Oil and Gas Opportunities in Alaska

Table of Contents
Alaska Petroleum Potential 3
North Slope 10
Cook Inlet 18
Alaska Peninsula 24
Alaska's Gas Potential 29
Natural Gas Pipeline 30
Unlocking Alaska's Natural Gas Hydrates: A Major New Domestic Resource 37
Alaska's Oil and Gas Leasing Programs 48
Exploration Incentive Credits and Royalty Incentives 56
Permitting Oil and Gas Projects in Alaska 67
Royalties and Tax Revenues - "Alaska As Landlord" 72
Access to Facilities and Pipelines in Alaska 82
Sources of Alaska Geological, Geophysical, Well Data and Information 86
Page No.

Alaska Petroleum Potential
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas

Alaska’s Oil and Gas Basins
mep 04/01

DO&G 01/05

28% of total U.S. oil reserves (2003)
6.9 BBO remaining in producing fields
17% of total U.S. gas reserves (2003)
37.5 trillion cubic feet of gas
19% of total U.S. oil production (2003)
0.97 million barrels of oil per day
Cumulative State Production through 2003
15.3 billion barrels of oil
11.6 trillion cubic feet of gas (net production)
Alaska Reserves and Production
Sources: All data are from U.S. Crude Oil, Natural Gas, and NGL Reserves, 2004 Annual Report, U.S.D.O.E.-E.I.A. and from Department of Natural Resources, Division of Oil and Gas, 2004 Annual Report.
jrc 01/05

Estimated Mean Undiscovered Recoverable Oil Resources
and Gross Acreage Evaluated

Historic and Projected Oil Production
1969-2022
beh/tjr 12/04

Wood Mackenzie Study
Alaska ranked in top 25 percent for discovery size
(99 MMBOE).
Alaska ranked in top half for commercial success rate
(18 percent) and reserves recovered (918 MMBOE).
Alaska ranked in top quartile of “post-take development and full cycle NPV/BOE” ($2.14/BOE).
Alaska ranked in top third of “absolute full cycle value created” ( $1.97 B).
Source: Petroleum News, February 20, 2005
Photo: Offshore Exploratory Well, Courtesy of Armstrong Oil and Gas

North Slope

sin

Generalized Geologic Evolution of Northern Alaska

Generalized North Slope stratigraphic column displaying
oil and gas reservoirs and associated accumulations

North Slope Oil & Gas
Activities & Discoveries
March 2005

North Slope Development Activities
2004-2005
jrc 12/04

North Slope, Alaska
Oil & Gas Potential with Leasing Activity
wen/mep 03/05

6.7
10.6
15

Cook Inlet

tjr 00
Cook Inlet Basin
Regional Geological Setting
Source: Swensen, 1997, Intro. To Tertiary Tectonics and Sedimentation in the Cook Inlet Basin.

mep 98
Cook Inlet Basin
Generalized Geological Cross Section

Cook Inlet Oil & Gas
Activities & Discoveries
December 2004
jrc/cjb 12/04

db/jrc 12/04
MMCF/D = million cubic feet per day
Cosmopolitan Unit – Conoco Phillips (Oil discovered in 1967 by Penzoil)
Hansen #1 well P&Aed, Forest reported successful results, no word from Conoco Phillips yet
Hansen #1A well completed as oil producer, test production is being trucked to Nikisiki refinery.
Iliamna Prospect – Pelican Hill
Iliamna #1 drilled and suspended, now converting to disposal well
Kasilof Unit – Marathon (Gas)
Unit approved in October 2002
Kasilof South #1 and #1L drilled, evaluating
Middle Ground Shoals Field – Unocal & XTO
While XTO continues operations at two platforms, Unocal has ceased operations at this field and placed its two platforms (Dillon and Baker) in lighthouse mode.
Decision on “decommissioning” platforms still to come
XTO drilling C31-26RD in progress
Nicolai Creek Unit – Aurora Gas
NCU #3 production of gas ended March 2004
NCU #2, 1B, 9 completed, producing gas since November 2003
Nikolaevsk Unit – Unocal
-- Red #1 drilled, results confidential. First of a 5-year 3 well commitment
-- Results Confidential
Ninilchik Unit – Marathon
G.O. #1 well completed as gas well, tested at 11.2 MMCF/D from one zone
G.O. #2 well completed as gas well, tested at 11.9 MMCF/D from three zones between 8,048 and 9,440 ft. (MD).
Falls Creek #1RD completed as gas well, tested at 6.8 MMCF/D from a depth of 8,714 ft. (
Susan Dionne #3 (SDPA) completed as gas well; Falls Creek #3 (FCPA) active, no details available.
Abalone #1 well drilled in 2003 at north end of unit, not completed, currently shut down, no other details available.
Plans to drill Susan Dionne #2 (SDPA), Ninilchik State #1 (GOPA).
Production started at GOPA in Septmeber 2003, currently about 15 MMCF/D rate.
Cook Inlet Development Activities
2004-2005

