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Home My WebLink AboutCO 237 DCONSERVATION ORDER NO. 237D Beaver Creek Field Beaver Creek Unit Tyonek Gas Pool 1. July 1, 2022 Hilcorp’s request to amend Rule 5 (CO 237C). 2. July 7, 2022 Notice of Hearing and Affidavit of Publication, emails list. CONSERVATION ORDER NO. 237D ORDERS STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue Anchorage, Alaska 99501 Re: THE APPLICATION OF Hilcorp Alaska, LLC for an order under 20 AAC 25.215(b) to authorize downhole commingling of production from the Sterling Gas Pool, the Beluga Gas Pool, and the Tyonek Gas Pool on a fieldwide basis in the Beaver Creek Unit ) ) ) ) ) ) ) ) ) ) ) ) Docket Number: CO-22-007 Conservation Order 237D Beaver Creek Field Beaver Creek Unit Sterling Gas Pool Beluga Gas Pool Tyonek Gas Pool Beaver Creek Oil Pool Kenai Peninsula Borough, Alaska October 13, 2022 IT APPEARING THAT: 1. By letter dated and received July 1, 2022, Hilcorp Alaska, LLC (Hilcorp) requested the Alaska Oil and Gas Conservation Commission (AOGCC) amend Rule 5 of Conservation Order No. 237C in accordance with 20 AAC 25.215(b) to authorize downhole commingling of production on a field wide basis from the Sterling Gas Pool (SGP), Beluga Gas Pool (BGP), and Tyonek Gas Pool (TGP) in the Beaver Creek Field (BCF). On its own motion the AOGCC is revoking Rule 3 to conform with the newly effective state law that had the effect of eliminating the requirement for interwell spacing restrictions. 2. Pursuant to 20 AAC 25.540, the AOGCC tentatively scheduled a public hearing for August 18, 2022. On July 7, 2022, the AOGCC published notice of the opportunity for that hearing on the State of Alaska’s Online Public Notice website and on the AOGCC’s website, electronically transmitted the notice to all persons on the AOGCC’s email distribution list, and mailed printed copies of the notice to all persons on the AOGCC’s mailing distribution list. On July 10, 2022, the notice was published in the Anchorage Daily News. 3. No protest to the application or request for hearing was received. 4. Hilcorp’s application contained sufficient information to make a decision without the need to hold the hearing. The hearing was vacated. FINDINGS: 1. Hilcorp is the sole owner and operator of the BCFand the Beaver CreekUnit(BCU),which are located in the Kenai National Wildlife Refuge, Kenai Peninsula Borough, Alaska. Cook Inlet Region, Inc. and the federal government are landowners for the BCU and for all lands adjacent to that unit. 2. Downhole commingling of production is currently only authorized for the BCU 19RD, BCU 23, and BCU 24 wells. 3. Hilcorp anticipates that as the field ages that essentially all wells in the BCU will become candidates for downhole commingling in the gas sands in order to prolong the economic life of, and thus ultimate recovery from the BCU gas wells and pools. Therefore, Hilcorp Conservation Order 237D October 13, 2022 Page 2 of 5 proposes amending Rule 5 of CO 237C to establish rules to authorize downhole commingling on a field wide basis without the need to apply for downhole commingling on a well by well basis, which would require public notice and opportunity for hearing and the issuance of an order for each well. 4. Hilcorp anticipates that fieldwide downhole commingling authorization will enable them to target smaller, undrained portions of heterogenous gas pools that wouldn’t be viable without the ability to commingle the production. 5. Pressure data from the BCU wells indicate that the SGP, BGP, and TGP do not appear to be abnormally pressured. 6. The existing commingled wells have flowing tubing pressures that are nearly identical to the non-commingled wells, suggesting that there are minimal pressure differentials between the three pools. 7. The commingled wells also showed increased production rates when perforations were added in a new pool, which indicates that both pools are contributing to flow. 8. Initial production allocation between the commingled pools can be done by comparing well testing results before and after perforations are added to a pool. 9. Production allocation can be revised on at least an annual basis thereafter by running a production log. 10. On September 27, 2022, House Bill 349 entitled “Relating to the establishment of oil and gas drilling units, spacing, and pattern; providing for the transfer of and addition of names to a personal use cabin permit for a cabin on state land” (hereinafter referred to as HB 349) became law. 11. HB 349 modified AS 31.05.100 and eliminated the statutory requirement to establish drilling unit requirements for each pool, and as such eliminated the need for pool rules that prescribe interwell spacing requirements. 