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9th Circuit upholds Shells EPA airpermits for Noble Discoverer

N A T U R A L G A S

N A T U R A L G A S

F I N A N C E & E C O N O M Y

Vol. 17, No. 53 www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of December 30, 2012 $2

The December issue of North of 60 Mining News is enclosed.

December Mining News inside

COLBY WRIGHT, UNIVERSITY OF ALASKA FAIRBANKS GRADUATE STUDENT

Alaska Division of Geological and Geophysical Surveysgeologists and students search for rare earths and othercritical minerals at Spooky Valley in the Ray Mountainsof Interior Alaska. This field investigation is one part of astate program aimed at developing Alaskas strategic andcritical mineral potential.

A special supplement to Petroleum NewsWEEK OF

December 30, 2012

3 Graphite Creeks world-class debut Inaugural resource catapults NW Alaska graphite deposit to No. 2 spot

9 Coffee deposit tops 3M oz gold Kaminak clears major milestone with maiden resource at Yukon property

13 Northwest Territories bucks trend Regulatory improvements, vast resource potential encourage investment

Chevron raises hopesAs incoming Kitimat operator, has global LNG experience; Encana, EOG out

By GARY PARKFor Petroleum News

Chevron has made one of the boldest moves yetto turn Canadas LNG export hopes into real-ity by taking over control of the Kitimat LNG proj-ect that has been stonewalled by its inability tosecure long-term buyer contracts.

In a radical overhaul of Canadas most advancedLNG venture, Chevron will buy out the minoritypositions of Encana and EOG Resources, each ofwhich held 30 percent stakes, while former opera-tor Apache will raise its stake to 50 percent from40 percent.

Chevron Canada spokesman Leif Sollid toldPetroleum News that the transaction is very excit-

ing news for his company, putting Kitimat in theforefront of North American plans to access Asianmarkets with its vast stores of shale gas.

But the immediate focus is on working throughthe transition period with Apache and taking oper-atorship within 90 days, he said.

Chevron Canada spokesman Leif Sollidtold Petroleum News that the transactionis very exciting news for his company,putting Kitimat in the forefront of NorthAmerican plans to access Asian markets

with its vast stores of shale gas.

see CHEVRON CONTROL page 15

Archer fires backArcher claims it fired Buccaneer over jack-up rig, not the other way around

By ERIC LIDJIFor Petroleum News

The international drilling giant Archer DrillingLLC is seeking more than $6 million in dam-ages from Buccaneer Energy Ltd. for a breach ofcontract connected with maintenance work on theEndeavour jack-up drilling rig currently docked inHomer.

Coming as Buccaneer publicly announced thatit had terminated the contract with Archer over latepayments and nonperformance, Archer filed asuit claiming the opposite: that it had terminatedthe contract because Buccaneer and its affiliatesand subsidiaries, including Kenai OffshoreVentures LLC undermined and underfunded

the project.By favoring wishful thinking over hard facts,

(Buccaneer) turned a blind eye to the amount oftime, money, and effort needed to bring such a rigup to operational levels, Archer claimed in its 18-page petition filed in Texas state court, in HarrisCounty.

Specifically, Archer claims Buccaneer under-funded maintenance work on the rig undertaken ata shipyard in Asia and moved the rig to Alaskabefore crews finished the necessary work, includ-ing installation of the mud treatment and condi-tioning systems, refurbishment of deep well risersystems, winterization of exposed working areas,full commissioning of all drilling systems, and a

see ARCHER RESPONDS page 14

ASAP to carry lean gasIn-state gas line plan simplified no NGLs, lower pressure, no straddle plant

By KRISTEN NELSONPetroleum News

P lans for ASAP, the Alaska Stand Alone Pipeline,have been simplified, with the proposal to shipnatural gas liquids removed from the plan, allowingfor lower pipeline pressure and easier offtake alongthe line.

The optimized plan also has a larger, 36-inchdiameter pipe, allowing the project to use industry-standard pipe, fittings and valves, Frank Richardstold the Alaska Legislatures Joint In-State GasCaucus Dec. 20.

Richards, manager of pipeline engineering for theAlaska Gasline Development Corp., established bythe Legislature in 2010 to develop a natural gaspipeline project, said the new design premise con-

trasts with the proposal presented to the Legislature in2011, which called for a 737-mile, 24-inch, high-pressure line. The proposed pressure, 2,500 poundsper square inch, was required because of the enrichedgas composition, he said.

