNR); Holly Fair; Jamie M. Long; 'Jason Bergerson'; Jesse Chielowski; 'Jim Magill'; Jim Shine; Joe Longo; John Martineck, Josh Kindred; Keith Lopez; Laney Vazquez; Lois Epstein; Longan, Sara W (DNR); Marc Kuck, Marcia Hobson; 'Marie Steele'; Matt Armstrong; Melonnie Amundson; 'Mike Franger'; Morgan, Kirk A (DNR); Pascal Umekwe; Pat Galvin; 'Pete Dickinson'; Peter Contreras, Rachel Davis, Richard Garrard; Richmond, Diane M; Robert Province; 'Ryan Daniel'; 'Sandra Lemke'; 'Susan Pollard'; Talib Syed; Tina Grovier (tmgrovier@stoel.com); 'William Van Dyke' Subject: Other order 125 Reconsideration Attachments: Oth 125 Reconsideration Order.pdf Feed Pa Bend along line to Use Avery® Template 51600 Paper expose AVERY0 � P pose Pop-up Edge �. a 5160 1 Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711-0055 George Vaught, Jr. P.O. Box 13557 Denver, CO 80201-3557 Gordon Severson 3201 Westmar Cir. Anchorage, AK 99508-4336 Darwin Waldsmith P.O. Box 39309 Ninilchik, AK 99639-0309 Penny Vadla 399 W. Riverview Ave. Soldotna, AK 99669-7714 Richard Wagner P.O. Box 60868 Fairbanks, AK 99706-0868 517 J C- Etiquettes faciles a peler A SRepliez a la hachure afin de www.avery.com ' Utilisez le gabarit AVERY® 5760® ens de reveler le rebord Pop-up-,' ' j chargement j 1 -800 -GO -AVERY ' l t AOGCC 10/9/2017 I1..O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 ALASKA OIL AND GAS CONSERVATION COMMISSION Before Commissioners: Hollis French, Chair Daniel T. Seamount Cathy Foerster In the Matter of Aurora Exploration, LLC's ) Application for Reconsideration of Other ) Order No. 125 regarding the bonding ) requirements for six wells in the Nicolai ) Creek Gas Field. Docket No.: OTH 17-024 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska PUBLIC HEARING October 9, 2017 10:00 o'clock a.m. Recorded and transcribed by: Computer Matrix Court Reporters, LLC 135 Christensen Drive, Suite 2 Anchorage, AK 99501 907-243-0668/sahile@gci.net Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 Ii...J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net Page 2 1 TABLE OF CONTENTS 2 Opening remarks by Chairman French 03 3 Testimony by Mr. Pfoff 07 4 Testimony by Dr. Craig 23 5 Testimony by Mr. Jones 31 6 Testimony by Mr. Quick 39 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 1 10/9/2017 11...0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 P R O C E E D I N G S Page 3 2 (On record - 10:00 a.m.) 3 CHAIRMAN FRENCH: Good morning. It's 4 call the hearing to order, it's 10:00 o'clock at -- on 5 October 9, 2017. We're here at 333 West Seventh 6 Avenue, Anchorage, Alaska, the headquarters of the 7 Alaska Oil and Gas Conservation Commission. To my 8 right is Commissioner Cathy Foerster, to my left is 9 Commissioner Dan Seamount, I'm Hollis French, the Chair 10 of the Commission. 11 We're here today on docket number OTH 17-024 12 concerning Aurora Exploration, LLC in the application 13 for reconsideration of the decision and order issued in 14 this matter by AOGCC. Specifically on September 15, 15 2017, Aurora Exploration, LLC requested reconsideration 16 of and a hearing on the Alaska Oil and Gas Conservation 17 Commission's August 31st, 2017 decision and order 18 regarding bonding requirements for six wells on the 19 Nicolai Creek Gas Field. The purpose of the hearing 20 today is to determine the appropriate bonding amount 21 for those wells. 22 Computer Matrix will be recording the 23 proceedings. You can get a copy of the transcript from 24 Computer Matrix Reporting. 25 There are people signed up to testify, Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1, _.J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 4 1 including Aurora Exploration, LLC individuals. Are 2 there any other parties intending to testify besides 3 those who've signed up on this sheet? 4 (No comments) 5 CHAIRMAN FRENCH: I don't see any. The 6 Commissioners will ask questions during the testimony. 7 We may also take a recess to consult with staff to 8 determine whether additional information or clarifying 9 questions are necessary. If a member of the audience 10 has a question that he or she feels should be asked, 11 please submit that question in writing to Jody 12 Colombie. She will provide the question to the 13 Commissioners and if we feel that asking that question 14 will assist us in making our determinations we will ask 15 it. Questions submitted, but not asked, will become 16 part of the record 17 For those testifying please keep in mind that 18 you must speak into the microphone so that those in the 19 audience and the court reporter can hear your 20 testimony. Also please remember if you have slides to 21 reference them so that someone seeing the public record 22 can follow along -- someone reading the public record 23 can follow along. 24 We have a few ground rules on what is allowed 25 relevant to testimony. Essentially we're looking for Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11-0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 5 1 relevant evidence on that bonding question. All 2 testimony should be relevant to the purposes of the 3 hearing that I outlined a few minutes ago and to the 4 statutory authority of the AOGCC. Anyone desiring to 5 testify may do so, but if your testimony drifts off 6 subject we will limit that testimony. Additionally 7 testimony may not take the form of cross examination. 8 As I said before the Commissioners will be asking the 9 questions. Finally testimony that is disrespectful or 10 inappropriate will not be allowed. 11 Commissioner Foerster, do you have anything to 12 add before we get started? 13 COMMISSIONER FOERSTER: Yes. Do we have -- we 14 have on the record that there will be some people on 15 the phone. I want to just make sure that they on the 16 phone. We have that George Pollock and Ed Jones are 17 on the phone. Is either one of those, both of you on 18 the phone? 19 MR. POLLOCK: Yes, George Pollock is here. 20 COMMISSIONER FOERSTER: Ed Jones? 21 (No comments) 22 COMMISSIONER FOERSTER: Okay. 23 CHAIRMAN FRENCH: So we'll cross that bridge 24 when we get to it. 25 Commissioner Foerster, anything else? Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 El —0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 6 1 COMMISSIONER FOERSTER: No. 2 CHAIRMAN FRENCH: Commissioner Seamount. 3 COMMISSIONER SEAMOUNT: Nothing. 4 CHAIRMAN FRENCH: We'll turn then to Mr. 5 Bankston and his clients. Please proceed. 6 MR. BANKSTON: Thank you, Mr. Chairman. I will 7 get right into the testimony, we will call Scott Pfoff. 8 MR. PFOFF: (Indiscernible - away from 9 microphone)..... 10 CHAIRMAN FRENCH: I think you need to hit your 11 on button on the microphone, there's a center button 12 that says push. Lit green now? 13 MR. PFOFF: Yes. 14 CHAIRMAN FRENCH: Very good. Good morning, 15 sir. 16 MR. PFOFF: Good morning. Good morning. My 17 name is Scott Pfoff. And I..... 18 CHAIRMAN FRENCH: Mr. Pfoff, before you begin 19 let's go ahead and raise your right hand. 20 (Oath administered) 21 MR. PFOFF: I do. 22 CHAIRMAN FRENCH: Please state your name and 23 your affiliation and then proceed to the testimony. 24 SCOTT PFOFF 25 called as a witness on behalf of Aurora Exploration, Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1'1,,.0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 7 1 LLC, testified as follows on: 2 DIRECT EXAMINATION 3 MR. PFOFF: Okay. My full name is Gregory 4 Scott Pfoff and my affiliation in this proceeding is as 5 president of Aurora Exploration. 6 CHAIRMAN FRENCH: Excellent. And you may want 7 to spell your last name just for the record. 8 MR. PFOFF: The spelling is P like Paul, F like 9 Frank, O -F like Frank, F like Frank. 10 CHAIRMAN FRENCH: Thank you, Mr. Pfoff. And 11 will you be seeking to be recognized as an expert 12 today? 13 MR. PFOFF: I'm not sure if I'm testifying as 14 an expert. 15 CHAIRMAN FRENCH: It's up to you. Fair enough. 16 MR. PFOFF: I'm not sure what the distinction 17 would be between being an expert. There are certainly 18 some technical things that we want to get into the 19 record. I'm not an engineer, I'm a business guy so I 20 just don't want any confusion there. 21 COMMISSIONER FOERSTER: The -- may I? 22 CHAIRMAN FRENCH: Commissioner, please. 23 COMMISSIONER FOERSTER: If someone wants to be 24 recognized as an expert in a particular area such as 25 geology or drilling or something like that we tend to Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 I7 m O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 8 1 give higher weight to the testimony who -- of someone 2 who is an expert in an area, but to be recognized as an 3 expert you have to show us your credentials and we have 4 to accept them. So if you're not -- if you're going to 5 be talking about technical things, but that's not your 6 area of expertise then it's best not to be recognized 7 -- not to attempt to be recognized. 8 MR. PFOFF: Okay. Sounds good to me. 9 CHAIRMAN FRENCH: And just so I'm pronouncing 10 your name correctly, is it Pfoff or..... 11 MR. PFOFF: We're not..... 12 CHAIRMAN FRENCH: How do you like to have it 13 said? 14 MR. PFOFF: .....we're not pronouncing it the 15 correct German way. It should..... 16 CHAIRMAN FRENCH: How do you like to hear it? 17 MR. PFOFF: We pretend the first F is not 18 there. So it's like..... 19 CHAIRMAN FRENCH: Poff. 20 MR. PFOFF: .....poff. 21 CHAIRMAN FRENCH: Very good. Mr. Pfoff, please 22 go ahead. 23 MR. PFOFF: Thank you. Well, thank you. First 24 of all we appreciate this opportunity to come talk to 25 you guys. I want to start out by saying we really -- Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I l mO: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 9 1 you know, maybe we got off to the wrong -- off on the 2 wrong foot and we don't like that. We really want to 3 try to work something out here that is acceptable to 4 both sides. We understand the bonding issue and the 5 bonding concerns and so we know what you're trying to 6 accomplish from the AOGCC's standpoint and we think we 7 can accomplish what you need and facilitate a transfer 8 of operatorship to our company. 9 The -- in case there's some kind of 10 misunderstanding about the Aurora name I want to kind 11 of talk about that briefly, it just always seems to 12 become an issue. I left Marathon Oil in 1994 and 13 started Aurora Gas, Inc. That's kind of the old 14 umbrella company. That's not Aurora Gas, LLC that went 15 bankrupt. 16 COMMISSIONER FOERSTER: What year was that? 17 I'm sorry. 18 MR. PFOFF: It was Aurora -- oh, did you ask 19 what year? 20 COMMISSIONER FOERSTER: Yes. 21 MR. PFOFF: 1994. 22 COMMISSIONER FOERSTER: Thank you. 23 MR. PFOFF: We changed the name to Aurora Power 24 Resources and then we began to found sister companies 25 that shared the Aurora name. We were all working Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11.10: AURORA EXPLORATION. LLC DOCKET No. OTH-17-024 Page 10 1 together towards the same goal, that is oil and gas 2 production, primarily gas production in Cook Inlet and 3 we had a gas marketing company. We brought a rig up 4 from Wyoming and we created Aurora Well Service. But 5 each -- and there are a couple -- and then we got into 6 E&P and created Aurora Gas, LLC. Each one of these 7 companies for different reasons had varying ownerships, 8 common ownerships, but they were not subsidiaries, they 9 were not the same group of investors in all cases, but 10 we liked the Aurora brand and it was very -- it worked 11 for many, many years, we were very successful in the 12 gas marketing business. 13 We did a private equity placement with George 14 Kaiser who funded the E&P company's efforts to bring on 15 gas fields on the west side of Cook Inlet and because 16 we didn't feel we needed big rigs to do workovers and 17 reentries, we did want to do some shallow drilling, we 18 wound up partnering with Boelens Well Service out of 19 Thermopolis, Wyoming and created Aurora Well Service. 20 That chugged along just fine for many years. 21 Ultimately George Kaiser's company, Kaiser -Francis oil 22 Company, grew a little tired of Cook Inlet. We were 23 very successful in a lot of cases bringing gas 24 production on fields on the west side. Then we started 25 swinging for the fence a little bit and drilled several Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Tax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITI`v,�: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 11 1 exploration wells, some were successful, most were not. 2 And so Kaiser -Francis Oil Company decided to go into a 3 mode where they just wanted to let the assets play out 4 and try to sell the company. At that time and that's 5 roughly 2009 or 110, that's not the kind of company I 6 wanted to be in charge of so I resigned my position as 7 president of Aurora Gas, LLC and at that time Ed Jones 8 took over as president. 9 One of the companies I -- the original company 10 I founded had a minority ownership in Aurora Gas, LLC, 11 at that time we had roughly 4 and 1/2 percent. The 12 majority of the company was owned by Kaiser -Francis oil 13 Company. They looked for a buyer for several years and 14 it was not until 2015 that they secured a buyer and 15 that was a group of German investors, Reek Oil. And I 16 would have preferred to exercise a pref right to 17 purchase the company, but rather than litigate the 18 issue I decided to sell Aurora Power's 4 and 1/2 19 percent. And I may be giving you too much detail, but 20 what I'm trying to set up here is the fact that Aurora 21 Exploration which is the company that I started when I 22 left the management team at Aurora Gas has no ownership 23 position whatsoever in the now bankrupt Aurora Gas, 24 LLC. So if there's any confusion about that issue I 25 just wanted to clear that up for the record. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 ITM-: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 12 1 And I'm -- should I ask you occasionally if you 2 want to elaborate on any questions or..... 3 CHAIRMAN FRENCH: Usually we're active enough 4 and assertive enough to jump in when we get curious. 5 So if we don't ask questions just feel you're -- feel 6 like you're doing good and keep going. 7 MR. PFOFF: Okay. We -- I guess one of the 8 biggest -- to get right to the heart of one of what we 9 feel is one of the biggest issues is what is the 10 appropriate amount of bonding. And I'm not an 11 engineer, but I've been around the oil patch enough to 12 know that that varies greatly depending on where you're 13 at and what you got to do. And so we feel like there 14 has been a considerable amount of fresh evidence since 15 the time your order was issued. I'm not sure where the 16 million dollars per well came from and we -- we'd be 17 happy -- we'd like to know more about it if that's 18 still the AOGCC's position, but what we think is that 19 the sundry notices that have been filed on behalf of 20 Aurora Gas, LLC to plug and abandon the wells that are 21 on Native lands, I think there's nine of them, 22 something like that, that those represent a much more 23 realistic -- and oh, by the way, it's our understanding 24 these sundry notices have been approved so the 25 procedures have been approved. And we feel like the Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@g6met r- AOGCC 10/9/2017 ITi..j: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 13 1 cost estimates that Ed Jones has formulated and 2 presented in the form of AFEs represent the best fresh 3 evidence of what it's going to cost to plug wells in 4 the vicinity. He further elaborated in his affidavit 5 that he saw no reason why the wells at Nicolai Creek 6 would be significantly different than the wells that he 7 filed the sundry notices on. 8 So with this fresh evidence, you know, we -- 9 it's our position that -- and maybe the million dollars 10 assumed that there was going to need a rig to be 11 mobilized across the Inlet and put on these wells, may 12 have assumed, you know, CT units. It's my 13 understanding that Ed's procedures don't require either 14 one of those. And so it's a much less expensive 15 proposition and it's our position that these would -- 16 these AFEs would represent a reasonable evidence of 17 what it would cost to plug wells on Nicolai Creek 18 ultimately. 19 We like Nicolai Creek, we think that there's 20 about 2 bcf of PDPs, proved reserves, right now that we 21 don't want to see get plugged and go to waste. I don't 22 think that you could justify the drilling of new wells 23 to get those bcfs in the future if somebody were to 24 come back in later after these wells have been P&A'd. 25 We think that there's a tremendous amount of upside. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOOCC10/9/2017 Pl ._J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 14 1 The previous estimates that we've relied on are about 2 17 bcf of probables, conventional probables. In 3 addition to that we see a great deal of unconventional 4 upside at the field, coalbed methane. Virtually 5 everyone of these wells we drill we're going through 6 coals, some of them gas charged, and there's no better 7 place to try a coalbed methane project in the Cook 8 Inlet than here where you've already got wells, 9 gathering lines and dehigh (ph) and compression. So we 10 hate to see that potential resource go to waste. 11 And then there is also deep oil potential. 12 Several years ago Aurora Gas, LLC farmed out its deep 13 rights to Apache and we're talking to Apache now about 14 possibly working with us to do whatever it takes to 15 hold this leasehold and according -- and therefore 16 their deep rights would stay in place. And so that's 17 something that we're looking at as well. 18 CHAIRMAN FRENCH: Let me just ask a question 19 for clarification there, Mr. Pfoff. Are you saying 20 that with respect to the Nicolai Creek wells the deep 21 rights have gone over to Apache? 22 MR. PFOFF: Correct. 23 CHAIRMAN FRENCH: Okay. Thank you. 24 MR. PFOFF: I forget year it was, but Apache 25 basically farmed into all of Aurora Gas' acreage in Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net i AOGCC 10/9/2017 I1,..,x AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 15 1 Cook Inlet. 2 CHAIRMAN FRENCH: And that interest survived 3 the transformation, the transfer of assets or you 4 envision it surviving the transfer of assets? 5 MR. PFOFF: Correct. 6 CHAIRMAN FRENCH: I understand. 7 MR. PFOFF: Correct. 8 CHAIRMAN FRENCH: Thank you. 9 MR. PFOFF: So whether or not they would be 10 interested in coming back and taking a look at this or 11 working a deal with us to..... 12 CHAIRMAN FRENCH: They've got a right of first 13 refusal..... 14 MR. PFOFF: Exactly. 15 CHAIRMAN FRENCH: .....or something like that? 16 Okay. 17 COMMISSIONER FOERSTER: Is their lease still in 18 effect? 19 MR. PFOFF: Pardon. 20 COMMISSIONER FOERSTER: Is Apache's lease still 21 in effect with the state? 22 MR. PFOFF: They have farmed into our leases. 23 So as long as our leases..... 24 COMMISSIONER FOERSTER: The deep rights are 25 held by the shallow production? Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11 j: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 16 1 MR. PFOFF: Correct. 2 COMMISSIONER FOERSTER: Okay. Thank you. 3 MR. PFOFF: Correct. I think the last thing I 4 want to point out as far as upside at Nicolai Creek is 5 that we -- when I was still president of Aurora Gas, 6 LLC we commissioned a phase one study -- engineering 7 study of the field for possible conversion to gas 8 storage. And everything about that came back positive. 9 It's not a huge reservoir, but it's strategically 10 located on the west side and some of the sands are 11 ideal for some burst deliverability in case you really 12 needed a lot of gas quickly. It's not really suited 13 for seasonal deliverability, but it's a great little 14 burst deliverability potential. And that can be 15 developed simultaneous with production, as some of 16 these reservoirs deplete you could convert that to a 17 storage while you're still maintaining operations in 18 the rest of the field. 19 The other thing I wanted to mention about the 20 fact that we like Nicolai is the fact that we see it -- 21 I've run the numbers, I know Ed has run the numbers, we 22 see at least five years of economic life in the field 23 and that's just to recover the 2 bcf of PDPs. If you 24 did nothing more than acquire the field, so some coiled 25 tubing cleanouts of two or three wells and a little bit Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11,-J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 17 1 of well work budgeted in the future, the project has a 2 five year life. So and those economics that I ran 3 burden the project with a formula similar, actually 4 patterned somewhat after the DNR -- DR&R agreement, in 5 other words I'm not putting all the abandonment costs 6 in the last year, I'm spending money in years three, 7 four and five which if the AOGCC were interested in our 8 proposal we would actually escrow those monies, those 9 are built into the economics and it's still a good 10 project. 11 CHAIRMAN FRENCH: Let me ask you an easy 12 question just for the sake of making a record, the 13 public may not know, but the Nicolai Creek wells are on 14 the west side of Cook Inlet, is there road access to 15 those pads? 16 MR. PFOFF: There is a road system on the west 17 side, there is road access to all the pads. 18 CHAIRMAN FRENCH: Can I drive there from here? 19 MR. PFOFF: But you can't drive there from 20 here. 21 CHAIRMAN FRENCH: That's the question I was 22 getting at. Thank you. 23 MR. PFOFF: Boat or plane..... 24 CHAIRMAN FRENCH: Right. 25 MR. PFOFF: .....to get over there, but once Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste, 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 Ii.. -J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 18 1 you get over there there's a very good established road 2 system. 3 CHAIRMAN FRENCH: And do you keep an operator 4 on those pads, how do those pads -- how do you envision 5 those pads or that pad working? 6 MR. PFOFF: Well, I always have to be careful 7 when we say we because I -- you know, Aurora Gas and we 8 all kind of still work together, but..... 9 CHAIRMAN FRENCH: I'm talking to Aurora 10 Exploration. 11 MR. PFOFF: Okay. Right now the field is still 12 owned and operated by Aurora Gas, LLC. And what they 13 did historically when they were operating five wells is 14 they had two or three operators that rotated shifts, 15 two weeks on and two weeks off. Some of the operators 16 were actually residents of the Native village of Tyonek 17 and didn't have to fly over. Other -- some of the guys 18 had to fly over and stay in a camp that we also operate 19 over there. And because of the bankruptcy we -- all 20 the wells have been temporarily plugged except Nicolai 21 Creek. So now we're down to just one gas field at the 22 southern end of the holdings. So right now Aurora Gas 23 is operating with one operator that rotates with one 24 other operator. And..... 25 CHAIRMAN FRENCH: And that single operator's on Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 FI—J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 19 1 24 hours a day, theoretically he's there to respond or 2 she's there to respond..... 3 MR. PFOFF: He's there. 4 CHAIRMAN FRENCH: Right. 5 MR. PFOFF: Correct. 6 CHAIRMAN FRENCH: If something happens there 7 they get out of bed and go see what the problem is. 8 MR. PFOFF: Exactly. 9 CHAIRMAN FRENCH: Right. 10 MR. PFOFF: Exactly. And I'm glad you 11 mentioned that because I do want to bring up the fact 12 that, you know, we plan -- if we're successful and 13 operatorship transfers over to Aurora Exploration we 14 plan to hire these guys and if that's not successful I 15 know of at least two operators that will lose their 16 jobs and four support jobs at the camp. We can't 17 afford to keep the camp open unless we have an anchor 18 tenant like the Aurora Exploration would be. So that's 19 six jobs right there just right out of the gate that 20 get lost if we can't find a solution to this. 21 I think that's all I wanted to talk about 22 unless you have any questions. 23 CHAIRMAN FRENCH: Commissioner Foerster. 24 COMMISSIONER FOERSTER: I don't have any 25 questions, but I do have something procedurally. There Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11...0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 20 1 are about 18 people signed up on this sign-up sheet and 2 there are about 25 people in the room. So after..... 3 CHAIRMAN FRENCH: If you haven't..... 4 COMMISSIONER FOERSTER: .....when we take a 5 recess we need to get people who have not signed up to 6 sign-up. But I'm going to hold my questions until 7 after we recess. 8 CHAIRMAN FRENCH: Commissioner Seamount. 9 COMMISSIONER SEAMOUNT: I have a few. Mr. 10 Pfoff, a few years ago -- well, my question is did 11 Aurora Drilling out of Wyoming work for Aurora Gas, LLC 12 a few years ago? 13 MR. PFOFF: The answer's yes. Aurora Well 14 Service worked roughly eight -- I'm going to say 80 15 percent of the work it's done has been for Aurora Gas, 16 LLC, but it's not an exclusive, it's a separate company 17 and Aurora Well Service has worked for just about all 18 the big names in the Inlet at one time or another. 19 COMMISSIONER SEAMOUNT: So is the name -- is 20 the word Aurora coincidence or a result? 21 MR. PFOFF: No, It's a result. Maybe I didn't 22 make it clear, but Aurora Well Service was one of those 23 companies that we formed when we were setting up these 24 different companies, all common -- pursue a common 25 goal. And one thing I will add to that is Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gei.net AOGCC 10/9/2017 ll mO: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 21 1 unfortunately the Aurora name, it just needs to go and 2 we're just waiting hopefully to resolve this matter. 3 I've known for a long time it needs to go. Part of the 4 deal with the German investors was that they were going 5 to change their name so that I could retain the Aurora 6 brand. And it's just one of many things they said they 7 were going to do that they did not do. And now that 8 name's been drug through bankruptcy. Paul and I both 9 agree and we've got a couple good ideas for new names, 10 but Aurora's got to go. 11 COMMISSIONER SEAMOUNT: How much gas has been 12 produced so far from Nicolai Creek? 13 MR. PFOFF: I've got something right there that 14 will give me the answer, can I take a look at it? 15 COMMISSIONER SEAMOUNT: Sure. 16 MR. PFOFF: Cumulative production of 9.5 bcf. 17 COMMISSIONER SEAMOUNT: Okay. I've heard a 18 number 17 bcf kicked around since I think Unocal had 19 the field. You say there's 2 bcf proved reserves, no 20 new wells are appropriate and you're going to get it 21 through coiled tubing cleanouts, correct? 22 MR. PFOFF: The 2 bcf gets produced with the 23 coiled tubing cleanouts..... 24 COMMISSIONER SEAMOUNT: Okay. 25 MR. PFOFF: .....but not 17 of probable. