This meeting of the House Resources Committee
will now come to order.
It is now 1.02 PM, Friday, January 23rd, 2025
in Capital Room 124.
Members present are Representative Fields,
Representative Colomb, Representative Hall,
Representative Meers,
Representative Elam,
Representative Sadler,
Co-chair Representative Diber,
and myself Co Chair Representative Freer,
as well as Representative Prox just joined us.
Let the record reflect that we have a quorum
conduct business. Please take this time to silence your
cell phone for the duration of the meeting. I'd like to
thank Jordan Nicholson from Records and Zach Lawhorn from
the Juno LIO for staffing the committee today. On today's
agenda, we have an update from the Department of Natural
Resources on oil and gas production and lease activity on
the North Slope and Cook Inlet in 2025. Before the
committee, today, We have Commissioner Designee, John
Crowther, and Division of Oil and Gas Director, Derek
Welcome to your house resources, and thank you for joining us. Please come to the table and begin your presentation
Jane thank, you very much chair freer and members of the committee my name is john crow there commissioner designee for the department not to resources for
The record it's an honor to be here and we're very happy to share our presentation today
As i'm sure you're aware of The department historically has presented up
our production forecast, so the technical details of the material about
upcoming production that we share with the Department of Revenue to inform the
revenue sources book. We typically do that for the finance committees this
first week of session.
We're very pleased and appreciate the committee's request to dig a little bit more into production
and activity so that you all have that information, naturally the jurisdiction of the Committee
about our use and development of our resources.
So we're here to share that today.
In very quick summary and we'll get into the details, what we describe as a good news
story to show.
We have a lot of activity on the North Slope.
We had front end exploration activities, so very initial work going on in different areas
we have projects developing with characterization wells and we
have for the first time in a long time major new greenfield projects that are
about to come online and materially add to our production.
So, on the North Slope, we have a great amount of activity and we'll share that in detail.
We're also here to talk a little bit about the Cook Inlet.
Fortunately, We have lot of Activity in the cook Inlets to report on and that's very
positive and important for our energy supply for South Central Alaska and the Rail Belt.
But we do have some challenges about long-term supply
and the need to have plans for additional energy supplies
in the inlet.
So we can talk a little bit in detail
about the activity we're seeing there.
And then I imagine that this committee and legislature
will be actively discussing some of those other longer term
energy approaches throughout this session.
So.
With that said, it's an honor and a pleasure to be here,
and I'll turn it over to our very capable director
to begin the presentation.
And thank you, Commissioner Dezimid, Crowther,
and thank You, Chair Freer, and members of the committee.
It's a Pleasure to Be Here this afternoon
to walk you through what John said was a very good news story.
And I will just kind of preface with a little bit
about the order of what we're going to see.
I would do a bit of overview of production.
For the North Slope as a whole and then I'll walk through the production forecast, a few slides on those.
Walk through some of the north slope lease results from this past fall, lease sale results
from the past Fall, some projects that are ongoing, and we'll talk about cooking, let
supply and the activities going on there without further ado, I will move along here.
So, just a quick overview of cumulative North Slope oil production.
That bottom bullet down there in the bubble says 19,223 million barrels of oil produced.
I'll probably refer to that as something like 19.2 billion barrels
of Oil.
We're almost on.
50 years of production from the North Slope.
As you look at the map in front of you,
you can kind of see the range in oil production
from various producing units.
And obviously right there in the middle is Prudhoe Bay,
with $14.2 billion out of that $19.20 billion.
So that is obviously the lion's share
of where the oil reduction is.
Prudhoe Bay is a field like no other field. There's probably not another one like it
in the world. It's a one in a million kind of fine with the size of oil resource, the type of
rock, that drive mechanism, those kind things going on within it.
It is marvelous feel. We are very fortunate to have been able to produce that and see those
Kapark River, you can kind of see, is almost at 3 billion barrels of world-class field
in and of itself, very high recovery factor, lots of activity, probably another one of
those top-tier fields in the entire world.
And as you kind look out, as we expand away, both to the west and to
east of those major fields. There are some really large producers like the Colville River,
and as you look further west in the MPA, starting to see some production out of a greater moose's
tooth, and we'll talk about Willow or the bare tooth unit in a future slide here. And obviously
out to the east, we've seen production from the Badami unit, Point Thompson unit. We've
of the North Slope oil producing area
and hopefully we'll see some more development activity
there in the future.
And Chair Freer, John Crother for the record,
I'll jump in occasionally on these slides
just to add a little more commentary.
We'll go into detail in next slide,
but of course you'd expect when you see a field
with that volume of production, that lifespan,
40, 50 years of operation.
Geologically those fields are very mature. They're on the tail end of production and so the
production rates we still see in the fact that we, as we discuss in our production forecast
presentation, that those fields are both Caparic River and Prudhoe Bay, either flat or seeing
an increase in production relative to their total volume, is a testament to a lot of investment
and activity. And it's also a reason why it is so important to have new fields, new developments
on the slope because our anchor supplies are at...
at an advanced age for an oil field and we need to expand the production stock to continue
to see the levels that we're seeing and what we needed to drive our economy. Fortunately,
right now we are seeing that. That's where we come in with a good news story.
This is a graph that basically shows the history of North Slope oil production from
and obviously you can kind of see it production peaked back in the late 1980s at around 2 million
barrels of oil per day. That's what the X or the Y axis on the left shows. Obviously, if you look
at the graph, the majority of the production has come from Prudhoe Bay and quite a bit from
One thing I will point out to you that's, you know,
pretty obvious is after that 2 million barrel a day peak,
fairly precipitous decline down to, say,
in the kind of 2006 to 2010 range,
where production more or less is,
I guess you'd say stabilized around,
you have the 400 to 600,000 barrel per day rate.
to stabilize that decline, though, however, I don't know how recognized it is, requires
an incredible amount of activity from development drilling, infill drilling facilities, optimization,
maintenance, well work, you know, workovers to keep, keep wells.
online, keep their capability of production going, because they do kind of wear out and
fail at times. Even though the production is flat, there is still an incredible amount
of capital and expense investment into these fields to make production flat.
Chair again, John Crowler for the record and members of the committee. I just well summarized by my colleague.
I would note that a point that I've been making in several forms recently is that when you look at our production curve history
You know, you can argue with the field of this size the startup period really was you know Prudhoe Bay
Obviously coming online in the late 1970s Capart coming on line shortly thereafter a very long kind of plateau startup
period, but since that peak
We have not seen an increase in our production, the entire history of the state.
And when we go into a little bit more detail in the next slide with our
production forecast, we're seeing a measurable increase within the
next 10-year period, 20, 30 percent increase.
So that is truly unprecedented in
our entire industry.
Oh, sorry,
we have a question from Representative Prox.
The difference, just to kind of drive home this point, the Kupark River production has
not, it appears from the graph, that it has not decreased as precipitously as prutobae,
relatively slower decrease.
Yeah, through the chair, Representative Pracks, for the record, I'm Derek Nottingham.
I think, yeah, the two fields do have quite different characteristics, and I would say
that the Caparic River field has, you know, has its main development, but also there have
progressed aggressively over time, it is a kaparic reservoir, if you will, that's the
age of the reservoir. Prudhoe Bay is what's called the Yveschach
reservoir so they're two different geologic formations. The fluid
characteristics in them are quite different as well.