12. Rule 3.b. of CO 237C specifies that the spacing for oil wells will be 40 acres and no oil well can be open within 660 feet of another oil well or within, and no oil well may be open within 500 feet of a property line where ownership changes. 13. Rule 3.a. of CO 237C specifies that there is no interwell spacing requirement for the three defined gas pools, and no gas well may be open within 1,500 feet of a property line where ownership changes. 14. 20 AAC 25.055(a)(1)&(2), respectively, establish that the oil wells cannot be completed within 500 feet of a property line where ownership changes and gas wells cannot be complete with 1,500 feet of a property line where ownership changes. CONCLUSIONS: 1. Downhole commingling of production from the SGP, BGP, and TGP in the BCU should maximize ultimate recovery from the wells and pools compared to producing the pools separately. 2. Basing the initial production allocation on the change in well performance after new sands are perforated and then conducting annual production logs to update the allocation factors will provide adequate allocation of production between the SGP, BGP, and TGP provided no rate altering (i.e., adding or plugging perforations, hydraulic fracturing or otherwise stimulating the well, etc.) work is conducted on the well between allocation factor adjustments. 3. HB 349 has eliminated the requirement to have rules specifying interwell spacing requirements for pools. Conservation Order 237D October 13, 2022 Page 3 of 5 4. Existing regulations require the same property line offset requirements that are contained in Rule 3. 5. HB 349’s elimination of the requirement to define interwell spacing requirements, and the existing regulations containing identical property line offset requirements as the existing rule, makes Rule 3 of CO 237C unnecessary. NOW THEREFORE IT IS ORDERED: This order supersedes Conservation Orders 237, 237A, 237B, 237C, 726, 787, and all administrative approvals issued under these orders. The records of these orders are incorporated by reference into the record of this order. Development of the Beaver Creek Unit is subject to the statewide requirements of 20 AAC 25 to the extent not superseded by the following rules: Affected Area: Seward Meridian (Source: CO 237A) Township, Range Description T6N, R10W Section 3: NE¼, W½ , W½ SE¼ Section 4: All Section 5: E½ NE¼, SE¼ Section 8: NE¼ Section 9: NE¼, W½ NE¼, NW¼ Section 10: N½ NW¼ T7N, R10W Section 26: SW¼ NW¼ , W½ SW¼, SE¼ SW¼ Section 27: All Section 28: NE¼ NE¼, S½ NE¼, SE¼ NW¼, SW¼, SE¼ Section 32: E½ E½ Section 33 & 34: All Section 35: NW¼, W½, SW¼, NE¼ SW¼ Rule 1 Field Name (Source: CO 237A) The Field is named the Beaver Creek Unit. Rule 2 Pool Definition (Source: CO 237B) (a) The Sterling Gas Pool is defined as the accumulation of gas that is common to and correlates with the accumulation present in the Beaver Creek Unit Well No. 1A between the measured depths of 5,188 and 6,370 feet. (b) The Beluga Gas Pool is defined as the accumulation of gas that is common to and correlates with the accumulation present in the Beaver Creek Unit Well No. 1A between the measured depths of 6,370 and 9,650 feet. Conservation Order 237D October 13, 2022 Page 4 of 5 (c) The Tyonek Gas Pool is defined as the accumulation of gas that is common to and correlates with the accumulation present in the Beaver Creek Unit Well No. 4 well between the measured depths of 8,886 feet and 14,518 feet. (d) The Beaver Creek Oil Pool is defined as the accumulation of oil that is common to and correlates with the accumulation present in the Beaver Creek Unit Well No. 4 between the measured depths of 14,518 and 15,874 feet. (e) Rule 3 Well Spacing (Made moot by HB 349 and existing regulation and Revoked in this Order) Rule 4 Administrative Action (Superseded by 20 AAC 25.556(d) and Revoked in CO 237C) Rule 5 Downhole Commingling (New in this Order) The downhole commingling of production between the Sterling Gas Pool, Beluga Gas Pool, and Tyonek Gas Pool is authorized on a fieldwide basis in the Beaver Creek Unit with the following conditions: (a) Following the initial testing phase of any new perforated zones within a defined gas pool intended to be commingled, the operator will allocate any incremental production rate gained by the additional perforations to its respective pool. (b) Thereafter, the operator shall conduct production logging operations within each well at least once each calendar year, with no less than 9 nor no more than 13 months between production logging operations, and adjust the allocation of production between the gas pools as appropriate. (c) As long as the well remains in downhole commingled production service, a production log must be run within 30 days after obtaining stabilized flow after any performance altering work is conducted on the well, and adjust the allocation of production between