The Art of the Deal:

CIRI Land and Resources

Jason Brune, Senior Director

Colleen Miller, Subsurface Manager

The Art of the Deal:

The Process

• Learn about your land

• Understand the laws

• Get clear directives

• Engage!

• Find a partner

• Remain engaged!

• 1959 Alaska Becomes a State

– Oil and Gas

– Minerals

– Fish

– Timber

– Tourism

The Art of the Deal:

Learn About Your Land

•Land Ownership in Alaska–365 Million Acres

•Federal 210 Million Acres

•State 104.5 Million Acres

•Native Corporations 44.5 Million Acres

•Conventional Private 2.7 Million Acres

• 1971-ANCSA is Passed

Alaska Native Claims Settlement Act44

million acres

– 7(i) revenues share 70% of resource

development with other 11 corporation

• Split between regional and village corporations

through 7(j) provision

• Guaranteed Access to lands

– Surface and subsurface (oil/gas/minerals))

• Subsurface has dominance

The Art of the Deal:

Understand the Laws

• 1.6 million acres of land

– Surface ownership split

between CIRI and village

corporations

– Subsurface ownership is

entirely owned by CIRI

The Art of the Deal:

Learn About Your Land

Entrusted with some of the richest and most delicate lands

in Alaska, CIRI prioritizes striking a balance between

sustainably developing resources to improve opportunities

for our shareholders, and protecting the land for future

generations.

Split Estate: Surface and subsurface

Understand the difference!

“In split estate situations, the surface rights and subsurface

rights (such as the rights to develop minerals) for a piece of

land are owned by different parties. In these situations, mineral

rights are considered the dominant estate, meaning they take

precedence over other rights associated with the property,

including those associated with owning the surface. However,

the mineral owner must show due regard for the interests of the

surface estate owner and occupy only those portions of the

surface that are reasonably necessary to develop the mineral

estate.” -BLM

The Art of the Deal:

Understand the Laws

• Study it. Understand it.

– Historical Use

– Access

• Roads, Electricity, etc.

– Potential

• Mineral/Coal Inventory

• Oil/Gas Seismic Evaluation

• Sand & Gravel Inventory

• Forestry

• Tourism

The Art of the Deal:

Learn About Your Land

• 1980-ANILCA is Passed

Alaska National Interest Lands

Conservation Act

– 106 million acres of land set aside as

CSUs (Conservation System Units)

– Increased total land for conservation

purposes in Alaska to 131 million acres

– Federal Wilderness in Alaska• 58 million acres (56% of national total of 105.7

million acres)

The Art of the Deal:

Understand the Laws

The Art of the Deal:

Understand the Laws

• Alaska is geographically and cost

challenged as it is

– Access

– Electricity

– Shipping

– Labor Costs

• Look for opportunities/technologies to

help bring your resources to market

The Art of the Deal:

Understand Your Land

• Communicate with your shareholders,

board, neighbors, CIRI, sister VCs, and

other stakeholders

• Be consistent. Be stable. Be predictable.

• Be patient. Resource Development

Takes Time

The Art of the Deal:

Get Clear Directives

• Let the World Know You’re Open for

Business

– Build a website and other promotional

materials outlining your development goals

and make sure to keep it current

– Speak at forums like this!

The Art of the Deal:

Engage!

• Develop Relationships

• Participate in trade associations

– Resource Development Council

– Alaska Miners Association

– Alaska Chamber

– Alaska Forest Association

The Art of the Deal:

Engage!

• Comment on other projects statewide– If you want to learn about how resource development

is done in Alaska, participate in the process

– Supporting projects statewide sends a signal that you

support responsible development and you’re open for

business!

– Avoid “just not there” mentality

– Encourage your board, employees, shareholders,

and contractors to engage

Development companies pay attention and our

investment climate matters!

The Art of the Deal:

Engage!

• Examples

– Apache Beluga Whale Letter of

Authorization (April 20)

– DNR In-Stream Flow Reservations

(Comment Deadline April 9)

– Chukchi/Beaufort Exploration/Lease Sales

(Comment Deadline March 30)

– Donlin Gas Pipeline Right of Way (past, but

more opportunities to come)

The Art of the Deal:

Engage!

• Be careful with who you engage

– Many groups like to pretend they’re your

friend, but their goal is to lock up your land

– Rex Rock of ASRC Presentation to RDC

• http://akrdc.org/membership/events/conference/

2014/presentations/rock.mp4

Forever is a long time

The Art of the Deal:

Engage!

Fact Check!

•Center for Biological Diversity Website 6/11/07

The Art of the Deal:

Engage!

• Research potential partners thoroughly

• Understand their values, their history,

their past mistakes (and more

importantly, what they did about them)

• Know that they will do their due

diligence too

– Will research your values, where you have

supported/opposed projects, etc.

The Art of the Deal:

Find a Partner

• Continue to get educated

• Look for new technologies and

opportunities

• Be patient

• Be consistent

• Remain involved

The Art of the Deal:

Remain Engaged!

TIKAHTNU FORUM

ECONOMIC DEVELOPMENT SUMMIT

OIL AND GAS LEASE AGREEMENTS

MARCH 25, 2015

History of the Inlet production

• Cook Inlet is comprised of more than 4,400 square miles or 2.8 million acres

• CIRI owns approximately 1.6 million acres of subsurface

• Oil was discovered on the Iniskin Peninsula during the 1800’s

• Swanson River was producing 900 barrels a day by 1959 and produced approximately 200,000 barrels a day during the 1960’s

• West Mac Aurthur Unit was discovered by Force Energy during the 1990’s to early 2000’s

Resource Revenue

• Oil and Gas

• Happy Valley

• Beaver Creek

• Swanson River

• Ninilchik Unit

• Lone Creek

• Gravel

• Kucera

• Lichen Street Pit

• others

• Other Minerals/Timber

• No current activity

Lessee due diligence

• License to operate in Alaska

• Economically viable

• SEC filings on Edgar: https://www.sec.gov/edgar

• Good Standing with lenders contractors

UCC filings: http://dnr.alaska.gov/ssd/recoff/UCC

Agreement Negotiations

Negotiations typically begin with Term Sheet

• List general terms of the agreement such as financial compensation, length of the agreement, and general work commitments

• Draft and Structure the remaining agreement for negotiations

Agreement General Structure

• Lease Agreement

• Rights to the subsurface to drill and extract Oil and Gas

• Rentals, royalties, shut ins, and minimum royalties

• Legal description of lands affected

• Requires and annual Plan of Development/ Plan of Operations

• Work commitments

• Default and Termination

• Reserved Rights

• Environmental Provision

• General Indemnity and Environmental Indemnity

• Insurance

• Force Majeure

Agreement General Structure

• Exploration Agreement

• Right to explore Oil and Gas

• Legal description of lands affected

• Work commitments/exploration commitments

• Seismic requirement

• Terms under which an area needs to be taken to lease

• Reserved rights

• Indemnification

• Force Majeure

• Default and Termination

Assignments and Lease burdens

Transfer or Assignment

• CIRI’ s agreements are not transferrable or assignable without CIRI expressed written approval which can be withheld at CIRI’s sole discretion

Lease burdens

• Overriding Royalty Interest (ORRI)

• Typically assigns a fraction of the royalty interest to a third party

• Liens: part of a lender package

• Withheld unless approved at CIRI’s sole discretion