Prudehoe bay has an enormous gas cap and so that precipitate
decline that you see at Prudhoe Bay is a result of a lot of gas breakthrough and being able to
handle that gas in the facilities and keep the oil production going. So different geology and
also just a different makeup of the fluids I think contributes the difference in kind of
All right, thank you. I think I'll
We had to get through this and then there might be some more fun questions. Okay. Thanks representative Brooks
Seeing no further questions get proceed to the next slide. Yeah for the record Derek nodding him
So this like John mentioned going forward. We are actually forecasting an increase in production over the Next
10 years starting with actually from fiscal year 2026, which is the year we're in to fiscal
year 27. So we are starting to actually realize a lot of the benefit from projects like Pika coming
online. Just to explain the graph in a nutshell, what you see is our high and low and official
forecast this year. The official forecast has us roughly at around 465,000 barrels of oil per day
on average for fiscal year 2026 with an increase of up over nearly 520, 000 barrels a day for
It's a large part due to Pika coming online. We're expecting Pica to come online at the end of
March, early April, with a period of several months of ramp up from about 30,000 barrels a day up to...
of max capacity of the Mnuchin production facility of 80,000 barrels a day by the summer, maybe
early fall of this year. And, you know, as we move forward into the future,
we expect to continue to see production from Pico kind of stabilizing and then in
2029 expecting to
see Willow coming online adding a significant number of barrels there.
And then there's some other projects that we'll talk about in the in a in
a future slide to kind
of give a flavor of what else is going into the the official forecast.
I will point out that...
There is an operator forecast line that's on the graph.
That operator forecasts comes from confidential conversations,
information that we obtain from the operators,
compile it and put it together.
a totally independent assessment of production than what we do.
However, it is interesting to note that we're fairly close,
in a fairly, close alignment with what the operators are saying,
with the exception that the operator forecast doesn't,
as it says down at the bottom,
doesn' t include the future projects that are already,
that our outside of currently producing units.
So projects like Pika and Willow won't be in that dashed forecast
that dash projection there.
Thank you.
Representative Shather.
Thank You Madam Chair.
I'll keep it quick so we can keep moving in progress.
I'm glad to see the forecast for increased production.
I am a little sugar in to to the operators.
Some are more pessimistic forecast but.
And it's not as if people should think we can go down to zero or 100,000 barrels a day.
Would the director speak to the operational limits of the pipeline operating below what we have as the forecasts?
Is there any generally understood floor when it becomes more operationally challenging to operate the taps?
Through the chair, Representative Sadler, I don't.
have a specific number right off-hand with that floor maybe, but in general there is a low-flow
sort of limit on production through TAPs. Higher flow rates mean higher heat through the line.
production drops through the line. The oil tends to cool off much faster and that will
cause basically it to develop like a waxy kind of material and basically plug up the
line and yeah. So there is a limit. I think the pipeline operator, Aliaska has worked
on various ways to even make sure that we can go to lower limits or lower production
if necessary right now at 460, 480,000 barrels a day. That's not a concern. I don't want to
venture to guess like what that number is, but it's significantly below that I'd say.
Yeah, just to share work experience on that very same thing that the
10 15 years ago somebody said we're going to go low go below 500,000 barrels a day
huh
This was never designed to Go below
500 thousand barrels today and they have spent
tens if not hundreds of millions of dollars dealing with the
low flow and figuring out how to do it so it it can go way below
500000 but it becomes much more expensive to operate. It's cheaper to operated
At 550 then 450 by a lot because of the heat
Just very brief on that topic, John Crother, for the record.
Representative Prax, thank you for that point.
And it's absolutely very relevant to the state from our royalty valuation.
We essentially, the fixed operational of costs of taps is spread across the shippers through the tariff.
If the Tariff goes up, our Royalty value goes down.
Consequently, if the tariff does down,
our Royalty value does up.
So, more oil in the pipeline means all of our royalty oil gets more valuable, and that's
one of the very significant commercial concerns with these low-flow scenarios in addition
to the just operational concerns.
I will say I've worked at the department for some time, I worked when there's been real
commercial and technical concerns about the trend, you know, when we saw a trend of 7-8.
10% decline per year about these operational things.
I can share, I've been approached by individuals, companies looking at investment Alaska who
have raised concerns about capacity for increase.
Are we going to have space in the line given modifications to adapt to low flow if we do
Are we going to have room to get our project in?
And that's a very different problem and a
very good problem to
have so it's been a real change in my time at DNR.
Yeah, for the record, Derek nodding him again, this map is very
I will try not to read through every one of the bubbles here,
but just to kind of characterize what this represents
is the activity that we've seen on the North Slope.
And it's very busy and that's a very good thing.
There's lot of development, new development
like we mentioned at Pika and Willow.
There is a lot activity in the legacy fields
to reinvigorate production.
some of those activities in a future slide. There's exploration success to reference at the
land yap, SOCI-2 that we have seen some success out there on the east side of the North Slope.
There is future exploration wells that are planned.
in the NPRA for this winter season.
So there's a lot of activity going on.
I'll highlight a few things.
One is Hill Corp. Alaska continues to really...
perform well in the Milney Point field and the Prudhoe Bay field, basically reversing
the climb there and doing significant development activity.
Willow Project is on its way.
Conoco Phillips is not only doing the Willow project, but a lot behind the scenes progressing
projects within the Colville River unit, within
the Caparic River Unit, that are just maybe an
additional pad, maybe a pad expansion, or just a
new PA that they're developing. So they continue
to adjust and navigate just within their existing assets
as well and continue to find oil there and produce it.
Yeah, if there if they're any other questions on this, I'll be glad to address them
Thank you to the chair direct, not even I see the new activity
I've always thought that the heavy oil viscous oil production is kind of our next next cleanup next frontier
I'm any progress in the technology or the operations that would help produce viscose oil
Through the Chair for the record for record. They're igniting him
Representative Sather
has tested and drilled a few ugly wells.
They have been fairly successful in doing that.
I think one of the things that they're, you know,
we are learning from, they are
learning is the use of
polymer flooding to basically make water that they use for injection and support in the reservoir
more viscous and what's called a better mobility ratio between the injected fluid and the produced
the flood, the recovery,
the production, if you will.
And so they've been testing that
and using that in their Schrader Bluff development.
So that has a lot of promise for,
I'd say, heavy oil development on the North Slope.
And yeah, they have been very successful at that so far.
Oh, Representative Paul.
Thank you, Madam Coach here.
I'm curious, could you please talk a little bit
box in the top right where it mentions specifically POSCO International Corporation.
We're not familiar with that company.
Yeah, Representative Hall through the chair. This is John Crother. I think the best and most
authoritative kind of source on the companies involved would be Glen Farnand or AGDC. But
it's our understanding that PASCO is a South Korean.
I believe steel company, very large,
potential participatory interest in the project, but also supplying important materials to it.
So I may need to double check and correct that,
but I believe that's correct.
Seeing no further questions. I do actually have a question. So we saw a presentation
a couple of days ago from Gaffney Klein, and they talked about the, I guess, once we start
producing the gas and how that affects the economics of further oil production.
Do you see or are you following that?
Are there trends?
What are your thoughts?
Yeah, Chair Freer, through yourself,
I always mumbled that one.
John Crow there for the record.
There's a couple of very important dynamics there.
The first that's commonly talked about is the, as Director Noddingham referenced earlier,
the gas, you know, Prudhoe Bay, some folks call it a gas field.
