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C)_~(~ Conservation Order Category Identifier Organizing RESCAN n Color items: [] Grayscale items: [] Poor Quality Originals: [] Other: NOTES: BY: ROBIN ~ Scanning Preparation DIGITAL DATA [] Diskettes, No. [] Other, No/Type OVERSIZED (Scannable with large (.~;;~,.,~1~ r/sca n ne r) Maps: Other items OVERSIZED (Not suitable for plotter/scanner, may work with 'log' scanner) [] Logs of various kinds [] Other ROBIN~ Production Scanning Stage I PAGE COUNT FROM SCANNED DOCUMENT: DATE: PAGE COUNT MATCHES NUMBER IN SCANNING PREPARATION: YES ~si NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: __ YES NO (SCANNING IS COMPLETE AT THIS POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO QUALrr¥, 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 99504 Re: THE APPLICATION OF MOBIL OIL CORPORATION ) covering the development of a prescribed area ) of the Granite Point Field for spacing ) exceptions to Section 2061(b) of the Alaska ) Oil and Gas Conservation Regulations and ) establishing of certain other field rules. ) Conservation Order #59 January 19, 1968 IT APPEARING THAT: 1. The Mobil Oil Corporation submitted a petition dated November 22, 1967, requesting the referenced exceptions. 2. Notice of the hearing was published in the Anchorage.Daily News on December 4, 1967. 3. A waiver of personal service was received from each of the affected parties. 4. A public hearing was held in the City Council Chambers of the Z. ~. Loussac Library on December 21, 1967. Testimony in support of the petition was presented by Mobil Oil Corporation and a protest to the spacing provisions only was presented by the Pan American Petroleum Corporation. AND IT FURTHER APPEARING THAT reservoir data presented at the hearing are adeqnate to determine that an exception to the acreage spacing.requirements of Section 2061(b) of the.Alaska Oii=!a~H~Gas Conservation Regulations is necessary for the affected area'hereinafter described. AND IT FURTHER APPEARING TRAT~there is, significant lensing of sands in the Middle Kenai Pool and inadeqUate.drainage.may result from 160-acre spacing and consequent loss of otherWis~'recoverable'hydrocarbonso AND IT FURTHER APPEARING THAT driili~g to a greater density than one well to 160 acres will be necessary to efficiently drain a greater number of sand lenses and recover a greater amount of hydrocarbons. AND IT FURTHER APP~iARING THAT insufficient testimony was presented to warrant a change in the statewide 1000 feet between well rule. However, CONSERVATION ORD~ #59 Page 2 January 19, 1968 testimony indicated that the 500 feet standoff from lease lines need only apply to a lease line where ownership changes because of the identical nature of royalty and working interest in leases held by the same company. AND IT FURTHER APPEARING THAT bottom hole pressures are dropping rapidly and some type of fluid injection program will be necessary in approximately one year's time to maintain reservoir pressure for maximum ultimate recovery and a spacing of two wells per governmental quarter section will offer greater fleXibility in an injection project at the earliest possible time. AND IT FURTHER APPEARING THAT well spacing of two wells per governmental quarter section will minimize the risks of step-out drilling and result in a minimum of unnecessary wells to effectively drain the pool. AND IT FURTHER APPEARING THAT the following field rules should be adopted for proper development of the pool. NOW, THEREFORE, IT IS ORDERED that the area described as follows is affected by this order: T 11 N - R 11 W~ S.M. Section 29: Ail Section 30: Ail Section 31: Ail Section 32: All T 11 N - R 12 W~ S.M. Section 25: E~NE¼, SE¼ Section 35: E% Section 36: All T 10 N - R 12 W, S.M. Section 1: All Section 2: Ail Section 11: Ail Section 12: All Section 13: Ail Section 14: All Section 15: E~SE¼ Section 22: NEW, NE¼, S%NE¼ SE~, SE¼SW¼ Section 23: Ail Section 24: All T 10 N - R 11 W, S.M. Section 5: Ail Section 6: Ail Section 7: Ail Section 8: All Section 18: Ail Section 19: All The following special rules apply to the aforementioned area: Rule 1. Pool Designation. The Middle Kenai Pool shall be designated as the interval which correlates with the interval 7725 feet to~'~00 feet in the Mobil-Union Granite Point #1 well. CONSERVATION ORD'__ #59 Page 3 January lC~~, 1968 Rule 2. Spacing,. No more than two completed oil wells shall be allowed in the Middle Kenai Pool on any governmental quarter section or governmental lot corresponding thereto. No oil well may be completed closer than 1000 feet to any well drilled to or capable of producing from the Middle Kenai Pool and at a distance of less than 500 feet from a lease line where ownership changes. Rule 3. Casing and Cementing .Requirements. Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the surface. The production string must be cemented with a sufficient volume of cement to extend at least 500 feet above the shoe or a volume sufficient to cover 100 feet above the top of the uppermost producing zone encountered in the well, whichever is greater. Rule 4. Bottom Hole Pressure Surveys.. A semiannual key well bottom hole pressure survey shall be made during the months of April and May and October and November with the results to be reported to the Committee by the end of June and December respectively each year. The operators in the area affected, with the approval of the Committee, will determine the datum, the wells to be included, the method to be used and the type of information to be secured. Bottom hole pressures obtained by a static build-up pressure survey, a 24-hour shut-in instantaneous test or a multiple flow rate test will be acceptable for this purpose. Survey results will be reported on Form P-12 or other appropriate means agreed to by the operators and the Committee. Rule 5. Gas-Oil Ratio Tests. A gas-oil ratio test of 24 hours'duration shall be made annually on each producing well in the affected area. The test will be made during the months of June and July and the results will be reported on Form P-9 by the end of' August of each year. The requirements of this rule will be waived if monthly reported oil and gas production is based on a gas-oil ratio test made at least every six months by the operator. ,, CONSERVATION ORDE~ ~59 Page 4 January 19, 1968 DONE at Anchorage, College, and Juneau, Alaska, and dated January 19, 1968. ,,. Thomas R. Marshall, Jr., cutive Secretary Alaska Oil and Gas Conservation Committee Concurrence: ,... ......... James A. Williams, Chairman Alaska Oil and Gas Conservation Committee Dale Wal'Iington, M~m~r Alaska Oil and Gas ~onservation Committee ~rl L. VonderAhe, Member Alaska Oil and Gas Conservation Committee ,~ ~/' c.-. ~..' Harry W. Kugle~, Member Alaska Oil and Gas Conservation Committee FORM 497 5- 65 PAN AMERICAN PETROLEUM CORPO ION SECURITY LIFE BUILDING DENVER, COLORADO 80202 December 28, 1967 File: AMR~2970~9860511 Re~. Field Rules for Granite Point Field Mro Thomas R, Marshall, Jr° Petroleum Supervisor Division of Mines and Minerals 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Mr° Marshall~ In its Application to you for Field Rules governing the Middle Kenai Pool in Granite Point Field, which was heard in a public hearing on December 21, 1967, Mobil suggested the following rule~ Rule 2 .... SRacing ~a.~er~n '[~ Oil wells .......... may be completed closer than 1,000 feet to any well drilled to or capable of producing from the Middle Kenai Pool, except 'that no oil well shall he completed at a distance of less than 500 feet from a lease line where ownership changes° During the hearing you requested that we furnish you our written comments on Mobil"s proposed rule0 We recommend that it he adopted in the Field Rules for Granite Point Field without any change° Our reasons are twofold.° l0 There is no practical need for an interwell footage limitation° The course of a deviated platform well is difficult to control° Wh'en an operator finds a drilling w~ll is approaching an existi,ng well, measures will be taken by that operator to purposely devi'ate the drilling well in such a manner as to complete the well a sufficient distance away 'to justify, from a reserve and drainage standpoinT, having drilled the well in the first .place° Economics as related to reserves that can be attributed to that well's drain- age radius will therefore be the criteria used by an operator to decide when a well is approaching too close' to an existing wello RECEIVED DIVISION OF MINES a MINERAL.,% ANCHORAGE Mro Thomas R0 Marshall, Jro December 28, 1967 Page 2 We interpret the language of Mobil's proposed rule to mean that no 500~ setback would be necessary from a boundary llne, between. two separate leases unless there was a difference in the ownership of either working interest,.overriding royalty or basic royalty interest0 A 500' setback requirement is advisable from a lease line where ownership changes0 In Granite Point Field, this requirement would apply along the common boundary between the Chakachatna leases and Mobil-Union acreage0 A setback requirement would be impractical between Chakachatna leases with different ADL numbers because owner- ship is known without question to be identical° There are no over- riding royalty interest owners under the Chakachatna leases in Granite Point° A setback requirement under these circumstances therefore would serve no useful conservation purpose° If it were adopted, however, it would hinder Pan American in its efforts to drill and complete wells at minimum expense on its common ownership leases° Economics, as related to reserves that can he attributed to that well~s drainage radius, once again will he the criteria used hy an operator to decide when a well is approaching too close to an existing well0 We thank, you for the opPortunity to provide o,ur recommendation on Rule 2 (a) and our reasons in support of that reeommendationo Yours very truly, cc: Mr° James Aa Williams Director Division of Mines and Minerals Box 5~300 College, Alaska Mr° Wes Christensen Mobil Oil Corporation Po O0 Box 1734 Anchorage, Alaska Mr° J0 L~ White Mobil Oil Corporation Po O0 Box 2122 Terminal Annex Los Angeles, California RECEIVED ANCHORAGE Mr0 H0 Wo Patterson ~ Phillips Mr0 F0 Lo Franz ~ Skelly Mr° W0 P0 Whitmore - Skelly Mr~ Fo K0 Krebill ~ Anchorage Mr° T0 J~ Files ~ Building 10 11 14 15 16 17 18 '19 20 21 ItEARING OF THE STATE OIL AND GAS CONSERVATION COMMITTEE WITH REGARDS TO 80-ACRE SPACING, GP~ANITE POINT FIELD Conservation File #59 & 1R COURT REPO~RTERS WEST EIGHTH AVENUE ~ SUITE 277.4713 ANCHORAGE. ALASKA 10 11 14 15 16 17 18 19 20 21 -2- PROCEEDINGS 'CHAIRMAN: This is a hearing by the Alaska Oil and Gas Conservation Committee on an application by Mobil Oil Corporation for an Order prescribing field rules for the development of the · Middle Kenai Oil Pool of the Granite Point Field. The request rules would allow for 80-acre spacing, if adopted. Notice of this hearing was published on December 4, and waivet~s of personal service of the notice were obtained from affected operators. Here on the Committee today, in addition to myself, Williams, we have Mro Marshall, Executive Secretary, Mr. W~ilingt¢ Mr'. Vonder Ahe, Mr. Kugler as members; Mr. Larson and Mr° Gil- 'breth as techniCaI'ad~isors; and Mr, Hartig as our legal counsel. Witnesses will be sworn in and will identify them- selves for the record, and will also have to be qualified if they have not previously~ been qualified before this Committee. Mr. Stevens, would you care to proceed? MR. STEVENS: Thank~you~ Mr. Chairman° I would like to formally enter my appearances Ted Stevens as attorney for Mobil Oil Corporation. I have a brief introduction and th~n I would like to present the qualifications of the witnesses which we offer, if you'll permit me to do so. (Mr. Stevens reads a prepared statement' which has been made a part of the transcript, and attached to it.) Gentlemen,~ I've given you copies of the exhibit that we will offer. These have been prepared generally under & R COUR:T RE~O~TERS WEST EIGHTH AVENUE -- SUITE 277-/~713 ANCHORAGE, ALASKA n, 10 11 14 15 16 17 18 19 2O 21 22 23 2~ 25 the supervision of Mr. Woodruff and he will identify them. ~. CREWS: l{r. Williams, if it pleases the Conservatio~ Committee, my name is Ralph Crews, and I~m the attorney for Pan American, and i would like to introduce in turn Oscar Swan, the company attorney for Pan American Petroleum who has a motion to make at this time. MRo SWAN: Mr. Chairman, before we proceed with the evi~ dence in this hearing, we would like to have clarified what can ! be considered by the Committee in this hearing. It's our feeling that when the matter is open for consideration of field rules, theft the Committee should consider any field rules which may be neces- sary to supplement the statewide rules or to modify the statewide rules. In other words, the entire question of w. hat field rule~ should be adopted should be considered in one matter. Because of this feeling we filed with the Committee an application to extend the scope of the hearing and to consider the advisability of field rules similar to those which have been entered in the Middl~ Ground Shoal Field permitting fluid injection tests -- not for a full scale fluid injection program, because we don~t b~ve the information yet, but permitting these tests and permitting the establishment of an injection program along the common boundary between the Mobil leases and the others. Apparently our filing of this has caused some questions. It's our feeling that we prob~ could have raised these same questions today at the hearing witho~ having filed anything, but we felt the Committee and all interest~ & IR COU1RT t~EPOi~TE~S WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAGE, ALASKA Mines &Min. ~, ~ ~,~ ~lJiv.. ,~ ~,~,~ caticm~. Inc. wi~ the ~in~ ff~' i/may b~ mproduo~ for int~-comp~ny u~ only. .biy :t :d 2 10 11 14 15 16 17 18 19 2O 21 22 24 25 -4- parties should be advised as soon as possible of what our conten- tions were going to be. The Committee has set our application as a separate matter later in the day. It's our feeling that these matters should be consolidated for hearing, and i so move at this time that they be consolidated for hearing, because we feel that the Order on field rules should be an Order which makes the findir~ on all necessary field rules; that it should not be tried piece- meal. If the Con~nittee feels that these matters cannot be consol- idated for hearing, then we move that the matter be continued un- til proper notices can be given and they can be consolidated for hearing, and I think we should have a ruling on the scope of the hearing at this time. If they cannot be consolidated then we are going to oppose the request Of~ Mobil for 80-acre well density or spacing as provided in the Rule 2. Mr. Stevens is correct. There is very little dispute on any of the other Rules, and this our p~osition at this time. We would like to have the Con~mittee r~ to what the scope of the hearing will be. CtiAIP~MAN: Mr. Stevens~ do you have any comments with regard to Oscar Swan's motion? MRo STEVENS: Well, Mr. Chairman, we'feel that we're uno the general field of pool regulation and classification section which is Regulation 2004. We~ve made the request, and the Commit tee at the request of any interested par~y can hold a hearing suc] as has been scheduled here and can issue an Order prescribing any necessary field rules. ! don~t argue with Mr. Swan~s interpreta- l~ & ~: COURT IREPO~TE~:S 825 WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAGE, ALASKA $ le a~ er 2 !1 14 15 17 18 19 2O 21 22 24 25 tion that the Committee should come out with one Order as a result of both applications, but I don~t think that he can at this time enlarge the concept of the matter that has been placed before the Committee on the basis Of our request, we have a request and they have a request, and the net result will be an Orde~ of the Com- mittee, I presume, which will be one establishing field rules for the development of the whole Pool. But we feel that we have presented the application and have the burden of coming forth with the evidence now to justify our field rules. If they have presented an application then they have the burden of coming forth with justifying their field rules. If Mr. Swan~s request oz motion is granted it places us in the strange position of h=vlno the burden of coming forward on ours and oppose theirs at the same time. I think that the basic question they should -- of keeping the evidence straight is -- the net result will be the sable as far as t~he Committee's action is concerned, but i do think we / should -- in the interest of the order of the hearing, be permit- ted to present our evidence and answer questions on that and hear objections to the field rules that we have proposed~ and then have the opportunity to listen to Pan American's justification of their proposed field rules -- which~cidentally i don~t be- lieve is a field rule but they have presented an application form, they have ~he.:~r±g~ht.~to come in and justify it as being such; and then permit us to answer their app!ication~ It does not ap- pear to us that the two are ~elated. I don~t think that there's IR & r~ COURT tREPOF~tE~S 825 WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHOIRAGE, ALASKA -5- ~ · ,~,.~ ~Div. Of Mines &Min.. ,,o~ ~.,~,~ I~tioe~, Inc. wi~n ~ undenr'~e~dtng ~ It mey be f~roduceci ~ Inter<ompeny u~e onJy. i 10 11 14 15 16 17 18 19 2O 21 anything in their application which could not be considered separately from the matters that we originally presented. Beyond that, ~. Chairman, I think it's a dangerous precedent to permit the filing of an application and then to permit it to be enlarged at the time of the hearing beyond the scope of the original notic~ Our notice was for the five rules we presented, and we're here at 9:30 for that hearing. I think the hearing at 1:30 should be ~ conducted as the Committee originally intended. As for the motio~ for continuance, I don't think there's any justification for con- tinuing this hearing until any ,motion could he filed or. any notice could be filed. Their notice was actually timely; today is the 10th day for their notice, and I think the hearing should proceed Basically it does not appear to us that we should be denied the right to positively present the testimony to justify the actions we seek because they have taken the procedural steps that they di~ I agree with Mr. Swan that they could have protested our applica- tion and I also agree with him that they can appear here today an~ protest without having filed a formal protest under this section, having taken the action they did~ I think they have the burden of going ahead with that application. If Mr. Swan's motion was grant Mr. Chairman, we could well dispose of the whole matter this morn and~ this afternoon people who might be' interested in Pan American application would come and find the hearing over. ! think having filed their application they must proceed and carry it out. MR. SWAN':~ Mr. Chairman, the parties are identical. I WEST EIGHTH AVENUE -- SUITE 277-47~3 ANCHORAGE, A~SKA Mines catlc~ ~ wilh ~ ~:~ ~ ~ ~y ~ ~ ~ Info.ny u~ ~. but ed, ng an't imagine anybody showing up this afternoon who's not here today. Mobil represents itself and Union; we represent the Chakachatna group. We're the only affected operators. We th~n'~ the matter can be heard at one time. Evidence which we have as profest is 10 11 12 14 15 16 17 18 19 2O 21 25 also evidence that is material in supporting our own application. ! agree with Mr Stevens tm=t we do raise question on who has the burden of proof on certain matters, and he has the burden of proof on his part of the consolidated application and we have the burden of proof on our part, and that's a detail that we can work out. i don~t think we'll have any trouble. I think the Contmittec will just hear a great deal of this -- these two cases~ twice if they are not consolidated for hearing. I~m trying to save the Committee some time and us some time. I~m trying to get the matter presented to the Co~mnittee in its proper perspective. Now, we're not interlopers in this field; we have two of the three platforms in the field. Our interest in here is at least as great as Mobil~s~ and I don~t think they can limit the Corm~ittee~s inqui into field rules by simply limiting what they put in their appli- cation. When they open it, t think it's opened it for all purposes. CI~IRMAN: We ~il have a short recess. (At 9:45 proceedings were recessed until 9:50 a~m.) !(ON aECOmO) CHAIR~MAN: Mr. Swan, I~m going to deny your Motion. think we should not consolidate the two hearings. We will have ~ ~ ,~,.~ ~,Div. of Mines &Min.. ,.~ ~.~,.~ ~ inc. with ~ ~t~ ~ ~ ~y ~ ~ ~ in~ny u~ ~. 1 & R COURT REPORTERS WEST EIGHTH AVENUE ~ SUITE ~; 277-47~3 ANCHORAGE, ALASKA ry 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the hearing as requested at !:00 p.m. I think this is proper. I will say further if you want to rest your case this afternoon on the record ~khat is presented this morning, if it's agreeable with Mobil people~ this would be proper. Motion is denied. You do -- of course, you do have the right to protest this morning and Unionhas the right to protest this afternoon. I mean Mobil, Mobil Union. Mobil is the principal here. ~o SWAN: Well, i think my argument on the motion is sufficient for an opening statement also. I think we are ready tc proceed. P~Ro STEVENS: Thank you, may we proceed then Mr o Chairm~ MR. WILLIAMS: proceed' Mr. Stevens,~ ~ ~ ' MR. WOODRUFF: I'm C. C. Woodruff, Area Engineer for Mobil Oil Corporation, and I would first -- CHAIP~-&~: Mr. Woodruff~ you'l! need to be sworn. We can swear in all three witness actually at the same time° (C.C. Woodruff, Hoyle Hamilton and M° J. Meyer are sworn in by Mr. Marshall) (Mr. C. C. Woodruff then reads a prepared statement whiCh is made a part of this transcript and appended to it. Also made a part of the transcript and appended to it was a series of questions and answers asked by ME. Stevens and answered by Mr. Woodruff.) MR1. STEVENS: Mr. Chairman~ I find I did not give ~/ou the copy of the statements, I have them here But, give them to you in just .a moment° If I may~ we've got a series of just short questions to pinpoint Mr. Woodru! 825 WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAGE, ALASKA Mines &Min. ~t~o~ Inc. w~n ~e undee~m~lng ~ I~r~y ~e reproduced fo~ lntee~omp~ny use n? f~s -9- i0 11 12 13 14 15 16 I? 18 19 2O 21 22 2~ main points if i may ask 'these to him. !v[r. Woodruff, is it your opinion that the development of the ~!iddle Kenai Pool on 80 acre spacing will resui= in the penetration of additional o=nd lenses which will result in a more effective drainage of the sands? MR. WOODRUFF: Yes, unless an 80-acre spacing Order I is issued, sand bodies will be missed ~togetner or they will not be penetrated in enough~we!!s ~o be effectivel~ drained regardless of the recove=y mechanism, thereby [ causing waste of oil reserves. MRo STEVENS: The, it is your opinion that additional reserves will be recovered if the 80-acre spacing is granted ? MR. WOODRUFF: That is correct. In addition to the need for 80-acre spacing to adequately drain the lenticutar sands in the Middle Kenai Pool, I W. ould like to emphasize again that we must make every effort to recover the reserves before the life of the facilities is reached. Unies.s this field is 'developed on 80-acre spacing, we will fall short of making our best effort and could leave millions of barrels of oil in the ground that could otherwise be recovered. M~. STEVENS: It is correct that in your opinion the development of the field on 80-acre spacing would minimize the drilling of an economic or dry holes in stepping out to delineate the limits of the reservoir. FLR. WOODRUFF: Yes~ steep dips~ possible faulting, erratic sand deposits and unknown water tables smoke the remaining stepouts on 160-acre spacing extremely risky. This would lead to economic waste. MR. STEVENS: Is it urgent that an 80-acre spacing Order be granted now? MR. WOODRUFF; Yes~ in order to minimize the investment committed ~o high risk wells which would occur under the present spacing rules, we need an 80-acre spacing order now. MR° STEVENS: And as I understand from what you said, you believe 80 acre spacing is justified for primary recovery alone~ is that right? 25 ~.., ~ .~,~ ~i)iv. of Mines &Min.. ,=. ~,~. inc. with fl~e und~',d;r~ ~ ~'me¥ be mprodu~:d for Int~'-c~ml~iny u~ only. MR. WOODRUFF: That is right. & F~ COU~t I~PO~TE~S WEST EIGHTH AVENUE ~ SUITE 277-4713 ANCHORAGE, ALASKA 10 11 14. 15 16 17 18 19 fil ~,~ STEVENS in your opinion would 80-acre spacing also result in advantages for fluid injection? -i0- MiR. STEVENS: Do you believe that the granting of an 80-acre spacing Order now would have a de~.i'menta! effect on the results of fluid injection? MR. WOODRUFF: I do not, we are keeping a close surveillance on reservoir performace and will continue to do so. We will exercise proper control to optimise economic recovery. FIRo STEVENS: As I understand your testimony~ you believe that fluid injection would increase the recovery over that from primary depletion and that ~he granting, of 80-acre spacing now would not delay the iniatiOn of fluid inj~cti°n but could bring about earlier field-wide fluid injection. MR. WOODRUFF: That is correct. MR. STEVENS: Are you in fact now taking steps to make a water injectivity test into the Middle Kenai Pool? ~o WOODRUFF: Yes, we are now drilling our well number 11-24. We expect this well to be completed within 2 or 3 weeks° We have ordered down hole completion equipment for this well which will permit us to make such tests. We are not designing surface equipment for this test. MR. STEVENS: In your opinion, Mr o Woodruff~ can one well drain 160 acres? MR. WOODRUFF: Theoretically, yes~ If all of the. potential sounds in a given 160 acres are penetrated by that well, and given sufficient time to produce all of the oil. But as a practical matter th~_: reserves can be increased by closer spacing .because of the amount of time on production affects the amount of oil produced. And this time is controlled by economic & r COURT FIEPO~TEIRS WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAGE, ALASKA MRo WOODRUFF: Yes, we believe the flexibility which 80 acre spacing can provide over 160'acre spacing to balance and control fluid movement and therefore improve recovery. This will increase the probability of a successful fluid injection program. 10 11 14 15 16 17 18 19 21 -II- factors, such as the life of platforms and facilities and operating costs. Also as mentioned previously, 80-acre spacing could be expected to result in the penetration of sound lenses in more optimum positions and p::oduce oil ~,~hich might not be available to wells drilled on !60-acre spacing. This effect would be amphlified under fluid injection, MR. STEVENS: Do i understand you.correctly that in you~ opinion the requested field rules are sufficient for the development of the Middle Keni Pool of the Granite Point Field and no other rules are needed? MR. WOODRUFF: That is correct. MR. S.~mV~.NS: Mr. Chairman, as I mentzonea at the beginning of the testimony~ we~ve given our considerati~ and most of our time to the 80-acre spacing Order and we believe this action is in line, that is the action we~ve requested, is in line with action taken by the Committee on all producing oil fields in the Cook~ Inlet and the Kenai PeninSul, a and the action has been granted in all of these other areas where it has been requested. MR. STEVENS: That completes our formal testimony. Aga{n I want to say I'm sorry ! didn't give you these earlier. C~i~IP~-~: At this time, I'd like to inquire if the t Pan ~nericen~peopie or anyone else in the audience would like to inspect these exhibits more closely. If so, we'll call a brief recess for that purpose. (Continued on next page) WEST EIGHTH AVENUE- SUITE 277-47~3 ANCHORAGE, ALASKA 10 11 14 15 16 17 18 19 20 21 22 24 25 (At 10:20 a.m. a brief recess was called until !0:25-a.~,.) CO O) C~iIRM._&N: Does any member of the Com~ittee or our advisOrs have questions to direct to this Mr. Woodruff or Mr. Stevens ? MR. MARSI~,LL: Yes, I have a question. CHAIRMAN: Mr. Marshall. I~R. MARSHALL: Mr. Woodruff, you indicated that the sam' of the reservoir fluids were very simiEar with/-- I believe it -- it was a two-mile radius or two miles between the two wells teste . How does this fit into the allegation that there is a great deal of lenticularity and a pos&ibility of isolated reservoirs in this area? Was that ~i~ particular massive sand or that your reservoir sample were made, correlative saflds? MR. WOODRUFF: No. The samples, at least on the Mobil ~'ell that was tested, were surface samples, recomined samples, that were used for the PVT analysis, and so it represented production from all the sands which were open; and we feel, and I believe the same was true of Pan American, that they would have to add to this for sure but the thing that this indicates to us is that in these two wells this far apart we~ve caught samples coming from all of the zones, and there are undoubtedly different sand interva that were opened in the two wells, and yet the results of the PVT analysis were just almost identical° We feel that this indicates that the fluids in the sands, even though they may not be a cormmo~ & IR COU~T IREPO~TERS WEST EI~HTH AVENUE -- SUITE 277-4713 ANCHORAGE, ALASKA Of' Mines I ~ ~ .~,.~ ~,Div. &Min.. ,~. ~,,~. ~ inc. wi~n lfle under~tnding tt',et It rally be reproduced fo~ Intes'-compony u~e ~'~ly. !es Is 10 !1 13 14 15 17 18 19 20 21 22 24 25 -13- reservoir, theyVre still -- essentially the fluids are identical, the characteristics of the fluids. ~. I~RSH~LL: Another question. Has you subsurface w& information substantiated your seismic faulting which you indica- ted on one of your exhibits? MR. WOODR~jFF: Tom, I may have to rarer to Jack on this but it -- we cannot say that we definitely have encountered any faults in the wells that we"ve drilled. We have these anomalies the seismic work that shows something here° We dould find some- thing in the wells that could be a fault but still there is not enough of an anomaly here that -- we could still get good correlai without calling it a fault, so, no, we have not really substantia it but feel they might be there. MRo MARSHALL: Thank you. MRo GILBRETH: Mr. Woodruff, has your company or has an' of the operators in the field tested these small stringers that you speak of to know that they are oil productive? Do you have information to show that they are oil prod~ntive? ~. WOODRUFF: Not in -~ as to~ the amount of oil that t~ give up. We have them open. in some of the wells, but as far as the specific tests showing a well, on Granite Point :/Jl~ we did te one of these small lenses and it did give up production, i beiiew at the rate of some seventy barrels per day. MR. GILBRETH: I believe you stated that the cost of th~ well was something in the order of one and a quarter million dol ~_ iars. Do you believe that the additional recovery~ the .gain due IR & R COUR%' R~PORTE~S 82S WEST EIGHTH AVENUE ~ SUITE 5 277-47~3 ANCHORAGE, ALASKA ion ed .ey to in-fill development would return this much additional money? MRo WOODRUFF: Our economics show that it would be econ mic. 1C%. GiLBRETH: You're aware that the Corm~.ittee is charge with the responsibili'cy of preventing, waste and protection of ~d correlative rights. Are you aware of the five percent royaly - 10 11 16 15 16 17 18 19 fi0 fil 25 discovery' royalty aware in this case? If eighty-acre spacing is approved 'will the correlative rights of all owners in the Pool be protected, in your opinion? MRo WOODRUFF: Yes~ I think that ~they would be. Each lease owner had and will continue to have the same opportunity to develop and produce their respective leases on an equal and com- petitive basis irregardless of whether it's 80~s or 160's. MR. GILBRETH: What about the royalty owner, Chariie? The State of Alaska is the royalty owner under the Mobil lease., fc example. If the recoveries are accelerated, will their rights be protected? MR. WOODRUFF: In my opinion, yes. MRo GILBPCETH: Do you think the additional recovery due to the 80-acre spacing would offset any loss that they might suffer through additional royalty? MRo WOODRUFF: t certainly do o Milt. GILBRETH: What about the gas production? At the present time there's approximately 900,000,000 cubic feet of gas a month being flared on Granite Point. If t. wice as many wells ~ ~ ~,~ wDiv. Mines &Min.. ~o~ ~,~ ~ Inc. with the ~l~ll~;~'~ln~ & R COURT REPORTERS WEST EIGHTH AVENUE -- SUITE IS 277.A713 ANCHORAGe. AkASKA 10 11 14 15 16 17 18 19 2O 21 22 24 25 ~ ~,~,~ ~f)iv. of Mines &Min.. f~ ~.~,~ Inc. with the unde~tendlng that it may be mproduc:~d fro' Intm'.compeny u~u only. -.15- are permitted what happens to the gas production? ~. WOODRUFF- Well, of courseD any time you produce a barrel of oil there's so much gas in solution and you've got .to produce that gas with it. CerLazn!y ~e of the industry as a whole i'm sure you're aware, are trying to do something to create a sale for this gas. We at this time do not think that it involves an economic waste. You can look at it from the standpoint that right now the gas-oil ratios in the field are under 1000 cubic feet per barrei~ so this means that we're talking about the value of the gas being something probably under 15':cents for every barr~ of $ 3.00 oil. ~ We're aware of this fact though, that we are flari the gas. The industry as a whole is making a study right now, trying to evaluate the economics of building a central gas pro- cessing plant to take care of this gas. Certainly we're going to continue to do everything we can to find a sale or a source for marketing this gas~ but right now it just doesn't exist. I~Ro GiLBRETH: If additional wells are drilled through, the oil production will increase significantly in the fie!d,~is that not right? MR. WOODRUFF: Yes, over a period of time it could, Easy, we feel like, based on our present development plans which we~ve built up, that there would really be not too much differenc~ or very little difference in the amount of oil produced under eit? program, say, over the next year to year and a half, and hopefuil5 by that time we can have something or some source ~.o_ disposing o the gas. ~ a ~ COU~T ~O~tE~S 82~ WEST EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE, ALASKA' ng 10 11 13 14 15 16 17 18 19 2O 21 ~XfRo GILBRETH: You mentioned, Charlie, that .you felt th~ t it's perhaps too late for the Committee to try and vertical segregation here, even if these were separate stringers or sepa- rate reservoirs or separate pools° Do you feel that if any separation is to be made it should be made very early in the life of the field? When is the time for this? MR. WOODRUFF: W. ell~ i think in this case if this reser voit continues to perform like it has up til now that then as far as we can tell there's all these sands being essentially equivalent as far as the sand characteristics, the fluid characte - istics, that they will perform essentially identical. We feel like that r~eaily the first real need for anything like this would probably be under a secondary recovery program when we start in- jection some fluids° -And certainly we as prudent operators are going to do everything we can to optimize the economic recovery of all the re'serves we can get. As I~ve stated, we very well may want to set up some segregation in our injection wells to try to control the injection into some of the sands. ~o GZLBRETH .... · .in your Rule 4 you've provided for bottom- hole pressure surveys with the first one to be made during the months of June and July of this year. Are any surveys or pressures being taken now by the operators in the fields? MR. WOODRUFF: Oh,. yes. We"ve run a number of surveys, just straight static bottom-hole pressures as well as variable flow rate and buildup pressures, i believe we~ve run static R & R COURT I~EPO~TE~S 82~ WEST EIGHTH AVENUE -- :SUITE 277-4713 ..... ~ ~ ANCHORAGE, ALASKA ~ ~. '. of Mines &Min.. ,~ ~.~ ~ with ~ ~ ~ ~ ~y ~ ~ ~ info.ny u~ ~. ............................................................................................................................................................................................................................................................................................................................................................................................ 10 I1 14 15 !6 17 18 19 2O 21 23 25 pressures on all of our wells, and on several occasions and have the variable flow rate buildup tests at least one time, and on all but one well and two times on several wells. MR. GiLBRETH: Do you believe that the provision for -- as one of the alternatives here for a 24-hour shutin would give good reservoir pressure information in this particular field? MR. WOODRUFF: Well, we feel like the Kay well test gives better information and this allows us better to run these variable flow rate and pressure buildup tests. Mcw, I believe, Hoyle, you can correct me if I'm wrong, but on the variable flow rate the buildup portion of this test, we had not reached static pressure in 24 hours. We had not° MR o GILBRETH: How long a time does it take to reach thJ MR. WOODRUFF: Well~ of course, on the buildup type ana ysis you don Wt necessarily have to get to this point. You can plo your curve and extrapolate it, and again, I'm going to have to re this to Hoy!e. Do you have an idea~ Hoyie, from the data you've seen? M~. HAMILTON: The 24-hour buildup although -- what we~ve seen in some cases have not reached what we thought was the static. It did approach it very close. It doesn't take much extrapolation. MR° GILBRETH: I see. You can safely extrapolate then. CHAiRMAn,: Thank you, Mr. Vonder Abe? PfRo VO~YDER AHE: In respect to that 500 feet of cement , ~.~ ~ .~,~ ~Div. of Mines .&Min.. ~. ~m~ Ir~ with ~'he ~t~nc~ing ~ Itn~y be mproduc~ fo~ Int~.comp~ny use ~R & F~ COU~T tREPO~TEIRS WEST EIGHTH AVENUE -- SUITE 277-47~3 ANCHORAGE, ALASKA .s? er 10 11 14 15 16 17 18 19 2O 21 22 25 Mines &Min. in carrying the cement 500 feet above the bottom of the casing or to the top of the producing zone, don.~t you feel that that should read at least i00 feet above the top of the producing zone? MR. WOODRUFF: Wells our intest of course would never b~ to leave the well in such a condition that we thought there was ! any chance for communication through zones above the oroducing ! zones, and we never -- we always set them up to get considerably more than even the hundred feet. As far as i know we would have no objection to a hundred foot minimum above. MR. LARSON: I have a few questions, Mr. Chairman. Ct~IRMAN: Mr. Larson. MR. LARSON: You have stated .that -- 80-acre spacing wm Id give you an increase in reserves, regardless of whether you -- if you discount the additional sands penetrated. By this i infer that you mean you will be able to get the reserves out faster and you will be able to get them out in the economic life period of the equipment ? MR. WOODRUFF: That ' s correct. MR. LARSON' Do you have a minimum thickness of these various sand lenses that you do perforate? I~R. WOODRUFF: Let me refer this question to Mr. l~eyer, if I can. PfR. lg~EYER: To that I'd say no, that wherever we have sand indicated then ~e have mud loggers on the -- all our wells have had since initiation and some of our logs -- are you probab!~ well know are -- have been logged in %niet mud, in salt::mud~ 'and ~ & R COUF~ IR~PO~TERS 825 WEST EIGHTH AVENUE -- SUITE ~ 277-4713 ANCHORAGE. ALASKA 10 I1 12 13 ~ ,, ,~v,~ ~,Div. of Mines &Min. Inc. with the und~'~t~nc~ir~ t~t it r~y be reproduced for int~.eomp~ny u~ 1 in some cases porous, so we back this up with the mud log, and 2 where we have shows and porosity~ sand indication, gan~ma ray, all 3 these factors we do perforate essentially under any thickness. 4 MR. LARSON: In other wo~ds~ you do give fairly compre- 5 hensive perforation into all possible productive intervals? 6 MR. ~z~YER: Where at all possible, we have perforated a t ? productive sands. $ MR. LARSON: Have you encountered any water in any of t~.ese 9 sands? Or is a water lens indicated in these other sands? Fflt. WOODRUFF: We have -- as I stated in the tes~imony~ in our well 33-13 we ran some DST's in some of the sands in the lower part of the Kenai interval, and did establish water up to a subsea of about a minus 10,200. We have not preforated any 1~ intervals that gave up water above that subsea depth. 15 MR. LARSON: Have you ever run any well interference te ts i~ to determine what possible communication though the reservoirs 17 might be ? 18 1~l. WOODRUFF: No, not as such. No. 19 MR. LARSON: This .request for no minimum distance between 20 wells, may this not work a hardship in some cases by getting the 2! wells too close together? 22 MR. WOODRUFF: Well, of course, we would not as prudent 2~ operators get these wells so close together; if we get them too 2~ close together then really you hurt yourself, and that you lower 25 the area that these wells are going to drain -- our primary iR & ~R COUIRT IR~PO~TERS 82~ WEST EIGHTH AVENUE -- SUITE E; 277-~713 ANCHORAGE, ALASKA 10 11 14 15 16 17 18 19 20 21 -20- concern here is the factor that based on experience to date we field that we run into real severe difficulty in the G_~n~e Point Field in too finite or attempting to keep too finite a control on these bottom holes, or on the well course through these steep dips and so forth that we have mentioned, =~d this gets into a pretty exorbitant cost and it involves a lot of time and difficu!~ies and I don~t really know that you could really control it real clot e or to specific points. So what we're just trying to do is give u~ a little more leeway in bottoming these wells and to try to select locations that would give us optimum recovery based on the information we obtained as we develop. MR. LARSON: Well, with 1000 foot separation~ in the 'well s, you could possibly get as close a well density as one well to 18 acres, which is fairly close. Perhaps that well density could be ........... ? MRo WOODRUFF: Well, true, course ~ even on the !60-acre spacing under the Statewide Rules, we could conceivable drill wells on essentially 40-acre spacing at a section corner or a corner Of a quarter section, and we would not intend to do this at all. ~R. VONDER A~: Mr..Woodruff, on that same thing, what would you consider would be a minimum distance which would be economical? There should be some limit, as you say. MR. WOODRUFF: I -- just quoting a specific number, would Be a -- a minimum distanceo i don't know. It's going ~2~ WEST EIGHTH AVENUE ~ SUITE 277-4713 ANCHORAGE, ALASKA -21- depend so much on what you finally develop and where you find the limits of thase sands, and this sort of thing. M2~o VONDER AHE: Wall,~! was wondering ~^- ~~ ~ ~=r~ you would et a limit. If your well is gettino -- how close would you figure it was worthwhile to -- to whipstock it and redirect it? You mus 10 11 13 14 15 16 17 18 19 20 fil .. 25 have some limit there. If you're getting down to a hundred feet it certainly would be -- ~X~R. WOODRUFF: Oh, yes~ I'm sure that that kind of a depth that we would take a -- we wouldn't get anywhere near that close. Of course~ we would try to spot these wells as near as we could to ~he ideal spacing location because we feel like this is. Ythe~best~ drainage pattern° MR° VONDER AIIE: I just wondered what you would conside~ the limit that you would start whipstocking -- woul~ stop it to p~ vent getting any closer° You don~t want to have that thousand foot limit. MR° LARSON: You stated that you are p~eparing to injec~ water into your well 11-24. Is this the only type of secondary recovery mechanism you've been considering. MR° WOODRUFF' No. It isn't. We 'are looking at both g and water, and right now we feel like that water is the most ~e~ sirable and that the thing we need to ~o is establish whether or not we can inject water into the reservoir at the rates which, would not be needed. M~t. LARSON: I believe that'~s all I have. R & R COURT REPORTERS 825 WEST EIGHTH AVENUw -- SUITE 5 277-,4713 ANCHORAGE. ALASKA em -22- I0 11 14 15 !5 17 18 19 2O 21 22 25 floor. 1~ CHAiRi~LN° We wil ~ be ~i . = now open for questions from t e MR. SWAN: I have a couple of questions, Mr. Chairman. C~L~,I~V~N: Mr. Swan. ~. SWAN: Mr. Swan of Pan American. Hro Woodruff~ following up on ~r. Larson's question, in view of the fact that you've testified that you do intend to inject water into one of your wells, do you have any objection to the Con~nission in its Order entered today permitting such water injection? MRo WOODRUFF: Well, we would hot have any objection to the Committee° MR'. 'SWAN: Hav& you drilled any 5fy hOles in this field to this time? MR. WOODRUFF: No. MR. SWAN: I do have a witness myself, 'but this is all cross examination I have. ~R. C~I!P~MDiq: Just a moment. Are there any further questions from the floor? MR. SWAN: No. CHAIRMAN: Apparently there are no further questions from the floor -- you may now put on your Witness~ Mr. Swan. P~. SWAN' May he be sworn, please? MR. STEVENS: May I formally move the admission of our exhibit for it to be made a part of your record, as Exhibit "A" does r. eplace Exhibit ! attached to this application? & R COU~T ~EPORTERS WEST E~GHTH AVENUE ~ SUITE 5 277-47~3 ANCHORAGE, ALASKA Mines icatiora ~r,c. w'~ ~ ~<{er~'~ndin~ f~et ttmay be r~uced ~ intes'.company u:~.a ~ly. he 10 11 13 14 15 17 18 19 2O 21 22 MR. CHAIR_~LA~: You may so move and Exhibits AD B, C and D as admitted here will be accapted in the record by the Committe~ x~.ZR. SW~2q:' ~' l~ay my witness now be sworn? k~x. W. Rausch zs now sworn as a witness.) ~l. SWAN: If it pleases the Commission~ it's probably obvious that on a great many tnznos here Pan .~nerzcan Agrees with things Mobil~ and although it may be taking/up a little out of order I would like first to have the witness point out those matters where ~e do agree. CIIAIPiMAN: We may have the witnesses name and qualifica~ on record ~ere? MR. SWAN: Well, i haven't started with him yet but his name is -- i'll let him give it when I put him on the stand. I think we can dispose of those matters where we agree rather quickly, and I think the Con~mittee will see there's one essential disagreement between us and that'a about all. With tha'~ preliminary statement~ may I proceed with the witness? Will you state you name~ please? A My name is R. W. Rausch. Q Mr. Rausch, by whom are you employed? A Pan American Petroleum. Q And what position do you hold with Pan American? A I~m staff engineer in the reservoir engineering section of our Denver Division office. Q Are you familiar with the operations which Pan American R & 1~ COU~T ~2~ WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAGE. ALASKA ~ ~ ~ ~i.~ ~JDiv. of Mines ~ ,~o~ ~ &~n. ~ic~or~ inc. with th~ ut~ee,~n~ing It~t i~ rn~y be mprc~uced for int~-comt~ny u~ only. ion~ i0 11 13 14 15 16 17 18 19 2O 21 24 25 A A Granite Point and elsewhere. I~m a member of A.IoM.E. l~ve authored or co-authored a number of technical pape~ which have been pnbiished on watsr flooding, thermal combustion, log analysis° MRo SWAN: May the witness.~s qualifications as an engin~ be admitted? CHAIRM~g~N: Witnesses qualifications are admi'~ted. is conducting as operator for the Chakachatna group of companies in the Granite Point Field? Yes, sir. Would you state briefly for the record what your educatJ~on and experience as an engineer has been? Yes~ sir. I have a Baco. e_or of Science degree from the University of W~yoming and a Master of Science degree fr~ ~m Northwestern University, both in mechanical engineering i~ve been employed by Pan American since 1950 in variou engineering capacities in Powell, Casper~ Riverton and Denver; the first three towns in Wyoming~ Denver in Colo- rado. Since 1958 I have been working as a reservoir engineer and since 1964 my principle responsibiiliy has been =eservoir engineer for our Alaskan operation at $ er Mr. Rausch, have you been present at the hearing since its beginning today? Yes, I have. You have heard all of ~the testimony of the witness? & R COUi~T ~EPO~TEI~S WEST EIGHTH AVENUE -- SUITE 277-47~3 ANCHORAGE, ALASKA 1 A 10 A 12 13 14 15 17 1~ A 19 20 21 22 23 24 25 I have. Going first to l~obii's application filed h~rein, the first Rule is the Rule defining the area that will be subject to the Order. Do you agree with that area? This area is satisfactory to us. is it possible that as development proceeds it may be necessary to change the area? Yes. But for now, it is a proper area? Ye s. The next Rule is the proposed Rule 2, paragraph A of which provides that oil wells may be completed closer than a thousand feet to any well drilling to or capable of producing for the Middle Kenai Pool except that no o~! well shall be completed at a distance of less than 500 feet from a lease!ine where ownership changes. Do' you agree with that part of the Rule? I think so. We have a little problem here however in t?.at the wording of the Rule is such that to us it appears t¢ imply that we cannot drill within a thousand feet of the !easelines within our ovm area where we have different State leases. Now~ we believe that it was the intent o this Rule that we should be able to complete within a a thousand feet of any line except the corn:non line between us and the Mobil-Union group. Maybe i can show that on ,~,~ ~jDiv. Of Mines &Min.. ,~m ~o,~ with th~ un~k~'~'~m:Jin~l that it ir~i¥ I~ ~ fro' Interco'ninny u~ c~. 823 WEST EIGHTH AVENUE ~ SUITE 277-4713 ANCHORAGE, ALASKA 10 1! 13 14 15 15 17 18 19 21 22 23 24 25 A A Q -26- their exhibit hera. ~'~ ' s exhibit and show what you Why don't you turn to ~oozl~ talking, about. You "B" is that right Yes. Exhibit ~B". re testifying now from Mobil's Exhil group .has ~hr=e dif~ re ~it ~er - ant leases here~ lease 18742, lease 17586 and 17587. We believe that the inten~ of the request here was simply that no one would drill within a thousand foot of this common lease line down here~ and ~ ~%a~ w~ would able to drill within a thousand foot of a line between two of our different ieases~ xcuse me, Mr. Rausch~ you mean within a five hundred feet -- Yes, that's within five hundred feet, Oscar~ and i thin! it's just a wording matter. I believe this was the intent of the Rule. We have a suggestion as to a change in wording on this. Would you read that into the record at this time~ please ? We would like to change this thing to read ~'That oil wells may be completed e!oser than a thousand feet to any or capable of producing from the well drilling to Kenai Pool and within a thousand feet of leaselines where ownership does not change, except that no oil well shall be completed at a distance of less than 500 feet from a !easeline where ownership changes. ~, ,, ~,~ ~.Div. of Mines &Min. inc. with t~e u'~,er~ing ~ itn~y be reproduced for In~-eompeny u~ R & R COURT REPORTERS 825 WEST tEIGHTH AVENUE -- $UITI~5 277-4713 ANCHORAGE, ALASKA 10 11 13 14 15 17 18 19 2O 21 22 24 25 A Q Excuse me. You mean w~_~nzn 500 . ~ . Dz~ i say 10009 Yes: 500 zeet -~ ~ . ExcuSe me again. Basically to clarify this~ our point I think obvious, that where tke lease ownership -- both working interests and royalty is identical~ unere s no reason for a 500 foot setback from a !easeline. On the other hand where the lease ownership~ as it is between the Chakachatna acreage and the }4obil-Union acreage~ where both the working interests and royalty or either the working interests and royalty are different, there should be a setback. CIiAIP~L%N: May we run through that suggested wording once again ? FIR. SWAN: Let me try it this tirae instead of Mr. Rausc~. Perhaps the best thing for us to do would be for us to write it out and submit it at the close of the case. May we do nn=t? ! think our point is obvious as to what we want. CIiAI~_AN~ You may submit it in writing. We know what you're after but I just follow the wording. P~. SWAN: Continue now~ Mr. Rausch~ with Rule 2. Section B of the Rule would permit two oil wells to be completed on any governmental quarter section. Do you agree with that furze ~ A No, we do not. Q If the Com~nittee pleases we~l! defer our reasons for this oceed wzth t~e objection 'til later and pr '- ~. rest of the ~ ~ ~,~ ~iv. Of Mines &Min.. ,,~ ~,~ li~tion~ ~nc. wi~ the u~'~'~n, ding tt..~,t ~t rn~y be reproduced fo~ Int'm'-comp~n¥ u~e & R COURT REPORTERS WEST E~GHTH AVENUE SUITE $ 277-47~3 ANCHORAGE, ALASKA 2 3 6 7 A * Q 9 !0 A ~ Q 12 13 A 14 Q 15 A 17 .A 19 20 21 22 A 23 Q 24 25 rules. Mr. Rausch: F, ule 3, which is on casing and ceme~- ting requirements, do you agree with that rule as proposed in Mobil's application? Yes. Do you have anything to add to what Mobi!~,~ ~,>~<tness sai~ with respect to this rule? No. Now, with respect to Rule ~'4, providing for bottomhole pressure surveys, do you agree wi'.~h that rule? Yes. Do you have anything to add to what Mobil's witness said ? No. How about Rule 5? We agree with Rule 5~ too. Nothing to add to that? We have nothing to add. Now~ there was one other point and it isn't a part of a rule, I don't be!ieve, but do you agree with the defini~ tion of this Middle Kenai Pool as it is contained in Paragraph fi3 of the application? Roman nunfoer I!i. We would like to suggest a change in this definition. Could you use one of Mobii's Exhibits to show the change we want. and why? Yes,sir. Mobil has requested that the -- & ~ COU2T ~EPO~TE~S WEST EIGHTH AVENUE ~ SUITE 277-47~3 ANCHORAGE. ALASKA 1 Q 5 6 7 9 10 i! 12 13 14 15 16 17 18 2O 21 22 23 24 25 Excuse ma, you're talking from Exhibit "C"? Exhibit "C". Okay. They have requested that the top of the i,{iddle i(enai be at 7720-plus which we are in agreement with. They have asked that the Base ox the i~iddle Kanai be at 9800 in this well. We are not in agreement with this 9800. No~, the problem here is that this is essentially the depth of the lowest productive interval that has been encoun- tered in any of the wells that Mobil has drilled to date and likewise, we have not found production below this inverval. However~ it is possible that sometime in the future production may be established somewhere in the next thousand feet or so down to the top of the .Hemlock which occurs about I0~900 in this well. We would prefer -- and this interval' in here is in fact g.aologi-~ cally similar to this interval here. We would prefer t~ see the base of the Middle Kenai defined somewhere near! the top of the Hemlock here, let us say~ down to around 103800, just to preclude the possibility of some sands being.picked up in a flank well that are not covered by the terms of the Order the Co~,~ission is approving t day Mr. Rausch~ now getting back to the Rule 2 and su0para-/ graph B of that Rule~ you Stated that you did not agree with ~-'~ ~ ~- ~ Rule. Would you explain the reason for ~our Mines &Min. . ,~ ~o~,~ ff ~y ~ ~ f~ Info.ny u~ ~. WEST EIGHTH AVENUE ~ SUITE 277-47~3 ANCHO~RAG~E, ALASKA 10 11 12 13 14 15 16 17 18 19 fl0 21 22 23 24 A A 25 -29- d ,_~$r~em~_t. Yes. Might i put up ~,e exhibit~ please, Yes~ sir. Mr. Rausch~ you've put on the board there ant exhibit, is it marked as an exhibit? No~ no~ yet. Would you write on it Pan American~s,Exhiblt I? What I is that exhibit~ Mr. Rausch, and, what does it show? ~ l This is an exhibit which shows the initial pressure tha~ have been ooserved from mot~omhole p~essure measurements at a number of the wells at Granite Point where such · measurements have been taken. What has been plotted here is the bOttomho!e pressure at a min~s 8500 dc~tum of the pressure that~ould occur -- all pressures have been corz ed to that common data. And across the bottom t~e n~_me at which the well~ ~as completed. What does this Dressure znzormation indicate to you wz~h resoect to the area that can be drained by one well in this fieId? This pressure information shows several things, but the ' ~'~° ~ ~ i~ that1 most significant -- one of the most szgnz_zc=nn, our initial completion here at this datum has a pressure/ of 4116 pounds. Each well ~-~ ~ ~a~ has been completed sub- sequently has had a lower initial pressure than that. This shows that withdrawals taken from the early wells i~ the field have lowered the pressure in the oil at the ~ ~, ~ ~Div. Of' Mines &Min.. ~,~ ~,~. Ir, c. '*,,'i~ ttm un~eratand~ng t~,art it may be re~u¢,~ fo~ Inter-company eot- ~ COURT 277-/~713 ANCHORAGE. ALASKA 10 11 12 13 14 Q A -30- location that was drilled into with the later wells T.~ shows 'then that there is com~v, unication between the wei!~ in t~e field ~ ' '~ 160 ac: as nar as the walls are separated; in tnzs case, and even more in some instances. Mr. Woodruff testified that the drilling of wells on 80-- acre density as requested in Mobil~s application would increase the recovery of oil from this field under -- f~ primary production methods alone· Do you agree with th~ statement ? As to the recovery from tl]ose zones wb. ich are not 1 possibility of isolated zones, it a~pears to us much too early to say whether or not these things are actually ~t 'es, om .t 15 16 17 18 19 20 21 Q A there. At this time is there any evidence from which you can determine whether it's the oil productive intervals or the non-productive intervals which are lenticula-~ or di~ continuous ? No, it's too soon. When you take oil out of a field it causes a pressure drop. It is possible from a knowl- edge of the amount of that pressure drop and how much oil you have taken out, to calculate the volume of oil in the reservoir. A normal way of establishing that there is ienticularity is to compare these pressure calj o'f 'Mines &Min. ~c~t~ ~n~ wi~h ft~ ue~r~t~c~ng ~ it mey I~ rc~pro~ucecJ for int~.compeny IR & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE. ALASKA -31- 10 11 14 15 16 17 18 19 2O 21 23 25 t~= amount of oil in cuiations with the estimates of place that you~:=v= ~ .... made off of logs of this type. i'f ' _ "~ ~stent with the you find that t~%e oressure ~zop is cons_ amount of oil you ~ ~ ~ for ~ ~-' .... you the~ conclude that this ~anc lens does not~imp!y ooo~ out her~ and peter out hez-e~ mu~ zn ~ac~ woven and bmaided in such a manner that you do get good~ az= the sands. I~ on n~e oth=r hand your drainage out of '~ ~ ' pressure data indicates that the pressure is declining~ much more rapidly than you would expect for the assumption that all of the lenses are productive, you then know tha.t you do ~indeed have this lenticulariuy problem that Mr. Woodruff mentioned. Now, we have taken actually only or.e pressure survey; we~ve completed only one. We~ve sur- veyed a number of wells heave last September. We are right now conducting another survey. This survey there is naturally some scatter in the data points. The pres sures that we see on these wells depends on how much oi! has been taken out of the offsets~ how far they are fron the other wells. !t~s a little early 7to make a very definite and precise estimate of what the correct average reservoir pressure is. I think our December survey will be somewhat more definive but in a nutshell we just don~t know whethe'r or not we are seeing the -- whether this picture here is correct or not. It's too early to R & R COURT REPORTERS 825 WEST EIGHTH AVENUE SUITE 5 277-47~3 ANCHORAGE, ALASKA 3 4 5 6 A 7 10 11 A 13 15 17 19 2O 23 A 24 -32- say. blt. Rausch, assume there are some sand lenses there thai are so small they will be missed on a !60-acre spacing. Do you think you:re talking about reserves that are sub- stantial enough to justify development? Our own experience certainly does not suggest this to bc the case. Then sum~ning up, do you believe that on primary alone 160 acres for each well will result in the recovery of ~ the reserves that can economically be recovered? Yes. On primary we certainly agree -- agree that 160 acres will recover all the oil that can economically be recovered. Putting it the other way around, wnac about drilling we .Is on 80-acre spacing purely for the oil that you will get on primary, do your studies indicate that this will be an economic proposition? Our own calculations indicate that it will not. We wil~ recover essentially the same amount of oil. in our groqp we spend between ten and fifteen million dollars more o~~ drilling wells. Are these wells unnecessary wells then? From the standpoint of primary recovery these are unnece sary wells in our group. Now~ some mention has been made of secondary recovery. ~ ~.~ ~ ~,.~ ~,Div. Of''Mines &Min.. ,~o~ ~,~. t ~ic~?ic~ In~. with th~ u~c~'~tl~ng that ii' m~y b~ ~ for In~-comp~ny u~ only. I !! & ~ COU~T ~EPO~TE.~S WEST EIGHTH AVENUE -- SUITE 277-47~3 ANCHORAGE, ALASKA Ha s 1 2 3 4 5 A 7. A 9 11 12 A 13 Q 14 A 17 19 A 2! A 22 23 24 25 Pan American conducted studies for ~-'- minzng the feasibility and =avzsabiiity of either second, dary recovery or pressure maintenance in this Granite P~ Field? Yes, sir~ we have. What methods have been considered so far? We have considered water injection, in~nisCib!e gas inje¢ tion, and very briefly we looked at miscible gas injec- tion. Are all of these methods, methods which have been used other fields and other areas? Yes. With varying degrees of success, I suppose? Yes, highly varied. At ~his' p~e~ent time, D~sed on your presen~ information which of the fluid injection -- or which of the fluids do you feel offers the =reauest promise for injection purposes? We think that ~ater offers the greatest promise. Would you explain why you have that opinion? Yes. First of ail, as to the miscible flood case that requires volumes of gas that we don't have available so studies of miscible gas injection are somewhat on'the academic side until we see a gas supply. This boils it do~n to a serious compa'rison between irmniscible gas in- ~ ~, ~ .~,~ ~f)iv. of Mines &Min.. ~o~ b~on~ ~nc. with lt~ ..n,.'~,rst~dmg lt'~ Il' rney be reproduced f~r Intes'..comp~ny u~e on~. 277-g713 ANCMORAGE, AkASKA iht .n I0 11 12 13 15 17 13 19 jection and water flooding. What we find here at Grani'~ie Point ',-rom tests of our core data is ~n=n we have very adverse, relative permaabiiity ratios-gas to oil. Now, by this i raaan that when you inject gas into this rock, the gas tends to move n~ougn the rock quickly and read~ without doing an efficient job of displacing the oil. Cn the other hand, when we inject water into core samp!es~ we get relatively efficient displacement. Now, we find let me refer to my notes here -~ to be specific we find that injecting gas will reduce the oil saturation by so~ 20 to 25% of pore volume to the economic gas-oii !imits~ to the point at which it becomes ~nfeasibie~ On the other 'hand we find th~+ injecting water will reduce the oil saturation about 35% of pore volume in the rock tha~ we're testing in the lab. Of course, zn ~he zield you would not get this much redUction in either case becaus you're not able to contact all the rock, but in sun,nary we find that water is potentially a far more efficient injection fluid than gas here. At the present time~ Mr~ Rausch, do you have sufficient information so that you can say with certainty that in- jection of water will be successful in this field? No, we do not. We have other problems~ What other information do you need or what needs to be done before you have an answer to this question? -34- WEST EIGHTH AVE]XIUE ~ SUITE 277-47~3 ANCHORAGE, ALASKA 10 11 13 14 15 i? 18 19 2O 21 22 24 25 A A -35- We do not know the rate at which '~e can inject water in u~s field Wa have some lab data that indicates that .~. -~-~n~J _ oblem to us ~,~ater injection rate may bes~m~-.~.o~= ' ' o~~ a pr !f we can injacn only at vary~ very~ very low ratas~ the .'~ ~o . We would water injection is not an economical o~oc~s ~-' ~ many wells to oe~ an acequate either have to mz-z!~ many, injection or we would have to spend literally hundres o~ years recovering the oil by water injection. On the oti: hand if we can inject water at a higher rate~ then since we do have good displacement efficiency~ we will t able to do much better bon~ with recovery and ecomomics wise with water. Is it necessary to have this information before you can determine where future producing and injection wells should be placed? in our view, it's very important to decide what the type of project we're going to have~ Whether it's a pattern~ fluid-type~ several other things. Would you explain why the rate of injection might make a difference in the well pattern that you pick? Yes. We refer again to Mobil~s ~xhibit '~B~' here. As ! mentioned if we get extremely low water injection rates we've determined 'that water injection is not feasible, ~ period~ and we would probably want to go to a gas injec tion program. This would very likely involve cresta! ~2~ WE~T EIGHTH AVENUE -- SUITE 5 277-47~3 ANCHORAGE, ALASKA 10 11 12 13 14 15 17 18 19 20 21 24 25 A ~a!is for injaction~ and we would want producers to somewhat down dip so we could drive the oil down. On ~he other han~ if we ga~ a very~ very hzsn water znject rate~ we will want to put in~ in all p~obabi!ity~ a peri- pneral-type water injection pan~e_n We would want to drill seve~ai injection wells on a do~ dip flank of th~ reservoir and ~rive the °il up dip with appropriate pro- vision along the boundary here° If we ~get an intermediJte water injection rates we will very likely want to go to~ a pattern flood arrangement whereby we n=ve injection and producing wells alteznated through the reservoir. Now~ the locauion and number of wells depends upon the injection rate and upon the type of fluid you're inject~ ng. If we go in here and ~ii! checkerboard 80~s before we know where we're going on the secondary ~ecovery operation we could be drilling wells in the wrong place; we could be drilling wells we don~t need~ we could be drilling too many wells in one part of the field and too few in the other. , Mr. RaUsch, is Pan American presently conducting opera- tions which are directed towards getting some of this information? Yes~ sir, we are. What are the natures of thOse operations? We are now drilling wells 12 -- I just want to get -- ~, ~,~,~Div. of Mines &Min..,,~ ~,~,~. Inc. wi~ the uc',~'atan~in,a ~ it may be re,prcx:luc:ed R & R CO'~JRT ~EPOF~TE~RS WEST EIGHTH AVENUE -- SUITE 277-47~{3 ANCHORAGE, ALASKA ion 10 11 12 13 15 16 17 18 19 2O 21 A the record~ I ~ant to get the location. Well 12 is in he no~-th~.~est of the southeast Section 31. it's this well right here. This ~:el! is currently drilling below 9000 feet and we are prap~re~ to convert that well to water injection as soon as %?e get it drilled tn~o~h the oan~ Not in~nediately. Wa want to tes'~- it w,_nn an oil producer for a short time first~ simply to establish the ability of the well to produce oil. The reason we want to do this is that an injection test basically -o we want to ec~_on capacity relative to the oil pro- measure the inj '~ ducing ability so that we can extrapolate our data and predict hOw much water would go into some other wellS without actually having to test it. Our plans here wou[d be to inject -- to produce this well sufficiently long to establish its potential as an oil producer and then convert it to water injection. Would you then recor~end or ask that the Co~.~nittee incl"de in any Order it enters a provision which would permit t~e injection of fluid into these wells Yes. -~ for the purpose of testing? Very definitely. At tb~ present time, however, you cannot present to the Con~mittee a plan for a fie!dwide secondary recovery or pressure maintenanceopera~on~" of' ] Mines &Min.. ~,~ ~. It~t it rn~y be reproduced {~r Jntor-compony u~ WEST EIGHTH AVENUE -- SUITE 5 277-4713 A~C;HO~AGE, ALASKA 3 5 ? 8 A l0 12 13 A 15 17 A 21 22 A 23 25 No~ sir. ~,~u,= we get~.,~,,~= data that 'tells us what tyi~e of injectivity we have we don~t know for sure where we'~e gozng. Assume that you do get c~,a znformation and you are read to conduct a zieidwide ~=~nd~ry recovery n-~- ........ v~ill~ it be necessary that this operation be conducted under some type of either unit or cooperative agreement? Yes, I believe so. The oil here certainly doesn't ~e~-~.~a nize the fact that there's a lease boundary here. Some arrangements would have to be made. At the present time is there any agreement which would permit such an operation to be conducted? No. Getting back to this ~!2~ is that well so located -- or apparently so located on the structure that you feel it will be a producer of oil? We expect it to be an oil producer. We started driiiinI it with that intention. Do you feel now~ however that it is more impornant to secure this information~ , than it is to have anoc~z pro- ducing well in the field? Yes ~ we do. Is there a 'possibility that injecting water in this well ~m~ the in'ti will mean that you~!l never produce more ~,~. test qualities of oil out of it? , ~,~, ~, ~,~ ~Div. of Mines &Min. ~ ,~ ~,~,~ I R & R COURT 825 WEST EIGHTH AVENUE 277-47~3 ANCHORAGE. ALASKA 10 11 12 13 14 15 17 18 19 2O 21 22 23 24 25 A A A Q ~'~n~s = is poss;'~=e. There have been ~,,~..=~'~ o whose produc~kx cap=s=~ities have ~een ruined by injectmng wate=. There ~s~ been many w~lls that hav~ ~ ....... ~ inj ted into '~-' ~e~n and then it was possibia to orzng ns. em back a~ otc. ducats. . I can ~ t say with .... certa~',~.t~.y what' will happen here. This might be one of tie ~= = f' ~=mo o information you'd need and would get from the operation? This is correct. Do you nave an opinion then as to whether priorities should be given the development cf this field to securing the necessary information and taking the neces~ steps to conduct a secondary recovery or pressure main- tenance program, or to the drilling of additional pro- ~uc~ng wells without ~,~ ~ ~ ~' ~ ~=Vino first zn~la~e~ secondary recovery? Yes: i certainly do have an opinion. What is that opinion? In my opinion the prcp=z zns~ztu~_on oz a ~cond~ry recovery pressure mazntenance prooram ~s ~ar more zmpor~ t=nt than dri!lino n.oz= wells We t~z~k s a~s~ qu~ ur ant. After on!~ s~x ei hts <-' g . y _ or months o~ production here we are. seeing pressures 3500 pounds at the lowest as comoared to 4100 pounds to start ~z~h. expect the 'if this rate of pressure d~op ~n~reases~ and we think & R COURT REPORTERS WEST EIGHTH AVENUE -- SUITE 5 277-,~713 AN CI"IO~RAG E, ALASKA ary 10 11 12 13 14 16 I? 18 19 fl0 21 25 A A will -- it's actually increased as the rate of pr.oductic~n has gone up. We expect that this reservoir will get to its bubble pozn~ some time next year zz there's no efzoz~ts made for fluid injection. We think that going below bu!.ble point here could be quzte deleterious ~otb. to the u-~m~ recovery and to the economics of the operat'zo~. If this field is mazn~ined on !60-acre spacing until secondary recovery opergtions can be initiated~ will it in your opinion result in the recovery of less oil from this fie Id? No. if 80-acre spacing is initiated and development on 80-a~re spacing takes place throughout the field~ before secondary recovery operations are undertaken~ what ~i!l be the re sults Zn your opinion? it is possible that due to a number of factors such as a reduction in'i the reservior pressure which causes a shrinkage of the oil~ an increase in the oil visosity -- of course, the higher the oll ~isosity~ the more difficult it is to push it is possible '~- z ~ -~ ~ha~ ~nstitu~ng a water flood at a low pressure here could result in la=!s water flood recovery than in one that's instituted prom~tty It is not certain that this would be the case. When 'yo~ take a reservoir below bubble point ano st=r~ to build ~p a gas saturation~ this factor is good. This tends to in- R & ~ COURT 825 WEST EIGHTH AVENUE -- SUITE 277-47~3 -41- 10 11 13 14 15 16 17 18 19 20 21 A 22 23 Q 24 25 ~u~ a'a the same time ~' ' crease the recovery. '~ ~ '- ~ ..... ~~ '-~' i! iscosity and shZi~{k- doing this you're .... =~=~--~o ~ne o s ing the oil. Both of these factors tend to be bad. T -~ in my judgment Ir he,_e~s a tradoff between these two~ . this particular fzeza zt s important to znstitute soma kind of fluid injection. We're talking wa'~i,:ar flood herJ at as high a pressure level as i.s oractica!. Also, instituting such a program at a high pressure level will maintain production° Our calculations indicate here th~ t if this reservoir goes below bubble point there will be quite a sharp reduction in productivity of the individu~ ! well. This is another reason that we find little econon~ic difference between 160 and. 80-acre spacing. (At 11:20 a.m. proceedings were recessed until 11°25 a.nl.) (ON TI~ RECORD.!, (By Mr. Swan) Mr. Rausch, assume that sufficient tests are run in nkzs field uo convince the ~ ~+ ~ op~r~o_s that secondary recovery by fluid injection would not be prac'~i- cal. In your opinion will any additional wells be neem~d in order to e~ficiently drain this field? No; without fluid injection I think you'd want qui'~ after we got i60~s drilled up. Assume the contrary now, that our tests do indicate that fluid injection and secondary recovery is feasible. Wilt additional wells be needed? & R COURT R~PO2TERS WEST EIGHTH AVENUE -- SUITE 277-~713 ANCHORAGE. ALASKA i0 1! 12 13 14 15 i6 17 18 19 2O A Q A A A A 22 A 23 ~ ,. o~.,~ ~Div. Of Mines &Min. ~ ,,o,~ ~t,o:~ I Ir,c. w~th the uetc~e"~and~ng t'h~' tt may be rapt-oduccd f~ inter-company urn. os'lI¥. I -42- Vary likely. When will those walls be needed? A~ such. time as you s~,_~ .:.~ne ~:.~zu znj2atiom op2ration At this time can you +eib. . how many additional wails mzgi~:t' ~a needed or where ~ . ' . t:~ay might be n,aedad~ No~ it depends on ~e type ozp~os~=,, we ~ave That would be something that would have to be taken car~ of when a proposal is presented to the Committee for a secondary recovery operation? Yes~ sir. Hou long do you th~nk ~t~a go~ng ~o ~ke you go ge~ zn z o rm~ c ion ? It's impossible to say for certain but as a good estimate I~d say on the order of four to six months. Smother point was z~aised by the questions of the and that is the possibility of having to protect correl{tiw rights. Will that be a problem if 80-acre so=cing, ~ is granted in this field before there is some provision for cooperative operation of a secondary recovery proje{t? Yes, it would be a very difficult problem for our group Would you point out what it would be? Yes, sir.,~'': Our platform here is about 4000 feet from th~ com~mon boundary. Hobil~s platform here is about 2000 f~et from the co~on boundary. They will be able to drill short 80-acre wells to all 0f the permitted locations R & R COURT RE~ORTERS 825 WEST EIGHTH AVENUE -- SUITE 277-~7~3 ANCHORAGE, ALASKA 10 tl 12 13 14 15 16 17 18 19 2O 21 22 23 24 ~o~g the com~.~_on boundary very quickiy~ ao_e to complete these wells quickly and get them on production. Since we're -further away it~::__ ~ ~ ~ c~ ~ bounory. longer time to run =~ our walls down to will not be able to get our wells drilled an~ compare,ed as ~uickiy Therefore ~ ~ ' ~ ~ ~ ~ . __~y drain som~ . i~lODll Will V~l'y oil out from under our lease onto theirs. ~% STEVENS: May I in~er_up~ here' just a m~.u~e. Eecau~ I think the record is not being made plain throughout this. Woul~ you draw a line up and down ih terms of the lease boundary as far as the vertical lease boundary zs concerned? %ou ~=ave the impression that it goes completely across. A Oh= I beg your pardon~ l~m talking about nhzs. ~R. STEVENS: Yes. Now~ % think that you can s~e that the same point works double that way. A Q Yes, that's true~ Of course, you have not drilled up here because 31-14 was a dry hole across the fa~ !t~ but the point's well ~aken~ (By Mr~ Swan) Well~ assume that Pan American and Mobil are able to put in enouon' wells down there rapidly enough so that correlative rights are protected~ wn=~ effect wi~ that have on the ~ ° '~' ' ' ~__ !n!ti~io~ o~ secondary recovery operations ? l~m afraid it will be-- de~a_ y it because both operator-~ will be busy drilling their production wells to protect We R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 15 ~'~' I 1 ANCHORAGE,ALASKA ~, ~ .~,~ ~¢Div. of Mines &M~n.. ~ ~ ] 10 1! 12 13 14 15 17 18 19 2O 21 22 23 25 A tion walls that they shcuid be usin ~ ~,3hila ago in ta!ki~g about ~- . ._ ~ne various types of fluid injection which might ba used you mentioned a miscible gas injection and you ~ismissed ~t r~ner quickly as no b~no practical in t~ field. Would you explain to us~ what you're talkin~ about when you talk about a miscibl~ ~as and rfse? Yes~ sir. I did not say it was not practical. I just said that we ~'haven~t studied it very carefully for practical reasons. If you inject together with light hyd~ocarbons~ propane~ butane~ depend- ing on the pressures and the composition~ you can create a situation underground in a reservoir where there's no phase difference. !t~s impossible to distinguish_ between a gas and a liquid. Tn~y~= look just alike. This is called achieving miscibi!ity~ you're driving oil with material of this composition you essentially have only one phase in the reservoir~ this miscible phase~ This is quite an efficient way to sweep the oil out of the reservoir. It requires pressures~ it we~uires lot o gas~ · _ q a f and it often requries a considerable quanity of intermediates such propane or butane. a Wei!~ why was ~o= dismissed as/possibility at the ~ & R COU~T 825 WEST EIGHTH AVENUE ~ SUITE 277-4713 ANCHORAGE, ALASKA 10 11 13 14 15 15 17 18 19 20 21 22 24 25 ~ ,, ,~v,~ ~Div. Of Mines &Min. prese~.~ ;zzme. We don't see any ~u~-~czenn gas supply available from k~est side or any~.~here else that we would have use for ~'~ Q Is wa~er av~z~b_~. A Yes: water ~'s avai~ ~'- ~ ....... ~ ~m. at com. c!udes ou~ case. CHA!~Z~N: Thank you~ Mr. Swan. M~. Stevens, do you wi~ to examine the witness? . : '~{ = ~= we have one or two basic ~ STE~NS Mr. Ch=_rm=_~ questions i'd like to ask before ~= make a motion, if i may do so Mr. Ras ' -~ Ch, as I understand your position now is that if secondary that is if fluid if injection proves to be zn=~v=sab_e in this structure~ Pan ~erican will never ask for an 80-acre spacing order~ is that correct? A From what we think now drilling wells beyond the 160- density would not be economical. ~R~ STE~NS: That's not what I asked you. Do you envi~ son an 80-acre spacing Order at any time on this snructu== on 'primary recovery .along? A I do not envision such. Engineers~ like everyone e!se~ change their minds. MR. oT~S: Have you considered this zrom the point view of the economic effect -- as far as timing the life of the platform facility is .~ ~ that ~ ' ~ . ~=s~ sir~ s exactly ho~ we did consz~er it. P~ SY~VEN~ Mr. Cnazrman~ we consider~anzs" ' to o= an ~S WEST EIGHTH AVENUE ~ SUITE ~ h 10 11 18 14 15 16 17 '18 19 2O 21 22 25 "- ~'~o'= from '-~ ~ direction ind_~= ~e appzzcatzon as abrup~ ~.~o~ nn~ ~ -~ ~ ~ted by '-~ ' '~ ' ' filed and previous consultations ~.oa had with Pan ~arican. would ~ ~ '~'~ .... ~ ' ~ ~ you aojourn .~%~.~ ~,~,--~.~c~~~o unti~ one o clock to oerm~t ' ' ~ ' ~ be prepared to us to review our detal~_s~ a~2s to ~'~ DaC[C rebut ~[r. RaUscn~s testimony. ~-SR. SW~N~ We tried to in= - = ' ~ .. =orm Nobile o= our intenuzons advance so they wouldn't be surprised and they did not want to be informed. We have fully advised them on this ooint~ that we did not think 80-acre spacing was pzac=icai unless nnere was secor dary recovery, and we have continued to try to do that~ and don~t think we have made a change. However, I have no objection a continuance to one o~c!ock~ i think he~s entitled to that. But I do~ in view of the difficulty I~ve had here in trying to make our position known~ I do think that the statement that we have changed our position is not justified. We have the same position we~ve had from the start. ~ ' ~ ~ _ l!R~ oTEV~NS Mr. Cha~zman, all T~m going by is the statsmsnts mad~ in tls application a=d thsy do not indieats necessity for a -- the results of -- of fluid injection tests -- _ ' ~ ~ the the results of fluid in5ection operations, but re=rely . ~m~n~ to soacing order should be delayed until there was an agre=' conduct such things, and Mr. Rausch~s testimony no~ indicates that Pan ,~erican wishes the results of not only the tests but.:of the oosrations themselves before going into a spacing order of more heavy ' censmny, i think this is something that we ara not -- ~., ~. ~,~ ~Div. of Mines &Min.. ~ .~,=~,~ 1 Inc. wi~ the tu'~'~r~in~l ~nat 1~ m~y be reptocluced fo~ inte~.company u~.~ cm~, t R g~ R COUNT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277-,47 I3 ANCHORAGE, ALASKA 10 11 13 14 15 i? 18 19 2O 21 22 24 25 -47- is not the -~,==~p~...-~.~anna'azon' madez~,:'4 the-"zr~iJ,?z~uatzcn"~. ~ . l~ff{. SW2~,[' i~ii give you a!l 'she time you want to get . ~a o not appreciate oezng acused ' ' ~ ' ' ',-i~-,~. that wa have ~.~ e · ~'= it should not be ~ ...... ~,~e~=~ until t~ the position Wh.=n we . -- ~ey reached a firm aeree2~en'~- ~-'~ , -=~h ~ , ~ ~.~a~. means if the o~3ezators can't r~, a firm agreement it should never be permitted~ and I ~nz~,m ~nat s just what we're saying now. C~I~[~[' Mr. Swan, of course that nzes the nearzng that you requested at i:00 o~'c!ock, you have no objection to that hearing t..er being pos~ oned~ or delayed, keeping in mind nnat we have eno B hearing at 3:00 o'clock? MR. SWAN: Wail, that hearing is a!~so ours and if that has to be delayed we will acceot that too~. here until fiomorrow~ that's fine. if we have to be' _ untzz !-00 p.m ) (At 11:30 a.m. the hear~;ng was recessed -~ . ECO D) CHA!Ri~N: Hearing will reconvene. ! believe we're at the point where Mr. Stevens was ready to examine the Pan J~merican witness. (By Mr. Stevens) Mr. Rausch, you indicated un=t~ somehov' you'd reached the conclusion that Mobi!-Union well 3!-!~ was a dry hole. Do you know that that's really not a correct conclusion? A As you know~ that was a mioo~-o~=,'.,o~.~oo~,~_,~. The well was re- & i~ COUiRT ~0~T~25 WEST F. IGHTH AVENUE SUITE 277-~7~ ANCHORAGE, A~ASKA 5 !0 il 12 13 14 15 16, 17 18 A A -45-- drL£~eo. This was u~e one i was speaking of as ~a-:~r.~g n~.~a dry hoi~ I ~,~.~ad to _~:~ ~h~ up so ~.n corms o~_ cna statement wa:va made An ans~.;er to '6ne sp=c~c question. Have yoq r.,~n~_cn id establish the any information ' ' ' wou ..... apparently crosses the ownership zzne in cnzs structure~ ~-n= lease line -' ~-" '-' "' '~ '~ tnau s souther!y~ $ouunwaz~. ! think we see this much like you do~ We sea an area - you're in gentle east dip for a While and then we see a' area of'much steeper dips. We agree with Chariie's statement that it's speculative whether this is faulting or rol!ovar. Going to your co~ent about correlative rights~ vmu!d y~ tell the Committee -- do you know when your platforms were located on your ,-~'~ _ ~: F ..... ~ of this st~ucture? The da The dates they were sat? Urn- hm. No, sir. i don~t have those handy. 19 2O 21 22 23 24 25 Q A Q A Well~ you know that they were both set before the Hobi! platform was set~ don't you? I Yes. [ ~ ~ ~ == yodr7 And do you know when you first got p~.oau,..tiono~_~ of platform? Yes~ I do have that infermationo Just a moment, i:d ~..= to look it up Wa ~ .... oroouc~on on ..a~ch o ~g=~ sustained - '- ~' '~ ~ ,~,~ ~/Div. of Mines &Min. with i'h,~ ~r,'~,ncllr~g ~ It n'~¥ be i~z~:~eoctucc~ for in~'.compony u~ R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277.471:b ANCHORAGE, ALASKA ,ve 10 II 12 13 14 15 i? 18 19 20 21 q A A Q Q Q A 22 2~ 25 !4th of 1967. And that was ais o'~ .... o~zore production zrom ~dobi!~ was it ~ot v~ s ir that ' ~=s~ , s correct. Which location did you drill first a~d,. z,_-~--'~.~o~ w~.zcn~' ' 'plat- fo~s ? ~ ~7-3 Wai!~ the. ~-~irst well we completed was ~73o . That wa~ drilled from our B ~o~m. The ...... completed was 18742 ~3 from our A oiatform. As it happeaed ' ~=~- -~ and the the next well was 18742 fi4 from our A next well was 17586 ~3 from our Bpza~zorm~ ~ ~ . Now~ when did you drill the two wells which are closest to the ownership line? When did we complete them? Yes. In May. May of this year? Of this year~ yes, sir, t have an indication that one was completed zn Sep~emoez of this year~ is that -- ? Excuse me. !~m looking at a tabulation here that shows production by wells and it shows the start of serious production from our wells here in May of 19o7 742 ~3 and ~/4 we!ls~ if those are the two to which you'~e referzing. We!l~ ~ referring to ~'5~ ~ think it is it s the one ~~ .! ,~.-, ,, ~,r,~Div. of Mines &Min. b/~ca,'io~ ~nc. wi~ tBe ur.~'~rancilng' t?~t ~ may ba reproc:uce~ for inter.company u~ on~/. WEST EIGHTH AVENUE -- SUITE 5 277-47~3 ANCHORAGE, ~LASKA -50- 10 11 13 14 15 I$ 17 18 19 2O 2! 22 24 25 A ~.~ s in ~.~!e soutl~wemt corner ofSec~J_~z i2. ~,~57 All right. Just a moment here. Z don=u know from memory the ~es on ~'?-~ and I'~ have to' zoom here. Our ~ '~]~_~ ~.=gan~= production ~?._ Septemoe~ of thisy~ aa'~_ . We!~ ~ ' _~ now has there been any'~hzng which would imoede your opportunity to drill those wells sooner than you d The two wells which are closest to the ownership line? i~Ro SWAN: I'm going to object to this line of testimony The problem of correlative rights is a reasonable opportunity. We admit that we've had a reasonableoFpo=~unz~y.'~ Mob il has had a reasonable opportunity to put their platform in ahead of ours. They got the discovery royalty here. So~ i think this is i~mater- ial as to these soecific d .... ~ ' . ~ a~=s that things were done zn the past ~. STEVENS: Mr. Chairman~ i think the question of whether there's been anything that ~ ~= ' ' ' zmpec=s tnezr opportunity would be about the only thing it looks like 'Mr. Swan agrees with me on~ the only thing that would raise correlative rights at this time~ the record ought to show whether there's any impediment to develop ment of those two wells sooner. MR. SWAN: No, my point in Mr. Rausch~s testimony was that if we went to 80-acre spacing then in order to nrotect cor- relative rights -- and we could do it -- we would have to driIi some wells that would delay the water injection. We~tl protect correlative rights if we have to and we can protect our correla- ,~, ~:~--~Div. of Mines &Min. WI~ST EIGHTH AVENUE -- SUITE 277-~713 ANCHORAGE, ALASKA 10 11 14 15 17 18 19 20 21 23 25 -51- tire ' ' ~ . ' ' r~gn~s %7e feel chat ~.~aste oreventLon comas ~o STEVENS" Well, if i~fr~ Swan is willing to stipulate to that correiatzve rights has no~z~ to do with th-:s I~il be glad to v~it~%draw the question. nothinE to do'%,~ith the hsariuE. l=m sayinE you're puttin~ us in a position where we will have to do that~ and in order to do that may have to do somechzng that will cause waste. We can -- ~. S.uV~JSm~ =x : i~d like to repeat my question to the wit es Is there anyuhzno which zmpedea the drilling of the two wells closest to the ownership line and prior to the time that you drilled them? A No. Q In other words~ the location of 'those wells was depende~ t upon the economics of the pza~form plus your own dril!iu~ u~at correct? schedule~ is ~-~' ' ' A Beg pardon? Q And by the same token you would not necessarily have to drill in the two 80~s that would be the only two !ocati( left along the line unless Mobil-Union decided to fill theirs in? A Well, the closer a.' well is to a line the more it d~ains but this is a monotonic function and any drainage is drainage. Q Weli~ but until -- again until -- assuming the 80-acre R COURT R~-PORTERS YVEST EIGHTH AVENUE -- SUITE 5 277-~.7 ~3 ANCHORAGE, ALASKA ns 1 2 3 4 A 5 6 9 A Q Q lO 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -52- spacing order is approved until the Mobil-Union operati~ drills the other two wells which would be permitted by such an order, you have no necessity to drill in those two 80's, would you? Not those two 80's. We have a necessity to drill other 80's. And further than that approval of the spacing order for the Pool at this time would not necessitate the driltin of 80-acre spaced wells on your portion of the structur~ except for any concept of correlative rights, isn't thai true ? That's true , · Now, with regard to the comments on Ienticularity, have you correlated these lens sands across your portion of the structure? It depends on what you mean. by correlated. If you're asking have we made bar diagrams of the type you exhibi' yes, we have. This doesn't constitute a correlation; i~ constitutes an opinion. What indications have you to substantiate your statemenl that these lenses, these sand lenses, may be braided an( interwoven? The pressure data indicates that there is some common degree of communication between the wells. To what extE they may be braided or interwoven~ I do not know at this R & R COURT REPORTERS 825 WEST EIGHTH AVENUE ~ SUITE 5 277-4'7 ! :3 ANCHORAGE, ,A I. ASK~ ,n ed, nt 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 25 A q A Q A A Q -53- time. I say they may be. Well, would you believe that the 125 foot difference which we showed in our Exhibit "C" is a minor differenc. in the two wells? Approximately 25% difference? A minor difference? i believe you said a minor difference. That's a good-size difference. Regarding fluid injection would you say at this time th. -- assuming that program is going to be instituted, that water injection seems~ to be the most promising me thod ? At this time I would say that. And have you drilled your wells that are existing to da' on any planned pattern which assumes an eventual 80-acr~ spacing concept ? We d~illed them on the State's 160-acre spacing~ orders to date. Yes., but in locating them are they not located so that they're compatible also with the 80-acre concepts on th~ s truc ture ? could go back and drill We true o That's not the question. Now, haventt= they been planne~ so you could go to 80-acres.'with ease from these platfo~ as they are located? R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE:, ALASKA ~t 'e 'ms 10 11 12 14 15 16 17 18 19 2O 21 22 23 24 25 -54- A I don't understand the question. MR. SWAN: t think, if it please the Committee, he's asking here for a question of intent. The wells drilled in accordance with the 160-acre spacing are under the statewide rules, so located so that you can go to 80 or 40 if necessary. That's one of the reason~ the rule is written the way it is, so that it can -- A If that' the question, the answer is yes. Q Let's take a look at your well in the southeast -- all right, take 4, 3 and 13. As a matter of fact, one of ti had to have an exception, didn't it, because they were too close? A Yes, #4. Q And is it an indication that you will -- by the spacing of those wells, that you really intend on this structur~ to have closer spaced wells than 160 acres? One to 160 acres? A We think very likely we'll~ have closer spacing eventual] yes, sir. Q Now, both companies have indicated here today that they going ahead with tests. Am I wrong? That was you indi. cation, without regard to Mobil-Union's operation you a~ going ahead with tests? A Yes, sir, we plan to conduct an injection test. Q What would an agreement for the conduction of such test~ & R COURT REPORTERS WEST EIGHTH AVENUE ~ SUITE ~ 277-47 ! 3 ANCHORAGE, ALASKA em ,Y, 1 3 4 5 7 10 11 12 13 14 15 15 17 13 2O 21 24 25 A A A -55- quarter section and one more well in this quarter section, and by the same token one more well in this quarter secA tion and one more well in that; a total of four wells, :wo on each side of the common ownership line. Now, tell m where I'm wrong. We've not done enough drilling on this flank to say for sur~ whether or not production extends into Section Eighteen It's possible that both you and us would drill addition; 1 'wells here. Likewise you were discussing this morning the fact that you folks own this quarter. Now,'we thint , it's unlikely that wells would be drilled in there in view of the results here. 'This well is not a dry hole, as you pointed out. But it's quite possible that you c uld drill two more in here and of course we would not be ab].e to drill more than two in this portion. So you could drill four around us here and we'd be drilling two here two here you you, two here for us, and I don't know wha' -- possibly somewhere else. As a pratical matter, to date, there's been balanced drill- ing on either side of the ownership line, has there not~ Each side has two wells adjacent to the line at this tinge. Any indication to you or to your company that the Mobil- Union Operation would in fact overdrill along the owner- ship line and force your change in your drilling operation?. We haven't gotten such an order, yet, no. ANCHORAGE, ALASKA Well, I mean, assuming the .80-acre spacing order was ap R & R COURT REPORTi~RS 82.5 WEST EIGHTH AVENUE -- SUITE g 277-4713 10 11 12 14 15 16 17 18 19 20 21 .23 25 -56- proved, do you have any indication that the first wells that are going to be drilled are the ones up here? A No. Q Next to the ownership line? A None at all. MR. SWAN: Is Mobil willing to stipulate that they will not drill up there? Q Well, now, let me ask that question another way, Mr. Sw. If you have an approval of 80-acre spacing, Mr. Rausch, where would you drill first? A I'd have to pass on that. I'd have to sit down and thir about it. Q Would you expect our production people to say the same think? A I would think so, yes. Q In terms of the well spacing without regard to economic now -- just in terms of the well spacing and noticing where these we lis are located on the Mob il-Union side, " would you anticipate that the two wells would be locate~ adjacent to the line or back at the deep end of the quarter section so that they would be more in the patte~ already existing in that stmucture? A You're asking me to speculate on what Mobil might do he~ Now, I don't know what Mobil might do. Q Take it on ~your side of the line. What would you do wit ~Div_Of Mines &Min. IR COURT RI='PORTi~R$ V~/EIST EIGHTH AVENUE -- 8UITE ANCHORAGE, ALASKA .rio .k 'ri 'eo :h 10 11 12 14 15 16 17 18 19 2O 21 23 25 -57- A Q A A your two wells' location? We would do as we did before. We would not drill along the line until we saw the neighbors were, because we think it makes sense to drill the cheap close in wells first. Of the two wells you mentioned out in the flank, the ea: flank.~ there of the structure, they could both be drillec already in the existing ord.er, couldn't they? Yes, that's true. Both available on the 160 acre spacing-- That ' s true. Could you tell me, Mr. Rausch, with reference to this injection well that you say that you're going to drill, do you intend to -- at this time do you know whether yo~ intend to inject into the entire producing area or -- would you in fact use it as an injection well and a pro- ducing well at the same time? We are not intending to drill it; we are drilling it. In fact, we're about through the sands. The well is right here. It's 4)12. We haven't logged it yet. We would like to test water injectivity into both a water zone and an oil zone. If we encounter here a mixture o oil and water sands I rather imagine we'll complete it eventually as a dual injection well into two different sections; one in the oil sands, anothere in the water sands to measure injectivlty into the two. If we have 825 W£GT EIGHTH AVE:NU£ -- SUITE 277-4713 , - .... ANCHORAGE, ALASKA 10 11 12 14 15 16 17 18 lg 2O 21 ¸22 23 q A -58- a full oil section we'll probably complete it as a single zone oil injection well. But you're going to do it in any event without regard to what Mobil-Union does, is that correct? It's our present plan. We were unaware until this morning, that you planned an injectivity test. I want to read you a statement here and ask you if you can explain to the Committee and us why the same philoso phy does not apply to this structure, and I'm reading fr, the hearing before this Committee on July 12, 1966, on Pan American's request for '80-acre spacing on Middle Ground Shoal in Cook Inlet. Mr'. Swan said ?Now, Mr. Giles, in a statewide rule in addition to this require- ment as to the location within 160-acre subdivision, it is also provided only one well shall be Completed on eac 160-acre subdivision. Do you think the area which could be affected by this Order as requested today can properl be developed on these two platforms if the number of wells are drilled in the two zones is limited to one well to each 160-acre tract?" And the answer is "No sir, I do not. I feel on this particular field the two zones should be developed to a greater density than 160 acres per well." The next question "Will you please tel us why you have that opinion?" And the answer is "Each of the permanent platforms ,that have been erected over R & R COURT R~'PORT~IR$ 825 Wr'ST EIGHTH AVENU; -- SUIT~ 5 277-4713 ANCHORAGE, A~SKA ,m 1 2 3 4 5 6 7 8 10 11 12 1:3 14 If} 17 18 ~0 ~.1 -59- this field represents sizable investments. There are 32 slots available for drilling from each of these platform It behooves us to drill these slots that are available for drilling in the most efficient manner and to drill the number of wells that it makes the most sense economi tally to drill from platforms" The next question "Well, what well density would you recommend, Mr. Giles, and why?" The Answer: "I would recommend an 80-acre oii w, density for each of these two zones which we're concerne~ with in this hearing. The next question: "Why? "I re- commend this because from the data that has been accumu- lated we see a substantial section of pay sands several hundred feet; a substantial section of Hemlock pay, and substantial buildup of pay in these two zones economical justifies in our option 80-acre well density in these tw. zones." The next question: "Could the field be develop~ profitably on a density of one well to 160 acres?" The answer: "Yes, it could." 'The next question is "How?" No. "How about the economic picture, one well to approx imately every 80 acres?" The answer was: "It's much more profigable." The next question: "Do you think that permitting the drilling of the wells in this area to approximate density of one well to each 80 acres wil in any way adversely affect ultimate recovery of oil from the two zones with which we're concerned in this R & R ~OURT REPORTERS 82~ WEST EIGHTH AVENUE ~ SUITE ~ 277-4'713 ANCHORAGE, ALASKA :his ly D 10 11 19. 14 15 16 17 18 19 20 9.1 22 23 25 hearing?" "No, I do not, as a matter of fact" "Could it in some circumstances increast ultimate recove~ The answer: "Yes. Not insofar as primary recovery is c cerned but let's look at it from the standpoint that eac well we drill at this time must be programmed to serve two' purposes. One is primary recovery; the other is secondary recovery. Now, under a secondary program the more wells We have the better opportunity we'll have to force injection fluids, to contact more of the reservoir rock, and this could perhaps increase the ultimate secondary recovery." The next question: "Are there any other factors which exist· here and are more or less pecu liar to this type of operation which might affect ultima recovery?" The answer is "Yes, sir. There is a rather important' one. We really don't know~.~ how long these plat forms will last. Now, recognizing the test it has to -- as to the stability of the platform that was given to our platform a couple of days ago, well, this certainly is no way to find out but be that as it may, we cannot be sure that the platform will last for fifty years or more; it would be required under a 160-m~cre spacing. While we certainly hope they'll last and have every reas to believe that they will we have no experience and neither does anybody else in this type of Inlet water with the ice floes and all attendant hazzards to prove R & R COURT REPORTERS 277-4713 ANCHORAGE, ALASKA y?" orl- :e Dh' 10 11 12 14 15 16 17 18 19 2O 21 23 -61- Whather it will be the case or won't. Now, if the platf fails, as long as it's needed it's not economically just fiable to repair it or put it back or put another one back; we could leave recoverable oil in the ground for- ever unrecoverable." The next question: "Will 80-acre density as opposed to 160-acre density tend to improve your chances or lessen your chances of recovering oil before the platform should fail or need extensive repaiz The answer is "It will improve the chances because at a given point in time the cumUlative recovery under 80-act oil well density would be greater than 160-acre density'.' And the next question: 'Now~, suppose the platform does n last --or does last until you've produced the last drop of oil that can be economically produced in this field, .is there still a factor which might make 80-acre density more desirable than 160-acres?" The answer: "Yes, ther is. The operating costs for the platform should be rela ly constant throughout the life of the field regardless of the number of wells we've drilled. Now, this means that the per well cost for a platform of twenty producir~ wells would be roughly 40% less than the per well cost o a platform with ten producing wells. The lower per well operating cost would make it economically possible to produce oil to a lower economic limit and to recover oil that would not be recovered from a platform with a highe R & R COURT REPORTERS 825WEST EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE, ALASKA orm i- S?tt ot tive 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 A q A Q -62- per well cost. It's awfully difficult at this time to state how substantial that might be but the extra oil that's recovered could be a substantial quanity." "Would it be possible, Mr. Giles, to drill these extra wells late in the life of the field to achieve the low operating costs?" And the answer is: "No," 'Why not?" "It's just too late. You can't do it then. You ought o d~ it now." Now having read that and you were here, as I recall, to refresh your memory on that, what difference is there when you consider .the platform economics in this structure as opposed to platform economics in the hearing where your company's position was exactly the same as my client's? If 'you'll give me just a moment, I think I have some g that will be able to demonstrate that for you. You said, as I understand it, that our position here is s what different thatn we took at Middle Ground. Now, I want to be sure that -- Mr. Swan can bring out whatever he wants on Direct. I want to be sure you ans my question. I'm talking about platform economics now. That's what I'm trying to answer. One thing I believe -- and I may be in error here -- that is not included in your statement from the point o view of platform economics only, what's the difference~. between Middle Ground Shoal and this Granite Point? i~ COURT IRI~PO~TI=~S Wi'ST £10HTH AV£NU; ~ SUIT;' 2'77-4713 , ANCHORAGE, ALASKA 1 2 A 3 4 5 6 7 8 9 Q 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 -63- We're dealing with the same things. The difference is this, that Middle Ground Shoal 80's az economic under primary. At Granite Point 80's are not economic under primary. ~'.hat is the difference. Now, t reason for that is this: at Middle Ground Shoal we have two main groups, the B,C,D, and the E,F,G, which between them contain about a quarter of a million barrels per ac There's also a little dab in the A zone too. The 80 acr per well at Middle Ground Shoal, each hole we drill puts us in touch with 20 million barrels of oil. At Granite Poing we have about 100,000 per acre, giving round num- bers. We have 160 acres per well now and each hole we drill puts us in touch ~ith 16,000,000 barrels of oil. If we cut this to 80 acres that puts us in touch with 8,000,000 barrels in place. In our judgment 8,000,000 barrels in place is not profitable under primary. We ge 15, 20% of this~;' this is not enough to pay for the well At Middle Ground Shoal on the other hand, 80 acres, 20 million barrels in place, this is profitable. This is why we feel that 80 acres is satisfactory for primary at Middle Ground and not at Granite Point. Mr. Rausch, your statement '.I can understand but you're still evading or avoiding the impact of Mr. GileS' testi mony at the Middle Ground Shoal hearing which talks abou the life of the platform. Now, let's '- do you have sore R & R COURT RE:PORTE:RS 825 WEE;T EIGHTH AVENUE -- SUITE. 5 277-4713 ANCHORAGE:, ALASKA he re. es 10 11 12 14 15 16 17 18 19 2O 21 22 23 25 -64- thing to say, Counsel? MR. SWAN: Yes. Your question was so long that I didn't understand it and I don't think the witness understood it, and I -- I think your -- I think the witness has given an answer to the question why is the platform economic difference in one to the other, and I think the answer is responsive. I think he's con- tinuing to argue with the witness. MR. STEVENS: Well, I hope I'm not arguing, Mr. Swan, I have no intention of arguing. Q (By Mr. Stevens) Mr~. Rausch, let's assume that this is correct. I don't have anything to assume otherwise. Let's assume that this is correct and that the platform in fact lasts twenty years. A platform that costs twent million dollars lasts twenty years. On 80-acre spacing you get maybe six or eight more wells at a million and a quarter dollars a well. NoW, under 160-acre spacing you could eyentually drain the 16,000,000 barrels but you could not do it in twenty years. Now, again from the po of view of platform economics aren't we saying the same think you said at Middle Ground Shoal, that 80 acres wil let us guarantee to the state that within the economic life of the platform, we can recover the maximum ultimat. recovery from primary recovery. Isn't that what you sai at Middle Ground Shoal? A Yes, sir, but again the circumstances are different. Th R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277-4'713 ANCHORAGE, ALASKA int 10 11 12 14 15 16 17 18 19 21 22 23 24 25 Q A Q Q Q A A -65- average producing rate of the wells at Granite Point is something on the order of 3000 to 3500 .barrels a day. A Middle Ground the average producing rates are much less than this. Therefore the timing considerations in the two fields are not identical. Granite Point has a much more permeability, much higher wells. When you drill -- Can you drain your portion of a structure in twenty year at 160 acres? A moment. Our calculations say yes. You can drill your portion in twenty years at 160 acres? Yes, sir. At primary recovery or Secondary? Primary. Primary alone ? On secondary our calculations indicate it would take an excess of twenty years. Are you talking about economic recovery or -- what are you talking about? I don't understand that. Do you mea you can drill this reservoir in less time on primary re- covery than on secondary recovery? Drill it or drain it Yes, because there's less to drain. Much less. Do you have figures to back up that that it would not be economic to drill it on 80 acres on Granite Point? Yes, I do. Well, what -- what's the basic difference here as oppose R & Fl COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE S 2.77-4713 ANCHORAGE, ALASKA 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 A A -66- to Middle Ground Shoal? Again now, I'm not talking abou platform economics from the point of view of the operati costs. You've made a great point that Middle Ground Sho which I think is correct, I don't doubt this, that the the lower operating costs per/well made it possible to recover lower economic ally recoverable oil, and there- fore -- you prevented waste. Now, why isn't that the. sa thing here ? That is true here. As a matter of fact, our figures co sidering primary only do show slightly more mecovery wit 80-acre spacing than with 160. What about your operating costs? How about your operati costs? But not enough to offset the additional drilling. The lower operating cost does not make it possible? The unit operating cost is no.~ lower and the life is not that much difference. Keep in mind these wells are -- withdrawals of one are felt in another, and when you in- crease the well density you simply increase the rate of decline of the already existing wells, so Perhaps we don't see the difference in producing rate and field quite as great as you do% ~ These are judgment matters an I can't' argue with you. Well', I agree. You've got your own judgment; that's fin Let me go into another line then. Assuming -- and as I R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 277-4713. ANCHORAGE, ALASKA ng al, rig. e · 10 11 12 13 14 15 16 17 18 lg 20 21 22 23 24 25 A Q A q Q A -67- understand the procedure of the Committee, you have to make an application for each one of the two wells that could possibly be offset to your ownership line. Assumi those are never drilled, will 80-acre spacing on the Mobil-Union portion of this structure harm yours? Yes. Tell us Why. Anytime anybody takes out more rateably than their share of oil in place migration is going to occur. If for example you were .go go tO 80 acres or even denser, if you drilled them all down here you would still create a pressure sink which would cause oil to move across the line unless we did the same thing, and this is a very wasteful procedure we're'./trying to avoid. Now, are you telling me that as prudent operator you would not take the actions necessary to protect the State and its interests in your portion of the structure We're ~oing that right now, right today. You mean by opposing the 80-acre spacing? Yes, sir. W~ll, along that line, Mr. Rausch, let me ask you, if -- if we agree to your application that's scheduled for the next session here of the 'Committee, would you withdraw your opposition to the 80 acres? If you agreed to what? R & R COURT REPORTERS 825 WEBT EIGHTH AVENUE -- SUITE ~r 277-4713 ANCHORAGE, ALASKA ag 10 11 12 14 15 16 17 18 19 2O 21 22 23 24 .. 25 -68- Q To what your -- if we stipulate your application should be granted would you withdraw your opposition to the 80 acres ? A No. No. MR. SWAN: Just a minute. I think this is a question for the Committee or for the lawyers to answer, and if the Commit- tee will enter an Order here saying that wells will not be~ drilled on closer spacing until we have,Ia firm agreement for initiating fluid injection operations, which is What we said in our applica- tion, yes, we'll -' we will agree that 80-acre spacing may be permitted at that time. Yes. MR. STEVENS: Well, I'd like to get this, Mr. Swan, I appreciate your position, but I want to get it from production -- there's another question that follows that's not exactly -- do agree with .'~hat? MR. SWAN: I think the question of what we can agree to a question~ffor the lawyers to answer. MR. STEVENS: Well, all right., well, let's just -- he'~ stated your position. Assuming 'this is correct, that if we agree that all we have to have is an agreement as to the initiation of tests, initiation of fluid injection operations, right? MR. SWAN: May I read the application? "That an Order permitting closer well spacing in'i.this field should not be en- tered unless the Committee in .the same Order authorizes fluid injeotion for secondary recovery and pressure maintenance, and'~' R &: R COURT RE:PORTE:RS 825 WEBT EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE, A~ASKA you is 10 11 12 14 15 16 17 18 19 2O 21 22 23 24 25 -69- also authorizes the drilling of one or more injection wells along common boundary between the Mobil-Union acreage and the acreage held by thb applicants."' MR. STEVENS: May I interrupt -- your right. That's -- that doesn't require anything. That's just an authorization. MR. SWAN: "And the drilling.,of wells on closer spacing should not be permitted until the affected operators have reached a firm agreement for initiating such fluid injection operations." We are perfectly willing now to stipulate that this Committee can enter an Order saying that at such ~ime as Mobil , and Pan American come to the Committee and say we are ready to commence fluid injection operations and we'~e agreed on a way to do it, we're willing to go to 80-acre spacing. We're willing to go to -- at that time we're willing to go to -- if you':.~will establish a reasonable barrier between the leases we're willing to let you drill on any spacing you want to because -- MR. RAUSCH: There are two questions here. How should we manage;:our loease. We see things maybe differently than you do. We don't care if you go to· 80's, 20's or 40's, miscible gas drive or mercury injection,,~ if we have some sort of a barrier 'between us so that your operations didn't effect our. The other question is assuming that there is no such barrier, and to date we haven't been able to get one, then what will your~going to 80's do to us? And this -- this is What we're -- MR. STEVENS: I'm glad you mentioned the word barriers R & R COURT RI=PORT£RS 2T7.4713 ANCHORAGE, ALASKA the · 17 -70- I because what you're really talking about -- you're not really 2 talking about fluid injection operations. You're talking about a 3 water flood barrier that's along the ownership line, aren't you? 4 A On our lease we're talking about what type of fluid 5 injection we'll have. This is your' affair. 6 Q What you really want to 'do is you want to create an art~ 7 ficial barrier in between there so that you can -- you 8 can proceed at the rate of development you want and we 9 can proceed at the rate of development we want. Isn't 10 that right ? 11 A This is one way we could go. 12 Q Well,, you know, Mr. Rausch, it's unfortunate that I'm a 13 member of the Legislature but I want to read you the 14 existing law about correlative rights. There is no such 15 protection of correlative rights in the State of Alaska 16 and I think -- I'm 'sure your Counsel has advised you and " you probably know that correlative rights in this state involves 'only the opportunity for development, not State 19 protection for your development in that space you want 20 to deyelop. Now -- and I'm reading from Section 31:05:1 21 -- "Correlative rights means the opportunity afforded so is 22 far as it/practicable to do so, to the owner of each 23 property in a pool to produce without waste his first an 24 equitable share of the oil and gas or both in the pool 25 being an amount so far as can be practically determined and so far as can practically be obtained without waste R & R COURT RFPORT£R$ 825WEST EIGHTH AVENUE -- SUITE 5 277-4713 ~ 1 ANCHORAGE, ALASKA t0 10 1 2 3 4 5 6 7 8 9 A Q 11 12 14 15 16 17 18 19 2O 21 22 24 substantially in the proportion that the quanity of recoverable oil and gas, or both in the pool under the property -- under the property, bears to the total recoverable oil and gas or both in the pool and for suc? purposes to use his just and equitable share of the reservoir energy." Now,' what you're really saying isn't it -- what you really mean by this approach is that you want the Committee' to take some action which wi prevent my client from having any possibility of -- of setting up a production pattern which would in fact drai.~ your portion of the structure, am I right?' No, that's not what we're after. Well, what do you mean by the injection wells along the common boundary? This morning you said that if you drilled injection wells, they would be on'.the periphery of the structure, on the down dip. If you drilled gas injection wells they would be at the top of the structure in your application, and now you are again talking about the common line as far as injection wells. Now, what use would they be other than to. protect your correlative rights? If our two companies do not. agree on how to conduct fluid injection operations, then we'll need some way so that we can each go our own way. It appears to us that an in- jection bartles is the'i:way. If w.e~..don't' have the inject R & R COURT REPORTERS 132~WEBT EIOHTH AVENUE: -- SUITE · 277.4713 ANCHORAGE:. AI. ASKA L1 .ion 10 11 12 14 15 16 17 18 19 2O 21 23 25 -72- barrier, and I'm sure you're aware -- we've been talkin~ about it and haven't been able to agree on how to build-| one -- then we must have agreement on what ~type of secon dary operation we are both going to conduct throughout · this field. Q "Well, there's another alternative. The State could say go unit, couldn't they? Am I right? A That's another alternative, yes, sir. Q As a matter of fact this State can tell you to go unit, can't they? A I'm well aware of that. Q And this State can deny your application for any indivi~ well, without regard to a spacing Order, can't i~? A Yes, sir. Q' If we get approval of an 80-acre spacing Order today, the drilling of these individual walls along that bounda is still within the power of the Committee, isn't it? Af a matter of fact, this is a point that our Committee made very forcibly in the Middle Ground Shoal area, isn' that .correct. MR. SWAN: Well, I think that this -- these questions are arguments, not questions. I think he's arguing too much with the witness. I don't like to keep objecting but I -- I think the questions can be much more precisely asked than this, and I would also like to point out that only under certain conditions, in R & R COURT Rg'I:'ORTi~iR$ 825 WEST EIGHTH AVENUE -- SUITE: 5 2'77-4713 ' ANCHORAGE, ALASKA ual ry 10 11 12 14 15 16 17 18 19 2O 21 22 23 24 -73- spite of Mr. Steven's statement, can.the Committee force unitiza- tion here. MR. STEVENS' Well, we're not advocating it, Mr. Swan. I'm sure of that. I just want to make sure we all understand there are'~other things than the water barrier or a barrier to protect correlative rights. But again, my last question is not argumentative. As a matter of fact, this 80-acre spacing Order cz not posaibly hurt production on your side until the Committee appr the first or second or whenever the well comes that might cause that harm, isn't that correct? The Order itself is not a per- mission to drill any well, is it? A Well, this is a legal matter. I think Once you have the Order it's critical for us to file the summary and get the well approved. We have no next day in court on this ~ Nobody objects now to our 160's as far as I'm aware. CHAIRMAN: We'll take a"short recess. (Proceedings 'were recessed from 1:40 p.m. to 1:45 p.m.) (ON THE RECORD) , Q (By Mr. stevens) Just a couple more questions. Mr. Rausch, as I under, stand it if we agree to your applica- tion before we exerciae the right under the spacing Orde if we enter into a firm agreement on fluid injection tha there would be no opposition to our field rules. Would tell me how that is consistent with your statement this morning, where you say it would be a number of months R & R COURT RE:PORTE:RS 82.5 WEST EIGHTH AVENUE ~ 13UITE 5 277-4713 ANCHORAGE, ALASKA rOU 10 11 12 14 15 16 19 2O gl -74- before you have the information on which you could even determine whether you were.going to have fluid injectior or not? A I think if we get a firm agreement on the details of flu injection, we have to know. what type of program we're going to have, which we're both'working towards right now. You plan to test a well; we plan to test one. When we started talking about this some months ago, thes plans weren't nearly as far along'as they are now. Well, but from the point of view of timing, what you really want us to do is enter into an agreement as to fluid injection operations before either one of Us know what type of fluid injection -- or even if fluid inject is -- is advisable, iSn't that correct? CHAIRMAN: Mr. Stevens, could you pose your questions directly to the witness rather than making them sound sort of like an argument? - Q Sorry about that. Let's put it this way. Do you think that you need the information from the fluid injection tests before you could reach a conclusion as to what ty~ of fluid operations are necessary? A Yes. Q But if we enter the agreement now you're Willing to stipulate to the Order? Is that correct? A If we enter an agreement t~o isolate your lease from oura R & R COURT REPORTERS' 825 WEST EIOHTH AYENUE ~ SUITE 5 277-4713 ANCHORAGE, ALASKA id on 10 11 13 14 15 17 18 19 2o 21 9.2 Q A A Q -75- A we're willing to .let you drill on any spacing you~ want t , drill. No, that's -- I agree, that's not what I said. Now, wha in the --what in the Order would separate your lease ~ from ours? What in your application would separate your lease from ours? The line wells. Fluid injection operation for secondary recovery would separate the two leases? The line wells. May I see that application? .(Reading) "And authorizing the drilling of one or more injection w along a. commom boundary between Mobil-Union acreage.and the acreage held by Pan American Petroleum, etcetera, etcetera. And my last question I want to ask you is then what you really talking about in terms of this approach is not secondary recovery but protection of correlative rights is that correct? Under that approach that's what we're talking about. MR. STEVENS: Thank you. CHAIRMAN: Do you have any questions? MR. swAN: I might have a little Redirect, yes. might have a -- (Pause) -- we have no Redirect. Gilbreth? If I CHAIRMAN: Does the Committee have any questions? Mr. R & R COURT REPORTERS 825 WEST EIOHTH AVENUE ~ SUITE 5 277-47 ! 3 ANCHORAGE, ALASKA 10 1! 12 14 15 16 17 18 19 2O 21 23 24 -76- MR. GILBRETH: Mr. Rausch, you testified that the press~ was dropping in this reservoir. At what point do you think a fluid injection project should be initiated? I didn't understand this. .Was it near saturation pressure? A Near saturation pressure, yes. MR. GILBRETH: Plus or minus a few pounds either way? A Ideally right at it, yes. MR. GILBRETH: Did I understand you to say that your estimates indicated that saturation pressure will be reached sometime next year? A Sometime., yes. I cannot be precise. MR. GILBRETH: .I realize that. Would it be late in the year ? A The algebra based on the September survey said next March. Now, algebra is just algeb=a. We're takifig· ant survey this month. I think if you'd ask me that questic in two weeks I could give you a much better guess, and I -- I would be willing to do so. MR. GILLBRETH: I realize that. I'm asking with regard to the proposal for the bottom h01e pressure rule where the first survey is suppose to be taken in Jun~ and July. I'm wondering, do you think this is too late to have beneficial results? A Oh, in fact, we've already taken surveys on wells as completed. We've surveyed several wells here during the period of tanker inavailability. We~e~,h~d some wells R & R COURT REPORTERS ' 825 WEEIT EIGHTH AVENUE -- SUITE;5 277-4713 ANCHORAGE, AI.ASKA the 10 11 12 14 15 16 17 18 19 2O 21 23 -77- shut in because of tanker shortages, and there was a good chance. We've scheduled a survey here in December in connection with finding some compressor equ~ ment for a well to be down.' We will take, I am sure many more pressure surveys than this Rule calls for. We regard this Rule as being a minimum requirement. We'll certainly take more than the Rule -- than the Rule appea for. Whether you put the Rule in or not we'll take -- MR. GILBRETH: Would your company object if this date were moved forward to February or March, something like that,? A That' s awful soon. MR. GILBRETH: Say March or April? A Oh, not really, but right this year-- we're taking one in December. Three months later iS awful soon. .MR. GILBRETH: You're not taking them~ three months yours A No, no, about twice a year is our notion of how often tc do it'. Basically as the thing gets older we'll ~eed them less frequently. . MR.' GILBRETH: I'm afraid I might have misunderstood your testomony about your early results on gas versus water. Did you say your indications we~ that. gas reduced your residual saturation about 20 to 25% and water about 35% or that it reduced it to that? A Well, it was by, but let me check my figures again here Gas reduced about 20 to 25% pore volume with gas displa. ~.~.;.~,~Div,. of Mines&Min. R 8t R COURT REPORTERS ' ~2~1WEBT EIGHTH AVENUE ~ SUIT£ ~1 277-4713 ANCHORAGE;, ALASKA pm ~S elf 10 11 12 14 15 16 17 18 19 20 21 23 -78- cing oil, and water we get about 35% pore volume. We get water reduction against -- not to but by. MR. GILBRETH: I didn't gain the full significance perha of your testimony with regard to the 'economics of completing these stringers further .than the main sand bodies. Did I understand you to say that you felt that the additional recovery which could be gained by 80-acre spacing on these stringers themselves would not pay out the additional cost of development? A That's our present view. Our basic position on, it was th~.t we need more pressure data::, to see how significant this !enticularity problem is. Our guess today is that we'll find it not major and we Won't need the 80's to pay off the lenticular thing, but that's just a guess as of today. MR. GILBRETH: Has your comPany noted any permeability stratification from the center of the reservoir to the edge of it? Anything like that that might he adverse to a recovery pro- gram? A , . We 'haVe seen variations 'in the permeability here. It's quite complex. We see a pattern of poor permeabflities to the north. We see some .areas in. the overthrust belt that seems to have poor permeabilities. We've seen some other anomalies that as yet we don't really understand. I think we can certainly agree with Charlie's statement about 10 millidarces look like a reasonable average R & R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 2'77-4713 ANCHORAGE, ALASKA ~S t hat -79- 1 permeable based on buildup data. 2 MR. GILBRETH: What kind of a minimum and maximum does 3 this represent? Do you have large variations? 4 A Oh, looking at our buildup data here we see -- well, the 5 worst one I see here is 2.8 and the best one is a little 6 more than 10. ? MR. GILBRETH: That's all I have, Mr. Chairman. 8 CHAIRMAN: Mr. Marshall? 9 MR.~ MARSHALL: I have a question in~ reg,ard to your obje¢ 10 tion to the lower 'limit of 'the pool in this field which was 9800 11 feet. I believe you registered an objection to Mobil's applica- 12 tion in this regard. These were intervals in Mobifs Granite Point ..... 13 #1 well. Would yOu care to give us a suggested fiture on the 14 lower limits footagewise in this same well, or would you rather -- 15 A We would like to carry the Middle Kenai through all of 16 its own -- here's Middle Kenai. This is the Hemlock 17 right here. If you want to.make a round number, call it 18 ten;eight. 19 MR. MARSHALL: Thank you. 'I believe that concludes mine 20 MR. VONDER AHRE: Mr. Rau$ch, were you permeabilities 21 based on the periameter readings by air or water? 22 A No, sir, the permeability figures I was quoting were 23 calculated from the buildup data. The core permeabilit) 24 information .that you're asking about indicates a much .... 25 high permeability, but it's very co~non that core perms much higher than the actual residual permeabilities you .~, ,~, ~ & ,R COURT REPORTERS ' "[':~.'Z'. ,;'? ;:? i ~','.~'~ ' ,,'.~i ':~-: ,i,,, ~3~"~ I/~tE~r EIGHTH AVENUE ~'$UITE ~ 277-4713 ~ 1 ' - ..... ANCHORAGE, ALASKA ~ ~ ,.~,~ ~,Div. of Mines &Min.. ~,.~.-. I are l0 li 12 14 I5 16 17 18 19 2O 21 22 23 24 25 -80- measure at the bottom. CHAIRMAN: Anyone else? Mr. Gilbreth? MR. GILBRETH: I'm not sure that I understand from your application, it's Pan American's position that if 80-acre spacing is approved and an injection program is approved, that the 80-acr~ spacing will not become operative until a program is initiated? Mr. Swan? MR. SWAN: No, sir, our position is that once we have ar agreement for it that is Satisfactory to both parties we would be willing that the Order than permit any drilling because I'm satisfied that neither party would sign an ag=eement unless they were satisfied that it would -- injection would start in such time that 80-acre spacing would not any longer be of improtance to us or to them, our position. Probably we're getting into the next application. I think I --I think we ought to defer that. CHAIRMAN: Any questions from the audience at this time? We're open for questions from the floor. Hearing none, doe Mobile have further questions? MR. STEVENS: We have none. . MR. SWAN: We have no further questions'. CHAIRMAN: Does Pan American have further questions? MR. SWAN: We have no other witness. CHAIRMAN: I think probably you can summarize your case at this time. .MR. STEVENS: Mr. Chairman, we would like to call our R & R COURT REPORTERS ' 825WEST EIGHTH AVENUE -- SUITE 277-4'713 ANCHORAGE, AI. ASKA 10 11 12 14 15 16 17 18 19 20 21 22 23 25 -81- expert witnesses back if it's possible. Mr. Chairman, if I can just ask some questions I'll identify the witness that I'm asking. Mr. Hoyle Hamilton has previously been identified for the record. Mr. Hamilton, will you comment on the presentation pertaining to lenticularity and particularly the -- and also the bubble point matter that was mention here? I'd like to know particularly with regard to bubble point. Whether the situation exists in this reservoir, the bubble point concept that was mentioned as a dropping of this is adverse to the recovery from this structure? A Well, your first question regarding lenticularity, I agree with the statement that Mr. Rausch made this morning. I won't try and quote him but I believe it was to the effect that pressure balance determination o reserves compared to a volumetric ~and' the pressure balar was lower; this would be an indication that the lenticu- larity might exist in the reservoir, and in our studies our pressure balance determinations are quite a bit -- are substantially lower than the volumetric calculation, in fact, on the order of 50%. And this along with our electric log correlations and the geology we've seen, We feel ties in with this lenticularity problem. In regard to bubble point I also agree with Mr. Rausch, that in ma cases reservoirs -- or the bubble poing is a critical factor in the depletion of a reservoir. Ail of the stud we've made of this. reservoir and the fluid pToperties R &'Fi COURT REPORTERS' 277.4713 ANCHORAGI~, AI.ASKA ;e ny 10 5 7 8 9 A A Q A 11 12 14 15 16 17 18 19 20 21 22 23 24 -82- that we've analyzed, we feel that the bubble point itsel is not a critical factor here. In fact, our calculation show than an optimum point to be at for particularly for water injection, would be possibly a 12% gas satura- tion which would be considerably below the bubble point. Now, Mr.. Meyers, in terms of locations of these wells that were mentioned along the common ownership, line, we've already pointed out the four potential locations. Would you tell us in terms:"~of timing of drilling of thes wells, what was the time of drilling of~ -- what's this one here? Nine? Five. Pan American's ~5 and drilling you 31-13. What's the .difference in drilling time involved there? Roughly -- well, the actual days for ~5 was approximatel 105' days, plus or minus. Our 31-13 was in the range of 120 days. Concerning drilling to that line would be'-- actually a very few days difference in the drilling time There are distance difference but the actUal drilling time, we don't, feel like are of a large magnitude. And Mr. Woodruff, what is the intention of Mobil-Union operation with regard to drilling of the wells along the common ownership line? Well, of course, as I mentioned in my testimony our feelings now -- we feel that we are at the point or pra¢ R & R COURT REPORTERS B2B WEST EIGHTH AVENUE ~ SUITE S 277-4713 ANCHORAGE, ALASKA f. 10 11 12 14 15 16 17 18 19 2O 23 Q A Q tically at the point where we are going to have .to start stepping out on locations that are going to create exces risks due to the steep dips that we encounter on the flank of the reservoir, so that our intent would be to drill primarily these stepout~wells so that we could step out shorter distances 'and therefore not encounter as much financial risk or as much risk in a -- See, the way we are now we step out another 160 location, we coul encounter as much as 2000 feet on 'the west side of structu=al loss, and we feel that this is excessive, We could minimize this risk by stepping out on 80-acre loca tions. And if you drilled on an 80-acre spacing what relation- ship would those new wells .have to your fluid injection program? Well, we feel that the drilling on 80-acre spacing would actually speed up the time in which we could indicate fluid injection primarily due to two factors. We would gain additional data which would enable us to better overall design the fluid injection program, and that by having these 80-acre wells we could start the injection sooner since we would have more flexibility. We would have wells already in place which could very possibly be used or incorporated in,.the injection program. Now, in terms of your primary recovery alone do you -- R & R COURT REPORTERS 825 WEST EIGHTH AVENUI; -- SUITE:5 277-47 ! 3 ANCHORAGE, ALASKA s iv~ 10 11 12 14 15 16 17 18 19 2O 21 22 2'3 2't -84- have you financial data, the economic studies to back up the position of the applicant here that there will bc a greater recovery on 80-acre spacing than there will be on 1607 A Our data definitely indicates an increased recovery unde 80-acre spacing. Our economics also indicates that 80 acre spacing would be profitable. We have this data; we consider it to be proprietary data but we would be glad to meet with the Committee at anytime and show the~ this data. M~. SWAN: Mr. Chairman, I'would certainly object to any conference with the Committee at which Pan American was not represented. I don't think you can Consider information we do not also see. MR. STEVENS: Well, Mr. Swan has made a statement for ti record.' I believe the regulations and the law permit us to submit data to the Committee under confidentially circumstances when it's proprietory data. And we have really made the offer to do so and if requested by 'the Committee would be glad to do sol. That would -- that is the scope of our rebuttal. If the Committee wishes us to make a closing statement we'd be glad to do' so. CHAIRMAN: You have questions at this time, Mr. Swan ? Q (By Mr. Swan.) Mr. Woodruff, I'm referring now to your Exhibit "B". In the northwest corner of SeCtion I8 -- don't know the Township and Range~: here but it's immedi~ R & R COURT REPORTERS 8:25WEGT EIGHTH AVENUE -- BUITE 5 277-4713 ANCHORAGE, ALASKA tel 10 1 2 3 4 5 A 6 Q 7 A 8 9 Q A Q A Q Q 11 12 14 15 16 17 18 19 2O 21 22 23 24 -85- east of where you have conducted development, are there at least -- well, there's one undrilled location in the northwest quarter of 18 'and another in the southwest qu~ ter of 18, is there not? There is. Do you intend to drill those? Right now, we consider them extremely risky locations. Here again we feel that if'we go on 80-acre spacing it will allow us to step out with less risk. Do you feel without having drilled any dry holes yet tha you have sufficient information so you can say this reservoir is defined? No, we don't feel that if -- the limits are absolutely definited at this time. Isn't one of the purposes of initial wide spacing to secure rapid definition of.a reservoir? I think that it would except that i think in this case it necessitates unnecessary financial risk when you're talking about extremely steep dips. Some point was made of the order in which wells were drilled from your platform. Which as the first well that you drilled and completed from your platform? The first well we completed was 31-13. That's the one up here right next to the common boundar) isn't it? R 6: R COURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE $ 27'7-4713 ANCHORAGE, ALASKA not r~ 10 1! 12 13 14 15 16 18 19 2O 21 23 -86- A That's correct. Q So you don't agree with Mr. Rausch's idea that you shou~ drill the ones cheap and close to the platform first, dc you? A Well, in our drilling that we have encountered to date w don't see an awful lot of~"difference in the timing of drilling these wells. Of course, we encounter severe problems, mechanical problems. Q Let me put it this way, given a choice Pan American firs drilled wells that did not immediately offset Mobil's and given the same choice Mobil drilled the first Well to immediately offset Pan American's, did it not? A That ' s correct. MR. SWAN: That's all. CHAIRMAN: Mr. Gilbreth? MR. GiLBRETH: I'd like to' ask two more questions. Mr. Hamilton, you indicated that you felt the optimum time for the program would be some -- well, after saturation is reached and gas saturation of some 12~/~ had been Set up. Does this represent a significant drop in pressure below the saturation point? By the time ~he 12% saturation is reached? A The best I recall, I think'we estimate~.'ithe drop at 700 t 800 pounds below the bubble point. MR. GILBRETH: Below the bubble point. MR. SWAN: I'm sorry. I didn't hear the witness's answe R & R COURT RE:PORTE:RS 825 ~'EST EIGHTH AVENUE -- SUITE 5 277.4713 ' ANCHORAGE, A I..ASKA r e 10 11 12 14 15 16 17 18 19 20 21 23 A I said, the best I can recall I think it represents a drop of seven to eight hundred pounds below the b~bbl~ point. MR. GILBRETH: Mr. Woodruff, you were questioned that y~ have economic data to show that the 80-acre spacing is more profil able than 160. Is that outright economics or is it discounted economics? A It is discounted economics. The main figures are on th: sheet. MR. GILBRETH: Without discounting do they still show i to be profitable? A We feel like it would be if you add the lenticularity and this, We feel that it would be. CHAIRMAN: Is there anything else? Then you may procee~ Mr. Steveni~. MR. STEVENS: I don't know how extensive you want, Mr. Chairman. I think that we've presented evidence to justify an Order on behalf of the Mobil-Union operation at least, and for the whole pool as the application, a permissive Order for well spacing on a greater density, similar to the order that has been issued in Swanson River and in Middle Ground Shoals and Trading Bay, and we ~think that the experience that has been brought in before you as far as the Mobil-Union operation certainly justifie at this time an 80-acre spacing Order included in the proposed Field Rules. These are Field Rules as such. They -- the scope & R COURT Ri~PORTE;RS WEST EIGHTH AVENUE -- SUITE 277-4713 ANCHORAG£, ALASKA 10 11 12 14 15 16 17' 18 19 20 21 23 25 -88- and application of them, of course, would apply throughout the structure and throughout the pool but since they are permissive, of course, Pan American is at 'liberty to proceed as they see fit and this operator would be permitted to proceed as they see fit, subject of course to individual approval of each well. Now, I've been given a note here which indicates that our first well spudded was not -- wa§ 31-14, which was not an offset well as 31-13 was -- was relatively close to our platform. This is just an inaccuracy in the prior temtimony, to meet Mr. Swan's bst poinl With regard to our application, we of course appreciate Mr. Swan's poSition to keep this other application out of this hearin but I think that we've got to consider the impact of the position here. As I'.'understand it, if my clients would agree today that th~ would meet the requirements Of~'Pan American for fluid injec- tion operations -- not necessarily secondary recovery operations but fluid injection operations, they"d have no objection to 80-acre spacing. Now, we have believed and I think it's con- .firmed now for the record that it's not -- they're not talking about fluid injection from the point ~of view of recovery but we'rE talking about fluid injection from the point of view of protecting correlative rights. And this is not a primary consideration for the Field Rules. It should not be a consideration with regar¢ to 80-acre spacing, because as a practical matter we feel that we have shown that economically and physically we are in~-~a position now where we needed an 80-acre spacing Order to continue the de- R COURT REPORTERS ANCHORAGE, AL.ASKA 10 11 lg 14 15 16 17 18 19 2O 21 23 -89- velopment of the Mobil-Union lease and that portion of the Pool that's under that lease for a maximum ultimate recovery, for the prevention of waste, we need this Order now. I think that the opposition is based primarily upon their economics for their por- tion of the structure which is -- if they do believe that they're better off to operate on 160-acre spacing they would still ,be at liberty to do so despite the 80-acre spacing Order. We would ,urg that -- that,:~he Committee issue the Field Rules. I would say th~ we have -- if we understand the impact of their amended -- I have not seen it written out yet -- to Rule 2-A, we would have no o.bjection, if I understand what Mr. Swan stated in terms of modi- fying that so it does not affect lease boundaries but only for' the -- of the ownership, at lease the common ownership change. W~ have no objection. We'd also have no objection to the modifica- tion of the depth as indicated by Mr. RausCh, subject to Committee approval. We think however that the application states the bot- tom limit so ~ar as we're' concerned at the present time, and if it is fiecessary we could at a later time ask ~or that to be amended. But the basic -- basic conflict is obvious before the Committee, and that is quite similar in my opinion to the same conflict that was' presented in the Middle Ground Shoals applica-. tion where there is a divided ownership on a common pool and one operator is in a position where economically speaking they're going to be forced to drill uneconomic wells or at least take excessive risks unless the Statewide Rule is ~odified. If the & R COURT REPORTERS WEST EIGHTH AVENUE ~ SUITE ~ 277-4713 ANCHORAGE, ALASKA ~ 9 10 11 12 / .... 13 14 15 16 17 18 19 2O 21 22 23 24 25 ( Statewide Rule is modified at this time I think the Committee and the State would still have sufficient control over the approval of the wells to prevent any undue drilling of offset wells or any action which would be harmful to the structure, which I'm certain that my clients wouldn,'t do anyway. We need this approval at this time ~in order to step out gradually on the structure and to accomplish the purposes that Mr. Woodruff outlined and we hope thi the Committee will approve these Field Rules,~ subject to these two minor modifications which we feel -- that you desire to do s© We're not urging these modifications on the Committee that were mentioned but we would~ihave no objection to the first two that they ~mentioned. I do believe that the other hearing on the other application may more fully.demonstrate our opposition to the con- cept involved there. Thank you. MR. SWAN: Mr. Chairman, before I close it's been brough' to my attention that I forgot to offer my exhibits. May I mark this Exhibit #1, and make this Exhibit #2, and offer Pan American Exhibit 1 and .2 at this time? CHAIRMAN: Are there any objections? MR. STEVENS: No. CHAIRMAN: Hearing no objections we will adopt these tw( Pan American exhibits #1 and 2. MR. SWAN: One more point. I think I might settle this problem on Rule 2 by asking a question of. the Committee, if I could make some member Of it a witness for a minute. Maybe we R & R COURT REPORTERS 82.5 WEST EIOHTH AYENUE ~ SUITE 5 277-4713 ANCHORAGE, ALASKA Lt 10 11 12 14 15 16 17 18 19 2O 21 ~90- are seeing a ghost that isn't here,i. If we were to complete a well within 500 feet of a lease line where the Chakachatna group owned owrking interest on both sides and the State owned the royalty on both sides, there was no difference in ownership at al' would that be permissible under the Rule as proposed in Mobil's application? If it would be, I don't think we' need to change it. Looking it over, it occurred to me that if you amend -- well, if the words Where ownership changes are meaningless, unless that what you did mean because otherwise you'd just say ypu shouldn't with five hundred feet of a lease line, period. 'But I think maybe the Rule as Mobil proposed it is --is proper. Is that the way you intended it? MR. STEVENS: I'm sure we intended where -- where the lease boundary meant a different as to ownership. MR. MARSHALL: Well, we do have -- in our new re~ulatior we do have a wording on this particular problem which indicates to us the proper meaning where there is any difference in a lease, regardless of ownership, but if there's a difference in lease then we should protect 'the 500-f~ot standoff on the grounds that perhaps there is an overriding royalty interest which could be affected by the 500-foot approach. Now, we know in this par- ticular case that the overriding royalty interests I am almost positive -- probably are zero. The royalty, interest is the same. The working interest is the same. I ~' ~ -~- just off the top of my he can't see where there is any problem there. R & R COURT REPORTERS 825 WEST EIGHTH AVENUE M SUITE 2'77.4713 ANCHORAGE, ALASKA S !rill 10 11 12 14 15 16 17 18 19 2O 21 -91- MR. SWAN: Well, we will submit then to you and also to Mobil a copy of what we think it should be. Quite frankly, working on it at noon today I -- the more I looked at it the.· more I thought it was all right the way it was, but you feel it should be clarified. We will try to clarify it. MR. MARSHALL: We do appreciate your thoughts on that. MR. SWAN: I think it's obvious the difference of opini~ here. About the only thing we do agree on whether fluid in- jection should come before 80-acre spacing or 80-acre spacing should come before fluid injection is that basically it's a question of economics, and I think you can't separate economics from a matter such as this. We feel that in trying to compare what happened here or what is happening here to what happened in. Middle Ground or Swanson River is like trying to add apples and oranges. Mr. Rausch has pointed out that there isn't -- there is a difference between them, and that's the reason for our differen¢ , , in. position. I think each field has to stand on its own facts, and right now just referming to EXhibit 2, one well in Middle Ground on 80-acre spacing puts us in* touch with more oil than one well at Granite Point on 160-acre spacing. And we don't think Middle Ground's ready to go to 40's or something less than 80's. And I think too the Committee ~should remember that while we proposed 80-acre spacing we didn't get 80-acre spacing until the Committee did enter an Order authorizing the fluid injection, and we are required to drill a dry h°le before we got an & R COURT REPORTERS WE:MT ~'IQHTH AVENUE: ~ SUITE: · 277-4713 ' ANCHORAGE, ALASKA ~n 10 11 12 14 15 16 17 18 19 2O 21 -92- 80-acre spacing Order, and those dry holes did give us some in- formation that put us a little closer to getting an agreement on a fluid injection. So while we don't like to drill dry holes either and we don't want anybody else to have to drill some un- necessary dry holes, sometimes the information we get from the dry hole, you have to have it before you know where to go next.. Some point is made that all we're talking about is protection of our correlative rights. I don't think that's it a~':~all. The protection of correlative rights is incidental here. What we're talking about first is a fluid injection program to get the maxi- mum out of this field. Now, in order to get such a program ini- tiated because there are two different leases here, or two differ~ parties, you're going to have to protect correlative rights in the agreement. That's just an unfortunate fact of life, that you can't do it without protecting correlative rights. You've got to do it on a fieldwide basis. But the thing we're trying to do is to get as much oil ultimately out of this reservoir as we can, and We know we can't do it unless we do put in some kind of secondary, assuming it's feasible. Now, we think it will be feasible but we can't -- we can't present to you today a program. But we don't think that denser spacing should be permitted until we are able to present such a program because we don't know where those wells ought to be until we're able to present that program. We don't know whether we're going go for crestal inject dispersed injection. We don't know a lot of things, and we ~ant ~tlDiv. Of Mines&Min.. R & R C;OURT REPORTERS BI~I$ WEBT EIOHTH AVENUE -- SUITE I~ 277-47 ! 