Department of Commerce, Community, and Economic Development
Alaska Oil and Gas Conservation
Commission
HOME
EVENTS
DATA
Data List
Drilling
Production
Orders
Data Miner
Document Search
REPORTS
Reports and Charts
Pool Statistics
FORMS
LINKS
Links
Test Notification
Data Requests
Regulations
Industry Guidance Bulletins
How to Apply
ABOUT US
History
Staff
HELP
Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
CO 031
Conservation Order Cover Page XHVZE This page is required for administrative purposes in managing the scanning process. It marks the extent of scanning and identifies certain actions that have been taken. Please insure that it retains it's current location in this file. ~'~;~ _ Conservation Order Category Identifier Organizing RESCAN [] Color items: [] Grayscale items: [] Poor Quality Originals: [] Other: NOTES: DIGITAL DATA OVERSIZED (Scannable with large plotter/scanner) [] Diskettes, No. [] Maps: [] Other, No/Type [] Other items OVERSIZED (Not suitable for plotter/scanner, may work with 'log' scanner) ~3'''''¢~' Logs of various kinds [] Other BY: ~MARIA Scanning Preparation Production Scanning Stage I PAGE COUNT FROM SCANNED DOCUMENT: / ¢ ? ' . . ' C-- PAGE COUNT MATCHES NUMBER IN SCANNING PREPARATION: YES ~ NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: ~ YES NO ROBIN MARIA DATE:~-C~7 ~)~ /S/~~ (SCANNING IS COMPLETE AT THIS POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO QUALITY, GRAYSCALE OR COLOR IMAGES) General Notes or Comments about this Document: 5/21/03 ConservOrdCvrPg.wpd STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS ALASKA OIL AND GAS CONSERVATION COMMITTEE 3001 Porcupine Drive Anchorage, Alaska RE: THE APPLICATION OF THE PAN AMERICAN ) PETROLEUM CORPORATION, covering the devel-) opment of part of the MGS Field, for an ) exception to Section 2061.1 of the Alaska ) Oil and Gas Conservation Regulations, ) Title 11, AAC ) Conservation Order #31 October 19, 1966 (rehearing of Conservation Order #26 - August 4, 1966) IT APPEARING THAT: 1. The Pan American Petroleum Corporation submitted a petition dated August 24, 1966 for a rehearing~of Conservation Order #26 involving an exception to Section 2061.1 of the Alaska Oil and Gas Conservation ReDulations, Title 11, AAC. 2. Notice of rehearing was published in the Anchorage Times on September 12, 1966. 3. Personal service of the notice of hearing was made to all affected parties. 4. A rehearing was held in the City Council Chambers of the Z. J. Loussac Library, Anchorage, Alaska on September 23, 1966 commencing at 9:30 a.m. 5. Testimony in support of the petition was given by Pan American Petroleum Corpor- ation and objection to the petition was presented by Shell Oil Company. AND IT FURTHER APPEARING that certain exceptions to Section 2061.1 of the Alaska Oil and Gas Conservation Regulations included in Conservation Order #26 should be granted because of the hazards and hardships of developing multiple reservoirs in this offw shore area from permanent platforms by means of directed holes. AND IT FURTHER APPEARING that reservoir data presented at the rehearing is insufficient to determine that a change in the existing acreage spacing requirements of Section 2061.1 of the Alaska Oil and Gas Conservation Regulations is necessary. AND IT FURTHER APPEARING that certain amendments should be made to clarify or modify the rules.listed in Conservation Order #26. These amendments are incorporated into the restatement of the rules listed below. CONSERVATION ORDER #31 Page 2 October 19, 1966 NOW, THEREFORE, IT IS ORDERED that the area described as follows is affected by this order. T9N-R.~2W,.S.M. Section 19:S/2 Section 30: Ail Section 31: Ail T9N-R..13W~ S.M. Section 25:E/2 Section 36:E/2 T8N-R13W, S.M. Section 1: All Section 2:E/2 Section 11: SW/4, E/2 Section 12: SW/4, N/2 Section 13:W/2 Section 14: Ail Section 23:N/2 Section 24:NW/4 The following special rules apply to the . aforementioned area: RULE 1 . · Spacing Footage - Oil wells may be completed closer than 500 feet to the section lines or quarter section lines and may be completed closer than 1000 feet to any well drilling to or capable of producing from the same pool except that no oil well shall be completed at a distance of less than 500 feet from a lease line where ownership changes. RULE 2 Spacing Acreage - No more than one oil completion in a pool as designated in Rule 3 shall be allowed in each governmental quarter section or govern- mental lot corresponding thereto. RULE 3 Pool DesignatiOn - Until ordered otherwise, the vertical producing intervals shall be divided into seven (7) pools which will correlated with the following intervals in the Pan American Petroleum Corporation State 17595 #4 well. MGS Oil Pool A - 5300' to 5720' MGS Oil Pool B - 5720' to 6100' MGS Oil Pool C - 6100' to 6400' MGS Oil Pool D - 6400' to 6750' MGS Oil Pool E - 6750' to 7050' MGS Oil Pool F - 7050' to 7375' MGS Oil Pool G - 7375' to 9215' CONSERVATION ORDER #31 Page 3 October 19, 1966 RULE 4 Permissible Commingling - A well may be completed in and produced simul- taneously from any one or more, or from all of the above seven pools provided that the production from the pools is adequately segregated in the well bore and produced at the surface so that the following requirements may be met: a. Production from MGS Oil Pool A, as defined in Rule 3, must be segregated in the same well bore from production orig- inating from any other pool. b. Production from MGS Oil Pools B, C, and D, as defined in Rule 3, may be commingled in the same well bore, but must be segregated from production from any other pool. c. Production from MGS Oil Pools E, F, and G, as defined in Rule 3, may be commingled in the same well bore, but must be segregated from production from any other pool. This Order is made pursuant to Section 2061.3 of the Alaska Oil and Gas Conservation Regulations and shall continue in force for a period of not more than eighteen (18) months from the date of Conservation Order #26 provided, however, that wells which have been drilled and completed and are being produced in compliance with the pro- visions of this Order, or any other Order of the Committee, may be produced in com- pliance with the terms of said Order notwithstanding the fact that such Order may have expired or have been terminated, or that there may be pending a request that said Order be modified or terminated, until such time as the Committee shall, after notice and hearing, enter an Order establishing different rules, requirements, or. provisions. The Committee on its own motion, or at the request of any interested party, may at any time during the temporary period set this matter for further hearing for the purpose of determining whether the present Order should be amended Or modified. The Committee will, in the absence of a request Of an interested party for a hearing at an earlier date, set this matter for hearing for a date which shall be not later than 30 days prior to the date of the expiration of this Order, for the purpose of determining the proper spacing and field rules which should 'then be applicable to this field. CONSERVATION ORDER #31 Page 4 October 19, 1966 DONE at Anchorage and Juneau, Alaska, and dated October 19, 1966. Thomas R. Marshall, Jr., ExeCutive Secretary Alaska Oil and Gas Conservation Committee Concurrence: ~mes A. Williams, Chairman Conservation aska Oil and Gas Committee Charles F. Herbert, Member Alaska Oil and Gas Conservation Committee t~rl L. VonderAhe, Member ' ' ...... Alaska Oil and Gas Conservation Committee CONSERVATION ORDER ~31 The official transcript of this hearing is not included in th~s ,,~,. NOTICE OF PUBLIC REHEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS Alaska Oil and Gas Conservation Committee Notice is hereby given that the Pan American Petroleum Corporation has requested the Alaska Oil and Gas Conservation Committee to rehear the appli- cation of Pan American Petroleum Corporation which requested the Alaska Oil and Gas Conservation Committee to issue an order of exception in accordance with procedures described in AAC, Title 11, Section 2061.3 establishing temporary spacing which would permit the development of that part of the Middle Kenai oil zone of the Middle Ground Shoal Field which can be developed from the existing permanent platforms now located in the field to an oil well density of 80 acres, and the development of that part of the Hemlock zone of the Middle Ground Shoal Field which can be developed from the existing permanent platforms now located in the field to an oil well density of 80 acres. The following described acreage in the Middle Ground Shoal Field area is affected: T9N-R12W~ S.M Section 19:S/2 Section 30: All Section 31: Ail T9N-R13W, S,M. Section 25:E/2 Section 36:E/2 T8N-R13W~ S.M. Section 1: Ail Section 2:E/2 Section 11: SW/4, E/2 Section 12: SW/4, N/2 Section 13:W/2 Section 14: All Section 23:N/2 Section 24:NW/4 NOTICE OF PUBLIC HEARING Page 2 The requested order would temporarily exempt the field from certain footage standback and acreage requirements of AAC, Title 11, Section 2061.1. The temporary order, if allo~ed, ~ould continue in force for a period of not more than eighteen months, after ~hich a hearing shall be held at which time the Committee will consider such evidence as will enable it to determine the permanent field spacing. A rehearing on the matter viii be held at the City Council Chambers in the basement of the Z. J. Loussac Library, 5th and F Streets, Anchorage, Alaska, at 9:30 a.m., September 23, 1966, s~ which the application will be presented and protestants and others may be heard.. Thomas g. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Comittee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish September 12, 1966 ON SEPTEMBER .., 1966 ON TIlE UNDERSIGNED. qOTICE~ OF I'U~LIC STATE OF D~~ OF ;~ON OF ~S N~e ~ h~by m~lca~ PePlum '~ra~on has ~a~n.,~ttee to r~r ~e ~atioH'o~ ~an. AmScan P~leum ~ratMn .w~h :a O~ '~ Gas ~n~rvat~n ~m- ~. ~~ ~ ~oc~=es ~cflb- d' ~. '~C, ~/~11, ~t~on ~1.~ ~a~ t'e~ spac~g which ~I~ P=mit ~e~..'d~elopm~t ,a~ o~ (~e :~'.~ai ~e ~d~e ~G~d.:?,~al .~eld winch ~an. ~"d~e,l~om ~e ,~ he fi~d~ ~,,' ~'~.' well .d~sity ~ ,~'~ ~ttng permanent ~afforms.;.. ~. 'l~a~ ~w~E des~ ~aerea~e ~ ~e Midge ~und ~al ~%ld ~ction .19: S~on-'. 30: .A~ .. S~tion. 31~ Afl . TgN-~3W, S~tton '~: S~tion 1: ~tion 2:. E-2 · ~n 11:'. ~ec~ ~: ~ N-~' ~n ~: ~n 14: ~ ' ~ requ~ ' o~, ~ ~- ~age ' s~b~e~ ~ab~ it to d~'. ~e ~muen~ ~. ~a~.. ~,,~,,a~:, ~ *~, ~aSka~ ~t 9:30'.. a.m., 1~5,' at which'. ~e:* a~Ucation' w~ be ~ent~ : and prOtestan~ .an~ oth~s maybe ~eard.. :'. Thomas .~. .~a ~' and Gas ~ervafion ':..'~..;. ~m~t~ ' ' .. ':' ~1' P~U~ ~ . Proof of Publication ANCHORAGE DALLY TIMES KENNETH LAUG~.LIN ........................................................................................................................... being duly sworn, according the ADVERTISING DIRECTOR to law declares' That he is ....................................................................................... The Anchorage Daily Times, a daily newspaper published in the town of Anchorage, in the Third Judicial Divi- sion, State of Alaska; tha~t, the " -PUBLIC H~:'~':~RING' PAN AMERICAN nOtlC OI..~. ...... [ ........ ' .:2' '. .... :.'.. ?ETROLEUM ~.,0RP,~ ~LASKA 0IL ~ ~.~.~S C~NSER-v-.~TIUN--'COMM'; ....... a copy of which is hereto attached, was published ...................................................................................... ........................................................... .S.'.~!![.T..[;..M~.~.R.. ...... .1...2..,:....1966' in said Anchorage Daily Times, beginning with the issue of ....... ~?.?..]:':[M..~.!?..R. ....... !...2.., 19 .... ~ w~th SEPW~ '~}'i MBER 1 2 66 and end'ng ' the issue of ...... :'...:...:~..:'.'L.. .... :' ............. :.:~: ......... , 19...'..~. ..... Subscribed and swor "o' t6r "' 1 2t5h . , SEPTEMBE~ 66 'b'ii; for ;'h'; My Commission Expires .......... .6.../...2.~.., 19....6...7... ROBERT C. ELY W. EUGENE GUESS JOSEPH RUDD JOHN E. HAVELOCK hERBERT D. SOLL SIDN E~-~. BIX LER MICHAEL G. BRIGGS JOHN Mc. CREA LAW OFFICES OF Ely, Guess, RUdd & HAVELOCK 202 CRAWFORD BUILDING P. O. BOX 1332 ANCHORAGE, ALASKA 99501 October 6, 1966 TELEPHONE 272-4577 CABLE ADDRESS "NORt hACR E" Mr. Thomas R. Marshall Jr. , Executive Secretary Alaska Oil & Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska. 99504 Re' Application of Pan American Petroleum Corporation - Conservation Order #26- Buffer Zone Dear Mr. Marshall' On be'half of Shell Oil Company, for itself, Atlantic-Richfield Company, and Standard Oil Company of California, Western Operations, Inc., we make the following statement in response to the submission of the Applicant in t'he captioned proceeding by Mr. Swan's letter of September 30, 1966, with its attachments. Pan American 'has taken exception to Rule 1 of Conservation Order No. 26 insofar as it requires a standbaCk of 500 feet from the entire perimeter of t'he area subject to the Order. It is and 'has been agreed by all concerned that no well should be completed at a distance of less t'han 500 feet from a lease line where owners~hip changes, or where royalty changes. In its Petition for Rehearing, Pan American asked that the language be deleted from Rule 1 Which requires a 500 foot standback from other portions of the perimeter. At the Rehearing on September 23, 1966, an alternative "buffer zone" plan was presented by Pan American whic~h would, under certain circumstances, permit t'he automatic addition of parcels of land to the subject area. Mr. Swan asked for and received permission to supplement the- record wit'h further information regarding the buffer zone plan. Upon review we find t'hat provisions are made in the text proposed by Pan American which substantially reduce the difficulties in Mr. Thomas R. Mars~ll Jr., Page 2 practical application and administration which we noted at the Rehearing. The proposed text protects against inclusion of lands which are owned by a lessee other than the drilling party without notice and hearing, a problem with which we were primarily concerned. From a reading of the transcript of the Rehearing, it appears that there may be some misconception of the main thrust of Shell's argument. It was not and is not our purpose to oppose Pan American at every turn and to differ on every point. It was and is our position, as stated in our letter of September 20, 1966, to the Committee, at page 83 of the transcript, and at other points in the argument, that Conservation Order No. 26 is reasonable and adequately supported by the record of the original hearing and that, therefore, the basis urged by Pan American for a full rehearing was unfounded. Had the buffer zone proposal, as it now stands, been made in the original Application and fully set forth at the original hearing, we would not have opposed its adoption. We withdraw our objection to its adoption now. JR:mf ccs: Oscar E. Swan, Esq. Pan American Petroleum Corp. Eben H. Lewis, Esq. Anchorage James A. Williams, Director Division of Mines & Minerals Yours very truly, ELY, GUESS, RUDD & HAVELOCK Joseph Rudd RECEIV O OCT ! g 1966 I~IVISION OF MINES & MINE~B ANCHORAGE ROBERT C. ELY w. EUGENE GUESS JOSEPh RUDD JOHN E. HAVELOCK HERBERT D. SOIL sIDnEY R. BIXIER MICHAEL G. BRIGGS JOHN M~.CREA TrT LAW OFFICES Of ELY, GUESS, RUDD & HAVELOCK 202 CRAWFORD BUILDING P. O. BOX 1332 ANCHORAGE, ALASKA 9950} September 20, 1966 tELEPHONE 272-4577 __ caBLE ADDRESS "NOrTHACRE" Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska. 99504. Re' Rehearing - Application of Pan American Petroleum Corporation - Conservation Order No. 26. Dear Mr. Marshall- On behalf of Shell Oil Company and its joint venturers, Atlantic Richfield Company and Standard Oil Company of California, Western Operations, Inc., holders of an oil and gas lease sub- ject to the captioned order, we protest the rehearing of Pan American Petroleum Corporation's application for an order of exception, or any amendment or modification of Conservation Order No. 26 as requested in Pan American's petition. The bases of protest are essentially those raised in the original hearing in this matter, primarily the absence of reservoir and other information necessary to justify so great a variance from the standard requirements of the Oil and Gas Conservation Regula- tions, at this time, and the absence of information acquired since the previous hearing of such significance as to justify re-opening the record which amply supports Conservation Order No. 26. We understand that a hearing is to be held at 9'30 A.M. September 23, 1966, in the City Council Chambers in Anchorage, at which Shell Oil Company et al may fully participate. JR/ec cc. Eben H. Lewis, Esq. S. B. Richards, Esq. C. L. Blacksher, Esq. D. A. Mabra, Jr., Esq. T. L. Osborne, Esq. Leslie E. Kell, Esq. Very truly yours, ELY, GUESS, RUDD & HAVELOCK Joseph ~Ru'dd RECEIVED SEP z 1 !966 D~VI$1ON OF MINES & M~NERAL$ ANCHORAGE 3001 Porcupine ,,~nchora§e, A~kas-k~ 99504 15, 1966 ~. EBen [~. Lewis P~bi~n, ~Caskey a~. ~s Anc~.r~e., Al.aska~ 99501 Cent Order ~'26 Thomas a.. '~iarshall, Jr. 3001 Porcuph~e Dr~ve ~ept~r 6, 1966 Pan ~ric.~ Pe~olem~ ~..~l~ora~ion ~nver, ~,l,o~ad~ 8020;2 , //" / C. L, Blackshet', $.kelly' 0~1 ~auy~ ~1~, ~I~~ RE: STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS ALASKA OIL AND GAS CONSERVATION COMMITTEE 3001 Porcupine Drive Anchorage, Alaska THE APPLICATION OF THE PAN AMERICAN ) PETROLEUM CORPORATION, covering the develop- ) ment of part of the MGS Field, for an exception ) to Section 2061.1 of the Alaska Oil and Gas ) Conservation Regulations, Title 11, AAC ) PETITION FOR REHEARING AND RECONSIDERATION AND FOR AMENDMENT OF CONSERVATION ORDER NO. 26 COMES NOW, PAN AMERICAN PETROLEUM CORPORATION, Applicant in the above entitled matter and respectfully petitions the Alaska Oil and Gas Conservation Committee for a rehearing on and a reconsideration of its application in the above matter and for an amendment or modification of Conservation Order No. 26, entered August 4, 1966, a copy of which was mailed to Applicant by letter, dated August ll, 1966. In support of its Petition for Rehearing and for Reconsideration, the Applicant states: , That there is now available new and additional evidence from the Pan American Petroleum Corporation State 17595 ~7 Well which could not have been presented at the hearing held July 12, 1966, which evidence is not merely cumulative, is competent, relevant and material, has a direct bearing upon the questions to be decided by the Committee, and will in Applicant's opinion require changes or modifications of Conservation Order No. 26, and particularly of Rule 3, thereof. 2. That certain provisions of Rules 1, 2, and 3 of Conservation Order No. 26 are not supported by evidence presented at the hearing and that if there is evidence to support these provisions this evidence should be made a part of the record by a supplemental hearing and Applicant and other interested parties should be given an opportunity to cross-examine the witnesses who present the evidence and to introduce evidence which might tend to explain, ampl.ify, or contradict said evidence. 3. That certain provisions of Rules 1, 2, and 3 of Conservation Order No. 26 are contrary to and in conflict with the only evidence presented at said hearing which was competent, relevant, and material to said provisions. WHEREFORE, Applicant prays that the Committee set this matter for hearing, that notice of the hearing be given as required by the law and by the rules of the Committee, that upon such hearing all interested parties be given an opportunity to introduce additional evidence bearing upon the issues to be decided by the Committee, and that after such hearing, the Committee recon- sider each of the issues which has been presented to it for a decision and that it enter an Order substantially as prayed for in its original application, filed herein. In the alternative, in the event the Committee, upon reconsideration, finds that it should not enter an Order substantially as prayed for in the orig- inal application, Applicant requests that Conservation Order No. 26 be amended and modified. The manner in which Applicant requests that each rule be amended and the reasons for such amendment are as follows: ~ Applicant requests that Rule 1 be amended by deleting from said Rule the following language;" . . . or less than 500 feet from the lines forming the perimeter of the above described acreage." Said provision is not supported by any evidence introduced at the hearing held July 12, 1966 and is not necessary to protect correlative rights or to achieve the proper and efficient development of the area affected by the Order. 2. Applicant requests that Rule 2 be amended by adding thereto the following language: "A well shall be considered as having been completed in the quarter section in which it encountered the deepest interval in which it has been completed, and from which it is producing, regardless of the location at which it encountered any other pool or pools in which said well may. have been completed and from which it may be producing." If Rule 2 is so amended, the desired spacing of wells will still be achieved and the operators will be given suffici- ent flexibility in the drilling, completing and producing of their wells so that the wells can be drilled, completed and produced in the most efficient and economical manner, Since the wide spacing required by Conservation Order No. 26 will require the drilling of wells from the platforms which deviate substantially from the vertical in order to develop the area subject to the Order, and since it is difficult to control the course of the wells precisely and difficult to determine before or during the drilling of a well, at what point ~ in its well bore it will leave one governmental quarter section and enter another governmental quarter section, this flexibility in completing a well is necessary to permit the operators to complete the wells in a manner which will allow the maximum recovery of oil from each pool. Applicant requests that Rule 3 be amended by changing the vertical limits of the oil pools as set out in said Rule 3 to read as follows° MGS Oil Pool A -- 5300 to 5720' ~-/~ MGS Oil Pool B -- 5720 to 6100' MGS Oil Pool C -- 6100 to 6400' MGS Oil Pool D -- 6400 to 6750' MGS Oil Pool E -- 6750 to 7050' MGS Oil Pool F -- 7050 to 7375' MGS Oil Pool G -- 7375 to 9215' In support of its request for this amendment, Applicant states that it has since the hearing had July 12, 1966, completed Pan American Petroleum Corporation State 17595 ~7 Well, and has secured new evidence, not available at the time said hearing was held. That it has perforated said well. in an inter- val which it believes is productive of oil and which it believes probably correlates with an interval which is included in MGS Oil Pool A, as defined by Rule 3, but which interval it believes should be included in MGS Oil Pool B, as defined by Rule 3. Applicant believes that the aforementioned interval will be found productive of oil in other wells in the field and that where it is found to be productive, the production from this interval ~ should be commingled with the production from the oil producing intervals in MGS Oil Pool B, as it is presently defined, rather than from the other intervals in MGS Oil Pool A, as it is pre- sently defined. A requirement that this interval which appears at a depth of approximately 6430' to 6480' in MGS Well ~7 be produced separately from the oil being produced from MGS Oil Pool B, as it is now defined, would have the practical and mechanical effect that this interval could not be produced at all. As an alternative, if Rule 3 is not amended as requested, Operator requests that a specific exception be granted to it permitting it to produce the MGS ~7 Well from intervals below 6430' and above the top of MGS Oil Pool B, as presently defined, and to commingle said production with oil produced from MGS Oil Pool B. 4. Applicant requests that Rule 4 be amended to read as follows: . ? Permissible Commingling. A well may be completed in and produced simultaneously from any one or more, or from all of the above seven pools provided that the production from the pools is adequately segregated in the well bore and produced at the surface so that the following requirements may be met: a. Production from MGS Oil Pool A, as defined in Rule 3, must be segregated in the same well bore from production originating from any other pool. b. Production from MGS Oil Pools B, C, and D, as defined in Rule 3, may be commingled in -5- the same well bore, but must be segregated from production from any other pool. c. Production from MGS Oil Pools E, F, and G, as defined in Rule 3, may be commingled in the same well bore, but must be segregated from production from any other pool. ~ ...................... '~?':-~' The reason for this change is to make it clear that multiple completions will be permitted where production is adequately segregated in the well bore. This may be implied in Conserva- tion Order No. 26, but Applicant believes it should be made clear. 5. Applicant requests that the final paragraph of Order No. 26 be amended to read as follows. _~.