The gas pressurization is very
important to ultimate overcovery.
So you have to manage gas off-take in light of overall field pressures.
And
the distribution of those throughout the reservoir.
There's a tremendous amount of work in modeling, understanding the
reservoir, water flooding, adjusting the pressure for reference to the committee.
Historically, when folks were looking at this project, the AOGCC, which is
directly responsible for that, did carefully assess this issue and issued
an approved off-take for gas at a time this
project was at different iteration.
that work has continued the companies, the operators,
the department also follows that
and pays close attention to it.
I think one of the things that Gaffney Klein
may have been referencing,
which is also a very positive thing for the state,
is that when you have additional resources
that can be produced from the same infrastructure,
you can spread that capital cost, extend that life,
and economically advantage that recovery.
And that's one the thing that is a little bit
If a given camp, a production facility, doesn't have to stand on the oil economics alone,
but there's also gas recovery, it's useful life maybe 25 years instead of 7.
And so that is a boon that we think potentially not well understood yet, but when we move
to large scale gas commercialization, there is lot of second order and follow on effects
that are very positive for the economics for producers and for state in extending that
life.
Thank you. Representative Miers, then Representative Prox.
Thank You through the chair. Thanks for being here. It's always good to layer on the information
because it's a lot and you guys specialize in it and we dabble, even though we have some
pretty big responsibilities with it. I would like to know more about what the gas
situation is up on the North Slope and if you guys have data compiled on that
that would be fantastic. Quality, quantities, you know, whether it's being
utilized for enhanced oil recovery and just a better feel for that. I mean we're
getting into that on Northslope a little bit more specifically on
But, you know, as we're looking at,
you now, beneficially utilizing the gas up there,
what does that look like?
I guess, I'm imagining there's that information
in pockets and pieces, at least at DNR,
but I would love to have a little bit of that data sorting.
And so it's easier for my brain to put it in context.
Through the chair, John Crother here,
representatives, we'd be happy to work with the committee
and share more information on that.
Thank you. Representative Prox. I am happy to report that others are stealing my questions.
Thank You. Oh, Representative or co-chair Diber. Thank. You co chair through the
Co-Chair
I don't know who can answer this just because I live in Fairbanks and Fairbanks is on one of these little graphs
And I'm just curious, can you, have you been to Harvest Alaska
plant and just kind of what is that like and
that'd be great. Thank you.
Co-chair Dibert, John Crowler for the record. I have not.
Personally, toward the plant, we've at the department,
we have been following it very closely
because it's important, one, just from the opportunity
to provide a secure supply of gas.
Obviously, it monetized some small amount of
gas, which is a good thing.
And as we will talk about later in the presentation,
that gas supply for Fairbanks is currently coming
from Cook Inlet.
And so,
You know, a small move away from Cookin that helps lower the pressure for some of those other demands.
So we view that as a very positive project.
I believe it's operational now, but director Nottingham may have more details there.
Co-chair Dyebert through the chair for the record there, igniting him.
Yeah, I've been to the plant when it was in its construction phase.
It's it on I
was formerly called the Atena pad, which was an existing pad. It shares that
that piece of land with another operation that's going going on there or
maybe maybe happening in the future. But it basically takes gas from the
out of that chilled gas to create LNG.
And they basically loaded on the trucks
and sanded down the Dalton Highway to Fairbanks.
Thank you.
Oh, Representative Brooks.
I think, thank you, through the chairs,
launched around this same slide.
The Great Bear Pantheon Project.
I have heard that there is a source of gas from there that its pipeline quality gas doesn't require all the conditioning.
I haven't heard anything about that in the last six months or so.
Have you heard any about anything?
Representative Prox, through the chair, John Crowler for the record, and I may let the
director supplement this a little bit.
You know, that project has been working on a series of exploration and characterization
wells.
They did drill one this year.
I believe they're still reviewing and processing those results.
They put some information out about it.
I think they continue to work to understand the reservoir, the nature of their development
is a little different than some of the other fields.
And so they've been trying to learn to understanding the reservoirs, nature, of charge, and the
volume of a charge there.
So I that work continues.
And I I they're continuing to be active discussing their project both with potential buyers
assess their kind of next steps for more wells and more exploration activity,
more characterization activity. Okay, thank you.
Representative Southern. Thank you to the chair. Probably Derek's best question.
We've been hearing, we heard some good news from the governor and from Glen Farang yesterday
about the prospects for national gas production and delivery. And the question I raised is,
I would like to raise this, what is the likely earliest source of early gas for a gas pipeline
We're hearing encouraging things, encouraging words said about where would that gas likely
come from?
Through the chair, Representative Sadler, there are several different options, I would say,
on the table.
Prudhoe Bay has the most gas. However, it has a very, when I say very high,
it had a CO2 content that's I think around 12% or so. So that CO 2 is very hard to handle
for a phase one gas pipeline, probably, you know, rules that out.
So as I understand that the project teams, they're looking for gas that has low CO-2
We think are a few different sources for a lower CO2 content
Not necessarily zero, but not quite as high as as Prudhoe Bay one might be
gas potentially from the the north star unit
potentially from Point Thompson.
Point Thomson's been a big part of past gas line efforts,
and it has, we think, somewhere around 6 to 10
TCF of gas available in a fairly low CO2 content.
It is quite a bit removed from the infrastructure,
and would require a pipeline in and of itself.
Awesome.
And I did this to the chair, and I've heard that Gwen Farrant is envisioning that spur
line now to point Thompson for gas as part of their phase one scope.
Thanks.
So, you know, for the questions?
This next slide just basically describes our fall 2025 lease sale on the North Slope.
It was one of the best that we've had and quite a while, which is a testament to the success that
we have seen in a large part.
in the new Shook Reservoir, which is what Pika and
Santos are developing what Conoco is developing out in Willow
And so we've seen a lot of activity and a lotta renewed interest in what's called the brooking aged
section of
geology essentially the results from this
this lease sale, $17.5 million in bonus bids.
That's the highest that we have seen
since prior to COVID, so in 2018,
there were 287 tracks that were sold around 500,000 acres.
That is the most land lease since 2014.
So a very good lease bill, by all respects,
this this past fall if you look off to the bottom right that gives you an
indication of the the companies and the and
the colors there represent or represented in the in
the least blocks above so you can kind of see where different companies have
been bidding and and release acreage positions they're they are acquiring
Representative Sandler. Thank you. Okay quick. It's always good to get money. No bonus money will be spent
Well, I'm sure but this is actually a down payment and future production
so and there's lots of nuance and
English that comes from these kind of things from your perspective as an industry professional
Characterize the what do you take from this lease sale is this mostly step-out work is as pioneering?
How should we interpret understand that the results this Lee sale?
Through the chair, Representative Sadler, I would say this is, it's definitely kind of an extension of the success that's been seen by, you know, in the Brookian plays.
So as I mentioned, the Pika development is a new shook reservoir, it's a brookie in play.
I think a lot of companies are seeing that success and seeing the availability, proximity
to infrastructure and really kind of looking at these leases in the North Slope in a different
As you see, the renewed production on the North Slope being commercialized, it obviously creates that interest.
And then further south down towards the alcade to leathe to river units, those expletory wells there, they've seen light oil,
potentially very big resources, so I think companies are also interested in those kind
of plays.
The oil resources here on the North Slope are immense.