3 ANI~HORAGE, ALASKA ,nt .on, 10 11 12 14 15 16 17 18 19 2O 21 -93- time to find them out, and we -- we do want in this Order a pro- vision to conduct these injection tests. In other words, we want permission to have fluid injection be'cause we're going to be ready to do it pretty quick and we think Mobil will be' too. I understand they don't object to that. What they object to is the matter in our next application wh'ich is the requirement that there be a firm agreement before we go into denser spacing. Thank you. CHAIRMAN: Mr. Stevens, as i understand it, the applica~ in these affairs is supposed to get the last word, and I thought you were getting it a .while ago, so go ahead. (Laughter) 'MR. STEVENS: Well, I'll make it very short. I really think that Pan American is avoiding the impact of the platform economics, that they instructed us all on in past hearings, and that is that--when there's just so much oil there it's going tO be recovered if it' s recovered at an economic level, and we have shown that drilling on 80-acre spacing from our platform we will recover more oil and the State Will not be. encountering waste if we're permitted to do so. ~ Now, if Pan American Wants to take the risk, if the State's willing' to let it take the risk on the life of its platforms, well, ~hat's its business. Our studies show us that within the economic projected life of the platform at 80 acres on primary recovery We're going to 'recover more oil, and this is the basis~ of this application and the necessity for it now is the situation that we're in, that unless we have 80- R & R C;OURT REPORTERS 825 WEST EIGHTH AVENUE -- SUITE 5 277-4713 ANCHORAGE, ALASKA 10 11 12 14 15 17 18 2O gl -94- acre spacing we're going to have to step off at a -- in an area where it's -- we're advised and the experts tell us that the economic risk is excessive. Now, there's no reason as I can see it to compel an operator to drill Under those circumstances when modification of the Order those wells can be stepped off and probably the development will be much greater and much better from the point of view of the State and the operator. I think that our problem here is we have the burden, as I understand it, of showing the' Committee that the modification of the statewide Rules would' prevent waste. I think that's the basic thing before the Committee and so far as the Mobil-Union portion is concerned I think that we've shown that absolutely not only in the resource sence, in terms of preventing waste Of the reserves but also in the economic sense in preventing 'the' waste of money going into the ground for dry holes. At a million and a quarter dollars a hole I think that's a substantial pr0hlem. 'That plus another little exercise in economics, that if this -- this platform only does last 20 years and we're developing it at 160 acres, when that time comes and the decision has ~to be made as to whether the platform:'~ going to be replaced and it would cost a great deal more than'twenty million dollars then, I think the only conclusio~ we can come to now is that it would not be replaced if we're forde~ to develop on 160 acres; there's going to be oil left in the groUnd if the fears as to the life of these platforms ~avex- pressed by Pan American onthe Middle Ground Shoal hearing and ~ R (iO[JRT RI=PORT£R$ WEST EIGHTH AVENUE 277-4713 ANCHORAGF., AI. ASKA ,y 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 expressed here too is correct. If the platforms have limited life then everything must be done to insure ultimate maximum recovery within the priod of that life, and that's what we're asking to do now. I've not gone into our position on the other application. I assume that Pan American's got the right still as expressed by the Chairman to withdraw that application if they so desire, but we do have some viewpoints to discuss on that position. Thank you. CHAIRMAN:,_~We'll close this hearing then at this time and open the next one 'in a few minutes. --- END OF HEARING --- & R COURT REPORTERS WEST EIGHTH AVENUE ~ BUITE ~1 277.4713 ANC:HORAGE, ALASKA PAUL F. ROIBISON KENNETH McCASKEY JOHN R, STRACHAN ANDREW E. HOGE RALPH G. CREWS ROBISON, MCCASKEY & STRACHAN ATTORNEYS AT I_AW 921 S~XTH AVENUE ANCHORAGE, ALASKA 9950]. December 7, 1957 TELEPHONE 272-94.46 iv~r. Thomas R. h'~rshali, Jr. F. xecut ive Secretary Alaska Oil g Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Re: Application for an order prescribing field rules governing the development of the i¢iddle l(enai Oil i~ool of the Granite t:'oint Fie id and Conservation File Dear ~v~r. Marshall' Pan American Petroleum Corporation by and through its attorneys hereby requests that its application dated December l, lc3~7, in the above captioned matter be regarded as a pleading in intervention on the hearing requested by Mobil Oil Corporation. It is the position of the applicant, or intervenor as the case may be, that the matters contained both in the application of ~/[obil Oil Corporation and the application of Pan 3merican Petroleum Corporation should be heard at the same hearing since both matters affect the Middle ~ienai Oil Pool in regard to spacing pattern and. other related matters. The said hearing is now set for December 21, 1967, at 9:30 a.m. Your applicant, Pan American Petroleum Corporation, also requests that its application dated December l, 196'I, in the above captioned matter be treated also as a separate application for a separate hearing on the same day, should it need be. Your applicant would, show the Conservation Committee that it has complied with all appli- cable state statutes and regulations and is entitled to a hearing as a matter of right. This letter is furnished to l~e Conservation Committee pursuant to and after conversation with Mr. Robert L. Hartig of the ~ttorney General's office. Respectfully sub~tted, Ra lph~. Crews ~ttorhey for the Applicant, Pan ~merican Petroleum Corporation AFFIDAVIT OF PUBLICATION STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT, ) ss. t,I~ '~';r ~ e awe 'i ~ being first duly sworn on oath deposes and says that ...... is the___~_~:?:~_-;.-~-.9-~}; ......of the Anchorage News, a daily news- paper. That said newspaper has been approved as a legal news- paper by the Third Judicial Court, Anchorage, Alaska, and it is now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all of said time was printed in an office maintained at the aforesaid place of publication of said news- paper. That the annexed is a true copy of a as it was published in regular issues (and not in supplemental form) of said newspaper for a period of .......... ~:~_. insertions, commencing on the ,tn day ofDe cem?~er '19 67 and ......................... ¢ ....... ending on the .... ~ ...... day of December 19____~., .............................. bolh dales inclusive, and ~hal such newspaper was regularly distributed 1o ~ls subscribers dur- in~ all o~ said period, lhat the full amounl of lhe {ce char~ed {or lhe {ore~oin~ publication h the sum of $ 20.00 which amount has been paid in full at the rate of 25¢ per line; Mini- mum charge $7.50. Subscribed and sworn to before me this ._~(_t':~day 19 .... / ....... &~+ ...... =.=...r.-: .... :...,~.~ ...... Not~ Public in .nd for the St.te of Abska, lhJrd Division, A~horage, Alaska ~Y CO~I~ION EXPIRES NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS Alaska Oil and Gas Conservation Committee Conservation File No. 59 Nottce I~ hereby given that the. l~[obil Oil Corporation has requestedi the Alaska Oil and Gas Conservatio~i Committee to issue an order as pro-! vided by Rule 2004 of the Alaska Oil l and Gas Conservation Regulations,l prescribing field rules for that part! of tho}Granite Point Field described as follows: T 10 N-R 11 Section 5 : Section 6 : sectiofi 7 : Section 8 : Section 18 : Section !9 : T 10 ./%1- R 12 Section 1 : Section 2 Section. 11 Section 12: Seetio,n 13 ': Section 1.4 Section 15: Section 22: : T 11 N - R 11 Section 29: Section 30: Section 31 : Section 32: 11 N-R12 Section 25: Section 35: W, All All All Al1 All All W, S.M. All All All Ail All All E1/2 SE1/4 S ~ NEI~; NE~/~NE~A SE¼; SE1ASW¼ W, S.M. All All All All W, $.IVL E~NE1/~; SEI~ E~&. Section 36 : A1! The applicant request~ %hat field rules apply to the Middle] Kenat Oil Pool of the Granite Point[ Field, defined as the interval which1 will correlate x¥ith that portion ofI the Mobil-Union Granite Point No. 1 well between 7725 feet and 9800 feet. The applicant further requests l that the field rules include a spacing{ pattern of two wells per govern-i menial quarier section withe,ut al minimum distance between wells,~ requirements for an' adequate cas-! in.g. and cementing program, pro-i wsmns for annual key well hole pressure surveys'and semi- annual or annual gas-oil ratio lests. A hearing on this request will held in the City Council Chambers, in the basement of the g. J. Lous- sac Library, 5th and F Streets, An- :chorage, Alaska at 9:30 a.m., Decem-.: ~ber 21, 1967 at which .time the ap- plication will be presented and pro- ~esiant~ and others may be heard, Thomas R. Marshal, Jr. Executive Secretary Alaska Oil and Gas C'onservaJ tion, Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish: .December 4, 1967 Legal N'otice No,. 689 WAIVER OF PERSONAL SERVICE NOTICE OF PUBLIC HEARING CONSERVATION FILE #59 Granite Point Field Rules Mobil Oil Corporation - Operator The undersigned waives personal service of the notice appearing above under Section 31.05.050 of the Alaska Statutes. SIGNED Date For (Company) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS ALASKA OIL & GAS CONSERVATION COMMITTEE 3001 Porcupine Drive Anchorage, Alaska RE: THE APPLICATION OF MOBIL OIL CORPORAT .ON for an Order prescribing Field Ru ~s governing the development of the Mi Idle Kenai Pool of the Granite 5,int Field. A P P L I C A T I O N//., Mobil Oil Corporation, on behalf.~f itself and Union Oil Company of California, respectfully petitions the Alaska Oil and Gas Conservation Committee for an Order isSued pursuant to Alaska law and the Alaska Oil and Gas Conservation Regulations ~prescribing Field Rules for the Middle Kenai Pool, as herein defined, which pool lies within the Granite Point Field and authorizing the gpacing pattern, the casing and cementing requirements, bottom hole pressure surveys and gas-oil ratio tests for said area. I, The area for which the applicant requests the establishment of Field Rules includ~e~ atl of said area.described.a~s follows: ~ Section 29: Ail section 25:~E/~ NE/~/ 'SeCtion 30: All SectiOn 25:'~ Section 31: Ail Section 35: E/2 ~Section 32:, Ail Section 36: All TION-RI 2W ~ S.M. Section 1: All Section :i!2: Ail Section 11: All Section 12: All Section 13: All Section 14': All Section 22' Section 22: i~E/4, SW14.) Section Section 24: All T10N-RllWt S.M. Section 5: All Section 6: All Section 7: Ail .Section 8: All Section 18: All Section 19: All ?., '~'. :::">:,., . II. Mobil Oil Corporation and Pan American Petroleum Corporation are the operators for all leases within said area. Said operators are now exchanging well amd reservoir information, conducting studies of reservoir performance and planning future development of the area affected for the purpose of securing the maxinmmultimate recovery through both primary production methods and the use of any feasi- ble pressure maintenance or secondary or other supplemental recovery methods. III. A spacing pattern, casing and cementing requirements, bottom hole pressure surveys and gas-oil ratio tests are herein requested for the above described area which will allow the development of the Middle Kenai Pool in .the Granite Point Field to proceed efficiently and without delay and in the manner best calculated to accomplish the purpose of the Oil and Gas Conserva- tion Statutes and Regulations of the State of Alaska. The Middle Kenai Pool 'shall be defined in all wells as the interval which will correlate with the intervals 7~' to 95'00' in the Mobil-Union Granite Point No. 1 Well. IV. ~"0/ The Applicant requests the issuance of the following Order: FIELD RULES FOR THE MIDDLE KENAI POOL ~Rq!e .!'%. A, rea ~t.o_ ,W,,h, iqb These ?~, ~!e.s, App,l,y. These Field Rules shall pertain to all wells in the interval which will correlate with the intervals 7725' to 9800,y in the Mobil-Union Granite Point No. 1 Well, located within the area described as follows: TllN-RllW, S.M. Section 29: All Section 30: Ail Section 31: Ail Section 32: Ail T10N-R12W Sect{~ 1: Ail S Section '~: Ail Section 22:NE/4 Section 11: All Section 22: S Section 12: Ail Section S~ection 13: Ail Section.22 Section 14: Ail Section Ail Sec Ail T10N,.R!iW,- .S.M. ~ Section 5: All SeCtion 6: All Section 7: All Section 8: All section 18: All Section 19: All /4. , SW/4 -2- Rule 2. Spa.¢ing ~attLe, rn. (a) Oil wells may be completed closer than 1000 feet to any well drilling to or capable of producing from the Middle Kenai Pool, except that no oil well shall be completed at a distance of less than 500 feet from a lease line where owner- ship changes. (b) No more than two completed oil wells shall be allowed in the Middle Kenai Pool on any governmental quarter section or governmental lot corresponding thereto. ,Rqle .~.~. Casing and Cementing Requirements. Surface casing must be set and cemented to a depth of at least 1600 feet. Sufficient cement must be used to circulate to the sur'face. The production string must be cemented with a sufficient volume of cementt~_~xtend at least 500 feet a~ove the shoe or a volume to covei'~th~ producing zone encountered in the well, whichever is greater. Rule 4.~ Bottom Hole P. reps~re Sur~eys. made during the months of June and July with the results to be .re~=~ed~to theCoam~ttee by.the end...~fAugu.s~t ea~hy~a.~=~ The operators in the area affeCt.ed, with approval of the Committee, will determine the datum, the wells to be included, the method to be used and the type of informmtion to be secured. Bottom h~l~ pressures obtained by a static build-up pressure survey, a 24-hour shut-in instantaneous test or a multiple flow rate test will be acceptable for this purpose. SUrvey results will be reported on Form P-12 or other appropriate means agreed to by the operators and the Committee. ,Ru!e 5.. G, as-Di! ~Ratio T,e~S. A gas-oil ratio test of 24 hoUrs duration shall be made on" each producing well in the area affected, annually. The test wil'l be made dUring the months of June and July and the results will be reported on Form P-9 by the end of August of each year. The requirements of this rule will be' waived if monthly reported oil and gas production is .based on a gas-oil ratio test made at least every six.months by the operator'. V~ There is attached hereto as Exhibit "A" a plat showing: the leases and lands for which Field Rules are .requested; 'the location of all oil and gas wells, including abandoned and drilling wells within and offsetting said area, and the names of all operators of leases offsetting this area. -3- VI. Except as specifically set out in the order proposed by this application, operations within the area to be covered by the proposed Field Rules shall remain subject to the general rules of statewide application adopted by the Oil and Gas Conservation Committee. VII. Pan American Petroleum Corporation and Mobil Oil Corporation are the only operators within the area which would be affected by the issuance of the proposed order herein and are also the only operators within approxi- mately one-half mile from the outer boundaries of said area. The operators named above are, therefore, the only affected operators, other than the State of Alaska as lessor, and are the only operators entitled to notice of the filing of this application. Mobil Oil Corporation, as the applicant, has given notice of the filing of this application to Pan American Petroleum Corporation. A copy of this notice, the date of mailing and the address to which the notice was sent is attached hereto. WHEREFORE, Applicant requests: Ie That this application for the issuance of the Order establishing the above Field Rules be set for hearing and that notice of the hearing on said application be given as required by Alaska law and by the Regulations of the Oil and Gas Conservation Cormmittee. II o If no proper protest and request for hearing is timely filed accor~ ing to such law and regulations, that an Order. be entered herein, without a hearing, to establish the Field Rules for the Middle Kenai Pool of the Granite Point Field as described above. Respectfully submitted: MOBIL OIL CORPORATION ~h"~~ / ....¥~.? / ...... t ,,~ ............ r'?"' L ....... .................. -4- STATE OF ALASKA THIRD JUDICIAL DISTRICT ) : SS ) W. G. Christensen, being first duly sworn, upon oath deposes and states: that he is Area Superintendent of the Northwest Producing Area of Mobil Oil Corporation, the Applicant herein; that he has per- sonal and comprehensive knowledge of drilling and producing operations being conducted in the Granite Point Field; that he has read the above Application and that the matters and things therein set forth are true and correct to the best of his knowledge and belief. / .,,?I I-'~/"~ ..... ~i'~' .... f W.G. Christensen SUBSCRIBED and SWORN to before me this 1967. Mobil Oil Corporation NORTHWEST PRODUCING AREA Post Office Box 1734 Anchorage, Alaska November 27, 1967 612 SOUTH FLOWER STREET LOS ANGELES, CALIFORNIA 90054 Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Re: Application for an Order Prescribing Field Rules Governing the Development of the Middle Kenai Oil Pool of the Granite Point Field. Dear Mr. Marshall: Attached hereto is an Application for an Order by the Alaska Oil and Gas Conservation Committee prescribing Field Rules governing the de- velopment of the Middle Kenai Oil Pool of the Granite Point Field. A copy of the attached application has been sent to all affected opera- tors as per the attached mailing list. It is requested that the subject application be set for hearing as soon as possible after December 18, 1967, preferably during the week beginning December 18, 1967. CCWoodruff:sjs Attachments Very tr.~l.y y..o,~rs, ~~/~~" :~. W. G. Christensen Area Superintendent MAILING LIST Sinclair Oil and Gas Company 501 Lincoln Tower Building Denver, Colorado 80203 Attention: Co L. Cox Phillips Petroleum Company 1300 Security Life Building Denver, Colorado 80202 Attention: H.W. Patterson Skelly Oil Company 1088 Lincoln Tower Building Denver, Colorado 80203 Attention: F. L. Franz Sinclair Oil & Gas Company 501 Lincoln Tower Building Denver, Colorado 80203 Attention: F. H. Rhees Phillips Petroleum Company 1230 Security Life Building Denver, Colorado 80202 Attention: C.W. Corbett Skelly Oil Company P. O. Box 1650 Tulsa, Oklahoma 74102 Attention: C. L. Blacksher Pan American Petroleum Corporation Security Life Building Denver, Colorado 80202 Attention: Wm. T. Smith Skelly Oil Company P. O. Box 1650 Tulsa, Oklahoma 74102 Attention: W. Po Whitmore Pan American Petroleum Corporation Security Life Building Denver, Colorado 80202 Attention: A. E. Piper Pan American Petroleum Corporation P. O. Box 779 Anchorage, Alaska 99501 Attention: F. K. Krebill Union Oil Company of California 2805 Denali Street Anchorage, Alaska 99503 Attention: Ro W. Yarbrough NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINES AND MINERALS Alaska Oil and Gas Conservation Committee Conservation File #59 Notice is hereby given that the Mobil 0il Corporation has requested the Alaska Oil and Gas Conservation Committee to issue an order as provided by Rule 2004 of the Alaska Oil and Gas Conservation Regulations, prescribing field rules for that part of the Granite Point Field described as follows: T 10 N - R, 1.1 W, ..S~Mo T 10 N - R 12 W, SoMo Section 5 : All Section6 : All Section 7 : All Section 8 : All Section 18 : All Section 19 : All Section I : All Section 2 : All Section 11 : All Section 12 : All Section 13 : All Section 14 : All Section 15 : E~SE~ Section 22 : S~NE~; NEkNE~; SE ; SE SW ~T,,,!I N - R .!2.w, Sol~., ..... Section 29 : All Section 30 : All Section 31 : All Section 32 : All Section 25: E%NEk; SE% Section 35: E% Section 36: All The applicant requests that the field rules apply to the Middle Kenai Oil Pool of the Granite Point Field, ~efined as the interval which will correlate with that portion of the Mobil-Union Granite Point tl well between 7725 feet and 9800 feet, The applicant further requests that the field rules include a spacing pattern of two wells per governmental quarter sectiQn without a minimumdistance between wells, requirements for an adequate casing and cementing program, pro- visions for annual key well bottom hole pressure surveys and semi-annual or annual gas-oil ratio tests. A hearing on this request will be held in the City Council Chambers in the basement of the ZoJo Loussac Library, 5th and F Streets, AnChorage, Alaska at 9:30 a.m°, December 21, 1967 at which time the application will be presented Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish December 4, 1967 '~3IL ~'iL CORPORATiOR:,' .v... 6i:.,...0.,.'~ OZ,, ..,MPA'" ~,£ CALT.J'ORNT_A PRESCRIBi'NG FIELD RULES C6"IER~' .', ..}'~ DEVELC-;i~iME?~'Z $.F Zi'[E MIDDLE KENAI OIL POOL OF THE GRANITE POINT FIELD BEFORE THE ALASKA 0iL Ai~6 GAS CONSERVATION COMMITTEE DATE OF '+'~ "' "~" ~i~..-~R~,.. DEC. E'~![BEi'& 2i, 1967