Highlights:
- Company positioned operationally to drill on award of permit
- Permit now expected 8-12 weeks
- Idaho court-ordered suspension of operations on federal leases sold in 2018 does not impact plans for Eblana-9
- Eblana-1, Eblana-3 and Eblana-6 well sites and access roads reclaimed
- US$200,000 of US$300,000 bond to be credited to the Company
Eblana-9 permit
Planning for the Eblana-9 drill, including identifying all necessary contractors, negotiating initial pricing estimates and agreeing provisional mobilization times, was completed by Q1 2020. Production planning in the event the well proves commercially successful has also been carried out. All preparations for drilling that could be made in advance of a Permit to Drill (APD) from Federal and State Authorities are currently in place, and all requests by State and Federal authorities for information to support the Eblana-9 APD have been efficiently complied with.
The Company has now received an update from the Bureau of Land Management (BLM) regarding the Eblana-9 permit application. To comply with the National Environmental Policy Act (NEPA), the BLM is currently carrying out an Environmental Assessment (EA) of the proposed Eblana-9 location. This is normal practice, and an EA was successfully carried out for Eblana-1, a distance of only 6000 ft. from the planned position of Eblana-9. The Company has no reason to expect difficulties in satisfying the current EA, although unexpected issues are always a possibility. The BLM has intimated to the Company an estimated time frame of 8-12 weeks for the award of the Eblana-9 permit. The Company expects to be able to drill within a short time of the award. In the current industry climate of depressed drilling activity, rig availability is not expected to pose a problem. However, by such time as a permit is awarded, pricing may vary from rates initially negotiated with contractors. To mitigate this risk the company will consider raising additional funding as a precautionary measure.
Court-ordered Suspension of Operations on 2018 leases
On May 12, 2020, the U.S. District Court for the District of Idaho (the Court) issued a Memorandum Decision and Order in the case of Western Watersheds Project vs. Zinke (:18-cv 00 187-REB). The Court ordered the suspension of operations and production on leases in Wyoming, Utah and Nevada sold by the BLM during the June and September 2018 oil and gas lease sales. Leases held by Major Oil in Hot Creek Valley, in total 52,046 acres, are impacted by this ruling. The Company hopes the suspension will prove to be of short duration, but at this time the issue remains unresolved. None of the Company’s leases on the West Play are affected in any way by this development. The Order has no impact on the Company’s plan to drill Eblana-9.
Site Reclamation and Bond Repayment
As part of the Conditions of Approval set by the BLM for the Eblana-1, Eblana-3 and Eblana-6 wells, in the aftermath of operations the wells were to be plugged and the sites and associated access roads restored to their original landform in accordance with submitted Reclamation Plans. To cover liability for plugging wells and reclaiming sites, a bond totaling US$300,000 was held by the BLM from Major Oil Intl.
As reported previously, all oil and water wells have been successfully plugged, and the Company has now completed a five week operation to reclaim the sites. Reseeding remains to be carried out and is scheduled for the Autumn of 2020.
Upon review, the BLM Nevada State Office (NSO) has determined that Major Oil has successfully complied with the Conditions of Approval set for the Eblana-1, Eblana-3 and Eblana-6 wells and has decided that US$100,000.00 is adequate to protect the remaining liability to the Federal Government. The sum of US$200,000 will be reimbursed or credited to Major Oil.
Brian McDonnell, US Oil CEO, said:
“For some time, the Company has been fully prepared to drill Eblana-9 as soon as the necessary permits are awarded. The regulatory authorities have now communicated their estimate that, subject to no unexpected issues arising, a permit to drill may be awarded within 8-12 weeks. The Company very much appreciates this update, as it considerably reduces the ongoing uncertainty in our drilling timeline. We anticipate very little delay between the award of a permit and the start of Eblana-9 operations.
“While awaiting progress on our Eblana-9 permit application, the Company has reclaimed to the highest standards its existing three drill sites, restoring the areas to their original landforms in accordance with our statutory and moral obligations. The work was carried out thoroughly and cost-effectively and demonstrates that Major Oil is a company that fulfils its permit conditions and is proactive and responsible in protecting the environment in which it operates. These reclamation operations also recoup for the Company significant funds previously lodged as bonds.
“While progress towards a drilling permit has been slower than expected, everyone involved, myself, the Board and our technical team, remain extremely excited about the prospects for the Eblana-9 drill. Our two control wells, Eblana-1 and Eblana-9 along with VSP and other data have given us a picture of the target structure far more complete than anything we have had before. As always, the drill bit will decide, but we believe optimism regarding a commercial well is fully justified.”
