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CO 105
Conservation Order Cover Page XHVZE This page is required for administrative purposes in managing the scanning process. It marks the extent of scanning and identifies certain actions that have been taken. Please insure that it retains it's current location in this file. Conservation Order Category Identifier Organizing RESCAN [] Color items: [] Grayscale items: [] Poor Quality Originals: [] Other: NOTES: DIGITAL DATA OVERSIZED (Scannable with large plotter/scanner) [] Diskettes, No. ~ - [] Other, No/Type [] Other items OVERSIZED (Not suitable for plotter/scanner, may work with ~~Logs of various kinds [] Other BY: '/~ARIA Scanning preparation TOTAL PAGES Production Scanning Stagel PAGE COUNT FROM SCANNED DOCUMENT: /'-/~/-'/. PAGE COUNT MATCHES NUMBER IN SCANNING PREPARATION: V YES NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: ~ YES NO (SCANNING IS COMPLETE A~IS POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO QUALITY, GRAYSCALE OR COLOR IMAGES) General Notes or Comments about this Document: 5/21/03 ConservOrdCvrPg.wpd STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Re: THE MOTION OF THE ALASKA ) OIL AND GAS CONSERVATION COMMITTEE ) to hold a hearing to consider ) issuance of an order or orders, ) effective July 1, 1972, restricting ) the flaring or venting of casinghead ) gas from the referenced oil pools ) to the amount required for safety ) Conservation Order No. 105 Middle Ground Shoal Field MGS "A," "B," "C," "D," "E," "F," and "G" Oil Pools June 30, 1971 IT APPEARING THAT: 1. The Oil and Gas Conservation Committee published a notice of public hearing in the Anchorage Daily News on April 24, 1971, pursuant to Title 11, Alaska Administrative Code, Section 2009. 2. A public hearing was held on May 25, 1971 in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time operators, subpoena.ed witnesses, and affected and interested parties were heard. The hearing record was held open through June 4, 1971 and additional~ information was received. 3. Conservation Order No. 100, permitting the flaring of casinghead gas in excess of the maximum amount that can be beneficially utilized, expires June 30, 1971. FINDINGS: 1. There is a growing shortage of natural gas in the contiguous 48 states and Hawaii, and natural gas is being sold at increasingly higher prices in both intrastate and interstate markets. 2. There are increasing needs for natural gas in the village of Tyonek and Greater Anchorage Area and Kenai Peninsula Boroughs, on both interruptible and uninterruptible bases. Specific needs are those of the Native Village of Tyonek, Inc., Chugach Electric Association, Inc., the City of Anchorage Municipal Light and Power Department, and Alaska Public Service Corporation. 3. Alaskan gas is being exported to Japan, and there are potential markets for Alaskan gas in the contiguous 48 states and Hawaii. 4. The Jones Act has impeded utilization of Alaskan gas elsewhere in the United States. 5. Substantially all fuel requirements on the oil-producing platforms of the Middle Ground Shoal Field are now met by casinghead gas. Conservation Order No. 105 Page 2 June 30, 1971 6. The casinghead gas and the entrained liquids now being flared could be beneficially utilized. There are uses for interruptible casinghead gas, and alternative fuels exist in the event the supply of gas is interrupted. 7. The Oil and Gas Conservation Committee has been concerned with the flaring of casinghead gas from the referenced field since 1966 and has held several public hearings to determine the progress of eliminating gas flaring in excess of the amount beneficially used. 8. During 1970, 5,049,618,000 cubic feet, or 82% of the gas produced from the Middle Ground Shoal Oil Field was flared. 9. There was insufficient testimony as to the minimum amount of gas necessary for a safety flare. 10. Restricting the flaring or venting of casinghead gas produced from each of the four platforms in the referenced field to a volume necessary for an adequate safety flare will conserve gas. 11. Expert opinions differ as to the effect on ultimate recovery of a restriction in the rate of production or injection under a fluid injection project, but it is not proven that any such restriction will reduce ultimate recovery from the referenced pools and thereby cause waste. A fluid injection project is in operation in the Middle Ground Shoal Field. CONCLUSIONS: 1. One year is a reasonable period of time in which to complete arrangements for use of excess casinghead gas currently being flared. 