~/~-~~ "This Order is made pursuant to Section 2061.3 of the Alaska Oil and Gas Conservation Regulations and shall con- tinue in force for a period of not more than twelve (~) months (oprovided, however, that wells which have been drilled and completed and are being produced in compliance with the pro- visions of this Order, or any other Order of the Committee, may be produced in compliance with the terms of said Order not- withstanding the fact that such Order may have expired or have been terminated, or that there may be pending a request that said Order be modified or terminated, until such time as the Committee shall, after notice and hearing, enter an Order establishing different rules, requirements, or provisiQns. The Committee on its own motion, or at the request of any interested party, may at any time~set this matter for further hearing for the purpose of determining whether the present Order should be i amended or modified. The Committee will, in the absence of a request of an interested party for a hearing at an earlier date, set this matter for hearing for a date which shall be not later than 30 days prior to the date of the expiration of this Order, for the purpose of deter- mining the proper spacing and field rules which should then be applicable to this field." .. There was general agreement that if sufficient evi- dence were not available at the time of the July 12, hearing, to determine what the spacing or well density wOuld be proper for efficient development, such information would become available within one year thereafter. 'We also think that all interested parties, and not just Pan American, should be charged with the responsibility of producing evidence. As a final alternative, the Applicant prays that, if upon Rehearing and Reconsideration, the Committee finds from the evidence in the record of the previous hearing and the subsequent hearing that the purpose of conservation of oil and gas may be better accomplished by an Order containing provisions different from those prayed for in the original application, or in this application, and different from those contained in Conservation Order No. 26, that it enter - an Order containing such provisions as will from the evidence properly before it best accomplish the conservation of oil and gas within the area affected by the Order. Respectfully submitted, PAN AMERICAN PETROLEUM CORPORATION Its Attorneys -7- ,, fOrM 1397 1-.66 '. PAN AMERICAN PETROLEUM CORI RATION PRODUCING DEPARTMENT H. T. HUNTER DIVISION PRODUCTION [MANAGER SECURITY LIFE BUILDING DENVER, COLORADO 80202 August 24, 1966 DISTRICT SUPERINTENDENTS W. M. JONES A. E. PIPER T. M. CURTIS JOINT INTEREST SUPERINTENDENT S. B. RICHARDS File: SBR-391-9860511 Petition for Rehearing Middle Ground Shoal Field Alaska State of Alaska Department of Natural Resources Alaska Oil and Gas Conservation Committee 3001 ,Porcupine Drive Anchorage, Alaska' Gentlemen: We transmit herewith three (3) copies of Pan American Petroleum Corporation's petition for rehearing and reconsideration and for amendment of Conservation Order No0 26° If the petition for rehearing is granted, we ask that notice be published as provided in the rules and served upon all interested parties and that the hearing be had without delay° Yours very truly AtT achment $ cc: Mr. J0 To Doyle (3-w/a'~tach'ments) Shell Oil Company 1008 West 6th Street Los Angeles, California 90054 Mr° D. A0 Mabra, Jr o Sinclair Oil and Gas Company 501 Lincoln Tower Building Denver, Colorado Mro C0 L0 Blacksher Skelly 'Oil Company P0 O0 Box 1650 Tulsa, Oklahoma Mr~ To Lo Osborne Phillips Petroleum Company 1300 Security Life Building Denver, Colorado ,) J '. SRSSTATE 18756 NO: $2-14 ,. ,. 4,20 CH AK. STATE 17595 NO. 6 472 CHAK STATE 17595 h;O. 7 490 ; ..- .) Low Economic L~mlt TIME ..._: MILLIONS OF BARRELS !00 >- L~J W :> 4O ., ZO Exhibit' 12 7 7. ~: ,,, ~, ~ L/,-, ..... '.: ,'?PEL IN 7'5 YEARS 0 I0 2_.0 :30 40 50 60 70 80 YEARS AFTER START OF PRODUCTION REHEARING BY THE ALASKA OIL & GAS CONSERVATION COMMITTEE, IN THE M=glTTER OF THE APPLICATION OF PAN PETROLEUM CORPORATION FOR AN EXCEP- TION TO TNg P~GULAT!ONS~ AND AN b~%EiYDMENT OF CONSERVATION ORDER NUMBER 2 6 R & R DEPOSITIONS 82~ W. 8TH 277-4713 ANCHORAGE:, ALASKA 10 11 12 14 15 16 17 18 2O 23 24 . · 25 THE REHEARING BY THE ALASKA OIL AND GAS CONSERVATION COt~iTTEE OF THE DEPARTMENT OF NATU.,'_~-~,, ov~'~,?~-~ '~ iN THE MATTER OF THE APPLiC-~TiOi~'~' OF ~T~ ~r~ ~'.~..Z,; ~2,~RICAN PETRO~ CO~ORAT'~- ' ION, COV"tRiii'2. TF~Z DE~LOP~NT OF PART OF T~ MIE, DLE Oi{OUi~D SHOAL OiL FIELD iN CO01I INLET,FC!i Abl m~i~.,, _iON TO SECTION 2061.1 OF THE ALz..,S~i ~ZL Aiq'D GAS CONSERVA- ~'~ ~ z~C; AND FOR TION REGUM~TiONf, T~,~= 11, AN f~ND~NT OF %ONSERVATiON ORDER NO. 26 STATE OF ALASKA .:;i~; PEARANCE S: FOR THE APPLICANT PAN z!i~,~RiCAN PETROLEUM CORPORATi('i. & .ASSOCIATES: Eben Lewis, Attorney at Law Oscar Swan, Attorney at Law FOR THE RESPONDENT SHELL OIL COMPANY AND ASSOCIATES: Joseph Rudd, Attorney at Law Eugene Wiles,Attorney at Law · ~ & l~ DEPOSITIONS 277-4713 I325 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 T'A B.L,E ~, 0 ~F .. C 0 N T E~N_T.S Opening Statement by Mr. Swan Opening Statement by Mr. Rudd Opening Closing Argument by Mr. Swan Closing Argument by Mr. Rudd Final Closing Argument by Mr. Swan -FOR THE APPLICANT' R. B. GILES WITb~SSES iRE C,T 9 CROSS 47 FOR THE RESPONDENT' None FOR THE ,'aPPLiCANT' 4 (With Overlay) 9 i0 THE RESPONDENT: None EXH. IBITS ADMITTED 46 14 14 23 25 4J R & R DEF~O$1TION$ 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 4 None 75 82 97 RED IP, E C T 56 72 10 11 12 14 15 16 17 18 19 2O 21 Page 3. P R.O C E E D~IN G S , CHAIRMAN WILLIAMS: This ~is a rehearing by the Alaska Oil and Gas Conservation Committee. The purpose here is to take testimony from or on behalf of Pan American Petroleum Company in support of its petition for 80. acre well spacing on certain acreage on the Middle Ground Shoals Field, and for ~mendment 'to"the~State' Conservation Order Number 26, and also to take testimony from or on behalf of Shell Oil Company in support of its protest to,the application for spacing. My name is Williams. Here on my immediate left (indicating) is Mr. Marshall, the executive secretary of the Committee, Carl VonderAhe on my far right (indicating) petroleum engineer for the State is a member of the Committe. The fourth, member, Mr. Herbert, is not here today. As tech~_~ical advisors we have Mr. Gilbreth, petroleum engineer for the State, a~d Mr. Kug!er, petroleum geolo- gist fOr ~the State, and for our legal advisor~ we have Mr. Crews frOm the State Attorney General's staff. Legal notice of the rehearing was published locally on Se'ptem. ber 12, which gives ample notice for a hearing of. this nature,~ which is not of state-wide application. Witnesses will be sworn in before they testify, and we would like a brief 'statement of their qualifications, Unless their qualifications a~ already on record in the transcript of the first hearing, which was held on July 12. I will now place this transcript of~the July 12, 1966~ aaring on this matter, and all nine ex~ozts, one through ei~~ R & R DEPOSITIONS 277.47~3 WEST EIGHTH AVENUE - SUITE ANC:HORAGE, ALASKA 10 1! 12 13 16 15 17 18 19 20 21 Page 4. by Pan American, and one by Shell, in the record of this hearing today. Now will the representatives or counsels of the companies involved, please introduce themselves and others that they may wish, and make any desired opening statement prior to the question ing of the witnesses? MR. LEWIS: Thank you, Mr. Chairman. i'm Eben Lewis, lOcal counsel for Pan American Petroleum Corporation and its associates in the matter. Appearing with me, and the gentleman who will present the case for Pan American, is Mr. Oscar Swan of Denver, Colorado, a member of the COlorado Bar. He has previously been admitted to practice ad hoc in these proceedings in the previous hearing. MR. RUDD: I'm Joseph Rudd, appearing for Shell Oil Company, Atlantic Rich'field Company and Standard Oil Company of California, Western Operations. Appearing with me is Gene Wiles, Anchorage attorney. CHAIRMAN WILLIAMS: Thank you. Do you have any opening statement s ? MR. SWAN: Yes, I have a brief opening statement. Do you want ~the witness sworn now, .or wait till I'm ready to present him? CHAIRMAN WILLIAMS: At your pleasure. MR. SWAN: Well, let me start on the opening statement. Our petition in this case asks first for a complete rehearing and' reconsideration on the original application, and then in the R & R DEPOSITIONS 277-47 ! 3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA L 10 11 12 13 14 15 16 17 18 19 2O 21 22 25 Page 5. alternative, if you don't agree with us on that, we!ve asked for certain specific changes in Order Number 26 that we think are necessary, and~ as a final alternative, if you don't agree with either of those, why we're asking for whatever order you think is proper based upon the evidence, at this hearing and the previous hearing. It's sort of a three-way petition. I'm not going to go into detail on what the changes are that we think need to be made. The witness will cover that~ but I do think in reading the record of the previous hearing, maybe we didn't makeit quite clear exactly why we think what we're doing is what the statute authoriz and contemplates, and I'd like to read the provision of the statute under which I consider this hearing is being held. It's Section 31.05.100 and the first paragraph of sub-paragraph A which reads, ~For the prevention of wast~e to protect and enforce the corre!ativc righ'ts of lessees in a pool, and to avoid the augmenting and. ac- cumulation of risks arising from the drilling of an excessive number of wells, or the reduced recovery which might result from too small a number of wells, the Department shall, after a hearing establish a drilling unit or unlts for each pool". We think the evidence which will be presented, at this hearing and that has been. presented-at the previous hearing, establishes that a? order, such as we reques'~ed~ ~ will accomplish all four of these put-poses that are set out in the statute. Let's go to that ~st clause. Bart, could you give me this --- where it says, ~ ..... the Department shall establish a drilling unit or units for R & R DEPOSITIONS WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 13 15 16 17 18 19 21 Page 6. each pool". Actually our application has requested the establish- ment of two drilling units. One is the yellow colored area to the north there (indicating), which will be developed by the drilling of a number of wells from a single surfact location. That's the Pl~atform in the approximate center of it there (indicating), and the other drilling unit is the gray colored area (indicating)~ which will be developed from the S.A.S. Platform, again, a single sUrface location from which a number of wells will be drilled. Your statute's a little different from alot of State statutes. There isn't any requirement that drilling units be of equal size, and these are not, Obviously. it doesn't say that only one well can be drilled .on the -- a drilling unit, or that the wells have. to be equidistant from each other. On the contrary, we feel that when we drew our original ap- plication that' the statute clearly provides for drilling units sucl as we've asked for here~ and. I think if the language that I've al- ready quoted leaves any doubt, the language in the first sentence of the next sub-paragraph of this same statute, should remove that doubt, and it provides --- CH_~IRMAN WILLIAMS: Pardon me, what paragraph are you on? I didn't find this. M~. ~ ~AN: it s 31.0 5. I00. H~Ii~kN WILLIAMS: Ail right~ thank you. MR. SWAN: Establishment~of drilling units for pools~ and sub-paragraph B of that says, "Each we[l permitted to be drilled R & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA C 10 11 12 13 14 15 16 17 18 lg 2O 21 Page 7. on a drilling unit shall be drilled under the rules and regulationl the and in accordance with/spacing pattern as the Department prescribe for the pool in which the well is located". Again, the words, "each well," indicate to me that they contemplate~ multi-well drilling units just like this,-and these are logical units. They are developed from a single surfact location. The ownership with- in each unit is uniform throughout that unit. And ~here's one more 'point on which~'apparently there was some doubt. The -- this paragraph of the statute Ive just read~ and that Section.~ says that, "The development will be in accordance with a spacing pattern that's fixed by the Department," and there seems to have been a feeling that this implies that development . has to be in accordance with an arbitrary and imaginary uniform grid that's superimposed on Cook Inlet, and that the sides of the grid is the. only thing that we're considering he're today. We don' thi~k that's right. We think the statute contemplates that in a proper case~the spacing pattern can be keyed to the producing structure, and we think that~ where this can be done, this is what should be done, and the main purpose for the uniform grid arrange- ment is the protection of correlative rights, and we don't think that is necessary in this particular case under the facts. I think this establishes the matter pretty well, why we think this statute authorizes what we're asking for. I'd like to ask yo~ to lo0k at the Other side of the coin for a minute, i'm not so . sure the statute authorizes your state-wide rule, or at least that , R & R DEPOSITIONS 277-47'3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 16 15 17 18 20 21 Page 8. it authorizes it to be used in the manner that it's sought to be used here; that is for a permanent order for the development of the field. It's pretty clear. The statute says you can space pools, but I can't find anywhere in the statute that it says you can space the entire State of-Alaska uniformly with a blanket ordel up hill and down hill and on dry land and on the sea without re- gard to the depth of the producing formation or the type of trap you've got or anything else. We're not objecting to the validity of this rule at this time but we do object to this rule being used as a foundation upon which you construct an order regulating the development of this pool. We don't think it was intended to do anything but regulate~'~ locat%on of wild cats and to ~keep things under control until the Committee could do what the. statute says,~ establish.'drilling units for a pool. In other words, ~it's a temporary expedient until you can have a hearing, and we would like to ask you to -- well, we~d like to have you forget Rule 2061. Instead, let's hear this case as though the Rule didn't ev~en exist. Don~t try to fit what you~r doing here as near as possible to Rule 2061. Try to fit it to wha~ the testimony shows should be done in this field. I have one witness only this time~ Mr. R. B. Giles. May he be sworn? CHAIRMAN WILLIAMS: Mr. Rudd~ did you have an opening state- ment you wanted to make before--- MR. RUDD: No, that's all right. ~ctually we have reserved R & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 15 16 17 18 2O 21 Page 9. our opening statement until --- MR. SWAN: I think we'd already agreed on that. MR. MARSHALL: Would you please raise your right hand? In the matter now at hearing, do you swear to tell the truth, the whole truth and nothing but the truth, so help you God? MR. GILES: I do.. R. B. GILES being first duly sworn testifi&d as follows on DIRECT EX;24iNATiON BY MR. SWAN' Q Will you state your name, please? A R.B. Giles. Q You are the same Mr. R. B. Giles who testified at the previou~ hearing, are. you not? ~ A I am. Q "And your qualifications were set out -- are set out in the transcript of that previous hearing? A That is correct.. · Q We don't, need to go into that again, do we? CHAIRMAN WILLIAMS: No s ir. Q You have read the transcript of the previous hearing? A ! have. ~. Q And you are familiar with everything that's in it? A I am. . Q Okay. You've also read. the Commission's Order Number 26? R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - ~UiTE ANCHORAGE, ALASKA 10 11 12 13 16 17 18 19 20 21 A Page i0. I have. Let's take up some of the individual provisions of that Order and first, I believe, it's Rule 3 that provides for sewen separate zones. What does it accomplish, in your opinion? I don't know, and I would be interested in learning from the Committee ~oday their reasons and evidence in support for a seven zones split. Gentlemen, we still feel there ought to be only two zones, these being the Middle Kenai Oil zone and the Hemlock Conglomerate zone. Now we can get along 'all righ with the Committee's two zone split which conforms to what Shell had requested at the July 12 hearing. This split would put the A, B, C and D zones into one pool, and the E, F and G zone.s into a second pool. The A zone in our Chakachatna Well ~ 4 tested, on a brief test, at higher gain-oil ratio than tests taken in other sand members in this well. Now further down flank, this particular zone may show fluid almosl identidal in composition to the.other sand members in the Middle Kenai Oil zone. We don't have this interval open in Well 4 now, and we don't intend to open it until we can ex- tensively test to get some production performance utilizing a compressor; then at that time, as a result of an extensive test, we can determine that 'this interval in the A Zone ought to be produced as a separate zone. We firmly believe, howeve~ that the A Zone ought to be included with the B, C and D zones as one pool, until more exte~nsive testing in Well 4, or r & R DEPOSITIONS 277-4713 825 WEST EI(~HTH AVENUE - SUITE ANC;HORAGE, ALASKA 10 11 12 13 14 15 17 18 21 Page il. if wells at lower elevations on the structure proves this is not adviseable. Now let's just presume for the moment that the Committee does not agree that the A Zone ought to be in, cluded in the B, C and D Zones. Then in our opinion, the A Zone and the B Zone have been improperly defined. In other words, the division between them has not been set at · the proper stratSgraphic level. Now by reason of this, the Committee has included in the A Zone, which you apparently feel was a high gas-oil ratio zone, an interval which we believe to be productive of oil and which, more logically, should be included in the B Zone. Further, bY reason of this improper definition, our number 7 Well technically is in violation of Conservation Order Number ~26, and this is in violation, in spi.te of the fact that it was completed in a manner approved by the Division of Mines after the hearing was held in July, but before the Order was issued on August if llth. Now/the A Zone is gOing .to have to be kept as a sep- arate zone, the definition or line between the A and B Zones we feel must be changed. Let me elaborate by showing, you an exhibit. Exhibit Nine. This is an induction ~ log comparison of Wells 7 and 4 on the Chakachatna Acreage (in- dicating). To support our claim that the interval shown with a red arrow perforated in Well 7, rightfully belongs in the B Zone, not the A Zone, if you've got to have this seven zone split, and we would propose that the top of the B Zone~ R & R DEPOSITIONS 277.4713 S25 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 14 16 17 18 19 20 21 Page 12. which you have defined in Order 26, based upon a marker in Well 4, be raised from fifty-eight, thirty feet to fifty-seve~ twenty feet in Well 4. Let me go further and explain this exhibit. The long red markers on Well 4 represent the in- tervals perforated in that well. The shorter red marks in Well 7 represent those zones that have been notched. This is done by an abrasijet tool which is simply a means to sand blast holes in the production casing, and we show the various markers, the tops of the A, B, C, D and E pools as defined in Well 4 in your Conservation 'order 26. I might, at this point, digress by saying that it looks like the A Zo'ne in Well 7 is much longer and a much thicker interval than Well 4. This is not true. Well 7 and Well 4 are structurall about equivalent to one another. The reason it shows As la distortion here is that Well 4 was drilled from a floater essentially straight, underneath where our Platform B now rests. Well 7 was drilled some. 2,500 feet away from the Platform in an S shaped manner, and in turning the cornet Of the S, we drilled what looks like an elongated section of the A Zone. We show the GOR test in Well 4 from this perforated interval which is now squeezed off with cement, and this -- finally Exhibit Nine shows that lithological!y, or showing the character of the 16gs, we feel that this Zone correlates quite well with this zone in Well 4, and the character of the induction electric log indicates it would be more logical to R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANC:HORAGE, ALASKA 10 11 13 14 15 16 17 19 20 21 Page 13. A include that interval in with the B Zone interval defined by Conservation Order 26. Another point is that we do not have a selective test of the interval in Well 7, the interval in question, but we do have a composite test of these sand members which we classify' as the Middle Kenai Oil Zone, and this composite test shows that the GOR was 490 as compared to~a GOR in the Well 4, highest perforated 'interval of just under fifty-eight hundred to one. I have an Exhibit Number Ten which compares that GOR 490 in Chakachatna Well 7 with other wells completed in the -- in similar sand zones in the B, ¢ and D as you have ciassi= Lied these upper zones. The well north of Well 7 is Chakacha'~' ~ ~n~ f~ 6 and the GOR was 472. The S.R.S. -- S.A.S, it should be, ~{~ 32-14 is the extreme~ southend well within the spaced area we're concerned with today, and it showed a GOR to these zones of 420. The S.A.S. Well 32-11, which is northwest of the Shell Platform, tested at a gas-oil ratio of~570 cubic '~eet per~ barrel. So the 490 ratio is within the range sho~n by the other wells throughout this spaced area. Mr. Giles~ before we leave these two exhibits~ Exhibit Numbez Nine~ ~hich was a comparison of the well logs of Well ~ 4 and ~-~ 7, and Exhibit Number Ten, which is a gas-oil ratio compar- ison~ were these exhibits prepared under your. supervision? They were. I offer them in evidence at this time. R & R DEPOSITIONS 277.4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 ~ 13 14 15 16 17 18 19 2O 21 22 23 24 25 Page i4. A CHAIRMAN WILLIAMS' Do you have these for distribution, Mr. Swan? MR. SWAN: Yes, we do. (Exhibits now distributed to Committee and audience by Mr. Richards.) Q Mr. Giles, have you completed your comments on Rule 3 at this time ? I have. We're a little out of o~der~ but let's go next to Rule 4 of Order Number 26. This is the one which is concerned with permissable commingling of the zones that were set up in Rule 3. CHAIRMAN WILLIAMS: Mr Swan, excuse me. _~ there are no objections, I'1I accept Exhibits Nine and Ten into the record. Mf<. RUDD: No objection. (Exhibit Number Nine and Ten on behal of Pan American Petroleum Corp. was duly marked and admitted in hearing) Q Do you believe that some changes should be made in Rule 4 also? ~ A Yes sir, I do. Q Would you explain what they would be and why ~you think they should be made? A Rule 4 does not clearly provide for dual completions. This Rule only needs, in our opinion, to provide that wells ~may be multiply completed in the well bore, as to two~ or three zones R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 1¸4 15 16 17 18 19 2O 21 22 23 24 25 q A Page 15. so long as these .zones are adequately segregated. The Com- mittee does not need any provision for commingling if the Committee will see fit to hold to a two or three zone split. If, .after the hearing, the Committee finds it's got to have the seven zone split, then Rule 4 should be made clearer with respect to what can be commingled and what pools must be segregated in the multiple zone completion. The language we included in our rehearing petition will accomplish this. You have no exhibit on Rule 4? I do not. Now let's go back to Rule 1 of Order Number 26. That's the one that provides that no well can be drilled closer than 500 feet from the perimeter of the Middle Ground Shoal spaced area, not only where t. here's no change in lease or royalty ownership across that perimeter, but there is none -- where there is, well, in both cases -- excuse me, I'm mixed up here, (Pause) Was it requested by. any party, Mr. Giles, that a well be kept 500 feet from this perimeter, even though there would be no change in ownership or either lease or royalty on t~e~.'other side_ of the line? No, there was not. Do you see any necessity for it? No, % do not. Well, would you explain why? Have you got a previous exhibit that would .... R & r DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 A A Page 16. Yes, Exhibit Number One, which was entered at the previous hearing. Rule 1 seems meaningless in those portions along th~ perimeter of the spaced area where there is ownership on each side of the perimeter. Now this occurs next to the yellow colored Chakachatna Acreage along the west side of the pr6pos~ spaced area. This occurs, by the way, everywhere around the S.A.S.