db/jrc 12/04
BOPD = barrels of oil per day; MMBO = millions of barrels of oil
North Fork Unit and Deep Creek Unit – Unocal
Unit getting renewed interest from small investor group
Non-binding pipeline contract with ENSTAR signed in September 2003
Development drilling will begin 2005
Redoubt Unit – Forest Oil (Oil discovered in 1968 by Pan Am)
Production began Dec. 9, 2002
Recent drilling results indicate field is more complicated than previously thought; reserves probably to be reduced
Waterflood most likely to come online soon (end of 2005?)
RU#3 well began producing fuel gas on 7/28/2003
South Ninilchik Unit and Deep Creek Unit – Unocal
Pearl #1 and Deep Creek NNA #1 wells completed as gas producers in 2002, Unocal reported disappointing results.
Nine wells drilled to date, two more in progress. Some of these wells have been successful, some not.
Unocal built gas pipeline connecting Happy Valley pad to KKPL. Start-up Nov. 1, 2004.
Three Mile Creek Unit
Unit approved March 26, 2004.
Objective is Beluga Formation gas zones bypassed by early opener.
Additional 2-D seismic acquired
Three mile Creek #1 well drilled
Trading Bay Unit/McArthur River Field – Unocal
T.B.U. #K-13 came on production at 7,100 BOPD, highest rate of any well in Cook Inlet
Unit and PA expansions approved to bring boundaries into agreement with producing areas
Cook Inlet Development Activities
2004-2005

Alaska Peninsula

Alaska Peninsula Geologic Map
dwb 09/03

Alaska Peninsula Geologic Cross Section

Alaska Peninsula/ Bristol Bay Basin
Hydrocarbon Potential
Numerous oil seeps are present along the southern half of the Alaska Peninsula.
26 wells have been drilled onshore since 1903, the latest being the Amoco Becharof #1 in 1985. One offshore stratigraphic test was drilled in 1983, the ARCO North Aleutian COST Well #1.
The northern half of the Alaska Peninsula is a low relief coastal plain underlain by a thick sequence (18,000+ feet) of Tertiary strata that is contiguous with the Bristol Bay Basin to the north. Here the setting is very good for both structural and stratigraphic traps as well as the likelihood of encountering good to locally excellent reservoir quality rocks.

Reservoir quality should be considered the highest risk as rocks derived from volcanic and plutonic source areas may give rise to pore plugging cements and clays.
Oil and gas shows are evident in many of the wells. No commercial flow of oil has been proven to date.
Hyrdocarbon source rocks of Tertiary age appear to be largely gas prone. Deeper Mesozoic strata may have both gas and oil generating potential.
Seismic control on the Alaska Peninsula is largely poor and archaic. Latest technology in seismic acquisition and processing is needed to further define prospects.
Alaska Peninsula/ Bristol Bay Basin
Hydrocarbon Potential (cont.)

Alaska's Gas Potential
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas

Natural Gas Pipeline

Projected North American
Gas Demand and Supply
Source: NPC Study (2004)
wen/mep 03/05

