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Still awaiting permits, jack-up rig expected to leave Homer next month

Naomi KloudaHomer Tribune
Courtesy Peter Law

HOMER -- Will Homer finally wave goodbye to a jack-up rig that becoming a part of its vista over the last three months?

Buccaneer Energy says it plans to move its controversial Endeavour rig parked near the Homer Spit as soon as lease permits are in hand to drill in the Cosmopolitan Unit three miles off Anchor Point. The first chance of that is the second week of December. Buccaneer has extended its lease at the Deep Water Dock of the Homer Port and Harbor through Dec. 8.

“At this point, the one driving the schedule is the DNR (Alaska Department of Natural Resources),” said Jay Morakis of Buccaneer’s public relations company, JMR Worldwide. “We have a permit to go to Port Graham if the DNR does not act, but we are waiting on them to approve our land-use permit. The public comment period should be ending, and at that point we will then have to wait for the DNR to notify us.”

Buccaneer is also waiting for the Alaska Oil and Gas Conservation Association’s go ahead on “a gas-only determination” so the company can test gas zones at the Cosmopolitan Unit, Morakis said.

Waiting for permits

Homer City Manager Walt Wrede said the city is in a holding pattern while Buccaneer awaits its permits. “They might need a couple of more weeks,” Wrede said.  “Their preference is to get to the Cosmopolitan Unit so they can put their legs down. They could then work on their drilling equipment. They can’t do that on the dock, but they could right at the spot where they hope to start drilling.”

Another option for Buccaneer is a move to Port Graham to winter over there. Already, the jack-up rig Spartan 151 has settled in for winter storage there, outside the Kachemak Bay Critical Habitat area. Buccaneer was granted a permit to winter its rig in Port Graham Bay. 
If worse comes to worse, the City of Homer is prepared to let the Endeavour jack-up rig remain in the harbor. It would need to be moved from the Deep Water Dock, however, Wrede said.

Homer has fielded quite a few public phone calls since the jack-up rig arrived Aug. 24.

“There are people who think it’s great, that it’s generating business and jobs and that we’re not always saying ‘no, no, no’ to everything,” Wrede said. “This is a slow time of year, and people are appreciative of the jobs. At least one hotel is full, restaurants are seeing more people than they probably would. Yes, people are upset about it. They believe it is a violation of the critical-habitat-area plan to have it there. It represents oil and gas to people and they don’t want to see it here in Kachemak Bay.

“But what we hear here is much more balanced. A lot of people are happy.”

AIDEA invested $24 million 

The Alaska Industrial Development and Export Authority has also been questioned about its partnership with Buccaneer in owning the Endeavour.

AIDEA doesn’t comment about Buccaneer’s drilling plans. “As a state entity, spending the people’s money, they will have the eyes of legislators upon them,” noted Larry Smith, who has served on numerous boards and helped form local environmental organizations. AIDEA invested $24 million into the purchase of the jack-up rig, said Karsten Rodvik, AIDEA project manager.

The total project cost was $105 million, including retrofitting the rig for work in the far north. The investment is shared by Buccaneer and Ezion Holdings Ltd., a large Singapore-based offshore development company. 
“This investment by AIDEA deals only with the Endeavour jack-up rig,” Rodvik said. “AIDEA is involved in this project in order to accelerate oil-and-gas exploration and production in Cook Inlet to help secure long-term energy supplies for Alaskans. The region’s economy will benefit and jobs will be created. This is consistent with our mission.”

6-year payback on loan

Buccaneer approached AIDEA for lending help. The $24 million is to be paid back within six years. “Buccaneer presented AIDEA with a business case to bring a jack-up rig to Alaska for drilling in Cook Inlet.  We were not approached by others,” Rodvik said.

“AIDEA conducted a long and complex due diligence and negotiation process before making the decision to proceed.  The participation and commitment of Ezion Holdings, Ltd. was a key factor in AIDEA’s approval of the Endeavour project. Ezion has secured and guaranteed $66 million of loans for the project.  Ezion is also investigating other potential investments in Alaska energy resources,” Rodvik said. 

However, the company doesn’t have an oil spill contingency plan for winter operations or a permit to drill in the inlet yet. It also has applied for a separate permit from the Department of Natural Resources to stage the rig offshore at the Cosmopolitan Unit off Anchor Point. That permit, if approved, would allow Buccaneer to move from the Homer Dock in December, said Jonne Slemons, deputy director at DNR.

This story first appeared in The Homer Tribune and is reprinted here with permission.