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11,.,0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 22 1 COMMISSIONER SEAMOUNT: Okay. Now the 17 2 upside, how would you get to that? 3 MR. PFOFF: Yeah, I hope I didn't mislead you. 4 What I was trying to say is that even if you didn't do 5 any additional development beyond the coiled tubing 6 cleanouts it's a good project. But it is not our 7 intent to do that. Part of our acquisition proposal to 8 the bankruptcy court which has been approved includes 9 the 3D seismic that was shot over the field, we have an 10 extensive amount of geology and now we've got a little 11 more well control than we'd like at some of the dry 12 development wells that we've drilled. And but, yeah, 13 we certainly plan to do additional drilling, bring in 14 whatever technical expertise we need to evaluate the 15 best places to drill for additional gas. 16 COMMISSIONER SEAMOUNT: So the 17 bcf would 17 require additional drilling? 18 MR. PFOFF: Yes, sir. 19 COMMISSIONER SEAMOUNT: Inside the unit? 20 MR. PFOFF: Correct. 21 COMMISSIONER SEAMOUNT: Okay. Thank you. 22 That's all I have. 23 CHAIRMAN FRENCH: Mr. Pfoff, thank you. Mr. 24 Bankston, you can call your next witness. 25 MR. BANKSTON: Dr. Paul Craig. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahileCagci.net AOGCC 10/9/2017 Fl -.O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 23 1 CHAIRMAN FRENCH: Dr. Craig, please raise your 2 right hand. 3 (Oath administered) 4 DR. CRAIG: I do. 5 CHAIRMAN FRENCH: Can you state your name, 6 spelling your last name and tell us who you're 7 affiliated with. 8 PAUL CRAIG 9 called as a witness on behalf of Aurora Exploration, 10 LLC, testified as follows on: 11 DIRECT EXAMINATION 12 DR. CRAIG: Paul Lawrence Craig, C -R -A -I -G. 13 I'm a 100 percent owner of Trading Bay Oil and Gas, LLC 14 which is the 50 percent owner of Aurora Exploration, 15 LLC. 16 CHAIRMAN FRENCH: Please proceed. 17 DR. CRAIG: So and just for clarification I 18 have expertise, but not about anything that's going on 19 in this room other than to the extent I can claim 20 expertise from the school of hard knocks, but you don't 21 want to hear those stories. 22 So with regard to my business involvement with 23 Aurora Exploration there's just a couple of points I 24 want to make. Aurora Exploration -- 50 percent of 25 Aurora Exploration was acquired by Trading Bay Oil and Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 n, -J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 24 1 Gas, LLC, I can't give you an exact date, but it was a 2 couple of years ago. And it was in the context of 3 Trading Bay Oil and Gas assigning 100 percent working 4 interest in four leases between Pretty Creek and Lewis 5 River, previously called the Hannah Prospect, now 6 called the Theodore River or Theodore Creek Prospect or 7 Theodore. And that's one of three prospects outside of 8 Nicolai Creek that is owned -- they're state of Alaska 9 leases owned by Aurora Exploration. 10 My point in this is that Aurora Exploration and 11 its owners have skin in the game far beyond the Nicolai 12 Creek unit. We view the Nicolai Creek unit acquisition 13 as an opportunity to be a producer, to be taken 14 seriously in the investment community as not just an 15 explorer, but a producer with exploration potential. 16 And essentially to cut to the chase I have my personal 17 life savings invested in this enterprise, it's very 18 serious to me, it's very serious to my family. I have 19 every reason to make this a successful enterprise which 20 requires responsible operations. And in that context 21 irrespective of the decisions reached by the Commission 22 a responsible operator will -- just like a depreciation 23 schedule a responsible business person operating a 24 company will place adequate funds in an account and in 25 this case we're offering it to be a trust account that Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1,_..J: AURORA EXPLORATION, LLC DOCKET No. 0TH -17-024 Page 25 1 benefitted the AOGCC, managed by the AOGCC, sufficient 2 to plug and abandon the wells. We're doing the same 3 thing with DNR through the DR&R agreement where we're 4 going to take capital from -- cash from the production 5 and fund a DR&R account over time to make sure that in 6 fact we're being a responsible operator. 7 COMMISSIONER FOERSTER: Can I interrupt for a 8 second..... 9 DR. CRAIG: Yes, you can. 10 COMMISSIONER FOERSTER: .....and take you back? 11 I'm a little confused. So..... 12 DR. CRAIG: That's fine. 13 COMMISSIONER FOERSTER: .....Trading Bay Oil 14 and Gas acquired SO percent of Aurora Exploration? 15 DR. CRAIG: Correct. 16 COMMISSIONER FOERSTER: And Aurora -- and what 17 has Aurora Exploration and Trading Bay -- what have you 18 all done, have you all acquired leases, have you 19 drilled wells, what have you done? 20 DR. CRAIG: Great question. So Mr. Pfoff 21 testified a moment ago that when he left the management 22 of Aurora Gas that he set up Aurora Exploration. And 23 he -- I know the history and I think this is hearsay. 24 If there's anything incorrect, Scott, please correct 25 me. But Aurora Exploration did own some leases and Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 17 �-j: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 26 1 developed -- and acquired two of the three prospects 2 currently owned by Aurora Exploration. Independently I 3 through Trading Bay Oil and Gas, and I'd have to look 4 at the chain of title, it might have been me as an 5 individual that bid originally, but in any case the 6 third prospect owned -- currently owned by Aurora 7 Exploration was acquired by me. It was sold to another 8 company with a two year performance requirement in the 9 sales contract by sale agreement. They did not 10 perform, the leases came back to me -- to Trading Bay 11 Oil and Gas and then in collaboration with Scott and 12 Aurora Exploration my company agreed to put -- to 13 assign the Theodore leases into Aurora Exploration in 14 exchange for 50 percent ownership of Aurora 15 Exploration. And now we're essentially -- Mr. Pfoff is 16 the president and CEO, the manager, the guy with the 17 oil and gas expertise, I'm essentially an entrepreneur 18 that has been involved in the oil and gas business here 19 in Alaska for 24 years. 20 I started Trading Bay Energy Corporation, 1993 21 I registered a public offering to raise capital for 22 drilling of three gas wells. In 1996 I permitted 23 wells. Back then Forest Energy stepped up and bought 24 out all of the assets of my company and since then I've 25 been actively involved in buying and selling oil and Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 17.,.,): AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 27 1 gas leases. I also have some oil and gas prospects on 2 the North Slope, 56 square miles of leaseholds. My 3 partner, Mr. Gardner's in the room. This hearing is 4 not about that. My point is I have skin in the game, I 5 have a 24 year record of behaving honorably and paying 6 my bills and closing out any businesses that I've 7 started in a responsible manner and I intend to do 8 exactly the same thing in the context of exploration. 9 I too want to emphasize that I understand the 10 Commission's position. You have a responsibility to 11 the citizens of Alaska to do several things, prevent 12 waste which getting Nicolai Creek produced helps do. 13 You also have the responsibility to -- obviously to 14 make sure that any and all oil and gas wells drilled 15 anywhere in the state of Alaska are properly plugged 16 and abandoned at the end of the day. And I respect 17 that and want to honor that by way of posting the usual 18 and customary $200,000 bond and funding a plug and 19 abandonment account over time that will meet your -- 20 meet the Commission's requirements to make sure that we 21 are behaving responsibly consistent with out oral 22 promise. 23 COMMISSIONER FOERSTER: So I'm going to go back 24 to my question. So Aurora Exploration and Trading Bay 25 own leases, but you have -- but Aurora Exploration Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 El -J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 281 1 hasn't drilled any wells? 2 DR. CRAIG: Trading Bay owns no leases. 3 Trading Bay Oil and Gas, LLC owns no leases to date. 4 COMMISSIONER FOERSTER: Has a 50 percent 5 interest in? 6 DR. CRAIG: No. 7 COMMISSIONER FOERSTER: No. 8 DR. CRAIG: Trading Bay Oil and Gas had 100 9 percent working interest in four leases. It 10 transferred 100 percent working interest to Aurora 11 Exploration. 12 COMMISSIONER FOERSTER: And you have part 13 interest in Aurora Exploration? 14 DR. CRAIG: Yeah. 15 COMMISSIONER FOERSTER: Okay. 16 DR. CRAIG: And that was in exchange for 50 17 percent ownership. 18 COMMISSIONER FOERSTER: Right. But has Aurora 19 Exploration drilled any wells? 20 MR. PFOFF: Can I..... 21 CHAIRMAN FRENCH: Mr. Pfoff, do you want to 22 answer that question? 23 MR. PFOFF: Sure. The quick answer is no, we 24 have not drilled any wells. We have acquired 2D 25 seismic data from Chevron and had it reprocessed and we Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 II,..J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 29 1 spent a lot of money having the geology and geophysics 2 worked up on all of those prospects. And the one thing 3 when we've gone out to Nape and other places looking 4 for investors, we get a lot of interest in our 5 prospects and we hear very often that if you just had 6 some production to go with it, something in case you, 7 you know, go 0 for 3 where there's still something 8 there. And so this would be a strategic acquisition 9 for us from that standpoint as well. We think if we 10 have a producing company with some developmental upside 11 to go with the exploration acreage that it's a package 12 that could entice some significant drilling on the west 13 side. 14 CHAIRMAN FRENCH: Mr. Pfoff, I think you just 15 answered my question, but just for the sake of crystal 16 clarity, does Aurora Exploration have any production 17 today? 18 MR. PFOFF: No, they don't. 19 CHAIRMAN FRENCH: Thank you. Dr. Craig, 20 anything else to add to your testimony? 21 DR. CRAIG: There's other things I could say, 22 but I don't think anything is particularly substantive 23 to the issue before the Commission. I think I've 24 expressed my thoughts. Thank you for the opportunity 25 to do so. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 Ei...O: AURORA EXPLORATION, LLC DOCKET No. 0TH -17-024 Page 30 1 CHAIRMAN FRENCH: Further questions for Dr. 2 Craig from Commissioner Foerster or Commissioner 3 Seamount? 4 COMMISSIONER FOERSTER: I'm going to save my 5 questions for after recess. 6 CHAIRMAN FRENCH: Commissioner seamount. 7 COMMISSIONER SEAMOUNT: No. 8 CHAIRMAN FRENCH: Mr. Bankston, you can call 9 your next witness. 10 MR. BANKSTON: Yes, it's my understanding that 11 Mr. Jones is telephonically available. Mr. Jones, can 12 you hear me? 13 MR. JONES: Yes, I can. 14 COMMISSIONER FOERSTER: Mr. Jones, you weren't 15 on the line when Commissioner French read the 16 introductory ground rules. Perhaps we should go over 17 those again? 18 MR. JONES: Yes, please. No, I was not on the 19 line. 20 COMMISSIONER FOERSTER: Okay. 21 CHAIRMAN FRENCH: Mr. Jones, yes, excellent. 22 Mr. Jones, the purpose of the hearing today is to 23 determine the appropriate bonding amount for the six 24 Nicolai Creek wells. That question of course is bound 25 up in Aurora Exploration's request to change -- their Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net ' r AOGCC 10/9/2017 ITi._j: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 31 1 change of operator form from Aurora Gas to Aurora 2 Exploration. So the first thing we'll do is we'll 3 swear you in, Mr. Jones, we'll ask you to state your 4 name and your background and then you can give us the 5 testimony that you think is relevant to that question. 6 So let's begin by having you raise your right 7 hand, Mr. Jones. 8 (Oath administered) 9 MR. JONES: I do. 10 CHAIRMAN FRENCH: Thank you. If you would 11 state your name, spelling your last name, and giving us 12 your affiliation, please. 13 ED JONES 14 called as a witness on behalf of Aurora Exploration, 15 LLC, testified telephonically as follows on: 16 DIRECT EXAMINATION 17 MR. JONES: Yes, my name is John Edward Jones, 18 I go by Ed. Last name J -O -N -E -S. I am the president 19 of Aurora Gas, LLC. 20 CHAIRMAN FRENCH: And thank you. If you'd go 21 ahead with your testimony. 22 COMMISSIONER FOERSTER: Does he want to be an 23 expert. 24 CHAIRMAN FRENCH: Oh, I'm sorry. I'm sorry. 25 Mr. Jones, we frequently ask witnesses if they want to Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 T ...J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 32 1 be identified or approved as an expert by the 2 Commission in a specific area. Do you seek that? 3 MR. BANKSTON: If I could be heard on that, Mr. 4 French. 5 CHAIRMAN FRENCH: Mr. Bankston. 6 MR. BANKSTON: In a courtroom an expert is any 7 person that can assist the trier of fact in making a 8 decision. 9 COMMISSIONER FOERSTER: That's not what we do 10 here. 11 MR. BANKSTON: Commissioner Foerster, I heard 12 what you said a moment ago, but I believe that Mr. 13 Jones has the expertise about the cost involved in this 14 proceeding. And so insomuch as he's going to testify 15 about what he's developed, the AFEs, then I would ask 16 that the Commission give weight to what he is going to 17 say about the cost of plug and abandonment. So..... 18 CHAIRMAN FRENCH: We give more weight to sworn 19 testimony than to unsworn testimony and we frequently 20 approve witnesses as experts in their specific fields. 21 But it's still not exactly clear to me what area of 22 expertise you're asking Mr. Jones to be certified 23 or..... 24 MR. BANKSTON: With that background, Mr. 25 French, I'll let him proceed to tell you what he has Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I`1_0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 33 1 done about developing a cost to plug and abandon these 2 wells. 3 So, Mr. Jones, just briefly so that the 4 Commission will understand what is your -- just briefly 5 give your educational background, your relationship or 6 as your experience and then what you did to prepare the 7 AFEs that are exhibits to your affidavit that's been 8 filed before this Commission. 9 MR. JONES: Sure. Sure. I have a civil 10 engineering degree from Colorado State University, I 11 have been in the petroleum industry for 43 years with 12 about five different companies. I have experience 13 throughout the lower 48, Rocky Mountain region, Gulf 14 Coast region, mid-continent region. And I started 15 working in the Cook Inlet of Alaska in 2000 when Aurora 16 Gas was formed and I was one of the founders of that 17 along with three others including Mr. Pfoff. I have 18 done much of the engineering for the company, I was the 19 vice president of engineering and operations until I 20 became the president. So throughout my career I have 21 worked as an engineer or engineering and operations 22 management. So that's my area of expertise, I guess. 23 As Aurora Gas we -- I engineered basically the 24 drilling, the reentry, recompletion completion, 25 workovers and abandonments of 38 different rig ups on Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I',_ .J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 34 1 25 different wells, mostly on the west side of the 2 Inlet, but at least one on the east side as well. And 3 recently with my colleague, George Pollock, who's also 4 an engineer, we have developed costs for plugging and 5 abandoning the wells on the CIRI leases, the 10 wells 6 there. And how we did that, we have -- both of us have 7 quite a bit of experience in costing operations there 8 as we've been working on the west side for a number of 9 years, but we went to a couple of vendors, cement 10 vendors, Schlumberger and Halliburton, asked for quotes 11 on the cement services that would be required for 12 abandoning wells. We went to a wireline operator who's 13 done most of the work for us as far as slick line work 14 and basic cased hole wireline work and that's Pollard 15 Wireline and we got cost estimates from them. 16 Otherwise, you know, we just based the costs on our 17 experience. As I say we've done a lot of work up there 18 over the years so the transportation, the support 19 services and so forth, we felt we had a good handle on 20 those costs so we didn't -- haven't gone to specific 21 parties for bids as there's a number of them. The bulk 22 of the work is the cementing and the wireline services. 23 So what we did, each of us working 24 independently and then collaborating, we came up with 25 cost estimates to do this work and we were pretty Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 ITi,..: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 35 1 close. The cost estimates were based on procedures, 2 procedures that I primarily developed to plug and 3 abandon the 10 wells on the CIRI leases and those 4 procedures were attached to the sundry notices that 5 were submitted and approved by the AOGCC for those 6 leases. And what I've come up with -- what George and 7 I've come up with basically is the cost for abandoning 8 these wells varies because of the amount of cement 9 required for different wells, different procedures 10 depending on where plugs were needed and to meet the 11 AOGCC regulations. But we've come up with numbers from 12 about $100,000 to a little over $200,000, about 13 $205,000, to plug and abandon these 10 wells. That is 14 assuming that we do the wells one after another so we 15 have one mobilization, one demobilization and that the 16 work is done in non -winter weather. It could be fall, 17 spring, summer, but certainly not in the winter as that 18 would drive the costs up somewhat. 25 August. So 19 So that's basically what we have done. We 20 provided that information to Aurora Exploration at the 21 request. 22 MR. BANKSTON: And when did you develop these 23 costs? 24 MR. JONES: They've been developed since 25 August. So last two months basically. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net r AOGCC 10/9/2017 ITi. AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 36 1 MR. BANKSTON: And would you compare the wells 2 that you developed these cost with the wells that you 3 have in the Nicolai Creek area and give us your 4 familiarity with the wells in the Nicolai Creek area? 5 MR. JONES: Yes. Yes, they are quite similar 6 and again they'll be a range of cost depending on the 7 wellbores themselves, but I was involved in either the 8 reentry, the drilling or the recompletion completion of 9 all of the wells basically including the six wells at 10 Nicolai Creek. They're all quite similar. They are 11 all shallow gas wells I might add and partially 12 depleted and the wells that we drilled are very, very 13 similar, the wells that Aurora Gas itself drilled. 14 Some of the wells that we've reentered are slightly 15 different, but again not significantly so the 16 procedures will be pretty much the same. 17 MR. BANKSTON: Mr. Jones, did you -- had you 18 tuned into the system where you heard Mr. Pfoff just 19 talk -- discuss the length of time that he thought the 20 existing wells in the Nicolai Creek area would be 21 producing and he said five..... 22 MR. JONES: Yes, I did. 23 MR. BANKSTON: Do you agree with that? 24 MR. JONES: I do, yes. 25 MR. BANKSTON: All right. No further Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 1 questions. 10/9/2017 L..J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 37 2 CHAIRMAN FRENCH: Do you have any other 3 witnesses? Well, first let me ask if Commissioner 4 Foerster has any questions for Mr. Jones? 5 COMMISSIONER FOERSTER: I do, but I'm going to 6 save them until after we recess. 7 CHAIRMAN FRENCH: Commissioner Seamount. 8 COMMISSIONER SEAMOUNT: I have none at this 9 time. 10 CHAIRMAN FRENCH: None at this time. And I 11 feel the same, I'll hold my questions. Do you have 12 other witnesses, Mr. Bankston? 13 MR. BANKSTON: Let me ask my client. Just one 14 moment. No further witness. 15 CHAIRMAN FRENCH: I think what we'll do then is 16 take about a 14 minute break until 11:00 o'clock. 17 we'll go back, we'll check in with our engineers, see 18 if we have any questions for you. If we do we'll 19 proceed with them, if we don't we'll proceed with one 20 of our engineers to build a record. So that's the next 21 15 minutes. We're going to take a break. Oh, if you 22 haven't signed up, please sign up on the sign-up sheet, 23 if you haven't done that, please do that. But we are 24 in recess. 25 MR. BANKSTON: Mr. French, let me ask..... Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 17. ,J: AURORA EXPLORATION. LLC DOCKET No. OTH-17-024 Page 38 1 COMMISSIONER FOERSTER: Oh. 2 MR. BANKSTON: .....is Mr. -- am I able to call 3 back Mr. Jones, you're going to have an engineer from 4 the Commission testify; is that correct? Yeah. Am I 5 able to call..... 6 CHAIRMAN FRENCH: We didn't break yet. Yeah, 7 we're going to have an engineer testify, you'll be able 8 to pose questions to Ms. Colombie that we will decide 9 whether to ask or not. If we ask them they'll be 10 asked, if we don't they'll be part of the record either 11 way. And we'll give you time to prepare those of 12 course after he testifies we'll give you some time to 13 think about what questions you want to ask. 14 MR. BANKSTON: Very well. Thank you. 15 CHAIRMAN FRENCH: Make sense? Good. All 16 right. We're in recess. 17 (Off record - 10:50 a.m.) 18 (On record - 11:05 a.m.) 19 CHAIRMAN FRENCH: We'll go back on the record. 20 The panel -- the Commission doesn't have any further 21 questions for Aurora Exploration. So we'll go ahead 22 and turn now to Mike Quick who is an engineer for 23 AOGCC. 24 Mr. Quick, good morning. Let's go ahead and 25 start by swearing you in. Raise your right hand, Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1] J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 39 1 please. 2 (Oath administered) 3 MR. QUICK: Yes. 4 CHAIRMAN FRENCH: If you would state your name, 5 spelling your last name and give us your affiliation. 6 MICHAEL QUICK 7 called as a witness on behalf of the AOGCC, testified 8 as follows on: 9 DIRECT EXAMINATION 10 MR. QUICK: Oh, I'm Michael Quick, Q -U -I -C -K. 11 I'm currently employed as a senior petroleum engineer 12 here at the AOGCC. 13 CHAIRMAN FRENCH: Please proceed. 14 MR. QUICK: I hold a bachelor of science degree 15 in petroleum engineering from Montana Tech located in 16 Butte, Montana. I have worked for over 20 years in the 17 oil and gas industry, mainly in drilling and completion 18 operations. I've worked in multiple places in the 19 lower 48 for a span of about seven years and I've been 20 working in Alaska since 2003. During my 14 years here 21 in Alaska I've worked for Talisman, Chevron and Rexel 22 and I have been with the AOGCC for about two years now. 23 I prepared a class four cost estimate for the 24 Aurora gas wells based on my experience in plugging and 25 abandoning over 30 wells here in the state of Alaska. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 Il...J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 40 1 Those that don't -- that aren't familiar with a tiered 2 class classification for cost estimates, a class four 3 cost estimate is generally considered a feasibility 4 estimate and is expected to be accurate to about minus 5 30 percent to plus 50 percent. So it's a fairly 6 preliminary number. This cost estimate does include 7 all well work needed as well as logistics costs which 8 would be barging, air transportation, air 9 transportation camps, et cetera, waste disposal costs 10 as well as engineering costs for planning and 11 supporting the plugging and abandoning of these wells. 12 The Aurora wells, I prepared the cost estimate 13 as if the state of Alaska was going to be in charge of 14 this work scope. Well work cost was based on utilizing 15 coil tubing to set multiple downhole plugs, squeezing 16 the cement into open perforations which is known as an 17 industry best practice for P&A work. This cost 18 estimate also included a 20 percent contingency due to 19 the unknown timing of when in the future this work 20 might be starting and the unknown conditions of the 21 wells at that time. It's common for oil and gas 22 operators to add between a 15 and 20 percent cost 23 contingency for any well work activities. So this cost 24 estimate totaled $960,000 per well. 25 Since the time that this cost estimate for the Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahileggci.net AOGCC 10/9/2017 ITMv : AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 41 1 Aurora wells was completed another operator was ordered 2 by the AOGCC to post an $800,000 bond to cover the P&A 3 cost of their gas well which was also located on the 4 west side of the Cook Inlet. That operator at that 5 time shared with the AOGCC that their estimated cost to 6 P&A that well was just over $666,000. They have since 7 completed the P&A of that well in mid September of just 8 this year and they shared that their preliminary field 9 cost estimate to complete that work came in at just 10 under $750,000. That estimated field cost is expected 11 to rise once final invoices are received, therefore the 12 total cost should be very close to the $800,000 13 estimate of the bond that AOGCC required. 14 Recently within the past 35 days the AOGCC has 15 approved 10 sundry applications via form 10-403 from 16 Aurora Gas to plug and abandon 10 wells that are 17 located on the CIRI land as others have mentioned. 18 Although the approved P&A plan for each well meets 19 AOGCC regulations, the AOGCC would not P&A the wells in 20 the same manner that Aurora has chosen. If successful 21 the Aurora plan will leave the wells adequately plugged 22 and abandoned, however the risk of failure for this 23 plan is high. There are many methods available to P&A 24 wells, the most conservative and most expensive method 25 is to put a rig, whether it's a drilling rig or a Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I1,.,O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 42 1 workover rig, onto the well, pull the completion and 2 tubing and cement the well from the bottom with several 3 cement plugs using a work string. The least 4 conservative method is working the existing tubing and 5 placing cement from the surface as Aurora Gas has 6 planned. Cost estimate that the AOGCC prepared is 7 between these two methods in both risk and cost. As 8 stated earlier our -- the AOGCC plan called for 9 multiple cement plugs in the well, squeezing cement 10 into open perforations utilizing the coil tubing unit 11 and then pressure testing each plug before moving up to 12 the next plug. In contrast the Aurora Gas plan is to 13 set one continuous cement plug which from surface down 14 to backup is over a mile in total length, going down 15 the inside of the tubing, back up the inner annulus, 16 from the top of the packer all the way back to surface, 17 that cement is placed through existing tubing. As long 18 as the cement job goes per plan and the cement in the 19 tubing and the IA successfully pass the AOGCC required 20 30 minute pressure test the P&A will be successful. If 21 the cement does not pass the required pressure test, 22 the remedial work required to remove the cement from 23 the wellbore down to an adequate depth to contain 24 reservoir pressure and then the recementing of that 25 well will cost many times more than the AOGCC estimated Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 11,,.0: AURORA EXPLORATION. LLC DOCKET No. OTH-17-024 Page 43 1 cost. Based on the differences in approach to the P&A 2 of these wells, the Aurora cost estimates should be 3 lower than our AOGCC cost estimate with a greater risk 4 of not successfully abandoning the well on first 5 attempt. 