jrc 05/05
Mean Value, Total Natural Gas Reserve and
Resource Base for Gas Pipeline Supply Report
All Values Trillions of Cubic Feet (TCF)
Alaska Division of Oil and Gas (01/12/05)
N/A = Not Assessed
1
Current estimate of known "stranded" recoverable North Slope conventional gas reserves in Prudhoe Bay, Point Thomson and smaller fields.
2
Subcategory of and included in "Undiscovered Technically Recoverable Conventional Reserves". Represents Basin Deep or Basin Centered component > 15,000' depth.
3
Craig and Sherwood arbitrarily split offshore hydrate resource estimates between Beaufort and Chukchi Sea shelves. Total North Alaska offshore gas hydrate potential remains 32,375 tcf.
4,5
Geological Survey of Canada estimated mean undiscovered gas in place ~ 0.489 - 0.800 TCF. Alaska component estimated as 0.116 Tcf.
8
Includes nonassociated and associated gas. State and Native lands are estimated to be approximately 37.5 TCF and are included in this total.
9
Oil and Gas Assessment of Yukon Flats, East-Central Alaska, 2004, USGS Fact Sheet 2004-3121, December 2004.
7
Barker, C.E., Clough, J.G., Roberts, S.B., and Fisk, R., Coalbed methane in Northern Alaska: potential resources for rural use and added supply for the proposed trans-Alaska gas pipeline;
AAPG-SPEM Joint Technical Conference, Anchorage, AK, May 2002.
6
Collett, personal communication, 11/26/04.
After Craig, J., and Sherwood, K.,Prospects for development of Alaska natural gas: a review as of January 2001, Minerals Management Service, Alaska Region. tbl. 9, p. 76.
Modified to include only North and Central Alaska basins and updated to include new information as footnoted.
4
1995 National Assessment of United States Oil and Gas Resources, U.S. Geological Survey, Open File Report , Digital Data Series-30, pub. 1995. For all central Alaska basins except the
Kandik Basin. Other basins not evaluated individually.

Prudhoe Bay Production & TAPS Schematic

Natural Gas Pipeline
Supply Study
DO&G 03/05

Useful Life of a Gas Pipeline
mdm 07/04
Project Life (Years)
Pipeline Capacity BCF/Day
(4.5) (5.6)
Reserves (Tcf)
Known
Resources
Undiscovered
Resources
33
36
40
60
100
150
20.1
21.9
24.36
36.5
61.5
91.3
16.1
17.6
19.6
29.4
48.9
73.4

Anchorage
North Slope
Valdez
WCSB
Mackenzie Delta/
Beaufort Sea
Monchy
Emerson
Dawn Hub
Huntingdon
New York
Boston
Kingsgate
Empress
Chicago Hub
Waha Hub
Midcontinent Hub
Henry Hub
AECO Hub
Proposed Northern Natural Gas Pipelines
Modified from Anadarko Petroleum Corporation, 2005
mep 03/05

Unlocking Alaska's Natural Gas Hydrates:
A Major New Domestic Resource
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas
37

Federal Legislation Provides
Project Substantial Benefits
Regulatory streamlining
Expedited judicial review
Loan guarantees
7-year accelerated depreciation
Investment tax credit for gas treatment plant

Resource Assessments
Alaska’s gas can make a huge contribution to reducing our nations dependence on foreign sources of energy.
Federal and state geologists believe that the 35 TCF of gas from Prudhoe Bay and Pt. Thomson is just the tip of the iceberg.
North Slope and offshore conventional mean technically recoverable undiscovered resource potential exceeds 236 TCF.
North Slope and offshore gas hydrate resource estimated in excess of
32,000 TCF, of which 529 TCF is estimated to be onshore.
Gas hydrate resource in the Prudhoe/Kuparuk Milne Pt. field area alone is 100 TCF.
Gas hydrates first confirmed in 1972 drilling, coring and testing in the northwest corner of the Prudhoe Bay field, 5 years prior to field start-up.
mdm 03/05

Gas Potential - North Slope Area
with Oil & Gas Leasing Activity
wen/mep 03/05

Gas Hydrates
commonly occur in Arctic regions and
deep ocean continental margins.
is a crystalline substance composed
of water and methane gas.
The solid water lattice accommodates gas
molecules in a cage-like structure.
One cu. ft. of methane hydrate will contain
as much as 164 cu. ft. of gas.
represent a large world wide resource,
500 to 1,200,000 tcf of gas.

Known Gas Hydrate Acccumulations
Modified from T.S. Collett, USGS Open File Report 2004-1452
Known gas hydrate accumulations (blue) and hydrate-associated free gas accumulations (orange) in the vicinity of the major North Slope oil fields (green). The USGS estimates up to 100 tcf in place of hydrate in the Eileen and Tarn trends combined. From T.S. Collett, 10/01 and Hunter and Collett, (2004).

Seismic amplitude of a gas hydrate prospect within the Milne Point Unit in 3-dimensional view (left) and in map view with time structure (right).
From Hunter (2004)
Warmer shades in shallowest corner of the fault-bounded reservoir compartment are
interpreted to be gas hydrates, consistent with the estimated depth of the hydrate stability zone.

Milne Point Unit Reservoir Model
Gas hydrate cap (orange) overlying free gas (green) and a single vertical producing well.
From Howe and others (2004).