-agreage, except where the perimeter offsets Section 10. That Would be .Township 8 North, Range 13 West. We don't see the need for this standback provision where you do have common ownership as to working interest and royalty on each side of the perimeter~ and weVd be very interested to learn today just why the Committe feels they have to have this s tandback provision. Is there an alternative solution that might be used in the event the Committee feels that~ in spite of your argument, wells should be kept 500 feet from the outter perimeter? Yes, there is an alternative. It's what we call the buffer zone concept. Let's just say for a moment that a well were drilled inside the yellow colored area, but next to the perimeter where it divides common ownership on each side of the perimeter. Then the -- you can include in a conserva- tion order that any drilling unit outside the spaced area~ but located within 500 feet of the -- where that well is- bottomed inside the areas would automatically come in under your conservation order, your spaced area. This is an easy R & R DEPOSITIONS 277.4713 82E~ WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 15 16 15 16 17 18 19 2O 21 A Q A Page 17. rule to administer. It's just automatic. Every time some- body drills a well and the drilling ~unit outside is. within 500 feet of that well, that drilling unit used to run on in to'the spaced area. This is not a new concept. We've used it extensively in the Lower Forty-eight states. Mr. Giles, you've been talking from Exhibit Number One, Is that an exhibit that was in evidence in the previous hearing? Yes. I don't need to reoffer tha~ do I? CHAIP~AN WILLIAMS: No s ir. Now let's go to Rule 2 of Comm~ittee~s Order Number 26. This leaves some doubt in my mind anyway as to how wells may be completed for production. Do you have some clarifying langu- age to suggest to the committee? Yes. We would propose the following language be added to Rule~2. Now I~m going to quote from what was contained in our rehearing petition. Quote,. . well shall be considered as having been completed in the quartez section in which it encountered the deepest interval in which it has been com- pleted, and from which it is producing~ regardless of the location at which it encountered any other pool or pools in which said well may have been completed and from which it may be producing," end of quote. Now if Rule 2 is so amended 160 acre spacing of wells will still be achieved. The oper- ators, however, will be given sufficient flexibility in the R & R DEPOSITIONS 277-4713 ~21~ WEST EIGHTH AVENUE - SUITE ~ ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 lg 2O 21 Q Page drilling, completing and producing~of their wells so that the wells can be drilled, completed and ~produced in the most ef- ficient and economic manner. The wide spacing required by Conservation Order 26 will require the drilling of wells which deviate substantially from the vertical in order to develop the area subject to this Order. .It will be difficult to control the course of these wells precisely. It will be difficult to determine before or during the drilling of a well, at what point in its well bore it will leave one gov- ernmental quarter section and enter another governmental quarter section. The flexibility in complgting~ a well is necessary to permit the operator to complete the well in a manner which will allow the maximum recovery of oil from each pool. Let's look at it another way: Our proposed langu- age would permit a we!i~ even though it's bottomed i~ the quarter section~ to be open for production where it coursed through the intervening quarter, section. Now we presume the Order, as now written~ meant to permit this flexibility. We presume this because there are existing wells where this pro- blem arises, and we see no engineering reason or logic why long stepouts, for example, should not be handled in the manner we've set out with our additional language. Fir. Giles~ up to this point in your testimony todays is it fair to say that your comments on Order Number 26 are based on the assumption that the Committee sees fit to continue R & R DEPOSITIONS 277-471:3 i325 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 16 17 18 20 21 160 acre spacing for the~pool and that these are just changes we think need to be made, even if they think 160 acre spacing should be continued.? A 'That is correct. Q Do you agree that 160 acre spacing for the.development of this particular field, is proper at this time? A No, i do not. Q Well, can you give us some of the reasons why? A From a recovery standpoint~ $0~s make more sense in three ways. First, on 80 acre spacing~ we'll-be able to produce to a lower economic limit. This' will increase recovery of oil. Second~ if a Platform should fail to last as long as it:s needed, then under the 80 .acre development prOgram we pro'pose< at the last hearing wi.th our Exhibit Four, the .cumulative recovery at any point mn future time will be al=her than it wOuld have been under 160 acre development. Third, under a secondary reco.v, ery:operation we:ll be able to sweep out the oil from 'the several pay zones that we've found on this structure, with more .wells on 80's as compared with less well: on 160 acres. Again, this will increase recovery of oil. There are other reasons for 80's; 80's make the most economic sense. They save the drilling of unnecessary wells~ which include unnecessary dry holes. 80's will p~rmit an operator to realize a faster return on his investment~ which is simply good sound business economics. Ail of this is sound conservat:' R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 A Page 20. Mr. Giles, Shell contended at the previous hearing that there has to be a good conservation reason before the Con~mittee is justified in changing from the 160 acre state-wide spacing that's established by Rule 2061, and apparently the Cormmittee agreed with this argument since Conservation Order 26 is patterned after Rule 2061, and it really just makes changes in that Order. Do you agree with this point of view, or with this argument? No, I do not. As pointed out in opening statement, Mr. Swan, we feel that Rule 2061 may 'proper!y be used only with the locating of wild cat wells and for maintaining an orderly development, until a field ~ · ~as reached the point at which a special order can be ennered for that field as 'provided in your statute. We think this field, Middle 'Ground Shoals has~ long since ~passed the point at which 160 acre spacing can be used as a guide for development. In our opinion~ it should be stated the other way around.. In other wordS~ there must be a real good conservation reason before you can justify keeping the 160 acre state-wide rule, and we don't think ther~ is such a reason. As a matter of fact, in the other states it is not normal to wait until the field is defined before eztablishing a special field spacing order. In fact~ it's not normal to wait as long as we've waited in this ~articu!ar field to enter a special spacing order for the~-=ield. in many states, North Dakota is a go~d example, the matter is 'R & R DEPOSITIONS 277-4713 825 WEST Ei'GHTH AVENUE - SUITE ANC:HORAGE, ALASKA 10 11 19. 13 14 15 16 17 18 19 9.1 9.2 9.3 A Page 21. set for hearing on the question of field spacing immediately after a discovery well is drilled. Well, Mr. Giles, you outlined three ways in which you think 80 acre spacing would improve ultimate recovery over the recovery that we'd obtain from 160 acre spacing. Would you elaborate a'~little on each of these? Firsts let's start with explaining how recovery can be improved if the economic limit is lowered. The operating cost foz a Platform should remain relatively constant throughout the life of the field regardless of the number of wells drilled from that Platform. This means that the per well cost for a Platfo~n witch 20 producing Wells would be roughly 40 percent less than the per~ well cost for the same Platform with only i0 p~oducing wells.. What does this mean? The lower per well operating cost afforded by 80 acre development would make it ' economically possible to produce the wells to a lower economic limit. This will per- mit recovery of oil that cannot be recovered from a Platform with a higher per well cost. We have an Exhibit Eleven which demonstrates how significant this additional recovery can be. This Exhibit is entitled, "HOw Economic Limit-Affects Recov- ery''. On the left scale is shown 'producing rate,on a lower scale: the time. The solid red line typifies the decline of a produc,i..ng well or a ?ooI~ a~nd when the producing rate has declined to ,the .point v,~here operating' costs exceed the revenu r & R DEPOSITIONS 277-47 ~13 825 WEST EIGHTH AVENUE - SUITE ANE:HORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 A Pao-a 22 from the product, you're through producing. It's no longer profitable to produce. Now on Exhibit Eleven we have shown a time 'economic limit which would be occasioned by having a ~high operating cost. For example, on 160 acre development, and also on the slide we show a Iow economic limit which woul be the case where you had .80~acre development, more wells~ so a lower operating cost on the Platform. If you can pro- duce beyond the high economic limit to the low ecOnomic limit the red colored area is the additional oil that you could recover by being able to produce to that lower economic limit; 80 acre spacing as compa~ed to 160 acre s~pacing. Mr. Giles, have you made any calculation as to just what the magnitude of the oil we're talking about at Middle ,G~ound Shoal in this area might be? Yes, we have made a calculation~ and we find that for a Platform within this spaced area~ this could 'calculate to be on the order of one point four million barrels. Now we have two Platforms within the spaced area so the order of magni- tude of this loss would be two point eight million barrels. This is only the oil that would ~be lost by virtue of produc- ing, or having to quit at the higher economic limit? That is correct. Well what are you talking about in dollars and cents? Well, at roughly three dollars a barrel, this would be~more than eight million dollars additional revenUe that you would R & R DEPOSITIONS 277-4713 823 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 Q ?aga 23. not be able to get, if we were required to stay on 160 acre spacing. Now the State would get an eighth of this better than eight million dollars. When referring to Exhibit Eleven, Mr. Giles, this is entitled "How Economic Limit Affec.ts Recovery," was that prepared under your supervision? it was. I offer it in evidence at this time. We have copies of it here to pass out too. MR. RUDD: No objection. CHAIRMAN WILLIAMS' Hearing no objections, Exhibit Eleven is accepted into the record. A (~x[~zoit Number Eleven, on behalf of Pan American Petroleum Corporation was duly .marked and admitted into the hearing.) Mr. Giles, let's go into that second reason you gave why 80 · acre development will increase recovery from the field; that is, the possibility of a Platform failure? Gentlemen, the Platforms located within the spaced area were designed to last indefinitely. Even so~ we don't know just how long the all-weather Platforms will last. That's to say whether they'll last the 75 years or so that would be require under a 160 'aCre order~ or for that matter~ whether the Platforms will last th~ 45 or so years that's required under an 80 acre order. Should a Platform fail to last as long as it's needed, and it's not economically justifiable at that R & R DEPOSITIONS 277.4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 13 16 15 17 18 20 21 Page 24. time to repair it, or for that matter, to erect another Platform, the recoverable oil would be left in the ground forever unrecovered. Now we have an Exhibit, Number 12, whic illustrates this point. This Exhibit is entitled, "80 Acre Development Reduces Risk of Waste by Premature Abandonment~. On the left scale we have cumulative oil recovery in millions of barrels. On the bottom scale, we have years after start of production. The red solid line shows the cumulative, re- covery with time on 80 acre development reaching a point in which we expect seventy-ei_~h~o~ - point six million barrels of oil would be recovered~ in 46 years under 80 acre development. The light blue solid line shows the cumulative recovery witb~ time on 160 acre deVelopment~ reaching a point, in our opinio~ of seventy-seven point, two million barrels in 75 years, under that type of development. The first point I want to make here is to tie back into Exhibit Eleven. You'll notice the cumulative recovery from a Platform under 160's does not ouite equal the cumulative recovery ·under 80 acre development ':~e difference is one~ ooin~ four million barrels. That's ....... =t one point four million ~i~arrels figure I referred to on 2~:hibit Eleven, due to the !o~er economic limit that you coul produce under 80 acre~ development. That's the additional oil that would be recovered. If a.major disaster, such as an earthquake, violent explosion~ devestating fire should just wipe out a Platform~ let's say 40 years: after start~ of· F~ & IR DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O production, under 80 acre development, you'll be at this point (indicating), or within three million barrels of ex- pected ultimate recovery, about 76 million barrels recovery. At t.hat same 40 year disaster point under 160 acre~ developmen' you will have recovered some 66 million barrels, or ten million barrels lesa than the cumulative recovery under 80 acres development, it doesn't have to be just a major dis- aster, but it could be components associated with the Platforn being wiped out, such as, wells collapse. You might find that even under 160 acre development~ if just some of the compo- nents went out, you might have trouble justifying restoring those components in order to complete recovery from the field Q Mr. Giles, Exhibit Number Twelve, which is entitled, ~'80 Acre Development Reduces Ri.sk of Waste by Premature Abandonment,~' has that Exhibit been prepared under your superivision? A It has. Q I offer it in to evidence at this time. FRt. RUDD: No objections. CHAIR~iAN WILLIAMS: Hearing no objections, Exhibit Number Twelve is entered into the record. (Exhibit Number Twelve, on behalf of Pan American Petroleum Corporation, was du!] marked and admitted into the hearing.) Q Now~ Mr. Giles, let's elaborate on this third reason that you gave on why 80's would improve recovery, that is, the reason to do with secondary recovery operations. R & r DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 A 2age 26. The more wells we have, the better opportunity we have to force injection fluid such as gas or water or both, to contac~ more of the reservoir rock. The more reservoir rock that is cont.acted by the injection fluid, provides increased ultimate recovery. We've found a number of sands productive in Middle Ground Shoal, as well as a thick conglomerate pay. We're going to need clot of wells to effectively sweep the oil from these pay zones .within a reasonable length of time. More wells would provide the flexibility to manipulate as to what wells ought to be injectors, what wells ought to be producers to get the sweep efficiency that's desired. We may want to start out .with certain wells as injectors and following the progress 'of the~ seconaary recovery operations, see that we ought to convert those injectors to producers~ and convert producers to injectors, alternate the injection pattern, to afford a better sweep of the oil out from the reservoir rock. This is being tried in alot of places and with success. Now the more wells we have~ the better off we are. We cannot hurt ourselves with the additional wells. They'll undoubted! help to improve ultimate recovery under secondary operations. _ Now Middle GroUnd Shoal field, there are roughly 500 million barrels in place within-the spaced area. If just two percent more recovery is obtained with the added wells on 80's, as compared to 160's, the additional recovery would be ten million barrels of °il. This is a conservative estimate~ in iR & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 24 A A Page 27. my opinion. I think the additional recovery could exceed two percent through the better sweep afforded by the added wells on 80's. Now such an increase in recovery is a sound- conservation measure. Mr. Giles, will the drilling of these additional wells also provide-information which will allow you to better plan your secondary recovery operation before you even initiate it? This is' always the case. Now you've given three arguments that 80 acre development wil increase ultimate recovery. In your opinion, if the operatora are permitted to develop on 80 acre density at this time, will the ultimate recovery from field be adversely affected in· any way? No. Ult£mately we are bound to get more oil under an 80 acre development. It's just a question of how much more. Well now, in reading the record of the previous hearing, Mr. Giles, it appears that we perhaps didn't adequately explain the difference between developing a field on a checkerboard pattern, such as Rule 2061 provides, and developing it on a density basis such as our application requests. Could you review this for us, and explain first, the spacing develop- ment, such as the state-wide rule provides for. Explain not only how a development proceeds under an order like this~ but why it's necessary or desireable in some cases to develop in this manner, and tell us what type fields or operations it's R & R DEPosITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 A applicable to. Well, first, let's just demonstrate how a spacing pattern or a rule which provides for spacing, provides for development of a field. Because a draftsman can draw squares easier than I can standing next to the machine (indicating), we'll just start on Exhibit 13 with this checkerboard six square outline.I In the case of the state-wide rule up here in Alaska, these checkerboard squares would be each 160 acres, it also pro- vides that only one well will be drilled in each--of these· 160 acres tracts. It would also provide that each of these wells would be approximately the same distance from one another, in cases where there are separately owned tracts, with within one of these 160 acres squares, there's provision/in~ __ the statute for po_~oling then~ so that all the' p. ersons that own an interest in this 160 acre square (indicating) can share in the 'production from the well. A rule such as this is designed primarily to protect the correlative rights of the different property owners in the field.. These rules came ? about down in the Lower Forty-eight states ~here there were alot of separately owned tracts in an oil field. These rules were designed to see that each party who has a tract in that oil field is allowed either to drill a well on h<~ own -- of his own, or to share in a well d. riil~ and to see that the drilling is orderly. But basicaliy, this rule is intended to apply to a dry land operation~ to a situation where there are R & R DEPOSITIONS . 277.471~ 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 16 15 16 17 18 19 20 21 24 A Page 29. a number of different tracts of ovmership in a field, it doe'sn't apply. Out here in the Cook Inlet where there are · large tracts such as we have in Middle Ground Shoal field where 20 or more wells should be drilled on the same tract in order to develop it adequately, when you have a situation like that, you need a different type of. development pattern. Now one other point i'd like to mention with respec~ to this checkerboard type spacing rule' it doesn't even attempt to take into account ~e ~.~f=~=~at~_on of the reservoir below the surface, it just simply puts out a grid on~the surface and it p~ovide~ 'that development will be on a surface acreage basis. M'~. Giles, is there a diffez'ent method of developing a field which would allow you to develop it, with reference to sub- surfact features, rather than surface features? Yes, there is, and we call it density drilling, and it works this way: There's more oil in the thickest build-up of pay so we need more holes t~aversing at !east~ through this thick pay build-up area to assure recovery. This is necessary~ eve~ though the wells are 'targeted for specific bottom hole locati~ out a~ay from the platform. ~'~^~ 'm ~,~,~t I saying conforms with o~:~.~ proposed language to clarify Rule 2 of Order 26. Let's state it another way: We need the space on the basis of acre feet of pay~ or oil in. place 'that's available in an area · it doesn't make sense to space ~t~?ictly on a surface acreage r & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA ~S 11 12 18 14 15 16 17 18 2O 21 A basis, except where necessary to protect correlative rights. Hr. Giles, let's refer to the statute for the next question, and I'm ~quoting from Section 31.05.100~ sub-paragraph B, and I'm .reading the first sentence of that sub-paragraph which says, "Each well permitted to be drilled on a drilling unit shall be drilled under the rules and. regulations and. in ac- cordance with the spacing pattern as the Department prescribe~ for the pool in which the well is located'~. Now~ this sentenc~ says there will be a sF~.cing pattern, but it doesn't state with reference to what features that spacing ~pattern should be established. In your opinion, in the Middle Ground Shoal field~ if we consider the area to be developed from each Platform as a drilling unit upon which a number of wells must be drilled from essentially the same surface _ocat~on, what kind of 'pattern would be more efficient; a spacing pattern established with reference to imaginary lines drawn on a' grid on the surface of the Cook Inlet~ or a spacing pattern estab lished with reference to the producing structure? A spacing pattern with reference to the producing structure because it is the entity that contains the hydrocarbons. Re- ferring back to Exhibit Ones we have proposed a drilling unit that embraces all of the yellow colored, acreage because there common ownership within that entire yellow acreage as to working interests and royalty interests. The same is true for the gray or light tan S.A.S. acreage. They can be treate R & ~ DEPOSiTiONS 277-47 ~ 3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A A Page 31. as a separate drilling unit. Is there any reason why we can't develop these two drilling units ~ith a spacing pattern keyed to the producing structure? None· that I know of. With a plan of development shown on Exhibit Four that we furnished the Committee at the last hearing, and with the power under the' statute~ that the Com- mittee has to regulate, well by well, 'this plan of development we can't conceive why the 80 acre density program cannot be administered in an effective manner to permit orderly develop- ment, avoid clustering of wells, or any of~ the other evils which Shell seems 'to feel might occur. There are no separately owned tracts within the area which will be developed from'the Chakachatna Platfmrm B shown as a square. Every barrel of oil produced within the ye~!iow colored Chakachatna acreage has the identical common ownership attached to it as any other barrel produced anywhere else on that yellow colored acreage. The same is true for the S.A.S. Well, would you put exhibit One back on, Mr. Giles? (Witness complies with request of counsel) In your opinion, is there any need to protect correlative rights of any party within the area which is colored yellow on Exhibit One, and will be developed from the Chakachatna Platform? is there any necessity fo~ the protection of correlative right within the area colored in gray~ which will be developed fzom R & R DEPOSITIONS 277-47~:~ 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 A A A Page 32. the S.A.S. Platform? No. Well then, apparently the principal reason fOr checkerboard spacing development really doesn't exist in the Middle Ground Shoal, does it? That's exactly.the point~ except along the boundary separatin the two colored areas where there is a difference in lease hold ownerShip~ and we've already provided for that in our order -- proposed oraez (pause of one minute) i think we've probably covered this, Mr. Giles, but I'd like to sum up on this point. Between these two concepts of development, that is~ the checkerboard spacing' pattern or the ~ "~ ooenslty dril!ing~ which~ in your opinion, is best adapt.ed to the development of.the Middle Ground Shoal field~ or that part of it that will be developed from these two Platforms? Density drilling makes the very.best sense in Middle Ground Shoal field. This is an off-shore drilling operation that lends itself'particularly well to density drilling. It's the most practical way to develop the anticline from a single focal point, the permanent Platform, Let's review Exhibit Four to explain the difference in these two concepts of density and spacing. You'll notice with the overlay I~ve shown with a square the 160 acre square designated as. the northwest ·quarter of Section 31. Now within that square we R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14¸ 15 16 17 18 2O 21 A show one, two -- I can do it better up here (indicating). We show one well, two wells, three wells and small portions of two others would be drilled in that 160 acre sub-division. We Show that along the competitive boundary the 160's only contain two wells each for protection of correlative rights. Well, why do we have more wells shown in the northwest quarte~ of 317 Because it's '~on the interior of our big lease, and it provides for developing the thickest build-up of acre feet of pay, or oil in place available in the area~ which is the way the anticline ought to be developed and produced. More wells where you have the thickest build-up~ not just~two wells here, two wells here as well as out on the extreme edges of the anticline (indicating). I notice -- isn't the Platform on this particular quarter section too, Mr. Giles? It is.. I'd like to make one final comment on this, and that is to say that in~ these off-shore fields in the Cook Inlet, density drilling is a coming qhing, and our request for densi will not be the last such request the Com~ittee will receive. Exhibit Four was introduced at the previous hearing. Ail he'~ done here is pUt this quarter section on as an overlay. I don't think we need to reintroduce it, do we? CHAIRFL~N WILLIAMS° I don't believe so, Mr. Swan. Okay. Now Mr. Gi!es~ at the previous hearing there was some testimony from other pa~ties that even though there was z~. i~ & R DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 1.1 12 14 15 16 17 18 2.0 21 A Page 34. provision for protection of correlative rights along the com- petitive boundary, that allowing 80 acre density within the areas which would be developed from these two Platforms, migh~ create an adverse drainage situation between the two areas. First, in your opinion, is this possible? Second, if you it think/is possible, which group will be adversely affected, the S~.A.S, group~ or the Chakachatna group? First you asked me if there was a possibility of adverse drainage under this situation could occur? It's within the realm of possibility, particularly if one group does not avail itself of the opportunity it has to develop its properties consistent with the other group's development. Now your second question, Mr. Swan, as to whom it might favor if drainage did occur. %tVs an appropriate one. Certainly Chakachatna is not now draining the S.A.S. group, and it does not appear we ever could. The S.A.S. installed their P!atfor~ ahead of ours. Because of this. they are about three wells ahead of us on completions. Now only one well at a time can be drilled from each group Vs Platform, even though we have a second smaller rig available on our Platform to assist in setting sUrface pipe and in completion work, while the big ~Is is busy drilling; therefore it would appear that the Chakachatna group will not catch up or pass the S.A.S. group on number of wells drilled and completed, from our respective Piatforms/~under either 160 or 80 acre development. If anyone R & R DEPOSITIONS 277o4713 825 WEST EIGHTH AVENUE - SUITE ANC;HORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 A A Pa~e 35 is getting drained, it's the Chakachatna group, but we're not concerned because it's up to us to protect ourselves. Do you have some production figures which would show what percent of the field cumulative oil production has been pro- duced by the S.A.S. group and by the Chakachatna group? Yes sir~ i do~ based on pipeline runs metered at the on-shore facilities. Shell~ as of September i~ 1966, has produced about 91 percent of the -- ~ounded off to the nearest thousand~ 1,183~000 of runs -? .... . _~o~ l~!idd!e Ground Shoal field l~ow another objection that was made at the previous hearing ~as that this density drilling that was proposed in Pan Danerican's application~ would create problems for the Com- mittee in administering the Act. Do you agree with this? Well, if by creating a. dministrative problems they mean that the Committee or its staff is going to have to exercise c!ose~ supervision over this operation and exercise discretion, and use judgment on matters that are presented to it from time to time, yes~ there will be an administrative problem' But we think that's What the Committee and its staff have been set up by the Legislature 'to do~ We~ll admit~ there's a beautifu simplicity to the development under a checkerboard .spacing pattern such as your state-wide spacing rule provides° The only trOUble with this beautiful simplicity is, it won't get the oil out of the groun~ the way we think the oil ought to be taken from this field~ if we're allowed to develop on a I~ & r DEPOSITIONS 277-&7~3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 Page 36. A A drilling density/of 80 acres. Now if it takes just a little extra work on the part of Pan Am and the part of the agency to get this extra oil out of the ground, we think it's going ~' to be well worth it. if the Legislature had intended for all development to take place on the checkerboard pattern, they simply could have adopted it in the statutes and let it go at that. You wouldn't need an agency to exercise discretion. Ail you would need is a policeman to see that the law was complied with. Mr. Giles~ in our application for a rehearing in this case, we asked first that the Conm~iasion reconsider this matter and grant an order for 80 acre density development, but then, in concluSion, we asked that if the Con~nission felt that if.