6 CHAIRMAN FRENCH: Mr. Quick, thank you. 7 Questions for Mr. Quick. 8 COMMISSIONER FOERSTER: I have..... 9 CHAIRMAN FRENCH: Commissioner Foerster. 10 COMMISSIONER FOERSTER: .....a question before 11 we recess. For the sake of the audience to visualize 12 what you're talking about with pumping cement down the 13 tubing and up the inner annulus or IA, what is the 14 diameter of that tubing? 15 MR. QUICK: Most of these wells, I'd have to 16 look at the records, have either a two and three - 17 eighths or two and seven -eighths tubing so nominally 18 two inches or less, between an inch and seven -eighths 19 or two inch..... 20 COMMISSIONER FOERSTER: So it would look about 21 like that? 22 MR. QUICK: Yeah, smaller than that. 23 COMMISSIONER FOERSTER: So it looks about like 24 this, the in..... 25 MR. QUICK: Yes, that large. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITN_ : AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 44 1 COMMISSIONER FOERSTER: So you're pumping a 2 viscous concrete cement down a mile worth of something 3 that's this thick and then back up the outside which is 4 probably -- looks like this? 5 MR. QUICK: The outside is bigger than the..... 6 CHAIRMAN FRENCH: Let the record reflect that 7 Commissioner Foerster is making an inner annulus 8 motion. 9 COMMISSIONER FOERSTER: Let the record reflect 10 -- yeah. And I'm doing an interpretive dance. 11 So you're trying to pump a viscous fluid a mile 12 down a skinny little -- a big drinking straw? 13 MR. QUICK: That a good analogy. 14 COMMISSIONER FOERSTER: Okay. 15 MR. QUICK: The problem with that is there's no 16 way to adequately isolate the fluids when you're 17 pumping them. You do similar work when you're setting 18 the casing strings when you're drilling the well, but 19 you have float equipment and plugs and different things 20 that you can control the cement. When you're pumping 21 it through tubing you don't have any of those control 22 methods available. 23 COMMISSIONER FOERSTER: Okay. I have other 24 questions, but I'm going to save them until after we 25 recess. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I l —J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 451 1 CHAIRMAN FRENCH: Very good. That -- let's 2 just do this now to -- for Aurora Exploration. You've 3 heard the testimony of Mr. Quick, I'm going to give you 4 20 minutes to prepare questions. They should be in 5 written form, they should be in a form that I can read. 6 They can be handwritten, I mean, they don't -- it's not 7 -- there's no formality, but I just need to be able to 8 read the questions. It would be helpful if they were 9 numbered. So we'll come back at 11:30, we'll take a 10 look at your questions. Actually -- yeah, at about 11 11:30, give your questions to Ms. Colombie, we'll take 12 a look at them, we'll decide which ones to ask Mr. 13 Quick and then we'll go from there. 14 COMMISSIONER FOERSTER: As a courtesy..... 15 CHAIRMAN FRENCH: Commissioner Foerster. 16 COMMISSIONER FOERSTER: As a courtesy to the 17 Aurora Exploration people..... 18 CHAIRMAN FRENCH: Yes. 19 COMMISSIONER FOERSTER: .....they might prefer 20 that they hear our questions of Mr. Quick and his 21 answers to them before they prepare their questions. 22 CHAIRMAN FRENCH: Fair enough. Fair enough. 23 COMMISSIONER SEAMOUNT: Yeah. 24 COMMISSIONER FOERSTER: So maybe we want to 25 take a 10 minute recess, come back and ask our Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 1 questions. 10/9/2017 F1, J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 46 2 CHAIRMAN FRENCH: We want to break before we 3 ask those questions. 4 COMMISSIONER FOERSTER: Yeah. And then as a 5 courtesy to Aurora Exploration, I hate..... 6 CHAIRMAN FRENCH: All right. we'll take two 7 breaks then. 8 COMMISSIONER FOERSTER: .....for them to have a 9 question that they didn't get asked because they didn't 10 know to ask it until after. 11 CHAIRMAN FRENCH: And we want to make sure 12 everybody's got enough time. All right. Then we'll do 13 that, we'll take a 10 minute break and then we'll come 14 back on record, we'll ask our questions of Mr. Quick 15 and then we'll take another break to make sure Aurora 16 Exploration has plenty of time to formulate theirs. 17 And we're in recess. 18 (Off record - 11:15 a.m.) 19 (On record - 11:24 a.m.) 20 CHAIRMAN FRENCH: Let's go back on the record. 21 Mr. Quick -- we're going to go back on the record and, 22 Mr. Quick, we have a couple questions for you from 23 Commissioner Foerster. 24 COMMISSIONER FOERSTER: Okay. My first 25 question is you referenced an operator who recently Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITN-,,: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 47 1 P&A'd a well on the west side of the Inlet and it cost 2 them about $800,000 to do that work. Did that operator 3 P&A its well in the manner proposed by Aurora Gas? 4 MR. QUICK: No. 5 COMMISSIONER FOERSTER: Did they do it in the 6 method that you proposed using coil tubing? 7 MR. QUICK: They did not use coil tubing. 8 COMMISSIONER FOERSTER: Okay. Did -- what did 9 they do then? 10 MR. QUICK: It's kind of a hybrid of the two 11 ideas. They were able to utilize placing the cement 12 through tubing, but they did it in smaller increments, 13 they didn't try to set one continuous cement plug, they 14 set a small plug a couple hundred -- 200, 300 feet, as 15 deep as they could, waited for that cement to cure, 16 pressure tested it and moved up above the packer and 17 placed another cement plug there and then worked their 18 way back up to the surface plug. They -- I think they 19 set three or four cement plugs in total in that one. 20 COMMISSIONER FOERSTER: Okay. So by using -- 21 by using a method that sets more plugs, why did they do 22 that, why did they not just do one continuous plug? 23 MR. QUICK: I can't answer for them, but in my 24 experience it's going to reduce your risk being able to 25 set a smaller plug deep, you can test the integrity of Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I" ._.J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 48 1 it and it failed for some reason you'd have room above 2 you to come up and set another plug that's going to 3 contain reservoir pressure. If you do it as one plug 4 and it fails your cost -- the choices to remediate that 5 well are -- it's very high, high cost and a lot of 6 effort to do it. However if it works the first time I 7 guess you're rewarded. So it's a different risk 8 tolerance. 9 COMMISSIONER FOERSTER: Okay. So they -- it 10 cost them close to your estimate, but even without 11 having a coiled tubing unit there because they were 12 taking more time to set plugs and wait for the..... 13 MR. QUICK: Yes, I haven't seen the exact time 14 breakdown, but anytime you set a plug you're going to 15 have to give that 25 cement the proper time to cure, based 16 on the blend it's typically 18 to 24 hours to allow it 17 to transition and set before you pressure test it. 18 Then you would go in to your next operation and set the 19 next one. 20 COMMISSIONER FOERSTER: And you do that to 21 reduce the risk of just stringing cement up and down 22 the tubing and not properly plugging the well, is that 23 why you do that? 24 MR. QUICK: If you're doing it you're setting a 25 smaller amount which will be controlled differently, Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net f AOGCC 10/9/2017 I� ...J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 49 1 then you're letting it sit, testing it before you plug 2 it. 3 COMMISSIONER FOERSTER: So it increases your 4 chance of having a successful plugging and abandonment? 5 MR. QUICK: Yes, gives you more than one chance 6 to do it. 7 COMMISSIONER FOERSTER: Okay. Did we force 8 them to do that or did they choose to do that on their 9 own? 10 MR. QUICK: We do not enforce methods, we..... 11 COMMISSIONER FOERSTER: Okay. 12 MR. QUICK: .....we enforce regulations that 13 cover how the reservoir has to be isolated. 14 COMMISSIONER FOERSTER: Okay. So..... 15 MR. QUICK: It was their choice. 16 COMMISSIONER FOERSTER: .....they were setting 17 a plug, letting it set, pressure testing it, setting 18 another plug and doing this a few times just to make 19 sure that -- okay. So have we had any recent 20 experiences with an operator who has attempted to do it 21 all in one go? 22 MR. QUICK: Yes. 23 COMMISSIONER FOERSTER: And what happened? 24 MR. QUICK: They were unsuccessful in getting 25 their surface pressure test. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2, Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 PI ..-J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 501 1 COMMISSIONER FOERSTER: On one well? 2 MR. QUICK: It was two wells. 3 COMMISSIONER FOERSTER: And did they try more 4 than once? MR. QUICK: Neither well has been 5 permanently abandoned at this point. They're winter 6 access -- winter access only locations and they have 7 went back the last two winters in attempts to remediate 8 the wells and at this time have not. 9 COMMISSIONER FOERSTER: So they used the method 10 of only setting one plug, it failed, and they've 11 attempted to fix it and they still have not been able 12 to? 13 MR. QUICK: That's correct. They're still 14 working on it. 15 COMMISSIONER FOERSTER: Okay. Okay. I have 16 one more question for you. Are there any significant 17 costs that the state would incur beyond the costs that 18 Aurora would incur if in fact the state were left to do 19 the work which is what would be the case if we were to 20 exercise our bond. 21 MR. QUICK: Certainly. I think there would be 22 numerous costs that are significant that are different. 23 For one the state would have to hire a consulting 24 agency to come in and research the wells, formulate the 25 P&A plan, come up with a scope of work, work with the Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net f AOGCC 10/9/2017 11 ,—O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 51 1 state to put out requests for proposals, requests for 2 quotes for the different services needed, bring those 3 back in and award it and that engineering consulting 4 firm would also be responsible for supervising the work 5 once it came to do -- came to fruition. So I think 6 there's a lot of in house knowledge that the Aurora Gas 7 team has that we would be starting from scratch to try 8 and determine and move forward. 9 COMMISSIONER FOERSTER: Okay. And I heard Mr. 10 Jones say that he got his cement quotes from 11 Schlumberger and Halliburton and that's likely who we 12 would use also, correct? 13 MR. QUICK: Yes. 14 COMMISSIONER FOERSTER: And he said that he got 15 his wireline work quote from Pollard Wireline Service. 16 Is that who we would likely use over there or..... 17 MR. QUICK: They would be included on the bid 18 list. As everybody knows the services available in the 19 Cook Inlet are not as voluminous as they are in other 20 places, but Pollard is a real active wireline provider 21 in the Cook Inlet region. 22 COMMISSIONER FOERSTER: Okay. Those are all my 23 questions. Thank you, Mr. Quick. 24 CHAIRMAN FRENCH: Commissioner Seamount, any 25 questions? Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Sts. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITN.,,: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 52 1 COMMISSIONER SEAMOUNT: Not at this time. 2 CHAIRMAN FRENCH: I don't have any either. Mr. 3 Bankston, how long do you think you'll need to 4 formulate your questions? 5 MR. BANKSTON: No longer than 10 minutes. 6 CHAIRMAN FRENCH: All right. Then we'll give 7 you an extra -- we'll give you an extra seven. We'll 8 break until 11:45 and we'll come back at 11:45. And if 9 you would give your questions to Tab Ballantine, our 10 attorney -- nope, sorry, to Jody Colombie. I read the 11 wrong name. Jody Colombie will take your questions 12 sometime before 11:45. 13 COMMISSIONER FOERSTER: And then we'll probably 14 take a few minute -- it'll take us probably another 15 15 minutes to go through all your questions and so we'll 16 resume at noon. We'll take your questions back at 17 11:45 and resume at noon. 18 CHAIRMAN FRENCH: Resume at noon. 19 COMMISSIONER FOERSTER: Okay. 20 CHAIRMAN FRENCH: Very good. You'll hand yours 21 in at 11:45. 22 (Off record - 11:24 a.m.) 23 (On record - 12:15 p.m.) 24 CHAIRMAN FRENCH: Let's go back on the record. 25 It's about 12 minutes past 12:00 again on October 9th. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahileCagci.net AOGCC 1 10/9/2017 11...0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 53 � 2 Mr. Bankston, we have five pages of questions 3 from you. We're going to begin with the typewritten 4 questions. So I'll let you know that we've reordered 5 them. We're going to begin with the typewritten 6 questions, we're going to call that page 1 and page 2, 7 page 3, then we'll begin with the handwritten questions 8 making this page page 4, you can see the one I'm 9 referring to, and then the last page, page 5. We want 10 to make sure we keep track of these, but we've 11 reordered them a little bit. It's my understanding 12 also, Mr. Bankston, that you only want the circled 13 questions on the typewritten pages to be posed to our 14 engineer; is that correct? 15 MR. BANKSTON: That's correct. 16 CHAIRMAN FRENCH: That's going to be our plan. 17 And when I read the question, especially when we get 18 the handwritten one, if you think I've read the 19 question inaccurately please correct me right at that 20 moment. 21 MR. BANKSTON: Okay. 22 CHAIRMAN FRENCH: Very good. Very good. Mr. 23 Quick, you're still under oath and I'm going to begin 24 by asking you..... 25 COMMISSIONER FOERSTER: (Indiscernible - away Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 1 from microphone) 10/9/2017 11 j: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 54 2 CHAIRMAN FRENCH: I did not do that. Thank 3 you, Commissioner Foerster. The Commission's not going 4 to ask every single question. So if you don't hear a 5 question read, at the end I'll go back and read all 6 those into the record so we make a complete record, but 7 don't be surprised if it looks like we're skipping 8 ahead, we're just neglecting to ask the question. And 9 so you understand the procedure. 10 Now then let's go ahead. On page 1 the first 11 circled question is number 5. I'm going to ask that. 12 Mr. Quick, do you have any reason to believe based on 13 your knowledge and experience that Mr. Jones' estimates 14 are unreasonable? If so please elaborate. 15 MR. QUICK: I do not believe his estimates are 16 unreasonable, his work scope procedure is different 17 than the work scope procedure that we came up with our 18 cost estimate from. So there's just a difference in 19 procedure which gives a different cost estimate. Also 20 his cost estimate is pretty vague of detail. When I -- 21 typically when I build an AFE for an operator there's a 22 lot more detail and it includes at least some amount of 23 -- a number of wireline runs, for example, amount of 24 cement pumped, pumping charges, mobilization cost, all 25 of that was not included in his AFE so I really have no Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 17.._J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 55, 1 way to say it was reasonable or not, it's light on 2 details is how I would describe it. 3 CHAIRMAN FRENCH: Question number 6. Describe 4 the number of cost estimates that you have received 5 within the last year for plugging and abandoning wells 6 in the Nicolai Creek unit? 7 MR. QUICK: Zero. 8 CHAIRMAN FRENCH: Question number 8. Describe 9 the number of times you have discussed with 10 Schlumberger or any other provider, the cost estimates 11 that you have received? 12 MR. QUICK: Zero. 13 CHAIRMAN FRENCH: Question number 10. What are 14 the specific disagreements you have with the AFEs 15 submitted by Mr. Jones, upon what do you base your 16 disagreement? 17 MR. QUICK: As I answered question number 5, I 18 don't have any specific disagreements, I think there's 19 vague details that upon more detail there might be some 20 disagreements or some follow-up questions, but based on 21 what's provided there's not enough detail in there for 22 me to have a disagreement with. I think it may be 23 missing some information. 24 CHAIRMAN FRENCH: Page number 2. I'm going to 25 ask question number 13. Is there any reason you Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITN...: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 56 1 believe that these wells will need to be plugged within 2 the next five years, within the next seven years? 3 MR. QUICK: They will either need to be plugged 4 by the state if the state receives the leases back 5 within that time period and I don't know when the state 6 would receive those back for our cost estimate to be 7 complete. The thing that I based our cost estimate on 8 was the longer between now and when the wells need to 9 be abandoned, the cost is going to go up and the 10 unknown conditions of the well will be further 11 increased due to the time frame difference. 12 CHAIRMAN FRENCH: Those are all the typewritten 13 questions we're going to ask. Let me turn now to the 14 handwritten questions. And the first question is if 15 the Aurora Gas procedure is successful is there any 16 reason to dispute the cost estimates provided by Mr. 17 Jones. I think we've asked and answered that. I'm 18 going to rule that as asked and answered. 19 The next question I'm going to ask is -- I 20 numbered it number 3. You stated there is a high risk 21 of failure. What is high? 22 MR. QUICK: I think that is a great pertinent 23 question. High is subject to risk tolerance of the 24 company. Working with other oil and gas operators for 25 the last 15 years we would typically do a risk matrix Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I1,..J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 57 1 associated with any procedure to try to minimize the 2 amount of risk associated with that procedure. 3 Typically with a major operator anything above 5 4 percent probability for failure is ruled medium to high 5 risk and above 10 percent was a high risk. Of the four 6 wells that an operator on the North Slope has tried a 7 similar procedure on within the last two years, two of 8 those wells were unsuccessful so that's a 50 percent 9 failure rate in recent history for wells in Alaska so 10 that's a pretty high failure rate. 11 CHAIRMAN FRENCH: Is there any historical 12 evidence of the proposed procedure failing especially 13 in a depleted gas well? And then next to that 14 question, two wells, which wells? 15 MR. QUICK: Okay. So the two wells that were 16 mentioned were both on the North Slope. One was a gas 17 well, Iko Bay number 1, the second one was an oil well, 18 South Simpson 26. And they both -- both failed their 19 pressure tests and have ongoing remedial work actions 20 planned for them. 21 CHAIRMAN FRENCH: How deep was the subject well 22 referring to Nordac and Tiger Eye? 23 MR. QUICK: On that subject well they started 24 their first cement plug at about 5,900 feet and worked 25 their way back to surface with subsequent plugs. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gei.net AOGCC 10/9/2017 17 iviO: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 58 1 CHAIRMAN FRENCH: On the final page of 2 handwritten questions I'm going to ask this. Are you 3 testifying about oil wells or depleted gas wells? 4 MR. QUICK: General testimony was about both 5 types, oil or gas wells. Our cost estimate was based 6 on gas wells on the west side of Cook Inlet. 7 CHAIRMAN FRENCH: And question number 3 was 8 asked and answered. And we're not asking the rest of 9 those questions. 10 So now let me read into the record the 11 questions that Mr. Bankston posed to the Commission, 12 but did not -- we did not pose to Mr. Quick. I'm going 13 to begin on page number 2 of the typewritten questions. 14 Do you believe the NCULs will continue to produce gas 15 in commercially paying quantities. 16 Question number 12. How long do you believe 17 they will continue to produce gas in commercially 18 paying quantities. 19 Question number 14. Have you reviewed the 20 proposal by Aurora Exploration to establish a trust 21 account for funds to plug and abandon the Nicolai Creek 22 unit wells. Do you disagree with that trust account 23 number. 24 Question number 15. Is it not correct that if 25 the wells are not going to have to be plugged in the Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 lTmO: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 59 1 next five years that this blank amount I think for a 2 number -- for -- meaning a certain number, should build 3 sufficient funds to plug and abandon these wells. 4 Question number 16. What evidence do you have 5 or know that Aurora Exploration will not be able to 6 fulfill the requirement for plugging and abandoning the 7 wells. 8 Question number 18. Do you have any reason to 9 believe that Aurora Exploration cannot fulfill its 10 requirements to plug and abandon the Nicolai Creek unit 11 wells. 12 Questions number 21. Have you ever 13 participated in any bond that has been established in 14 excess of $200,000 when the operator of one or more gas 15 wells was transferred from one operator to another, if 16 so what were those circumstances, describe what the 17 limits were? 18 Question number 22. How many operators in the 19 state of Alaska have a bond with the AOGCC in excess of 20 $200,000, who are they, what are the amounts of their 21 bonds. 22 On page 3, question 30. Have you spoken with 23 any member of the AOGCC about your opinions concerning 24 the cost of plugging and abandoning the Nicolai Creek 25 wells, if so when, where, why. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 ITi,,O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 60 1 Question number 31. Auroral Gas operated wells 2 on CIRI land. Do you believe that the costs to plug 3 and abandon the CIRI wells is the same as for the 4 Nicolai Creek unit wells. Compare the wells in the 5 Nicolai Creek unit with the CIRI wells. 6 Finally on this page. Has the cost of plugging 7 and abandoning an onshore gas well in Cook Inlet ever 8 cost $1 million or more, more than $500,000? 9 On the -- on page number 4 I ruled the first 10 question as having been asked and answered. 11 Question number 2 is do the cost estimates 12 provided by Ed Jones have contingency. 13 And then on the final page of handwritten 14 questions, have you ever worked for a small, 15 independent that has a razor focus on efficiency. 16 Question number 3 I ruled was asked and 17 answered. 18 Question number 4. What is the rate of failure 19 for P&A of a shallow, depleted gas well. 20 Question number 5. Mr. Quick, have you read 21 the trust fund proposal. 22 Question number 6. What problems does he 23 foresee, Mr Quick, with the proposal. 24 Those are the questions that were not asked. 25 Let me take a brief recess. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gei.net AOGCC 10/9/2017 I,...O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 61 1 (Off record - 12:25 p.m.) 2 (On record - 12:25 p.m.) 3 CHAIRMAN FRENCH: We're back on the record. 4 That concludes the hearing from our perspective. Mr. 5 Bankston, do you or your clients want to make a closing 6 statement of any kind and after that I'll ask if any 7 members of the public want to testify. 8 MR. BANKSTON: Mr. French, it's my 9 understanding that I was allowed to have Mr. Jones 10 testify after Mr. Quick testified, is that not correct? 11 CHAIRMAN FRENCH: That's completely fine. Yep, 12 if he's -- if he wants to testify that's fine. 13 MR. BANKSTON: All right. So, Mr. Jones, are 14 you available on the telephone? 15 MR. JONES: Yes, I am. 16 MR. BANKSTON: All right. And you've just 17 heard the AOGCC's expert testify and I would just like 18 for you to comment very briefly on that. You're still 19 under oath. 20 MR. JONES: Right. Well, you know, first of 21 all I appreciate Mr. Quick and his expertise. Not 22 having met him, but worked with him remotely and 23 appreciate all the work that he did reviewing our -- 24 the Aurora Gas proposals on the CIRI wells. Let me 25 just add some perspective to a couple of those things. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1....0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 62 1 First of all the CIRI wells, the depth that -- 2 we talked about one of them was indeed a mile deep, but 3 the rest of them were between about 13 -- 150 feet and 4 2,700 feet. And all of those wells had either two and 5 seven -eighths or three and a half inch tubing. And the 6 cross section of those is certainly larger than two and 7 three-eighths and much larger, three times larger or so 8 than coiled tubing. Just to give some perspective to 9 the arguments about that. 10 Also the wells at Nicolai Creek then are 11 actually fairly shallow. They range to do the same 12 technique as we propose for the CIRI wells, the depths 13 would be from 900 feet to 2,400 feet the deepest. And 14 all of those wells with one exception have two and 15 seven -eighths tubing. That one exception has two and 16 three-eighths tubing and a very large casing. 17 And just a couple of other comments. And I -- 18 I'm not sure, I don't know all the details about the 19 wells on the Slope where the technique that we're 20 proposing had failed, but I believe there were some 21 pretty severe circumstances there, extenuating 22 circumstances including perhaps winter weather, higher 23 pressures and the fact that they had some questionable 24 -- the questionable condition of the tubing and casing 25 in there. All of the wells at Nicolai Creek are Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 L...O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 63 1 relatively new or the tubing's relatively new. They 2 have been operated very recently if not operating right 3 now. And we know the condition of the wells is all 4 fairly good. So that certainly reduced the risk 5 somewhat. I mean, I agree that this is a riskier 6 method perhaps than using coiled tubing, but 7 nonetheless I think that there are ways to mitigate 8 that risk and some of those were certainly written into 9 the procedures. 10 Those are just some comments to bring a little 11 perspective, you know, to Mr. Quick's testimony. 12 MR. BANKSTON: Thank you, Mr. French. Thank 13 you, Mr. Jones. Any questions by the Commission? 14 COMMISSIONER FOERSTER: I have one. 15 CHAIRMAN FRENCH: Commissioner Foerster. 