Anchorage oil company hopes to find profits by taking second look

Posted: Monday, January 08, 2001

ANCHORAGE (AP) -- No doubt there's oil at Katalla.

To prove the point to a skeptical companion in 1897, a hunter tossed a match into a burping pool of crude and natural gas in a nearby slough. A torrent of flame shot skyward, burning off his eyebrows.

Katalla burned for a week. The hunter's seared face set off a development frenzy.

But a burning swamp did not a bonanza make.

Twenty-six years of poking into the sodden ground 50 miles Southeast of Cordova, produced only a trickle. A fire at the nearby refinery in 1933 ended oil production.

Now, a local company is betting Katalla may produce oil again. Cassandra Energy Co. has applied for permits to explore on private land at the old oil field.

''I'm convinced there's many millions of barrels of oil there,'' said Bill Stevens, a part-owner of Cassandra and the company's president.

Cassandra has entered into an agreement with the field's owner, Del Welch of Valdez, and regional Native corporation, Chugach Alaska Corp. Chugach owns mineral rights under more than 10,000 acres of nearby national forest. The company will lose those rights unless oil has been produced from the area by Dec. 31, 2004.

''Time is of the essence,'' said Rick Rogers, Chugach land manager.

Stevens' plan is to drill deeper than old exploration efforts and use modern techniques to drill sidewise beneath the national forest to determine the scale of the reservoir.

The plans have met opposition from environmentalists, who are concerned about further development pressure that oil exploration will mean for the Chugach National Forest and Copper River Delta, which lies about 10 miles west.

''We're very concerned about oil drilling in the Copper River Delta especially in view of the importance of the Copper River salmon run,'' said Scott Anaya with the National Wildlife Federation in Anchorage.

The proposed exploration area is not in the delta, but does fall under the same management plan as the delta. Under the management plan, conservation of fish and wildlife is a priority.

Stevens submitted an application to the Forest Service to drill for oil last month. While Cassandra plans to drill from private land, the Forest Service must approve use of a two and a half-mile road from the Katalla River across federal land to the 460-acre privately owned former oil field. Also, the agency must approve Cassandra's operating plan for

the area, said Cal Baker, the Forest Service district ranger in Cordova.

Stevens speculated that Katalla may harbor a 50-million barrel field beneath the swamp and forest. Stevens hopes to begin drilling before the end of the year.

Between 1901 and 1933 the Katalla oil field produced a meager 154,000 barrels of oil.

By comparison, Phillips' new Alpine oil field on the North Slope produces almost that much in two days.

But in 1907, with oil leaking from the ground, the massive Bering River coal fields nearby, and the Kennecott copper development under way over the mountains, a boom mentality gripped Katalla.

The owners of the Kennecott mines built a wharf and began construction of a railroad at Katalla to serve the coal fields and copper mines. By 1907, 10,000 people lived in town. Katalla had a saloon called the ''Alaska Madhouse.''

But the next year, Kennecott owners opted to build the railroad to the mine from the more sheltered Cordova. Oil exploration failed to spring a gusher. Katalla began its long slide into oblivion. All oil production went to local demand. A 1933 refinery fire ended production.

A Chevron geologist reached the glum conclusion in 1938: ''The history of this region has been filled with countless blasted hopes and bitter disappointments. ... No other equal area has had so sad a fate.''

But the region has continued to attract explorers, including Phillips Petroleum in the 1950s and Atlantic Richfield Co. in the 1960s.

In 1985, Stevens' Alaska Crude Co. drilled a well at the Katalla field, hitting oil but not in commercial quantities.

While the region's history leaves little reason for optimism, Stevens bets he is sitting on big field.

''This area has been ignored too long,'' he said.

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