The Art of the Deal: CIRI Land and...
Transcript of The Art of the Deal: CIRI Land and...
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The Art of the Deal:
CIRI Land and Resources
Jason Brune, Senior Director
Colleen Miller, Subsurface Manager
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The Art of the Deal:
The Process
• Learn about your land
• Understand the laws
• Get clear directives
• Engage!
• Find a partner
• Remain engaged!
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• 1959 Alaska Becomes a State
– Oil and Gas
– Minerals
– Fish
– Timber
– Tourism
The Art of the Deal:
Learn About Your Land
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•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
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• 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
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• 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.
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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
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• 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
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• 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
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The Art of the Deal:
Understand the Laws
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• 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
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• 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
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• 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!
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• Develop Relationships
• Participate in trade associations
– Resource Development Council
– Alaska Miners Association
– Alaska Chamber
– Alaska Forest Association
The Art of the Deal:
Engage!
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• 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!
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• 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!
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• 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!
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Fact Check!
•Center for Biological Diversity Website 6/11/07
The Art of the Deal:
Engage!
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• 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
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• Continue to get educated
• Look for new technologies and
opportunities
• Be patient
• Be consistent
• Remain involved
The Art of the Deal:
Remain Engaged!
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TIKAHTNU FORUM
ECONOMIC DEVELOPMENT SUMMIT
OIL AND GAS LEASE AGREEMENTS
MARCH 25, 2015
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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
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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
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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
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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
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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
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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
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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