As you saw from the production, we're at 19.2 billion barrels.
There could be quite a bit more to go out there and explore for and develop.
that we're seeing from the other fields.
Okay, thank you.
Chair Furrier, just very briefly, John Crowler for the record.
I know we need to move along in our presentation, but I...
You know, one of the other dynamics just to note for the committee, all the green squares on that map are already leased.
And so, you know when we have a record setting lease sale or a very high results lease
sale when have that level of current lease tracks issued is just a sign, a
very good sign because we all those other green tracks we're seeing activity
exploration and characterization work on as well.
So it's a we are pretty well leased up.
Thank you. There's a question for representative Paul
Thank You madam co-chair through the co chair
I'm wondering if you could put it in perspective a little more. I see on the side here. We're talking about
Since 2018 since 2018, but I guess over over the overall
History or I yes in modern history when it comes to leases in on
the North Slope
Where do these leases compare to leases maybe in the 80s or 90s like everything's relative right so I guess I'm trying to understand like
More as far as like how significant this is especially when it comes to the cost per acre if that's even a way to measure it
Representative all john kerler for the record through the chair
We can share some kind of historical statistical information with the committee for reference.
I think one of the dynamics, as I was alluding to before, we've had huge lease sales in the
past when there's been a very new geologic kind theory or originally sale obviously
What what makes the department so excited about seeing a lease sale with these this magnitude is how much acreage we currently have leased you know we we know
Many of these areas were taken for lease in the last year last two three years
And so when we see this level of activity on top of what's already out there. I think that's why we view this is such a good result
But we'll share that statistical information for the committee
Through the chair this Derek Nottingham for the record so to kind of follow on the the lease sale
What they felt like it was appropriate to talk about was the
Potential upcoming lease sales on and in the federal lease areas so an NPRA
And an war and and also in The Cook Inlet so there's a lot going on in this slide
And I'll try to summarize it as best I can but the one big beautiful bill
uh... did compelled the department in interior to basically reinstate its
lease sale program in the federal areas which includes
obviously alaska so
the BOEM or Bureau of Ocean Energy Management is going to conduct a lease sale fairly soon here
March 4th in the Cook Inlet and the OCS waters of the cook inlet so they've modified the royalty
terms for those new leases down to 12 and a half percent and they do plan on having up to five
Yeah, so this is, that's exciting news.
It supplements our, our desire, hope for more gas to be
explored for out of the cook inlet.
Representative, do you have a question?
Thank you.
Appreciate the presentation.
Talking about the Cook Inlet and just kind of curious,
what the state is doing as well to, I guess, make sure the
oil in particular. We talked about cooking natural gas a lot, but making sure that
cook and let oil is also a priority. It's great to see that the feds are stepping in on some of that,
but I know with things like marathon, for example, our refinery out there, they have the
not, you know, it's built for cook-and-let oil, right, and that produces a ton of jet fuel,
everything up into the interior and around, so just making it still a priori.
Representative Elem to the chair, John Crowler here for the record.
It's absolutely, we do talk a great deal about cooking the natural gas, but we follow the
oil production quite closely.
One of the things we address in our production forecast is that oil protection continues to
decline, and that's in part because of necessity for operators to be pursuing gas in the part
But one of the things we have done at the department level to try and
send new activity in the inlet is offered highly competitive, what we call net profit share leases.
So that's where companies are only responsible for paying into the state once they reach profitability, so they recoup their costs.
And that something we did to incent both oil and gas activity.
We've seen a limited number of those leases taken up yet and not that much activity on them.
to continue to offer those and do everything we can to make sure oil production remains robust.
Thank you.
Representative Sadler.
Thank You to the Chair to Commissioner Crowther.
So the on the Cook Inlet lease sales is that royalty reduction just for that first sale or
does that carry through to The rest of the five six sales and second any estimation as
to how effective that might be an enticing bid to cook inlet.
Representative Sadler through the chair I may be misstating the federal law
but I believe that that sets that royalty for the sale program going forward so
it would be that sale and the future sales but can work to confirm that for
the committee. On the question of interest I think we
We're hopeful that that'll drive some interest, but it still is a challenge in the Cook Inlet,
and that's driven.
It's a complex market, and it's also challenged by potentially federal permitting, so there
are some federal leases today, we're hoping we'll see some activity in a near-term on
those and be able to see successful permitting for that activity.
that's part of why the department's been doing everything we can with our
authorities on our state acreage because we know we we
can't depend on on the federal acre, unfortunately.
Through the chair, for the record, Derek Nottingham,
to just kind of move on from Cook Inlet and talk about the
the onshore north slope.
Bureau of Land Management, Areas of Authority, NPRA, and NMOAR, we're anxiously awaiting
a sale announcement.
They're required to make that first sale by July 4th and to administer four more sales
through 2032 as well.
sale as well as BLM sales on the North Slope is try to coordinate our lease sales with
them as much as possible so there's just a kind of a swelling of interest in Alaska all
at one time whether it's on federal leases or on state leases.
And so that's kind of what those two bottom bullet points indicate there.
We have already made plans to coordinate our cook-in-let lease sale on state leases with
the upcoming cook in that sale by Bohm.
Because of the timing and our previous sale being
just this past fall, we may hold a special sale
that co-insides with the BLM activity on the North Slope.
Well, Representative Prox.
Yes, thank you through the chair on that.
leasing properties now to get current income versus looking ahead 10 20 years
what the market might be and are we is our leasing schedule what drives our
leasing scheduled I guess. Representative Prox threw the chair John
The department does a fair amount of effort to understand, you know, when we offer leases
we want to offer them for a long enough time that an entity is able to do the work necessary
to develop them, but also a tight enough that we don't have warehousing or acreage sitting
kind of fallow without work.
potential extensions versus shorter primary terms.
So we evaluate a lot of different variables
to try and strike the best balance.
And we vary those across location,
you know, highly prospective areas.
We may include a shorter term or higher royalty or both.
And so that's it.
The department works very carefully to have what we think
is a balanced lease approach that protects our interest,
accelerates development while letting folks have
competitive terms that will attract bidding.
So I hope that answers your question.
I can really think to compare it to is the housing market, but if you're a real estate
developer, rental properties, you can get too many on the market today, and therefore
you are hurting your long-term prospects.
On the other hand, who knows what's going to happen in the future?
It's looking, I'm optimistic for, got to get through a short period, then we're going to have
pretty decent income from the state. One of the things that happened with Prudhabe was, frankly,
there was probably too much income coming on the front end. And then that income fell off
over the last 15 years or so, and we are where we
not so much the leases, that just happened, but we built a lot of facilities that we
are having a trouble, long-time trouble maintaining.
Maybe a little more sometimes to talk about offline, maybe future discussion, I don't know.
Representative Prach, through that you're happy to discuss it. I think in short summary,
we think the frontage and stage of making leases available, there's not a risk that
All right, we're not going to get too much money.
Thank you.
Through the chair for the record, this is Derek nodding him again.
So we are kind of transitioning out of the lease sale results and future...
plans for lease sales into a little bit more of some operational and status updates on
projects.
The first one here is a production chart that shows our Millney Point unit, which is currently
operated by Hillcorp, but was previously operated from the early 90s up until 2014.
