Performance Details

Department of Natural Resources - Oil & Gas Development

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Mission

The Division of Oil and Gas manages lands for oil, gas, and geothermal exploration and development in a fair and transparent manner to maximize prudent use of resources for the greatest benefit of all Alaskans, and facilitates safe and environmentally conscious operation and maintenance of common carrier pipelines.

Core Services

• Enforce exploration & development obligations of lease & unit agreements, considering technical & commercial aspects & proposed work commitments. Provide for exploration of state land through geophysical exploration permits.
• Ensure that exploration, leasehold, and unit-related operations are conducted in a timely and responsible manner.
• Administer AS 38.35 leases; revenue collection, permitting, authorizations, oversight of construction, operation, maintenance and termination of pipelines. Coordination with other state and federal agencies in a manner that serves the state's interests.

Mission Results	Core Services
A: Maximize financial benefit of oil, gas, and geothermal production to the state  Details > TARGET #1: Ensure the state receives the maximum rates and payments for oil and gas resources.	A1: Enforce exploration & development obligations of lease & unit agreements, considering technical & commercial aspects & proposed work commitments. Provide for exploration of state land through geophysical exploration permits.  Details > TARGET #1: Adjudicate all (100%) lease operation and unit actions (formation, expansion, contraction, termination, extension, participating area, tract allocation, & plans of exploration or development) as required by regulation and lease or unit agreements.
Mission Results	Core Services
B: Manage Alaska’s oil, gas, and geothermal resources for responsible exploration and development for maximum benefit to the state.  Details > TARGET #1: Provide access to state lands for the purpose of responsible oil, gas, and geothermal exploration and development.	B1: Ensure that exploration, leasehold, and unit-related operations are conducted in a timely and responsible manner.  Details > TARGET #1: Evaluate and issue 100% of plan authorizations within established timelines for each lease or unit plans of operation. TARGET #2: Issue permits for geophysical exploration within established timelines (100% Compliance)
Mission Results	Core Services
C: Ensure the design, construction, operation and maintenance of jurisdictional pipelines meet regulatory and environmental requirements.  Details > TARGET #1: Offer design criteria and safety information to the public to support best management practices for each lease.	C1: Administer AS 38.35 leases; revenue collection, permitting, authorizations, oversight of construction, operation, maintenance and termination of pipelines. Coordination with other state and federal agencies in a manner that serves the state's interests.  Details > TARGET #1: Facilitate and improve regulatory and lease compliance monitoring of AS.38.35 pipelines

Performance Detail

Target #1: Ensure the state receives the maximum rates and payments for oil and gas resources. Audit Collection of Royalty and Net Profit Share Lease Revenues Collected (In Millions) Fiscal Year $ Millions FY 2018 44.7 FY 2017 $-0.1 FY 2016 $14.3 FY 2015 $1.8 Analysis of results and challenges: FY2018: The Audit Section issued eight audits over the past fiscal year representing claims of $46.1 million in royalty and net profit shared leases (NPSL) revenue. Audit collections were $44.7 million in royalty and NPSL revenue, not including interest. Twenty issued audits remain in appeals pending final resolution, and represent claims of $22.1 million in royalty and $63.1 million in NPSL revenue. There are two unresolved audits that were remanded back to the division representing claims of $11.6 million in royalty revenue. Audits are focused on cases where recoveries are expected to be the largest. The audit staff has increased its focus on net profit share audits in the past several years. The limited number of auditors performing audits subject to deadlines set by expiration of statute of limitations periods to audit requires careful selection of which leases and units are selected for audit. Lessees are frequently unwilling to agree to voluntarily extend the statute of limitations periods to conduct audits. Audit findings are not always collected when issued. Some audit decisions are appealed by lessees to the Commissioner's Office. The audit staff must also work the appeals cases, which reduces time available to perform audits. Net profit share audits have an appeals procedure prescribed by regulation. This procedure and robust net profit share regulations facilitate more timely resolution of audit issues and more timely collection of the additional revenues owed the state. Also, net profit share lessees must pay the audit claim in order to preserve their appeal rights if they choose to appeal the audit. FY2017: The Audit Section issued two audits over the past fiscal year representing claims of $7.7 million in royalty and net profit shared leases (NPSL) revenue. Audit collections were ($0.1) million in royalty and NPSL revenue, not including interest. Fourteen issued audits remain in appeals pending final resolution, and represent claims of $21.0 million in royalty and $22.1 million in NPSL revenue. There are two unresolved audits that were remanded back to the division representing claims of $11.6 million in royalty revenue. FY2016: The Audit Section issued seven audits over the past fiscal year representing claims of $14.4 million in royalty and NPSL revenue. Audit collections were $14.3 million in royalty and NPSL revenue, not including interest. Nine issued audits remain in appeals pending final resolution and represent claims of $7.9 million in royalty and $22.1 in NPSL revenue. There are three unresolved audits that were remanded back to the division representing claims of $15.3 million in royalty revenue. FY2015: The Audit Section issued ten audits representing claims of $5.1 million in royalty revenue. Audit collections were $1.8 million in royalty revenue, not including interest. Five issued audits remain in appeals pending final resolution and represent claims of $3.9 million in royalty and $7.8 in NPSL revenue. There are four unresolved audits that were remanded back to the division representing claims of $19.3 million in royalty revenue.

