Bonding

Each operating company (as defined in 20 AAC 25.990(46) ) establishes a single-well bond or a statewide bond with Alaska Oil and Gas Conservation Commission (AOGCC) under Regulation 20 AAC 25.025 to drill, produce, and maintain oil, gas, and geothermal wells. An operator's bond remains active from the time the operator applies for a Permit to Drill for its first well until all wells operated by that particular company are plugged and abandoned according to state regulations and all well sites are restored in conformance with Regulations 20 AAC 25.170 or 20 AAC 25.172. The AOGCC does not establish bonds solely for the purpose of dismantling, removing, and restoring wells.

Operators can choose to submit either a surety bond (Form 10-402A) or a personal bond (Form 10-402B), depending on the financial instrument used. AOGCC's bond forms are available online through our website using the Forms hyperlink. Form 10-402A is required to establish a Surety Bond. A Personal Bond is established using Form 10-402B. If a surety bond is used, the insurer must be authorized in Alaska. You can check this online here.

If an operator chooses to use a Certificate of Deposit (CD) as the financial backing for the bond, then the operator must submit:

1. Personal Bond form (Form 10-402B),
2. CD documentation or receipt, and
3. Assignment of CD form (available on AOGCC's Forms page beneath the Personal Bond (10-402B) form).

The CD must clearly state that it is issued in the sole favor of the Alaska Oil and Gas Conservation Commission, and it must be obtained from a bank authorized to do business in the State of Alaska. If you chose to use an out-of-state bank or credit union, you can check whether or not that institution is authorized on the following page.

Please note that Powers of Attorney are required for every company representative signing these forms. These Powers of Attorney must demonstrate that each person signing has the legal authority to bind the corporation to lease and bond agreements. The bond cannot be processed until the AOGCC has Powers of Attorney for every representative signing these forms.

Ms. Samantha Carlisle coordinates all bonding activities for the AOGCC.  She can be reached at samantha.carlisle@alaska.gov or 907-793-1223. 

Permit to Drill Process and Schedule

Introduction

In order to drill a well for oil, gas, or geothermal resources in Alaska, a person must obtain a Permit to Drill from the Alaska Oil and Gas Conservation Commission (AOGCC). This requirement applies not only to exploratory, stratigraphic test, and development wells, but also to injection and other service wells related to oil, gas, and geothermal activities. Since the AOGCC is one of several state agencies that may have a role in reviewing and approving oil and gas activities, there is sometimes confusion about the AOGCC's precise function. We hope the following explanation helps to clear up any confusion.

First, the AOGCC is not in the business of managing or deciding whether to develop state owned resources. Rather, the AOGCC regulates certain oil and gas operations anywhere in Alaska, whether on state owned, federally owned, or privately owned land. Second, the AOGCC's oversight of drilling operations focuses on ensuring that appropriate equipment is used and appropriate practices are followed to maintain well control, protect groundwater, avoid waste of oil, gas, or geothermal resources, and promote efficient reservoir development. The AOGCC is not authorized to deny a Permit to Drill on the basis of land use concerns or conflicts between surface and subsurface interests. Third, the AOGCC's issuance of a Permit to Drill does not relieve the applicant of any obligations to comply with the permit or regulatory requirements of other state, local, or federal agencies before drilling. Local agencies that should be contacted by the operator are the affected borough (for example, the North Slope, Kenai, or Mat-Su Boroughs) and city. Federal and State agencies involved in permitting a well may include:

• Army Corps of Engineers
• Department of Environmental Conservation
• Bureau of Indian Affairs
• Department of Natural Resources
• Bureau of Land Management
• Environmental Protection Agency
• Federal Aviation Administration
• Fish and Wildlife Service
• National Marine Fisheries Service

A Permit to Drill from the AOGCC is often the last step in the overall approval process, and usually all of the other concerned agencies have given their go-ahead by the time the operating company (defined by 20 AAC 25.990(46) ) applies to the AOGCC for a Permit to Drill.

