Web posted Friday, September 17, 2010

Doyon adjusts gas exploration programs in Minto, Yukon Flats

By Patricia Liles
For the Journal

Doyon Ltd., the Interior Alaska Native regional corporation, is conducting follow-up work this fall on its Yukon Flats gas exploration program, but is postponing a planned winter seismic program in the Nenana Basin.

Earlier this year, Doyon leaders said they were preparing to fund a seismic program this winter in northern part of the under-explored Nenana sedimentary basin, located southwest of Fairbanks.

That program was postponed, although regulatory permits to conduct the work are still being processed, according to Jim Mery, senior vice president of lands and natural resources at Doyon.

"The only three markets for Nenana gas are very uncertain right now, and we thought we should give it some time," Mery said. "We think some of these issues will settle down, or will become more clear in the future, so we recommended to our board to postpone this effort for a season."

Those three markets include Fairbanks, a bullet gas pipeline to Southcentral Alaska and new power generation to feed into the Railbelt electric grid. Uncertainty about the bullet line route and proposed state legislation regarding ownership of existing power generation equipment are some concerns that contributed to Doyon's decision to delay the seismic program, Mery said.

"One of the big question marks is the bullet line, whether that's going to happen. Depending on how that is put together, it could be really good for Nenana gas. At this stage, we just don't know," he said.

The third potential commercial market for natural gas from Nenana is currently served by Fairbanks Natural Gas, which has put together a sale deal and expansion project with the Alaska Gasline Port Authority and Golden Valley Electric Association as an anchor customer. That project would involve trucking liquefied natural gas from the North Slope to the Fairbanks area for use in the existing gas pipeline grid, and to power electric generation in North Pole.

"Fairbanks has always been our base case for gas development and were that (LNG trucking) project to actually happen, Fairbanks would no longer be a viable market for Nenana gas," Mery said.

Doyon managers overseeing the planned Nenana Basin seismic exploration program are continuing with the regulatory permitting process, he added, which includes collecting data needed for applications. The winter program being planned anticipates collecting two-dimensional seismic data over a minimum of 125 line miles.

Doyon managers have been planning to use on part or all of the study area low-impact equipment, provided by helicopter-portable drill rigs. "We recognize that this is a more sensitive area," Mery said.

Doyon was one of five business entities involved in a wildcat gas exploration well drilled last summer four miles west of Nenana on land owned by the Alaska Mental Health Trust.

Results from that 11,100-foot-deep well have not been publicly released by the exploration group, which also includes Arctic Slope Regional Corp., Usibelli Energy LLC., Denver-based Rampart Energy, and Cedar Creek Oil and Gas Co., a Bloomington, Minn., company that joined the Nenana exploration group in 2009.

The consortium holds an exploration license to explore some 500,000 acres of state land in the Nenana sedimentary basin, which expires in late 2012. State land managers have already extended the license once.

Doyon, along with local village corporations, also owns land in the Nenana basin. Earlier this year, Doyon President and CEO Norm Phillips Jr. said Doyon was encouraged enough to continue to explore the Nenana basin.

Mery expressed the same encouragement regarding the Doyon-funded winter seismic work completed earlier this year in the Yukon Flats, located north and east of Fairbanks. During the winter months, CGGVeritas completed 95 line miles of two-dimensional seismic data north of Stevens Village on the Yukon River.

Although no specific results from that work were released, Mery said Doyon is conducting follow-up ground work in the area.

A helicopter-supported crew will spend several days this fall collecting soil samples along some of the seismic lines shot by the Doyon contractor, as well as seismic lines Exxon shot in the 1980s. Soil samples will also be gathered this fall in the Birch Creek area, Mery added.

"Basically there's a lot of vertical faulting in the Yukon Flats and there are some indications that potential gas seeps may go to the surface. We want to see if indeed there is some sort of surface expression of hydrocarbons along the seismic lines," Mery said "We're obviously encouraged, otherwise we would not be spending money sending people back into the field."

After this fall's program is completed, Mery anticipates work to integrate collected data to help support the corporation's decisions about future exploration work.

"We are rethinking what's going on in the Yukon Flats before we start making any more plans about where we go," he said. "We have a lot of work with this data over the winter and I anticipate we will make some decision after that."