Target #1: Adjudicate all (100%) lease operation and unit actions (formation, expansion, contraction, termination, extension, participating area, tract allocation, & plans of exploration or development) as required by regulation and lease or unit agreements. Unit and Lease Operation Actions Adjudicated Fiscal Year Received/Issued FY 2018 74 -15.91% FY 2017 88 +14.29% FY 2016 77 -10.47% FY 2015 86 Analysis of results and challenges: Adjudicate all 100% of lease operation and unit actions as required by regulation and lease or unit agreements. Provide the subsurface technical and commercial understanding to inform 100% of lease operation and unit actions. The Division of Oil and Gas and The Commissioner's Office adjudicate a variety of lease operation and unit actions to enforce the exploration and development obligations of lease and unit agreements. These actions include: unit formation, expansion, and contraction; unit termination; lease and unit plans of exploration or development; and unit participating area formation, expansion, contraction, and tract allocations. For all unit and lease operation decisions, the division’s unit managers oversee the adjudication. The division’s geologists, geophysicists, and engineers provide the technical expertise, and the division’s economists provide commercial expertise. The number and type of decisions vary from year to year, depending on operators’ actions. In addition, land managers negotiate agreements and agreement amendments related to units. FY 2018 Decisions: Plan of Exploration/Plan of Development: 47 Unit Revision (expansion/contraction): 9 Participating Area (formation/expansion/contraction/tract allocation redeterminations): 8 Unit Formation: 1 Unit Extension: 0 Default/Termination: 2 Miscellaneous: 7 FY 2017 Decisions: Plan of Exploration/Plan of Development: 53 Unit Revision (expansion/contraction): 14 Participating Area (formation/expansion/contraction/tract allocation redeterminations): 6 Unit Formation: 1 Unit Extension: 1 Default/Termination: 5 Miscellaneous: 8 FY 2016 Decisions: Plan of Exploration/Plan of Development: 46 Unit Revision (expansion/contraction): 7 Participating Area (formation/expansion/contraction/tract allocation redeterminations): 10 Unit Formation: 0 Unit Extension: 1 Default/Termination: 4 Miscellaneous: 9 FY 2015 Decisions: Plan of Exploration/Plan of Development: 52 Unit Revision (expansion/contraction): 9 Participating Area (formation/expansion/contraction/tract allocation redeterminations): 8 Unit Formation: 2 Unit Extension: 0 Default/Termination: 5 Miscellaneous: 10

Target #1: Provide access to state lands for the purpose of responsible oil, gas, and geothermal exploration and development. Acreage Under Lease or License Fiscal Year FY 2018 4,996,840 FY 2017 5,343,661 FY 2016 6,161,719 FY 2015 5,797,702 Analysis of results and challenges: Note that historical acreage reported may be slightly different from previous reports because of changes in reporting protocols. FY 2018: Acreage under lease or license 4,996,840 FY 2017: Acreage under lease or license 5,343,661 FY 2016: Acreage under lease or license 6,161,719 FY 2015: Acreage under lease or license 5,797,702

