Dayon limited pioneers: Frontier Basins Middle Earth pushes oil and gas exploration in Alaska's quiet corners.

• Author: Hollander, Zaz
• Position: OIL & GAS

The state's latest oil and gas exploration incentive program, dubbed Frontier Basins, is also known as Middle Earth. Set aside fantastical images of J.R.R. Tolkien's world of hobbits and elves. This Middle Earth earned the name for its general location between existing incentive programs for oil and gas production on the North Slope and Cook Inlet--and state officials and potential oil and gas producers hope this Middle Earth is very real.

The Frontier Basins/Middle Earth program, created by legislation during the last session in Juneau, provides major incentives for companies drilling exploratory oil or gas wells or obtaining seismic data in six areas.

The state will pay up to 80 percent or $25 million in exploration costs and 75 percent or $7.5 million of seismic costs for qualifying work. Any production that results gets a tax break. In return, the state gets access to seismic data otherwise kept confidential.

The statute limited eligibility to sedimentary basins in the state's less-explored and hard-to-reach regions: the Kotzebue and Selawik Basins; Nenana and Yukon Flats; Emmonak; Glennallen and Copper River area; and the Alaska Peninsula near Egegik and Port Moiler.

State officials and lawmakers want more seismic information and exploration in "frontier" plays otherwise too risky and expensive to work. But they also hope to provide new energy sources for Fairbanks and rural communities throughout the state.

"Around the state there's all kinds of need for local-use energy," says Paul Decker, a petroleum geologist with the Alaska Division of Oil & Gas and manager of the division's resource evaluation section. "Let's find people willing to explore and take some of the risk out of this exploration."

Public Player

Doyon Limited, the Fairbanks-based Native regional corporation, is the only company so far to publicly announce planned seismic and exploration activity under the new program. The company plans to work in the Nenana Basin and Yukon Fiats areas. Doyon otherwise wouldn't be interested in seeking new oil and gas plays in the areas, says Jim Mery, Doyon's vice president for lands and natural resources.

"They're very, very risky financially. They're high-risk propositions," Mery says. "Really, without the state participation, we wouldn't be pursuing these projects as aggressively as we are."

Doyon is currently in the process of permitting a 12,000-foot exploratory well for next summer about 10 miles from the road system in Nenana...