the gas pools as appropriate. Performance altering work includes but is not limited to: 1. Adding perforations, 2. Plugging perforations, 3. Hydraulically fracturing the well, and 4. Other forms of well stimulation. (d) Within 30 days of completion of the well testing or production operations required by this rule electronic copies of all logs and data used for determining the allocation of production between the gas pools shall be submitted to the AOGCC. (e) Other allocation methodologies may be approved administratively by the AOGCC should circumstances warrant. DONE at Anchorage, Alaska and dated October 13, 2022. Jessie L. Chmielowski Gregory Wilson Commissioner Commissioner Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2022.10.12 16:25:48 -08'00' Gregory Wilson Digitally signed by Gregory Wilson Date: 2022.10.13 11:30:18 -08'00' Conservation Order 237D October 13, 2022 Page 5 of 5 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 denialof 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 reconsideration 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. From:Carlisle, Samantha J (OGC) To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] Conservation Order 237D (Beaver Creek Field) Date:Thursday, October 13, 2022 11:36:31 AM Attachments:co237D.pdf An order under 20 AAC 25.215(b) to authorize downhole commingling of production from the Sterling Gas Pool, the Beluga Gas Pool, and the Tyonek Gas Pool on a fieldwide basis in the Beaver Creek Unit Samantha Carlisle 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.carlisle@alaska.gov Unsubscribe at: https://list.state.ak.us/mailman/options/aogcc_public_notices/samantha.carlisle%40alaska.gov Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711 mailed 10/13/22 INDEXES 2 Notice of Public Hearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: Docket Number: CO 22-007 By application dated July 1, 2022, Hilcorp Alaska, LLC (Hilcorp) requests that the Alaska Oil and Gas Conservation Commission (AOGCC) amend Rule 5 of Conservation Order No. 237C to allow for the downhole commingling of production from the Sterling, Beluga, and Tyonek Gas Pools on a fieldwide basis Beaver Creek Field/Unit (BCU). Downhole commingling regulations (20 AAC 25.215) are in place to prevent waste and to protect correlative rights. Operators are prohibited from producing from, or injecting into, more than one pool (a rock formation where oil and/or gas has accumulated) in the same wellbore without the AOGCC approving the downhole commingling of two or more pools. It is not uncommon for a well to encounter multiple pools. In these situations, normally an operator will first produce from the deepest pool in the well until it is depleted, then plug off that pool and move up to the next pool and repeat the process until all the pools have been depleted. Sometimes one or more of these pools is not large enough to warrant production/injection operations on its own, or there are other reasons to allow commingled production/injection. In these instances, an operator will apply to the AOGCC for an order approving the downhole commingling of two or more pools. The AOGCC reviews the application to assure waste will not occur and all owners receive their share of the production. To date the AOGCC has authorized downhole commingling in two wells in the BCU. This notice does not contain all the information filed by Hilcorp. To obtain more information, contact the AOGCC’s Special Assistant, Samantha Carlisle, at (907) 793-1223 or samantha.carlisle@alaska.gov. A public hearing on the matter has been tentatively scheduled for August 18, 2022, 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: 730 806 333#. Anyone who wishes to participate remotely using MS Teams video conference should contact Ms. Carlisle 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 July 29, 2022. 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 August 1, 2022. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 :est 7th Avenue, Anchorage, AK 99501 or samantha.carlisle@alaska.gov. Comments must be received no later than 4:30 p.m. on August 17, 2022, except that, if a hearing is held, comments must be received no later than the conclusion of the August 18, 2022 hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact Samantha Carlisle, at (907) 793-1223, no later than August 11, 2022. Jeremy M. Price Chair, Commissioner Jeremy Price Digitally signed by Jeremy Price Date: 2022.07.07 15:45:34 -08'00' ANCHORAGE DAILY NEWS AFFIDAVIT OF PUBLICATION Account #: 100869 ST OF AK/AK OIL AND GAS CONSERVATION COMMISSION 333 W. 7TH AVE STE 100, ANCHORAGE, AK 99501 Order #: W0031265 STATE OF ALASKA THIRD JUDICIAL DISTRICT 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 07/ 10/2022 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 