16 COMMISSIONER FOERSTER: I have one. You say 17 that the wells have relatively new tubing. Some of 18 those wells have been around since the 1960s so are you 19 saying that in all those wells the tubing has been 20 replaced and if so when? 21 MR. JONES: Yes. All the wells have tubing 22 that has been run since about 2001 or 2002. So the 23 oldest tubing would be from 2001/2002 and it was brand 24 new when it was put in. Some of the wells have even 25 newer tubing than that. Any well that has been Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 1,...0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 64 1 reworked, the tubing's always inspected and a couple 2 times including the Nicolai well with its two and 3 three-eighths tubing, that was replaced completely 4 since then. So all of the -- all of the tubing is 5 relatively new so to speak..... 6 COMMISSIONER FOERSTER: And has the..... 7 MR. JONES: .....in the wells and when it's 8 pulled out generally the condition is quite good. 9 COMMISSIONER FOERSTER: Has the condition of 10 the casing been verified recently as well? 11 MR. JONES: At some point in time now not 12 recently. Several of the -- several of the wells are 13 fairly old, the casing to a degree in the Nicolai 1, 2 14 and 3 wells are -- is fairly old and those have had 15 casing inspection logs or some sort of casing log run 16 on them. Now we know that the number 2 well had had 17 some problems and that was correct -- those problems 18 were corrected with a casing patch. So there's a 19 casing patch in that particular well across the only 20 known problem in that well. And that problem was 21 actually not so much with casing, but with squeezed 22 perfs that were done back in the 190s I believe. So we 23 believe that the condition of all of the Nicolai Creek 24 wells, the tubulars, is fairly good. 25 COMMISSIONER FOERSTER: Thank you. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1....0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 65 1 CHAIRMAN FRENCH: Other questions, Commissioner 2 Foerster? 3 COMMISSIONER FOERSTER: That's it. 4 CHAIRMAN FRENCH: Commissioner Seamount, any 5 questions? 6 COMMISSIONER SEAMOUNT: I have none. 7 CHAIRMAN FRENCH: Mr. Bankston, any closing 8 remarks? 9 MR. BANKSTON: Yes. I will try to make them as 10 brief as possible. Although lawyers do do brief 11 statements, it's difficult. 12 I appreciate, my client appreciates the 13 opportunity to appear in front of this Commission. 14 It's the first time I've had the opportunity to appear 15 in front of you. And Mr. Ballantine explained to me 16 the procedure that was going to be followed today and 17 therefore I managed to have a few questions for your 18 expert. 19 I looked through the statutes over the weekend 20 and I want to emphasize the first thing that prior 21 order which I gave you a copy of, order number 125, was 22 completed voided by the bankruptcy. So what happened 23 today, my clients would have enjoyed sitting down with 24 your expert, with their expert, their cost estimates, 25 and developing what has happened today. Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I. _ .J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 66 1 Now it is very clear to me that this procedure 2 that Mr. Ballantine -- I was puzzled by this procedure 3 because it was not following the Administrative 4 Procedures Act. And then I saw that the Commission, 5 and I'd like to file this with the Commission if I may. 6 CHAIRMAN FRENCH: Please. 7 MR. BANKSTON: So since this -- CIRI did not 8 choose to protest the motion for reconsideration, 9 didn't follow the Administrative Procedures Act, it 10 appears to me that that's perfectly what your procedure 11 is. And then this must be -- what you must decide then 12 because it didn't follow the APA is that the 13 application applies to a single well or a single field. 14 So that's what you are to decide today is that you are 15 to take what has been presented in front of you and 16 apply that to the Nicolai Creek field, nothing else. 17 This is not -- all right. 18 Now let's look at what you have today. If you 19 don't approve what we have proposed and it's 20 interesting that we have proposed something different 21 and I've really -- it's not what we proposed initially. 22 We've proposed building a sinking fund. So you have -- 23 if I can use the standard 500/$200,000 bonding in 24 establishing a sinking fund. These wells -- so once 25 you establish that sinking fund and that's with an Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 L —O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 67 1 interaction with this very agency as to what it's going 2 to cost to plug and abandon these wells. So with the 3 facts you have before you about this particular field 4 it seems that the cost of plugging and abandoning these 5 six wells has been met, there's no other evidence about 6 the Nicolai Creek wells before you. 7 If you want to look at the state of Alaska's 8 broad perspective look at what you have. If you don't 9 approve this transaction there are nine wells and you 10 -- that you're going to have to deal with. Three that 11 aren't on the Nicolai Creek and the six on Nicolai 12 Creek. The evidence that you have before you from the 13 AFE which we submitted and your expert didn't submit 14 any of his AFEs, we've come to find out those AFEs from 15 his very own testimony deal with North Slope wells. 16 And those wells are probably either old cars as one of 17 the Commissioners has said that are beside the road, 18 this is not a old car at the side of the road, these 19 wells are pumping. But from the state of Alaska's 20 perspective you'd have nine wells. It's going to cost 21 between -- the testimony is unrebutted, it's going to 22 cost between 100,000 and 200,000 for those wells. So 23 with three wells that -- if you approve this procedure 24 with three wells that are going to wind up 25 unfortunately because of the bankruptcy then you have a Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 1,.._O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 68 1 300,000 to 600,000 exposure and you have $700,000 to 2 protect the state. If you don't approve it you have 3 nine wells so you have $900,000 to $1.8 million and so 4 you're automatically in the hole. 5 So it seems my client has met any burden that 6 you could rationally impose by establishing a fund to 7 provide for a financial contingency in the future. And 8 based upon your procedures which I didn't object to my 9 lack of the ability to cross examine your witnesses or 10 because that's your procedure, you're to focus on this 11 Nicolai Creek unit. And I don't think that you can 12 extrapolate what -- if you want to say well, your 13 expert should be better believed than Mr. Jones, I have 14 a phrase that I developed a long time ago, experience 15 is the greatest teacher because it's test first and 16 it's lesson second. So your own expert does not really 17 dispute those numbers, he says well, they could be a 18 little bit lower, you know. But it doesn't matter, you 19 must understand that. It does not matter because these 20 people are going to take money out of their pockets and 21 put it in a fund for -- to satisfy that contingency. I 22 can't think of any other rationale basis that you can 23 say unless you want to which you've already tried by 24 your order 125 in the bankruptcy court. And I've only 25 been practicing law 46 years in Alaska and quite Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net AOGCC 10/9/2017 1....0: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 69 1 frankly I've never seen that happen before where the 2 bankruptcy court said to the state agencies order was 3 void. 4 So I don't see -- Okay. So that's why our clients wanted to sit 5 down and talk to you about it. So it seems under any 6 rationale basis that my clients meet that standard, 7 they meet every standard, the money will be there to 8 plug and abandon these wells. Let's do what you might 9 call -- lawyers would call a demurral which means or 10 dismiss. Let's take every argument that your expert's 11 got, every one of them, he'll say well, these wells, 12 it's going to cost $700,000 or $800,000 to abandon. 13 Let's say he's right and with his experience and 14 background you're going to take his testimony which is 15 your own expert and you don't want to for various 16 reasons take any exception to your own expert. It 17 doesn't matter because if you sit down and that's the 18 actual cost that you come to with these people in the 19 future, you're going to accrue that cost in a sinking 20 fund. 21 So I don't see -- I mean, I was thinking about 22 how to approach this with you. All of this is almost a 23 mathematical certainty. I -- when I was taking 24 calculus it's really -- the E to the X is always E to 25 the X. My people have satisfied under any rationale Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 I1 -..J: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 70 1 basis the concerns that this Commission can have. And 2 if you want to -- suppose you use an administrative law 3 technique and, you know, go back into your cloistered 4 halls and come back with a decision and say well, you 5 know, it was a million dollars before, now it's 6 $700,000, you know, you shouldn't use this proceeding 7 and I think under the law you can't use this 8 proceeding, to change the entire approach of Alaska. 9 This is not -- there are 8,300 wells been drilled in 10 Alaska, are you going to require each well, are you 11 going to require that BP, ConocoPhillips and all those. 12 And another thing that's interesting enough, if my 13 client, if my client were one of those BPs, you know, 14 one of those huge companies, all -- many huge companies 15 go broke. If you look over the operators that have 16 been approved in Alaska, Texaco is an operator. Until 17 Texaco went bankrupt would you have sat here and denied 18 Texaco and gone through all this procedure? No, you 19 wouldn't have done that. You know, BP came close to 20 going broke a few years ago and we had one blowout. So 21 again when you look at what's been presented to you, 22 when you look at what you have before you, and you look 23 at the mechanism which I don't think anybody else has 24 with Alaska Oil and Gas Commission and you can 25 certainly do that in the future, I think our clients Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net 1 AOGCC 10/9/2017 L..,O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 Page 71 1 have met their burden and you should allow this 2 proceeding to go forward, you know. And like I said 3 these wells will keep producing, they will provide 4 money to the state of Alaska, goodness knows Alaska 5 recently indicated it had the most money of any other 6 state, we don't spend it. 7 So therefore we request that you grant our 8 application, that you require the trust fund, require 9 the bonding level and we proceed. 10 Thank you. 11 CHAIRMAN FRENCH: Mr. Bankston, thank you. Let 12 me ask before we close the hearing whether there's any 13 other member of the public who would like to be heard 14 on this question in the room or online? 15 (No comments) 16 CHAIRMAN FRENCH: Hearing and seeing none, with 17 that at 12:35 we're going to adjourn. Thank you. 18 (Hearing adjourned - 12:35 p.m.) 19 (END OF PROCEEDINGS) 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email: sahile@gci.net AOGCC 10/9/2017 1. _..O: AURORA EXPLORATION, LLC DOCKET No. OTH-17-024 1 C E R T I F I C A T E 2 UNITED STATES OF AMERICA ) )ss 3 STATE OF ALASKA ) 4 I, Salena A. Hile, Notary Public in and for the 5 State of Alaska, residing in Anchorage in said state, 6 do hereby certify that the foregoing matter in Docket 7 No.: OTH 17-024 was transcribed to the best of our 8 ability; 9 IN WITNESS WHEREOF I have hereunto set my hand 10 and affixed my seal this 10th day of October 2017. 11 12 Salena A. Hile 13 Notary Public, State of Alaska My Commission Expires: 09/16/2018 14 15 16 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907-243-0668 135 Christensen Dr., Ste. 2., Anch. AK 99501 Fax: 907-243-1473 Email sahile@gci.net NAME STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Docket No. OTH-17-024 Application for Reconsideration October 9, 2017 at 10:00 am AFFILIATION Testify (yes or no) 4A Fmk PAJ L ti KIP � pluk Iti KCI`I �Ir�9t (SN:R, 006-1(,(- t13 pro( ---7 C G 1J n "�A+vYr tiva Y.::+ ii � A9x OCT u all (,) r AOGCC STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: ) Change of Operator Form ) Form 10-411 ) Docket No. OTH-17-024 Nicolai Creek Gas Field ) SOLE APPLICATION OF AURORA EXPLORATION'S REQUEST TO BE AN OPERATOR U p As has been transmitted by the Alaska Attorney General's office, the hearing on y�l N October 9`1i is not a hearing under the Administrative Procedures Act (APA). Since it is not x O ° S N a hearing under the APA it must be "an action by the Commission... that has application 3 Ama Q a J rn Y - a to a single well or single field." AS 31.05.060(b) Z y 7 iC �i0 ; 5 a . a Therefore, today's discussion only applies to the Nicolai Creek Unit, does not have Z `Q - I N o statewide implication, and is not precedent for the AOGCC. a 3 r This is not the hearing that will determine future state bonding for any other z �a8 plugging and abandoning for any other well, fields, or units. z DATED at Anchorage, Alaska this 9`I' day of October, 2017. BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Aurora Exploration, LLC 2�-44a� By: William M. Bankston AK Bar No. 7111024 wbankston@bgolaw.pro Page 1 of 2 A486M MOGMSOLEopemtor 4 RECEIVED OCT 0 4 2017 STATE OF ALASKA AOGCC ALASKA OIL AND GAS CONSERVATION COMMISSION RE: ) Change of Operator Form ) Form 10-411 ) Docket No. OTH-17-024 Nicolai Creek Gas Field AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION U FOR TRANSFER OF OPERATOR'S AGREEMENT a M L BACKGROUND N x o N Aurora Exploration, LLC (AE) filed before the Alaska Oil and Gas Conservation y N o ° Commission (AOGCC) a request to replace Aurora Gas, LLC as the designated operator �..A N U. z r a for the Nicolai Creek Unit (NCU). AE offered to post a $200,000 bond to the AOGCC, Z 0,6, �O z N coupled with a $500,000 bond to the Alaska Department of Natural Resources, Oil and Gas ON Division (DNR). This would have given the State of Alaska $700,000 of protection at the FNCU, and would have freed up the existing $700,000 of protection AG has with the State d z ~ for use other than at the NCU. � Despite the lack of any substantive discussion between AE and AOGCC, AOGCC ai entered its August 31, 2017 Decision and Order (Order 125). AE filed a Request for Reconsideration on September 15, 2017, based upon three grounds: (1) AOGCC arbitrarily conditioned its approval of change of operator from Aurora Gas to AE on the requirement of AE plug and abandon the three Three Mile Creek Unit wells that AE has no control over, no responsibility for, and in violation of the United States Bankruptcy Code; (2) AOGCC failed to consider DNR's requirement for establishing a trust fund for the State of Alaska's further protection; and AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page I of 9 A4860\1 \AOGCC\MOTdetemiinationAOGCC (3) AOGCC's requirement for a $6 million bond is not reasonable or based upon any articulated facts, and appears to be a decision unsupported by the actual costs of plugging and abandoning these wells. In support of its request for reconsideration, AE provided a copy of the draft DR&R agreement containing language that would require AE to obtain AOGCC's approval prior to finalizing the DR&R's monetary provisions (simply stated, AE would not be able to settle up with DNR until AOGCC signed off that the wells had been properly plugged and abandoned). AE also filed the affidavit of J. Edward Jones in which he indicated the �j estimated cost to Plug and Abandon similar wells in adjacent native lands ranged from a' $100,000 to $250,000 and the affidavit of Paul L. Craig documenting much lower bonding N requirements in other oil and gas producing providences. Gx N Additionally, AE articulated an argument of waste prevention and further argued the yN 0,00 H m = a AOGCC could, and should, use its statutory right to a variance from the public hearing z U. z ; d a procedures to issue a replacement Order prior to closing of the AE transaction to avoid 2 a<6AIm a g o , unduly postponing — or terminating — operations at the Nicolai Creek Unit. Finally, AE documented the simple mathematics of the situation which clearly ZO tOac F demonstrate the State is better off supporting AE's proposed acquisition and posting of additional bonds than to allow the transaction to go unconsummated and be faced with p� more plugging exposure and less bonding. The AOGCC granted reconsideration on September 19, 2017 and set a hearing on reconsideration for October 9, 2017. Simultaneously with AE's request for AOGCC's reconsideration, AE moved in the Bankruptcy Court that AOGCC Order 125 was a violation of the automatic stay and was discriminatory. After briefing by AE and the State of Alaska, the Bankruptcy Court issued AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 2 of 9 A4860\1 \AOGCC\MOTdetemmnationAOGCC I A copy of this Order and Memorandum (Docket 321) is attached. 2 Affidavit of Ed Jones 10/4/17. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 3 of 9 A4860\ 1 \AOGCC\MOTdetermutationAOGCC its September 25, 2017 Order (Docket 322, hereafter Bankruptcy Order).' The Bankruptcy Court's Order renders AOGCC's Order 125 void. II. AE's CURRENT POSITION AND PROPOSAL I. The Bankruptcy Court has legitimized AE's first grounds for appeal. Because AOGCC's Order 125 is void, there is no reason to hold any hearing on October 9`h. AE proposes the AOGCC consider a solution to the issue of adequate bonding which would be similar to DNB's DR&R Agreement. A draft Plugging and Abandonment Agreement "P&A Agreement" which AE would be willing to support is included herein. �j 2. AE reiterates the AOGCC should consider the additional protection the State p" achieves with the latest version of the DNR's DR&R agreement and states for the record, N its willingness to incorporate DNR's proposed language in the DR&R Agreement that will x N require AOGCC's sign -off that wells have been properly plugged prior to finalization i'�NOO U' 3 NY X a of the monetary settlement. z .4Z2LL z W d < . —°o, 3. As additional support for AE's third grounds for reconsideration, AE 26 21 a supplements the affidavit of J. Edward Jones with two Authority for Expenditures (AFE's) 3 N X IQs for the plugging and abandonment of wells on CIRI/TNC lands AFE's are a projection E_ of the project costs supported by vendor bids and operational experience. The first AFE x ~ z documents what Mr. Jones perceives to be the estimated cost to plug and abandon wells Aspen 41, Lone Creek 43, Moquawkie 44 and Kaloa #2. These wells represent the lowest projected cost abandonments. The second AFE documents the estimated cost to plug and abandon the Simpco Moquawkie #2 well and represents the highest projected cost abandonment. Sundry notices for these wells have been submitted to and approved by the AOGCC. III. DRAFT P&A AGREEMENT TERMS AE proposes the following P&A Agreement terms: I A copy of this Order and Memorandum (Docket 321) is attached. 2 Affidavit of Ed Jones 10/4/17. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 3 of 9 A4860\ 1 \AOGCC\MOTdetermutationAOGCC GENERAL TERMS 1.1 The following terms are a supplement to the $200,000 operator bond to be posted by Aurora Exploration (AE) at closing when it purchases the six wells within the Nicolai Creek Unit (NCU) from Aurora Gas (AG). These terms apply to the plugging and abandonment (P&A) of the six gas wells at the Nicolai Creek Unit (NCU). The procedures proposed and performed for purposes of P&A of the NCU wells will meet all standards for such operations established by the AOGCC. 1.5 If, on a Reassessment Date, the corresponding P&A Remaining Requirement for AE is negative, then AOGCC shall authorize a partial release of the P&A Trust Account balance back to the AE within ninety (90) days after the corresponding Contribution Date. Provided the P&A Remaining Requirement for AE is negative, the AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 4 of 9 A4860t 1 \AOGCC\MOTdeterminationAOGCC 1.2 On or before July 1, 2019, AE shall establish the P&A Trust Account with Bank with AOGCC as the sole beneficiary and manager of the account. U 1.3 Within thirty (30) days after July 1, 2019, and based on the P&A 0. Estimate developed by a qualified arm's-length consultant, contracted through AE and co cl approved by AOGCC, AE shall make Contributions to the P&A Trust Account for the sole and exclusive purpose of fully funding the P&A Trust Account. x Q MON MON 2WO o c 1.4 AMOUNT OF THE CONTRIBUTION (Note: "Reassessment Date" A,o x e 3 4=; as used below means the due date, occurring every three years and starting on March 1, -z .Z Z u LL „ 2019, by which Aurora Exploration must provide updated P&A Estimates to DNR for ' d a ' in E<Ora the Leases. Reassessment Dates will continue until the P&A Obligations are met to the O .r° c satisfaction of the AOGCC. a 3 u N Z Z oao 1.4.1 The Contribution for AE will be determined as follows: F d P&A Remaining x z Contribution _Requirement at year t � t = 0, i, 2, at year t 5 — t 3, 4 Where i refers to the year of the Contribution Date. In particular, t = 0 corresponds to 2019 and t = 4 corresponds to 2023. 1.4.2 If the ratio of the Cumulative P&A Estimate provided at any Reassessment Date to the most recent Cumulative P&A Estimate is greater than or equal to 1.3, then a new five-year period shall begin for the purpose of calculating the Contributions. 1.5 If, on a Reassessment Date, the corresponding P&A Remaining Requirement for AE is negative, then AOGCC shall authorize a partial release of the P&A Trust Account balance back to the AE within ninety (90) days after the corresponding Contribution Date. Provided the P&A Remaining Requirement for AE is negative, the AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 4 of 9 A4860t 1 \AOGCC\MOTdeterminationAOGCC amount to be released by AOGCC from the P&A Trust Account shall be equal to the amount in excess of the corresponding P&A Requirement. 2. PROVISIONS RELATED TO THE P&A TRUSTACCOUNT 2.1 ACCOUNT REQUIREMENTS. 2.1.1 AE shall establish the P&A Trust Account with AOGCC as sole beneficiary with a bank or other financial institution authorized to do business in the State of Alaska within sixty (60) days after the Effective Date. The form and terms of the P&A Trust Account must be acceptable to the AOGCC, consistent with this Agreement, and recognize that the sole and exclusive purpose of the account is to provide funds to cover the P&A Obligations associated with the Leases. All written agreements with the U a+ bank or financial institution pertaining to the account will be attached to and become a part of this Agreement. AE is solely responsible for all costs and fees associated with the 94 establishment and maintenance of the account. S S N 0 o s 2.1.2 AE shall cause the earnings on the amounts deposited in the P&A Trust Account to be deposited 3 M c C9 ANY.°' a and retained within the P&A Trust Account. z ° d "'-,Do3 LL c z ; d a Im 2.1.3 The P&A Trust Account will run with the Leases for the benefit of the State. If the Leases are further assigned under 11 AAC 82.605, a os c 1 all the funds in the P&A Trust Account shall remain in that account to be used by AOGCC or a 3 c ^ any approved assignee to fulfill the P&A Obligations. Z o<g O fO 9: 2.1.4 Upon the incapacity of the bank or other financial institution x administering the P&A Trust Account, by reason of bankruptcy, insolvency, or suspension or revocation of a charter or license, AE will be considered in material breach of this Agreement. If such a breach occurs, AOGCC will provide AE written notice of the breach and request that the AE remedy it. If AE fails to remedy the breach to AOGCC's satisfaction within forty-five (45) days after the notice, AOGCC may take whatever legal action it deems reasonable to protect and enforce its rights under this Agreement, the Leases, any applicable Unit Agreement, and applicable statutes and regulations. 2.2 LATE PAYMENT FEES. AOGCC will assess a late payment fee at the rate set out in AS 38.05.135(d) if a Contribution is not made according to the provisions of section 3 by the tenth day after it is due. The AOGCC Commissioner may, for good cause, grant an extension of time for AE to make a payment, without incurring a late payment fee, of up to, but not more than sixty (60) days. An extension request must be received by the AOGCC Commissioner in writing no less than thirty (30) days prior to the payment due date, with a copy of the request sent to the Director of the AOGCC Division of Oil and Gas. The AOGCC Commissioner will notify AE in writing at least seven (7) AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT A4860\ 11A0GCC\M0Tde1erminationA0GCC Page 5 of 9 days before the payment due date as to whether the extension request is approved or disapproved. 2.3 EXCESS EXPENDITURES. Nothing in this Agreement is intended to limit the P&A Obligations. AE shall be liable for its corresponding share of the P&A Obligations even if meeting these obligations results in expenditures exceeding the available balance of the P&A Trust Account. 2.4 AOGCC may, at its sole discretion, use any funds in the P&A Trust Account for any of the P&A Obligations associated with these wells. 3.5 Prior to the last funds being released from the P&A Trust Account, AE shall document to AOGCC that it has satisfied all P&A Obligations in accordance with the approved P&A Plan, and in compliance with the Leases, and applicable statutes and regulations. AOGCC shall then and only then provide AE with a letter of compliance regarding fulfilling all aspects of P&A the wells. AE shall submit this letter to DNR as required in DNR's DR&R Agreement. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 6 of 9 A4860\ 1 \AOGCC\MOTdetentinationAOGCC 3. P&A PLAN — RELEASE OF FUNDS 3.1 Prior to commencing any work to fulfill the P&A Obligations a+ under this Agreement, AE shall submit a P&A Plan to AOGCC for approval. AOGCC will approve or disapprove the P&A Plan in writing. If AOGCC disapproves the P&A Plan, d x M N AOGCC will explain in reasonable detail the reason(s) for its disapproval. AOGCC may C b request additional information from AE to aid its review of the P&A Plan. 2W oo 0 z° j w x M a 3.2 AE may request the release of funds from the P&A Trust Account to z;da,0, "_ A LL 9 execute an approved P&A Plan. z`QIm^q N o 3.3 To request partial release of funds from the P&A Trust Account, a 3 N AE shall submit invoices or expense receipts to AOGCC for reimbursement of expenditures z o a` o associated with the P&A Obligations, along with proof that the relevant activities have O F been satisfactorily completed in compliance with the terms of the P&A Plan. AE shall include a statement certifying that all applicable activities have been completed in z accordance with the approved P&A Plan. 3.4 AOGCC will evaluate requests to release funds from the P&A Trust Account, and either approve or disapprove the release of funds in writing. If AOGCC disapproves a request to release funds, AOGCC will explain in reasonable detail the reason(s) for its disapproval. 