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HomeMy WebLinkAboutUnalaska Geothermal Insurance Correspondance 1984- MEMORANDUM Stateof Alaska r TO:Larry D.Crawford DATE:June 13,1984 Executive Director FILE NO: TELEPHONE NO: FROM:Brent N.petri'?SUBJECT:Purchase of Insurance Acting Director of Project 'for Unalaska Geothermal Evaluation Well Through its contractor,Republic Geothermal,the Power Authority purchasedcatastrophicwelldamageinsurancewitha$5 million dollar limit of liability to cover the FY 1984 field season.The policy expires 6/21/84 and should be renewed to cover the FY 1985 field season.The premium forrenewalofthesamepolicyforanotheryearwouldbeapproximately$5,500.(FY 1984 expenditure for this item was $5,226). Please indicate your approval of this expenditure,chargeable to account 672,Unalaska Geothermal Drilling. SGR/BNP/ald Concurrence: D WesGloriaManni M7!oTI380DDilidbyb@2596/168 F2 02-001A(Rev.10/79) ee tGe ponei MEMO TO THE RECORDALASKASUBJECT\erthenmels Lefe,bare 6/39 /¢¢4avSHEETCnalethannPOWER '|AUTHORITY He ates Arcr,prosect_lCnalslba . awnPeers,Lui)Nhemt IND Calle b rtd NedpendeAPAAe):nif tt atIESfosbonsLtweemsthatsplotfosma,bfaife and.aside t.east fol Lae desk ?seed repliedMpfordtad oe}iin eset pars S worth invesh eT 4 MN.sled mast boo)abs phlecs Teakcey?jks ThewepurdedsChapoyHoCarersge.ae Oyu WH Pore,osetle ete,Deg th PaveD-C vn Chis ap Gthed what use)meoded)h An 7+Nepetporded)Hat 2nd wth bere,Aybliad lowsitépperatiuneGAdiiabWel),)20 ded petiud.4D pards obyernce..-Ctaati "ba go tons=hekely or Neur well as.Be April 19,1984 Mr.Ira Peer Deputy Director ; Divisionof Risk Management/DOAPouchC Juneau,Alaska 99811 Reference:Unalaska Project Geothermal Drilling Dear Ira: Following our telephone conversation,this is to ask you to evaluate if it is necessary for the Alaska Power Authority to continue providing theDNR/Division of Minerals and Energy Management (DMEM),now Division ofOilandGas(DOG)with an exploration bond under 1]AAC 87.050 (copyattached).To satisfy such requirements,the Power Authority elected to set up a reserve,as described in the attached letter from Patti DeJong to DMEM,dated January 13,1983. A contract with Republic Geothermal,Inc.,and a RSA with the Division of Geological and Geophys{cal Surveys will carry the Unalaska drilling project to completion.These activities will resume in early July 1984andatthattimethePowerAuthoritywillbeparticipatingintheStateSIRprogram;if the $100,000 reserve were available the funds could be productively used to acqufre additional necessary data, Please advise us if AAC 87.050 requirements can be satisfied under the Power Authority/State SIR program;if not,please inquire about the cost of buying a bond to replace the existing reserve. For your reference I am attaching copfes of documentation for the existing coverage on this project,through the Power Authority and through the main contractor. Please call me if you have any questions. Sincerely, Gloria Manni Controller Attachment as stated GM/ald cc:Brent Petrie,Alaska Power Authority David Denig-Chakroff,Alaska Power Authority 789/195/D1/F1 htePheosebQueetyofbecleHE urocde fe.Uc oCug /ALAM ees [ieee GP ip phks'Ge, April 13,1984 Me Ira Peer Deputy Director Division of Risk Management/DOA Pouch C Juneau,Alaska 99811 Reference:Unalaska Project Geothermal Drilling Dear Ira: Following our telephone conversation,this is to ask you to evaluate if it is necessary for the Alaska Power Authority to continue providing the N pow Dr gim of O4Oa?(poDYiR/Division of Minerals and Energy Management (DMEM).with an explor-u 37 ) ation bond under AAC 98.050 (copy attached).To satisfy such require- ;o- Geserfiedments,the Power Authority elected to set up reserve,as Ain the attached letter from Patti DeJong to DMEM,dated January 13,1983. A contract with Republic Geothermal,Inc.,and a RSA with the Division of Geological and Geophysical Surveys will carry the Unalaska drilling Lovprojecttocompletion.These activities will resume in Lath July 1984X 789/195 D1 Cis the $100,000 reserve were available the funds could be productively usedto acquire additional necessary data,Jand at that time the Power Authority will be participating in the State SIR programx ;-teal- aeoe Please advise us if AAC 7.050 requirements can be satisfied under the Power Authority/State SIR program;if not,please inquire about the cost of buying a bond to replace the existing reserve. For your reference I am attaching copies of documentation for the existing coverage on this project,through the Power Authority and through the main contractor. Please call me if you have any questions. Sincerely, Gloria Manni Controller GM/ald cc:Brent Petrie,Alaska Power Authority David