2. Except in cases of emergency, the flaring or venting of gas after 7:00 A.M., ADST, July 1, 1972 in excess of the amount required for safety will constitute waste as waste is defined in AS 31.05.170(11). 3. A hearing is required to determine the amount of gas necessary for adequate safety flares. NOW, THEREFORE, IT IS ORDERED THAT: 1. Casinghead gas in excess of the maximum amount that can be beneficially utilized may be flared until 7:00 A.M., ADST, July 1, 1972. 2. Effective at 7:00 A.M., ADST, July. l, 1972, the flaring or venting of casinghead gas from the Middle Ground Shoal Field is prohibited, except for the amount necessary for adequate safety flares and except in emergencies. Conservation Order No. 105 Page 3 June 30, 1971 3. The commencement, nature and termination of all emergencies requiring flaring of casinghead gas in excess of the amount required for safety flares shall be reported to the Committee within 96 hours after occurrence. DONE at Anchorage, Alaska, and dated June 30, 1971 Thomas R. Marshall, Jr., Executive Secretary Alaska Oil and Gas Conservation Committee Concurrence: Homer L. Burrell, Chairman Alaska Oil and Gas Conservation Committee 0'. K. Gilbreth, Jr., Member Alaska Oil and Gas Conservation Committee STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Re: THE APPLICATIONS OF SHELL OIL ) COMPANY AND AMOCO PRODUCTION COMPANY ) for an order amending Conservation ) Order No. 105 to permit administra- ) tive approval of gas flaring for a ) maximum of 60 days in cases of opera-) tional necessity. ) Conservation Order No. 105-C Middle Ground Shoal Fi eld MGS "A" "B" "C" "D" "E" "F" and "G" Oil Pools. January 28, 1974 IT APPEARING THAT: 1. The Oil and Gas Conservation Committee published a notice of public hearing in the Anchorage Daily News on August 16, 1973, pursuant to Title 11, Alaska Administrative Code, Section 22.540. 2. A public hearing was held on September 11, 1973, in the City Council Chambers in the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time the applicants and other parties were heard. 3. The hearing record was combined with that for Conservation File No. 102 E, which related to the Middle Kenai Oil Pool of the Granite Point Field, because the same order was requested and Amoco Production Company was an applicant for both orders. 4. The Committee gave the substance of this order verbally to the applicants after the hearing. FINDINGS: 1. Pursuant to Rules 2 and 3 of Conservation Order No. 105, flaring or venting of casinghead gas in excess of the volume required for safety is permitted only in case of emergencies, and must be reported to the Committee within 96 hours, after occurrence. 2. The Committee considers emergencies to be situations involving a danger to life or property. 3. During the period of routine repairs of gas handling equipment on the platforms, gas pipeline breaks, "turnarounds" of facilities using the gas, and other required repairs, overhauls and work on equipment downstream from the oil wells, beneficial utilization of some casinghead gas may not be feasible. These repairs and other work arise out of opera- tional necessity. Conservation Order~ "5-C Page 2 January 28, 1974 4. The history of such repairs and other work indicates gas handling equipment can usually be repaired or overhauled within a few days, pipe- line breaks may take several months to repair depending upon the time of year and weather conditions, and overhaul or "turnaround" of the Collier Carbon and Chemical Plant which is the market for the gas will probably take less than two months. 5. Most overhauls of gas handling equipment can be scheduled to coincide with the "turnaround" of the Collier Carbon and Chemical Plant, thereby minimizing the time during which the gas is not beneficially utilized. 6. No reasonable alternative use of the casinghead gas exists during the periods the gas handling equipment, pipeline or Collier Carbon and Chemical Plant is inoperative. 