~some other order ~ere bette.r suited~ they enter whatever order they thought was practical, is there some middle ground between this 80 acre density concept which we have asked for in our original application and. again at this rehearing~ and the 160 acre checkerboard spacing which the State Rule 2061 provides and which Conservation Order Number 26 follows? Yes, there is. The next best thing to 80 acre density deve- lopment would be 80 acre spacing. How would you suggest that the Committee enter an order vThich ~,~ou!d permit the 80 acute spacing, if they feel this is the proper way to go? Well, ~.~e would propose-that in any governmental quarter secti~ R & R DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE -- SUITE ANGHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 ~_~ge 37 again, shown on Exhibit 13 as a square, the 'operator be given the prerogative to lay down, in this fashion (indicating), lay down an 80, or stand up an 80, as the physical drilling of the holes dictate. Now i might state it another way: MR. RUDD: Fir. Chairman, ' if '_I'" may interrupt here, i~d like to register an objection to this line of testimony coming in. This appears to be a whole new concept which was not raised in the pre- vious, original application and it's not raised in any of the . material submitted with the petition. 'for rehearing. MR SWAN: Well, I think our original application and certain!} the petition for rehearing opens the thing wide open and says that we asked the Committee to hear 'this thing, and enter whatever is proper. And again, I'm trying to show a compromise -- or a possib compromise as a middle ground bet.~,~een what we asked .for and what the Committee has given us at the previous case. i think anything between those two extremes is admissable in this Case. CP~IRi~J~ WILLIA~S' (One minute 'pause) The objection is overruled. A Let me go on to say that, put anoChe_ way, ~.ve would oropose that in any governmental quarter section only two wells can be completed in any governmental quarter section, and they cannot both be comoleted on the same 40 acre sub-division. Now 80 acre spacing will ad. ve~-sely affect us by zequiring some changes in our development plans on the interio: government=~ quarter section, but ~...~a a~e saying that 80 acre spacing is R & R DEPOSITIONS 277-47~3 WeST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 A A A much~much better than 160 acre spacing for this field. We continue to advocate, however, that Rule 2 ought to be clari- fied in the manner and by the language which we have already covered· · In 6ther words, if the Committee adopts this suggested alter- native, RUle 2 should be changed to fit 80 acre spacing in- stead'of 160 acre spacing? That's correct. W~I.I, the principal a~gument which was used against 80 acre spacing at the Previous hea~_~ings seems to have been that~ ~-~ - ' ' ,~ have to do it now; that even ~.~ough it s adviseabie~ we don~ you ~'o postpone =~:~e decisi~'~, w~t~.ou'a serious affect Do you agzee with this argument? No~ ! certainly do not.. Would you explain ~.~hy you think it's ire'pot ..... ~- ~.n= that 80 acre spacing or 80 acre density dril!ing~ one of 'the two~ be per- mitted? Yes sir, I'll answer by saying~ why avoid the inevitable when the decision can logically be made right now. Shell says 'it's premature to go to 80's at this time. The container needs to be defined first. We say, not Soo .Enough is known about the size of the container right now. There's enough oll per acre to justify 80 acre development ~_~ight now~ no matter what s~.zs the productive area turns out to be. Additional wells refine the data to some extent~ but these additional wells that are iR & R DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 19. 13 15 16 17 18 19 20 9.1 9.2 9.3 9.4 continually being completed, do not change the overall outlooi for 80 acre development one bit. 80's make the most e~onomic sense, and we're going to cover that some more in a minute. Even Shell doesn't refute the fact that 80's make the most economic sense. It's just a matter of timing. So i say, do it now for two reasons. Firsts if an operator has to step out on 160 acre spacing, and he gets a dry hole on that tract then that operator doesn't know what the intervening 80 holds in store for him. He might drill a second dry hole at the cost of a million dollars. Now on the other hand~ if an 80 acre Order were in effect, and an operator could, cautiously step out on 80's to define the container, he'd be conserving money by avoiding the needz_os drilling of dry holes -- extra dry holes. Now ! say ~xtra dry holes because we know full well that even under 80 acre development~ we're bound, to dril: some dry holes. There's another as~pect to t.~.zs. We save valuable time in our development 'program if we can avoid the unnecessary drilling of dry holes by drilling producing wells instead. Let me demonstrate this on Exhibit Four. If we drill this hOle first {indicating)~ we don't know what the intervening 80 holds in store for us. It's conceiveable that L~s could be a dry.. hole too. That'd be two dry holes o~,oing out first on one 80 -- going 160's, and then back in on the 80's. Now on the other hand, if we could have drilled from the Platform at this location first (indicating)~ then it R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17. 18 19 20 21 22 23 24 25 A A Page 40. could tell us a lot as to how we ought to program this parti- cular well, and we could save the drilling of perhaps two dry holes And we think that, on our .a~re~oe at least, that we can avoid the drilling of several unnecessary dry holes. Mr. Giles, as a part of this argument that 80 can and should be deferred until the field has been defined, there seems to be an. implication that perhaps the field won't be defined if you drill on 80 acre density, or 80 acre spacing. In your opinion,, is this correct~ o~' isn't it? This is not correct. We will define the limits of the produ- ctive just as readily on 80 acre spacing as we would if the order were to require 160 spacing. There's another aspect of this. We've got to define the limits of the pool before we can undertake properly, a sound secondary recovery program, an~ this we intend to do. Now you've covered pretty well the reasons why 80 acre spacin~ should be permitted. Are there.other reasons~ or is the~e another reason? Yes, there is. The best productive capacity exists where the acre foot content of reservoir~is highest, and cautiously proceeding outward on 80's f~om the Platform~ roughly half of our total wells will be the best producez~:o ~ow these hi~.~h ~roducers being the first ones dril!ed~ will cause the p~oducing rate to go up faster. The return on our heavy in- vestment on the Platform and in thee wells will, therefo~e~ % ~ ~ ~ ~O$~T~O~ 277-zl. 713 825 ~¥EST EIGHTH AVENUE -- SUITE ~ ANC:HORAGE, ALASKA L 10 11 12 16 15 16 17 18 19 20 21 A A Pao-e 41 come back to us quicker. The returned money can be reused soon to install secondary recovery facilities in this field, in other fields in Alaska, or for that matter, for wild cats, in Alaska. It's purelY a matter of good business economics to get your return investment coming back to you as quickly as possible. Mr. Giles, is there any reason: from a conservation stand point, why it would be undesiL~able to get the producing rate in this field as hi-~ g~ as possible, as fast as possible? No, there is no conservation reasons for it to be undesir/abl~ Do you know of any reason why 80 acre spacing might not be advis~able at this time? / I know of none. In fact~ gentlemen~ ~ m at a loss to under- stand why we're having such a difficult time convincing anyon~ other than ourselves on the merits of going to 80 acres spacing now. i think we're all looking at the same evidence. Maybe there'll be some evidence, introduced today that i~m not aware of that will let me know why '80's aren't pr6per at this time. I've explained good conservation reasons for 80's I've pointed, out the business logic for 80's. Everyone can make more money on 80's~ including the State. 80'S can't do anything but help in many ways, and i 'just can't visualize any plausible argument as to how 80's 'can hurt anyone. Mr. Giles, let'§ go back to the statute for a few questions here. I'm reading Section 3!.05.i00~ sub-paragraph~A, i've R & R DEPOSITIONS 277.4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, AL~kSKA 10 11 12 13 14 15 16 17 18 21 A read it twice now. "For the prevention of waste and to pro- tect and enforce the correlative rights of lessees in a pool, and to avoid the augmenting' and accumulation of risks arising from the drilling of an excessive number of wells, or the reduced recovery which might result from too small a number o'. wells. The Department shall_ , after a hearing~ establish a drilling unit or units for each pool," and the last sentence says, "The establiShment of a unit for gas shall be limited to the production of gas.~' ~ don't nnznk that s material to this case. Let's take it up clause by clause. First, Mr. Giles~ the primary purpose of any order which the Committee enters pursuant to this~ ~'~n~~_~.__ o would seem to be the preven- tion of waste. Which spacing, in your opinion, will be more than likely to prevent, waste; 80 acre spacing or 160 acre spacing? Eighty acre spacing. Which type of spacing pattern will, in your opinion~ better prevent waste; a spacing pattern based upon the producing structure, or a spacing pattern with six -- ~ztn reference to a surface checkerboard? A spacing pattern related to the producing structure. Now the next purpose o-f an order such as we're asking for is to protect and enforce 'the correlative rights of lessees in a pool. Which, in your opinion, is better calculated to protect and enforce, the correiati~e rights of lessees in a ~l & ~ DEPOSITIONS 277-47~3 825 WEST EIGHTH AVENUE -- SUITE 5 ANCHORAGE, ALASKA C 1 5 6 7 8 A 9 ~o q 11 12 13 14 15 16 17 A 18 19 20 q 21 22 A 23 Q 24 25 pool; 80 acre spacing or 160 acre spacing? It really doesn't make any difference as long as you protect both groups in the same manner. And ~how about the spacing pattern? Which is most likely to and enforce ~protect/correlative rights adequately; one fixed with refer- ence to the producing structure, or one fixed with reference to a surface checkerboard?' Again, it really makes no difference as long as the Committee fixes the order to apply t0~ both groups. The third purpose of an order is to avoid the augmenting and accumulation of risks arising from the drilling of an exces- sive number of wells. 'Which spacing, in your opinion, is most likely to avoid this augmenting and accumulation'of risks arising from the. drilling of an excessive number of wells in the area with which we're concerned here; 80 acre spacing or 160 acre spacing? Eighty acre spacing very definitely because it will avoid the need to drill unnecessary wells, which includes unnecessary dry holes. And a dry h°le~is about as unnecessary a kind of well that you could get', isn't it? It is. Welt~ now which type of pattern, or spacing pattern, in your opinion, is most likely to-avoid this augmenting and accumula tion of risks arising from the drilling of an excessive R & R DEPOS~TIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 't 13 14 15 16 17 18 19 20 21 22 23 24 25 A A A Page 4L:.. number of wells; a pattern fixed with reference to the pro-' ducing structure, or a surface checkerboard? A spacing pattern related to the producing structure beca~ e under this type of development program, you can feel your way in a more prudent manner out to the limits of the pool. The final purpose stated in this statute is to avoid the reduced recovery which might result from too small a number of wells..'Which spacing, in your opinion, is most likely to avoid the reduced recovery which might result from too small a number of wells; 80 acre spacing or 160 acre spacing? Well, that question almost answers itself, ~ounsellor~ the answer being 80 acre spacing principally because of the three reasons we gave .ko_ improving recovery under the more dense spacing. Which type of spacing pattern~ in your opinion, is most !ikel to avoid the reduced recovery which might result from too small a number of wells; a spacing 'pattern fixed with refer- ence to the producing structure, or one fixed with reference to a surface checkerboard? A spacing patte~rn related~ once again~ to the producing structure~ rather than on a checkerboard pattern. ~zr teen in Mr. Giles~ i don't believe we offered Exhibit ~ ' evlflence. That' was your checkerboard that you did,.some _ _ ' exnzoz~ during dra~,~?ing on. You've actualiy_:~onstructed thzs '~ '~ '~- your testimony~ haven't you? R & R DEPOSITIONS 277-47 ' 3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 lg 20 21 23 A Except for the basic squares~ yes. For what it's worth~ i o~zer Exhibit Thirteen. · . · ~.~.1 ..L. ~ '~'~'~ (Lauo~er) We have no ob ~ RUDD For what it's wor~:L. j ection except we renew our objection on the 80 acre spacing pat- tern. CHAIRlZ~N WiLLIAiv~S· ~×~zoit Number Thirteen is accepted into- the evidence. (E~,~hibit lqumber Thirteen on behalf of Pan :~;~e~ican Petz'oteum Corporation ~as duly mazxec~ ant. ac. mztted in the hearing.) Q Mr. Giles~ have we ~o~~e~ anythzng? A ~o~ we haven't. Q This concludes our case. Fil, C~WS: Mr. Swan~ would you like to reoffer all of your exhibits again~ just in the event that you may have missed, one like we had last time? MR. SWAN: Yes si~. What did we start with~ Bart? At this ~ ~ ' Nine Ten Eleven time I ~ould offer Pan ~nerican's ~xh~ts~ Twelve an~. Thirteen. Do you ~vant me to describe them more zu~ly ol!=~I~2%&N WILL%;~S. I believe that's not necessary. ! ~i!! ~= ~leven and ~Welve and Thirteen are repeat that Exhibits Nine~ z~n~ ~ - all received in evidence~ into the record of this hearing. MR. R~D: Mr. Chairman~ do I understand that the overlay will remain on Exh~bit Four= and become a part of the exhibit? CH~&iP~!N WiLL!;2~S' ! t~ ~ ~ - ' _~znm not. As 7 understand zt, that overlay does not become a pa~t o~ the ~,hibin Four. P~ & R DEPOSITIONS 277o47~3 WEST EIGHTH AVENUE -- SUITE AN(~HORAGE, ALASKA 10 11 12 13 14 15 16 17 18 10 2O 21 ~LR. SWAN' We're perfectly willing to put it in. MR. RUDD: We would be perfectly happy to have it there. ~.~. SWAiq: It's simply ~ ' ~ _ orawzno the outlines of the northwest quarter of ' what was the section? P5t. GILES: Thirty-one. simply MR. SWAN: I think the same thing could be accomplished/by drawing it on, if you want it on there:, but i think his testimony shows what the overlay has accomplished. CHAIRi~N WILLIAMS: Did you wish the --- MK. RUDD: We would, have no objection to letting it -- the exhibit with the overlay as zt is zzg~ now to save any more oro- blem. MR. SWAN' Well, why don't we just put -- o¥=_zer it in with the overlay on it. We'll r. eoffer that. I think ' ~ ~ n~a~ may be proper. That's Exhibit Four, was it not? MR. GILES: Yes. MR. SWAN' From the previous hearing with the overlay on it. CF~IRlf~N WILLI~[S: Exhibit· Number Four then~ from the previo hearing~ with the overlay is accepted into the record. (Exhibit Number Four and the overlay on behalf of Pan AmeriCan Petroleum Corp. was duly marked and admitted in hearing ~..~e~ WiLLi~2ES: You '!~ave cross examination~ Mr. Rudd~ MR. RUDD: Yes, I wonder if we would like to take a break here before we .ibegin cross examination? R & R DEPOSITIONS 277.47~3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA iS i0 11 12 13 14 15 16 17 18 19 20 21 CHAI~N WILLIAMS: Yes, we' I! take a recess. ¥~R. SWAN: I think we~d all appreciate that. (Whereupon at 10:50 a.m. the Chairman adjourned the hearing for ~a recess. At 11:01 a.m. the Chairman called for the hearing to resume~ after ~hich the following proceedings were had :) CHAIRMAN WILLIA~S: Off the Record On the Record CHAIRMAN WILLIAMS: hearing will reconvene. i don~t see Mr. Rudd, (Pause) have everybody we need now? The Ro B. GiI~£ Previously sworn testified as follows on:~ CROS S EY~iNAT ION ._ BY MJb. I<~JDD: Ail right~ Mr. Gi!es~ with ~eze_ence to your Exhibit Number Nine, this was the cross section or comparison between . Middle Ground Shoal ~ 4 and ~) 7. This was used in the dis- cussion of the proposed change in the top of the B Zone· The proposal is based~ as I understand it, primarily on the ~area indicated in red and indicated with a red arrow .~zndicating). Is that cor~rect? You have information from that area which indicates there should be a change in the top of the B, in your opinion? 277-g71g 825 WEST EIGHTH AVEI~IUE -- SUITE ~ ANC:HORAGE, ALASKA 10 11 12 13 14 ¸15 16 17 18 19 21 A A Page 48. Y~s o What is the information that you get from that area? Two things' One is that comparing the induction electric log .features on both wells 4 and 7, we feel that"this cor- relation~ is realistic and that the character and lithology of the log demonstrates to us that the red arrowed zone in Well 7 rightfully belongs with these sand members rather than . that type of sand lithologica! character indicated up in the ~< A. Now more impo~t~anti7 is the fact that the test that I mentioned that Stra~led ~ ~ ai~_ these notched intervals, which incidently, I want to correct one thing while we're on the subject. These ~ere jet perforated and not abrasijet notched but be ·that as it may~ this test indicated a GOR substantiall different than the GOil in the -- what the Committee called the ·A' Zone in Well 4, up above the arrowed zone in Well 7. Ail right, and I gather then your conclusion is that if that zone 'produces anything~ it produces oi!~ a similar gas-oil ratio to that in lower B~ C and D pools? That is correct. Do you know whether or not that zone produces anything.at all We have every reason to believe that it is contributing to thc overall p~oduction We have no~hing to -- we see nothing to indicate that the reverse is the case. You say you have reason to believe it. What is the reason to believe that it is producing? R & R DEPOSITIONS 277-47~3 WEST Eighth AVENUE - SUITE ANC:HORAGE, ALASKA 10 11 12 13 14 15 16 17 18 ¸19 2O 21 A Q A A Q A Pae'e 49 it was jet perforated in much'-- in the same manner aa .~..!i thc other zones and, therefore~ we would expect that it will be contributing, just as the other notched zones are contribu- ting to the aggregate production shown to the right side of Exhibit Nine. Well, are you saying that,wherever you perforate your pipe',. in those three holes, you're going to get some production? We would certainly expect to receive some production. We do not have, and we admit this~ a selective test on this red arrow zone, But you say that you would ~xpect production ~.~,from ~ any zone within the three pools~ B, C and D pools~ wherever you might perforate? Wherever we perforated.~ yes. Ail rights could you explain briefly what it is about the electric log curves that lead you to believe that the area between the existing top and the proposed top is more akin to the sands below? i see it -- that these zones uP in the A pool of Well 4 are I' more massive, they're thicker than the strat~graphic equival- ent in We_ll 7 that we. have perforated. May I follow that out? Are you suggesting that the zones in the existing pool B are thinner than those in the existing~ Zone A~ in general? Somewhat thinner. ~ & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 19. 13 14 15 16 17 18 21 9.9. 9.3 9.4 A A Q. A You consider that there is a subs~=n~al ~i-~ference in the thickness of these zones? It's not substantial. Thank you. The principal reason that we are advocating this change is the GOR Comparison. Ail righ't,' I think that's -- if you would like to take that off the machine (indicating). Ail right, sir: now turning to your Exhibit Eleven. Now this exhibit was used in.~connection with. your testimony as to why it would appear advantageous to drill 80 acre wells immediate!y~ is that correct? That is not correct. I believe you --- No, I believe this. was one of our exhibits to illustrate three reasons how we could improve ultimate recovery with 80~s as compared to 160's. We did not tie this particular exhibit to why do it now? All right the red line curve depicts what?~. ~yo~cal decline of a well or a pool Is it in any way tied to the decline in a well or a pool in Middle Grgund Shoal? No~ there's no scale on either the left or the bOttom. Ail right, so this is purely' a hypothetical situation? ~..-~ is correct~ to illustrate a ~oint. Ail right, thank you. (Pause) ' l~0w going to Exhibit Twe!ve~ R & R DEPOSITIONS 277-47~3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 A another diagram of that. You show the blue curve and ~-~= red curve each beginning at the zero point; no recovery~ zero time, and they in~nediately begin to separate. Now isn't it true that if you were drilling one well at a time, as you state, that the two curves will be simultaneous until you have drilled as many wells on either 80 or 160 acre spacing as you could drill in the area on 160 acre spacing? Not precisely. Under 80 acre spacing you would be developing more wells with a higher producing capacity because they are closer to the Platform that's 16cated over the thickest build-up of pay. As you get further away from that Platform~ you would expect the productive capacity of individual wells to not be' quite as high. Do you--- The very first few wells d~il!ed from the Platform under eith~ spacings will be substantially the same~ but as you get furth~ out, they will not. Can you testify with certainty at the present time on what the degree of spread will be during this early development of the ~ieId? This is an engineering calculation to develop these curves. They are engineering estimates of how to project for the future. They are similar to engineering estimates as to how can you justify putting in a Platform. You base it on future predi6tions from the day you have it. R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 21 9,4 A A A A A A ~- are 59 Do you have production experience from wells close to the Platform and wells far away from the Platfmrm which would justify the curves that you have shown here? Yes,. i think we have. Perhaps you could, by going back to the prior exhibit Four~ indicate which wells have given you that production experienc Well 7 is located 2,500 feet away from the Platform. This is 160 acre step-out ('~ . z.