A Spanish oil company is taking early steps to develop what some believe could be a significant oil field on Alaska's North Slope -- including recently telling state officials about some of the plans.
Bill Hardham, Alaska operations manager for Repsol, was cautiously optimistic about the prospect near the Colville River Delta, where the company has drilled several wells in recent years, including three that yielded "oil discoveries."
Hardham said Repsol has been evaluating results from those wells and other data and intends to begin submitting permit applications to state and federal agencies in June in the hope of one day achieving production. "It's a great step, but there are still questions out there," said Hardham of the decision to submit permit applications.
Hurdles include uncertainty in the permitting process, funding approval and state support for Repsol's newly proposed unit between ConocoPhillips' Kuparuk and Alpine fields some 600 miles north of Anchorage.
Senate President Kevin Meyer, in a weekly meeting with reporters in Juneau on Friday, said company representatives have made clear to legislators they are pursuing development.
Meyer said he understands the project could yield between 35,000 and 50,000 barrels a day, with first production possible in 2019.
Hardham would not confirm those figures. "It's too soon to say. It's just premature," he said.
Asked if the company had provided those details to lawmakers, Hardham responded, "I can't say."
If Meyer is correct, a discovery of that size would make it an important field for the North Slope, considered an under-explored oil and gas province although it is home to some of the nation's largest oil fields, including Prudhoe Bay.
The amount of oil flowing from those big fields has been declining for years, and new production in 2019 or soon after could come at a desperate time for a state currently living on its savings amid projections of multibillion-dollar deficits.
However, production from the discovery, if that occurs, would likely be deemed "new oil" under the controversial tax law known as the More Alaska Production Act. The law was designed to spur new production and offers the most generous incentives for "new oil."
At today's oil prices -- about $52 a barrel on Friday -- the project would have no production tax burden, state officials said. But that would begin to change above $80 or so a barrel, assuming the project's tax-deductible lease expenditures fall within current averages on the North Slope.
Still, the state would receive new revenues from property and income taxes. It would also receive money from royalty oil sales, which helps support the $54 billion Permanent Fund.
"The tax legislation makes it all possible," Hardham said. "It gives us the confidence to move forward with this. That is very important."
Repsol announced two years ago it had made three "good quality hydrocarbon discoveries" in the Coleville River area. It continued drilling wells in the area to help determine a path toward production.
Data about those wells has been protected under state confidentiality provisions, but the two-year limit on the three wells ends in May and early June, allowing the records to be made public at the Alaska Oil and Gas Conservation Commission, state officials said.
Repsol will probably make a public announcement in late May about its plans, said Ashley Reed, a lobbyist in Juneau for Armstrong Oil and Gas.
Armstrong is partnering with Repsol in the project through its subsidiary, 70 & 148 LLC. GMT Exploration Company is also a partner. Repsol holds a 70 percent stake, while the Denver-based partners together hold 30 percent.
Reed said he attended meetings about two weeks ago with Repsol officials updating state lawmakers and other policy makers about their plans and noted that they were pleased with their success on the North Slope, said Reed.
"It was alluded to that there was a large commercially recoverable find," said Reed, who would not provide specific details about possible production levels.
Hardham said he did not know if Repsol would make an announcement in late May.
Paul Decker, the state's acting director of the Oil and Gas division, said Repsol has drilled about 10 wells over several years in the Colville delta area.
The company and its partners have recently applied for the creation of a unit that would be called Pikka. The proposed 63,000-acre unit would be situated between other units, including ConocoPhillips' Kuparuk River and Alpine fields.
"This is an area where they've done significant exploration, so that is a very good sign," Decker said.
Decker said some of the land in the area is jointly owned by the state and ASRC, the regional Native corporation for the North Slope. Both ASRC and the state would be eligible to receive royalty oil production on land they own. An "allocation split" on areas owned jointly would be worked out if the project eventually moved toward a production phase, he said.
"That would come about at the formation of a participating area" that would spell out lands to be involved in production.
The Natural Resources department is analyzing the unit application and will decide in the coming months whether the unit will be approved as proposed, he said.
If production ultimately happens, the department would have to make a determination about whether its production classifies as "new oil." Such a determination would be likely in this case, Decker said. "That'd be the expectation," he said.
Hardham said Pikka is an Inupiaq word that means "upriver, away from the ocean, up there."
Forming the unit, which allows a company to extend the life of its leases during production, is one step in the process, Hardham said. Also, funding has yet to be approved by the partners, in what's known as a final investment decision.
Deciding what to call the project would be another step.
"(It's) still a bit premature to name it," he said.
-- Reporter Nathaniel Herz contributed to this story.