this 16th day of September 2022. jc�da 4AM* Notary Public in and for The State of Alaska. Third Division Anchorage, Alaska MY COMMISSION EXPIRES 2024-07-14 ]ada L. Nowling ELECTRONIC NOTARY PUBLIC STATE OF ALASKA MY COMMISSION EXPIRES 07/14/2024 Document Ref: KJZV7-HFGWN-W6SYJ-SCQQ8 Cost: $367 Notice of Public Hearing STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION RE: Docket Number: CO 22-007 By application dated July 1, 2022, Hilcorp Alaska, LLC (Hilcorp) requests that the Alaska Oil and Gas Conservation Commission (AOGCC) amend Rule 5 of Conservation Order No. 237C to allow for the downhole commingling of production from the Sterling, Beluga, and Tyonek Gas Pools on a fieldwide basis Beaver Creek Field/Unit (BCU). Downhole commingling regulations (20 AAC 25.215) are in place to prevent waste and to protect correlative rights. Operators are prohibited from producing from, or injecting into, more than one pool (a rock formation where oil and/or gas has accumulated) in the same wellbore without the AOGCC approving the downhole commingling of two or more pools. It is not uncommon for a well to encounter multiple pools. In these situations, normally an operator will first produce from the deepest pool in the well until it is depleted, then plug off that pool and move up to the next pool and repeat the process until all the pools have been depleted. Sometimes one or more of these pools is not large enough to warrant production/injection operations on its own, or there are other reasons to allow commingled production/injection. In these instances, an operator will apply to the AOGCC for an order approving the downhole commingling of two or more pools. The AOGCC reviews the application to assure waste will not occur and all owners receive their share of the production. To date the AOGCC has authorized downhole commingling in two wells in the BCU. This notice does not contain all the information filed by Hilcorp. To obtain more information, contact the AOGCC's Special Assistant, Samantha Carlisle, at (907) 793-1223 or samantha.carlisle@alaska. gov. A public hearing on the matter has been tentatively scheduled for August 18, 2022, 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: 730 806 333#. Anyone who wishes to participate remotely using MS Teams video conference should contact Ms. Carlisle 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 July 29, 2022. 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 August 1, 2022. In addition, written comments regarding this application may be submitted to the AOGCC, at 333 west 7th Avenue, Anchorage, AK 99501 or samantha.carlisle@alaska.gov. Comments must be received no later than 4:30 p.m. on August 17, 2022, except that, if a hearing is held, comments must be received no later than the conclusion of the August 18, 2022 hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact Samantha Carlisle, at (907) 793-1223, no later than August 11, 2022. Jeremy M. Price Chair, Commissioner Pub: July 10, 2022 Page 35 of 91 From:Carlisle, Samantha J (OGC) To:AOGCC_Public_Notices Subject:Public Hearing Notice, CO-22-007, Hilcorp BCU Commingling Date:Tuesday, July 12, 2022 7:46:00 AM Attachments:CO-22-007 Public Hearing Notice Hilcorp BCU Commingling.pdf RE: Docket Number: CO 22-007 By application dated July 1, 2022, Hilcorp Alaska, LLC (Hilcorp) requests that the Alaska Oil and Gas Conservation Commission (AOGCC) amend Rule 5 of Conservation Order No. 237C to allow for the downhole commingling of production from the Sterling, Beluga, and Tyonek Gas Pools on a fieldwide basis Beaver Creek Field/Unit (BCU). Samantha Carlisle AOGCC Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 1 3800 Centerpoint Drive Suite 1400 Anchorage, AK 99503 Hilcorp Alaska, LLC Phone: 7 Fax:907/777-8301 2 76301 July 1, 2022 Jeremy Price, Chair Commissioner Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501 RE: Beaver Creek Field — Amendment to Pool Rules Application Dear Commissioner Price, Hilcorp Alaska, LLC ("Hilcorp"), as Owner and Operator of the Beaver Creek Field/Unit ("BCU"), herein requests the Alaska Oil and Gas Conservation Commission ("AOGCC") to amend Rule 5 of Conservation Order 237C ("CO 237C") to allow for field -wide downhole commingling from the Sterling Gas Pool, Beluga Gas Pool, and Tyonek Gas Pools within the BCU, pursuant to 20 AAC 25.520(b). Hilcorp is requesting approval from AOGCC to amend Rule 5 of CO 237C to allow for field -wide downhole commingling between all gas pools within the BCU. Issuance of this requested Order requires a field -wide exception to 20 AAC 25.215(b). Additionally, this requested Order requires a field -wide exception for the requirement to provide complete separation of flow streams from separate pools as specified in 20 AAC 25.210. The specific language proposed by Hilcorp states: Rule 5 Downhole Commingling. 