~cicating) And what well do you use for comparison which is close to the Platform? Well 6. And can you tell me roughly what the length of time is that those ·wells have been producing? It's relatively short;, month~ or several months. Well --- ! might' add also that we have taken into consideration the step-outs on 160 acres that the. S.A.S. has drilled and the production performance reported to the ~State f'~_~om those wells to give us an idea of how ~,~e might project for the future. Ail right, and from these -- well, let me -- you say a month to perhaps several months on your t~,~o wel!s~ the 6 and 7? That is correct. ,And is it approximately the same time on the Shell we!Is~ the same time limitations? The Shell Welis~ approximately the same. R & R DEPOSITIONS 277-47~3 825 WEST EIGHTH AVENUE -- SUITE ANC:HO~RAGE, ALASKA 10 11 12 13 14 15 16 18 ¸9.O 9,1 29. 9.4 A A Page 5 3. Ail right. There are a few Shell wells that have produced much l~We~ tha~ that. Ail .right, and from these you are able to get an approximatic from which you can derive the projected curves is that correc'i~? That's what I~m saying. Ail right, thank you. Now did I understand you to say~ in response to one of Mr. Swan~s questions~ that you could defin~ the field as quickly on an gO acre pattern as you could on 160 acre pattern? I said we can define it just as readily. Would there be a time differential involved, here? Yes, there would. Could You estimate wha.t that '~ ~ o ~_m_ difference would be? I would v. enture to say that the -- on 160 acre development~ 'perhaps you could be a couple of months ahead on defining the limits of the field~ compared to 80~ but ! want to mention one point; that it's essential that we have rather complete development before we undertake secondary recovery, whether Jointly_ or COoperatively. Ail right, I'd like to take up secondary recovery here. I~,~el'i, i'd like to finish, sir~ if !mzg~n' ' ~ and I want to point out that you can get out faster on 160 acre stap-outs to t!y to d. exzne the limits of the poot~ ts~:n you can on ou s · but when you get out there' on .!60~s~ my op_:._~on~ -~ '~ is~ before yo~, R & R DEPOSITIONS 277-4713 ~25 WEST EIG{-~TH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 12 14 15 16 17 18 19 20 21 q A A A can adequately/undertake a secondary program~ you're .going to have to drill additional wells as pick-up producing wells to recover the oil~ and. so we're going to meet tke same time element in the end run before wa~re ready for secondary. ~hether we do it on ~0~s pro~ress~veiy or s~p-Out an. in-fill back. ~d~ it's your opinion~ at the present time then~ based on what's been drilled an~ what you know of the structure~ you will have to drill ~0's before you can embark on a secondary recovery Program? We'll have to be well ~ ~ ~ ~ unmerway on 80 s. Ail ~'~- now you gawa a 'F~gu~e o'S approximately 500 mil!io~ barreis est' "=~ · zm~t~a reserves in this structure~ Oil in place, sir. Oil in place~ all right Now i gathered that -- ! ~._d not follow your mathematics exact!y~ but you then came up with a .figure for the two percent increase which mzohn be obtained !s that based on the 500 thousand -- million -- 500 million figure you began with? Yes siA~ it was. D° you have any indication at this time of the recovery efficiency of the field,? l~Te have engineering estimates as to how much the recovery ezzzciency is expec~aed to be~ yes. And are these estzmates zn a ~~ o~ say -- just a -- r & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 6 10 11 12 13 15 16 17 18 19 21 A A A A have to give a for e~.~a~ple~ 30 to 40 percent, or i5 to 20 percent~ or some~hzng like t~nau sir? There is a range of 30 to 35 percents for primary and seconder' recovery. Ail right, Now si~A, going back to the or~ina!~o hearing in this matte~ thez~e ~as testimony on your pa~t and on Shell~s part concerning the perimeter stand back for the area in question here~ and at ~=~ time i think it was agreed by the ·parties that there ought to be a 500 foot gand back where there was a lease o~ne?ship change~ am I correct in that? That is correct. Now it was notmen~zo~e~~ ~ ~ today~but I believe ~as oreviously~~ that there ought to be a similar stand back where there is a royalty change. W~s. that your position in the earlier That is correct. And is that still your' 'position? That is still our position. Thank you, (Pause) Mr. Giles~ i wonder if you could, put Exhibit Four on the projector, with the overlay -- ~ ~ ff? ~ ~lcen O No~ no leaVe it on, it shows a 160 acre square surrounding the Chakachatna P!atform~ is that correct? Yes sir. And you test~_ed that there ~era th-~ee productive interVals ~ & R DEPOS~'iONS 277-/~7~3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 14 15 16 17 18 lg 20 21 A A A A from shown on your plat =- the -- ag:d this is productive the middle Kenai, which lie only within that square, and two additional ones which -:~.:_~ par~aziy"-' ~ wzun~n'~' ' the square~ is that correct? That is correct. So that if we credit each of the partial ones with being half of the productive zone and~ therefore~ call them one~ you would have fou~ pr ~ .... _ oc.u~tive zones four - ~ ' pz oauctzve, in- tervazs in four -- in =<.0 acre square? a~a~ as'sumption~ yes~ , '~" of &O acres within that square~ And you would have a densz~y , is that correct? On that assumption~ that's correct. Ail right~ would there, be a similar reduction in increase in density on the lower horizon~ on the Hemlock horizon? Yes. Let's look at Well i think your answer is quite sufficient as it is, I want to be sure of my answer~ sir, Well~ i would suggest then that perhaps Mr, Swan could ask you z~ he thinks it important, i have no fu=tl~ questions 1~. SW~: Are you--- MR. RUDD: Yes~ i have no further questions P? 1~I H-r. Giles~ would lyOU put that log exhibit back on.~ (Witness R & r DEPOSITIONS 277-4713 S25 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA I0 11 12 13 14 15 16 17 18 19 2O 21 A Q A A A complies with request of counsel) ~r. Rudd asked you a question, and if ! understood your answer the ~ay i heard it, you said anywhere you might put perforations in Well in these B, C and D zones, you would expect to get ~oil. Is that true ? No, I say where we perforated~ actually perforated i would expect production. But in places where that is not now perforated, I would assum~ you wouldn't anticipate any production if you put any more perforations in, is that right? That's correct. OkaY,now.let's put that ~×h~_m_.t FOur back on. The point was made there that, in effect, making some assumptions~ you've got four wells on 160 acres there in the center of the field around the Platform. is the drainage area of those wells of~ 160 acres? (Pause~ in othe~ word. s~ does that quarter sectio~ represent the drainage area of the fou~ v:~el!s? No. What would the dzainage area be? It would be somewhat larger wsuldn't it? Yes~ it would~ i have no furthe~ questions. CP~_~_!~4~.N WiLLI~'-'~S: Do you have any recross examination? M2~. P~UDD: No, no recross. CP~:iP~LMN WILLI~X{g: Do you have -- let's see, I guess we must 1~ & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE -- SUITE ANGHORAGE, ALASKA 10 11 12 13 14 15 16 17 19 2O 21 ?~ge 5 go be through with you then, Mr. Giles. F~t GILES' Unless you ~entlemen have any questions CHAIRMAN WiLLIAI~S: Do we have any questions at this time? ~. KUGLER' i would like to ask a question on your Exhibit Nine. Why don't you put that on, Mr. Giles? (Witness complies with request. In your previous testimony at the July !2th hearing I believe you Stated that you would not open pool -- what we have defined as Pool AD in any of your wells you did not put -- plan to produce this pool, is that correct? · MR. GILES" At that time, we had the perforations in Well 4~ but we had no idea that you -- that the Committee would include what we perforated in numbe~' 7 as part of the classified A Zone pool. We didn't know we v,;'era doing something that would not be approved. In fact, it's my. understanding that the Division of Mines gave its a'pproval to 'perforate the.~:e in Well 7 before the order was actually issUed~ Conservation O~'~e_ 26. MR. KUGLER: How did you interpret the electric log at the point where you had the two sets of perforations in your number 7 Well? .. M~. GILES: I don't z~eai!y understand the question. MR. IiUGLER' Well you do -- how -- what do you interpret the ,!ithology to be there? FiP,. GILES: That there's some build-up of pay. mz~. KUGLER: Some sand? ~,v' GILES' Some sand F~ & ~ DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 9.1 29. ~, ~Se 59. ~.. KUGLER: Did you have a iithologic log? MR. GI~S' What do you mean by lithologic log? MR. KUGLER' Showing the iitho!ogy of that portion of the MR. GILES: Ail we had was the induction electrical log. MR. KUGLER: Just the log? MR. GILES: Just the log, yes. MR. KUGLER: I see. You felt this zone meritted two sets of notches? MR. GILES' Apparently so. MR. KUGLER: If Pool E were raised there, you would still not plan to produce Pool A in any o'? your wells, is this correct? MR. GILES- That is correct~ until we had it compressed to where we could conserve thel gas: this is right. HR. iiUGLER: In your treatment of those notches where --- MR. GILES' Sir, I ought to expand that answer by saying .that we may~ as I've testified, '~-~_na that. at lower elevations on the structure, a test of the equivalent -- stratographic equivalent to this zone in Well 4, may turn up oil with a G©R that's consis- trent with what we see in what we calls from the B Zone down. HR. ~~'~o~ Yes~ i understand that. i hope to have some mor tests back. Do you believe in the treatment of those notches wher~ we have the red arrow that vertical fracturing could have taken place? MR. GILES' I would not expect it to. R & ~ DEPOSITIONS 277-47~[3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 14 15 16 17 18 19 2O 21 22 23 24 25 MR. M~kRSHALL: Mr. Giles~ i have a question in reference to Rule I as it appeared in our Conservation Order Num~ber 26. Would ~00~ you please explain the alterna'~ive suggestion on the 500 = + stand off~ that we incorporated, i believe~ it's my impression that you said that if we eliminate the 500 foot stand offs there was an alternative method used in other states to protect the border line. I would like to ask you to repeat tha~. I have a question in my' mind. MR. GILES: i'd. be happy too The west boundary of the yellow colored'~acreage as it cou~ses di~ectly throUgh the central pa~t~~- of Sections 25 and 36, both halves of Section 25, both halves of 36 are common ownership as to working and royalty interests~ and we say we don't see the need to have the 500 foot stand back~ ~nd that as an alternative suggestion that if a well is dril%ed within the yellowed colored area~ then any drilling unit outside the yeliow colored area that is located within 500 feet of where that well is bottomed, would automatica!!¥~ under provisions of the Order~ come in to the spaced area. You'd move this red line out to include it. For example, if the well were drilled %n this corner (indicating) of a -- the southeast quar~r of Section 25~ it was drilled in the southwest corner~ then both drilling units would co~ in automatically because both of them would be within 500 feet of the well that's drilled inside the yellow a~eao F~. !¥~RSKALL: This~ i~ effect~ then is a half a miles ~p~- tension~ or it 'could be if~ !etas say~ we were on 160 ac~es~ it ]~ & R DEPOSITIONS 277-4713 WEST Eighth AVENUE - SUITE ANCHORAGE. ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 25 Page 61. would amount to a possibie mile of no man's land.~ beyond the area subject to an order. This could be a possibi!ity~ is this --- P~..GILES' That's correct. Half a mile buffer. FL~. MPfRSHALL: I see. ~. VON DE~,~- Yes~ i had a question~ Mr. Gi!es~ on Exhibit Nine. That -- where the red arrow is~ that two sections, or that two places perforated above the top of Pool B~ as long as that was not tested separately and was tested as a totality, the whole per- forated interval~ approximately that was about one-sixth of the -- -- ' tl~ness is~ discounting the spaces ! don'n what the actual --~-~ ~ why would you. think that~ i'? that ~=~= _ ,,¥~_= a high gas-oil ratio zone above there that, with that being only one-sixth of the total in- terval open~ and the lower zones being higher pressured, why shoul~ ' ~ if that raise the gas -oil ratio appreciably, it were in a high gas2oii -~ ~ioi~ zo~e~ I --- ~. G!~S: You're asking me if. this were~ by chan~e~ a high GOi% zone~ would we sea it in the aggregate GO~ figure? MR. V Oiq~DE ~P~· Yes ~.znm we wou!ct. l~i. GIGS: i think we wou!d~ i '-~ ' ~ ~ ' ' ' '~' '~P' cnez e s so much of the other open and MR. VO~Lm~Hm Where "-~ ~ ' actually the pressure's be~'_ns~'/~s~.~zm~,,m= ~ below. ~'~mow Y_ don't know whe'~_~ your 'cuDS' ~_ng is~ how_ zar -= aown' that was tubed ogf-~~_ but it seems to me like it wouldn't afzect it too much. , ~=.~,..~ zt to s~'~ow up in the F~ & R DEPOSITIONS 277-4713 825 WEST EiGhTH AVENUE -- SUITE ANCHORAGE, ALASKA C 10 11 19. 13 14 15 16 17 18 19 9.0 21 9.3 24. GOR, and I'm saying_ that we didn't see it show up in the -o~-~"=-g~'"te and this a~ras~te G0R is comparable to similar oe~z~ated sand intervals in other wells. MR, 'VOh~E~' Well, I was just wondering if it could be considered as an adequate test of the ratio with the whole zone open There's something 1~'= . ' ~,.~, twelve intervals against -- a~togeth~ of which this is only the top two. MR GI~S' ~ would lika to . _ ~=t it is an adequate test~ Mr. VonderAha. ~- -- z~ seems me&~ingzui to us that the GOR 490 is re- ~o. does comp~_~ presentative -~ ....... zavo=goly with the other wells in '~ ~ l~<~e at~ fied with wit~-~ this similar per.or=ted sand me~?~er~ _ . zur~he% c~uestio~s ~ ,~ ~'~WA~ WzLLiz~io t any ~ _z~,.~ to asM a question. n.~-~.. GILBP~TH' i' d ~ '~ HR. uILB~IH' Mr Gzles~ referr . z~g back to your earlzer testimony and with regards to the 'pool detineation~ you stated the ~ ' Mzddle it was your feeling that probably the '= Kenai sands were one co--on source of supply. ~,,;'ouid you please tell the Oommittee~ wha in your opinion~ constitutes a common source of supply? MR. Gi~S' That's a very good question. A common source, of supply' indicates to me that there is adequate communicatio~i betwee[ all members that would be produced from in that pool a common source of supply. HX. GiLBi~TH: In other words~ are you referring to it as a ~-:-~=~ than a common oil sourceS common energy soUrce~ _~= . P. & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 MR GILES I would ~ez~r to it as oo~.~_. Now T did say at the earlier hearing that we were not sure for the Middle Kenai Oil ZoneD uhat it was one common source of supply~ but we proposed that it be designated as suc~ until we could prove differently. Keep us innocent until we're proved gui!ty, rather than reverse it MR. GiLB~TH: Yes sir. Do you have any information on the vertical communication~ either through core data or any other tes'ts~ that show that there is any communication between any of the sand. stringers in the ~idd!e Kenai Zone? Do you have any in- formation that shows comm:~unication? MR. G.z~,mS' T frankly don' t know, There may be some~ but I know o~. it. ~g:. GILBPgTH' Through testing that your company has done~ have you found any water in any of the stringers in the Middle Kenai section that have been included as from Pool A through Pool MR. GILES: To my knowledge~ there has not been. M~, G!LEiq~TH: Ail right~ sir, i believe in answer to Mr.. 1S Kugler~s question~ you stated you did not feel that your treatment ~.0 would not ~result in vertical fractures in the Middle Ground Shoal ~1 ·pool and more particularly in the two zones shown at the top of ~'~ Pool B on your Exhibit Seven? ~3 ~. Gi!~S: if you are stating me correctly. 24 MR. GiLBitETH: Ail right. You do not know then anything abou 25 the ' ~ .~,~a3/~/~ , · = zrac~ure ingredient th. at you-;~'" mzz~ have encountered out there~ F~ & R DEPOSITIONS 277-47~3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 wheta~r it would incfzc~-,~a vet,, zcal or ~ozzzontal -s~o - .... . ~iLLo No. ~ ~' ~ ib~e that verc I~, GILo~Tn !~ ~t ~,~ ' ~ ~' ~ ' ~ ....... ~OSS ~ ' - ~ - ~C~ ZraC~l~ could have ~esu!~ed through mraatment and "-m ..... ~u - ~ ~,~ weiz completions would ~ ever, at any time in s~o_e zuture, be possible to prove that ~-~-~ pools ex~st in the ~-~ ~z .... ~ ~ in your o~inior ~'~ ~,_~..,v~ vertical fracture? ~-~,x. GI~S' If you could n ~. GILB~TH· Iz the traacman'as ct~ are being performed ara' --- should fracture vertically ~stead of horizontally where there was communication ba~.~,'~,an,~= tham~ would '~t be 'possible to ., prove pool se'paration, or the presence of dzff~r~nt ooois~ at any time in the fUture? D'~. Gi~S Yes~ i thi,nk wa cou!d~ ~ ~:~ ~ ~'~ What tion wou zn.~o:ma l'd have to be obtained to , prove this~ Mr. Gi!es? ~,~. GI~S: Pressure inforraation. MR. GiLB~TH: Pressure znformation, if the pools were in commun: ~tion through ,~=~+,} ~.ai ~S~ac'- ~i ............... ~u __ .~u~_.~o~ you think that 'pressure. information woul~ prove't:~;~s~" ?. . ~,,. Gi~S. Yes~ I tkink it w ~ld give very good insight as '~o~. that question. I m~_~.~e~'~ ....... ~Doint_ out~ this sc=~ .... <indicat~ng) may be d~ceiving us to some ..... "'~'-~t. ~' ' .............. znzs zs ~, feet here so it looks to me like there is a break of at least 20 fee'~z <'~ the ~"~ zznno~ogica~ character of the ' ~ ~+~.~ ~ .~ x znau~=~o~ log ~eze ~zno. zcanzng). MR. ~ILB~Tn' But you do ~elieve ~-~ ...... -;~ ~u ~.~=~=~=~ .~ vertical R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, AhASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 you think that there is vertical communication by what is shown on your exhibit. There's pool E, and Pool D~ and Pool C, and Pool B, and Pool A, and so forth. You feel that this is one commo~ source of supply at this stage? !fa%. GILES: I feel we ought to treat it as such until we can prove that it should not be treated that way. MR. GILBRETH: Weli~ that's what i'm trying to find out. if we do that, how are we going to find out in the future that it is not? (Pause) !'m trying to find out if there's any way that this can be shown in the future that it is not ~ common source of supply. M~. GI~S' Well~ oz course~ in the future, if we should find any encroachment oz ~ater~ a~en we may wish -- we might very definitely want to affecti~a!y segregate one zone 'from another~ classify it as a different coniston source of supply for purposes . of production and good recova-~y from all '~-~ _ ~ ZOt~S . , ~s~.~,~ I see. You do not have any interference tests information or anything of that nature in this pool at this stage do yOu? MR. Gi~S: Not to my knowledge. HR GILB~TH' And o-.~-no- · o ..... ~ ~:~ to your~ i believe~ Exhibit be lieve Four with the overlay~ do you/in a solution ~ reservoir such as ~ ~ ~ that it'~ possible to have you have in the Middle Ground 8noa_~ regional migration over a large distance: a mile or two miles~ something of that nature{ Or even a half a mi!e? ~ & R DEPOSITIONS 277-47~3 825 WEST EIGHTH AVENUE -- SUITE ANCHOIRAGE, ALASKA 10 11 12 12 14 15 16 17 18 19 20 21 MR. GILES: Yes. Y~R. GILBRETH' Under the proposal that you have made, and ~umDez' 2 ~ believe it's your proposal where you're proposing the acreage allocated to a well be that acreage where the bottom of the hole is located? ~. GI~S: Yes. MR. GILB~TH: Wouldn't it be possible, then, under that type of a rule, to compzete ~?eil~ and have ~nr~e or zour or zzve wells included within a localized zrea and~ for example, the 160 acres outlined on yoUr exhibit. This ~x~ouid be 'possible wouldn't it? MR. GILES: It ' ~ 'TM cer~aznzy ~ou!d, and i think we're going to need those. ~ U_LBP~TH in the absence of anything to restrict produc- tion ~ would it be possible, for an operator to have .heavy with- drawals at localized areas where you have a concentration of wells likg that? MR. GI~S: Yes~ and nm__s would be = . ~ine. . }~t. GiLB~TH: ~7ou!c,. it be possib!e~ in your opinion~ to ~av~ enough withdrawals to create this regional drainage? I~m not talking about now over a period of 30 days~ but let'~s say i0 years or 40 years or 50 years~ as we talk of the life of the field. MR. Gi~S: Yes. MR. GiLB~TH' Then it would be possible to group the in such a manner, or for the wells to be grouped in such a manner uneer this proposai~ ~nat a~ainage even across property lines R ~: R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENU~ - SUITE ANCHORAGE, ALASKA C 10 11 12 18 15 18 17 18 19 20 21 25 could result? ~x~%. GILES: Ah, but one ~nzng we haven't talked about it, each group would have a similar opportunity to have holes in the ground. MR. GILBRETH: Yes sir, i see that. MR. GILES' I think another answer is '-' '- ~nau we put our piatfor s / where we feel the biggest build-up of pay is~ and this is where . Sn~ll we're glad we did put it for that very reason Perhaps didn't put theirs exactly where they should have. MR. KUGLER:. Concerning this maps Mr. Giles, is there a Pan Junerican Middle Ground Shoal State Well ~ 3 somewhere in the yellow acreage? MR. GILES' Yes sir~ but that concerns 'the area above the area for which, we are asking for spacing. MaR. KUGLER: It's not on the yellow acreage? MR. GILES: it's on the yellow acreage: but it concerns depth wise~ an area higher than the stratographic area that we're ta!kin in concerning the spacing here today. MR. KUGLER' i didn't quite understand you there. Would you say that again? MR. GILES:~ We are asking -- we have been asking for spacing for the Fiiddle Kenai Oil Zones and the Hemlock. MR. !(UGLER · Yes. MR. ~'~"'~'zLES: And l'm ,saying that Number 3 is no~ a part o-~_ thai ~ ' ~ ~ the information request, and that's why we ~zo. not s~how it. ~~lso R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 17 18 2O 21 25 from Number 3 is still within the conzzcential status right now. F'~ KUGLER: i didn' ~ ~ ~ ' · ~ _ea,_zze that. Would it nave a bearing on your structural interpretation as shown? MR..GI~S' i don't know because it's not a part of the two zone projection that we have shown to you here. MR. KUG~R' Urn-hum. CF~Ii~N WILLiamS' Any fur ther --- MR. GILBP~TH' Yes, i-- Mr. G~!oreth ~. GILB~TH: Mr. G{ ~s, your original application provided for a certain number og v~e~~ .... ~= ~ to ~e dr - ~ w~zn the area out zor the Pan Am =creaoe lined by different colors on your e~hibit = ~ and the Shell acreage. Would the number of wells be based on an 80 acre density per well? fa~s a mather of fact~ i think the number of locations were set out there. Now your proposal was that the Co~ittee examine each aoolication~, and determine whether or not well was satisfactorily located to protect correlative rights and to get an efficient drainage pattern~ is that right? MR. GILES: That is correct~ using Exhibit Four for the Midd!~ Kenai~ and Five for the Hemlock as the guide. !~. GILB~TH' Yes sir.. What kind of information do you feel the Co~ittee should look at if this were the case then~ in deter- mining whether or not a well. is properly located? How much of ~ob is this ~ a.pp~cation to er_!l~ we would tell ~ & ~ D~POS~TIONS 277-4715 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, A~SKA 10 11 12 13 14 15 17 18 19 2O 21 where we intend to target ~- ~ ' ~' _ =ne oo~uom that particular well, and ~ would say that if ! were in your shoes~ ! would look at how that p. roposed well will line up ~,~ith this type of a plan of development '~ °~ I d ca that we submitted to t~e State: ~.~ if it doesn'tz~,='~ ' I! Pan ~erican and Shell to find out why we have deviated from our proposed plan of development. Was there some reason because of an intervening well that changed its course and caused us to change our p!ans~ and if so~ how would our plan of development then look? ~i. G!LB~TH' You do think it would be necessary to look at a well that had been orz!tec. MR. G!~S: Yes, I sure do. M~ e~LBP~TH ~e you aware of the fact that operators: and more particularly platform .operators file application for wells in advance so they don't have down time~ from the time one ~,~el! is completed until the next one is drilled.? MR. GILES: Yes. MR. GILB~TH: Are you aware of the fact that 'there is a con- siderable delay in the filing of information on ~ve!!s to be drii!e and that~ as a matter of fact~ we only have information on two of your wells now? What would you propose we look into then, in the absence of this other info~ation~ better than some sort of a 'pattern? MR GI~S: Weti~ if you don~t have the ~ '~ ~ '' ~ you ~eel you ought to have to make this decision~ Z think it behooves you l~ & R DEPOSITIONS 277-4713 S25 WEST EIGHTh AVENUE -- SUITE ANCHORAGE, A~ASKA 10 11 12 13 14 15 16 17 18 lg 2O 21 23 Pa~e 70. to get ahold of us and we will come and show you this information that would help in 'the decision. MR. GILBRETH' Now_n~ ~ estabiishing your 'o-r'~o-~-m~_vo ..... hare, you hav~ after a fashion, looked at the future with respect to density and pay build-up, and some type of a drainage area. Why do you think $0 acres.