And you see, you know, back when BP did the primary development of fairly high production
rate, 50,000 barrels a day, the peak at nearly 59,00 barrels per day back in 1998, and then
a dash line there, water production coming up. So the water in the reservoir is basically
moving through and pushing that oil out, but then it basically moves through, and it moves
better than the oil in a lot of cases. And so oil declines.
and down to around 18-19,000 barrels by the time BP transferred the asset or sold the
asset to Hill Corp.
So very precipitous decline.
Hill corp took over from that point, stabilized production and as you can see in the last
5 to 10 years has really ramped up production to the point where you're almost at that equivalent
primary development peak. So right now there are a little over 50,000 barrels a day. What's
unique about this is that the oil that they're producing today is predominantly what's called
the Schrader Bluff formation. It's a bit thicker, more viscous oil, it's harder to move.
And so we talked about polymer injection earlier.
They're doing what's called polymer
injection and they're drilling a lot of.
relatively closely spaced horizontal producer injector pairs in the
Schrader Bluff and and they really are getting after it quite a bit you know
to use a little bit of a colloquialism and in they you
know they've really kind of turned that that decline around
it's very rare that you see a mature field like this
actually hit a second peak after redevelopment
almost the equivalent of its kind of primary peak plateau production.
So outstanding job here by the operator and the other interesting point I'll make before
I move on is that Hill Corp recently acquired any Italian oil companies assets on the North
have basically the same formation, the kind of development in them, same type of oil and so
I mean I'm not, I don't want to make any promises for Hill Court, but they're
you know, they have their eyes on those fields
to kind of do some of the similar techniques there.
And, you now, hopefully we see something fairly similar
to this in those field, or even half of this kind
of impact would be a brilliant thing to see.
So.
This next slide is a bit of an update on Pika.
very close to complete commissioning work, sorry, under way.
And so production is expected at the end of first quarter.
So right around in the March, early April,
we expect to see production coming online from Pico.
You see on the map just where the Pica project is.
So just for reference, the Capark River unit
top right corner and you move west and the new shook production facilities there on the
green road that you see label at the MPF. The initial pad for Pika phase one is NDB. So
already or have been drilled on the
NDB pad
They've got obviously another 20 or so wells to continue drilling. They got the
the production modules in place, the seawater treatment plant in
place. And so we're right at the cusp of bringing on one of the
you know the biggest new oil developments that we've seen on the
North Slope and quite a while probably since
back in the early 2000s, maybe even before that. So very good
progress there. They continue to mature.
they're phase two and I understand that you know if you were an oil company you
kind of want to see how this investment goes and how things progress and if
things are kind-of producing the way you'd
hope they wouldn't expect they would before you make the next significant investment so I think
there's going to be a period of time before phase two goes forward. Don't think it's gonna be very
long. We expect good things out of Pika from what we've seen. You know, things are kind of coming in
as expected.
A bit of an update on Willow. Willow is about 50% completed and remains on track for first
production in early 2029. They've done a lot of activity in the in
the past winter season, constructing two bridges, installing 72 miles of...
pipelines west of Kapark. They've got a big plan, big plans for this winter for gravel and
remaining drill sites, installing two remaining bridges, continued pipeline work, opening up the
They've made major progress on the central production facility modules that are currently
under construction and they'll be transported up to the slope within 2027.
That project is expected to see a peak rate of 180,000 barrels of oil per day and has
Representative Sadler, then Representative Fields.
Through the chair, so I see on the legend,
there is ASRC lease and state lease,
and then ASRCC slash state least,
what is the ASARC slash State least?
What's the relationship there?
Representative Sadler through the Chair very quickly,
and I'm John Grother for the record.
I may not fully capture the history here, but.
When the Alaska Native Claims Settlement Act occurred,
regional corporations were established and had the right
to receive lands within their relative regions.
Because of the status of land positions with the federal
withdrawals and state actions, selections on the North Slope,
there were limitations on ASRC receiving their full allotment
of lands at that time.
So there was a negotiated settlement agreement where the
state and ASARC essentially jointly own
some lands in the subsurface and that's the the yellow color on that map
So under that settlement agreement for those leases
There's an allocation of royalty between the two parties. So some particular sections have a very high percentage for one some some the other
For reference for the committee
Obviously those some of those leases underlie the pica unit the kind of state
overall net royalty interest is probably between a
10, 11%, and that'll be subject to the actual final production and how it comes out.
But that's a long-standing settlement I think that was reached at some point in the 1980s.
Thanks.
Representative Fields.
Thank you.
Through the chair, the State Department of Labor tracks Alaska higher rates in different
industries and reports on annual basis.
I was curious if the department.
perhaps in partnership with other departments,
tracks Alaska higher rates on specific projects.
My impression is that Alaska high rates
were actually pretty good in terms of pipeline construction,
will, and pick up.
But as we try to understand what drives
these long-term trends of either growth or reduction
in Alaska-high rates industry-wide,
can we also track that in these individual units
and try understand
what produces better outcomes?
Thank you.
Representative Fields to the chair John Crowler for the record
I we'd be happy to talk with the
Department of Labor see the granularity of the data and and see if it's a something we can do be either by operator or by area
And just for
the committee the schedule for last or for next week has come out, but we will be hearing from
conoco Santos and
Hill Corp next Week on Wednesday
You can ask those companies individually
Through the chair for the record, Derek Nottingham again.
I'll just point, just to reference the map one more time,
the Willow project is those three pads
that indicate BT1 or bare tooth one, bare two two,
bare to three, those are the three drill pads,
and it's within the bare-tooth unit.
So they're further to the west
of the Greater Musus Tooth Unit.
This next slide is a summary of all the future projects that we see coming down the pipe.
We've already talked about Pika and Willow, and as we mentioned, PIKA once Phase 2 is
kind of implemented in online, potentially up to 160,000 barrels a day.
Willow has an estimated peak rate of 180,000 barrels a day.
So that really is a lot of the good news story in our production forecasts and the bright
future ahead of us, but some of other projects that are going on that don't get as much notoriety,
but definitely can add to that.
A production peak in the future, the Coel River CD8 project is one that is a new pad that
could potentially be our estimate up to 20,000 barrels a day.
It's east of the village of New Exit.
considering the location, a lot of stakeholder engagement type questions, what's the best way
to develop those resources and mitigate any impacts that come with developing in those areas.
But that is one that the Corps of Engineers has recently created its notice of intent.
That was back in September, meaning they're in the process of drafting EIS and planning
on issuing that record of decision later this year or early next year.
The the next project down on the bottom is the PBU or Prudhoe Bay
Project, Taiga
It's basically two pads called the omega pad and iPad
This is out on, the western side of Prudo
It basically if you kind of look at the geology it's more Schrader Bluff
development like we've seen in Milney Point where we saw that production curve, they basically turned
it around. So this is Hill Corp kind of doing its magic going back into a mature area of the
reservoir of field, developing the thicker viscous oil, and hopefully we'll see really good things
from that project as well. Peak rate expected to be 40,000 barrels a day when both pads were online.
This next slide is a it's very busy here I understand it basically shows
some of the exploration work that Conoco Phillips is planning this
winner in MPRA just those those exploration wells the four of them are
I apologize if I don't say it right, Tenamiak, 19 and then I believe it's the Sokkok, thank
you, I appreciate that.
The other two wells that you see indicated on the map are old exploration wells, that
are planned to be P&A'd.
They're also going to shoot a seismic survey over some of the southern parts of
the established units. And just so this one is currently being litigated so
my environmental groups have challenged the BLM decision.
that authorize Conoco to do this program.