Denig-Chakroff,Alaska Power Authority 789/195 D1 June 13,1983 Ms.Kay Brown Ofrector Division of Minerals &Energy Management Department of Natural Resources 555 Cordova Street Anchorage,Alaska 9950) SUBJECT:Geothermal Drilling Permit Unalaska per AS38.05,330 Dear Ms.Brown: The Alaska Power Authority has requested the Division of Minerals and Energy Management to issue a permit for exploratory geothermal drilling work at Unalaska Istand.CommunicationsbetweenAlaskaPowerAuthorityandDivisionofMineralsand Energy Management staff indicate that the last remaining point needingclarificationforissuanceofthepermit{fs the bonding provision of Section 11 AAC87.050. The major concerns have been related to possible catastrophic well damage and completion guarantees.The Alaska Power Authority has,through its contractor,Republic Geothermal Inc,purchased catastrophic well damage insurance with a $5 million limit of liability.Your staff has indicated that this insurance 1s accept- able remedy for the catastrophic faflure concern in the permit process. The Alaska Power Authority has budqetarily set aside $100,000 in state account 98-73-4-672 as unencumbered funds for the purpese of assuring abandonment of the subject wells in lieu of a bond for abandonment.This money will]not be encumbered without written appraval of Division of Minerals and Energy Management for any purpose until each of the two permitted wells being drilled at Unalaska have been abandoned per Divisfon of Minerals and Energy Management's ceothermal regulations.The wells will be drilled Jivsion of Min 1s &Energy Management Geothermal Dri ng Permit June 13,1983 Page 2 consecutively.This comparable security procedure is allowed under Section 11 AAC 87.080 (2)and satisfies the last remaining concern that your division has requested clarification or change on for the permits.We therefore request your issuance of the subject permit for well number one as secon as possible to avoid serious field standby costs. Sincerely, FOR THE EXECUTIVE DIRECTOR Patti DeJong Director of Project Evaluation PDJ/sc §41.06.030 ALASKA STATUTES SUPPLEMENT §41.06.040 Sec.41.06.030.Reservoir management.(a)The commissioner shall require the filing and approval of a plan of development and operation on each producing geothermal system and may issue well-spacing and pooling orders,limits on production,and reinjection requirements,in order to prevent waste,promote maximum economic recovery,and protect correlative rights. (b)Lessees of all or part of a geothermal system may enter into a unit agreement for cooperative development,with the approval of the commissioner.The commissioner may suspend or modify the approved development plan in accordance with the unit agreement. (c)If the owners of at least two-thirds of the leasehold interests in a geothermal system ratify a unit agreement approved by the commis- sioner,the commissioner may enforce the agreement as to lessees not a party to the agreement by allocating production under the principle of correlative rights and by apportioning costs and revenues. (d)Lease operations under an approved development plan or unit agreement are considered to be in compliance with individual lease requirements.(§6 ch 175 SLA 1980) Sec.41.06.040.Drilling regulations.(a)The commissioner shall 'adopt regulations in accordance.with.the Administrative.ProcedureAct(AS 44.62.010 -44.62.650)relating to the siting,spacing;drilling, casing,cementing,testing,logging,operating,producing,'and aban-donment of geothermal wells so as to prevent(1)geothermal,resources,water or other fluids,and gases.from escaping into strata other than thatin which they are found (unlessin accordance with an approved reinjection program); (2)contamination of surface and groundwater;(3)premature degradation of a geothermal system by waterencroachmentorotherwise;7 4 on-Ph 40 amGier-iGan(4),Dlowouts,cavings"and.seepage;'and |ficabetets3-5)unreasonable disturbance or injury to neighboring.-properties,prior water rights,human life,health and the natural environment. A-35 oA: vayaT§41.06.050 Pusiic RESOURCES §41.06.060 (b)The commissioner shall cause the operator of a geothermal well or wells to file adequate individual or blanket surety bonds to ensure compliance with his regulations. (c)The commissioner shall require a geothermal operator to notify the department if the operator discovers significant quantities of hydrocarbon substances,helium or fissionable materials. (d)The commissioner may enter upon any property,public or private,to inspect a geothermal operation for compliance with his regulations. (e)Geothermal fluid and water of sufficient heat or pressure to constitute a threat to human life or health,which are regulated by the commissioner under this chapter,are exempt from the jurisdiction of the Alaska Oil and Gas Conservation Commission under AS 31.05.030(g).