3.5 Prior to the last funds being released from the P&A Trust Account, AE shall document to AOGCC that it has satisfied all P&A Obligations in accordance with the approved P&A Plan, and in compliance with the Leases, and applicable statutes and regulations. AOGCC shall then and only then provide AE with a letter of compliance regarding fulfilling all aspects of P&A the wells. AE shall submit this letter to DNR as required in DNR's DR&R Agreement. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 6 of 9 A4860\ 1 \AOGCC\MOTdetentinationAOGCC 3.6 AOGCC may demand payment, in writing, from the P&A Trust Account if (i) P&A activities are not conducted in compliance with the P&A Plan as approved by AOGCC or (ii) AE is in breach of this Agreement; provided, however, that if AE or another person agrees to comply with the conditions of the AOGCC-approved P&A Plan, the payment may be postponed. Notwithstanding the foregoing, AE will have thirty (30) days to cure any breach that would entitle AOGCC to demand payment. 4. BREACH — REMEDIES and CURE 4.1 Any one of the following events will be a breach under this Agreement subject to whatever legal action AOGCC deems reasonable to protect and enforce its rights under this Agreement and the Leases: (a) AE fails to comply with a material obligation or condition under this Agreement; (b) AE is deemed to be in breach of this Agreement under Section 4.1.4 above; or (c) AE has become insolvent, an application p" for adjudication in bankruptcy has been filed by or against AE, or an application for gn assignment, composition, extension or receivership has been filed by or against AE. S 4.2 If a breach occurs other than a breach deemed to have occurred under 0 3 S o Section 4.1.4 above under this Agreement, and AE, after due notice from AOGCC, fails to zd 3 cure the breach, as provided in the notice, AOGCC will notify the bank or other financial Z ; d a" o institution administering the P&A Trust Account under this Agreement that a breach has o *E 4,^ a occurred. AOGCC will send a copy of its notice of uncured breach to AE. After AOGCC W. a � a n � has provided the uncured breach notice to AE, AOGCC may withdraw from the P&A Trust g Account funds equivalent to the Sum of Previous Contributions to cover AE's share of the z m a 9 P&A Obligations, without any requirement to seek recourse to judicial proceedings and E F without demand, appraisal, advertisement, or notice of any kind, all of which are hereby expressly waived by AE. z t4 PQ IV. PROCEDURAL POSTURE The schedule established by the bankruptcy court to close the purchase of the NCU by AE is time limited. Because of AG's financial condition, if the transaction does not close very quickly, the purchase agreement will become void and the bankruptcy proceedings will end without the sale of the NCU to any party. Therefore, AE does not request any hearing, order, or decision by the AOGCC that can be appealed. AE requests a variance to be issued by the AOGCC incorporating its proposal without any changes proposed by the AOGCC and accepted by AE. The requirement to keep the wells operational coupled with the limited time to close the bankruptcy transaction establishes AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 7 of 9 A4860\1 \AOGCC\MOTdetenninationAOGCC By: William M. Bankston AK Bar No. 7111024 wbankston@bgolaw.pro 3 Attached to AE's Request for Reconsideration supplemented by Ed Jones Affidavit 10/4/17. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 8 of 9 A4860\ I \AOGCC\M 0Tde1emmna1,0nA000C this variance is in the best interests of the State, will prevent undue delay of operations at the NCU, and will prevent waste. The statutes which govern the AOGCC require a reasonable and rational basis for the AOGCC to act. The only information that the AOGCC has at the present time as to the cost of P&A is the Affidavit of Ed Jones .3 The establishment and funding of the proposed P&A Trust Account, will adequately protect the State of Alaska. V. CONCLUSION �j Therefore, AE requests that p 1. The hearing scheduled for October 9ffi be cancelled. N2. That AE enter into good faith discussions with the AOGCC concerning the x o�� moN transfer of the operator for the NCU. 3 0 N a y x 3. That those discussions include the posting of a $200,000 bond to the z zL ; d a" AOGCC, in addition to the $500,000 bond to the DNR and establish the proposed P&A a <> e N Agreement including a P&A Trust Account. �a o U N 4. The AOGCC issue a variance to grant the assignment of the operator of the F NCU from AG to AE with the conditions agreed upon by the AOGCC and AE. cc z For these reasons, AE requests that this matter be placed for immediate consideration by the AOGCC. DATED at Anchorage, Alaska this 4`h day of October, 2017. BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Aurora Exploration, LLC By: William M. Bankston AK Bar No. 7111024 wbankston@bgolaw.pro 3 Attached to AE's Request for Reconsideration supplemented by Ed Jones Affidavit 10/4/17. AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 8 of 9 A4860\ I \AOGCC\M 0Tde1emmna1,0nA000C 0 z z Z 0 L z 0 F x z _. I HEREBY CERTIFY that a true and correct copy of the foregoing was served upon the following on the 4' day of October, 2017: Cathy P. Foerster, Commissioner (hand delivered) AOGCC 333 W. 7h Avenue Anchorage, Alaska 99501 Cabot Christianson cabot@cclawyers.net Tab A. Ballantine tab.ballanlMieO.al: Vozar AURORA EXPLORATION, LLC'S MOTION FOR NON -ADJUDICATORY DETERMINATION FOR TRANSFER OF OPERATOR'S AGREEMENT Page 9 of 9 A4860\ I \AOGCC\MOTdetermuiationAOGCC ease lb-uulsu L)' Szz rnea UUlZbrll tnrerea uwi t lb:uy:_Lb uesc iviain Document Page 1 of 1 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA In re: Case No. A 16 -00130 -GS AURORA GAS, LLC, Chapter 11 Debtor. ORDER GRANTING MOTION FOR ORDER RE: ALASKA OIL AND GAS CONSERVATION COMMISSION (AOGCC) BOND On September 21, 2017, at 1:30 p.m. this courtheld a hearing on Aurora Exploration, LLC's Motion for Order re: Alaska Oil and Gas Conservation Commission (AOGCC) Bond (ECF No. 29 1) (Motion). Appearances were as noted on the record. After considering the papers filed in support of and in opposition to the Motion, the argument of the parties on the record, for the reasons stated on the record and in this court's concurrently -entered memorandum decision on the Motion, with good cause appearing, IT IS HEREBY ORDERED that the Motion is granted, with relief limited to this court's finding that the Decision' is void. DATED: September 26, 2017. BY THE COURT /s/ Gary Snraker GARY SPRAKER United States Bankruptcy Judge Serve: D. Bundy, Esq. R. Crowther, Esq. C. Christianson, Esq. K. Perkins, Esq. E. LeRoy, Esq. ECF Participants per NEF 'Capitalized terms utilized but not defined herein have the meaning assigned to them in this court's enneurrently-entered memorandum decision on the Motinn. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/1 / 16:00:42 Desc Main Document Page 1 of 14 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ALASKA In re: AURORA GAS, LLC, Debtor. Case No. A16 -00130 -GS Chapter 11 MEMORANDUM ON MOTION FOR ORDER RE: ALASKA OIL & GAS CONSERVATION COMMISSION (AOGCC) BOND At the time it filed its petition, debtor Aurora Gas, LLC (Aurora Gas) operated 19 oil and gas wells in southcentral Alaska's Cook Inlet.' Aurora Gas leased ten wells from Cook Inlet Regional Inc. (CIRI),2 and nine wells from the State of Alaska (State).; For purposes of this memorandum, the court will refer to the leases with CIRI collectively as the "CIRI leases." However, the wells leased from the State are separated into two distinct groups based upon their locations. Three of the State's leased wells are located in the Three Mile Creek unit.' The remaining six wells leased from the State are located in the Nicolai Creek Unit.' The debtor's efforts to reorganize have not proceeded as originally hoped. During the bankruptcy it has incurred significant losses which effectively preclude it from reorganizing. On March 24, 2017, the United States Trustee (UST) filed a motion to dismiss or convert the bankruptcy First Amended Disclosure Statement, ECF No. 179 at 5. ECF No. 223. ECF No. 291-2. G Id. 5 Id. Case 16-00130 Do, 321 Filed 09/26/17 Entered 09/26,_1 16:00:42 Desc Main Document Page 2 of 14 case.' In response to that motion the debtor attempted to sell its assets.' During this process, the debtor realized that it would not be able to sell its nonoperational wells, and began temporarily plugging those wells as it reduced its operations. This included all of the wells leased from CIRI except a disposal well, and the three Three Mile Creek wells leased from the State. Based upon its financial condition, however, the debtor has made it clear that it does not have the resources to permanently "plug and abandon" those wells as required under the leases. The parties have continued the hearing on the UST's motion to dismiss several times during this process, recognizing the benefit of having the debtor properly close its operations, while closely monitoring the debtor's progress and finances.' As part of the process, Aurora Gas sought, and obtained court approval, to reject nine leases with CIRI, and the three leases with the State for the Three Mile Creek wells.' While closing the non -operational wells, Aurora Gas continued its efforts to sell the operational wells in the Nicolai Creek unit. The Nicolai Creek wells remain operational, and continue to generate limited revenue for the debtor which has funded the closing of the non- operational wells. Aurora Gas has informed the court that upon resolution of the approved sale it will not oppose the UST's motion to dismiss or convert. The debtor procured an offer from Aurora Exploration, LLC (AE) to purchase five oil and gas leases with the State for wells in the Nicolai Creek Unit, and various personal property, free and clear of liens, for $100,000.70 On August 22, 2017, the court entered its Order Granting Motion for ' ECF No. 170. ' ECF Nos. 178-179. ' ECF Nos. 191, 205, 209, 215, 226, 243, 261, 263, 281, 297. 9 ECF No. 298. 10 ECF No. 267. 2 Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26,,7 16:00:42 Desc Main Document Page 3 of 14 Authority to Assume and Assign Certain Mineral Leases and Sell Related Assets Free and Clear of Liens (Order) approving the sale," including assumption and assignment of the debtor's interests in the five Nicolai Creek oil and gas leases.12 The Order provides that the State must approve all transfers of the debtor's oil and gas leases, and for this reason the sale was expressly made "subject to approval of the State of Alaska."" In recognition of the State's authority over the leases, the Order further provides, "[t]he failure of the State of Alaska to approve assignment of the Mineral Leases on terms acceptable to AE shall nullify the Transaction and all parties shall be restored to their positions as of the date of the entry of this Order.s14 AE filed its change of operator form with the Alaska Oil and Gas Conservation Commission (AOGCC) to "substitute itself for Aurora Gas ... as operator of record for the Nicolai Creek Gas Field."" Relevant to the matter before the court, the AOGCC is the state agency statutorily authorized to require "the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste."" AE requested that it be allowed to post a bond of $200,000 as security for the performance of the plug and abandonment obligations under the leases it was acquiring from Aurora Gas.' " ECF No. 280. '2 The leases are identified in Exhibit A to the Motion to Sell Leases and Related Assets Free and Clear of Liens (ECF No. 267-1). " ECF No. 280 at 2. is Id. " ECF No. 291-2 at 1. 16 AS 31.05.030(4)(4). " ECF No. 291-2. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26,-, 16:00:42 Desc Main Document Page 4 of 14 On August 31, 2017, AOGCC entered its Decision and Order on AE's request that it be substituted for Aurora Gas on the Nicolai Creek Unit leases (Decision)." The Decision is short and to the point: Aurora Gas is currently the operator of nine wells on state lands. Three ofthose wells are shut in and need to be plugged and abandoned: Three Mile Creek Unit (TMCU) 1, TMCU 2 and Three Mile Creek 3. The other six wells - Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCU 10 and NCU I 1 - are capable of production. Aurora Exploration's change of operator form only seeks to be named operator for the wells involved in production and excludes the wells which need to be plugged and abandoned. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate" is $1,000,000 per well, roughly $6,000,000. Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000. The AOGCC cannot, consistent with its duty to require a bond sufficient to cover the estimated cost to plug and abandon the wells, accept a $200,000 blanket bond on all six wells. Aurora Exploration's request for a $200,000 blanket bond is denied. AOGCC will not approve the change in operator unless Aurora Exploration agrees to one of the following: 1) A bond in the amount of $200,000 and Aurora Exploration's agreement to plug and abandon the three Three Mile Creek wells within six months of AOGCC's approval of the change of operator form, or '" Id. " In the Decision, the AOGCC refers to six Nicolai Creek wells AE allegedly seeks to operate. This court's Order incorporated the list of mineral leases attached to the sale motion as Exhibit A, which identified the five Nicolai Creek leases the debtor was assuming and assigning to AE with the sale: lease nos. ADL017585;ADL017598;ADL063279;ADL391471;and ADL391472. SeeECFNo.267-1. Additionally, in its motion to reject certain leases, the debtor described the Nicolai Creek Unit as consisting of "five wells/leases." ECF No. 268 at 2. This court cannot be certain based on the evidence presented whether a discrepancy between the Decision and the sale order exists, because the Decision references individual wells while the sale motion addressed leases, which potentially could each include more than one well. For the purposes of the present Motion any discrepancy is not material. Case 16-00130 Dot; 321 Filed 09/26/17 Entered 09/26,-716:00:42 Desc Main Document Page 5 of 14 2) A bond in the amount of $6,000,000, to be posted over a three-year period, $2,000,000the first year, anadditional $2,000,000 the second year, and an additional $2,000,00020 Roughly a week later, AE filed its Motion for Order re: Alaska Oil & Gas Conservation Commission (AOGCC) Bond (Motion) in this court.21 AE charges that the AOGCC impermissibly discriminated against it based upon Aurora Gas' bankruptcy under § 525(a) of the Bankruptcy Code. Section 525(a) provides in relevant part: a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against ... a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title ... or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.7z On September 15, 2017 AE filed a supplemental memorandum in support of its Motion (Supplement),23 in which it maintains that the AOGCC's Decision also violated the automatic stay.24 Specifically, it argues that the bond requirements constitute; (1) the commencement of a proceeding against the debtor to recover a claim, (2) an act to exercise control over property of the estate, and (3) an act to collect a prepetition claim .25 20 Id. " ECF No. 291. 22 11 U.S.C. § 525(a). 23 ECF No. 303. 24 11 U.S.C. § 362(a)(6). " 11 U.S.C. § 362(a)(1), (3), and (6). Case 16-00130 Doi, 321 Filed 09/26/17 Entered 09/26,_, 16:00:42 Desc Main Document Page 6 of 14 AE now asks that this court order the AOGCC to accept the transfer of the Nicolai Creek leases based upon the posting of $700,000 in bonds to secure the obligation to plug and abandon those wells upon termination 26 Aurora Gas has joined in the Motion." The State opposes the Motion on a number of grounds 28 First, it argues that this court lacks jurisdiction to decide the Motion. Second, it contends that the sale documents and Order preclude the relief AE now seeks. Third, it argues that AE has misstated the availability of Aurora Gas' pre-existing $200,000 bond29 and the terms of the court -approved sale to AE, and thus AE's request for transfer of the debtor's pre-existing bond to AE must be denied. Fourth, it argues that § 525 cannot apply to the Decision because it was not made solely based upon Aurora Gas' bankruptcy, and the debt will not be discharged by the bankruptcy. Fifth, and finally, the State argues that § 525(a) protects the debtor, not AE, and relief is not available under § 525(a) for this reason either. The court set the hearing on the Motion on shortened time at AE's request based upon the debtor's precarious financial condition, and the importance of ensuring that Aurora Gas had the ability to properly close the remaining wells if the sale to AE does not close.30 This has created its own set of problems concerning the evidence to be presented. AE has submitted two affidavits in support of its Motion," and issued several subpoenas to compel the attendance of " In its Supplement, AE committed to posting an additional $500,000 to bond the plug and abandonment liability for the five Nicolai Creek wells it seeks to acquire. ECF No. 303 at 11. " ECF No. 306. 28 ECF No. 309. " ECF No. 309 at 24-31. 30 ECF No. 295. " ECF Nos. 304-305. Case 16-00130 Doc 321 Filed 09/26/17 Entered 09/26/1116:00:42 Desc Main Document Page 7 of 14 representatives of the AOGCC to testify at the hearing, as well as one generically calling for presentation of the person most knowledgeable of the AOGCC's Decision and bond requirements." The State has moved to quash the subpoenas." AE opposed the State's motion to quash the subpoenas, citing the need to establish the basis of the AOGCC's Decision.34 At the hearing, however, AE released the three subpoenas served on commissioners of the AOGCC, but argued that the subpoena as to the person most knowledgeable should be enforced. AE also asked the court to admit the affidavits of Paul Craig35 and J. Edward Jones,36 and offered the witnesses for examination. The State objected to the admission of evidence at the hearing as being premature, and depriving it of the opportunity to conduct discovery." The court finds that the admission of further evidence is unnecessary. The Decision amply demonstrates that the AOGCC conditioned the transfer of the Nicolai Creek leases from Aurora Gas to AE upon AE's assumption of Aurora Gas' obligations to plug and abandon those wells on State leases that AE did not purchase. The Decision offers no reason for imposing such a condition apart for its statement that: Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska ECF Nos. 311-314. 33 ECF No. 310. ECF No. 316. l6 ECF No. 304. 36 ECF No. 305. " The court has trouble understanding what discovery the State needed to understand its own Decision. I Case 16-00130 Do, 321 Filed 09/26/17 Entered 09/26,116:00:42 Desc Main Document Page 8 of 14 Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000.38 Tellingly, the State does not deny that the Decision was an attempt to collect Aurora Gas' debt for the Three Mile Creek leases. Rather, it defends its action as necessary to provide for the plugging and abandonment of the wells which the debtor will not be able to accomplish. Whatever its motives, the AOGCC's Decision is an attempt to recover on the debtor's prepetition liability. AE has no interest in the Three Mile Creek wells, not any obligations to the State as to those wells. The AOGCC's conditioning of its approval of the transfer of the Nicolai Creek leases to AE upon assumption of the debtor's pre-petition liability runs afoul of § 362(a)(3) and (6), as well as § 525(a). Section 362(a)(3) stays any act to exercise control over property of the estate .39 Section 362(a)(6) precludes any act to collect or recover prepetition claims against the debtor.40 The debtor's leasehold interests in the Nicolai Creek wells certainly constitute property of the bankruptcy estate subject to the automatic stay.41 Section 362(b)(4) excepts from the stay the commencement or continuation of a proceeding by a governmental unit to enforce its police and regulatory powers 42 While the AOGCC's evaluation of the transfer request did not violate the automatic stay, the conditioning of its approval of the transfer upon the assumption of the " ECF No. 291-2 at 1. 39 11 U.S.C. § 362(a)(3). 41 11 U.S.C. § 362(a)(6). 41 Pursuant to 1 I U.S.C. § 541(a), property of the estate is broadly defined to include all legal and equitable interests held by the debtor as of its petition date. 41 11 U.S.C. § 362(b)(4). i Case 16-00130 Doi 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 9 of 14 debtor's prepetition liabilities for wells AE was not purchasing constitutes an act to exercise control over the debtor's leases in an effort to collect upon Aurora Gas' prepetition liability. Traditionally, the automatic stay protects the debtor or the bankruptcy estate, and third parties may not complain about violations of the stay.43 While the stay is not intended to benefit AE, the debtor has joined in the Motion. The debtor certainly has standing to address the State's efforts to condition the sale of its Nicolai Creek wells upon payment of a prepetition liability in violation of § 362(a). Accordingly, the AOGCC's Decision violates § 362(a)(3) and (6), and is void.d4 Closely related to the stay violation, § 525 protects the debtor, or a person with whom the debtor has been associated, from governmental discrimination based upon the debtor's bankruptcy or the failure to pay a dischargeable debt. The protections afforded by § 525 should be read together with the protections afforded by the automatic stay in this instance to ensure the debtor receives the full benefits of its bankruptcy.45 The AOGCC effectively denied the debtor's transfer of five of its Nicolai Creek leases because it insists on recovering the debtor's Three Mile Creek plug and abandonment liability. " Burkart v. Coleman (In re Tippett), 542 F.3d 684, 691 (9th Cir. 2008)("the automatic stay provision is designed to protect the debtor against his creditors"); see also In re Pax America Development, LLC, 2013 WL 6054744 at "1 (Bankr. C.D. Cal. Nov. 15, 2013)(citing Tilly v. Nicurevich (In re Pecan Groves ofArizona), 951 F.2d 242, 245 (9th Cir. 1991))(`Because the only legal beneficiaries ofthe automatic stay are the debtor and trustee, a creditor does not have standing to seek damages for violation of the automatic stay."). 44In re Schwartz, 954 F.2d 569, 571 (9th Cir. 1992)(" Miolations of the automatic stay are void, not voidable."). 45 4 Collier on Bankruptcy § 525.03 (16th ed. 2017). The discussion in Colliers focuses upon the close relationship between § 525(a) and the discharge injunction imposed under § 524. However, the court discerns no meaningful difference between the automatic stay imposed during the case and the discharge injunction imposed afterwards. i Case 16-00130 Doi, 321 Filed 09/26/17 Entered 09/2611716:00:42 Desc Main Document Page 10 of 14 The State defends the Decision on the basis that the AOGCC's desire to recover the Three Mile Creek debt was not the sole basis for its decision. However, the AOGCC's subjective intent is irrelevant under § 362(a) where it seeks to collect upon a prepetition debt owed by the debtor, and seeks to exercise control of its leases. Neither the debtor, nor AE, deny the AOGCC's right to impose a reasonable bond upon AE to secure its own plug and abandonment liability upon transfer of the five Nicolai Creek leases. But, by conditioning approval upon assumption of the debtor's liability for the Three Mile Creek leases it discriminated against the debtor based upon its bankruptcy and inability to pay that debt. The AOGCC's Decision holds the debtor's sale of assets to AE hostage subject to AE's assumption of the Three Mile Creek liability. This violates not only § 362(a), but § 525 as well. Given the impact upon the debtor's sale, and the debtor's joinder in the Motion, the court concludes that § 525(a) has been properly raised. Moreover, the court finds that given the direct impact upon AE as the buyer of the debtor's assets, and the target of the discrimination, AE had standing to raise § 525 as well. The State attempts to blunt the impact of the Decision by directing the court's attention away from the option to assume the debtor's Three Mile Creek liability, and focusing upon the payment of $6,000,000 as a bond. According to the State, the $6,000,000 bond was reasonably based upon the AOGCC's evaluation that it will take $1,000,000 to plug and abandon each of the six Nicolai Creek wells. The requirement to post a $6,000,000 bond to transfer the debtor's leases to AE may be a proper exercise of the agency's discretion in discharge of its statutory duties. However, AE and the debtor dispute that fact. The remainder of the Decision, including the other alternative for posting an acceptable bond, colors the State's position, as does the amount of the prior bonds required for the Three Mile and Nicolai Creek leases together - a total 10 Case 16-00130 Dom 321 Filed 09/26/17 Entered 09/26ii7 16:00:42 Desc Main Document Page 11 of 14 of $700,000. There is nothing in the Decision to support the AOGCC's conclusion that it will cost $1,000,000 to plug and abandon each well. The court may not simply ignore the clear import of the AOGCC's Decision and efforts to condition the transfer of the debtor's leases to AE upon payment of the debtor's existing debts. Even without the benefit of additional evidence, which the State declines to provide or allow, the Decision itself evidences the State's efforts to compel AE to assume the debtor's obligations by "offering" as the only alternative a prohibitively high $1,000,000 per well bonding requirement. The severity of this bonding requirement is highlighted by the comparatively minuscule bankruptcy sale price of $100,000 for assignment of five of the Nicolai Creek leases. The State further argues that the AOGCC's Decision does not run afoul of § 525 because it was not solely motivated by a desire to collect the debtor's liability for the Three Mile Creek leases. Rather, it argues that the AOGCC was attempting to ensure sufficient funds will now be available for AE's plug and abandonment liability. The Supreme Court rejected such a narrow reading of § 525 in FCC v. NextWave Pers. Commc'ns Inc., 537 U.S. 293, 301-302 (2003): When the statute refers to failure to pay a debt as the sole cause of cancellation ("solely because"), it cannot reasonably be understood to include, among the other causes whose presence can preclude application of the prohibition, the governmental unit's motive in effecting the cancellation. Such a reading would deprive § 525 of all force. It is hard to imagine a situation in which a governmental unit would not have some further motive behind the cancellation—assuring the financial solvency of the licensed entity, or punishing lawlessness, or even (quite simply) making itself financially whole. Section 525 means nothing more or less than that the failure to pay a dischargeable debt must alone be the proximate cause of the cancellation—the act or event that triggers the agency's decision to cancel, whatever the agency's ultimate motive in pulling the trigger may be. i Case 16-00130 Dou 321 Filed 09/26/17 Entered 09/26/17 16:00:42 Desc Main Document Page 12 of 14 [Internal citations omitted, emphasis in original]. For these reasons, the inclusion of a second option to post a $6,000,000 bond does not change the fact that the debtor's bankruptcy, and specifically the outstanding Three Mile Creek liability, was the proximate cause for the Decision. The remainder of the State's arguments are also unavailing. The State argues that the debtor cannot establish that the Three Mile Creek liability will be discharged, rendering § 525(a) inapplicable. It reaches this conclusion based upon the debtor's admission that it will not be able to confirm a plan and continue its operations as required for a nonindvidual debtor to obtain a discharge of debts in chapter 11 46 However, § 525(a) requires only that the challenged governmental action apply to "a debt that is dischargeable." The State has not identified any exception within § 523(a) for the debtor's prepetition liability for plugging and abandoning the Three Mile Creek wells. Nothing within § 525(a) requires that the debtor actually obtain a discharge, only that the debt be dischargeable.47 The State also misconstrues the import of the agreement between the debtor and AE. The sale documents upon which the State relies govern AE's relationship with Aurora Gas, not the State. Similarly, the concerns regarding the effect of the prior bonds have been resolved and have no bearing on whether the Decision violated the Bankruptcy Code. Finally, the AOGCC's concerns regarding this court's jurisdiction are well taken, as bankruptcy courts are courts of limited jurisdiction." In the Motion, AE requested that this court "See 11 U.S.C. § 1141(d)(3). 