But the 2,500 psi pressure meant that a straddleplant was required to deliver natural gas to Fairbanks,a plant that would allow the natural gas liquids thatwere entrained in that gas stream to be pulled out, gas

The The higher pressure of 2,500 psimeant that we were not at industry

standard piping, fittings and valves,Richards said.

see LEAN GAS page 16

Furie says looming $15 millionfine is scaring away investors

The federal government has yet to collect a $15 millionJones Act fine against Furie Operating Alaska LLC. But thecompanys president says Furie is feeling the pain anyway.

The looming penalty, and the refusal of authorities to miti-gate it, has made it difficult for Furie to secure investors inits resource exploration and development venture, Furiespresident, Damon Kade, said in a Dec. 14 declaration filed inU.S. District Court in Anchorage.

U.S. Customs and Border Protection assessed the penaltyfor an alleged violation of the Jones Act, a shipping law. CBPis an agency within the Department of Homeland Security.

The Jones Act requires that cargo transported between

New AGDC bill to be offered,separating agency from AHFC

The Alaska Gasline DevelopmentCorp., AGDC, was established by theAlaska Legislature in 2010 to develop anin-state natural gas pipeline, called ASAP the Alaska Stand Alone Gas Pipeline.

AGDC was set up as a subsidiary ofthe Alaska Housing Finance Corp. with alegislative mandate to get North Slopenatural gas to Alaska consumers at theleast possible cost. The original legisla-tion, House Bill 369, established atimetable for the project and required that a project be pre-sented to the Legislature by July 2011.

see FURIE FINE page 15

see NEW AGDC BILL page 14

MIKE HAWKER

http://www.PetroleumNews.com/http://www.miningnewsnorth.com/

2 PETROLEUM NEWS WEEK OF DECEMBER 30, 2012

Petroleum News North Americas source for oil and gas news

FINANCE & ECONOMY

EXPLORATION & PRODUCTION

3 Court rejects Shell air permits appeal

9th Circuit Court upholds Environmental Appeals Boarddecision in appeal against air quality permits for Noble Discoverer drillship

5 NMFS lists ringed and bearded seals

Says that shrinking Arctic sea ice extent threatens survivalof species; Alaska state administration considers suing the agency

6 AOGCC proposes new state fracking regs

Regulations would require water monitoring, disclosureof hydraulic fluid contents and implementation of well integrity rules

6 W Canada cash cow runs dry

Land auctions across the border record sharp declinefrom 2011; turnaround based on establishment of new unconventional fairways

5 Homer gas pipeline inching forward

State prepares easement for small distribution line as Homer and Kachemak City move ahead on proposals for funding citywide grids

7 Deepwater Horizon: a scientific response

Newly published papers document how the sciencecommunity responded to a disaster of unprecedentedmagnitude in the Gulf of Mexico

9 EIS describes two-stage Shadura project

NordAqs gas development could feature six wells at sitewithin Alaskas Kenai National Wildlife Refuge;initial test well is key

ENVIRONMENT & SAFETY

10 Expanded Canal could reroute LNG

2015 completion of work will allow tankers to move more freely, could edge industry toward global pricing structure similar to oil

11 RCA puts pipeline back out for notice

Spectrum Alaska and a pair of Flint Hills subsidiaries are both interested in building North Slope liquefied natural gas plant

NATURAL GAS

contents

10 Alberta needs pipeline cure

11 Osprey platform well workovers continue

GOVERNMENT

FACILITIES4 BRPC permitting Mustang road

3 New Cook Inlet tugs arriving soon4 Taking stock of future

LAND & LEASING

Furie says looming $15 millionfine is scaring away investors

New AGDC bill to be offered,separating agency from AHFC

Chevron raises hopes

As incoming Kitimat operator, has global LNG experience; Encana, EOG out

Archer fires back

Archer claims it fired Buccaneer over jack-up rig, not the other way around

ASAP to carry lean gas

In-state gas line plan simplified no NGLs, lower pressure, no straddle plant

ON THE COVER

SIDEBAR, Page 8: The science behind Macondo well capping

http://www.askcasey.com/

G O V E R N M E N T

Court rejects Shell air permits appeal9th Circuit Court upholds Environmental Appeals Board decision in appeal against air quality permits for Noble Discoverer drillship

By ALAN BAILEYPetroleum News

The U.S. Court of Appeals for the 9thCircuit has rejected an appealagainst the Environmental ProtectionAgencys approval of air quality permitsfor the Noble Discover, the drillship thatShell is using for exploratory drilling inthe Alaska Arctic outer continental