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Home My WebLink AboutCO 817CONSERVATION ORDER 816 Milne Point Unit Kuparuk River Oil Pool Schrader Bluff Oil Pool Sag River Oil Pool Ugnu Undefined Oil Pool 1. May 17, 2024 Hilcorp gas offtake allowable application 2. May 23, 2024 Notice of public hearing and affidavit of publication STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue Anchorage, Alaska 99501 Re: THE APPLICATION OF HILCORP ALASKA, LLC. to establish an allowable gas offtake for the Milne Point Unit ) ) ) ) ) ) ) ) ) Conservation Order 817 Docket Number CO-24-007 Milne Point Unit Kuparuk River Oil Pool Schrader Bluff Oil Pool Sag River Oil Pool Ugnu Undefined Oil Pool July 23, 2024 IT APPEARING THAT: By application dated May 17, 2024, Hilcorp Alaska, LLC. (Hilcorp), as the operator of the Milne Point Unit (MPU), requested the Alaska Oil and Gas Conservation Commission (AOGCC) issue an order establishing an allowable gas offtake for the MPU to allow the MPU to sell compressed natural gas (CNG) to a third party. Pursuant to 20 AAC 25.540, the AOGCC tentatively scheduled a public hearing for June 27, 204. On May 23, 2024, the AOGCC published notice of the hearing on the State of Alaska’s Online Public Notices website and on the AOGCC’s website, and the AOGCC electronically transmitted the notice to all persons on the AOGCC’s email distribution list. On May 27, 2024, the notice was published in the ANCHORAGE DAILY NEWS. The AOGCC received no comments or request to hold the proposed hearing. The tentatively scheduled hearing was vacated. FINDINGS: 1. Operators: Hilcorp is the operator of the MPU. 2. Owners and Landowners: Hilcorp, Eni Petroleum US LLC, Herbaly Exploration LLC, and George Alan Joyce are the owners of the MPU. The State of Alaska, Department of Natural Resources (DNR) is the landowner. 3. Proposed CNG Sales: Hilcorp is negotiating to sell CNG produced from the MPU to Alaska CNG, LLC (AK CNG) who in turn will sell the CNG to other customers. 4. MPU Oil Pools: There are three defined and one undefined oil pools in the MPU, these are from shallowest to deepest: the Ugnu Undefined Oil Pool, the Schrader Bluff Oil Pool, the Kuparuk River Oil Pool, and the Sag River Oil Pool. Production from these pools are commingled on the surface and processed in the MPU’s processing facilities. 5. Proposed CNG Sales Daily Volume: Hilcorp proposes selling up to 1,500 MSCFPD, on an annualized average basis, of produced gas in the form of CNG to AK CNG. 6. Potential Impacts on Ultimate Recovery: The MPU currently process approximately 40 MMSCF of gas and reinjects 15 MMSCF of gas for enhanced oil recovery (EOR) purposes on a daily basis. The 1.5 MMSCFPD of gas that Hilcorp proposes to sell would amount to Conservation Order 817 July 23, 2024 Page 2 approximately 10% of the volume of gas available for EOR injection in the MPU. The MPU injects approximately 120 MBW per day, with some going to EOR and some going to disposal. The main fluid injected for EOR purposes at the MPU is water. On a reservoir barrel basis, water injection accounts for approximately 80% of the EOR fluid injected in the MPU. Therefore the 10% loss of EOR gas injection that would occur through sales of CNG accounts for only 2% of the total volume of fluids injected for EOR purposes. This small of a decrease in the amount of fluids injected for EOR purposes would not have a significant impact on ultimate recovery from the field. Additionally, the decrease in EOR injection as a result of gas sales can easily be made up for by taking some water that is going to disposal injection and using it for EOR injection instead. CONCLUSION: 1. Sales of CNG from the MPU to AK CNG will not have a meaningful impact on the ultimate recovery from the MPU, and any impacts could be mitigated by increase water injection for EOR purposes. NOW, THEREFORE, IT IS ORDERED: The maximum annual average gas offtake rate for the MPU is 1,500 MSCFPD. This is a cumulative amount for all oil pools in the MPU. This applies to production from all defined and undefined oil pools in the MPU and to both known and any as yet to be discovered oil pools in the MPU. DONE at Anchorage, Alaska and dated July 23, 2024. Jessie L. Chmielowski Gregory C. Wilson Commissioner Commissioner RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsider- ation will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. Gregory Wilson Digitally signed by Gregory Wilson Date: 2024.07.23 14:07:47 -08'00' Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2024.07.23 14:45:41 -08'00' 