~than I00 acres or 40 acres or 50 acres, or something else We talk about the grids, i noticed all of yours are based on 80. Why is 80 better than soma other figure? FLR. GILES' Tha~' s a vary good. ouestion_. . ' 80~ even looked at looked at several different censities; 160~s 40's. We found 80~s to be the best from an optimum productivity and economical basis; present worth of future of income which we are concerned With, so 'we can get our return on the investment as quickly as possible. I ~ould venture to say that after secondary 'is under way, there'may be a need for a few wells on 40's within thiJ~ spaced area to more effectively .sweep the oil out from the reservoir rock. We don~t know when,, but i would venture, from experience in other areas~ that we will need 'perhaps another extra well or two, and we can azzozc the expense of drilling it~ for this purpose. ~. GILBP~TH' You speak of the greatest present worth -- profit, is this the primary basis for your economic consideration~ is itor~a~ = ".-~e~_~- re turn on investment, or pay out, or discounted cash fiow~ or i~ ~-~ ,-'~ c . ~'.0 se . ~,_~. Ail of "-~ R & R DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA Pa~ 7 1 10 F~. GILBRETH We~l, there's a considerable dzzzerence. ~. GILES' Wel!~ it's really present worth of future income; the discounted or current value of a given sum of money that's expected.to be received in the future· MR. GILBP~TH: Under your proposal to do 5 away with the quarte~ 6 section lines~ would it not be possible on the sou~h enc~ ~ne ? Shell acreage to drill a well to the Hemlock on one lease and 8 complete on the upper zones on ano'~ther lease~ have the acreage ~ attributed to the first ~a~e al'~-%.~~!~ ..... ~ ~ ..... o~ ~e wel!~'s l roaucing on the Second lease? You. might have your E~{hibit Five~ I believe 11 it's --- . ~~. The onky E:c~zbi~ tha~ --- 13 ~. GILB~TH: The one that shows the Whole area. . : -- ~' ~ both drilling 14 MR Gi~S (Continuip~g) we have that 1~ units is Exhibit One. 16 Mi7.. GILB!~TH'. Ail ~'~ zg~ ~ ~ ~~o~!~ it be possiDie' to drill a 17 well to the Hemlock in the southern portion of the Shell acreage 18 there~ and have it . ' ...... _ yet complenec in '~ne Kmnai on the other ~ease~ 1~ have the acreage attributed to the southern-most tease~ Shell:s? ~0 I~[R. GILES: We!!~ my first question is~ what other lease? ~1 This is all co--on acreage inside and outside. 22 klP. G~nBPJ;T;a.~heze~ ~' two keases involved in the 23 acreage " ' ~' ' unougn~ are nm. ere not? 24i i'5~. GILES: Tt was ::~ot ,~y ,~-~,~c~-n~}~ing that there was u'nder~toodo this to ~= aL2~.~'.'~,= ~oasic lease~ .~ s even ~' R & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 23 25 Fage 72. same basic lease outside here. '~ -~ all right ~'h%. GiLBRETH' ,_ see ~ . P~. GILES: Or am i wrong? i,~. 'S~.,,~2eN· I think he ' s wrong. HR. RUDD' ! think tha serial numbers are on ~ne piat~ are they not? MR. SWAN: I think{o~ere are two leases; however i would like to ask at this point ~f ~' ~- _ nz=~ can t be done anyway~ regardless of what effec~ T don~t ~n~,~ ~hz~. '~ ~ -- ~ ~_s material to --- . ~_~nu~ that. ,- ~, .,, ..... ions~, C~Li!I~,N WiLL!~4S: Any zur~?.e~ q.~es~ fiR. G!LB~TH: That's all i have~ yes. ~3~2. SWAN: ~ have one .~uest~on on redirect. Mz. Giles, !~m lookin~o at oage, 39 of ~.e tra'nsczzpt o~ · previous hearmng it ' ~ · ~e bottom 0f the o~ ! asked you this question: ~Wit! there be a~'..y adverse affect on ultimate recovery if wells aze completed in this Middle Kena~ Oil Zone an~ p~oduce from it as though it were one source of supply~ an.e you'd later ~zn~. out that it was more than one source supply~~ and your answer on page 40 was~ ~No~ not in my c ;inion. ~ R & R DEPOSITIONS 277-47][~ 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE. ALASKA C 10 11 12¸ 13 14 15 16 17 18 19 20 21 22 25 Pa~s 7~. Right. Have you changed your opinion? A I have not. '~i~F:~ I ' ~~ qu~ . MR. ~" ~' nay= one _stion CFL~iP~,9~N WILLiD2~S' I~[r. Crews has a question. I,~. CP~WS' l'm not really a member of the Giles, but i would like to ask you -- you've asked for g0 acre density spacing here~ ! believe~ and in the a!ternative~ the 80 acre grid spacing~ ane you sago 'than ~_ theoo~ittee don't g~nt'~ this request now~ they are just merely postponing the inevitgble~ and .ultimately ~ wil~ ~- ~ ~ to ...... ~ _= = ~a,v= be ~=os. ucem on either 80 acre~ or 80 acre grid basis, in a ~%:~-~r ...... a;:~"orazs~ ~ =~ of this situation~ there any substantial .............. ~gv,=~..~-,=~.=~.o~ ~-~='o be gaz~eu by waiting? Y~. ~WS: Or is' there any advantage at all? Mk. GILES: in~e is none MR. C~WS~ That you can ~_~=~ s_ . u!LuS ~n~r~ none. !nat ~s precisely my case today. Why wait ? M~. %P~WS:~ ~ We!l~ that~s all I had to ask you. Thank you~ s ir. Rudd ? .~ave any ~ner questions~ ~.~,;_,~.~, ~':~LLi~. Do you ~.~_~-~.,~, ~--.~:,~ co you have 277-47 ~ 3 82~ WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 M~. RO-DD' Has ~ir. Swan concluded his case? MR. SWART: This concludes our case on direct. ! would suo~es t --- , -T ~e. ~'~;~,~- is your pleasure now~ Do you have witnesses? MR. RUDD: We will not put on any witnesses~ no. i have a statement -- closing or argumant~ if you will~ that i would like to present. It '~'~- ' . mzo[,~ be ap~:voprzate to break for lunch C~AI~I~N WiLLI~2~S ' '~=~= ~ ~ v ~o ~==~y ~ go to lunch. Ail' right. What time would you suggest~ ,~s 1:30 ~.:~r,~riate to return, or can you make it --- MR. RUDD' 1:30 would, be 'C~iPa~iN %{ILLI~ES: Ail right~ .we'~ll adjourn until 1'30. (Whereupon at 12'00. Noon.. . .~ Chairman Williams adjourned ~. C~=~e zor the the hearing. At 1'30 '~ m. =~e Chairman ~=,~ hearing to resume, after ~ ' ' wnzcn the following, proceedings were had :) ~L~,~[~ WILL!.~dS The he=ring will reconvene. i believe you have a statement~ or were you standing to say some- thing, Mr. Swan? i~. S%'~AN Well ! if this is closing ........ that the burden is. still on us. i~laybe l~d better open. I¥~1%~ ~UDD: You're quite right~ 'We'll let ~r. . and t~!=ur~ we'll argue in opposition to him~ giving him~ of course~ the rig]hr to close R & R DEPOSITIONS 277-47 ! 3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA . 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 CHAIF~bkN WILLi32~S: This is agreeable with you then? MR. RUDD: That' s fine. CHAiP~Z~N WiLLLAMS: Ail zi ght: i~[r. Swan. ~ 'SWAN Yes~ I th~n~ he needs my closing statement be~o._e he knows what to answer. (Laughter) CHAIRMAN WiLLIA2~S: We!l: this sounds like a pretty congenial group here. (Laughter) MR. SWAN: There is one matters actua!!y~ before ! start this closing statement, on the matter of the seven zones that you have established in Rule 3. I feel quite strongly that there is no evidence before the Committee that the establishment of those seven zones accomplishes any of the' purposes of the statute~ and I'm not going to read that statute to you again~ I think I read it to you enough, but ! think .to include it in the -- then in the · Order, it just doesn't -- ~-'~.~' ~.~=~ s no evide~'~ce to support it~ and if '~he Co~ittee still feels it should be in ~ I'd like to have your evidence on it and have the opportunity no rebut it. Now if you have it~ l'm asking you for it now. I'm ready to close CLiI~AN WILLieS: I don't think we will: Mr. Swan. ~.. SW~N: Let me get my notes back there. (Pause) There was one other matter in our petition ~r rehearing t~at Mr Giles, didn't cover and that was your final paragraph number five where you said that the order would last for 18 months, and at the end of that time, Pan ~nerican would come back and give you the eviden~ on a -- necessary for a permanent order. The testimony at the 277-47~3 825 WEST E~GHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 14 15 16 17 18 19 2O 21 24 25 previous hear'~ ........ i~,g lnolcated that a 12 month per!oe would be su~zl- cien~. We~d sort of.lihe ~o see ~ only 12 months.~ ho~ever that is not -- perhaps not too impo:~tant because i think that the la~,7 provides 'anc that the or,er ~nould provida~ that the Cormnittee has continuing jurisdiction over this matter anywaY~ and that any ~o~:~.t~ee _ can sen it for a hearing interested party or the ~ =~'~ itself = if they think a change in the order is necessary· ! would like to see that 'provision in your order though~ even though it is~ ! think~ the law~ and we'd ~-~ zz~.e to -~'~=~=~,,~= the implication that we have in there that-- or ~t .we ~=~?~== from it that Pan American is one charged with the duty of giving you ~the testimony~ 'and perhaps even implying that othez-'parnies v~ou!dn~t be entitled to come in. I think znan-- leave that out. Just Say at the end of -- weit~ not at the end of the time i would set 30 days before the expir- . oraer foz~ your hearing on a permanent ation of your temporary ' ~ order. Otherwise you're liable to have your hearing~ ~nd then for ~ o::: i t. ~'ow i~m gettin~ dowm to arguing fha case~ and in my opening R & R DEPOS~T.~ONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 21 9.4 statement i ~hznk' ' i explained why we zeez' ~ that the ao.o!ica'cion._ ' that we filed asked for just 'the kind of action that the Legisia- ~ ' ._n~_n~ the ture intended should be taken in a case like ~hzs. ! ~' = ~ evidence 'we've put on shows that an order such as we~ve requested would prevent waste, and that it will protect an enforce the correlative rights of the lessees in a ooo~ _~ . and avoid "this aug- menting and accumulation of risks arising from the drilling of an excessive number of wells~ oarticularly excessive dry holes~ and that it will avoid the reduced recovery resulting from too smiii' a number of wells Those were ~.~a~ the Legislature was concerned with and ! think we've sno~.,?n you 'that on eac~ point we accomptishe the purpose and I~d like to ~iaborate a little more here. ! will ~ ~'=iative right ~ and read the statute to you one 'point~ uo=~e ...~ this is the dafznztion~' ' 3i..u_~=.!70~, ~Corra'~tive'- rights mean tn~ ~iLoroe~ so Eg~ 8. S _ opportunity ~-= ~ ~ =~-~ ~'t is 'practical to co so to the owner of each property in a pool to produce~ %~ithout waste~ his just and equitable share of the oil or gas~ or both in the poo!.~ Correlative rights means opportunity. !t doesn't mean that you're , ' ~ ~av- any=hzng. Ail you're going to guarantee the man 'anat you ~ '~ '- ' giving him is the same chance you give the other fellow, and that' what we~[re as~zzng be done here. We=re perzeculy wi!izng that the rules that apply to us~ should apply to She!i~ an~ i think to be that way, but we feel that this field is gOing to be devel- =' and we don~t see any reason ~o~ d'ezaying op~ on 80 acre density~ _. n=ze. They' ~n. We think we've Set up two logical drilling units ANGMORAG~. A~SKA 11 1,5 18 2O 21 Page 78. the area that will be developed from the two platforms, and aa ~'ve said before, we think it fits the statute just exactly. Now I'd like to repeat the request I made earlier that yc,u erase this state-wide rule from your mind. We think it was tended only as a rule to -- or should be used only as a rule to locate wild cats and to keep things under control until you c~.n enter a prope~ order applicable to the particular pool, .and I · ~:hink we've got enough evidence mow to skow you ~what kind of c0rder we ought to have, and the principal argument, the only one t can really see against 80 acre development is,. well, we can do it ~ater; we don't have to do it now, and Bart, would you put theft ~hing up (indicating), and it may be true that we c~:n do it l~.ter. We think some harm might result if we have to do it later. For instance, this problem of dri'lling the unnecessary dry holes t-~hat may we/have to drill to define the s~ructure. If you drill just one unnecessary dry hole, it's going to be rather expensive and takes some time that could have been better used drilling some producing wells, and we're facing~ a?~limit here. This isn't like a dry land operation where you can get in more rigs and catch up if you have to. We're _th=ee=,~well~ behind Shell, and it looks like we"re going to stay that way° We don't seem to be able to ca~:ch up and I don't see how we can. We can only drill them one at a ~ime like they' do, and I don't think we have the right to complain about the fact that we are behind Shell. They got their platJi!orm in first, and on' the other hand, as my witness pointed Out, m~ybe R & R DEPOSITIONS 277-~;71:3 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16¸ 17 18 19 2O 2'1 29, 24 by getting in first they made a little mi '~ s~=',~e and got it too far from the com~non property line, but that's not our fau!t~ and if it takes them too long to get up there and dri~ along that property line, we .shouldn't be oenaiized~ for that. ..o=In,~' they're entitled to the opportunzty. They've ha~ ~n=zr opportunity. They put thei~ platform where they wanted it~ and i think they're stuck with the consequences of that loc~- ~ion~ just like we're stuck with the consequences of ours. We think we~ve got enough information. We think that the actual ~ ~ ' mez~nzn~on of the pool is zn~oo~~'~ ..... ~ only for secondary re- covery purooses~, and as Mr. Giles pointed a.~-~ whether you go out and drill 160 and in fitl~ oz' move out on 80's~ you're going.to end up ready for secondary z~acovery at about the same time so there's no real choice the'~-a. ! think if you're going to '~ait till you can prove anything beyond a shadow o: a ~.~,~ 5efore you get in there a~.develop these resou33ces~ you'z~e going t© wait a long time to get some of t ~ " , '~ ~o_~m now hem deveio~ec~. ~'<~e wan~ to develop '~-~= . ~,~Ze admi~- ~e ~ant to get u~ze-' ' production up as high~'~ ~:,=,,~ can. as fast as we can, and we think there's n° conservation reason why ~e shouldn't, and if you're going, to insist that these z~esou:~'cas be developed on rules . M~S that were d'~veioped in other states or other conditions'~ and "-~ .d~fzeren~ conditions sometimes, we!!~ you aren't going to get developed at all in some cases because z-~!a~ka just. doesn't '=~:' problems that you ' = ~ . nay= in other e~ates So we want ::a da~.:'e~o'~ =~t ir & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE- SUITE ANCHORAGE, ALASKA 10 11 lg 13 14 15 16 17 18 19 20 21 order that will ~=i'i- this field.. '='~ ....... o~-~ ~nzn~ we've shown you tb_e t~.~ of orcer we snou!d have ~.,~,~ think _u will let us develop the fieqd in the mos~ ez=zczann manner~ produce it in a manner whzch wzzz acnzeve ooun optzmum productiv- ity and the greate~ultimate recovery of oil from the field. We want both, and we want to get it up high~ and we want to get all we can possibly get out of it. There is one more matter before i close, and that is some interest Mr. Marshall exor~a!~ed -- some interest in this ~uz~e~ ..... ~ ..... ted ~ -c, ing zone possibility, l~__ you ~o-?~:~'~tlem~an .... ~..~ z~e~es ~_~ see oroers where this wa~ con= ss you c=~L s=e how it would work~ be happy to supoiement~ ~ tke ........ ~ ..... ~~".~:~, ~..~,:e~: I~e~= n back home aha I would send Shell g copy of ~t~ or if you'd' }~ke we could even try our "~ ' "~ .... ~' ~ if you hand at~==-~==tzn~ a one that p%ouie, f~_t thzs po~= ~_~u=~r .case~ would. 1<i~. I~i&RSI-L~LL' We ~"~,',~,'~,,,~,~=~ be very. happy to have any suggestions ne zp on this line. t~ii. SWAN Well, we~!'.[ s~'ive you s,,mething and i~i! send onel~ a copy of C~,'~'~v~N WiLLi~!S' ,~'~ objections from Shell on this~ That conciuae~ my clo~,~ ~"~ -~'~'~ ~ '~'"~W~c;' ~ ~'~ '~ ~-ior~s ~;e you open for q~,~su n~' .~. ~-":~w,~ '~',~-~ ~ ~' ,~.-,,z,c,, F~'a~,~hal! would R & R DEPOSITIONS 277-4713 1325 WEST EIGHTH AVENUE - SUITE 15 ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 24 25 ®] P~-.~. ~=-~z,~.,-_~,.~=· ~,:: . ~v.,=n ~ on ..... ~=~b= ? o= your for rehearinS you have a ~-~e as follows' ~:We also · ~. ~ .... and no~ jus~ ~n _can~ ...... that all interes',=d sa~t{,~s~ ~e charged with the responsibility o-~ sroduczng ~,=u~nce . As it your intent here that this would apply only if there was a protest to your reapplication or the =~=~= .... s at the end of the months period~ whenever ~-~ ~ ~- . . -- =na~ had}pens to bee i don't believe i see how if you make an aop!icaEion zo~ an exception ho~ we can ask others to produce = ~ ~=~ '-~ -. ~ ~-, m~-~ . es MR. SWAN' Weii~ I uhz==~. I made a mistake~ sir, in calling this an application = ~ ' zo= an exceptzon, i think we've learned by mistakes. I' was following ~¥~a= another operator had done previous ~his ly. I don~t =hznk/shoutd have been called an application for an exception. We shonld have .requested this to be set for the purpos. of determining what sort of field rules should govern the dove zop= ~nd in alot oz cases that is done on the ment of this 'field, Co~ission's own motiona:cner:= a .Siscovery~ well is drztled. But that's -- really is what the case is. I think I made a mistake in calling it an application for an exception. I think this is re- questing 'field rUles ~ and I' think that every operator that's in- terested in the field has a rzgb.~ =_~ path=ps a duty to presort= to the Comnission his views on it= and the Committee itself -- ~..... ~.~h~.LL. '.fxanm you. ~ & lq DEPOSITIONS 277-Z~713 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 2O 21 24 ~nyo~:e else? zo~ s . ~=~e) ~ guess that everything. Mr. Rudd? · ~ ~ ~ ~~e~=n before re getting into MR R~DD Y~ oh~_rm~n ~ ally the statement or argument that i wish to make~ i think ! ought to note that there are certain areas that we do not actively oppose~ or even go along with Pan American in their~-oo~su~°'~sted amendments as proposed in their petition for reconsideration. I'll briefly enumerate them: They--oo-~a~t- clarification of Rule 4 of the existing Order 26 so as to more fully explain ,the cop~iJgling and dual completion that is contemplated, by the Order and the suggeste, language provided there is fine with us. They suggest an expanded statement of the rights of the '2 ~=.=ties and that the State should have further hearings to make amendments to the existing Order. We think that's language that is suggested -- probably restates ' ~'~' . This the law as it is I~l any eve~lt~ ~= s quite acceptable to us wou~d be their final suggestion~ and i believe it's page 7 of thei'. petition There is one po' ,~- _~ take issue v~ith . zn~ there which we wou]~ It is the limitation of the effectiveness of this Order to a !2 month period, and we would suggest that it be expanded to the i8 month period~ which is the maximum permitted by the regulations~ with- of course~ the understanding that ~f evidence is gathered ~ouio s ~ ~'~ and an amendment prior to that time which ~' ~us~.zzy a hearing~ ~ ' ~ ' month eeriod~ the for aeop'cion of permanent ruies~ azter a i2 procedure is available to ~{~o so. They have asked for o}~ actually an alteration of ~-~ · =~.~ top oE ~h~ B pooi We nave some r & ~ DEPOSITIONS 277-47~3 82~ WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 4 10 11 1¸2 13 14 15 16 17 18 19 2O 21 22 24 25 Paga 83. doubt in our mind as to whether or not there is actual p= oc~.uction from that zone. Pan Jamerican appears convinced that they have it, and we would not oppose an exception on the number 7 k~ell so as to provide for the production of that top perforation, along with the B, C and D Zones. Our basic position is that this rehearing is not necessary at all. We think that reference to the original record indicates that 'the Order 26 as it was promulgated is ade- quately supported by the evidence "-~ ~- ~ ~a~ was put in the record originally The only new '~proble~ ~-~~ . . ¥,~ has arisen, and c~%m'~ 's is the only new and different point '-~ ~- ~a~ we ve heard discussed all day~ goes '.~o this relatively mino~ adjustment on the top of the B Zone, whether or not nn~s small interval is actually 'productive or will be productive in other wells is something, open to question. ~e_at~on or an exceotion in Again~ we have no objectior~ to an at~ r ~ the case of the Numbez 7~ but this ne~o~ problem doesn't have any . relationship to the major issues during -- on which most of the time~ has been spent this morning, and on which most of the time was spent in the previous hearing. _~e top of the B Zone {s un- ~ ~ about spacing important when you're talking about stand ~ac.,s, about i~r~terior sUbdivisions: and it has very little to do with all the d~ ............. ~.at ~e~ve seen. ~S=~zs and exhibits ~-~ Now the petition for ahear~n.? .further went on and noted, r = ~ - ' so.n= a~ounds ~or reooening the ?~ aire hearing, and basically these went to the evidence .u in ~pport -- for Rules !~ 2 and 3. lJhether there is a real question ' ~-~'~ and i think in /~=n~'~' ....upon upon the review oz ~_. 2 & R DEPOS~TiONS 277-/~7~ 3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 2O 21 upon an unders~anaing of the nature of the hearing '-' '-'~- ' gaged in now, and were engaged in back in July Bas' ~" · ica ,_zy~ what the Com~nittee is asked to do in Pan f'~_merican's applicat'zo~,~ is to legislate.; it's to make rules for the dove' ~ zopmen~ of this area shown on t~e slide. Now the Department of Natural Resources is authorized by zze~!o.~ and conservation Statute to adopt development rules for '~' ~ measures to provide the greatest recovery of oil from those fields They have done .so on a State-wide baszs by the ~adop~zon of the 160 acre oil well spacing requirements and n~,e regulation 2061~ and similar ones for gas fields. They've imposed the 500 foot set back on all the quarter section lines in the case of oil field Now what Pan American nas ~.~c~ the ~ ~ommztte= to do is in effect~ to amend the reguia~ion and legislation~ if .you wili~ that hasn't been appticab!~ to all oil fields in the State. I quite . agree with Mr. Swan that the put'pose of 2061 is to guide the ini- tial development of a field, that is the general rule. it's not to be held inviolate forever and ever~ .but i think where we differ is that when we come in as we have here and apply for changes and amendments~ the applicant, is asking for something ~~a!_ to fit a particular situation~ a particular set of facts~ and 'those facts ...... EtON mus~ be {.~z~ before ~he Oo~missien ¢~ ~roer to jus~if~ a cn~nse ~ the s'~'~s:~'~ ru~e which has been adopted Now ~nzs is done on a ~=.~,~n~'~=~ Pas'is it's expect~o ~ngt th~ factual material will n~t be a~ ~,.~,~o~+e as o~= would !ike~ ,,~h~n R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 the first rule changes are '~,~.c..~-~.~ The limitation of a reasonable one;during !8 months many walls can be dr~i!ed and . '~' o'~dinariiy be real production history on ~se ~_,~ wells can ~ obtained We may find that at the end o~ the 18 months or oe~ora that zurthe~ amendment is necessary, but it should, be borne in' mind that as an administrative body, you are more akin to a legislative com~-~ittee ~ ~ ~¼~ hearing is ~rimarily a than you are to a court or ~ jury. ~,.~s fact-finding operation. You hear ex'ioert testimony~ you hear opini~ you hear legal argument~ bu'.i; you're bound by none of it. What. you are bound by is 'the facts and th~:,~ law ':"~ .... u~,_= which you operate. Now if you were a jury' in a~.~'~.~sonal ~,~ury~ ac'~°~zon .and you heard a plaintiff's doctor testify that the plaintiff was never going to fully recover from his injuries~ and you heard the defen- dant~s medical expert tes~:i.fy ~ 'unat he would be recovered in one year, you would not be entitled, as a jury to conclude that he~s going to all right in ten years ~ ~ ' . =~no~ award, damages on that baszs You are bound by the opinion of the experts who testify before you in an ordinary court trial. That's not the case here. You're fully entitled to exercise your own judgment and your own expert knowledge, yoUr own experience in connection with the facts that are brought before you and are in the record of the hearing. Now 'there is, of course~ a limitation. You cannot act arbi- trariiy~ _ . yo~, can't act unreasonably Now you've been asked to s~mend nneg~: general state-wzde rules by adoption of temporary OZ ~ ~ afl special - ~ z uzes for a portion/a fie_m which is in a very~ very e IR & R DEPOSiTiONS 277-47~3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ~tage of ~eve_o~men,. Pan f~merican made that request aha it's ~ 7 ' '"' '" .{- incumbentupon them 'to sno~ wnac the zac~uaA situation is that demands some action be taken. At the preceding hearing we spoke of the burden of proof, and. ~-' ~ we don't mean burden of proof in the same sense unit you it in connection a criminal ~ial~= o_~ ~oeyona~ a reasonable The burden here is on the ~' appzlcant'-to present such evidence~ SUCh facts as will indicate that some action ~ =s needed to deviate ~rom the standard rules wn~c~ appAy state-wide. Now~ of course~ the applicant will urge a particular course of action~ and others that are affected~ in this case e~,e S A S group~ may believe action is necessary~ they ~-a~,~ believe that d. ' z~zerent action is necessary and will present their case. ~ We presented our case fully. The presented_ the factual information_ . wh~h is ava ..... ' ' '' ~ hearing ' to us a= ~ne present tzme in the zzrs~- . We've near~ no- . thing today that impqis us to add-to what was said before Now the State itself has an interest~ of course~ both as an regulatory a~ency and as a !essor~ and it too is entitled to judge E~e meaning~ the s~ ~n~ -~' . -o .... zcance of whatever evidence i~ available. Now just by way of comparison with some other states~ it should be noted tha~ in the Texas courts zn Rule 3~ exceptions nave une oursen on ~ne applicant. Tom~=~"~ a leading_ case~_ ~.~'z,~:~:~noz~_a, ]<:e~-~-~ .... m versus the ~= ~ ~ ~,. ....... -~- - ............. ~x~z~_roac ........... ~,sion. Z can provide the c:etaited citations zz you v:,an'c t~:~.z~m. ~. similarc~o~, Gulf :q & ~q DEPOSITIONS 277-47 ~ 3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 18 17 18 lg 20 21 9,9. 23 all =~ ~ ~-:~.~ zicant- tei:'~o ~ ,..~-,-'i?~{o=~' ,:.<'Lich clo -;,'.,~,~',~ ':-:-.~ burda~ of ' ~ . .'~'roof on the ~:r,t..~_cant~'{ ~ for a cn~-:ns.a {~ ..... 'the -- or a~ca~.'t4o,~ resuiat-~ on'-'_ . in~..~,_n~.'] -,'-n---,~...,,. ~ Nester- ~"- sv~~',~ ~.~ ...... 3{~cI ai~,~,_ ca,~'~.~.~ ~n New Nexico ant'. .... a.c. mknlstrat~ve case~ ]'n ................ ?'.-e .AE.DI{c8~-4o~ in ~-heir case i~umDer !308 '~3!e had a of Sunray MiS-Continent~ _. . reverse situation there. The Conservation Comsnission was asked to increase the dri!!inS units to 80 acres~ rather than~.~ stand~' - ard 4.0 acres~ and the Comr. ls~ioners found, that the ~,-~,~- had failed to Drove the ~" =ssarI ~ ~.-~I ~ ' . , ~ec~ fac'as =~_ e~n~eo, the ~,.~tition U'hah~ i~ the same st~:o.~a~o.~ ~.= .... 3~n~-~ ca~ w~cn was a proEract~ and complicated spacinS prdceedins~ the appl~cant was required to it present that proof and/~.~as made clear in the s-;~ rulings of +~-'~ n~-:~, .~.- ~n~ ~= ~..~unser~ation Co~7~ission that '-~ ~urden with the aoplicant ~ '~ Acumen_ ma'cuer is revzewed in some . de~,}th in ~he Utah Law ~ev~ew artAcie~ 7 Utah haw N. eview~ All risht~ now this is the sor~. of thinS that you have to keep ~n_. mind as ~,S~,.~n,.~ -~,~.,_,~ '~'"'~'"'~ ~S~--.~'~- your 0reef Number 26. Now Pan American ~as oaid '~ ~ ther ~ v~o ~' '~ but ~ unaE e As ~,.t evmde~iary support _ ~ l.c:?,....:~ ScrAG ~R~ ~ O"~- u~ie e'v~cl~'n-'~.~ on a 'p~'~tlcu~a~" ~ '- point was to "-~ .... '"-":-'~' and eu~.:.- cllereJ~or~ ~ .:,, ...... ~,..y~ ~.~,~..~ ~ .~.s~.e was a cuestion con- , E~e ~op.s ervs.'h Io~ cernlr_.:::, car cain pro%; .... ?anct 3 of .... n-,s~- i~a't~s 'take ~-1-~ ir, .orce~ here ~2~u!e ~ qu 5n'~ ' ,~ ........ ~ .... z~, = re Ares a foo'c ~ ..... u~na~ac'_c~ ~ '' on the per~'~:neter ..... No¥.,~ a'c' pages ~:-5 ~n~ ~ -' ~:~-~ o~= the tran- script o'~ the last hearin.S -~ "~,'~ ~ ~ }x~ n-~ Snized R & R DEPOSITIONS 277-47 ~ 3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 ~-~ne utility of ~'~ ~' ' ~ ui%~ St~..-,.o ,.- e¼e~e is ~ ~ec. se o%.?ners~%iD ~'y ~ ~ The change or where there is a rova~n~ ~n=~se. re s no contest ~= ~ cna= such a standback shou~e be about that. Shell ~o tes't~fied '=' ~ ~' imposed at those points. ~-~ ._~=y .... ~s~s oz owners~=p in the Now of course~ une possib~]='~v o~ ~~ ~ leases in the future unrcu~n ass~onm=nu or through rearrangement of joint ventures is perfectly well known~ and it doesn't appear to us to be u~7reasonabie for this Committee to have concluded so as to prevent unnecessary adjustments at some later date~ .... ~-~ full perimeter of the 500 foot standback shouio, extend arouno. area in question. Now o~ course~ you ns. yen t done anything new by calling for that stano, b=~. ~?~!a'~ you have done is left zn .... ' ~ already the~e That standback effect the sc~ce-w~de rule t~= was . line was there right from the beginning~ and all you have done is refuse to remove it as Pan American requested. Now there's been mention of a bu= ~fer zone concept which was new to us today~ ! think new to =ve~yon= As I un~ersn=na it, when a well approached the boundary !~.~e within 500 ~===t~ another spacing unit -- anothe~ drilling unit would be tacked on the out- side of the area that is de_~neo~ here and would automatically be- .~ ~o~utee adopted for this come subject to the rules which t~%e ~' ~ .... ~ ~ , =~= ~=~ for it would area. Now if 160 acre ceve=o.pm~= is ~=~= that one welI placed near the junction of the quarter section line might well automatically bring in another 320 acres~ into this~ and presumaab!y'~ if'a well were drilled out in to this new 390 f~ & r DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE /~'NCHO RAG E. ALASKA 1 I acres: 10 11 12 13 ¸14 15 16 17 18 19 20 21 22 23 24 additional parcels might be brought in beyond~ so that this " ,', , '{ne- of co'crse~ _ 2 could be an ever expands.,o area, ]imited by the struc- ture and by the accumulation. Now we questioned. ,~he~_ ~~y,~ .... we ouestioned the aav_seabzzity oz se~tin~ up an automatic expansion o-~ 5 of 'that sort where additional problems of ownership~ ~ structure approaching a fault zone. ~e=~aps we d into addztional roya!t] 7 changes. Ail of these things would not come into question with 8 the automatic extension system which is proposed. We'd simply 9 keep on moving out ant ~=~a probiams would arise without anyone ~- ~ to +v .... o-v~+' about ~h=m~ had an opportunity having touched them~ ~o=~ modify the system. Now ?~k~n~ Rule 2 and 'this is~ of course~ the crux of our differences. When Rule 2~ as it stands~ is combined with Rules 3 and 4~ we feel that the maximum flexibility is gained in your location of wells and the drilt~no' of wells a maximum that is . _ an~ the careful accumulation consistent with orderly development ' ~ = data necessary to accom?iish your end desire here~ and that is to build a basic background of information on which you can adopt ~ina! rules ~ ~ zoz the field. Now the expression has been used again and again~ both in the original hearing and this hearing~ that Pan American believes un= thing to dO is to gan the production rata up as high as they can: as fast as they can. Now this is just exactly the point, that " nzzzee ~ainst in the last , ~,e have harding on~ the~- we have res .... ~ ~= 25 he ar -~,o ~ " ~ 'that is mostob~,o~ous~ ~ ~ to us in t~e possibilities which 'Fl & R DEPOSITIONS 277-471:3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE,' ALASKA 10 11 12 13 14 15¸ 16 17 18 19 20 21 22 23 24 25 have been set forth for the deveic'~,ment of this field. Hr. in the original hear'~.~z~,o~ described with some care the ~ro~o~,~. ~ which Shell had embaried on the 160 acre steoouts~~ on ~e~~o~~ ~ of ..... '~' ~ ' naa zzeld~ on accumuia~zon of production history zrom zts walls and i think it's clear i~_~ as ~'r.. . Gi!e=~ says~ migration of oil caused by high density drilling can be == eIiecc!ve across a mile' or two miles~ we're going to have' ~" ~'- ~We!l ~:a~age. Now they say~ that's all right~ ge~ up there an drill your protection welis~ but it's well known~ each of these platforms can drill one well at a time. If the adoption of Pan American's suggested plan requires Shell to a~anaon -~ts 'program~ than this znfo:ma=zon which Pan ~er which Shell has been ....... ~'~'"~' hard. -- wo~:,~=$ . to collect and to co!lac c ...... ~ and properiy~ is not going to be available That progra will have no be abandoned in favor of going up and protecting against drainage on the border. Now Pan ~erican makes something of a point of the fact that ~ proper way to meve!op an~ ~me~a to do so on the basis of 80 stepouts away from the platform~ Presumeab!y at some point~ ' ~ ~ and nobody eise~ they are going to drill the dry no!es wn_ch they~ wants to drill. They're still going to have to drill them to find the edge of that field. Whether they do it this year~ or whether they do it 3 or 4 years from now~ the dry holes are inevitable. The plan suggested by Pan Y~,erican flies in the :face of the stan- ~ e ~- ~'~- S dard, the recomm, ended procedur ~h~' been adopted by =ne body c~_at uro~aoly knows more about conservation and probably IR & R DEPOSITIONS 277-47~3 825 WEST E~GhTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 '12 13 14 15 16 17 ¸18 19 21 23 24 more for the other states and for the industry in conserva'cion, 'than any other. Now the interstaue Oil Compact Cor~mission, whic'- inc~ ~_cen~!y is the body ~''~n~ ..... crazued' :~e'~ modez" act which has ~oeen adopted in Alaska as its conservation act, published a lengthy report on conservationp~z~es~'~ and z quote zrom Vo~um~ X from their qua~ner!y bulletin as zoizow~' in~ ends of conservation and the demands of economics would be fully served if fields or pools could be originally developed on wide spacing patterns determine the field~!imits and the reservoir and fluid count characteristics. Following the studies thus made~ possible in fill wells would be tocatec7 and c_zzz~d to provide adequate re- servoir ~ ~ ~ = czazna~?e and meat *'h~ reo~,~=~~ f ~ ~ ~ ~-~.~o o conservation~ econ- omics O! ......... ~ ~ ~ ~ . ~ow the two or three senuances there is summe~ up the basis of Shei~'s argument in 'this whole 'proceed~~-. ~$. T_he ciusterin . ~nat nas been the subjeCt o'g a gYean dea~ oz discussion here the avai~ ~,- ~ ~ ~ ~_ ._ ~ .~ ~ -~ ,, .,_ ~u_~ay - the po lus lng ,~-~:~:piy shown by - sszo~mm~y of c tar was the Exhibit ~our' with the overlay -~n ' = ' ~ wnzcn you zzno. a aensity of not 80 acres~ bUt something more like 40 acres. The continued insistence by Pan American on ..... = .... o ge~ns ah= ~production rate up as z=s~ as possib!e~ as quickly as pos~ib'~e~ all of these would milztane for an oraer that zs contrary to what zs generally accep~-~.d by conservation ~ ~-~ ~ne country. ~ DOQ~S &CROSS .,-u ~ ~: ~.-,o. with here is a Now remember~ what we're u~_~,o _~m~o~a_y ~,~-~ 'l 2 .... -- Probabiy an !8 month o~ .... a o:~de-~ effort ~ =~- -~ ' 277-4713 025 W~ST ~IGHTH AVENUE -- SUIT~ ANCMORAG~, A~SKA 10 11 12 13 15 16 17 18 19 20 9.1 29, 9,3 2'aga 92, r ~ ~ DEPOSIT~{ONS 277-47 ~:3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA order should be provides for, ~,:z-cn oz course the ~rovision that an earlier accumulation of facts might call zoz an ear£ier ~-~~ Buz we're nog talking about something off ~ive years or t~n years. We'~e not tailing about forc~,~ Pan American to abandon or shu~ down their drilling operation o~c~use they're going ~o run out of wells to drill· Certainly the Shell group will not run out of wells to drill during the short life of this temporary order. We have an additzon~l problem in connection with the close spac~_no~; the possibility__ of clustering even more closely than the density figure that zs usa and ~_~ concerns oressure mazntenanc~ ~'*" ~~zed to in the last hearzng and secondary recovery. ~ ~:,~,as" ...... '-= '=' ' that a clustering of wells ~a~ wz~hc~w=! rate from a !imite~ area within the field might well cause difficulty in setting up and maintaining a pressure recovery program or a secondary re- . n'~" ~ne 80 acre waizs before it is covery program The ~ z~czng of '~ = known either that they're needed zor p_oc~ucnzo~ or that they're needed for secondary recovery~ or before a secondary recovery program can be deszgne~ so that shay can,'be .p. lacee properiy~ will be damaging to the overall development of the field. Now Mr. Giles said at a earlier hearing that 160. 'acre develop ment would be a practical operation~ based upon their projections connex~ zrom which zt was said ! gather from the testimony in the . '- ~- ~ ' ,. that this would ,be true throughout the life of the zzelc. "He then went on~ of cOurse~ ~:o. saz~ that 80 acre development would be mot profitable: but the'~ .... q-=~ =~uz~e,~en~ that for a year or a Year and a 10 11 12 13 14 15 16 17 18 19 20 21 22 25 half to continue on 160 acr=~ basis: is not.~ oo~' _~~o~,~,,~ to break Pan American. ~ow., when wa look at ~-be~. fac~s ~nan ware ~-~.~s~=~a= ~y l<ir. ' {~ aooears that the ~.~,-~n~o~o and ~,io- Giles zn his testimony~ gists and so forth~ have not really been able to provide mucN the way of backing put into testimony here. we.. ' ~n~ve' e~t{~at~s.~ ~ ~ ~' +' a! d ~ . We have nypo~ne~mc iagrams curves We have projections. We have opinions. We have practically everything but facts: and. . ~ t~.at it s improper to F~o~e~. very~ very ~few of those We zee~ ~ on a full-fledged program for development of this zz~za when we don't have facts. ' ' . Sne~ Now Shell has not 'provided, much in nne w~y o~: facts " has not been able to srove a. case for shy particular type of de- what ' ~ ~"~--~r-,~s+i~,~~ or lack 0f information~ ve!opment here~ ~u~/Sheii~s _.f~ .... ,~ does prove i.s +R~+~,~=~ development wsrk on a cautious basis~ encompas- sing as much~ of the struc u~=e =__c. , munn oz nhe productive area ss po ~ ~ should continue so tb~at, the facts may be 8aehered and may be evaluated. ' ' ~, ~e~a~d to a 'proposition set forth by New ~'d porn5 out~ _~ _ ~ _ ~{r. Swan~ in his openins statement~ that this concept of a dritlin unit {s not somethinS s~'~s- ~s~ or just thrown in to the ~ ' ~ without ~ rience ~:'e~ .... -..-~ ~ ~ .~.~-~ Statute without cnougn~ ~ ~ ,¥z~.~ in the ~'~ _~ ~,,= sug?sested model cote o~ the of zz_st p!ace~ thiS <= ~)~ ~ the Inter-state Oil ~ ~ ~ ~'"~= ~' <~ and t~e te~m {~ one tha'- well known and wel~ accepted, r_ note~ just an inc'~ ' R & R DEPOSITIONS 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGe, ALA$~<A 10 11 1¸2 13 14 15 16 17 18 19 2O 21 ¸22 thai when [hare was d~scusolon of ':'-!~e buzzer zone: - ~, ....... ~ ~- '~ ~S varied to the ordinary under~tand-~n~ of ~he ~erm and said that as you drill close to E~,~ ]ina a new ori~l~ unit is automa~- ~ ~z~S about a ~ri~ ~!n~ unit oz iou acres~ ca!ly aamed. Now he ' s taTM~--~-~' ~ _,' ~ ' ~ ~ ~ ~a or 80 acres, some drilling unit based on these legal subdivisions. Now this isn't a terra that ~ermits yOU tO jUSE turn loose and {e any way you want and zz~z it in with any number of wells. Ther~ is a well understood meaning and we have spoken of it on ' ~ .... nea~ ina. basis~ almost entirely zn tm4e ~ Ail right~ i think the only other point to note in regard to which "~'~-~' suggestioh/Pan American made before Rule Number 2~ there'~ ~ ..... ~ _ and renewed today to tn= ez.~ec= u~at the most ezzzczent way to handle this Would be to take it on a well by wez_ basis and just look at each well as application is made. ~ ~ zor a permit to drill it~ see whether it's too c!os=~ ~ne=~er it s gozng to affect 'anyone. As was pointed out in the last hearing again~ w~?~lis drilled in the yellow area in the diagram there (indicating) in the Pan American lease~ are going to have an effect on that portion of the st~uc=ure that lies within n~e S~ell lease ~=n being the case~ each time a decision has to be made.on a particular we!i~ there=s got to be notice to the interested parties~ there's got to be publican-ion and a wa~ u=nE _ ~ ~.~ere s ~ot to be a b. ear{~ and tha S.A.S.. group's got to be permitted an opportunzty to con- c'~.r or object., as zt may ~.see fz=~ This zs an administrative burde~ ~'~?~ere' is~ o~ course,' a certain =mou~=~ of burden in exercis='~n~- the F{ & R DEPOSITIONS 277-47Z3 825 WESt EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 lg 13 14 15 16 17 18 19 20 21 judgment involved, tna~ l~'ir G:!es '~ = --~= but ~-ba--~ burden is on the Conzmittee and on a,~a parties theresa!vas in hav~o to come into a hearing on each ~,~ every ~.~at! that Pan ~ to drill Likewise~ each and every we~ ...... ~ .. =_ una5 snell ~,ould have to drill under that sort of a rule. %le feel that aspect and that legal requirement makes the plan proposed by Pan American impractil . cal. Now turning to 2uie 3~ and nn_s is the zonation probiem~ the zones that were picked were not ones that were urged by either party here before the in the ' ~'- _~ -- ne=~ing held before~ but it's clear from a review of nhe ic~ on the numfber 4~ and a compar- ~ ~ ~ '~ ~ ....~ the Co~ittee has done ison of that log wln~ o~nar logs~ cn~ is not unreasonable. The points used are rather clearly defined on the log~ the groupings a?pear reasonable~ They appear to help correlate reasonably well z~om we!! to well. That obvious aspect ~~it which was be'= ' ' _ ~ore you: combined with the inaDi!ity of both Sheli's and Pan American's witness to define a source of supply~ to tell much about co[~unication between zones says to me that this is a ?=~=~aly reasonabie~ temporary approach to the subject. There's evidence there and the evidence is right there in the number 4 log aha its comoar~son ~z~h the other logs. E~z~ ~= = rebutting or evidence in ~ ..... ~'~ ~ o?~,~==~nzon to th~s groupzng is not available. For a =~'~=mpor=~=~'y ormer~ ~ for one ~,~hich w~l] .... be effect dur~ the time ~roductmon tes~s and ~= ' -~-o . ' _ ~n~ other operat!ons ~hich are necessary to de'~ .... ~ " ===~ ....~ comrf~unlcation ars be~nc run. 1R & ~R DEPOSITIONS 277-47~3 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA .10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 Temoorary oraer; ,~n,-s . ~ow we go to ~ule l~umber ~. and ~e find cnere" t~a~ u~e A ~.~ is one which no one is o~oduc~ ~ ~.~~, ~_ ~ng at ~n~ ~ .... + and apparently no one intends to produce it e~ ..~- . ~u we can~ ~or the moment~ atop tha~2 from our considerations. ~he ~-~' ~'~ - f ~-~-~ B~ o~oup=~g o ~= C and D ~oo!s~ and the grouping ~ ~ '~'-~ oz u~ E~ ~ a~a G poois~ as .~=~ as the practical effect is concerned~ permits production on a dual completion basis similar to that which Shell argued for in the last hearing~ and presented maps and diagr~=~,.~ cross-sections~ supporting. The practical effect of Rule 4 is zu~y supported by the evidence Shell urged that resuit~ ~.~. we "~e quite' satisfied with Now looking at these th:~ae ru!es~ 2~ 3 and 4~ as.'a'package~ they work well together, if there were simply two thin~ zones~ there would be less fiexib%!ity in thelu~0 ac~-e s?~ac. .ing situation '~ zn~e~sec~g a producing because it would increase u~e chance of = ...... = . interval at a point where it crossed a quarter section line, As the zones become thinner you reduce the chance of that occuring and thereby give it greater f~ TM = ' ~_exibility, We re,er no the earlier , hearing to the ~em!ock and '~he G e and the G,N, ~ _ .... ~, the lowe-~~ three . ~ '- i! be com:pleted sands ifow the order does not require ~han they a . . T..ey can in the sa'~e uuarter section h be completed with the two thin ones in one quarter sec. tion and the Hemlock in the other ~. , t_m~ you get a problem is when one of ~uarter section The only ~ = 'these proaucing sands actually under,=es a quarter section !ine: ~-~ ~ that rare inst~~ ~ee! '~ "~ r & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 1 no difficulty in getting an e~-,:ception ~ ; ' ' ' ~g,~ tko --. w~_~zcp, you d ass ..... 2 zone to one quarter section or ~ka other, kre of course -- the 3 comm4n~]~n~ portion of ~,:~= ~' is a necessary and reasonable oart ~ of this package so that dual completions may be accomo!~shed. 5 i think that looking at the Order made and looking at '~= 6 evidence as a whole and sometimes discounting the opinions or the ? suggestions of the experts '~ , . who testified, I think support for 8 Order 26 can be found in the record which was made in the original hearing. We nkznk t~an the suggestions made by Pan gmmrican originally, and again~ new .o:~as made today ought not to be adopted ~ none of them %ead to the efficient None of them work as wezz~ development of this fie!d~ development based on real know!ed, ge~ rather than projections~ as well as the Order 26 which was entered And excei;'~ in the technical respects which we noted at the outset '~ -'- Or.ar ~umber 2 We 15 of my -::ai~ here~ we do not u~ge amendment of , '~ ,,x 6. ~,~. . uzge =~ c cmo develoomsnt ~+'. '~ long the lines set forth, in 17 2o~ and n~.en we then~ az'ear a perio¢ of severa~ montns~ come back 18 with ..... '~ ~ facts which we can present to you~ and make the great 19 many ~-' '~''- ~" ~'-"'~ ~' ~ ~ = = ~i~yi~g sc=~e,~e~,to~ c:~ar=zyzng exhibits~ so that this Corn_mission will know how to go~ what rules to in, pose for the final ~1 and long range development of this field. Thank you. 24 1~ SWAN' i '~ ~ '~" .... ' ' ' Chis case~ that the-~e was only one real di=~ ~ c . - ~ ~ zzereilc= ol ODl~lO~ .10 11 12 13 20 22 [~ & 1~ DEPOSITIONS 277-4713 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 5 10 11 19. 1¸3 14. 15 16 17 18 19 9.0 9.1 9.2 between Shell on the one nan~ and Pan American on the others and 'that was as to the queszicn of ~,~hen~ but T think maybe wa:ye got a little bit more than ~hat. ~" ~ ~-~ ~n~, question o~ the perimeter. ~lrst~ ~eu s 'take up ~ =~ .c is very important to Pan S~er~-~n~ along_ the wast side ~h~'-~ (indi- . ~ ' is the same zease on both sides cating)~ of the spaced area ~nzs .~ '= ~' ~ !O pretty close to our placzorm. ~- s the c sest place to our piatform~ except for down here {indieatins) where we admit we have to have a 500 foot stepoaa~c 1,4a re feeling for the ~doe of the reservoir in here. if it's only 200 feet zrom that tine~ we ' ~ I~ s we ougn~ to be able to '~- _ g~u our we ~, out' there. We re not offse~h- ting anyboay but oursezwss~ There:s just -- there's no conserva- tinn reason for keeping us back. Now the question is raised~ well, ~.nat if this is asszgne~ as we could assign it. Wel!~ of course~ if it:s assigned~ you've . i~ned~=~==!y established a change zn ownershiD. ~ on each side~ and - ~ '~ ~ '" but if wa had a well · then we would have to stay ~00 zee,= tnau was in there 200 c ~.~ zeet away ~= a time when we owned the Whole ~ ~ ~ ~ wz=~ full knowledge and he would ~-~e purchaser wouzo, .buy ~t iease~ have to admit .that. the =~ ~ ~" ' '~ ~>~z~=zl s~ouzd stay .there. So we think that this ~o important, kr¢~rz~c~y~ ........ ~ e~z it's as {~o _~ ~=aa~= to Shell ~ ,-~ e~,~ + and I~ ?.s it is to us~ maybe more ~,:~,~ ...... ~: m an a zittie bit a loss to understand their objection. . 24 ~, Some point has .~e=n maae of thzs ~tu~stion~ ~ of ~"~'"~,,'~,:u'~ s gou to u~ _ ~ne prooi Rare ~ ccove w~==-~t. We adm~ we=va got ,gna burden o~= ~' R & R DEPOSITIONS 277-47 ~ 3 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12 15 14 15 16 17 18 19 20 '21 th'~nk_., we've out. on a prima r-~ie~.~ cas~_, v~ 'think 'that: -'vgnez.,- we ~ve done that, ~ = ~=-'-~ ~ somebody d{sa~-raes ,~ and that lnc/uo.e~ ~o~ml~ee, up ~o =~==: o us know how nney /~'=agree and why they .di~a_o~or~=~ ant S~Ve us a cna~e to an=~-,~e~, _ t~,es=~ -;-~~===.~.o~- ~a~.~= that you're en'~it!ed to exercise your owns your own znde'pencent juso'~-,~,n:~o.._~ _~ but z =nzn~% we snoulm be -- uke p~Trp.~e of this hearing is so ..... __ ~=ngs~ anm _ ~ .... S onin~or~ tell us about -}t %7e~d i~ you've got some ~!szerences o_ . ..... ~ . _ . like a chance to answer~ and ! think that's what the hearing ~s for. . . i~ ~zl, aemlt~ '- the ~c~ay you ~nave t[~e -~ ..... se , ~J=~ zones t up now wit"- the permissab!e ' ~ "~'~ ~ -" ' ' - ~' ~ co~n~l~Sz.~I:~S~ we can operate juse_ fzne~ pro~zoin you change this ~=_~ln~=lo~ between . ~na the B because, in "= you ~e~-us do j~,~st %7x<~ ,O~r r'd~e ea~ S do e~ect~ . ~ y we can . The only~'~--, is why '~ ......... have ~"-9 i don' ~.u you. ma t -- these zolles don6t accomplish any conservation purpose. W'e don~t see any evl=ence =na~ supports =~,~ ...... :. Ane ~ ~ a,~e~ but i ::ave:.~ '~ ~- heard . -- tnzs those ., !~'~- ' ~ say that .... '~' "' ~ ':-~",a+ .=~.:.~ =~Zone a~: you have it set ue~ prove: ..... ~ ~ ~ ~ that's one source of ~ ......... ly ~ don~.~ +R{~v ,~,,~-~p ~ r,7 n e i't ~s at 'this time or not~ and }2 'h i~, -Y .r;. %c . 'Chat l{r. ~' ,~ta'ted ' Olio source 0'F SU. pD or ~ tu~:,.~ .... ,. _ ~ .... ~:~.: o~,=.,a=~= them as ':"~ ....... were .... ~our.'-,~ = ' ' ~'~ ~'-,',~-}~" ultimate 22 23 24 R & R DEPOSITIONS 277-4713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE. ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 24 25 stead ol sevan~ ~~ -, ~,~.b~' ... .... _3 i't on_ of 'd~ie ..... uz ~..~;~" that wa're develoulnS this '?ield - We ~.'~zil don~t se,~ "'~-~ ~ ...... ' ' ' ' ,~,'- - ' rate up here as haan ~o ' ~- ' ' ~o we can~ as zest as we c~. re in the business o~ nroducing, _ o-;~__. ¥'"~,;~ ;~'~-~-,,..~ to get t~,z~ u.~, . eon t see any conservation reason for no'U doing it~ and there is no other reason that this oon~n_ut~e o~ould consider other than a conserva- tion reason. I'm still arguing this '~',,'- ' 206!~ - :/~i~ on P, uze your state-wide ..... , .... it for it spacing rUle. mn~re may be some s~aau~o~y -~ you have to stretch the scapula ~ lon~ ~Z.y to say you can s~=ce the State of Alaska uniformly under this statute~ and yet ~ think the statute is clear that it au=nor~zes the kind of a ~ule we are aski~ ¢,n-'~=,, .... ~ and i don~t know~ i _~;~te~,~ to un=.~lenEe a man on . but I~m ~fraid Shell has a c.~zle~enu copy_ une i.0.C.C, mod. e~ act from the one I have. ~x~-' *'~ '- Ac is -- ~.z~ ,~m= t oatterened it - follows the same pattern~ but there are atot of ez~zerences z't~ and I ask you to ~e~ ~e zaeest copy of the ~ 0 ~ C model act and compare them. They're no= the same~ and' I think~ zran~y~ altzers ~ .... some of ~-~ ' ' '-h~ were r?mde ,.that way on ~.~= ways in wnzch it ~" - ~ a ~ L~ka : '~ ' and i nnznk there ~ s some good purpose because ~=_~ s difzeren~ thin~s in here because of that. A lot oz states sa~'s ~n ~e~ statute this re~uLr=msnt that each or~'~ng unzt h~, to be o~~ unz~ozm szze ~nd shape~ and on!x one well to a un~.~ and all that 277-47~3 WEST EIGHTH AVENUE - SUITe AHCHOI~AGE. ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 24 s'~uff~ and that wou£e~,'~t have fit Alaska. i ..... ''- 'va statute that=Sits you and we're =o=.=~.~~o~-~'-~ you to=n~==~ ~-~-~ an orcer' that fits us NOW ~' .~ne point's been made that 'this Order of course~ we can always come back and change it. So we:re drii- ' ~ ~_ose wells {n an ling wells right now~ and if we have to e. rzz! e~ . inefficient manner~ in a manner which requires us to incur expense we shouldn't incur~ or requires us to _ocane a well a !===ze bit different from how we would ~zme to locate i,~ just to take care of staying away from an arbitrary line that was drawn on the map~ with reference to i don't know what~ i guess you've got a land t , '- have based point somewhere ~-~ ..... u=.~ starts zrom~ tO do that~ when the te~.~,u~ ..... y order expires: we're not soinE to b{ . able to.get our money Dacm or to n~5 · ~.~ ~ .... aha= the zocaEion of ~he well. ~ , ' yes sut Or.mr ~ ~ So it's a ~emporary ' ~' ' ..... all of your orders are temeor- ary. You'Ve got the ~q~P~{-__o ..... to '~revm~w-~- them 'at any time~ but the damage wilt have been dena. We wii'i, have spent some meney we shouldn't have had to ..... ~ ~ ~en=,. We will cril! some dry holes we shouldn't nave had to drill We may have put them in a place we shouldn't have placed them. We admit thatwna~ ~= ~e're ~pz~.