(§6 ch 175 SLA 1980) Sec.41.06.050.Relationship of geothermal resources to water. (a)An operator shall,before drilling or constructing a geothermal well or group of wells to be operated in concert,file an application with the commissioner for approval to drill the well or wells.The date of filing of the application establishes priority as to later appropriators of nongeothermal fluids.The application must contain sufficient informa- tion to enable the commissioner to determine whether the operation of the well or wells will interfere with or impair a prior water right. (b)An operator may not begin well drilling or construction withouttheapprovalofthecommissioner.The commissioner shall approve the well construction upon the conditions he considers necessary to protectthepublicinterest,if -(1)the proposed geothermal operation will not significantly inter-fere with or substantiallyimpair a prior water right; (2)the geothermal owner has acquired through purchase or con- demnation adequate water rights to offset the potential interference or impairment;or (3)the geothermal owner has obtained and dedicated to the affectedpartyorpartiesanequivalentamountofreplacementwaterofcompa-rable quality. (c)Geothermal fluid is not subject to appropriation under AS 46.15.010 --46.15.270 and no priority may be established among geothermal owners in a geothermal system.(§6 ch 175 SLA 1980) Sec.41.06.060.Definitions.In AS 41.06.010 -41.06.060 (1)"commissioner”means the commissioner of natural resources; (2)"correlative rights”means the right of each geothermal owner in a geothermal system to produce without waste his just and equitable share of the geothermal resources in the geothermal system; (3)"geothermal fluid”means liquids and steam at temperatures greater than 120 degrees Celsius naturally present in a geothermal system; Register 86,July 1983 (9)Abandonment of holes must be done in a manner that will protect freshwater aquifers and prevent subsurface interzonal migration of fluids and surface leakage.At a minimum,the boring must be filled with mud or cuttings from total depth to 10 feet below the surface and with cement from a depth of 10 feet to the surface.For observation holes,the top 10 feet of tubing below the surface must be filled with cement and the tubing cut off at ground level or in a manner otherwise directed by thecommissioner.(Eff.5/8/83,Register86 Authority: 11 AAC 87.040.COMPLETION OFGEOTHERMALEXPLORATION.The operator shall submit a report to the commissioner within 60 days aftercompletionofgeothermalexploration and include the following information: (1)final hole designation andlocation; (2)a drilling log noting any water table,aquifers,and salt and mineral deposits encountered; (3)methods of cementing and completion,and types of casing and tubing used; (4)complete details of abandonment procedures; (5)any information on drilling difficulties or unusual circumstances encountered which may be helpful in assuring future safety of operations or protection of the environment in the area concerned;and D-3 NATURAL RESOURCES ll AAC 87.030 11 AAC 87.050 (6)temperature data and logs for each hole surveyed.(Eff.5/8/83,Register 86) Authority:AS 38.05.020 AS 38.05.181 AS 41.06.020 AS 41.06.040 AS 41.06.050 11 AAC 87.050.EXPLORATION BOND. The permittee may be required to furnish a personal or corporate surety bond acceptable to the commissioner and conditioned upon compliance with all the terms of the permit.The commissioner will determine the amount of the bond based on the scope of the activity planned.Operations requiring a bond may not commence until an acceptable bond has been filed.Within 30 days after receipt of a completed application,the commissioner will notify the applicant whether a bond will be required.(Eff.5/8/83,Register 86) Authority:AS 38.05.020 AS 38.05.181 AS 41.06.020 AS 41.06.-040(b)aw Bike scare s aARTICLE3.DRILLING'OF GEOTHERMAL WELLS Section 070.Drilling permit 080.ODrilling bond 090.Change of operator 100.Well identification 110.Records120..Casing and cementing” 130.Blowout prevention 140.Well spacing and production rates 150.Deviation 160.Abandonment 170.Plugging requirements for geothermal wells 180.Water wells 190.Completion of drilling operation t Register 86,July 1983 11 AAC 87.070.DRILLING PERMIT. (a)Unless authorized under 11 AAC 87.030,a drilling permit is required before the drilling,redrilling,or deepening of any well and before the _reentry of an abandoned well. 