2 Notice of Public Hearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: Docket Number: CO-24-007 Hilcorp Alaska, LLC (Hilcorp), by letter dated May 17, 2024, filed an application to the Alaska Oil and Gas Conservation Commission (AOGCC) to establish an allowable gas offtake rate of 1,500 MCF/D for the Milne Point Unit (MPU) to allow sales of compressed natural gas (CNG) to third parties. AS 31.05.030(e)(1)(F) allows the AOGCC to regulate the rate at which oil or gas is withdrawn from a well or field for the purpose of conservation. Hilcorp is negotiating with Alaska CNG, LLC (AKCNG) to sell CNG from the MPU to AKCNG and possibly additional parties in the future. Selling natural gas from the MPU will reduce the amount of gas available for re-injection into the pools in the MPU for pressure maintenance and enhanced oil recovery (EOR) purposes, which has the potential for reducing ultimate recovery from the field. Hilcorp states the gas reinjection loss can easily be made up by increased water injection, which is the main fluid injected for pressure maintenance and EOR purposes. This notice does not contain all the information filed by Hilcorp. To obtain more information, contact the AOGCC’s Special Assistant, Samantha Coldiron, at (907) 793-1223 or samantha.coldiron@alaska.gov. A public hearing on the matter has been tentatively scheduled for June 27, 2024, at 10:00 a.m. The hearing, which may be changed to full virtual, if necessary, will be held in the AOGCC hearing room located at 333 West 7th Avenue, Anchorage, AK 99501. The audio call-in information is (907) 202-7104 Conference ID: 433 773 304#. Anyone who wishes to participate remotely using MS Teams video conference should contact Ms. Coldiron at least two business days before the scheduled public hearing to request an invitation for the MS Teams. To request that the tentatively scheduled hearing be held, a written request must be filed with the AOGCC no later than 4:30 p.m. on June 10, 2024. If a request for a hearing is not timely filed, the AOGCC may issue an order without a hearing. To learn if the AOGCC will hold the hearing, call (907) 793-1223 after June 12, 2024. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 west 7th Avenue, Anchorage, AK 99501 or samantha.coldiron@alaska.gov. Comments must be received no later than 4:30 p.m. on June 24, 2024, except that, if a hearing is held, comments must be received no later than the conclusion of the June 27, 2024, hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact Samantha Coldiron, at (907) 793-1223, no later than June 20, 2024. Brett W. Huber, Sr. Chair, Commissioner Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2024.05.23 07:44:59 -08'00' Lisi Misa being first duly sworn on oath deposes and says that she is a representative of the An- chorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the afore- said place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on AFFIDAVIT OF PUBLICATION ______________________________________ Notary Public in and for The State of Alaska. Third Division Anchorage, Alaska MY COMMISSION EXPIRES ______________________________________ 05/27/2024 and that such newspaper was regularly distrib- uted to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. Signed________________________________ Subscribed and sworn to before me Account #: 100869 ST OF AK/AK OIL AND GAS CONSERVATION COMMISSION333 W. 7TH AVE STE 100, ANCHORAGE, AK 99501 Order #: W0045966 Cost: $335.94 Notice of Public Hearing STATE OF ALASKAALASKA OIL AND GAS CONSERVATION COMMISSION RE: Docket Number: CO-24-007 Hilcorp Alaska, LLC (Hilcorp), by letter dated May 17, 2024, filed an application to the Alaska Oil and Gas Conservation Commission (AOGCC) to establish an allowable gas offtake rate of 1,500 MCF/D for the Milne Point Unit (MPU) to allow sales of compressed natural gas (CNG) to third parties. AS 31.05.030(e)(1)(F) allows the AOGCC to regulate the rate at which oil or gas is withdrawn from a well or field for the purpose of conservation. Hilcorp is negotiating with Alaska CNG, LLC (AKCNG) to sell CNG from the MPU to AKCNG and possibly additional parties in the future. Selling natural gas from the MPU will reduce the amount of gas available for re-injection into the pools in the MPU for pressure maintenance and enhanced oil recovery (EOR) purposes, which has the potential for reducing ultimate recovery from the field. Hilcorp states the gas reinjection loss can easily be made up by increased water injection, which is the main fluid injected for pressure maintenance and