Regulation 20 AAC 25.705 grants the AOGCC jurisdiction over all geothermal drilling and production activities conducted on all land in the state lawfully subject to its police powers, including Federal lands. Regulations 20 AAC 25.710 through 20 AAC 25.740 governs these activities. By reference, Permit to Drill application requirements for geothermal wells are specified in 20 AAC 25.005.

Permit to Drill Application

The application form for a Permit to Drill may be obtained from the AOGCC's web site. Copies of all of AOGCC's forms can be accessed through the Forms link under the Information heading. The operator must fill out Form 10-401 and provide the form with accompanying information as required by regulation 20 AAC 25.005. The form and supporting information are submitted to the AOGCC in duplicate. The supporting information includes, but is not limited to:

• name of the proposed well and its purpose;
• coordinates of the proposed surface location of the well;
• operator bond information;
• proposed depth of the well at the top of each objective formation and at total depth;
• property lease designation and plat identifying the property and the property's owners;
• diagram and description of blowout prevention equipment;
• drilling hazard information including maximum pressure expected down hole and at the surface, potential gas zones, abnormally geo-pressured strata, lost circulation zones, zones of differential sticking;
• formation integrity test procedures;
• casing and cementing program;
• diagram and description of the gas diverter and BOP systems;
• drilling fluid program;
• diagram and description of the drilling fluid system;
• exploratory and stratigraphic test wells require site specific geophysical surveys described in 20 AAC 25.061;
• proposed drilling program;
• proposed directional survey, if the well is other than vertical, a digital version should be provided on CD or by e-mail ;
• general description of drill mud and cutting disposal plan.

Other, more specific requirements are listed or referenced in 20 AAC 25.005. Note: under AS 31.05.030(j) there are additional requirements that apply to wells that will be used in exploring for or producing nonconventional gas (i.e., coalbed methane, gas hydrates, or gas contained in shales). Applicants proposing to drill wells to explore for or produce nonconventional gas should contact the Commission for more information.

Processing of the Application

Once the AOGCC receives the Permit to Drill application, it is recorded in our Permit to Drill log and forwarded to the AOGCC's senior staff for processing. First, the application is assigned a Permit to Drill Number (a unique, seven-digit number primarily used to track well information within State databases) and an American Petroleum Institute (API) number, which is a unique, fourteen-digit, standard reference number used to track well information in national or specialized data systems. Next, a geologist, a reservoir engineer, and a drilling engineer review the entire application in detail using a standardized, multi-question checklist to ensure the application is complete, accurate, and conforms to all applicable regulations. Questions on the checklist ensure:

• well is correctly placed with respect to property lines and existing wells;
• operator is bonded;
• there are no other affected parties;
• no exceptions to regulations or AOGCC orders are needed;
• casing program is adequate to protect all known underground sources of drinking water;
• casing program is adequate for collapse, tension, burst and permafrost;
• cement program is adequate;
• nonconventional gas wells meet the requirements of AS 31.05.030(j);
• adequate tankage will be provided;
• diverter and blow out prevention equipment are adequate;
• drilling fluid program and equipment are adequate;
• choke manifold complies with American Petroleum Institute recommended practices;
• verification of mechanical condition of potentially affected offset wells within mile;
• adequate preparations are made if hydrogen sulfide gas is encountered;
• potential geo-pressured intervals are identified;
• shallow gas hazards are identified;
• seafloor conditions are adequate if the well is offshore;
• identification of a point-of-contact in the operating company for exploratory wells.