Gas production profile from a schematic reservoir.
Cases 1, 2, and 3 compare offtake profile from the same reservoir using one horizontal, three vertical, and two vertical wells, respectively.
Note extended plateau for one horizontal compared to two vertical wells, and that total flow in all scenarios is virtually the same after 15 years.
Case 4 represents a lower permeability reservoir.
Originally from Howe and others (2004) cited by Hunter (2004)

Graph showing modeled contribution of hydrates to total production for the reservoir model in Milne Point Unit reservoir model
Production of original free gas constitutes all of the initial production; reservoir depressurization results in dissociation of overlying hydrates into free gas.
In this particular simulation, dissociated hydrate gas accounts for nearly all production beyond the fifth year, and continues at a nearly constant rate for the next decade.

Methane Hydrate Research, Development and
Field Operations -- Authorization Budget

Alaska’s
Oil and Gas Leasing Programs
State of Alaska
Department of Natural Resources
Division of Oil and Gas
Alaska Department of
Natural
Resources

Areawide
Oil & Gas Lease Sales
Annual lease sales
May: Cook Inlet & North Slope Foothills
October: North Slope & Beaufort Sea
Beginning in October 2005: Alaska Peninsula
Leases up to 5,760 acres
Maximum non-unitized acreage under lease
Offshore – 500,000 acres
Onshore – 750,000 acres
Term of lease: up to 10 years
$1/acre annual rental, increasing annually by $0.50/acre to maximum of $3/acre for 5th and succeeding years

Five-Year Oil & Gas Leasing Program
Public Notification Schedule
DO&G 01/05

Five-Year Oil & Gas Leasing Program
Public Notification Schedule

Exploration Licensing
Proposals accepted during month of April
10,000 to 500,000 acres
Maximum acreage under license: 2,000,000 acres
Term of license: Up to 10 years
Work commitment, expressed in $$
No rental fees during term of license
One-time $1/acre licensing fee
Right to convert to oil & gas leases

Exploration Licensing Program
Issued Licenses
Nenana Basin
Susitna Basin
Copper River Basin
Susitna Basin License 1: Issued
Licensee - Forest Oil Corp.
386,207 Acres
Susitna Basin License 2: Issued
Licensee - Forest Oil Corp.
471,474 Acres
Copper River License: Issued
Licensee: Forest OilCorporation
Size: 318,756.35 Acres
Nenana Basin: Issued
Licensee: Andex Resources
Size: 483,175 Acres
ods/pb/pg 1/05

Exploration Licensing Program
Proposed Licenses
Usibelli Coal Mine Inc. proposed a work commitment of $500,000 with a 10 year term.
Solicitation of Competing Proposals ended
Dec. 9 (none received).
Solicitation of Public Comments ended.
Preliminary Best Interest Finding (June/July).
Final Best Interest Finding (Fall 2005).
Proposed
Holitna Basin
Exploration License Area
Proposed
Healy Basin
Exploration License Area
Holitna Energy Co. converted from Shallow Natural Gas applications (Under HB 531).
Solicitation of Public Comments (Ended Dec. 21).
Preliminary Best Interest Finding (May/June 2005).
Final Best Interest Finding (Fall 2005).
ods/pb/pg 1/05

Independents in Alaska
Alaska Venture Capital Group, LLC
Alliance Energy, LLC
Anadarko Petroleum Corporation
Andex Resources, LLC
Armstrong Alaska, Inc
Aurora Gas, LLC
BBI, Inc.
Burlington Resources Alaska, Inc.
Cassandra Energy Corporation
Devon Energy Production Company
EnCana Oil and Gas (USA), Inc.
Evergreen Resources Alaska, Inc.
Forest Oil Corporation
Gas-Pro Alaska, LLC
Lapp Resources, Inc.
Murphy Exploration (Alaska), Inc
Northstar Energy Group, Inc.
Pioneer Natural Resources Alaska, Inc.
Pioneer Oil Company
Prodigy Alaska, LLC
Rutter & Wilbanks Corp.
Trading Bay Oil and Gas, LLC
Ultrastar Exploration, LLC
Union Oil Company of California
Winstar Petroleum, LLC
XTO Energy, Inc.
pb 05/05

Exploration Incentive Credits
and
Royalty Incentives
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas

Exploration Incentive Credit (EIC) Programs
Program I - AS 38.05.180(i) Oil and Gas Leasing
Restricted to oil and gas leases, shallow gas leases and unleased state lands that will be offered for leasing within two years of the activity.
Maximum of 50% of allowable drilling costs on conventional oil and gas leases.
Maximum of 50% of allowable geophysical program costs on unleased state lands during the two years immediately preceding inclusion of those lands in an announced lease sale. Information must be made public following the lease sale.
Applicable to royalty and rental payments and taxes owed the state under AS 43.55.
Credits may not exceed 50% of the payment toward which it is being applied.
Credits may be assigned.
Total drilling credits granted to-date: $54.6 million

Exploration Incentive Credit (EIC) Programs
Program II - AS 41.09.010 Exploration Incentive Credits
Program expires July 1, 2007.
Restricted to unleased lands, lands under exploration license, and federal and private lands.
Up to 50% of allowable costs for activities on state lands.
Up to 25% of allowable costs for activities on federal and private lands.
$5 million maximum per project; $30 million maximum for program.
Applicable to geophysical work NOT subject to AS 38.05.180(i) and to exploratory and stratigraphic test wells.
Applicable to bonus bids, royalties, rental payments, and taxes.
Credits may be assigned.
Drilling data confidentiality term cannot exceed the normal two-year term.
Geophysical data may be shown, but not transferred, to interested third parties.

Royalty Incentives
Royalty Reduction
as low as 5% if new production
as low as 3% if producing or shut-in
as low as 5% for oil production from CI platforms if production falls below specified levels
Discovery Royalty
CI only: 5% royalty for 10 yrs
Pre-1969 leases statewide: 5% royalty for 10 yrs.

Production Tax (ELF) - AS 43.55
15% X Non-Royalty Production X ELF X Gross Value at Wellhead
ELF: Factor between 0 and 1.
1 – Very BIG fields
Prudhoe Bay: 450,000 barrels/day
1 – Very PRODUCTIVE fields
Alpine and Northstar: over 4,000 barrels/well/day
All other fields are close to 0.
150,000 barrels/day fields with low productivity
2,000 barrels/well/day fields with low volume
Dan Dickinson, Department of Revenue, Tax Division

Exploration Tax Credits - AS 43.55.025
Production Tax Credit.
Effective for exploration well and seismic and geophysical exploration activities conducted July 1, 2003, through June 30, 2007, except those included in a unit plan of development or plan of exploration on May 13, 2003.
Applicable only to production occurring on or after July 1, 2004.
Applicable to all unleased and leased state, federal and private land within the state.
Credit is transferable.
Exploration well tax credits:
- 20% if the bottom hole location is 3 or more miles from the bottom hole location of a preexisting completed, suspended or plugged and abandoned oil or gas well that was spud more than 150 days, but less than 35 years, prior to spud date of the eligible exploration well.
- 20% if the bottom hole location is 25 or more miles from the boundary as of July 1, 2003, of any unit under a plan of development.
- 40% if both conditions are met.
Seismic exploration tax credits:
- 40% of eligible costs for those portions of activities outside of units under plan of development or plan of exploration.
- Seismic data submitted to state will be held confidential for 10 years and 30 days following activity completion date.
Dan Dickinson, Department of Revenue, Tax Division

Gas Exploration and Development Tax Credit
- AS 43.20.043
Income Tax Credit.
Applicable only to exploration for and development of gas resources and reserves south of 68o North latitude.
May not be used in conjunction with any other tax credit or royalty modification.
Allows a tax credit for 10% of the cost of qualified capital investments made after June 30, 2003.
Total allowable yearly tax credit may not exceed 50% of the taxpayer’s total tax liability and shall be determined before application of any other credits allowable under AS 43.20.
Expires January 1, 2013.
Unused tax credit may be carried forward.
Dan Dickinson, Department of Revenue, Tax Division

Alaska State Taxes
Production Tax and Conservation Surcharge, AS 43.55
Income Tax, AS 43.20
Property Tax, AS 43.56
Dan Dickinson, Department of Revenue, Tax Division

Property Tax - AS 43.56
20 mills.
Credit for any local assessment.
Evaluation for Exploration property “is the estimated price that the property would bring in an open market and under the then prevailing conditions in a sale between a willing seller and a willing buyer both conversant with the property and with prevailing price levels.”
Assessed as of January 1.
Due in June.
Also applies to production and pipeline properties.
Dan Dickinson, Department of Revenue, Tax Division

Income Tax - AS 43.20
Sliding scale up to 9.5% on $100,000 of income.
Start with Federal taxable income.
Three-factor Alaska apportionment to arrive at Alaska income.
Payroll, property and sales.
Once a producer, modified apportionment.
Production replaces payroll.
Unitary group.
Dan Dickinson, Department of Revenue, Tax Division

