Oversight & Surveillance

An Operator proposing to drill a well for which a permit is required must file a bond with the Alaska Oil and Gas Conservation Commission (Commission).  Our bonding regulations are available online at Bonding 20 AAC 25.025.  (Please be patient:  sometimes this web page takes up to a minute to display completely.)
The Operator can choose to submit either a surety bond (Form 10-402A) or a personal bond (Form 10-402B), depending on the financial instrument used.  If a surety bond is used (Form 10-402A), the insurer must be authorized in Alaska.  You can check this online at http://www.dced.state.ak.us/ins/apps/companysearch/InsCompanyStart.cfm.   Type in the insurance company name, click on the “Query” button, then click on the “AKID#” hyperlink in the left-hand column, and scan down the lines of insurance list to find “Surety” and the date issued.  If “Surety” is not in the list, then the company is not authorized to provide that service in Alaska and the bond will not be approved.
If you chose to use a Certificate of Deposit (CD) as the financial backing for a personal bond, then you must submit 1) the personal bond form (Form 10-402B), 2) the CD documentation or receipt, and 3) the attached Assignment of CD form.   The CD must clearly state that the certificate of deposit 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 by going online to “Banks registered under the Model Foreign Bank Loan Act.” If the bank is an out-of-state bank and it is not on this list, the bank is not authorized, the CD will not be accepted, and the bond will not be approved.
Please note that Powers of Attorney are required for every representative signing these forms.  These Powers of Attorney must demonstrate that each person signing has the legal authority to bind the corporation to lease agreements.  The Commission requires original signatures on every submitted bond form or bond-related document.
If you have any questions, please call Steve Davies, Sr. Petroleum Geologist, at 907-793-1224 or email him at steve.davies@alaska.gov.

• Introduction

  In order to drill a well for oil or gas in Alaska, a person must obtain a permit to drill from the Alaska Oil and Gas Conservation Commission. This requirement applies not only to exploratory, stratigraphic test, and development wells, but also to injection and other service wells related to oil and gas activities. Since the Commission 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 Commission’s precise function. We hope the following explanation helps to clear up any confusion. First of all, the Commission is not in the business of managing or deciding whether to develop state owned resources. Rather, the Commission regulates certain oil and gas operations anywhere in Alaska, whether on state owned, federally owned, or privately owned land. Second, the Commission’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 or gas, and promote efficient reservoir development. The Commission 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 Commission’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:
  U.S. Federal Government State of Alaska

  • 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 Commission 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 someone applies to the Commission for a permit to drill.

• Permit to Drill Application

  The application form for a permit to drill may be obtained from the Commission’s web site. Copies of all of Commission 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 Commission 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 floppy disk or by e-mail ; and
  • 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 Commission receives the permit to drill application, it is recorded in our Permit to Drill log, and forwarded to the Commission’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 (a unique, fourteen-digit, standard reference number used to track well information in national or specialized data systems). Next, a geologist and a drilling engineer review the entire application in detail using a 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 Commission 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 ¼ mile;
  • adequate preparations are made if hydrogen sulfide gas is encountered; 14. potential geo-pressured intervals are identified;
  • shallow gas hazards are identified;
  • seafloor conditions are adequate if the well is offshore; and
  • identification of a point-of-contact in the operating company for exploratory wells.

  The Commission 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 Commission orders are needed – such as a well spacing exception – the operator will be notified. Usually such exceptions are handled through a public notice process with an opportunity for a hearing.
  If the application is complete, it is forwarded to the three Commissioners for their 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 Commission 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.
  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 Commission’s Weekly Drilling Report. To view this report, log on to http://www.aogcc.alaska.gov, and select “Drilling Statistics - Weekly & Monthly,” under "Information", and “Approved Permits” for each week of interest. 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 Commission 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 2003 Commission performance records, our “average” time to permit a well is slightly more than 4-1/2 working days after a complete and correct permit to drill application is received. Exploratory wells are generally permitted in 15 working days.. Permits for routine oil and gas production and injection wells in established fields are typically approved in 4 working days.

• 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 Commission’s regulations pertaining to drilling are 20 AAC 25.005 through 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 Commission’s web site under the “Of Interest” heading. The above general description of the permit to drill process is provided as a convenience to the public and should not be relied on as a substitute for referring to the applicable statutes and regulations.

Before a new pool may be developed, an operator must submit to the Commission a Plan of Operation and Development, which includes detailed reservoir information. Information in the plan is used by the Commission 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.

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.

Operators may apply for disposal injection orders to allow disposal activity in individual wells. After the public review process and Commission analysis, an order may be issued that approves the proposed disposal project.

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.

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 Commission 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 51 disposal and 830 EOR wells.

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 Commission on July 1, 1995. Regulations governing annular disposal were created and became effective on September 22, 1995. The Commission takes a very active role in ensuring that wells permitted for annular disposal will adequately contain injected waste. The Commission also reviews and approves specific wastes for annular disposal.

The goal of the flaring oversight program is the elimination of unnecessary flaring whenever possible. New gas disposition regulations became effective on January 1, 1995. 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.

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

• The Commission's surveillance activities are intended to ensure that Operators are acting to prevent waste and maximize recovery of oil and gas.
• In conjunction with DOR and DNR, the Commission provides oversight of the production allocation activities at Lisburne Production Center.
• The Commission produces decline analyses and reserve updates to check ultimate recovery.
• The Commission maintains reservoir pressure histories for the various fields.
• The Commission reviews and updates gas field reserves.
• The Commission undertakes independent analysis of subsurface information in order to assess volumes of original oil in place and recovery efficiencies for oil and gas reservoirs.

An inspection arm of the Commission oversees drilling rig blowout prevention equipment tests and other safety requirements of oil and gas exploration and production. In addition to acting as a liason between the Commission and operators, the field inspection staff provide 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, Commission 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 Commission 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 Commission actively witnesses MIT's on all new injection wells, workovers, and repairs to injection wells. Currently, the Commission 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 Commission 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
Commission staff inspect all abandoned locations for clearance unless waived by the Commission following site inspection and clearance by other jurisdictional agencies. The inspectors also witness the setting of critical cement plugs in wells during abandonment as long as the well is not being abandoned for a zonal sidetrack.
Safety Valve Testing
The Commission 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.