4' FCCv. NextWave Pers. Commc'nslnc., 537 U.S. at 303 ("A preconfirmation debt is dischargeable unless it falls within an express exception to discharge."). 48 Pursuant to I1 U.S.C. § 106(a), sovereign immunity is abrogated as to governmental units with respect to § 362 and § 525. 12 Case 16-00130 DOL,321 Filed 09/26/17 Entered 09/2611716:00:42 Desc Main Document Page 13 of 14 "order all the leases within the [Nicolai Creek Unit) in the operator position to be transferred to AE as they existed on the date of the Petition, including the operator status thereof. 41 This court has no jurisdiction to hear, or evaluate, applications to transfer oil and gas leases. It does, however, have jurisdiction over matters that arise under or in a bankruptcy case.50 This necessarily includes whether or not an action impermissibly discriminates against the debtor, or violates the automatic stay.51 The court finds that it has jurisdiction under 28 U.S.C. § 1334(b) to decide whether the AOGCC's Decision violates the Bankruptcy Code, but that is where the court's jurisdiction ends. The court further concludes that it does not have jurisdiction to substitute its judgment for that of the AOGCC; nor would it do so even if it did. For these reasons, the court finds that the AOGCC's Decision violated §§ 362(a) and 525(a) of the Bankruptcy Code. The court shall grant the Motion, but limit the relief to the determination that the Decision is void. The court will enter a separate order consistent with this memorandum. DATED: September 26, 2017. BY THE COURT /s/ Gary Snraker GARY SPRAKER United States Bankruptcy Judge 49 ECF No. 291 at 4. 50 28 U.S.C. § 1334(b). " See Johnston Envir. Corp. v. Knight (In re Goodman), 991 F.2d 613,617 (9th Cir. 1993)(actions alleging violation of the automatic stay are "core proceedings"); Morrow v. Torrance Bank (A re Morrow), 189 B.R. 793, 796-797 (Bankr. C.D. Cal. 1995)(proceeding predicated upon section 525 of the Bankruptcy Code is a core proceeding under 28 U.S.C.A. § 157(b));United AirLines, Inc. v. The City ofLosAngeles, 391 B.R. 791, 794-95 (Bankr. N.D. 111. 2008)(proceedings involving violations of the stay under § 362(a), and to determine whether action was a discrimination under § 525(a) arise under the Code.) 13 I Case 16-00130 Doc 321 Filed 09/26/17 Document Serve: D. Bundy, Esq. R. Crowther, Esq. E. LeRoy, Esq. C. Christianson, Esq. K. Perkins, Esq. ECF Participants per NEF 14 ( Entered 09/26/1716:00:42 Desc Main Page 14 of 14 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: ) Change of Operator Form Form 10-411 ) Docket No.OTH-17-024 Nicolai Creek Gas Field Debtor. ) U AFFIDAVIT OF J EDWARD JONES a STATE OF TEXAS ) SS' x COUNTY OF f -or i - C W� ) m eco C7 J Vi Y W 6 za d a LL 6 1, J. Edward Jones, being first duly sworn upon oath, depose and state as follows: z EQ;�S CW z° - c d ! ]. I am the President of Aurora Gas, LLC, the debtor in the above -captioned a�a� Co C bankruptcy case. � d x 2. As President of Aurora Gas, I have personal knowledge of the anticipated costs to properly plug and abandon gas wells on the west side of Cook Inlet. 3. Based on the bids Aurora Gas has received, I estimate the expenditures for plugging and abandonment of wells will range from $100,000 to $205,000. George Pollock and I have prepared Authority for Expenditures (AFE's) detailing the estimated project costs and they are attached to this affidavit as Exhibits 1 and 2. C293432.utt,cc 13ri<r:v'1!i�n,cn Page] of2 4. Based upon my familiarity with the wells at Nicolai Creek, I do not know of any reason the cost to permanently plug and abandon those wells would be significantly different than the cost to plug and abandon the wells on CIRI lands, assuming that costs to mobilize and demobilize necessary equipment can be shared by multiple wells, that the wells are, thus, plugged in an uninterrupted sequence, and that the work is done in non - winter weather. U a N DATED at m f � 1 Texas, this ,day of October, 2017. C n x o�� to 0 CL / Z 0, d a'� 3 J. ward Jones za)�6, / O ps mr Ri xn o`m a g 0 ^ SUBSCRIBED AND SWORN TO before me this 4th day of October, 2017. pZ Saco^ [Seal] Notary Public in and for Texas My Commission Expires: a- 5�:>-Z-22o PAULA S. POLK MVCOMMISSION EXPIRES SMOTARAYBD ER 64 40120 . C29.1432 .uX;CC 136el rr„n'` Page 2 of 2 AURORA GAS, LLC PLUG & ABANDONMENT AUTHORIZATION FOR EXPENDITURE OPERATOR: AURORA GAS, LLC DATE: 10/3/2017 AFE applicable to the following wells requiring a single balanced plug: Aspen Lone Creek 3 Kaloa 2 Moquawkie 4 Expenditure Intangible Costs Location Drilling Rig and Tools Drilling Fluids Rental Equipment Cementing Support Services Transportation Supervision and Administration IDC Subtotal Tangible Costs Tubular Equipment Wellhead Equipment Completion Equipment WELL COST SUBTOTAL Surface Production Equipment Flowline and Meter PL + PF SU Subtotal Project Management & General Engineering Contingency TOTAL PROJECT COST DRY HOLE COST= 100% AURORA GAS, LLC SHARE George Pollock 10/3/2017 OPERATOR: AURORA GAS, LLC 0 0 $0 0 0 0 $0 $0 $0 $0 EXPENSE WORKOVER $ 13,500 $ 2,750 $ 13,000 $ 25,000 $ 19,500 $ 16,250 $ 4,000 $94,000 0 0 0 $94,000 = CWC= 0 0 $0 $ 6,000 $100,000 = $100,000 $100,000 EXHIBIT $94,000 100,000 AURORA GAS, LLC PLUG & ABANDONMENT AUTHORIZATION FOR EXPENDITURE OPERATOR: AURORA GAS, LLC DATE: 10/4/2017 AFE applicable to the following well requiring high volume of cement and spacer and bullhead squeeze of surface casing/production casing annulus. Simpco Moquawkie #2 Expenditure Intangible Costs Location 0 Drilling Rig and Tools 0 Drilling Fluids 0 Rental Equipment 0 Cementing 0 Support Services 0 Transportation 0 Supervision and Administration 0 IDC Subtotal $0 Tangible Costs Tubular Equipment 0 Wellhead Equipment 0 Completion Equipment 0 WELL COST SUBTOTAL $0 Surface Production Equipment Flowline and Meter PL + PF SU Subtotal $0 Project Management 8 General Engineering 0 Contingency TOTAL PROJECT COST DRY HOLE COST= $0 100% AURORA GAS, LLC SHARE $0 George Pollock/Ed Jones 10/4/2017 OPERATOR: AURORA GAS, LLC EXPENSE WORKOVER $ 14,500 $ 5,500 $ 40,000 $ 15,000 $ 45,450 $ 33,000 $ 24,250 $ 6,000 $183,700 0 0 0 $183,700 = CWC= 0 0 $0 0 $ 20,000 $183,700 $203,700 = 203,700 $203,700 $203,700 EXujSIr_,__4;2� 3 NOTICE OF PUBLIC HEARING STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket No. OTH 17-024 Aurora Exploration, LLC. Nicolai Creek Gas Field Reconsideration Hearing of Other Order 125 On September 15, 2017 Aurora Exploration, LLC (AE) requested reconsideration of, and a hearing on, the Alaska Oil and Gas Conservation Commission's (AOGCC) August 31, 2017 Decision and Order (Other Order No. 125) regarding bonding requirements for six wells in the Nicolai Creek Gas Field. AE also requested the hearing be held on shortened time. The request for reconsideration and a hearing is granted. The request for the hearing to be held on shortened time is granted. A public hearing on AE's application will be held October 9, 2017 at 10:00 a.m. at 333 West 7`h Avenue, Anchorage, Alaska 99501. If, because of a disability, special accommodations may be needed to comment or attend the hearing contact the AOGCC at (907) 279-1433 no later than October 6, 2017. Hollis S. French Chair, Commissioner 270227 #1410663 $139.46 AFFIDAVIT OF PUBLICATION STATE OF ALASKA THIRD JUDICIAL DISTRICT Joleesa Stepetin being first duly sworn on oath deposes and says that she is a representative of the Alaska Dispatch News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on September 21, 2017 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. Signe &,L Subscribed and sworn to before me this a/ day of X/ - 20 I i Notary Public n aid for The State of Alaska. Third Division Anchorage, Alaska MY COMMISSION EXP ES C NOTICE OF PUBLIC HEARING STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket No, 0TH 17-024 Aurora Exploration LLC. Nicolai Creek Gas Field Reconsideration Hearing of Other Order 125 On September 15, 2017 Aurora Exploration, LLC (AE) requested reconsideration of, and a hearingR on, the Alaska Oil and Gas Conservation Commission's ((AOGCC) August 31, 2017 Decision and Order (Other Order No. 125) rerMing bonding requirements for six wells. in the Nicola! Creek Gas Fie d. AE also reques (ad the hearing be held on shortened time. The request for reconsideration and a hearing isgranted. The request for the hearing to be held on shortened time is granted. A public hearing on AE's application will be held October 9, 2017 at 10:00 a.m. at 333 Wes 7th Avenue, Anchorage, Alaska 99501. If, because of a disability, special accommodations may be needed t comment or attend the hearing contact the AOGCC at (907) 279-1433 no later than October 6, 2017. //siggnnature on file// Hol is S. French Chair, Commissioner Published: September 21, 2017 RECEIVES OCT 0 4 2017 Notary Public BRITNEY L THOPITSON p State of Alaska Mly Commission Expires Feb 23, 2019 STATE OF ALASKA ADVERTISING ORDER NOTICE TO PUBLISHER SUBMIT INVOICE SHOWNG ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION WnNATTACHED COPYOFADVERTISMENT. ADVERTISING ORDER NUMBER u o AO-18-008 FROM: AGENCY CONTACT: Jody Colombie/Samantha Carlisle Alaska Oil and Gas Conservation Commission DATE OF A.O. AGENCY PHONE: 333 West 7th Avenue 9/19/2017 (907) 279-1433 Anchorage, Alaska 99501 DATES ADVERTISEMENT REQUIRED: COMPANY CONTACT NAME: PHONE NUMBER: ASAP FAX NUMBER: (907)276-7542 TO PUBLISHER: Alaska Dispatch News SPECIAL INSTRUCTIONS: PO Box 149001 Anchoraec, Alaska 99514 TYPE OFADVERTISEME;NT: '• LEGAL ! DISPLAY CLASSIFIED OTHER (Specify below) DESCRIPTION PRICE OTH-17-024 Initials of who prepared AO: Alaska Non -Taxable 92-600185 SUBMIT84VOICE SHOWING ADVEIITISIBO: ::OBDERNO.; CERTIFIEDAFFmAVR OF:: ................ ... .... ... .. ........ :ruB1;ICAnoNw1TH:Ar3acHEHeorr.oF: Alli'$RTI6MBN7:'fO "' Department of Administration Division of AOGCC 333 West 7th Avenue Anchorage, Alaska 99501 Page I of 1 Total of All Pages $ BEENumber Y Amount Date Conunenls I PVN ADN89311 2 AO AO-18.008 3 4 FIN AMOUNT SV Appr Unit PGM LGR Object FV I DIST LIQ I 18 021147717 3046 18 2 3 4 Purc sig o r T Purchasing Audacity's Signature Telephone Number O. # and receiving agency name must appear on all invokes and documents relating to this purchase, he state is registered for tax Dee transactions under Chapter 32, IRB code. Registration number 92-73-0006 K_ Items are for the exclusive use of the state and not for r ale DISTRIBUTION, DNtsion FYscel/Ortginal:il0 ::Copies: Pulifisher jfateil), Divisloa E'iscal, Receivipg Form: 02-901 Revised: 9/19/2017 G. Scott Pfoff President and COO 4645 Sweetwater Blvd., Ste. 200 Sugar Land, TX 77479 William Bankston Bankston Gronning O'Hara, P.C. Attorneys at Law 601 W. S" Ave., Ste. 900 Anchorage, AK 99501 NOTICE OF PUBLIC HEARING STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: Docket No. OTH 17-024 Aurora Exploration, LLC. Nicolai Creek Gas Field Reconsideration Hearing of Other Order 125 On September 15, 2017 Aurora Exploration, LLC (AE) requested reconsideration of, and a hearing on, the Alaska Oil and Gas Conservation Commission's (AOGCC) August 31, 2017 Decision and Order (Other Order No. 125) regarding bonding requirements for six wells in the Nicolai Creek Gas Field. AE also requested the hearing be held on shortened time. The request for reconsideration and a hearing is granted. The request for the hearing to be held on shortened time is granted. A public hearing on AE's application will be held October 9, 2017 at 10:00 a.m. at 333 West 7s' Avenue, Anchorage, Alaska 99501. If, because of a disability, special accommodations may be needed to comment or attend the hearing contact the AOGCC at (907) 279-1433 no later than October 6, 2017. Hsignature on frleH Hollis S. French Chair, Commissioner Bernie Karl K&K Recycling Inc. Gordon Severson penny Vadla P.O. Box 58055 3201 Westmar Cir. 399 W. Riverview Ave. Fairbanks, AK 99711-0055 Anchorage, AK 99508-0336 Soldotna, AK 99669-7714 George Vaught, Jr. Darwin Waldsmith Richard Wagner P.O. Box 13557 P.O. Box 39309 P.O. Box 60868 Denver, CO 80201-3557 Ninilchik, AK 99639-0309 Fairbanks, AK 99706-0868 Colornbie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, September 19, 2017 3:24 PM To: wbankston@bgolaw.pro Subject: Notice of Hearing Docket No. OTH-17-024 Reconsideration Hearing Attachments: Public Hearing Notice Oth 17-024 (Reconsideration).pdf Please see attached. Re: Docket No. OTH 17-024 Aurora Exploration, LLC. Nicolai Creek Gas Field Reconsideration Hearing of Other Order 125 Jody J. Co(ombie AOGCC Speeia(Assistant Alaska OiCandGas Conservation Commission 333 West 7`fi Avenue .Anchorage, Alaska 99501 Office: (907) 793-1221 Fax: (907) 276-7542 CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. . The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Jody Colombie at 907.793.1221 or Lody.colombie@alaska.ggv. Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, September 19, 2017 3:01 PM To: aogcc.inspectors@alaska.gov; wbankson@bgolaw.pro; Bender, Makana K (DOA) (makana.bender@alaska.gov); Bettis, Patricia K (DOA) (patricia.bettis@alaska.gov); Brooks, Phoebe L (DOA) (phoebe.brooks@alaska.gov); Carlisle, Samantha J (DOA); Colombie, Jody J (DOA) Qody.colombie@alaska.gov); Davies, Stephen F (DOA) (steve.davies@alaska.gov); Foerster, Catherine P (DOA) (cathy.foerster@alaska.gov); French, Hollis (DOA); Frystacky, Michal (michal.frystacky@alaska.gov); Guhl, Meredith (DOA sponsored) (meredith.guhl@alaska.gov); Kair, Michael N (DOA); Link, Liz M (DOA); Loepp, Victoria T (DOA); Mumm, Joseph (DOA sponsored) ooseph.mumm@alaska.gov); Paladijczuk, Tracie L (DOA) (tracie.paladijczuk@alaska.gov); Pasqual, Maria (DOA) (maria.pasqual@alaska.gov); Quick, Michael (DOA sponsored); Regg, James B (DOA) Qim.regg@alaska.gov); Roby, David S (DOA) (dave.roby@alaska.gov); Schwartz, Guy L (DOA) (guy.schwartz@alaska.gov); Seamount, Dan T (DOA) (dan.seamount@alaska.gov); Singh, Angela K (DOA); Wallace, Chris D (DOA) (chris.wallace@alaska.gov); AK, GWO Projects Well Integrity; AKDCWeIIIntegrityCoordinator, Alan Bailey, Alex Demarban; Alicia Showalter; Allen Huckabay; Andrew VanderJack; Ann Danielson; Anna Raff; Barbara F Fullmer; bbritch; Becky Bohrer; Ben Boettger; Bill Bredar, Bob; Brandon Viator; Brian Havelock, Bruce Webb; Caleb Conrad; Candi English; Cocklan-Vendl, Mary E; Cody Gauer; Colleen Miller, Connie Downing; Crandall, Krissell; D Lawrence; Dale Hoffman; Darci Horner; Dave Harbour; David Boelens; David Duffy; David House; David McCaleb; David McCraine; ddonkel@cfl.rr.com; Diemer, Kenneth J (DNR); DNROG Units; Donna Ambruz, Ed Jones; Elizabeth Harball; Elowe, Kristin; Elwood Brehmer; Evan Osborne; Evans, John R (LDZX); Garrett Brown; George Pollock; Gordon Pospisil; Greeley, Destin M (DOR); Gretchen Stoddard; gspfoff, Hunter Cox; Hurst, Rona D (DNR); Hyun, James J (DNR); Jacki Rose; Jason Brune; Jdarlington Qarlington@gmail.com); Jeanne McPherren; Jerry Hodgden; Jill Simek; Jim Watt; Jim White; Joe Lastufka; Joe Nicks; John Burdick; John Easton; John Larsen; John Stuart; Jon Goltz; Josef Chmielowski; Juanita Lovett; Judy Stanek; Kari Moriarty; Kasper Kowalewski; Kazeem Adegbola; Keith Torrance; Keith Wiles; Kelly Sperback; Kevin Frank, Kruse, Rebecca D (DNR); Kyla Choquette; Laura Silliphant (laura.gregersen@alaska.gov); Leslie Smith; Lori Nelson; Luke Keller; Marc Kovak; Mark Dalton; Mark Hanley (mark.hanley@anadarko.com); Mark Landt; Mark Wedman; Mealear Tauch; Michael Bill; Michael Calkins; Michael Moora; Mike Morgan; MJ Loveland; mkm7200; Motteram, Luke A; Mueller, Marta R (DNR); nelson; Nichole Saunders; Nick Ostrovsky; Nikki Martin; NSK Problem Well Supv; Patty Alfaro; Paul Craig; Paul Decker (paul.decker@alaska.gov); Paul Mazzolini; Pike, Kevin W (DNR); Randall Kanady; Renan Yanish; Richard Cool; Robert Brelsford; Robert Warthen; Sara Leverette; Scott Griffith; Shahla Farzan; Shannon Donnelly, Sharon Yarawsky; Skutca, Joseph E (DNR); Smart Energy Universe; Smith, Kyle S (DNR); Stephanie Klemmer; Stephen Hennigan; Sternicki, Oliver R; Steve Moothart (steve.moothart@alaska.gov); Steve Quinn; Suzanne Gibson; Tamera Sheffield; Ted Kramer, Teresa Imm; Tim Jones; Tim Mayers; Todd Durkee; Tom Maloney; trmjrl; Tyler Senden; Umekwe, Maduabuchi P (DNR); Vinnie Catalano; Well Integrity; Well Integrity; Weston Nash; Whitney Pettus; Aaron Gluzman; Aaron Sorrell; Ajibola Adeyeye; Alan Dennis; Andy Bond; Bajsarowicz, Caroline J; Bruce Williams; Bruno, Jeff J (DNR); Casey Sullivan; Corey Munk; Don Shaw, Eppie Hogan; Eric Lidji; Garrett Haag; Graham Smith; Heusser, Heather A (DNR); Holly Fair; Jamie M. Long; Jason Bergerson; Jesse Chielowski; Jim Magill; Jim Shine; Joe Longo; John Martineck; Josh Kindred; Keith Lopez, Laney Vazquez; Lois Epstein; Longan, Sara W (DNR); Marc Kuck; Marcia Hobson; Marie Steele; Matt Armstrong; Melonnie Amundson; Mike Franger; Morgan, Kirk A (DNR); Pascal Umekwe; Pat Galvin; Pete Dickinson; Peter Contreras; Rachel Davis; Richard Garrard; Richmond, Diane M; Robert Province; Ryan Daniel; Sandra Lemke; Susan Pollard; Talib Syed; Tina Grovier (tmgrovier@stoel.com); William Van Dyke Subject: Docket No. OTH-17-024 (Aurora Exploration, LLC.) Public Notice I Attachments: PubllL nearing Notice Oth 17-024 (Reconsideration).pdf See attached. Re: Docket No. OTH 17-024 Aurora Exploration, LLC. Nicolai Creek Gas Field Reconsideration Hearing of Other Order 125 Jody J. CoCombie .AOGCC SyecfaCAssistant ACaska OiCandGas Conservation Commission 333 West 7" .Avenue Anchorage, .ACaska 99501 Office: (907) 793-1221 .tax (907) 276-7542 CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Jody Colombie at 907.793.1221 or iodv.colombie@alaska.gov. RECEIVED SEP 15 2011 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: ) Change of Operator Form ) Form 10-411 ) Nicolai Creek Gas Field ) Docket No. OTH-17-024 AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING Aurora Exploration, LLC ("AE") respectfully requests the Alaska Oil and Gas Conservation Commission ("AOGCC") reconsider its August 31, 2017 Decision and Order (Other Order No. 125) ("Order") in the above -referenced matter. I. RELEVANT FACTUAL BACKGROUND The Order at paragraph 1 requires a $200,000 bond and an agreement from AE to plug and abandon the three Three Mile Creek Unit wells within six months of AOGCC's approval to the change of operator from Aurora Gas to AE. Alternatively, as set forth in paragraph 2, AE must post a bond in the amount of $6 million over a three year period.' AE has entered into a Federal Bankruptcy Court -approved agreement with Aurora Gas, LLC ("Aurora Gas") to acquire six (6) gas wells located in the Nicolai Creek Unit. AE has never owned or operated the three (3) gas wells at Three Mile Creek Unit and has not offered to acquire these three wells from Aurora Gas. AE has agreed to assume all liability associated with plugging and abandoning the six Nicolai Creek Unit gas wells that it intends to purchase. AE has offered three forms of financial responsibility to the State of Alaska for the Nicolai Creek Unit wells: (1) $500,000 bond to the benefit of DNR; (2) $200,000 $2 million each year for three years. AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING A48MREQreconsiderationA0GCC 9-15-17 Page I of 8 U a d co x T O N O 3 Amo 0 C7 _jjJ3 e z ;dN;3 H N LL C z c Q o z E a CD a �x�0W �a3r� z aao F x z bond to the benefit of AOGCC; and (3) Dismantlement, Removal, and Restoration Agreement ("DR&R Agreement") trust account funded by AE and managed by the Alaska Department of Natural Resources ("DNR"). The immediate effect of these bonds is the doubling of bonding currently in place to plug Aurora Gas's nine gas wells located on State of Alaska land. Aurora Gas's existing bonds totaling $700,000 will remain in place and can be applied to the cost of plugging and abandoning the three wells at Three Mile Creek Unit. The AE transaction will remove six wells in the Nicolai Creek Unit from Aurora Gas's portfolio of nine wells that will need to be plugged and abandoned if the AE transaction does not close. A. DR&R Agreement Between DNR and Aurora Exploration AE has agreed to execute a DR&R Agreement with the State of Alaska DNR pertaining to the Nicolai Creek Unit. The terms of the DR&R Agreement require AE to establish a trust account at a bank for the benefit of the DNR. The funds in the trust account will be under the exclusive control of DNR. AE is required under the DR&R Agreement to fund the DNR's trust account over a five-year interval for the amount independently determined to be required to dismantle, remove, and restore the surface of the Nicolai Creek Unit after production ceases. The DR&R Agreement states that any residual funds in the trust account and the $500,000 bond held by DNR will not be released to AE until AE has submitted a letter from the AOGCC stating that AE has plugged and abandoned all wells at the Nicolai Creek Unit to the satisfaction of the AOGCC. This requirement is set forth in Article 4 of the draft DR&R Agreement? B. Cost to Plug and Abandon the six Nicolai Creek Unit Wells AE accepts responsibility for the full cost of plugging and abandoning the six wells at the Nicolai Creek Unit, and AE will have ample financial incentive to do so because of the $700,000 ($200,000 + $500,000) bonds and the cash deposited in the Copy attached. AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING 44860\REQreconsidemtionA0GCC 9-15-17 Page 2 of 8 DR&R Agreement trust account. The actual cost to plug and abandon the six wells is I significantly less than $6 million Per J. Edward Jones, President of Aurora Gas, AOGCC has already approved a procedure for plug and abandon of wells on CIRI land the cost of which is estimates to be between $100,000 and $250,000 per well.3 Mr. Jones knows of no reason why the costs to plug and abandon wells in the Nicolai Creek Unit would be significantly different from the estimated costs related to the wells on CIRI land 4 II. DISCUSSION AE requests that AOGCC reconsider its decision based upon three grounds: (1) AOGCC arbitrarily conditioned its approval of change of operator from Aurora Gas to AE on the requirement that AE plug and abandon the three Three Mile Creek Unit wells that AE has no control over, no responsibility for, and in violation of the United States Bankruptcy Code; (2) AOGCC failed to consider DNB's requirement for establishing a trust fund for the State of Alaska's further protection; and (3) AOGCC's requirement for a $6 million bond is not reasonable or based upon any articulated facts, and appears to be a decision unsupported by any financial information, cost estimates, or bids for plugging and abandoning these wells. AE's proposed purchase and operation of the six Nicolai Creek Unit wells has nothing to do with the three Three Mile Creek Unit wells that AE is not purchasing. Any liability for the plugging and abandonment of the three Three Mile Creek wells remains the obligation of Aurora Gas, and AOGCC cannot impose upon AE any obligations in regard to wells that AE is not purchasing or operating. 'Attached hereto is a copy of the Affidavit of J. Edward Jones dated September 15, 2017, the )riginal of which was filed in the United States Bankruptcy District of Alaska in Case No. 16- )0130. See Id. at 14. i Id. kURORA EXPLORATION, LLC'S REQUEST FOR tECONSIDERATION AND HEARING \4860\REQreeonsiderationAOGCC 9-15-17 Page 3 of 8 U a N x o�� 5M� 3•gmo 0 dt X Z Z Ea' �-� �xin `p0 z Qac E" x z Aurora Gas is in bankruptcy. The requirement for AE to plug and abandon the three Three Mile Creek Unit wells in order to be allowed to post the usual and customary $200,000 bond is a violation of the United States Bankruptcy Court's automatic stay pursuant to 11 U.S.C. § 362. The relevant statutory language is as follows: §362. Automatic Stay (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of – (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (6) any act to collect, assess or recover a claim against the debtor that arose before the commencement of the case under this title; The Order, although couched in terms of bonding requirements, is actually an attempt to exercise control over Aurora Gas's bankruptcy estate property for the purpose of collecting claims that arose—or that are deemed to have arisen—prior to 'Pursuant to 11 U.S.C. §365(g): [T]he rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease - (1) if such contract or lease has not been assumed under this section or under a plan confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the filing Athe petition; or AURORA EXPLORATION, LLC'S REQUEST FOR KECONSIDERATION AND HEARING 44860\REQreconsiderationAOGCC 9-15-17 Page 4 of 8 U a N ^Q]i th N x o�� O 3°mNoo U' JN'SEL Y z w C Q X LL O Z T y z 04 airs 5 E o so z Sao F x z Aurora Gas's bankruptcy petition date. What explanation for this requirement can there be other than AOGCC's intent to recover the pre-petition obligation of Aurora Gas associated with the three Three Mile Creek Unit wells? The Bankruptcy Code prohibits governmental units from using the power to grant or withhold necessarily licenses as a tool to collect debts.5 The requirement for AE to plug and abandon the three Three Mile Creek Wells should be stricken from AOGCC's Order. What remains from the AOGCC's Order is a $200,000 bond. The $200,000 bond is the standard bond which has been approved by the AOGCC for Aurora Gas and other operators.6 The $200,000 bond coupled with the $500,000 bond the DNR and the trust fund created by the DR&R agreement between DNR and AE is sufficient to protect the interest of the State of Alaska, and creates ample incentive for AE to plug and abandon the six wells that it will operate in the Nicolai Creek Unit. Paragraph 2 of the Order requires a $6 million bond to be placed by AE over a three year period. As set forth in the attached Affidavits of Craig and Jones, the future (2) if such contract or lease has been assumed under this section or under a plan confirmed under chapter 9, 11, 12, or 13 of this title - (A) if before such rejection the case has not been converted under section 1112, 1208, or 1307 of this title, at the time of such rejection; or (B) if before such rejection the case has been converted under section 1112, 1208, or 1307 of this title - (i) immediately before the date of such conversion, if such contract or lease was assumed before such conversion; or (ii) at the time of such rejection, if such contract or lease was assumed after such conversion. 