EOR purposes. This notice does not contain all the information filed by Hilcorp. To obtain more information, contact the AOGCC’s Special Assistant, Samantha Coldiron, at (907) 793-1223 or samantha.coldiron@alaska. gov. A public hearing on the matter has been tentatively scheduled for June 27, 2024, at 10:00 a.m. The hearing, which may be changed to full virtual, if necessary, will be held in the AOGCC hearing room located at 333 West 7th Avenue, Anchorage, AK 99501. The audio call-in information is (907) 202-7104 Conference ID: 433 773 304#. Anyone who wishes to participate remotely using MS Teams video conference should contact Ms. Coldiron at least two business days before the scheduled public hearing to request an invitation for the MS Teams. To request that the tentatively scheduled hearing be held, a written request must be filed with the AOGCC no later than 4:30 p.m. on June 10, 2024. If a request for a hearing is not timely filed, the AOGCC may issue an order without a hearing. To learn if the AOGCC will hold the hearing, call (907) 793-1223 after June 12, 2024. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 west 7th Avenue, Anchorage, AK 99501 or samantha.coldiron@alaska.gov. Comments must be received no later than 4:30 p.m. on June 24, 2024, except that, if a hearing is held, comments must be received no later than the conclusion of the June 27, 2024, hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact Samantha Coldiron, at (907) 793-1223, no later than June 20, 2024. Brett W. Huber, Sr. Chair, Commissioner Pub: May 27, 2024 STATE OF ALASKA THIRD JUDICIAL DISTRICT ______________________________________2024-05-28 2024-07-14 Document Ref: EEONI-9VMFV-P5CSL-OCECR Page 3 of 31 From:Coldiron, Samantha J (OGC) To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] Public Hearing Notice (Hilcorp) Date:Thursday, May 23, 2024 8:23:30 AM Attachments:CO-24-007 Public Hearing Notice MPU gas offtake allowable.pdf Docket Number: CO-24-007 Hilcorp Alaska, LLC (Hilcorp), by letter dated May 17, 2024, filed an application to the Alaska Oil and Gas Conservation Commission (AOGCC) to establish an allowable gas offtake rate of 1,500 MCF/D for the Milne Point Unit (MPU) to allow sales of compressed natural gas (CNG) to third parties. AS 31.05.030(e)(1)(F) allows the AOGCC to regulate the rate at which oil or gas is withdrawn from a well or field for the purpose of conservation. Samantha Coldiron AOGCC Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 __________________________________ List Name: AOGCC_Public_Notices@list.state.ak.us You subscribed as: samantha.coldiron@alaska.gov Unsubscribe at: https://list.state.ak.us/mailman/options/aogcc_public_notices/samantha.coldiron%40alaska.go v 1 May 17, 2024 ATTN: Dave Roby Alaska Oil and Gas Conservation Commission 333 W 7th Ave, STE 100 Anchorage, AK 99501 Dave.Roby@alaska.gov RE: Gas Offtake Allowable Application Milne Point Field Kuparuk River Oil Pool, Schrader Bluff Oil Pool, Sag River Oil Pool and Ugnu Undefined Oil Pool Dear Mr. Roby: Hilcorp Alaska, LLC (“Hilcorp”) is negotiating an agreement to provide Alaska CNG, LLC with natural gas from the Milne Point Field. This natural gas is to be delivered at the custody transfer meter at the Milne Point Facility (“MPF”). The natural gas will then be transported to customers across the North Slope. Initial deliveries are expected to commence in July 2024. Hilcorp may also enter into additional gas sales contracts with other entities for the same or similar purposes. Alaska CNG, LLC and other purchasers will hereafter be referred to as “Purchasers.” The regulations promulgated by the Alaska Oil and Cas Conservation Commission (“AOGCC”) do not expressly address gas allowables or specify procedures for AOGCC approval of natural gas production from an oil field, and most existing pool rules do not address the issue. However, we recognize the authority of the AOGCC under AS 31.05.030(e)(1)(F) to regulate for conservation proposesthe quantity and rate of production of gas from a property. For the reasons set forth below, Hilcorp, as operator and on behalf of the working interest owners of the Milne Point Unit, seeks AOGCC approval of the above-referenced gas delivery to Purchasers on the grounds that this offtake is consistent with good oilfield engineering practices and conservation purposes. The Milne Point Field is comprised of the Kuparuk River Oil Pool, Schrader Bluff Oil Pool, Sag River Oil Pool, and Ugnu Undefined Oil Pool which are processed through the MPF. The gas produced from these oil pools are