Production Tax - AS 43.55
15% X Non-Royalty Production X ELF X Gross Value at Wellhead
12.25% for first 5 years of commercial production
Gross value at wellhead is
market value at destination
less transportation costs to point of production
tankering costs
TAPS
quality bank
upstream pipelines
Dan Dickinson, Department of Revenue, Tax Division

Permitting Oil and Gas Projects in Alaska
State of Alaska
Department of Natural Resources
Division of Oil and Gas
67

Permit Streamlining Accomplishments
Significantly revised the Alaska Coastal Management Program
Re-organized permitting agencies and consolidated responsibilities within the Department of Natural Resources (DNR)
Created large project permit office in the DNR
Clarified rules and procedures for Oil Spill Contingency Planning
Created Permit-by-Rule Air Quality Permitting

Measure of Progress
One Independent went from lease issuance to permits in hand for a North Slope off-shore well in 3 months.
Lease issued: August 12, 2002
Permits Obtained: August 20, 2002 – November 15, 2002
Ice Road Started: January 14, 2003
First Well Spud: February 25, 2003

Permitting Contacts
Department of Natural Resources
Division of Oil and Gas
Patrick Galvin, [phone]
[email protected]
Steve Schmitz, [phone]
[email protected]
Alaska Coastal Management Program
Ben Greene, [phone]
[email protected]

Permitting Contacts
Department of Environmental Conservation
Oil Spill Contingency Planning
Bill Hutmacher [phone]
[email protected]
Air Quality Permitting
Jim Baumgartner [phone]
[email protected]

Royalties and Tax Revenues
"Alaska As Landlord"
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas
72

ALASKA:
570,000 Square Miles
1.48 Million Square Kilometers
365 Million Acres
Majority of known petroleum reserves are on state-owned lands
About 30% of proven U.S. oil reserves are located in Alaska
krb 12/03
Alaska Land Ownership

Calculation of Alaska Royalty and Tax Revenues

Royalty is a Contract Right
krb 12/03

The lease is a bilateral agreement between the state and the lessee
The lease grants exclusive right to the oil and gas resource to the lessee
The lessee promises to develop the resource expeditiously
The state retains a royalty interest in the oil and resource
The royalty is the share of production retained by the state in the lease
When the state sells the lease, only the lessee’s working interest is offered.
The lessee values the lease based on the economic viability of the working interest.
The royalty share and the bid price for the lease is the “economic rent” captured by the state.
Royalty is a Contract Right
krb 12/03

The lease cannot be changed unilaterally by the state or the lessee.
Modification of the lease royalty rates ex post is not a tool available to implement fiscal policy.
Royalty is a Contract Right
krb 12/03

The royalty share is not:
an entitlement to a share in the profits
burdened by a share in the costs of production
The royalty share is set by statute at a minimum of 12.5%
Many offshore Beaufort Sea leases are set at 16-2/3%
Some leases have sliding scale percentages based on price or gross revenues
The lease royalty rate may be reduced under special circumstances
The Royalty Share
krb 12/03

The state may take its royalty share in kind or in value
When the state takes its Royalty-in-kind (RIK), it takes physical possession of the production and it may sell its royalty share to someone else.
The state must take its oil and gas royalty share in kind unless the DNR commissioner determines that the taking in-value would be in the best interests of the state.
The Royalty Share
krb 12/03

Royalty-in-Value
When the state takes its royalty-in-value (RIV), the state has the right to a share of the value for which the production is sold.
When the state takes its royalty-in-value (RIV), the lessee is obligated to use due diligence to market the state’s share.
Royalty revenue to the state is calculated by multiplying the oil or gas price or value times the percentage rate specified in the lease times the total production from the lease
The Royalty Share
krb 12/03

Royalty Oil Production and Total Royalty-In-Kind
krb 12/03

Access to Facilities and Pipelines in Alaska
State of Alaska
Department of Natural Resources
Division of Oil and Gas
82