=sinS zs perhaps a little novel_ We admit we're pioneering and we d. on~t apologize for it. We 'think -,- ~ {' ' . The conditions in the we're en~itted Eo braS a iitEie ~l'c on it Cook inlet are novel, i don:t knew any place else in the world -~ ..... ~'- you ~' '~ in ~n~u nas some of the n-~oh!ems ~ ' R & 1:~ DEPOSITIONS 277-/~713 825 WEST EIGHTH AVENUE - SUITE ANCHOiRAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 °~.s i~ we aren't ~o~ne to aporoach some of these problems with an open mind and try some new a~osroachas, we're just not going to get the job done i_i~e it ough'c to be done. Sura~ wa can usa une ex- perience 'from other states. 'W'e could use the mistakes we~ve reade in other states and avoid them here, but we're just not going to be able to o. ev~!oo~ the ~i~ !nlet~ any_-~ield in ~ the way ~'~n~nss have been developed anywhere eise~ and we might as well '~ ~Ce UD tO the fact. Ne just don~t t~.n~ Rule _ 61 has any business appiyinS to the Cook inie~r in fact:, ~ .. ~zve it co~=slceration 'to filing an aoolicatio~,~ ~ .. with 3~ou to ju°~_ eliminate its aPoiication to the Cook ~n~ec. We may ba back hera to see you for that- 's' ] ..... unau they're going to Oh~ yes~ bnelz e~.~pressed some concern "-~ have to change their plan of oper .... ~ions to get up and off set us ~ .... -~ v ~-~=~ end then they ~on~t be able to accumulate all this in'" ~' "~'~ = ' =o .... =~on ~n=y seem to zee! is necessaY~y. Weli: we're going to have to change the way we would want to de- ~" I! .... ~ if the Cormnittee veiop our field to wait on o~e apparenczy~ doesn't see fit to grant our appl~ ~ Now i~'s not our fault tnau mney've got to go almost mnree times as far to get 'uP to that con. on boundary. They pua their -' "-'~ ' ' 'zney _ plau~orrn thare, naa ~he opportunity to locate t wherever nnef wad':tad to May be ~' ~:=f .were a little hasty. ~,iaybe they ~' "unzs thi':'~g that they're so azra~c~ of doing now and acted. . they did have the facts~ and maybe that's why we were a little " + ~ '~,~f~m in wa wa~ted to get it in and we la=e in get~ing our ~ ...... ~ . R ~ R 2~EPOo,T[ONS 277-4713 825 W~S7 ~IGHYH AV!NU~ - SUITf 5 ANCHORAGe, ALASKA 10 11 12 14 15 16 17 18 1¸9 2O 21 9.4 ' . zn:nk . nad to 60 have it ,_n exacEiy ~-' p~ce i if we today: we'd put it r~g~= bask where 4t As. m~= we dasnet ESi< them to wa~t to stern r~={-~ erA!!_~:S ooera~o~= = '-~ until ' our platform in~ and we don~t think we should he required to wait to conduct ' t - ~ ~ ~ wna we feel is the proper eeve~ooment of our uract ~ ~ · . · {~'~"- 4US until they're r~aay to let us do i~- Correlative r=a~:cs means the oopor, tunAuy~-~ '~-' and, not anything more than that. Thank you: gentlemen. CI%i!PdZhiN WILLIAMS: ! neglected to ask if there were question~ on Hr. Rudd"s statement: and i believe Mr. Marshall has one. : t d-~dn:t either. MR. izP~RSF=ALL· Joe ~ i '{,Rould like c far~ == ~-' i~Cag!OR OR our F{u!e . ertl=uae =ow~e.s i'E. i2~S i understand~ you Number A: and your ~-~' .... ~ .... ="'~' ' ~ ' .... _ !lum~er 26 have no objection to it a© ~,3,ritten in Conservation Order ~'~ but it was m~ understandzn$ ~a~ you sa!d that ~ou were ~n agree- ment with item a on ~aoe 5 ef Yen ,~, ~ ehearinS . ~-~m s app!icat~ .... which' covers this same !{uie .- ~' -- ~{~umue=x .... 4~ ~nan~" is~ and does 'this mean that you are Eot a v=~u===u, cep==~ce of item Number ~ of Pan Am~s appliCation for rehearing~ or are you in favor of the P, ule 4 as stated in' our conservation order? MR. R~JDD: Hr. liar~ ' ' tn=t we be"~(eve s~.a~l~ our oo-~nt there Is ' ~' ~ o~es°'~'~'ested revision of ii'uAe ../' which fan American has oresenteo.~ their petition is a :.~ ~a~e~=~c oz - -forAGes for now. ~'.~= ha.v.a 'no ~R~ , i-~ ' R & R DEPOS~T|ON$ 277-4713 825 WEST EIGHTH AVENUE - SUITE 5 ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 . ='~-=~~ Thank you Th~ ~{ill sim,:~ rewriting the Order~ ~,~hstev~r the case ,~-~s~,- se. One other ques- tLon~ Joe. You mentioned in your statement the adviseabiiity of cautious development to determine the limits of the field. Now the way it looks to me~ ~t= more cautious to probe for ~our limit by movin~ out 60 feet rather than .i9~0 feet~ which a~s the respective. ~de~= ~ -~'~'~ ~'~?-,'~-,o ~'~:o~,'~- ~g~,~_ ,_~ ..,~ as you would probe toward the field limit. Would you care ~o clarify that statement? ~us~. Yes~ i think two -~ .... n~,-~ ,-N~- n ' ' entirely course~ ';,~a certainly shouldn't be de'eendant/upon Ehe results of the last well in order to determine where ~o So with the next well Ne have structuralln~orma~ ': '=ion= ~ orisinaiiy seism!c~ .confirmed or ,.~oeif~ed by other drilling, We have goo!oEec Axmu~aum~n~'~r'~ .... ~'==~ of var~- . ou~ sorts derived z~om wells that have been drzzzea out there so that we're not really shooting in.the dark when we step out some aistance from the platform. We're steppzng ouu to wnau we hope will be close to,the edge of the fie!d~ but of course~ we . hope not to have a dry hoie~ bUt we ~op= to be able to determine from long step outs where that edge is. . . Now second!y~ perhaps cautious is not the proper word. Per- haps conservative Would be a better word. it is the position of ,::he!! that the. characteristics of uno' ~ produc=-~-~g sands '~-~n~oughout ubs area that can be reached from the platform ought to be deter?J~: F{ & R DEPOS{TIONS 277-4713 82~5 YVEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA 10 11 12¸ 1¸3 14 15 18 17 18 19 20 21 25 There ought to be some ~roduction history accumulated over a broad area of the ~eld, as broad ~.~ o~ be ..... ~._~ as can reached from that platform, in order tout'~-;-~-r'~.~~_.::_~ -~-h~ .... Eotal reservoir that they're going ~o be dee=z%S w~h, .... ~:~ those wells, _~,~ t. in these early stage~, o, concentrating__, on a narrow area where additional well does no~ expand your mnowzedge to any great oroao, est knowledge of the wnoze structure~ We far prefer to get the ~ ~ ' which can be reachedzrom = the p_a~zorm~7 ~ ~ an~ then concern ourselves ~ ~ ~ ..... ~ with the - with building up the rate of o~.e~'~tion~ ~ ~.~ ~ aha so ' _ nnay .... with zn fill welis~ i-F ~' tu~~. out to be necessary~ with second- ary recovery~ pressure mezn'~enance~ whatever turns ou= to be nec- essary. ~'~=,,. f~.ILSi~L~. Tb. ank you. "= believe y,c,~ wou!c agree~ cnouon~ i~ ' C~_~C ~ that ~x you found an ozl-wa, ter .~'r,'-~ ~- in the lower .sand of your ~ ~ your ~owest producing reservozr~ ~n= this may be promuce -- o- - very valuable information a~out picking your ~ ~- location zur~her out to the limit? ~gic~ ~nt~ ~' fami!ia'~ . ~ ~ ~ e~.~1 Z~m not SU ...... y iv~fc. RUDD: i wouzc~ zn ~ ....... with the geo~ _ zogy out ~-~-,'=r.g~ to know what ezfect' that mzgh'~ have on other ~oo!s. ]~. ~-~,o:~r,,~ ,' ~ ~ o-'- ~ "~ .... ~ ~ ' '~b_ank you }~i CP~NS ~ '' Tom % think -- maybe you ought to clarify here whether. ~oe's tes~_~v-~ne:~--~ as a b~o!oo~ t or are you srguzng a ~ a~,=~ er joe? (Ge~==~ ~ ~'~"~h "~'}l~. ~"r,~O~l ~ m ~-'?~ ~ ''''~ ....... "'~" ~a tO 13~$ ~"= .-~ -¢~' ~ ~ ,~n, lO~ < $'~ ~ & R DEPOSITIONS 277-47~3 825 WEST E~GHTH AVENUE - SUITE ANCHORAGE. ALASKA 10 11 12 13 14~ 15 16 17 18 19 2O fll 22 u~inm _ can ues'czry from wh, at was put ir~to the recoro sy cur witness last ~ime. ~~N - ~-F .... ! want I,'~~,~ he s =astztyzng as a to swenr .him in. (General_ ~,!~ugn~er2~" P~. SWAN: ~.,~e!i~ ~ _~ ~m~= his quaiificau~ons~ _ help. {General !aushter} CFAiP&'B_N WILLISEES ~ s~-=~ un~n~ we - OUgnL to able to swear in !awye-~s_ . Are ~-~-=~_e any fur. '~=n=z~- questions o-S_ Mr. ~;edde.~ , . Are there any further questions of Mr. Swan? I%d like to give Mr. Swan the last word here yet. I~. W~,'ouWA~T- Yes Y -- CPL~!PGZ~qN WILLi~{S' Do you have --- ............ ~-'~ ......... in ~;,~-~,~ to N~r. Swan~ about 'people at =~...se at this ~===-=~.,s~ ~-=.-~ ...... apparent sudden appearance of some of these~ wha'~ ma~ seem to be extraneous matters !~.tO our ~,n~ervetion Or,er. ~'~ ~an .- ~.~,. i~om 'the perimeter ~s '~?~ operatlo~i~z _~. p~ocedure whic' have usec un oUr day to day e'~suance of ==~'--=-~-o ~ ~ ~ '~n~ ....... p=zm==o~+~ as it af~ ~ -...-L - ~'~e approvi.__o zecuec ~..~.e .un~r~_, boundary, iln ~{-~-,.~v,~==_ words ~ when we ~= ~ permil ?;'i .... ~ .... "~ wa ~- feet zrom ~.=~t u. nz'c boundary~ we ':-ry~ to preserve the s~-'~:_u.a~o~.~'~-, _~ y,~u~ may say~ as it may affect t~-,is~?~==~-S~'~'~ ........ area so that '~cna~e-~ would z~ot~ ~ne a s~ ' ' ~ ~ ~" ' '~ S,O'Lir!O.~=~ ~ ~i~. ,s~:.z weil~ zur insta'nce~ ~zSnt oz! 'cna unit ~'~ ~ - !ins ~ by h~ ..... 277-/~713 825 WEST EIGHTH AVENUE - SUITE ANCHORAGE, ALASKA I a wall there: ca,~se~, a'._: ~.=,_,_~,:_,..~;,_ dralnzga o=c~'L,_or: '.'-or t:ka ~_~'-o~ow 9. outside t!.-~ unit who :,~',z wan:i~ "-o ~o ~n a very raguiar~ ~ 500 foot location. So thru. ..... ~7~:ot ~4 ..... ~ the ~,r ~ c:.~'~_ more or ~_~ ,~se~ by nadir z must admit '~- ~''- '~ ' · e~== A~ C.~tn. appear anywhere in the 'aestl- 5 mony. We thoush-c~ this was sort of a standard =~=~.~_ ~ o-~ course~ =~ : ._. -".=alzze 'cna cwo szc. es oz that Also ~n the way oz expzanaEion~ ';ye did not zntend~ ourin 8 last nearlnS on this ~' ~ ~ ' 9 pools. ~'~ ' ~nLs was sort. of an evolutionary development as we Wo'r~ed towards writing an 0-~,~ ..... ~ ~'n ~' Lye . that we ~ ~.~ ~ ~.~'.~. our =~'~=.~_ ~C~p~,i ptOt w~S ~_=_e z~ was non-revers"" iDLe 'CO gO ErOLs_ one pooz te seven poo/s~ or 12 more poo!s~ and it was '~}osslbie to ~'~':~-~ ' ,. ~r om o o I s · ~,.~,~a~ going seven p 1~ to ze,der poe!s~ and '~m{~ o;-~.~,.~, wa not ~ the ia .... o ~:o ......... ~ .... sc testimony and L4 we're eorry we had E~..ose stiz",~)rises in ~-~ ~uu ~n~.t $ ou'~- reasor~ ~cemen~_~~, c.~.~ ar~i'Crary o ..... wnzcn i 'believe 16 you were referrinS., to our {-e~?~,~hi.o_~ ,,~ ~. ~,~s ~,-a.nc~~ -o,~ system~ Z do believe 17 ~t~s probably '-'~ - ~:~..:?{.s of any ~tate in the _ Es_= most re:zularo arbitrar'~7, o ...... 18 Union. it's pro~-~-~ '~-~s ~':-~ F:= ~o~cc,:~. ,=~z over t ...... tire State. Y believe that 1~ iz we were tazmmnS ~ ook'6 ~ one or two wolf fie!d.~ ..... .... pu~ ' " A'.OSAOa.~ c. eve!oement of a a ~cremendous strain on the ~ ~-'= ' ~1 b iieve:in' a zie~,u, the s~; JYilo. de~o~,o.'~ ' Shoal tha't ?~,.~u matter' 22 where you p',+ .-~s ~-F -~t i ~. ' ~ ._. 24 O, i8~ce &'. ...... .3~ EL%~E ~i~e orl . ..~e~:~. or ERe'; o'~'u~r o~_ t[!e ': ....... at' q~-'{~ ..... ~ ...... would h~ve a 10 11 2O 25 277-4713 WEST EIGHTH AVENUE - SUITE ANCHORAGE. ALASKA ' 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 situation That was illogical, i ';chink t,3e field, is just 'that bis~ that some where you're ~o~r,o- to have an ine~ui~ uaole~ s~u~ -- - -~ .... any type o-~ o-~a ~ha~ you'J an itiogica~ situation anyway~ ~,~ try to ~mpose over ~n~s area i know thee so,ia ~.~:l,~ .......... F~:~ are ~oc~e~ that we do go by our ~~--~=~",-~ ' ~ ...... = ....~_z quarter secnion~ out actuaily~ on a~=tate-wide basis anyway~ it seems "-~o h,a about as '~s~u~=~ar a division as oossible' i'm saying ': ' ~= ~ - - - . . nnzs ina~zense o_{ the regula- tion. N~,. SWAN. Well~ maybe you ~rzlsunders+ ~ ~znm ~c s a perfectly proper grid to use where it's necessary to mark boundaries for" pr c and t s a '6~e ote tion of corre=~lve ~__ perzectly proper grid to u~= for zease ownersnzp, k!t wa:re say- ~:~- ~z lay the oil zzezd, down to comply ina is~ the Good Lord dze~: .... wz'~'~n it~ and where you c:.on~t have to foiiow it for uhos 'purposes: it doesn't rea-~ ~ ,'~' accompiis~ any'~'~ ~ ~ ~ ~ '- ~ -~p ~ aP.~ng znan $ ail we're ...... ~ s precisely my po t~ ~na~ any symetricat or unzform ,~'~' ~ over.an oil zzeld that~s~ say roughly~ nine miles !ong~ by virtue of the many spacing units in- voived~ I really do believe they~i~ average out~ one as coon as the other. Now maybe this is a point we should not further dis- ~ ~ but it ~ cuss ne=e~ s a matter of opinion. Ni SWAN' ~' ' znere is one '~oolnt ~ ~'-~'-~ e:~.~ .= ~nmn~ the ter wouze 1 to know about. Do we wane to do the same thing on the transcript as we did R & R DEPOSITIONS Z77-47~3 825 WEST EIGHTH AVENUE -- SUITE ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 than. ~'~ ~ gentleman. lg 2O ~ & ~ DEPOSITIONS 277-47 ~{ 3 ~325 WEST EIGHTH AVENUE -- SUITE 5 ANCHORAGE, ALASKA UNITED STATES OF A~MERICA ) STATE OF ALASKA ) .... ^,.~.~.,~.~....~ ....... !~.~. .... .~.!.e...~?~. ...... Notary Public, in and for ':iza State of Alaska, re- siding at Anchorage, Alaska, and Electronic reporter for 1{ & l:t Depositions, do hereby certify: ~ ' -.-:-o- ~" i~e~rozeum ~o:~e. s Appiicat~u That the m~exed ~d foregoing/d:~:~dSi~i.6~.. ' ~ ' ' ~ ~ ~ ' . .:k~.~.... J~.~. Q~ '.~ ~...Q. ~....em~.~.~.~¢.~.:~ Q re ................. was taken before me on the ..... ~..3.2J.~.....day of ..... '.-..,;.;~...'-..~.,,-.~.~.~;.,... 1966, beginning at the hour of ...... 91'.'35 a.m..., at the''~os~e-,eklS:..'~-' .... ~ .... -'~ .... ~ '~ .... lk/. ~, ;~.y ..... ~..~.~.¥; a,, M ,~ ~... ~z :;A~.~A .,~2:.:S,R .~ ............................ , Anchorage, Alaska, pursuant to Notice to take the deposition of said witness on behalf of ~a~e of Alaska Oil and. ~ ~-~ ion ~as o~.~oervat Cormnittee ~ .................... ~ ................................................................... } That the above.named witness, before examination, was duly swo~ to testi~ ~o the Muth, the whole truth, and not~g but the truth; That thzs ~eposztzon, as heretofore annexed, is a true and correct transcription of the testi- mony of said witness, taken by me electronically and thereafter transcribed by me: That the zd~p~S!!~i¥~iXhas been retained by me for the purpose of filing the same with the off~ _ _ .A.s.=~,,~.,.~.y...ea~ a~ ..=! .~.. =,o. .~:~=~,~~? ..... /~-~,'~ }~chorage, ~aska, as required by law. I am not a relative or employee or attorney or counsel of any of the parties, nor am I ' financially interested in this action. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this ...... '.-ki~.~ ..... day of ........... .C.l.c.'.'~..o...b...e.}i ......................... , 1966. P:<£-'z -z.~ ....... ' / ;",:~ .'~ ,' .". C/: +;:'/r Notaw Public' in and for Alaska P~n'ne j,/Cb, riveau commission expiros: ...a/.~At. 7. Q ................. R & R DEPOSIi"iONS P.O. BOX ~947 277-4713 ANCHORAGE. ALASKA FORM 1397 1-66, PAN AMEI CAN PETROLEUM CORPOILATION PRODUCING DEPARTMENT H. T. HUNTER DIVISION PRODUCTION MANAGER SECURITY LIFE BUILDING DENVER; COLORADO 80202 August 24, 1966 DISTRICT SUPERINTENDENTS W. M. JON:S A. E. PIPER T. M. CURTIS JOINT INTEREST SUPERINTENDENT S. B. RICHARDS File: SBR-391-9860511 Re: Petition for Rehearing Middle Ground Shoal Field Alaska k Ii ~ II L II III I II I II I , State of Alaska Department of Natural Resources Alaska Oil and Gas Conservation Committee 3001 iPorcupine Drive Anchorage, Alaska' Gentlemen: We transmit herewith three (3) copies of Pan American Petroleum Corporation's petition for rehearing and reconsideration and for amendment of Conservation Order No0 26o If the petition for rehearing is granted, we ask that notice be published as provided in the rules and served upon all interested parties and that the hearing be had without delay° Yours very truly, Att achment s cc: Mr. J0 T0 Doyle (3-w/a~tachments) Shell Oil Company 1008 West 6th Street Los Angeles, California 90054 PP,/ISION OF MII-,I['.-3 A>~C~O~(~ Mr° I), Ao Nabra, Jro Sinclair 0il and Gas Company 501 Lincoln Tower Building Denver ~ Colorado Mro C0 L0 Blacksher Skelly 'Oil Company Po O0 Box 1650 Tulsa, Oklahoma Mr~ To Lo Osborne Phillips Petroleum Company 1300 Security Life Building Denvem, Colorado STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS ALASKA OIL AND GAS CONSERVATION COMMITTEE 3001 Porcupine Drive Anchorage, Alaska RE: THE APPLICATION OF THE PAN AMERICAN ) PETROLEUM CORPORATION, covering the develop- ) ment of part of the MGS Field, for an exception ) to Section 2061.1 of the Alaska Oil and Gas ) Conservation Regulations, Title 11, AAC ) PETITION FOR REHEARING AND RECONSIDERATION AND FOR AMENDMENT OF CONSERVATION ORDER NO. 26 COMES NOW, PAN AMERICAN PETROLEUM CORPORATION, Applicant in the above entitled matter and respectfully petitions the Alaska Oil and Gas Conservation Committee for a rehearing on and a reconsideration of its application in the above matter and for an amendment or modification of Conservation Order No. 26, entered August 4, 1966, a copy of which was mailed to Applicant by letter, dated August ll, 1966. In support of its Petition for Rehearing and for Reconsideration, the Applicant states: · That there is now available new and additional evidence from the Pan American Petroleum Corporation State 17595 ~7 Well which could not have been presented at the hearing held July 12, 1966, which evidence is not merely cumulative, is competent, relevant and material, has a direct bearing upon the questions to be decided by the Committee, and will in Applicant's opinion require changes or modifications of Conservation Order No. 26, and particularly of Rule 3, thereof· 2. That certain provisions of Rules 1, 2, and 3 of Conservation Order No. 26 are not supported by evidence presented at the hearing and that if there is evidence to support these provisions this evidence should be made a part of the record by a supplemental hearing and Applicant and other interested parties should be given an opportunity to cross-examine the witnesses who present the evidence and to introduce evidence which might tend to explain, amplify, or contradict said evidence. 3. That certain provisions of Rules 1, 2, and 3 of Conservation Order No. 26 are contrary to and in conflict with the only evidence presented at said hearing which was competent, relevant, and material to said provisions. WHEREFORE, Applicant prays that the Committee set this matter for hearing, that notice of the hearing be given as required by the law and by the rules of the Committee, that upon such hearing all interested parties be given an opportunity to introduce additional evidence bearing upon the issues to be decided by the Committee, and that after such hearing, the Committee recon- sider each of the issues which has been presented to it for a decision and that it enter an Order substantially as prayed for in its original application, filed herein. In the alternative, in the event the Committee, upon reconsideration, finds that it should not enter an Order substantially as prayed for in the orig- inal application, Applicant requests that Conservation Order No. 26 be amended and modified. The manner in which Applicant requests that each rule be amended and the reasons for such amendment are as follows: ~ Applicant requests that Rule 1 be amended by deleting from said Rule the following language;" . . . or less than 500 feet from the lines forming the perimeter of the above described acreage." Said provision is not supported by any evidence introduced at the hearing held July 12, 1966 and is not necessary to protect correlative rights or to achieve the proper and efficient development of the area affected by the Order. 2. Applicant requests that Rule 2 be amended by adding thereto the following language' "A well shall be considered as having been completed in the quarter section in which it encountered the deepest interval in which it has been completed, and from which it is producing, regardless of the location at which it encountered any other pool or pools in which said well may.. have been completed and from which it may be producing." If Rule 2 is so amended, the desired spacing of wells will still be achieved and the operators will be given suffici- ent flexibility in the drilling, completing and producing of their wells so that the wells can be drilled, completed and produced in the most efficient and economical manner, Since the wide spacing required by Conservation Order No. 26 will require the drilling of wells from the platforms which deviate substantially from the vertical in order to develop the area subject to the Order, and since it is difficult to control the course of the wells precisely and difficult to determine before or during the drilling of a well, at what point ~ in its well bore it will leave one governmental quarter section and enter another governmental quarter section, this flexibility in completing a well is necessary to permit the operators to complete the wells in a manner which will allow the maximum recovery of oil from each pool. Applicant requests that Rule 3 be amended by changing the vertical limits of the oil pools as set out in said Rule 3 to read as follows° MGS Oil Pool A 5300 to 5720' MGS Oil Pool B -- 5720 to 6100' MGS Oil Pool C -- 6100 to 6400' MGS Oil Pool D -- 6400 to 6750' MGS Oil Pool E -- MGS Oil Pool F -- 6750 to 7050' 7050 to 7375' MGS Oil Pool G -- 7375 to 9215' In support of its request for this amendment, Applicant states - that it has since the hearing had July 12, 1966, completed Pan American Petroleum Corporation State 17595 ~7. Well, and has secured new evidence, not available at the time said hearing was held. That it has perforated said well in an inter- val which it believes is productive of oil and which it believes probably correlates with an interval which is included in MGS Oil Pool A, as defined by Rule 3, but which interval it believes should be included in. MGS Oil Pool B, as defined by Rule 3. Applicant believes that the aforementioned interval will be found productive of oil in other wells in the field and that where it is found to be productive, the production from this interval ~ should be commingled with the production from the oil producing intervals in MGS Oil Pool B, as it is presently defined, rather than from the other intervals in MGS Oil Pool A, as it is pre- sently defined. A requirement that this interval which appears at a depth of approximately 6430' to 6480' in MGS Well ~7 be produced separately from the oil being produced from MGS Oil Pool B, as it is now defined, would have the practical and mechanical effect that this interval could not be produced at all. As an alternative, if Rule 3 is not amended as requested, Operator requests that a specific exception be granted to it permitting it to produce the MGS ~7 Well from intervals below 6430' and above the top of MGS Oil Pool B, as presently defined, and to commingle said production with oil produced from MGS Oil Pool B. 4. Applicant requests that Rule 4 be amended to read as follows: Permissible Comminglin9. A well may be completed in and produced simultaneously from any one or more, or from all of the above seven pools provided that the production from the pools is adequately segregated in the well bore and produced at the surface so that the following requirements may be met- a. Production from MGS Oil Pool A, as defined in Rule 3, must be segregated in the same well bore from production originating from any other pool. b. Production from MGS Oil Pools B, C, and D, as defined in Rule 3, may be commingled in -5- the same well bore, but must be segregated from production from any other pool. c. Production from MGS Oil Pools E, F, and G, as defined in Rule 3, may be commingled in the same well bore, but must be segregated from production from any other pool ~ The reason for this change is to make it clear that multiple completions will be permitted where production is adequately segregated in the well bore. This may be implied in Conserva- tion Order No. 26, but Applicant believes it should be made clear. 5. Applicant requests that the final paragraph of Order No. 26 be amended to read as follows: ...~/~----~~ "This Order is made pursuant to Section 2061.3 of the ~ ',~-~,~ ~" .; Alaska Oil and Gas Conservation Regulations and shall con- ,...,. tinue in force for a period of not more than twelve (~) months~:~ -~. ~ ~ ~,~.,%~-A,~... 0..~,~., ~provided, however, that wells which have been drilled and completed and are being produced in compliance with the pro- visions of this Order, or any other Order of the Committee, may be produced in compliance with the terms of said Order not- withstanding the fact that such Order may have expired or have been terminated, or that there may be pending a request that said Order be modified or terminated, until such time as the Committee shall, after notice and hearing, enter an Order establishing different rules, requirements, or provisions. The Committee on its own motion, or at the request of any interested party, may at any time~ set this matter for further hearing for the purpose of determining whether the present Order should be ~ amended or modified. The Committee will, in the absence of a request of an interested party for a hearing at an earlier date, set this matter for hearing for a date which shall be not later than 30 days prior to the date of the expiration of this Order, for the purpose of deter- mining the proper spacing and field rules which should then be applicable to this field." There was general agreement that if sufficient evi- dence were not available at the time of the July 12, hearing, to determine what the spacing or well density wOuld be proper for efficient development, such information would become available within one year thereafter. 'We also think that all interested parties, and not just Pan American, should be charged with the responsibility of producing As a final alternative, the Applicant prays that, if upon Rehearing and Reconsideration, the Committee finds from the evidence in the record of the previous hearing and the subsequent hearing that the purpose of conservatiOn of oil and gas may be better accomplished by an Order containing provisions different from those prayed for in the original application, or in this application, and different from those contained in Conservation Order No. 26, that it enter . an Order containing such provisions as will from the evidence properly before it best accomplish the conservation of oil and gas within the area affected by the Order. Respectfully submitted, PAN AMERICAN PETROLEUM CORPORATION Its Attorneys -7- ADL 18772 GH,AKA~, , . ": "' OF EXGEPTIOH HAS :" REOU F$'1'£ D. : - T. 9 N ).. --- · .570 · .f