5 See In re Bertuccio, 414 B.R. 604, 611 (Bankr. N.D. Cal. 2008) (holding that the State of California violated the Automatic Stay in refusing to re -issue a contractor's license to a debtor whose license was originally suspended for failure to pay tax obligations owed the State) and In re Nejberger, 120 B.R. 20, 722-23 (E.D. Pa. 1990), (holding that the State of Pennsylvania -ould not refuse to renew a debtor's liquor license simply because of unpaid tax obligations because doing so violated the Automatic Stay). 'See Affidavit of J.E. Jones, at ¶ 4. AURORA EXPLORATION, LLC'S REQUEST FOR tECONSIDERATION AND HEARING %486OaEQrmonsiderationAOGCC 9-15-17 Page 5 of 8 U a -It M M O 3•gmo 0 Y X Zi R N R 3 H N C A, R ¢ 'o z°i > >Qk'i min C 7 2 z �¢o F � F z t� liability of plugging and abandoning the six wells in the Nicolai Creek Unit is estimated by AE to be nowhere near $6 million. AOGCC's Order violates AE's entitlement to due process of law. AOGCC issued the Order without holding any hearing in order to hear evidence upon which it could base its Order. The Order is arbitrary and capricious without a basis in fact. AS 31.05.30(d) permits AOGCC to require the furnishing of a reasonable bond with sufficient surety conditions for the performance of the duty to plug each dry or abandoned well or the repair of wells causing waste.' It cannot be said that the Order requiring a $6 million bond is a reasonable bond. If AOGCC does not agree to reverse its Order setting forth the unreasonable bond requirements, the AE requests an evidentiary hearing before the AOGCC on its filed change of operator form. The time required by the public hearing and court appeal procedures described by the AOGCC to the Bankruptcy Court on September 8, 2017 will unduly delay operations at the Nicolai Creek Unit. The AOGCC's enabling statute allows a variance from a public hearing to allow a timely decision to prevent unduly delaying of operations. Specifically, AS 31.05.060(c) states "...the commission may, where operations might be unduly delayed, approve a variance from the commission's regulations that apply to the well or field without providing notice and opportunity to be heard." In justification for its Order, AOGCC may believe that there is a risk that after AE acquires the Nicolai Creek Unit that AE could become insolvent, which would be a "worst case scenario" from the perspective of AOGCC. If this occurred, the State of Alaska would once again have six wells that need to be plugged and abandoned. However, under this apparent "worst case scenario," the State would have the benefit of the additional bonding posted by AE to pay these costs. If the approved sale of the six Nicolai Creek Unit wells to AE does not occur, the current situation emerges as the Emphasis added. AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING 44860\REQreconsiderationAOGCC 9-15-17 Page 6 of 8 actual worst case scenario: The State will have these six wells to plug and abandon with no additional bonds in place to pay these costs. If AE is required to post a $6 million bond (which is 3,000% higher than $200,000, Aurora Gas's current operator bond) then the Nicolai Creek Unit becomes non-commercial and the AE transaction will not close. This failure to close not only delays operations, but may cause operations to cease at the Nicolai Creek Unit altogether, resulting in the actual worst case scenario for the State. Alaska Statute AS 31.05.095 states, "The waste of oil and gas in the state is prohibited." AOGCC is charged with preventing waste of Alaska's resources. If AOGCC does not exercise its option to use a variance without public hearing to: (1) remove the requirement in option 1 of the AOGCC Order requiring AE to pay the cost of plugging and abandoning the three Three Mile Creek Unit wells; and, (2) reverse its request for a $6 million bond, then AOGCC will have caused waste by way of demanding unprecedented terms that render the AE purchase non-commercial. If AOGCC requires the same $200,000 operator bond as was in place for Aurora Gas at the time of Aurora Gas's bankruptcy petition, then the proved gas reserves at Nicolai Creek Unit will be produced by AE. Otherwise, the P1 reserves will be plugged and abandoned. Setting the operator bond at $200,000 will improve the State's current level of bonding for these six wells and will prevent waste of Alaska's resources — namely, P1 gas reserves. Requiring a $6 million bond will cause the State's proved royalty gas reserves to be plugged and abandoned rather than produced, creating waste. To mitigate the actual worst case scenario for the State of Alaska associated with Aurora Gas's nine wells, to prevent waste, and to prevent unduly delaying operations at the Nicolai Creek Unit. AE requests AOGCC to immediately: (1) reconsider its Order; (2) nullify its Order; (3) issue a replacement Order requiring that AE post the usual and customary $200,000 operator bond at closing; and, (4) transfer Operator of the Nicolai Creek Unit to AE at closing. In the alternative, AE requests that AOGCC provide an AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING A4860NREQreconsiden ionAOGCC 9-15-17 Page 7 of 8 U a N x o�� O3�woo C3 JrnY�' Q x o-zy N MM iy N z0v¢ o z cQ6— O or R x� L3 ¢3ON a z c¢o O tO E" x z opportunity for AE to present evidence at a hearing to determine reasonable bond requirements in accordance with AE's due process rights. AE requests that the AOGCC use its statutory right to a variance from the public hearing procedures to issue a replacement Order prior to closing of the AE transaction to avoid unduly postponing — or terminating — operations at the Nicolai Creek Unit. III. CONCLUSION For the above -stated reasons, AE requests AOGCC reconsider its Order setting forth the exorbitant bonding requirements. If the AOGCC is unwilling to use its right to a variance and to order the $200,000 operator bond immediately, then AE requests the opportunity to participate in a hearing before AOGCC in order to establish fair and reasonable bonding requirements. DATED at Anchorage, Alaska this 15`h day of September, 2017. BANKSTON, GRONNING, O'HARA, P.C. Attorneys for Aurora Exploration, LLC By: /tet ��— AG—�t—� William M. Bankston AK Bar No. 7111024 wbankston@bgolaw.pro I HEREBY CERTIFY that I hand delivered a true and correct copy of the Foregoing to the following on the 15`s day of September, 2017: -athy P. Foerster, Commissioner AOGCC 333 W. 7d�Avenue Charlene Vozar AURORA EXPLORATION, LLC'S REQUEST FOR RECONSIDERATION AND HEARING A4860\REQrmonsiderationA0GCC 9-15-17 Page 8 of 8 From: Smith, Kyle S (DNR) [m it o:kyle.smithiaalaska•goy] Sent: Tuesday, September 05, 2017 1:17 PM To: Scott Pfoff <gS fp off@aurorap9wer.com> Cc: Shine, Jim M (DNR) <jim.shine@a_ Iaska.ggv_>; Meza, Jhonny R (DNR) <jhonny.meza@alaska.gQy>; Hurst, Rona D (DNR) <rona.hurs @ la aska.gPv> Subject: Nicolai Creek DR&R Agreement Scott, We have finished drafting the DR&R agreement for the Nicolai Creek Unit. Please review the attached draft and contact us with any questions or proposed edits. If you'd like to schedule a meeting to discuss further, feel free to let me know some times that would work. Thanks, Kyle 2017-09-05 Aurora ... t).docx Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT Aurora Exploration DR&R Agreement This Aurora Exploration DR&R Agreement ("the Agreement') is entered into by Aurora Exploration, LLC ("Aurora Exploration' or "Assignee"), an Alaska limited liability company, whose address is 1400 W. Benson Boulevard, Suite 410, Anchorage, AK 99503, and the State of Alaska, Department of Natural Resources ("DNR"). These entities are further collectively referred to as "the Parties" and individually as "Party." This Agreement is entered in support of and as part of an application for approval of the assignments, under 1 1 AAC 82.605, of certain state oil and gas leases, permits, rights- of-way, and easements set out in the attached Exhibit A ("the Leases"). The terms and conditions set out in this Agreement supplement, but do not replace the obligations stated in the Leases, and applicable statutes and regulations. The DNR Commissioner is entering into this Agreement under his authority set out in AS 38.05.020(b)(2) and (4), and 11 AAC 82.615(a)(4). The effective date of this Agreement is September XX, 2017 (the "Effective Date"). RECITALS A. WHEREAS, as of the Effective Date, Aurora Gas, LLC ("Aurora Gas" or "Assignor") is a working interest owner in the Leases, and the current operator of the Nicolai Creek Unit; B. WHEREAS, on May 3, 2016, certain unpaid creditors filed an involuntary bankruptcy petition against Aurora Gas. And, on June 13, 2016, Aurora Gas consented to an order for relief under Chapter 11, Case Number 16-00130; C. WHEREAS, on July 19, 2017, Aurora Exploration filed, through the bankruptcy court, a second offer to purchase certain assets of Aurora Gas including the Leases, sales contracts, wells, and associated surface production facilities in the Nicolai Creek Unit; D. WHEREAS, following this second offer, Aurora Gas is seeking to assign all the assets described in recital C to Aurora Exploration. Consequently, on August 10, 2017, the Assignor and the Assignee submitted to the Division of Oil and Gas of DNR an application for working interest assignment in the Leases; E. WHEREAS, on August 22, 2017, the bankruptcy court granted a motion for approval of the assignment of the assets described in recital C to Aurora Exploration; F. WHEREAS, upon final approval of this transaction by DNR, Aurora Exploration as Assignee shall become a working interest owner in the Leases and the operator of the Nicolai Creek Unit. Furthermore, Aurora Exploration shall be liable to fulfill the DR&R Obligations under the terns of this Agreement, the Leases, and applicable statutes and regulations, and for making payments to the DR&R Trust Account to meet the DR&R Obligations; G. WHEREAS, it is in the interest of DNR to ensure that the DR&R Obligations will be met, and that the Assignee has the financial capacity to meet its DR&R Commitments; NOW, THEREFORE, in consideration of the mutual promises stated herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows. 1.1 "Approved DR&R Contractor" means any person engaged in meeting the DR&R Obligations after being approved to do so by DNR. 1.2 "Assets" means facilities, infrastructure, roads, pads, equipment, wells and other improvements on the Leases. 1.3 "Contribution Date" means July 1 of each year, starting in 2019. 1.4 "Contribution(s)" means the amount(s), as determined in section 3, in U.S. legal tender that Page I of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT Aurora Exploration shall provide as financial assurance for its share of the Cumulative DR&R Estimate. The Contributions for Aurora Exploration shall be deposited into the DR&R Trust Account. 1.5 "Cumulative DR&R Estimate" means the aggregate of the DR&R Estimates across all the Leases. 1.6 "DR&R" means the dismantlement and removal of facilities and infrastructure, repair of damage to land or property resulting from activity on the leased land or operations of the lessee or its agents pursuant to the lease, and return of the leased land to a condition acceptable to the Commissioner of DNR. 1.7 "DR&R Estimate" means, for each Lease, the most recent estimate of the total cost to meet the DR&R Obligations for that Lease. The DR&R Estimate is to be prepared by an independent engineering firm, acceptable to DNR, and presented in a detailed report of sufficient detail so as to provide a basis for judging its accuracy and completeness. For the purpose of calculating the Contributions, the DR&R Estimate shall, to the extent possible, reflect the allocation of the DR&R Obligations for each of the Leases. 1.8 "DR&R Obligations" means all obligations under the Leases or existing and future statutes and regulations relating to the DR&R of the subject Leases. 1.9 "DR&R Remaining Requirement" means the Contributions into the DR&R Trust Account needed to completely fund Aurora Exploration's respective share of the Cumulative DR&R Estimate as of the Contribution Date. Specifically, it is the difference between the values of the DR&R Requirement and the sum of previous Contributions. 1.10 "DR&R Requirement" means Aurora Exploration's respective share of the most recent Cumulative DR&R Estimate. It is calculated as the sum, across all Leases, of the product of the DR&R Estimate allocated to a Lease multiplied by Aurora Exploration's working interest ownership in that Lease. 1.11 "DR&R Trust Account" is the account established to hold the Contributions and designed to fund the expenditures in meeting the DR&R Obligations pursuant to Section 4.1 of this Agreement. 1.12 "Effective Date" of this Agreement has the meaning provided above. 1.13 "Lease(s)" means any or all the oil and gas leases set out in Exhibit A. 1.14 "Reassessment Date" means the due date, occurring every three years and starting on March 1, 2019, by which Aurora Exploration must provide updated DR&R Estimates to DNR for the Leases. Reassessment Dates will continue until the DR&R Obligations are met to the satisfaction of the DNR Commissioner. 1.15 "Rehabilitation Plan" is a plan outlining a process by which the dismantlement and removal and restoration of Assets and the return of the land in good order and condition to the satisfaction of the DNR Commissioner are assessed and implemented. 2. SCOPE—PRIORITY 2.1 This Agreement applies to the DR&R Obligations of Aurora Exploration under the Leases. 2.2 if DNR approves an expansion of the Nicolai Creek Unit, this Agreement shall be amended to include the leases added to the unit. 2.3 if DNR approves a contraction of the Nicolai Creek Unit, this Agreement shall be amended to remove the leases contracted out of the unit, provided that the DR&R Obligations in the removed leases, if any, are met to the satisfaction of the DNR Commissioner. 2.4 DNR acknowledges that. in order to comply with I 1 AAC 82.600 and 1 I AAC 83.160, Aurora Exploration shall provide the necessary bonds to the State of Alaska as beneficiary. In case Aurora Exploration provides these bonds, and they are only associated with the Page 2 of 12 Aurora Exploration DR&R Agreement September XX, 2017 Leases in the Nicolai Creek Unit, DNR agrees to discount Aurora Exploration's DR&R Remaining Requirement by the amounts bonded. Specifically, DNR agrees to discount Aurora Exploration's DR&R Remaining Requirement by the amount of its bonds because, as of the Effective Date, the leases within the Nicolai Creek Unit shall be the only leases in Alaska in which Aurora Exploration has improvements and infrastructure. If, after the Effective Date of this Agreement, Aurora Exploration conducts oil and gas exploration or development activities on leases in Alaska that are not within the Nicolai Creek Unit, Aurora Exploration will no longer be allowed to discount its DR&R Remaining Requirement by the value of those bonds, if any. 3. FUNDING METHODOLOGY 3.1 On or before July 1, 2019, Aurora Exploration shall establish the DR&R Trust Account pursuant to Section 4.1 of this Agreement. 3.2 Within thirty (30) days after July 1, 2019, and based on the DR&R Estimate developed and presented as of the first Reassessment Date, Aurora Exploration shall make Contributions according to subsection 3.3 for the sole and exclusive purpose of fully funding the DR&R Trust Account. 3.3 AMOUNT OF THE CONTRIBUTION 3.3.1 The Contribution for Aurora Exploration will be determined as follows: DR&R Remaining Contribution _ Requirement at year t t = 0, 1, 2, 3, 4 atyear t S — t Where t refers to the year of the Contribution Date. In particular, t = 0 corresponds to 2019 and t = 4 corresponds to 2023. 3.3.2 If the ratio of the Cumulative DR&R Estimate provided at any Reassessment Date to the most recent Cumulative DR&R Estimate is greater than or equal to 1.3, then a new five-year period shall begin for the purpose of calculating the Contributions. 3.4 If. on a Reassessment Date, the corresponding DR&R Remaining Requirement for Aurora Exploration is negative, then DNR shall authorize a partial release of the DR&R Trust Account balance back to the Aurora Exploration within ninety (90) days after the corresponding Contribution Date. Provided the DR&R Remaining Requirement for Aurora Exploration is negative, the amount to be released by DNR from the DR&R Trust Account shall be equal to the amount in excess of the corresponding DR&R Requirement. 4. PROVISIONS RELATED TO THE DR&R TRUSTACCOUNT 4.1 ACCOUNT REQUIREMENTS. 4.1.1 Aurora Exploration shall establish the DR&R Trust Account with DNR as sole beneficiary with a bank or other financial institution authorized to do business in the State of Alaska within sixty (60) days after the Effective Date. The forin and terms of the DR&R Trust Account must be acceptable to the State, consistent with this Agreement, and recognize that the sole and exclusive purpose of the account is to provide funds to cover the DR&R Obligations associated with the Leases. All written agreements with the bank or financial institution pertaining to the account will be attached to and become a part of this Agreement. Aurora Exploration is solely responsible for all costs and fees associated with the establishment and maintenance of the account. Page 3 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT 4.1.2 Aurora Exploration shall cause the earnings on the amounts deposited in the DR&R Trust Account to be deposited and retained within the DR&R Trust Account. 4.1.3 The DR&R Trust Account will ruts with the Leases for the benefit of the State. If the Leases are further assigned under 11 AAC 82.605, all the funds in the DR&R Trust Account shall remain in that account to be used by DNR or any approved assignee to fulfill the DR&R Obligations. 4.1.4 Upon the incapacity of the bank or other financial institution administering the DR&R Trust Account, by reason of bankruptcy, insolvency, or suspension or revocation of a charter or license, Aurora Exploration will be considered in material breach of this Agreement. If such a breach occurs, DNR will provide Aurora Exploration written notice of the breach and request that the Aurora Exploration remedy it. if Aurora Exploration fails to remedy the breach to DNR's satisfaction within forty-five (45) days after the notice, DNR may take whatever legal action it deems reasonable to protect and enforce its rights under this Agreement, the Leases, any applicable Unit Agreement, and applicable statutes and regulations. 4.2 LATE PAYMENT FEES. DNR will assess a late payment fee at the rate set out in AS 38.05.135(d) if a Contribution is not made according to the provisions of section 3 by the tenth day after it is due. The DNR Commissioner may, for good cause, grant an extension of time for Aurora Exploration to make a payment, without incurring a late payment fee, of up to, but not more than sixty (60) days. An extension request must be received by the DNR Commissioner in writing no less than thirty (30) days prior to the payment due date, with a copy of the request sent to the Director of the DNR Division of Oil and Gas. The DNR Commissioner will notify Aurora Exploration in writing at least seven (7) days before the payment due date as to whether the extension request is approved or disapproved. 4.3 EXCESS EXPENDITURES. Nothing in this Agreement is intended to limit theDR&R Obligations. Aurora Exploration shall be liable for its corresponding share of the DR&R Obligations even if meeting these obligations results in expenditures exceeding the available balance of the DR&R Trust Account. 4.4 DNR may, at its sole discretion, use any funds in the DR&R Trust Account for any of the DR&R Obligations. 5. REHABILITATION PLAN —RELEASE OF FUNDS 5.1 Prior to commencing any work to fulfill the DR&R Obligations under this Agreement, Aurora Exploration shall submit a Rehabilitation Plan to DNR for approval. DNR will approve or disapprove the Rehabilitation Plan in writing. If DNR disapproves the Rehabilitation Plan, DNR will explain in reasonable detail the reason(s) for its disapproval. DNR may request additional information from Aurora Exploration to aid its review of the Rehabilitation Plan. 5.2 Aurora Exploration may request the release of funds from the DR&R Trust Account to execute an approved Rehabilitation Plan. 5.3 To request partial release of funds from the DR&R Trust Account, Aurora Exploration shall submit invoices or expense receipts to DNR for reimbursement of expenditures associated with the DR&R Obligations, along with proof that the relevant activities have been satisfactorily completed in compliance with the terms of the Rehabilitation Plan. Aurora Exploration shall include a statement certifying that all applicable activities have been completed in accordance with the approved Rehabilitation Plan. 5.4 DNR will evaluate requests to release funds from the DR&R Trust Account, and either approve or disapprove the release of funds in writing. If DNR disapproves a request to release funds, DNR will explain in reasonable detail the reason(s) for its disapproval. Page 4 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT 5.5 Prior to the last funds being released from the DR&R Trust Account, Aurora Exploration shall document to DNR that it has satisfied the DR&R Obligations in accordance with an approved Rehabilitation Plan, and in compliance with the Leases, and applicable statutes and regulations. Aurora Exploration shall document it has properly plugged and abandoned the wells by providing DNR proof of satisfactory completion from the Alaska Oil and Gas Conservation Commission. 5.6 DNR may demand payment, in writing, from the DR&R Trust Account if (i) DR&R activities are not conducted in compliance with the Rehabilitation Plan as approved by DNR or (ii) Aurora Exploration is in breach of this Agreement; provided, however, that if Aurora Exploration or another person agrees to comply with the conditions of the DNR -approved Rehabilitation Plan, the payment may be postponed. Notwithstanding the foregoing, Aurora Exploration will have thirty (30) days to cure any breach that would entitle DNR to demand payment. 6. BREACH —REMEDIES and CURE 6.1 Any one of the following events will be a breach under this Agreement subject to whatever legal action DNR deems reasonable to protect and enforce its rights underthis Agreement and the Leases: (a) Aurora Exploration fails to comply with a material obligation or condition under this Agreement; (b) Aurora Exploration is deemed to be in breach of this Agreement under Section 4.1.4 above; or (c) Aurora Exploration has become insolvent, an application for adjudication in bankruptcy has been filed by or against Aurora Exploration, or an application for assignment, composition, extension or receivership has been filed by or against Aurora Exploration. 6.2 If a breach occurs, other than a breach deemed to have occurred under Section 4.1.4 above, under this Agreement, and Aurora Exploration, after due notice from DNR, fails to cure the breach, as provided in the notice, DNR will notify the bank or other financial institution administering the DR&R Trust Account under this Agreement that a breach has occurred. DNR will send a copy of its notice of uncured breach to Aurora Exploration. After DNR has provided the uncured breach notice to Aurora Exploration, DNR may withdraw from the DR&R Trust Account funds equivalent to the Sum of Previous Contributions to cover Aurora Exploration's share of the DR&R Obligations, without any requirement to seek recourse to judicial proceedings and without demand, appraisal, advertisement, or notice of any kind, all of which are hereby expressly waived by Aurora Exploration. 7. NOTICES 7.1 All notices, requests, demands, and other communications must be in writing and must be delivered by hand, mail or facsimile to the addresses designated below. Any notice, request, demand or other communication delivered or sent in this manner will be deemed given or made when actually delivered to the correct address. 7.1.1 For DNR: Department of Natural Resources, Commissioner's Office ATT: Commissioner 550 W. 7th Avenue, Suite 1400 Anchorage, Alaska 99501 Facsimile: (907) 269-8918 Division of Oil and Gas, Department of Natural Resources Page 5 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT ATT: Director 550 W. 7th Avenue, Suite 1100 Anchorage, Alaska 99501 Facsimile: (907) 269-8938 7.1.2 For Aurora Exploration: Aurora Exploration, LLC ATT: G. Scott Pfoff President Aurora Exploration, LLC 1400 W. Benson Blvd., Suite 410, Anchorage, AK 99503 Facsimile: (281) 495-9051 8. MISCELLANEOUS 8.1 Aurora Exploration is liable to fulfill its share of the DR&R Obligations under the terms of the Leases and applicable statutes and regulations. 8.2 Nothing in this Agreement is (i) a waiver or release of the State's rights against any other entity or person that may be liable for all or any part of the DR&R Obligations or (ii) an assumption by the State of any obligations or liabilities associated with the DR&R Obligations. 8.3 Aurora Exploration agrees that if it assigns interest in the Leases that it remains fully liable for all existing DR&R Obligations at the time of such an assignment. 8.4 Aurora Exploration agrees that the neglect or forbearance by the State in enforcing this Agreement will not in any way release Aurora Exploration from any liability or commitment under this Agreement. 8.5 Each provision of this Agreement is severable from all others. If any term or provision is deemed invalid, void or unenforceable, this Agreement has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions will not be affected thereby. 