North Slope Oil & Gas
Activities & Discoveries
March 2005

Cook Inlet Oil & Gas
Activities & Discoveries
December 2004
jrc/cjb 12/04

Sources of Alaska Geological, Geophysical, Well Data and Information
Alaska Department of
Natural
Resources
State of Alaska
Department of Natural Resources
Division of Oil and Gas
86

jrc 12/03
Where to Get Exploration, Development and Production Data and Information
Alaska Division of Oil and Gas, Anchorage, AK.
Alaska Oil and Gas Conservation Commission, Anchorage, AK.
Alaska Division of Geological and Geophysical Surveys, Fairbanks, AK.
U.S. Geological Survey, Reston, VA and Menlo Park, CA.
U.S. Bureau of Land Management, Anchorage, AK.
U.S. Minerals Management Service, Anchorage, AK.
Alaska Oil and Gas Association, Anchorage, AK.
Geophysical Contractors (WesternGeco, PGS Onshore Inc., Fairweather Geophysical/Veritas DGC).
Exploration Consultants
Mapping Services

jrc 04/05
Alaska Division of Oil and Gas
550 West 7th Avenue, Suite 800
Anchorage, AK 99501-3510
[phone]
http://www.dog.dnr.state.ak.us/oil/
Information available on the Division’s website includes:
State oil and gas statutes and regulations.
Leasing, licensing, unitization, incentive, and permitting programs.
Unit notices and decisions.
Unit maps.
Annual Reports of state-wide production, production forecasts and reserve estimates at field level.
Various publications, maps, graphics, lease and unit boundaries.

jrc 04/05
Alaska Division of Oil and Gas
550 West 7th Avenue, Suite 800
Anchorage, AK 99501-3510
[phone]
http://www.dog.dnr.state.ak.us/oil/
Information NOT available from the Division or on the Division’s website includes:
Geophysical data purchased or acquired under permit requirements are not disclosed without permission of the owner. Some exploration incentive credit programs allow third-party viewing in special instances, but prohibit distribution of data or copies of data without owner’s prior permission.
Several Department of Revenue Exploration Incentive Programs provide for disclosure of G&G data after 10 years.
Well logs, well history, completion reports are not archived at or released through the Division of Oil and Gas. These are available only from the Alaska Oil and Gas Conservation Commission (AOGCC).

jrc 04/05
Alaska Oil and Gas Conservation Commission
333 West 7th Avenue, Suite 100
Anchorage, AK 99501
[phone]
www.aogcc.alaska.gov
Oversees oil and gas drilling, development and production, reservoir depletion and metering operations on all lands subject to the state's police powers.
Issues drilling permits, pool rules, conservation orders and conducts field inspection programs.
Repository for data from all oil and gas wells drilled on lands under state’s jurisdiction.
Distribution agency for non-confidential well histories and well logs normally released 24 months following completion or abandonment.
Publishes weekly, monthly and annual drilling reports.
Publishes monthly and annual production reports tabulating monthly, yearly and cumulative production.

Data Integration
E-Commerce at the Alaska Oil and Gas Conservation Commission
Well history/records
Well logs
Production data
Directional surveys
Public Internet Access

jrc 04/05
Alaska Division of Geological and Geophysical Surveys
3354 College Road
Fairbanks, Alaska 99709 [phone]
http://wwwdggs.dnr.state.ak.us/
Among the Division’s missions is determination of the potential of Alaskan land for production of metals, minerals, fuels and geothermal resources
Major state-wide programs are mineral and energy resource appraisals and engineering geology investigations.
Energy resource appraisal program includes continuation of the North Alaska field program consortium and Alaska Peninsula field programs.
Numerous reports, most addressing hard-rock minerals and geohazards, are available on-line.
Geologic Materials Center (GMC) in Eagle River is the public depository for non-confidential well cuttings and cores, thin sections, outcrop samples and analytical reports. Contact curator John Reeder at [phone] or at
[email protected]
for information.

jrc 04/05
U.S. Geological Survey
Alaska Energy Resources Program
Program Representatives:
Ken Bird, [phone],
[email protected]
David Houseknecht, [phone],
[email protected]
Key USGS resource assessments and reports include:
1995 National Oil and Gas Assessment is available on-line at:
http://energy.cr.usgs.gov/oilgas/noga/index.htm
U.S. Geological Survey 2002 Petroleum Resource Assessment of the National Petroleum Reserve in Alaska (NPRA): Play Maps and Technically Recoverable Resource Estimates is available at:
http://wrgis.wr.usgs.gov/open-file/of02-207
A Digital Atlas of Hydrocarbon Accumulations Within and Adjacent to the National Petroleum Reserve–Alaska (NPRA) is available at:
http://geopubs.wr.usgs.gov/open-file/of02-071/
The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska is available at:
http://energy.cr.usgs.gov/OF98-34/
Descriptions of and links to other USGS Alaska petroleum studies are at:
http://energy.usgs.gov/alaskaoverview.html#pubslist