The AOGCC will notify the operator if there are any deficiencies in the application. The operator will either supplement the original application with revised or additional information, or, in the event that substantive changes are needed, re-submit the entire application. If unanticipated exceptions to regulations or AOGCC orders are needed, such as an exception to well spacing requirements, the operator will be notified. Usually such exceptions are handled through a public notice process with an opportunity for a hearing, a process that generally takes from six to eight weeks to complete. Following review by AOGCC technical staff, the Permit to Drill application is forwarded to the AOGCC's Commissioners for review. If the application is approved by the Commissioners, a letter to the operator is attached to one copy of the application and returned by courier or mail. This letter grants approval for the drilling operations, and it presents any stipulations identified by the AOGCC concerning operational or environmental safety. It also provides notification that the Permit to Drill does not exempt the operator from obtaining additional permits or approvals required by law from other governmental agencies, and it does not authorize conducting drilling operations until all other required permits and approvals have been issued. Once approved, the operations detailed in the Permit to Drill application must not be changed without additional AOGCC approval (see 20 AAC 25.015). After issuance of a Permit to Drill, information on the surface and proposed bottom-hole locations and the identity of the lease, pool, and field for each well is published on our web site in the AOGCC's Weekly Drilling Report. This information is also compiled on a monthly basis, and these monthly compilations are available on the same web page.

Permit to Drill Timing

The length of the approval process for a Permit to Drill application varies depending on the type of well, complexity of well design, location and ownership issues. Every application submitted to the AOGCC passes through the detailed review process described above. Exploratory wells, stratigraphic test wells, and wells implementing technology that is new to the State of Alaska may receive more intensive review than routine development wells in an already-producing reservoir. Wells to explore for or produce nonconventional gas (coalbed methane, gas hydrates, or gas contained in shales) are subject to special requirements under AS 31.05.030(j), which may also require more time for permit review.

Based on past performance records, the AOGCC's average time to permit routing oil and gas production and injection wells is about 5 working days after a complete and correct Permit to Drill application is received. Exploratory, stratigraphic test, and geothermal wells generally require 15 working days if there are no associated well spacing or correlative rights concerns

A Note on Statutes and Regulations

The specific statutory authority for Permits to Drill is AS 31.05.090. AS 31.05.030(j) also addresses Permits to Drill, in the case of nonconventional gas. The AOGCC's regulations pertaining to drilling are 20 AAC 25.005 through 20 AAC 25.080, and Permits to Drill are particularly addressed in 20 AAC 25.005. These authorities are among the statutes and regulations that can be found on the Statutes and Regulations page. The above general description of the Permit to Drill process is provided as a convenience to the public; this description should not be relied on as a substitute for the applicable statutes and regulations.

Plan of Operation and Development for New Pools

Before a new pool may be developed, an operator must submit to the AOGCC a Plan of Reservoir Operation and Development, which includes detailed reservoir information. Information in the plan is used by the AOGCC to evaluate if operations proposed by the operator will prevent waste, protect correlative rights and ensure the maximum recovery of oil and gas that is prudent. (See 20 AAC 25.517.)

Conservation Orders

In response to an application or under its own motion, the AOGCC will hold hearings and issue conservation orders to allow activities that are in variance to AOGCC regulations if needed to prevent waste, maximize recovery and protect correlative rights. (See 20 AAC 25.252.)

Area Injection Orders

Injection orders may be issued on an area basis rather than for individual wells in areas where greater activity is anticipated. The area injection orders describe, evaluate, and approve subsurface injection on an area wide basis for enhanced oil recovery and disposal purposes. (See 20 AAC 25.402.)

Underground Injection Control (UIC) Program

The goal of the UIC program is to protect underground sources of drinking water from contamination by oil and gas (Class II) injection activities. The UIC program requires the AOGCC to verify the mechanical integrity of injection wells, determine if appropriate injection zones and overlying confining strata are present, determine the presence or absence of freshwater aquifers, and ensure their protection, and prepare quarterly reports of both in-house and field monitoring for the U.S. Environmental Protection Agency (EPA). Through a Memorandum of Agreement (MOA) with the EPA, the AOGCC has primacy for Class II well in Alaska. The three types of Class II wells include oilfield waste disposal wells, enhanced oil recovery (EOR) wells, and hydrocarbon storage wells. The AOGCC currently manages approximately 50 disposal and 1,400 EOR wells. Class I wells are regulated by the EPA. For more information, contact EPA's Region 10 office. There are currently about 20 Class I wells in Alaska.