8.6 This Agreement will be interpreted, governed and enforced under the laws of the State of Alaska without regard to its conflicts of laws principles. 8.7 Section headings are included in this document for convenience only and are not to be considered a part of this Agreement or relied upon for its interpretation. 8.8 This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument. 8.9 This Agreement and the attached Exhibits may be amended at any time by mutual agreement of the Parties. IN WITNESS WHEREOF, the Parties have executed this Agreement and, by our signatures, agree to be bound by its terms and conditions. AGREED, UNDERSTOOD, AND CONSENTED TO: Page 6 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT State of Alaska, Department of Natural Resources Date: Name: Chantal Walsh Aurora Exploration, LLC Date: Name G. Scott Koff Director Division of Oil and Gas Department of Natural Resources State of Alaska President Page 7 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT EXHIBIT A: List of Leases (and any other permit, right-of-way, or easements) Page 8 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRA FT EXHIBIT B: Account Pledge and Control Agreement Aurora Exploration, LLC ("Aurora Exploration"), an Alaska limited liability company, whose mailing address is 1400 W. Benson Boulevard, Suite 410, Anchorage, AK 99503, as Principal, enters into this Account Pledge and Control Agreement ("APCA") with the State of Alaska, Department of Natural Resources ("DNR") and as the Financial Institution. The Principal is held and firmly bound unto DNR for the sums and commitments specified in the DR&R Agreement ("DR&R Agreement'). In accordance with that DR&R Agreement, the account established by the APCA is required to satisfy the DR&R Obligations set forth in the DR&R Agreement. The account being pledged hereby contains cash or cash equivalents comprising CDs, demand deposit accounts, savings accounts, or other approved cash account and/or a brokerage account containing U.S. Government Treasure obligations with a maturity of less than one year or a U.S. Treasury based money market account. Following are the account number(s), name, and address of the Financial Institution holding the accounts, and description of the account. Account number: Financial institution holding account: Name of the Financial Institution: Attn: Address: Phone: Description of account (amount / type of asset): The sole and exclusive purpose of the account is to provide funds to cover the dismantlement, removal, and restoration (DR&R) obligations of Aurora Exploration under the DR&R Agreement. Any withdrawals of the funds from the account, except as provided below in cases of default and future assignments, are for the purposes of meeting these DR&R Obligations when they become due, and are to be requested by the Principal and agreed to by DNR in writing. That written consent must include an express release of funds in a specified amount to the Principal, and must be verified by the Financial Institution. The Principal and the Financial Institution holding the account agree and understand that this account shall remain in full force and effect until terminated by DNR and the Principal, unless that DNR in its sole discretion may terminate the account due to the default of the Principal under the terms of the DR&R Agreement or due to the Leases subject to the DR&R Agreement being assigned. The Financial Institution is required to comply with the abovementioned termination instructions from DNR without any right or obligations to verify the existence of such default or assignment. The Principal cannot close the account or withdraw funds from the account without the prior written consent of DNR, which must be verified by the Financial Institution. If the assets making up the account have an expiration date, those assets shall be automatically renewed into the same assets unless DNR directs that all or a portion of the funds be put into a demand deposit account. Notwithstanding any modifications to the DR&R Agreement approved by DNR, this APCA remains in full force and effect, and the Financial Institution and the Principal and the Principal's assignee. if any, waives, as a defense against DNR, any right to notice of such modifications. Page 9 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT DNR shall review the account and, at times as set forth in the DR&R Agreement, may require additional cash contributions to the account pursuant to the terms of the DR&R Agreement. The Principal shall pay all the costs and expenses associated with establishing and maintaining the account. Interest on the account shall be reinvested and remain part of the account. Upon determination by DNR that a complete assignment of the Leases covered in the DR&R Agreement has taken place, the Financial Institution shall release the funds, if instructed in writing by DNR, without any right or obligations to verify the existence of the assignment. The neglect or forbearance of DNR in enforcing against the Principal or Financial Institution, performance by the Principal or Financial Institution of any obligation, tern, or condition of the DR&R Agreement shall not in any way release the Principal from liability under this APCA. In the event the Principal is declared by DNR to be in default under the terms and conditions of the DR&R Agreement, then, upon written demand from DNR, the Financial Institution shall provide all the funds currently in the account to DNR without any right or obligations to verify the existence of such default. The Financial Institution is permitted to charge the APCA for fees based on the current published fee schedule and it is permitted to deduct the fees from the APCA. Within 30 days after the Financial Institution deducts any fees from the APCA, Principal shall deposit into the APCA the full amount of the deducted fees. The Financial Institution has the right to resign and/or assign to a successor organization after providing the Principal and DNR thirty (30) day notice. Within 30 days after such notice of resignation, the Principal shall, with DNR's approval, establish a new account with another financial institution that shall satisfy the financial assurance obligations set forth in the DR&R Agreement. All notices, requests, demands, and other communications must be in writing and must be delivered by hand, mail or facsimile to the addresses designated below. Any notice, request, demand or other communication delivered or sent in this manner will be deemed given or made when actually delivered to the correct address. For DNR: Department of Natural Resources, Commissioner's Office ATT: Commissioner 550 W. 7th Avenue. Suite 1400 Anchorage, Alaska 99501 Facsimile: (907) 269-8918 Division of Oil and Gas, Department of Natural Resources ATT: Director 550 W. 7th Avenue, Suite 1100 Anchorage, Alaska 99501 Facsimile: (907) 269-8938 Page 10 of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRAFT For Aurora Exploration: Aurora Exploration, LLC ATT: G. Scott Pfoff 1400 W. Benson Boulevard, Suite 410, Anchorage, AK 99503 Facsimile: (281) 495-9051 For the Financial Institution: Name of financial institution: ATT: Facsimile: DNR and the Principal agree to hold the Financial Institution harmless for all conduct related to this APCA unless the Financial Institution is grossly negligent. NOW THEREFORE, the Principal certifies that the above cash deposit is free of all liens, including tax liens. Signed and executed this day of Date: PRINCIPAL 20 Aurora Exploration, LLC G. Scott Pfoff President FINANCIAL INSTITUTION Signed and executed this day of LA (Signature ofFinarncial Representative) (Print name) (Name and Address of Financial Institution) (Title) 20 Page I I of 12 Aurora Exploration DR&R Agreement September XX, 2017 — DRA FT ACKNOWLEDGEMENT OF FINANCIAL INSTITUTION The foregoing instrument was acknowledged before me by this _ day of , 20 (Name of Individual) 0 Witness my hand and official seal ---- (Seal) ---- (Signature of Notary Public) My Commission Expires: _ APPROVAL AND ACCEPTANCE BY THE STATE OF ALASKA, DNR Andrew T. Mack, Commissioner Department of Natural Resources Dated: Page 12 of 12 William M. Bankston, Esq. Robert P. Crowther, Esq. Attorney for Aurora Exploration, LLC wbankston@bgolaw.pro crowther.lawoffice@acsalaska.net UNITED STATES BANKRUPTCY COURT DISTRICT OF ALASKA 3. In 1996, 1 was invited to present information about bonding/financial responsibility requirements for Operators in Alaska to an ad hoc committee established by Governor Knowles. The committee of oil and gas experts was chaired by Ken Thompson, then President and CEO of ARCO Alaska, Inc. The committee was established to make recommendations to the Governor regarding steps the State could C2934WTLEADINGSWFFcraig Pagel of4 IN RE: ) Case No. 16-00130 AURORA GAS, LLC ) U ) p,� Debtor. ) N AFFIDAVIT OF PAUL L. CRAIG x MON N m_ STATE OF ALASKA ) Q 3-5062 ) z; aaa )SS: THIRD JUDICIAL DISTRICT zdauo z `' aO;Z I, Paul L. Craig, Ph.D. beingfirst duly sworn uponon oath depose and state as ir,j' a N follows: Z Sag 1. I am the Manager of Trading Bay Oil & Gas, LLC, one of the two 50% x zmembers of Aurora Exploration, LLC (AE). 2. I have personal knowledge of the information set forth in my affidavit. 3. In 1996, 1 was invited to present information about bonding/financial responsibility requirements for Operators in Alaska to an ad hoc committee established by Governor Knowles. The committee of oil and gas experts was chaired by Ken Thompson, then President and CEO of ARCO Alaska, Inc. The committee was established to make recommendations to the Governor regarding steps the State could C2934WTLEADINGSWFFcraig Pagel of4 take to increase oil and gas production in Alaska. I researched the bonding/financial responsibility requirements to drill an oil well on State or Provincial lands in each North American jurisdiction (USA and Canada). My research revealed that the average (mean) bonding/financial responsibility requirement for Operators throughout North America — excluding Alaska — was under $13,500. The range — excluding Alaska — was zero to $55,000. 4. During September 2017 I researched the bonding/financial responsibility requirement to assume the Operator role for six (6) low-pressure gas wells in a few representative jurisdictions. 5. In Alaska the bonding/financial responsibility requirement to date has been $700,000 (AOGCC & DNR) and a commitment to deposit cash over time into a DR&R Trust Account to the benefit of DNR in an amount sufficient to dismantle, remove, and restore (DR&R) the surface estate when production ceases. 6. In Oklahoma a company must post a $25,000 (twenty-five thousand dollars) bond to become the Operator. 7. In Kansas an Operator may submit a one-time cash payment of $1,800 (one -thousand eight hundred dollars) to the Kansas Oil & Gas Commission to become the Operator of up to 30 wells drilled deeper than 2,000 feet. 8. In Texas an Operator must post a $25,000 (twenty-five thousand dollars) bond with the Texas Railroad Commission to operate up to 10 oil or gas wells. :2934\32\PLEADINGS\AFFcraig Page 2 of 4 U a � W x N xi o r. n O y Nom+ 3'�mo 0 CSJrnY�'a Z LL z �¢ o zcat >a�a P0.' Y�. ino `� <o z �¢o O W 0) F x~ z 9. I have been actively involved in oil and gas leasing on State, Federal, and � Private lands in Alaska since 1993. 10. Since 1997, Trading Bay Oil & Gas, LLC and I (an individual) have participated in the drilling of oil and gas wells in Louisiana, Texas, and California. 11. During 1996 another company I own, Trading Bay Energy Corporation, acquired all but one permit from State and Federal agencies to drill three onshore gas wells in Alaska. Before these wells were drilled, these State leases and permits were purchased by Forcenergy, Inc. 12. At no time have I ever heard of any State or Provincial bonding requirements that exceed the $700,000 in Alaska including the $200,000 bond to the benefit of AOGCC and the $500,000 bond to the benefit of the DNR. I have never heard of any other State or Province requires bonding anywhere close to the amount required in Alaska to become the Operator of six low-pressure gas wells. 13. In addition to agreeing to post a total of $700,000 of bonding, Aurora Exploration, LLC has agreed to execute a DR&R agreement.' This agreement provides for the establishment of a trust fund controlled by DNR into which Aurora Exploration will deposit sufficient cash to satisfy all dismantlement, removal, and restoration liabilities at the Nicolai Creek Unit when production ceases. 14. I am familiar with the leases, units, and wells that Aurora Gas owns and operates. The three wells located at Three Mile Creek Unit are about 20 miles away Exhibit 1 to the Motion at Docket 291. ;2934132%PLEADINGS\AFFcraig Page 3 of 4 from the wells at the Nicolai Creek Unit. Aurora Exploration, LLC does not have permission to cross the private land between the Nicolai Creek Unit to the south and the Three Mile Creek Unit to the north. For these reasons, it is not possible for Aurora Exploration to plug and abandon wells at Three Mile Creek in association with its plan of operations at Nicolai Creek Unit. 15. Aurora Exploration's plan of operations in the six wells at the Nicolai Creek Unit involves cleaning sand out of wells to improve gas flow rates. None of Aurora Exploration's anticipated operations will change the cost of plugging and abandoning the wells once production ceases at the Nicolai CreelyUnit. DATED at Anchorage, Alaska SUBSCRIBED AND SWORN TO before r}e�3 144" day of September, 2017. STATE OF ALASKA NOTARY PUBLIC Chaiiene F. Vozar 01 Wry CamNssion Expires March 7 C2934\32TLEADINGS W FFcraig ul-rnblic in and for Alaska Commission Expires: / Page 4 of 4 William M. Bankston, Esq. Robert P. Crowther, Esq. Attorney for Aurora Exploration, LLC wbankston@bgolaw.pro crowther.lawoffice@acsalaska.net UNITED STATES BANKRUPTCY COURT DISTRICT OF ALASKA 3. The bonding requirements for the Alaska Oil & Gas Conservation Commission (AOGCC) were satisfied by a $200,000 certificate of deposit held by the First National Bank Alaska. The $200,000 cash bond is available to meet any liabilities of Aurora Gas pursuant to plugging and abandonment of wells. The $500,000 letter of C2934\32\PLEADINGS\AFFjone Page 1 of 2 IN RE: ) Case No. 16-00130 AURORA GAS, LLC ) U Debtor. a M AFFIDAVIT OF J. EDWARD JONES N STATE OF ALASKA ) 0 y N 136 M� `O )SS. Z J fq Y ... Q THIRD JUDICIAL DISTRICTLL ) N c ca I, J. Edward Jones, being first duly sworn upon oath, depose and state as follows: u, Oto C3 a 3 n 1. I am the President of Aurora Gas, LLC, the debtor in the above -captioned z �a o bankruptcy case. ~ 2. During my tenure as President of Aurora Gas, I have personal knowledge of the bonding which Aurora Gas has with the State of Alaska. 3. The bonding requirements for the Alaska Oil & Gas Conservation Commission (AOGCC) were satisfied by a $200,000 certificate of deposit held by the First National Bank Alaska. The $200,000 cash bond is available to meet any liabilities of Aurora Gas pursuant to plugging and abandonment of wells. The $500,000 letter of C2934\32\PLEADINGS\AFFjone Page 1 of 2 credit is available, provided that letter of credit is properly drawn upon and demand is properly made by DNR. 4. Recently, Aurora Gas submitted Sundry Notices to the AOGCC which sought approval for the procedures to permanently plug and abandon 4 wells on CIRI lands. The AOGCC subsequently approved the Sundry Notices and I have been in the process of obtaining bids for the work necessary to complete the project. Based on the bids I have received, I estimate the expenditures for plugging and abandonment of wells will range from $100,000 to $250,000. Based upon my familiarity with the wells at Nicolai Creek, I do not know of any reason the cost to permanently plug and abandon those wells would be significantly different than the cost to plug and abandon the wells on CIRI lands. DATED at Anchorage, Alaska, this 15th day of September, 2017. J. Edward Jones TO before me this 15th day of September, 2017. DAVID H. BUNDY Notary Public -, State of Alaska My commission Expires Notary� Public in and for Alaska February 07, 2021 n My Commission Expires: ]2934\32\PLEAD I NG S\A FFj on es Page 2 of 2 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Change of Operator Form (Form 10-411) ) Other Order 125 Docket Number: OTH-1 7-024 August 31, 2017 DECISION AND ORDER Aurora Exploration, LLC (Aurora Exploration) filed a change of operator form (Form 10-411) seeking to substitute itself for Aurora Gas, LLC (Aurora Gas) as operator of record for the Nicolai Creek Gas Field. With the change of operator form, Aurora Exploration filed a document captioned "Transactional Justification." The Transactional Justification seeks to have the Alaska Oil and Gas Conservation Commission (AOGCC) require a minimal $200,000 bond of Aurora Exploration as the new operator. Aurora Gas is currently the operator of nine wells on state lands. Three of those wells are shut in and need to be plugged and abandoned: Three Mile Creek Unit (TMCU) 1, TMCU 2 and Three Mile Creek 3. The other six wells — Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCU 10 and NCU 11 — are capable of production. Aurora Exploration's change of operator form only seeks to be named operator for the wells involved in production and excludes the wells which need to be plugged and abandoned. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate is $1,000,000 per well, roughly $6,000,000. Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000. Other Order 125 August 31, 2017 Page 2 of 2 The AOGCC cannot, consistent with its duty to require a bond sufficient to cover the estimated cost to plug and abandon the wells, accept a $200,000 blanket bond on all six wells. Aurora Exploration's request for a $200,000 blanket bond is denied. AOGCC will not approve the change in operator unless Aurora Exploration agrees to one of the following: 1) A bond in the amount of $200,000 and Aurora Exploration's agreement to plug and abandon the three Three Mile Creek wells within six months of AOGCC's approval of the change of operator form, or 2) A bond in the amount of $6,000,000, to be posted over a three-year period, $2,000,000 the first year, an additional $2,000,000 the second year, and an additional $2,000,000 the third year. Done at Anchorage, Alaska and Dated August 31, 2017 �K/41t�V4� uz� Cathy . Foerster Daniel . eamotmt, Jr. Com issioner C tssinnP.r NOTICE Unless an application for reconsideration is filed, this is the AOGCC's final order or decision and any appeal must be filed in superior court within 30 days of the date this order or decision is mailed or otherwise distributed. 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 riled 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 ton 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 tons until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. G. Scott Pfoff President and COO 4645 Sweetwater Blvd., Ste. 200 Sugar Land, 1X 77479 M'6nt%,c STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage, Alaska 99501 Re: Change of Operator Form (Form 10-411) ) Other Order 125 Docket Number: OTH-17-024 August 31, 2017 DECISION AND ORDER Aurora Exploration, LLC (Aurora Exploration) filed a change of operator form (Form 10-411) seeking to substitute itself for Aurora Gas, LLC (Aurora Gas) as operator of record for the Nicolai Creek Gas Field. With the change of operator form, Aurora Exploration filed a document captioned "Transactional Justification." The Transactional Justification seeks to have the Alaska Oil and Gas Conservation Commission (AOGCC) require a minimal $200,000 bond of Aurora Exploration as the new operator. Aurora Gas is currently the operator of nine wells on state lands. Three of those wells are shut in and need to be plugged and abandoned: Three Mile Creek Unit (TMCU) 1, TMCU 2 and Three Mile Creek 3. The other six wells — Nicolai Creek 09, Nicolai Creek Unit (NCU) 01-B, NCU 02, NCU 03, NCU 10 and NCU 11 — are capable of production. Aurora Exploration's change of operator form only seeks to be named operator for the wells involved in production and excludes the wells which need to be plugged and abandoned. By law, AOGCC has a duty to require a bond sufficient to "ensure that each well is drilled, operated, maintained, repaired, and abandoned and each location is cleared." AOGCC's estimate of the cost to plug and abandon the six wells Aurora Exploration seeks to operate is $1,000,000 per well, roughly $6,000,000. Aurora Gas is bankrupt and will not plug and abandon the three Three Mile Creek wells. As a result, the cost of properly plugging and abandoning the wells will fall to the landowner, the Alaska Department of Natural Resources, which has no budget surplus from which to draw the necessary $6,000,000. Other Order 125 August 31, 2017 Page 2 of 2 The AOGCC cannot, consistent with its duty to require a bond sufficient to cover the estimated cost to plug and abandon the wells, accept a $200,000 blanket bond on all six wells. Aurora Exploration's request for a $200,000 blanket bond is denied. AOGCC will not approve the change in operator unless Aurora Exploration agrees to one of the following: 1) A bond in the amount of $200,000 and Aurora Exploration's agreement to plug and abandon the three Tbree Mile Creek wells within six months of AOGCC's approval of the change of operator form, or 2) A bond in the amount of $6,000,000, to be posted over a three-year period, $2,000,000 the first year, an additional $2,000,000 the second year, and an additional $2,000,000 the third year. Done at Anchorage, Alaska and Dated August 31, 2017 //signature on file// //signature on file// Cathy P. Foerster Daniel T. Seamount, Jr. Commissioner Commissioner Unless an application for reconsideration is filed, this is the AOGCC's final order or decision and any appeal must be filed in superior court within 30 days of the date this order or decision is mailed or otherwise distributed. 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 atter 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 mn 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 tans until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. Bernie Karl M Recycling Inc. Gordon Severson Penny Vadla P.O. Box 58055 3201 Westmar Cir. 399 W. Riverview Ave. Fairbanks, AK 99711-0055 Anchorage, AK 99508-4336 Soldotna, AK 99669-7714 George Vaught, Jr. Darwin Waldsmith Richard Wagner P.O. Box 13557 P.O. Box 39309 P.O. Box 60868 Denver, CO 80201-3557 Ninilchik, AK 99639-0309 Fairbanks, AK 99706-0868 Ct—Le —2c�1� K From: Carlisle, Samantha J (DOA) Sent: Thursday, August 31, 2017 1:42 PM To: Ballantine, Tab A (LAW); Bender, Makana K (DOA); Bettis, Patricia K (DOA); Bixby, Brian D (DOA); Brooks, Phoebe L (DOA); Carlisle, Samantha J (DOA); Colombie, Jody J (DOA); Cook, Guy D (DOA); Davies, Stephen F (DOA); Eaton, Loraine E (DOA); Foerster, Catherine P (DOA); French, Hollis (DOA); Frystacky, Michal (DOA); Guhl, Meredith D (DOA); Herrera, Matthew F (DOA); Jones, Jeffery B (DOA); Kair, Michael N (DOA); Link, Liz M (DOA); Loepp, Victoria T (DOA); Mumm, Joseph (DOA sponsored); Noble, Robert C (DOA); Paladijczuk, Tracie L (DOA); Pasqual, Maria (DOA); Quick, Michael J (DOA); Regg, James B (DOA); Roby, David S (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA); Singh, Angela K (DOA); Wallace, Chris D (DOA); AK, GWO Projects Well Integrity; AKDCWeIIIntegrityCoordinator, Alan Bailey; Alex Demarban; Alexander Bridge, Alicia Showalter, Allen Huckabay; Andrew Vandedack; Ann Danielson; Anna Raff; Barbara F Fullmer, bbritch; bbohrer@ap.org; Ben Boettger; Bill Bredar, Bob Shavelson; Brandon Viator, Brian Havelock; Bruce Webb; Caleb Conrad; Candi English; Cocklan-Vendl, Mary E; Cody Gauer, Colleen Miller; Connie Downing; Crandall, Krissell; D Lawrence; Dale Hoffman; Darci Horner, Dave Harbour, David Boelens; David Duffy, David House; David McCaleb; David McCraine; ddonkel@cfl.rr.com; Diemer, Kenneth 1 (DNR); DNROG Units (DNR sponsored); Donna Ambruz; Ed Jones; Elizabeth Harball; Elowe, Kristin; Elwood Brehmer; Evan Osborne; Evans, John R (LDZX); Brown, Garrett A (DNR); George Pollock, Gordon Pospisil; Greeley, Destin M (DOR); Gretchen Stoddard; gspfoff, Hunter Cox; Hurst, Rona D (DNR); Hyun, James J (DNR); Jacki Rose; Jason Brune; Jdarlington Oarlington@gmail.com); Jeanne McPherren; Jerry Hodgden; Jill Simek; Jim Watt; Jim White; Joe Lastufka; Radio Kenai; Burdick, John D (DNR); Easton, John R (DNR); Larsen, John M (DOR); John Stuart, Jon Goltz; Chmielowski, Josef (DNR); Juanita Lovett, Judy Stanek, Kari Moriarty; Kasper Kowalewski; Kazeem Adegbola; Keith Torrance; Keith Wiles; Kelly Sperback; Frank, Kevin J (DNR); Kruse, Rebecca D (DNR); Kyla Choquette, Gregersen, Laura S (DNR); Leslie Smith; Lori Nelson; Louisiana Cutler, Luke Keller; Marc Kovak; Dalton, Mark (DOT sponsored); Mark Hanley (mark.hanley@anadarko.com); Mark Landt; Mark Wedman; Mealear Tauch; Michael Bill; Michael Calkins, Michael Moora; Mike Morgan; MJ Loveland; mkm7200, Motteram, Luke A, Mueller, Marta R (DNR); knelson@petroleumnews.com, Nichole Saunders, Nick Ostrovsky; Nikki Martin; NSK Problem Well Supv; Patty Alfaro; Paul Craig; Decker, Paul L (DNR); Paul Mazzolini; Pike, Kevin W (DNR); Randall Kanady; Renan Yanish; Richard Cool; Robert Brelsford; Robert Warthen; Sara Leverette; Scott Griffith; Shahla Farzan; Shannon Donnelly, Sharon Yarawsky, Skutca, Joseph E (DNR); Smart Energy Universe; Smith, Kyle S (DNR); Stephanie Klemmer, Stephen Hennigan; Sternicki, Oliver R; Moothart, Steve R (DNR); Steve Quinn; Suzanne Gibson; sheffield@aoga.org; Ted Kramer, Teresa Imm; Tim Jones, Tim Mayers; Todd Durkee; Tom Maloney, trmjrl; Tyler Senden; Umekwe, Maduabuchi P (DNR); Vinnie Catalano; Well Integrity, Well Integrity, Weston Nash; Whitney Pettus; Aaron Gluzman; Aaron Sorrell; Ajibola Adeyeye; Alan Dennis; Andy Bond; Bajsarowicz, Caroline J; Bruce Williams; Bruno, Jeff J (DNR); Casey Sullivan; Corey Munk, Don Shaw, Eppie Hogan; Eric Lidji; Garrett Haag; Smith, Graham 0 (DNR); Heusser, Heather A (DNR); Fair, Holly S (DNR); Jamie M. Long; Jason Bergerson; Jesse Chielowski; Jim Magill; Shine, Jim M (DNR); Joe Longo; John Martineck; Josh Kindred; Keith Lopez, Laney Vazquez; Lois Epstein; Longan, Sara W (DNR); Marc Kuck; Marcia Hobson; Steele, Marie C (DNR); Matt Armstrong; Melonnie Amundson; Franger, James M (DNR); Morgan, Kirk A (DNR); Umekwe, Maduabuchi P (DNR); Pat Galvin; Pete Dickinson; Peter Contreras; Rachel Davis; Richard Garrard; Richmond, Diane M; Robert Province; Ryan Daniel; Sandra Lemke; Pollard, Susan R (LAW); Talib Syed; Tina Grovier (tmgrovier@stoel.com); William To: von Dyke Subject: Other Order 125 (Aurora) Attachments: other125.pdf Please see attached. Samantha Carlisle Executive Secretary In Alaska Oil and Gas Conservation Commission 333 West 7u, Avenue Anchorage, AK 99501 (907) 793-1223 CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Samantha Carlisle at (907) 7937223 or Samantha.Carlisle@alaska.gov.