'However,in an emergency,oral approval by the commissioner of any operation covered by 11 AAC 87.070 -- ll AAC 87.190 is sufficient. (b)An application for a drilling permit must be accompanied by a fee of $100 payable to the Department of Revenue.The application must includethefollowing:-..., (1)the name and address of the landowner or lessee; (2)a legal description and map of the parcel and well location; (3)the name and address of the operator;; (4)©the well name and number; (5)the proposed bottom-hole coordinates for a directionally drilled well; (6)the datum elevation or elevation of the derrick floor,rotary table,or kelly bushing,relative to surface level; (7)the elevation of the ground, relative to sea level; (8)the estimated depth of the intended zone of completion,relative to datum; (9)the estimated planned total depth,relative to datum; (10)a description of the proposed casing program as required in 11 AAC 87.120; NATURAL RESOURCES ll AAC 87.070 (11)a description of the blowout prevention equipment to be used and the information required by 11 AAC 87.130; (12)a description of the proposed sump plan and method of sump abandonment; (13)an indemnity bond as required by 11 AAC 87.080;and (14)any other relevant information the commissioner determines necessary. ,(ec)For a well which is to be intentionally deviated,the application for the drilling permit must also include (1)the surface and proposed producing interval locations; (2)a plat drawn to an appropriate scale showing the path of the proposed wellbore in relation to all other vertical and deviated wellbores which are within a distance of 2000 feet from the proposed wellbore;the true vertical depths must be shown at frequent intervals along each wellbore;and (3)a neat and accurate plat of the lease and all affected leases, showing the names of all affected owners and the surface and proposed producing interval locations of the well and all other wells within one-half mile of any portion of the new well;the plat must be drawn to a scale which will permit easy observation of all pertinent data. (d)If drilling is not commenced within 24 months after approval,the drilling permit expires. (e)Any proposed changes to the drilling permit must be approved by the commissioner.(Eff.5/8/83, Register 86) a Register 86,July 1983 Authority:AS 41.06.020 AS 41.06.040 AS 41.06.050 ]1 AAC 87.080.DRILLING BOND.(a) An applicant for a drilling permit shall file an indemnity bond for each well drilled,redrilled,or deepened, or a statewide bond for the drilling, redrilling,or deepening of one or more wells on the same lease or unit area.The bond.must be in the amount the commissioner determines necessary to ensure compliance with the applicable provisions of this chapter. (b)The bond may either be a personal bond or a corporate surety bond executed by an insurance company authorized to do business in Alaska. (c)The bond must be conditioned - upon compliance with all terms of the permit and must remain in effect until -the abandonment of all wells covered by the bond is approved by the commissioner and the bond is released or until another valid bond for the well has been filed with the commissioner. (d)The commissioner's approval of the abandonment of a well and the release of the bond constitutes a presumption of proper abandonment,but does not relieve an operator of liability to the state after the abandonment. (e)If authorized by the commissioner,comparable security, such as a certificate of deposit,may be submitted instead of the bond required by this section.(Eff. 5/8/83,Register 86) Authority:AS 41.06.040 NATURAL RESOURCES 11 AAC 87.080 ll AAC 87.100 11 AAC 87.090.CHANGE OF OPERATOR. An operator wishing to relinquish the role of operator shall notify the commissioner in writing.The newly designated operator shall notify the commissioner in writing of acceptance of the obligations as operator and shall furnish a bond as provided in 1l AAC 87.080.(Eff.5/8/83,Register 86) AS 41.06.020 AS 41.06.040 Authority: 11 AAC 87.100.WELL IDENTIFICATION.(a)Every well and every operating geothermal drilling rig must be identified by a sign posted in a conspicuous place on or near the well.The sign must be of durable construction,large enough to be legible under normal conditions at a distanceof 50 feet,and maintainedinlegiblecondition.Each sign must show (1)the name of the lease or ADL number,if applicable; (2)the name of the landowner or lessee; (3)the name of the operator; (4)the well number; (5)the well surface location by quarter section,township,range and meridian;and (6)the drilling permit number, if applicable. (b)The name of each lease or unit must be different and distinct. (c)The wells on each lease or property must be numbered in a logical and distinct sequence.(Eff.5/8/83, Register 86) AS 4].06.020 AS 41.06.040 Authority: