Member Info for dustofnations

Hi StockCheque/Haggis, the advice previously was that the full LONO would take 6-8 months (4,000 hours of engine time).

The wide range in time estimations is because:

- It depends upon the route, routes with long uninterrupted stretches are good for burning through the hours faster (this proposed route looks very good for that).

- How efficient the ports visited are (i.e. if you're straight in and out, then you spend less time idling in anchorages). Again, European ports are usually extremely fast; contrast that with the time Leandra got stuck in Port of Durban for about a week because she was in general purpose segment of the port rather than the container terminal. Huge difference!

- Restrictions: such as emissions control areas (ECAs), ports that forbid scrubbers, etc.

We're in a really strong position this time due to the new scrubber that has been installed.

If this route is the LONO one (of course, it could change), Leandra will spend a very large portion of her sailing time in ECAs (North American, North Sea, and Baltic Sea, 0.1% SOx ECAs); in these zones unscrubbed vessels cannot even use 0.5% ULSFO; instead they need to switch to extremely expensive LS-MGO (low sulphur marine gas oil — similar to diesel).

Except for ports that restrict open loop scrubbers in very small areas (and I am not aware of any of those being on the list), Leandra will be able to use high sulphur residue in her MSAR/bioMSAR formulations without needing to switch fuels. That obviously means lots of additional hours of engine time on bioMSAR/MSAR.

Hope that makes sense!

Jason has long suggested that Netherlands is the intended area to establish bunkering for the POC and LONO (at least, as of last time he mentioned it); this was for tax and logistical reasons. This new route is compatible with that suggestion, as bunkering is often done out at sea via a bunkering barge without the vessel calling into the container terminal itself.

I'm sure some of the former merchant mariners in our ranks can confirm that.

Apologies, I just realised later posts in this thread already answered the question about Leandra and Bremerhaven (and with fewer words!).

As far as I am aware, the current plan is to do full LONOs on both bioMSAR and MSAR. Having an additional vessel would half the time to formal OEM approval. I've not heard any more about the idea of running 2 vessels for a long time, though, so I'm not sure whether it's still in the offing.

Leandra and Bremerhaven would generate good comparative data on things like efficiency and emissions because they're essentially identical vessels, so it would still be an apples-to-apples comparison.

The existing partial LONO for conventional MSAR does not apply as 'credit' to reduce the new LONO requirements (sadly), because the OEM are looking at wear characteristics over prolonged and (mostly) uninterrupted real-world use.

At this point, I'd be absolutely delighted for the fuel supply situation to be clarified and get even one vessel running on our fuel!

Thanks for the comment StockCheque.

Of course HSO's attorney says that; that's their job to push for the best possible outcome by interpreting the rules as favours them (even if it's not actually the case).

According to the Department's own legal team, the Board *do* have the right to hold up the RAA that's in flight and has not yet been approved. But they cannot undo the previous one; I think you are mixing up the Board's inability to interfere with the *previous* decision, with the ability for the Board to halt progress on the *current* RAA.

I don't know how anyone can be confident it will be approved given all the factors I've mentioned that the *current* RAA will be approved.

I certainly expect, as prev outlined, that Hoodoo's bid to undo the *previous* Board ruling will be dismissed in full, so that's good for HSO.

As much as I would like it to be the case that DOGM Board bats Hoodoo aside from delaying the *current* RAA, I just don't see it as likely; I just want to be open and realistic. We will see very soon!

[Again, caveating that I'm definitely not a Utah O&G/Minerals lawyer!]

The problem is that Sullivan is not exactly like Hoodoo nor HSO, it's a combination of both and includes elements that are relevant to neither.

The (Request for Agency Action) RAA in this case is being advanced by HSO, not by Hoodoo. In Sullivan the RAA was by Sullivan, and the respondent was the existing field operator.

In Sullivan, the field was already active and the RAA was filed by Sullivan to disrupt the existing status quo.

In this case, Hoodoo are acting to stop the status quo being disrupted.

Hoodoo are also arguing they will be prejudiced by HSO being allowed to extract "their" oil, which means both sides are claiming they will be prejudiced by any action or inaction by the DOGM Board.

That means there's an irreconcilable contractual dispute which must be first resolved by the courts before they proceed. And DOGM Board cannot resolve that dispute.

I don't think any reasonable person should expect the hearing to be a slam dunk in favour of HSO. Continuance (delaying) of the RAA until the dispute is resolved seems the most logical outcome, as per DOGM's own recommendation and a reasonable reading of linked case law.

As you all know, I would be glad to be wrong and for it all to go ahead without further delay, but I think there needs to be some reasonable skepticism applied. After all, I am not a Utah O&G lawyer.

> The DOGM cannot assume that Hoodoo will win in court, so it cannot prejudice Valkor by holding up the licence in the expectation that Hoodoo win in court.

DOGM Board also can't assume HSO will win. Both sides are claiming they would be prejudiced, and hence doing nothing is likely the default position. DOGM Board are not allowed to adjudicate on the substance of the matter. That appears to be the nub of the issue...

Yes, I've read the referenced judgement. You can see it here: https://www.courtlistener.com/opinion/2628237/sullivan-v-utah-bd-of-oil-gas-mining/

If you read through the actual facts of the case, it's not clear to me that it helps HSO/ACO, as it was about the DOGM Board denying an agency action until the courts resolved the contractual dispute in question between the parties.

In the Sullivan case, the petitioner (Sullivan) was using an agency action to try to force KMG (operator) to put money into an escrow account that he believed he was due according to the disputed contract. The DOGM Board refused to proceed with Sullivan's request for agency action until the courts had resolved their contractual dispute.

If you read the context and ruling, it's seems likely to me the Board will freeze the RAA until the courts are able to resolve the case. Alternatively, the parties could settle or use a dispute resolution process.

And yes, apols, 28th is the hearing.

StockCheque — the latest filings are from DOGM itself, not Hoodoo (see p5 onwards: https://fs.ogm.utah.gov/bbooks/2023/06_Jun/Docket/2023-022_471-03_HSOandACOil/2023-022_471-03_20230622.1_DivisionsMotionForLeaveToFileResponseToRequestForAgencyActionOutOfTime.pdf).

Their view is that (purely my lay understanding of the filings, NAL):

i) Hoodoo's attempts to disrupt the *previous* board approvals relating to HSO/ACO are inadmissible as they did not make submissions at the correct time, and they can't use the current hearings as a proxy to re-litigate matters that are already settled.

ii) DOGM Board cannot adjudicate on contractual interpretations/contractual disputes, as those are not delegated authorities (i.e. not within their jurisdiction). They should be addressed in district court.

iii) However, DOGM also recommend not approving HSO's unitisation plan until the dispute has been resolved with Hoodoo.

p3 (7/10) - emphasis mine:

"""

Given that the Board is not the appropriate body to resolve the underlying title dispute, **the Board should decline to consider HSO’s RAA seeking the establishment of the Asphalt Ridge Enhanced Recovery Unit until the parties resolve their ongoing dispute over the rights granted by the SITLA leases in the appropriate forum.**

"""

I notice that the DOGM Board tends to be quite deferential to DOGM on legal matters, but I'm sure they'll take their own advice too.

---

- HSO/ACO want to proceed with the board approvals process, with litigation/negotiations in parallel which would resolve any conflict.

- Hoodoo want to undo the previous decision and to block the current/upcoming approvals process, likely as a way to extract financial concessions out of HSO/ACO.

- DOGM appears to cut down the middle, saying previous decisions cannot be undone, but that the current approval process should be halted until the dispute between HSO and Hoodoo is resolved.

I imagine this is what Hoodoo wanted from the start, as they surely knew trying to undo the previous decision was impermissible, but this was part of a strategic approach to gum things up with extremely costly delays.

Anyway, we shall know a bit more by tomorrow evening.

The news absolutely is good, but it is contingent on various other steps being successful executed in order to become real, so it's not a dead certain yet. Market is probably reflecting that.

We need Valkor's clients HSO+ACO to:

1) fend off (IMO) vexatious litigants 'Hoodoo Mining and Production';

2) Get their plans finally approved, and get their drilling and production underway;

3) Securing a funding package for Valkor of at least $15m USD.

4) Then there are various steps to get the drilling and extraction underway, identify customers, and begin trials/commercial activity with those customers.

As always, looks like a great opportunity, just isn't plain sailing in terms of timeline or execution.

You can read the rebuttal/motion to strike here.

There are a lot of process, technical, contractual arguments intertwined that make it difficult for people without extremely niche knowledge Utah mineral rights law and precedent, plus the specific rules and precedent for the DOGM Board.