Target #1: Evaluate and issue 100% of plan authorizations within established timelines for each lease or unit plans of operation. Percent of Plan Authorizations Issued Within Timelines Fiscal Year YTD Total FY 2018 100% FY 2017 100% FY 2016 93% FY 2015 99% Analysis of results and challenges: FY2018: The Permitting Section reviewed 100% of the submitted Plan and Plan Amendment requests with 100% of the authorizations issued within expected timelines. Four new Plans of Operation (two Lease Plans and two Unit Plans of Operation) and 146 Plan Amendments were reviewed. Four of four Lease and Unit Plans were approved. One hundred and forty-four of 146 Plan Amendments were approved; two Plan Amendment applications were closed due to application to the wrong agency. FY2017: The Permitting Section reviewed 100% of the submitted Plan and Plan Amendment requests with 100% of the authorizations issued within expected timelines. Nine new Plans of Operation (five Lease Plans and four Unit Plans of Operation) and 75 plan amendments were reviewed. Five of nine Lease and Unit Plans were approved; three applications were put on hold and one was closed at the applicants’ request. Sixty-five of 75 Plan Amendments were approved; Ten Plan Amendment applications were closed or withdrawn. FY2016: The Permitting Section reviewed 100% of the submitted Plan and Plan Amendment requests with 93% of the authorizations issued within expected timelines. Ten new Plans of Operation (one Exploration License Plan, four Lease Plans, and five Unit Plans of Operation) and 83 plan amendments were reviewed. Eight of 10 plans were approved; one application was transferred to a different agency, and one was withdrawn. Seventy-four of 83 plan amendments were approved; three were withdrawn, and six did not require an approval to conduct the requested activity. One plan and four plan amendments that were approved experienced inter-agency coordination that, though resolved, resulted in longer timelines than is typical within our process. FY 2015: The Permitting Section reviewed 100% of the submitted plan and plan amendment requests with 99% of the authorizations issued within expected timelines. Eight new Plans of Operation (one Exploration License Plan, three Lease Plans and four Unit Plans of Operation) and 126 plan amendments were reviewed and approved. The Exploration License project was rescheduled by the company to the following year. The estimated timeline was exceeded while staff time was redirected to current season projects.

Target #2: Issue permits for geophysical exploration within established timelines (100% Compliance) Number of Geophysical Exploration Permits Issued Fiscal Year FY 2018 3 FY 2017 2 FY 2016 10 FY 2015 13 Analysis of results and challenges: FY2018: Three geophysical permits were issued; five applications were received - one was put on hold and one was withdrawn. FY2017: Two geophysical permits were issued in FY2017. Four applications were received in FY2017 and two were withdrawn. FY2016: Eleven geophysical exploration permits were reviewed and resulted in 10 permits being issued. One application was withdrawn a week after submittal. FY2015: Thirteen geophysical exploration permits were reviewed and issued within established timelines. Authorized geophysical exploration permits increased from 10 in FY2014 to 13 in FY2015: Twelve of the 13 seismic permits authorized up to 4,111 square miles in 3D acquisition and one of the 13 authorized 71 line miles of 2D acquisition.

Target #1: Offer design criteria and safety information to the public to support best management practices for each lease. Methodology: Lease application details include: applications, amendments and transfers. Right-of-Way Lease Application Activity Fiscal Year Issued Active Withdrawn YTD Total FY 2018 3 0% 19 +1800% 0 0% 22 +450% FY 2017 3 -72.73% 1 -50% 0 -100% 4 -75% FY 2016 11 +37.5% 2 +100% 1 0% 16 +77.78% FY 2015 8 +166.67% 1 -66.67% 0 -100% 9 +28.57% Analysis of results and challenges: FY2018: The State Pipeline Coordinator Section (SPCS) conducted reviews of several pipeline modification projects. These projects included reviewing the proposed modifications of pipelines and related facilities, pipeline integrity repairs, changes to service and temporary discontinuance of service. Technical reviews were completed to ensure that each proposal met safety and design criteria as outlined in specific code. Additionally, the section conducted engineering reviews of newly proposed pipelines and has made that information available to the public and industry by way of lease compliance and engineering reporting and Commissioner’s decisions.

Target #1: Facilitate and improve regulatory and lease compliance monitoring of AS.38.35 pipelines Compliance & Oversight Monitoring Actions of AS 38.35 Pipelines Fiscal Year YTD Total FY 2018 200 -28.83% FY 2017 281 -13.54% FY 2016 325 +10.92% FY 2015 293 -1.35% Analysis of results and challenges: FY2018 : The Pipeline Section applied a systematic approach to lease compliance inspections based on lessee annual reports and proposed work plans. Each field inspection is conducted according to a project mission developed around lease stipulations and the lessee's work plans, or other lease related actions such as releases of interests and renewals. The Pipeline Section has implemented a Geospatial Information System (GIS) platform for gathering field data and pipeline system data while conducting inspections. This GIS platform serves as a database by which pipeline environmental, health, and safety data is aggregated and used to communicate concerns and progress to the lessees via inspection reports.

Current as of August 9, 2019