1) Commingling' of production downhole from the Sterling Gas Pool, Beluga Gas Pool, and Tyonek Gas Pool is allowed with the following conditions a. Following the initial testing phase of any new perforated zones within a defined gas pool intended to be commingled, the operator will allocation any incremental production rate gained by the additional perforations to its respective pool. b. Thereafter, the operator shall conduct production logging operations within each well at lease once each calendar year, with no more than 13 months between operations, and adjust the allocation of production between the gas pools as appropriate. c. Within 30 days of completion of production logging operations, electronic copies of all logs used for determining allocation of production shall be submitted to the AOGCC. Hilcorp Alaska, LLC Amendment to Beaver Creek Pool Rules Page 2 of 4 I :XT41 "It" Z 111 E) The BCU was formed in June 1967 by Marathon Oil Company being the Operator at the time. The BCU is now Operated by Hilcorp and is comprised of four (4) federal oil and gas leases containing a total of 3,680.00 contiguous unit acres. The mineral ownership within BCU varies between the Bureau of Land Management (`BLM") and Cook Inlet Region, Inc. ("CIRI"). Since Hilcorp took over as Operator of the BCU in January 2013, cumulative gas production totaled 38,736.1 MMcf, while cumulative oil production totaled 785.0 Mbbl. Gas production from the BCU came predominately from the Sterling and the Beluga Formations with some production coming out of the Tyonek Formation. To date, 12 of 18 existing BCU wells remain active, and an additional two (2) disposal wells. On August 5, 1988, the AOGCC issued Conservation Order 237 establishing the field -wide Pool Rules for the BCU. On June 18, 2014 the AOGCC issued Conservation Order 237A to amend the BCU Pool Rules that redefined the pools, modified the well spacing, and enacted the authority for Administrative Approval. On May 6, 2016 the AOGCC issued Conservation Order 237B which again amended the BCU Pool Rules to define the Tyonek Gas Pool and allow for unlimited spacing within said pool. On January 20, 2020, the AOGCC issued the current Order, CO 237C to amend the BCU Pool Rules allowing for downhole commingling for various wells within the BCU. Despite BCU's longstanding development and production history the current Pool Rules specified in CO 237C does not allow for commingling between pools on a field -wide basis. In the absence of AOGCC's authorization to commingle downhole on a field -wide basis, the Commission has issued three (3) separate orders related to downhole commingling staring in 2016, including the most recent order issued (CO 237C). Hilcorp now anticipates commingling production downhole in the BCU 18RD and BCU 14B wells, which would each require a separate Order from AOGCC. Hilcorp also, anticipates commingling production downhole in essentially all BCU wells at some point, as the field continues to mature and deplete. To avoid such administrative inefficiencies and to guide the further development of the BCU, Hilcorp therefore requests the AOGCC to enter an Order establishing this proposed Amendment to CO 237C. DISCUSSION Hilcorp is requesting in this application approval from AOGCC to amend Rule 5 of CO 237C to allow for field -wide downhole commingling between all gas pools within the BCU. This request requires a field -wide exception to 20 AAC 25.215(b) and a field -wide exception for the requirement to provide complete separation of flow streams from separate pools as specified in 20 AAC 25.210. This proposed amendment to the BCU pool rules are designed to prevent waste, further protect correlative rights, and improve the ultimate recovery of remaining hydrocarbons throughout BCU. Allowing for the commingling of downhole production will also help reduce the administrative burdens on both Hilcorp and AOGCC staff. Hilcorp Alaska, LLC Amendment to Beaver Creek Pool Rules Page 3 of 4 As one hundred percent (100%) Working Interest Owner and sole Operator of BCU, Hilcorp's objective is to maximize the recovery of remaining hydrocarbons from the field. Hilcorp cannot efficiently drill and produce the remaining reserves under the rules of CO 237C, without strenuous administrative requests by Hilcorp and approval from AOGCC. While the existing rules and procedures under CO 237C may have adequately protected correlative rights and prevented waste during the field's initial discovery and following development, they are not applicable to the effort necessary to explore, produce and develop the remaining hydrocarbon reserves. Requests for authorization to commingle production downhole are administratively burdensome and are currently unnecessary to protect