Annular Disposal of Drilling Waste

The goal of the annular disposal program is to provide an efficient means for the on-site and safe disposal of waste from drilling activities. Oversight of annular disposal of drilling waste was transferred from ADEC to the AOGCC on July 1, 1995. Regulations governing annular disposal were created and became effective on September 22, 1995. The AOGCC takes a very active role in ensuring that wells permitted for annular disposal will adequately contain injected waste. The AOGCC also reviews and approves specific wastes for annular disposal. (See 20 AAC 25.235). The operators are required to report all flaring events in excess of one hour. Previously, facilities were penalized when they exceeded set daily limits. Flaring events over one hour are analyzed and investigated if necessary. The operator may be penalized if it is determined that waste has occurred.

Drilling Activities

The goal of the Commission's oversight of drilling activities is to ensure the prevention of waste of hydrocarbon resources as well as provide adequate protection for freshwater aquifers.

Permit to Drill

The AOGCC approves drilling plans submitted with an application for Permit to Drill. The permit application is reviewed by the Commission's professional staff and the approval process typically takes 5 working days for a routine oil and gas production or injection well. Exploratory, stratigraphic test, and geothermal wells typically take 15 working days to review if there are no associated well spacing or correlative rights concerns.

Sundry Approvals

Variances from approved drilling programs and remedial well work require approval from the AOGCC in the form of Sundry Approvals. AOGCC' staff work closely with the operators in approving requested activities.

Surveillance

General

• The Commission's surveillance activities are intended to ensure that Operators are acting to prevent waste and maximize recovery of oil and gas.
• The AOGCC undertakes independent analysis of subsurface information in order to assess recovery efficiencies for oil and gas reservoirs.

Inspection Program

An inspection arm of the AOGCC oversees drilling rig blowout prevention equipment tests and other safety requirements of oil and gas exploration and production. In addition to acting as a liaison between the AOGCC and operators, the field inspection staff provides the following services:

Meter proving

The Commission's metering responsibilities require verification of the accuracy of crude oil sales meters used for royalty and severance tax determinations. In the field, AOGCC engineers and inspectors monitor water drawing and calibration of volumetric provers, and witness proving operations. Meter factor calculations and fluid volume calculation are verified to ensure that correct temperature and pressure factors were used. AOGCC inspectors witness gas meter calibration at major custody transfers every six months and minor ones once per year. The inspectors witness meter proving on all meters at Prudhoe Bay Unit every month, major LACT's every quarter, and Topping Plants every six months.

Mechanical Integrity Testing

The MOA between the AOGCC and EPA requires that the AOGCC witness initial mechanical integrity tests (MIT's) and at least 25% of all subsequent MIT's on Class II wells. The AOGCC actively witnesses MIT's on all new injection wells, workovers, and repairs to injection wells. Currently, the AOGCC witnesses approximately 60% of subsequent MIT's. The AOGCC is also required to witness the plugging and abandonment of all Class II injection wells.

Blow Out Preventor Testing

The AOGCC witnesses Blow Out Prevention Equipment (BOPE) testing following installation of the surface casing on all exploratory wells and wells that might encounter abnormally pressured zones, as well as on each rig at start up, after major moves and every two months on a routine basis. Diverter tests are witnesses on all exploratory wells, new rig or reactivated rigs start-ups where a diverter is required, and all wells requiring a diverter because of known or probable shallow gas sands.

Plugging and Abandonment and Location Clearances

AOGCC's staff inspects all abandoned locations for clearance unless waived by the AOGCC following site inspection and clearance by other jurisdictional agencies (see 20 AAC 25.170 and 20 AAC 25.172.). The inspectors also witness the setting of critical cement plugs in wells during abandonment as long as the well is not being abandoned to redrill the well to a new location within the same pool.

Safety Valve Testing

The AOGCC established a goal of witnessing at least 25% of safety valves tests required either by regulations or conservation orders and 75% of all retests, rotated so that all wells are witnessed at least once every two years. When safety valve systems are required by regulation, all pilots, surface and subsurface safety valves are tested every six months.