Kenai officials say remote oil project could benefit city

Posted: Tuesday, November 12, 2002

KENAI (AP) -- The Kenai City Council is urging federal approval of an exploratory drilling program in a remote location on the eastern side of Prince William Sound.

City officials are hopeful the proposed venture in Katalla by Cassandra Energy Corp. of Kenai could directly benefit Kenai.

Katalla, about 50 miles south of Cordova, is the site of Alaska's first commercial oil production, from 1902 to the early 1930s. Attempts at oil production on the site were abandoned until the 1980s, when exploration was again attempted, but not brought into production.

Cassandra Energy, with its office in Anchorage, has started a permitting process to begin new exploration at the Katalla site. The site is in the Chugach National Forest and includes both federal and private land. The surface of the site is federally-owned, while the Chugach Alaska Native Corp. gained the rights to the subsurface oil and gas in the 1982 Land Settlement Agreement.

However, if commercially viable volumes of oil or gas are not produced by the end of December 2004, those rights will revert back to the federal government.

Cassandra Energy has entered into a lease-option agreement with Chugach Alaska Native Corp. to perform horizontal drilling techniques in the site with the goal of beginning commercial production there.

But first Cassandra must get through a lengthy and complicated permitting process, which is currently in the stage of an environmental assessment being conducted by the U.S. Forest Service.

Although the public comment period for the assessment has ended, Bill Stevens, president of Cassandra Energy, addressed the council Wednesday and asked it to pass a resolution that would show the Forest Service the city of Kenai supports the project.

''It's been 25 months now in permitting,'' Stevens said. ''That's about four times as long as it should have been.''

Stevens told the council the city stands to benefit handily if Cassandra Energy gets the necessary permits to allow it to proceed with exploration.

''Of interest to Kenai is that this operation will be basically worked out of Kenai,'' he said.

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