correlative rights within the BCU. The effected owners and landowners within BCU will continue to be protected by the terms and provisions of the BCU Agreement. All lands currently within the BCU are committed to the BCU Agreement. Allocations of production from any pool will be allocated in accordance with the corresponding Participating Area allocation schedules, which have been reviewed and approved by the Bureau of Land Management (Unit Manager). Authorizing downhole commingling within the BCU will greatly reduce these administrative burdens while protecting the correlative rights of all parties involved. In addition, the proposed amendment to CO 237C is designed to prevent economic and physical waste, loss of reserves, and improve the ultimate recovery of remaining hydrocarbons within BCU. By authorizing downhole commingling, Hilcorp can target smaller, un-drained portions of heterogeneous sand bodies that cannot produce on their own without commingling. The Sterling, Beluga, and Tyonek sands at BCU do not appear to be abnormally pressured, as evidenced from production in various BCU wells. BCU currently has three (3) online, commingled gas wells: BCU 24, BCU 23, and BCU 19RD. Data in each of these three (3) commingled wells show nearly identical flowing tubing pressures to what is seen in non -commingled wells; this suggests minimal pressure differentials exist between the Sterling, Beluga, and Tyonek sands. Our most recent production survey in a commingled well (BCU 24 on 06/16/2022) shows that sands from both the Tyonek and Beluga reservoirs are clearly contributing, further supporting the idea that commingling does not put reserves from either pool at risk. Moreover, all three (3) commingled BCU wells experienced a production increase when new sands were perforated and commingled, without observing any subsequent crossflow. Hilcorp expects to see a similar response in other BCU wells if commingling were to occur. Following the initial testing phase of any commingled wells, all incremental rate gained by the additional perforations will be attributed to its respective pool. On an annual basis thereafter, Hilcorp proposes to track contributions from individual sands by running a production log across all open perforations within the commingled wellbores. Such data will be used to meet the requirements of 20 AAC 25.215(b)(1). During the initial testing phase and thereafter, production will be allocated to its respective Participating Area, in accordance with the allocation schedule for each of the Beaver Creek Unit's Participating Areas. Adherence to proper reporting Hilcorp Alaska, LLC Amendment to Beaver Creek Pool Rules Page 4 of 4 requirements for both allocations of unit production and payment of royalties will ensure that the correlative rights of affected landowners are adequately protected. Upon approval from the AOGCC and issuance of an order providing for commingling of downhole production, the requirements of 20 AAC 25.215(b)(2) will also be met. Conclusion As demonstrated in this application request, Hilcorp's proposal to commingle production from each of the gas pools within the BCU will not lead to waste, a loss of reserves, or less ultimate recovery from either pool. This plan will allow Hilcorp to produce these BCU gas pools which otherwise would be bypassed due to the inability to sustain flow on their own. Allowing for commingling will result in extending the productive life of the BCU and maximizing recovery of reserves. If the AOGCC does not grant a waiver of the requirement to provide complete separation of flow streams from different pools as specified in 20 AAC 25.210 on a field -wide basis, Hilcorp will be unable to evaluate potential Sterling, Beluga, and Tyonek pay within various BCU wells, without strenuous administrative burdens by both Hilcorp and AOGCC. Hilcorp could also by-pass potential pay, resulting in the premature plugging and abandonment of various BCU wells after sand depletion, thus reducing the ultimate recovery from the Beaver Creek Field. Hilcorp respectfully requests that the AOGCC approve this proposed amendment to allow for commingling of production downhole from the Sterling, Beluga and Tyonek Gas Pools on a field - wide basis within the BCU, pursuant to AS 31.05.030, 20 AAC 25.520(b), and 20 AAC 25.215(b). If you require additional information regarding this request, please contact Meredyth Richards (Reservoir Engineer) at 907-777-8430, Sarah Frey (Geologist) at 970-274-9398, or the undersigned at 907-777-8432. Sincerely, Cody T. Terrell, Landman Hilcorp Alaska, LLC Enclosures: BRU Map (Exhibit A of the BRU Agreement) BRU Tract Ownership Schedule (Exhibit B of the BRU Agreement) cc: Samantha Carlisle, AOGCC (via email) Robert Brumbaugh, BLM (via email) Chaitanya Borade, CIRI (via email)