The Alaska Oil and Gas Conservation Commission has denied a request from two companies seeking access to a confidential report about the Kenai Loop gas field.
AIX Energy LLC and Cook Inlet Energy LLC had asked for access to the Hite Report -- and to a corresponding section of confidential transcripts from an April 21, 2014, hearing discussing the report -- to improve their standing in bankruptcy proceedings involving Buccaneer Energy Ltd., which operates Kenai Loop through a subsidiary.
The Alaska Mental Health Trust Authority land office commissioned the Hite Report from geological consultant David Hite as part of an ongoing dispute over drainage at Kenai Loop. The report and the section of testimony pertaining to it "appear to rely upon confidential information of other parties which was reviewed by Hite," according to the AOGCC. In a Jan. 31, 2014, order, the oil and gas commission required parties in the case to share certain confidential information among each other but not with any outside parties.
Even though AIX Energy and Cook Inlet Energy aren't parties to the case, they told the commission that having access to the report would allow them "to meaningfully participate in the upcoming bankruptcy sale of Buccaneer Alaska LLC" and added that disclosing the report "may also facilitate a settlement of issues pending before the commission."
Ultimately, the commission disagreed.
"Because neither AIX nor (Cook Inlet Energy) is a party to this proceeding the AOGCC will not order the entities which are parties to provide access to the Hite Report or the testimony," the commission concluded in an Oct. 3 order. Furthermore, the commission decided that the Trust Land Office would need to get written authorization from any affected parties before releasing confidential sections of the report to outside parties.
After Buccaneer filed for bankruptcy protection in late May, the company mentioned plans to auction "substantially all" of its Alaska assets to repay creditors.
In early iterations of those plans, AIX Energy LLC -- Buccaneer's largest secured creditor -- had committed at least $58.5 million as a "stalking-horse" bidder. A stalking horse bidder provides a guaranteed minimum bid to protect a seller from low bids.
In September, Cook Inlet Energy parent company Miller Energy Resources Inc. said that it had entered into a non-binding letter of intent to buy "substantially all" of Buccaneer's operating assets in Alaska for approximately $40 million to $50 million.
While the Buccaneer portfolio includes a smattering of leases across the Cook Inlet basin, the Kenai Loop field constitutes the only leases currently in production. The field currently produces about 10 million cubic feet of gas per day, according to the oil and gas commission.
To date, Buccaneer has drilled four wells at the field, one of which was a dry hole and one of which has been suspended until a correlative rights dispute reaches resolution.
The two producing wells are located on Alaska Mental Health Trust Authority leases but have also been draining from surrounding acreage owned by the Trust, Cook Inlet Region Inc. and the state. The case before the oommission - and a case in Alaska Superior Court - are trying to fairly allocate production to date and going forward.
On May 23, the court required Buccaneer to deposit all future profits from Kenai Loop production into an escrow account until the parties could reach an allocation agreement. The order was effective June 1. Buccaneer declared bankruptcy May 31. The bankruptcy proceedings stayed aspects of pre-existing legal and regulatory cases.
This story originally appeared in Petroleum News and has been republished here with permission.