The state has intervened in that particular case
and opposed the preliminary injunction
that those environmental groups have saw it.
And we're just basically awaiting the decision at this point.
When do you anticipate to hear a decision?
You know.
Chair Freer, it's possible that decision
has been issued during this hearing, essentially,
Okay.
Any day now is the best answer yet.
I'm sorry.
Anyday now.
John Crowther for the record.
Anyay now?
Thank you.
Through the chair for record, this is Derek Nottingham.
So we'll transition into Cook Inlet gas and why it's so important and then talk a bit
about the kind of the production forecast that we've done and a little bit about
the activity that's going on.
So why is cook-and-let gas so important?
Well, that gas goes to serve about 70% of Alaska's population in terms of heating
and electricity, so N-Star provides a lot of that
gas that's used for heating about 440,000 people over 25 communities.
Also, the interior gas utility that serves about 2,400 people.
that we talked about the Harvest LNG project earlier is now supplying IGU with
North Slope gas so that does alleviate some of the pressure off of
the Cook Inlet system.
And then on the electric side, two-gatsh electric serves
around 300,000 people.
Matt New School Electric serves around 180,00 people
over the south central areas, as well as Homer serving
around 36, 000 people, so a lot of people
are really affected in terms of their livelihood,
their homes, their businesses.
buy the, you know, cook in like gas and they put in,
you I'm pending shortages that we see in the in
the future. The other thing to note here is the long
term contracts and when they expire for each of the
different utilities there.
The chart on the right basically just shows the uses of that gas in terms of which utilities
use the gas, so Instar uses about 50% of it.
The other 50%, or 40% or so, 50 percent, is MEA's two-gatsh and Matinxchoelectric and
then IGU about 6%, but like we said, there's going to be some reduction in that, that's
a good thing.
Representative Mears.
Thank you through the chair. So on that last slide
So Homer Electric Association's contract ran out already on the gap on
direct gas supply and is being served now through end-stars contract
And then I think it was just last week met an USCO electric
has extended their contract through 2029.
So there's a little bit of very recent changes on there.
But yeah, it's coming soon.
And so that's the, I think,
the more important part of the slide here.
Through the Chair, Representative, here's, yeah.
Thank you for that supplementing that.
Yes, the...
There is a response that we're seeing in the Cook and then we'll talk about that in
the next slide to the potential shortfall and so, yeah, we are seeing contracts being
renegotiated and those type of things happening so that is
a good thing.
The the sort of the the bad news story. I guess that we saw back in 2022 is shown on this slide
in
hill court basically
Announced roughly in April that it would
Continue to supply gas to meet its existing contracts
But basically said that into the future the assets were getting so depleted that they were not going to
to extending those contracts long-term into the future. So at that point we put
together a forecast of what the supply would look like.
relative to the what we understood to be the demand for the cooking like gas so that top line
demand number is around 70 BCF per year. That's the amount of gases that's required to
to feed the electrical utility demand, the heating utility
demand plus any field and industrial demand like fuel gas usage for oil and gas operations
marathon refinery. So that's kind of the demand breakdown for the cooking like
gas. And what you see there is this forecast and those blue bars represent
the annual volumes that we estimated from the existing fields plus the
existing field and wells and the ongoing development drilling that was
And you saw, as you see this precipitous drop off in the 26, 27 time frame, and then, you
know, a lot of white space out there at the, towards the tail end of the graph.
So the interesting thing here is that this has actually been shown through multiple studies
middle to end of the 2020s that this was kind of going to happen. So it's been forecasted before.
Oh, Representative Prox. Oh through the chair. Where is Cook Inlet?
Graph these they are not
Signing long-term contracts, but that doesn't necessarily mean boom the gas shuts off the next day
Correct
to the chair. That's correct. You know that there's fixed contract volumes. There's also
gas sold in the spot market outside of contracts at times. I would note this is dated to 2022.
It's historical information at this time. But this about production, not necessarily
contracted volumes, this chart.
Today's price the price if the prices changes price goes up
Maybe there's more available
Representative practice through the chair John Coder again for the record that that's right this this effort in 2022 now historical
Did not include a price variability that naturally would affect supply and demand
We were able to see in the next slide is a little bit how the markets are all been the supplies of all
Okay, that might be
the next question because I guess the
next questions okay gas line shows up
that changes kind of makes my mind
cook in let obsolete I don't know if
that's true or not but anyway that was
going to be the
next
question but that might come in this
slide I'll wait okay through the chair
for the for
the record Eric Nottingham so the the
next slide
really shows some of the activity and change that we've seen since 2022. So it's a fairly
positive story, I'd say. What you're seeing is the same blue bars, but what we're seen is a
five years or so, even in the 2030.
So the existing operators, existing producers,
primarily the Hill Corp, have done a lot of work
to optimize their drilling program,
to focus in on areas where they are having the most success.
For instance, at the Beluga River field,
at North Cook Inlet field and some other areas
where have just been able to drill better wells.
And so we're seeing the impacts of that.
Those orange bars that you see are some of the new gas that we're seeing come online with
Fury Hex drilling at the kitchen lights field and also potentially expecting some gas to come
online from the cosmopolitan field in the future. When you
see those purple bars showing up there in 2032 and 2033, 2034 time frame, what that is is a
The system only uses about 70 BCF, so any overage of 70
BC F in the near term, we assume gets injected into storage
and stored for long-term use into the future,
so that purple is just kind of gas coming out of storage
as the fields go on that decline.
The cook-in that still eventually does go on to climb and there still is this white space out there
and so
If it's the you know, if it is the line from the North Slope coming in there, there's
There's definitely a window here and a bridge that this North the cook in like gas fills
And then obviously a need for
the North Slope gas to fill that white space into the future.
So I would say to answer your question, Brett Prox,
we hope and we see a future for both Cook Inlet gas and North slope gas.
Representative Fields.
Thank you through the chair following up on that question.
I mean, I'm guessing this question is unanswerable at this time because we don't.
No, the price from which Instar would be buying gas from a pipeline where there's not a gas sales agreement yet,
but if there becomes one, then I would certainly be interested in understanding the cost of that,
the costs for their buyers and how that would relate to, say, you know,
And SARS buying from hex at 1350 per MCF because I agree with you.
I could see an environment where actually utilities are using both or maybe the gas from the pipeline
really is a lot cheaper.
So just tracking that I think in the future would be helpful.
Thank you, Representative Mears.
Thank You through the chair.
So I am happy to see the purple on there.
So resources in a 33rd legislature was.
kind of front lines for doing a lot of new legislation to support that and the utilities are and I'm
producers have really taken that up, and we keep hearing new news about that storage increasing.
Duke Atchoelectric, this fall also gave an update to legislators showing their changes,
and of course they've got the beluga field, which is their part owners with that is kind of outside
of their contract with hiltcorp, even being partners there. So we're seeing...
a little bit of being able to look off into the future
and seeing some other things kind of filling
some of that white space.
We have been getting information,
you know, Fury Hacks having a successful summer.
I've heard that Bluecrest is under new ownership.
I haven't gotten any background on any potential,
increased production there.
Do you guys have any more information if they,
updated their plan of development or giving you new ideas on what their production might
Of course absent a new platform. Yeah, representative Mears through the chair John Crowler for the record here
So I may be addressing the last or most specific question there at the end the
At this time the department has not processed transfer of ownership or new new ownership
for the the blue crest entity owner and operator the cosmopolitan field
That field right now is is in default pending a potential cure that involves securing either investment
Partnership
Operatorship that can get in and develop the resource and drill new wells
So that administrative process is still ongoing at the department
I don't want to speak too much more, but you know the goal of the Department all throughout that has been
We want, to see success we want a, see partnership
because we need that new investment because
we needed the production.
And so that continues to be our goal
and our encouragement to all the parties involved
is to proceed as rapidly as we can to production
Representative Klum.
Thank you, co-chair.
So I'm comparing what you guys forecast in 22
to what's happening now.
And just had a couple of questions.
One is in 22, I mean, seeing so was there,
we were storing guests, then why wasn't storage included
in the original graph?
Yeah, Representative Colum, through the chair,
perhaps a little, you know, specular through
the sands of time for me, and you
know it gets a Little Hazy, but at the time
what we are focused on is trying to get as much,
the department has historically tracked this issue. We had reports every couple years on either
cooking the resource, reserves, production. But we were updating that based on what we saw,
the production volume from the current well stock, and really trying to assess what's a
reasonable assumption about development drilling. What we have eight, what have 12,
core presentation of those those kind of two elements of of the equation as we continue to dig in obviously
there's a tremendous and number of other elements to that one of
the key ones is storage and that's why in our our updates we've added that because it becomes so material on the entry your
basis but it you know I don't want to call our I do want
to color work rudimentary because a lot of it but if you
know this was our modern update at the time as
We work to understand that announcement by Hillcore in the state of the market.
I'll follow up.
So, I mean, the predictions and what actually happened are pretty, there's a big difference.
And so, would you say that's because Hillcorp's new 15 drills.
Is that because of HEXFURY development?
What is it?
A combination of things because it looks like we.
Here we were born off the cliff in 26 and here we're falling off
the clip around 2031 so I'm just wondering what did you not know a couple
years ago that you know that that actually happened. Yeah but
represent a problem it's a very important question and series of kind of analysis
for the Department to undertake and we do undertake it John John and
This slide, the 2022 forecast, I don't want to shirk or limit what the department was
trying to do at the time was provide that information about well performance and expected
wells to be drilled.
That's a key part of the overall balance and activity in the market.
We weren't necessarily trying the forecast.
There will be no gas on the Market or there will a material difference in 27.
current well stock, expected development drilling,
we start to see a material issue in the near future.
And when we go to our current,
our most recent kind of supply and demand balance,
we've included, obviously, that important storage component.
We've seen, as Representative Fields alluded to,
some price modification, you know,
price adjustment in market,
which we didn't attempt to forecast
whether it be price changes or not,
would that drive more production ornot.
This is a little bit more of a holistic R 2025 information that reflects the changes in the market on the price term reflect storage
But we still don't
We still do not assert that this is the forecast of what will happen
It's an increasing amount of information about what is happening in factual
Information about performance going forward or stowage capacity going for it, etc. So it
It is intended to be an important part of the discussion, but not the
and I'll be all forecast that okay if I just add the reason why I focused on that because I
remember seeing this a couple years ago and we're like panicking mm-hmm we were putting forward
cuts and royalty rates we try and were trying to you know incentivize drilling
and then to see kind of what happened I'm just saying that I mean I look at DNR graphs the night
Take them seriously guys do serious work, but I think it was
You know when I look at it now, maybe I mean it actually need to be happening
But I thank at least for me
There's a little bit more panicky than what we're seeing happening now and I'm glad there's more drilling and
I am glad their storage capacity that's expanding, But
Yeah, that really affects the decisions we make
What you guys say, so that is why I just
Notice didn't point it out. Yeah, thank you representative Colum to the chair John Crowler for the record
I we take that obligation very seriously and I appreciate that we need to
Continuously be available to share
update and you know take take our work very serious when we present it. I think I
Would just note you no this this chart shows there's
royalty modification by the state, so a major exercise of our authority to reduce the
state take to enable some of this development. There's some state lending in there.
There is price increase, which has an unfortunate negative effect for the consumer.
To go from the 2022 chart to this chart has been a tremendous amount of work by
everyone involved, and unfortunately has some negative effects to the
It's possible that this, the reality of how this issue plays out will continue to evolve
and the department will do our best to provide as much information as we can about it.
Thank you.
I've got representative Fields and representative Meerst.
Through the chair, yeah, a lot of positive changes in the last couple years and my read-on
is basically the royalty modification and kitchen lights worked and department did some good
exploration and ultimately production out of the cosmopolitan unit.
I don't know if you all want to talk a little bit about the work you did to get meaningful production at a cosmopolitan.
Thank you, Representative Fields, through the chair.
You know, in a sense, I think that works very much still on-going, so I do not want
to speak too much detail to it, but as I said earlier,
we view that the operator has an obligation to develop those leases.
been doing everything we can to encourage and push them to bring in investment to
enable that development. And we very sincerely hope that that will be
successful in their term. They'll benefit from that. The market will
benefit. From that and and that'll be the best outcome. Uh, the department is
certainly reviewing that issue very closely because that the unit currently
is in default and without successful investment in a cure, then we and the
I just want to thank the department.
I mean, they've used their existing statutory authority
very well, I think, going back to both the former commissioner,
this commissioner of their staff.
And yeah, we had hearings and they did the work.
So thank you.
Awesome.
Representative Mears.
Thank you through the chair.
So I'm not going to go into my concerns too much with the flat demand curve, but this
is just very top line for us.
We've seen in electricity generation there's been a lot of plant improvements for reducing
the amount of natural gas needed for electrical generation.
There have been some general movements with consumers for changing out light bulbs and
doing that setback thermostats and those sorts of things to make some differences.
But I think that as legislators and with our communication channels to our residents that
Like I'd mentioned before our natural gas storage capacity is increasing greatly so that we've got the ability to store
That energy
Seasonally always a big thing in energy. How do you how do use store it for later?
So that increased capacity it's huge
We've go, you know, we created the green bank a couple years ago
Which is now the sustainable energy corporation over at HFC. So we got The ability To
continue in that direction to reduce what our demand here is.
Renewable energy is a piece of that as well,
so that we can make our local gas go further.
So I guess this is
a call to my fellow legislators that
we do have some responsibility.
And well.
not responsibility ability. We can we can make some changes here with our communications and the
other thing other policies that we enact here so that that purple can be bigger and we
can have less white space soon. Representative Fields.
Yeah just following up on that through the chair maybe the department could model out
what expansion of capacity it Bradley looks like in conjunction with if our
potential hydroelectric generation that would meaningfully reduce gas demand for electric generation and
Just maybe provide us with some multiple scenarios for a sort of gas only
Approach versus a mixed approach that diversifies at least a lighter generation a little bit. Thank you
See no further questions
We're almost
Through the chair this for the record Derek Nottingham
This is an overview of just the activity that occurred in the cook in in 2022 or sorry 2025
There were 22 development wells drilled in 2025
the fields that they were drilled in. You can kind of see there. As I mentioned earlier,
a lot of focus by Hill Corp in the Beluga River and North Cook Inlet Fields.
And also, we mentioned the kitchen lights, development wells are being drilled now. That's
activity that we haven't seen in addition. We haven t seen any additional activity to Hill Corps.
drilling for quite a while. And so seeing another company get out and develop its leases is a very
positive thing. As we mentioned already, I'm hoping to see more of that with the cosmopolitan unit.
And also, Cinxa did expand their capacity by drilling a couple of wells in 2024 and eventually
And for the sake of time, I'll just kind of move ahead to the next slide here.
And I believe this is the last slide, and it's just a summary of a lot of the activity
that we've already been talking about, Hill Corp.
They're always drilling in the Cook Inlet, but also they've acquired the North Fork
unit from Gardas Holding, so that's another avenue for them to get out and redevelop a
somewhat mature field and hopefully find some more gas there.
for approval of the Keeneye Pool 6 for third-party gas storage. That was back in
August of 2025 so they've applied to the regulatory commission of Alaska.
and mentioned the hex fury drilling, the three wells.
One of those was in the end of 2024,
two of them sort of the summer fall of 2025.
They've done one work over and a lot of that,
we say this has been enabled by some of our authority by
analyzing and granting a royalty modification plus some loan authority through ADA and as we've
mentioned bluecress we're you know they're working with potential investors unit is in the default
and you just working them to ensure that we could see them developing their gas in a very near future.
And that fuel gas, that 10 BCF that we see is kind of the bottom piece of those graphs,
that demand, is also becoming a scarce commodity and straining all users because the people
that produce the gas want to use that to fulfill utility contracts and other operations have
been dependent upon that gas for their oil operations and in other industrial activities.
I would just summarize by saying, you know, the graph does show that we are, it does look like we're going to see supply above that 70 BCE for the next five or so years.
It is a risk forecast. There is risk that goes into it. Some things are anticipated to happen that could not happen. That would significantly change that.
make that graph, you know, get production up to say 90 BCF per year or something like that,
and you'd see extended, that extended runway with more purple bars out there.
So there, there are pluses and minuses to that. We're showing kind of the mid case or mean case
there but as with anything with subsurface development, oil field development there
And I believe that's the last slide.
Thank you.
I've seen Representative Field has a question.
Thank You through the chair.
If you could just talk a little bit about having only one
Jack-Up-Rig can be a constraint on exploration
and future production.
One Rig in the inlet, thank you
Representative Fields through
the Chair, John Crother for the record.
You know that that is correct.
When we first were doing our 2022,
assessment, and the level of activity from Hillcore, we saw that that rig, which Hillcore
had purchased and was an asset of their company, was being subscribed, but not necessarily,
they didn't necessarily have a program that would enable a multi-rig program in their
company.
When we started to see that success and interesting kitchen lights being developed, there started
to be constraints on rig time, especially when you're transferring it between operators.
We've been working with the operators, one, to ensure that the rig, the current
rig the one rig that's there is utilized as much as possible.
But second, we've
been encouraging the
operators to look at and explore the ability to bring a second rig in and
run a full full program with both operators.
And so I think that that certainly something that will continue to work
with them closely on and it might be a benefit to the supply of picture.
I guess follow up.
So, my understanding of the way that royalty reduction works, I think you all very wisely
applied with your statutory authority is that there's a gross revenue cut off for royalty
relief.
So perversely, your authority under state statute doesn't really let you eliminate the
Have any incentive whatsoever to do that because they're going to get cut off from royalty reduction at the same gross revenue target.
Is that understanding correct?
Thank you.
Representative Fields, through the chair, if I understand your question correctly that it is correct that the royalty modification does not take into account changes in expected expenditure costs.
We assess those when we set the gross revenues target, but if an operator say chose to be more aggressive.
that wouldn't modify our our now final decision.
All right, closing.
Madam Chair, I just identify this for the committee because if an operator went out
and say acquired a jack-up rig for, say, $50 million,
they would actually be taking a financial hit within the existing structure of royalty modification
as it exists in statute because it's a gross figure.
And I think that's an issue that maybe we want to take out.
So thank you.
Thank you, Representative Fields.
Representative Mears.
Thank You through the chair.
representative Fields was getting into one of my two questions about Jacob
Briggs, so now I only have one. So I hadn't been aware of or contemplated the
pressure from utilities for getting gas under contract and how that would
affect other users. I'd love to know more about those those effects. Thank you.
Thank you representative mirrors through the chair John crowler for the record just very briefly
But of course can follow up with you for for more discussion
You know those users are a couple different things oil production is one of them
And so we are seeing a strain on oil operators that don't necessarily have associated gas or enough
Associated gas that have had to buy it on the market are being
priced or constrained out. And that's an issue for the department from a royalty perspective,
from market for a supply perspective. So that is an issues. Also, the refinery,
the Kina refinery runs on Cook Inlet Gas. When there is not gas available under contract for
that refinery they have to divert some of their product stream to enable their operations
negatively affects the cost and the output for Alaskan. The supply constraints are real in the
response to in the market, and that's a challenge.
And we'll continue to be so unless there's
a very material change, so.
Thank you for, just a quick follow up through the chair.
Yeah, I'd love to get a little more
in The Weeds offline.
Absolutely.
Wonderful.
Are there any other questions from the committee?
I do, that too.
Representative Sadler.
Thank you.
If we're kind of going a little bit far field for the report coverage, there's been a number
of disruptions in federal employment and this curiosity here if DNR has been able to pick
up any experts from the federal workforce to fill some spaces or reinforce our personnel
at the Department to excavate the division.
Representative Soutler, through the chair, very briefly, we have been...
Very blessed to keep a very good team of the Division of Oil and Gas over the last several years
So we haven't needed to bring in a large number of folks
We do have a few key openings right now if anybody's looking for a job check out our website
But both
With industry tightening a little bit and with the federal we've been looking closely at those folks
And and we're would be eager to have skilled folks look at state employment at the department
Representative Elon
Thank you, just kind of going back to the Cook Inlet oil conversation a little bit.
How do you guys see the supply chain being for keeping oil coming from Cook inlet?
Because specifically to The Refinery, it's a concern that I have in that, you know, I
would hate to see The Refinery ever get.
Into a spot where it didn't have supply chain because I do know that you know arctic North Slope
Oil is not the same as cook-inlet
Oil and so it's it kind of you you knead it for production
Representative elam to the through the chair John Crow there for the record. It's a very important and
significant challenge, for just the reasons you mentioned, the refinery,
refineries are very complex machines. They're built for spec for a certain
inflow stream. I'll be quick in the coming time. The refinery has adapted to bring a lot of oil
over from Valdez, so it's still Alaskan oil. Some of that's been Alascan royalty oil,
which we're seeking to finalize one of those contracts soon.
And when we don't have Cook-Inlet oil, we have crude slate quality issues and we
have the likelihood that more oil will be imported and that's really a shame.
So when you talk about the future of Cook Inlet, especially if we
have less pressure on our gas market, some of that gas could go towards
supporting those existing operations that have very delicate economics right now.
We have seen a continued decline and unless we have some material changes
We expect that decline may unfortunately continue
So we'll be looking at everything we can do to be helping their finery though because it is
Absolutely critical to Alaska fuel fuel availability. Thank you
All right
Now, for real seeing no further questions from the committee.
That completes our agenda for House Resources Committee meeting today.
Thank you, Commissioner Designee Crowther and Director Nottingham for joining us today!
Our next House resources meeting is Wednesday, January 28th at 1 p.m.,
where we will hear presentations from Hill Corp, Santas and Conical Phillips.
The time now is 2.40 p-m, and this hearing of the House Resource Committee is now adjourned.