Warning: 40MB PDF

https://fs.ogm.utah.gov/bbooks/2023/06_Jun/Docket/2023-022_471-03_HSOandACOil/2023-022_471-03_20230523.2_MotionToStrikeHoodooMiningAndProductionCompanysResponse.pdf

@crownos — I broadly agree with your assessment. This latest problem reminds me of the incident we criticised about a year ago where QED missed a scheduled slot to complete this trial because the midi-MMU was not completed/assembled on time, and they had not put in place any contingencies. Today's failure to complete is one of the same category; a lack of adequate contingency planning and ineffective risk assessments. Comprehensive spares — whether components or an entire standby unit — should have been part of that process.

Anyway, it's done now.

We need to hear:

(1) Approximately, when is the re-re-re-re-re-scheduled trial going to happen? No doubt there is some fuzziness at the end of each run, depending on stuff like equipment failures, etc.

(2) How are QED going to prevent this recurring?

This is an incredibly disappointing and is a serious project management and risk assessment failure. QED should have had a full suite of spares for all critical components, or even a full standby/cold unit. In my opinion, this project is critical to the future of the company and such a failure should not have been allowed.

As others have pointed out, the RNS avoided giving any guidance as to when the next run will be, so we're in the dark again on that.

She's been classed the whole time, if she went out of class she would not be able to sail as her insurance would be void and she would not be allowed to enter any ports.

- Utah: they were possibly given bad information by Valkor, or QED just made a mistake. Don't see any rhyme or reason for it to be deliberate, given the small time window and immateriality from a QED investor perspective.

- MSC: Interestingly, Leandra still shows as "under survey" and has not been issued classification society certificates yet. I imagine she will be visited by a classification society surveyor when she gets to Shanghai to formally close out the dry dock period? So may be one of those "technically..." things, i.e. her sea trials take her to Shanghai where she gets surveyed and reloaded.

@dgdg1 I think we're all on the same page now. So, we should watch for the 24th May hearing of the DOGM Board in which their pilot drilling campaign should finally be approved.

As I understand it, the issues were purely regulatory and administrative, principally around well spacing rules because Utah has never approved a heavy oil projects before, and hence they had no rules to cope with the smaller well spacing needed. The filings indicate the department are happy for the board to grant an exception to the spacing rules in order to allow HSO (Valkor etc) to proceed.

My understanding of the documents is that the delay from last month was because of feedback from DOGM on how to best structure the application from an administrative perspective to cope with the myriad of companies all involved at the same time (AC Oil, HSO, Valkor, Greenfield, etc).

Anyway, finally seems like this painfully slow regulatory phase will get over the line shortly and we can start seeing some pilot and trials activities using MSAR/bioMSAR late spring/summer.

AIUI, they'll need to go back to the board again to get approval for their full field development plans once the pilot is completed, assuming everything goes as successfully as they hope and the department is happy.

RE: approvals for drilling plan in Utah. It think is just bad phrasing, and likely reflects that this RNS was written a short while ago.

From all the open source data I've been able to access, none of the relevant drilling permits have yet been granted, but this should occur next week.

It's possible there's another SB-related company I am not aware of which has already had its permits granted, so I cannot be definitive.

@iantobach, re: Utah. From previous conversations with the team, my understanding is that they are counting the sale of an MMU as commercial revenues. That would be great, but IMO is likely not what most people would be thinking of when 'commercial revenues' is mentioned (i.e. not licensing revenues from ongoing large volume fuel sales).

@Willswag — the latest update said POC and LONO would not begin until H2, so I think think that's an almost-definite no given there's been no announcement yet, and all of that infrastructure and process would need to be arranged and commissioned afterwards. Plus, when QFI/QED have historically advised a particular half or quarter, it's rarely ended up being at the start of the period (usually afterwards).

Link to article identified by originalharrystamper, but on LinkedIn for those who feel inclined to upvote.

https://www.linkedin.com/posts/quadrise-international-ltd_decarbonisation-technology-may-2023-issue-activity-7062337216903049216-NqfJ

You'll have to copy and paste as it seems they're no longer rendering links. On the plus side, they now seem to support UTF-8, so we can use emojis ☝️.

Yes, she's sitting back at the wharf at the dock next to the dry docking location. Likely to be starting sea trials shortly to validate the changes they've made.