separated from the oil and water at the MPF and is used for fuel gas for power generation, gas lift, and compressed natural gas for in-field fuel for trucks. The remaining gas is reinjected back into the Kuparuk River Oil Pool for pressure support and additional oil recovery. The total volume of processed gas at the MPF is approximately 40,000 mscfd, and approximately 15,000 mscfd is reinjected. The overwhelming majority of pressure support is supplied by water injection with the injection of approximately 120,000 bbls of water per day. The loss of reservoir voidage from gas sales can be made with increased water injection which is readily available. Thus, diverting up to 1,500 mscfd of gas from injection to gas sales will not have a measurable impact on production or ultimate recovery of oil from the Milne Point Field oil pools. P.O. Box 244027 Anchorage, AK 99524-4027 3800 Centerpoint Drive, Ste. 1400 Anchorage, AK 99503 Phone: 907-777-8341 Fax: 907-777-8301 Email: jamie.wilson@hilcorp.com By Samantha Coldiron at 9:09 am, May 20, 2024 AOCGG Gas Offtake Allowable Milne Point Field Page 2 of 2 Hilcorp is requesting an approval of one million five hundred standard cubic feet per day (1,500 mscfd) of natural gas offtake allowables to Purchasers. In conclusion, pursuant to Rule 12 of Conservation Order No. 432 E (Kuparuk River Oil Pool), Rule 11 of Conservation Order No. 477 (Schrader Bluff Oil Pool), Rule 14 of Conservation Order No. 423 (Sag River Oil Pool), Hilcorp asks the AOGCC to administratively approve additional third party gas deliveries of up to one million five hundred standard cubic feet per day (1,500 mscfd) from the Milne Point Field beginning July 2024. Please contact the undersigned should you have any questions. Sincerely, Hilcorp Alaska, LLC Jamie Wilson Sr. Landman CAUTION: External sender. DO NOT open links or attachments from UNKNOWN senders. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Jamie Wilson To:Roby, David S (OGC) Cc:Coldiron, Samantha J (OGC); Bradley Simpson; Aaron O"Quinn Subject:RE: [EXTERNAL] MPU gas offtake application Date:Thursday, May 23, 2024 8:48:43 AM Dave, Thanks for reaching out! Our answers are below in red. Let us know if you have any additional questions. Thanks, Jamie From: Roby, David S (OGC) <dave.roby@alaska.gov> Sent: Monday, May 20, 2024 10:34 AM To: Jamie Wilson <jamie.wilson@hilcorp.com> Cc: Coldiron, Samantha J (OGC) <samantha.coldiron@alaska.gov> Subject: [EXTERNAL] MPU gas offtake application Hi Jamie, I’m reviewing your application for the MPU gas offtake and preparing the public notice and have a question for you. In the application it states “[t]he loss of reservoir voidage from gas sales can be made with increased water injection which is readily available.” How much additional water injection would it take to replace the 1,500 MCF/D proposed? The gas used for CNG would normally be injected into the Kuparuk formation. The Kuparuk formation volume factor (Bg) for gas in the Kuparuk is 0.88 rb/Mscf and the formation volume factor for water in the Kuparuk (Bw) is 1.02 rb/stb. Therefore, 1,500 Mscf/d *Bg / Bw = 1,294 stb/d of water injection required to make up the loss in gas injection. We currently dispose of ~20,000 bwpd in the MPU B-50. Any loss of gas injection voidage could be made up by decreasing the disposal at B-50 and putting it back into the surface system. In addition, we have an approved project that will re-distribute gas injection on F-pad and L-pad. Once completed we will also have additional source water capacity on F-pad and L-pad to make up additional voidage requirements from CNG sales. Also, do you want the 1,500 MCF/D to be a hard limit (you couldn’t sell more than 1,500 MCF in any given day) or do you want the 1,500 MCF/D to be a max average daily volume (as long as the average daily rate for the year is less than 1,500 MCF/D you’re OK even if you exceed the 1,500 MCF on some days)it to be a nominal value)? We would like the 1,500 mcfd to be a max daily average over a year timeframe for operational flexibility. Regards, Dave Roby Senior Reservoir Engineer Alaska Oil and Gas Conservation Commission (907)793-1232 The information contained in this email message is confidential and may be legally privileged and is intended only for the use of the individual or entity named above. If you are not an intended recipient or if you have received this message in error, you are hereby notified that any dissemination, distribution, or copy of this email is strictly prohibited. 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