jrc 12/03
U.S. Bureau of Land Management
Branch of Energy Minerals
222 West 7th Avenue, #13
Anchorage, AK 99513-7599
[phone]
http://www.ak.blm.gov/ak940/index2.html
The Branch of Energy Minerals is responsible for the mineral leasing program and related functions, reservoir management, approval and inspection of drilling and production operations including oil and gas, geothermal, coal, and other energy minerals.
Links to National Petroleum Reserve-Alaska information are available at:
http://www.ak.blm.gov/
The BLM, Native corporations and state resource management agencies share joint management responsibilities for several producing units in the Cook Inlet/Kenai Peninsula area.

jrc 04/05
U.S. Minerals Management Service
Alaska OCS Regional Office
3801 Centerpoint Drive, Suite 500
Anchorage, AK 99503-5820
Phone: [phone]
Fax: [phone]
http://www.mms.gov/alaska/
The mission of the Alaska Region of the USMMS is to manage the mineral resources of the Alaska Outer Continental Shelf in an environmentally sound and safe manner.
Resumed Alaska OCS lease sale program with the Beaufort Sea Sale 186 in September 2003.
Seven Alaska OCS sales are scheduled through May 2007.
Shares management responsibilities with the State of Alaska for the Northstar and Cosmopolitan Units.
Permits and oversees oil and gas drilling, development and production, reservoir depletion and metering operations on all offshore lands under federal jurisdiction.
Permits all geological and geophysical exploration activities conducted on federally managed offshore lands and notices release of such data upon expiration of 25 and 50-year confidentiality terms.
Several significant OCS resource assessment reports are available at:
http://www.mms.gov/alaska/re/reports/rereport.htm

jrc 04/05
Alaska Oil and Gas Association
121 W. Fireweed, Suite 207
Anchorage, AK 99503 [phone]
http://www.aoga.org
AOGA is a trade association established for the purpose of fostering the long-term viability of the oil and gas industry in Alaska by providing a forum for communication and cooperation with its members, with the public and with local, state and federal governments.
AOGA's members are companies which represent the majority of oil and gas exploration, production, refining, transportation and marketing activities in Alaska.
A January 2001 report entitled The Economic Impact of the Oil and Gas Industry on Alaska is available on the website and is the first statewide study that accurately captures oil and gas industry employment and spending impacts.

jrc 04/05
Geophysical Contractors Presently Active in Alaska
Fairweather Geophysical/Veritas DGC
715 L Street
Anchorage, AK 99501
[phone]
PGS Onshore, Inc.
341 West Tudor Road, Suite 206
Anchorage, AK 99503
[phone]
97

jrc 04/05
Exploration Consultants
Petrotechnical Resources of Alaska (PRA)
3601 C Street, Suite 1378
Anchorage, AK 99503
[phone]
David M. Hite, Ph.D.
Consulting Petroleum Geologist
2250 Woodworth Circle
Anchorage, AK 99517
[phone]
Arlen Ehm
Geological Consultant
2420 Foxhall Drive
Anchorage, AK 99504
[phone]
Arctic Geoscience, Inc.
12100 Industry Way
Anchorage, AK 99515
[phone]
Terrasat
1413 West 31st Avenue
Anchorage, AK 99503
[phone]
ASRC Energy Services E&P Technology
3900 C Street, Suite 702
Anchorage, AK 99503
[phone]

jrc 04/05
Mapping Services
MAPMAKERS ALASKA
259 South Alaska Street
Palmer, AK 99645
[phone]
Excellent source for maps depicting land ownership, leasehold information, unit boundaries, key exploration well locations and related information.

jrc 04/05
Charter for Development of the
Alaskan North Slope
Proposed by BP and ARCO as a condition of merger and entered into with the State of Alaska on December 2, 1999.
Intended to promote competition, diversity, corporate responsibility and renewed and expanded exploration, development and production of Alaskan North Slope (ANS) oil and gas.
Addresses sale of ANS reserves and properties; marketing and sale of proprietary seismic and well data; facilities access; divestiture of TAPS and feeder line capacity to those buying production; sale of excessive tankerage; commitment to environmental requirements and charitable causes throughout the state; commitment to Alaska hire and Native recruitment.
Complete text of the Charter is available on the Division’s website at:
http://www.gov.state.ak.us/bparco/FinalCharter1202.html
ARCO and BP seismic data are being brokered by WesternGeco, Houston, TX.