7. Operating experience in the referenced pools indicates that the shutting-in of wells may impair production rates for approximately 90 days after the wells are re-opened to production. CONCLUSIONS: 1. Repairs, overhauls or other work on gas handling equipment, pipelines and the onshore facilities beneficially utilizing the casinghead gas may be required. 2. The time required for these repairs, overhaul and other work may depend on conditions beyond the applicants' control. 3. The referenced pools are producing increasing quantities of water wi th the oil, and the possibility exists that shutting-in the wells will damage the producing zones. 4. Additional beneficial uses of the casinghead gas do not presently exist. 5. The flaring of casinghead gas, when required because of repairs, overhaul and other work on wells or on equipment and facilities downstream from the wells in the referenced pools, may be an operational necessity. NOW, THEREFORE, IT IS ORDERED: Rule 1. Rule No. 1 of Conservation Order No. 105 is hereby revoked. Rule 2. Rule No. 2 of Conservation Order No. 105 is hereby amended to read as follows: Effective 7:00 a.m., October 1, 1973, the flaring or venting of gas from the Middle Ground Shoal Field is prohibited except for the amount necessary for adequate safety flares or emergencies or as may be authorized by the Committee in cases of operational necessity exceeding 96 hours. Conservation Order ( ~-C Page 3 January 28, 1974 Rule 3. The commencement, nature and termination of all emergencies requiring flaring of casinghead gas in excess of the amount required for safety flares shall be reported to the Committee within 96 hours after occurrence. Rule 4. Any flaring or venting of gas in excess of 15 days per calendar quarter per platform, other than that required for safety, shall require Committee approval. Flaring or venting of gas in excess of the volume required for safety at a location other than a platform shall be deemed to have taken place at each platform. Rule 5. Commencing with the Calendar quarter beginning January l, 1974, the operator of each platform or facility in or serving the referenced pools shall report in writing to the Committee the number of days gas was flared or vented in excess, of the volume required for safety, the reason for the flaring or venting, and shall identify the platform or facility. The report shall be.submitted within 30 days following each calendar quarter. DONE at Anchorage, Alaska and dated January 28, 1974. om~~as R.. Zh al 1 ,~j~~~Se c. retary Alaska Oil and Gas Conservation Committee C°ncTrence' ...,.?, Homer L. Burrell, Chairman Alaska Oil and Gas Conservation Committee O. 'K. Gilb-reth, Jr., Membt~ Alaska Oil and Gas ConSe~ation Committee December 31, 1985 A D l~l I N I S T R A T I V E A P P R O V A L N O. 105C-15. Re: The application of AMOCO PRODUCTION COMPANY to flare gas in a quantity that exceeds the current permitted volume at Platform Baker,. Middle Ground Shoal Field. Mr. W. G. Smith District Manager Amoco Production Company P. O. Box 100779 Anchorage, Alaska 99510-0779 Dear Mr. Smith: We have received your letter of December 27, 1985 requesting the extension of the date of. December 31, 1985 set out in Administra- tive Approval No. 105C-14 for the flaring of excess gas at Baker Platform. This extension is requested to provide additional time to complete repairs of the gas compressor. The Alaska Oil and Gas Conservation Commission has reviewed the new data available and restates that flaring of' gas at Platform Baker is an operational necessity. By this letter, Amoco Production Company is herebY permitted to flare all gas not beneficially used on. Platform Baker from this .date until the completion of the' remedial work on the gas com- pressor, or until February. 15, 1986, whichever occurs first. ' Yours very truly, Harry W. Kugler Commissioner BY ORDER OF THE COI~ISSION be :/3. AA105 ,.. December 13, 1985 A D M I N I S T R A T I V E A P P R O V A L ~-] O. !05C-14. Re: The application of AMOCO PRODUCTION COMPANY to flare gas in a quantity that exceeds the current permitted volume at Platform Baker, Middle Ground Shoal Field. Mr. W. G. Smith District Manager Amoco Production Company P. O. Box 100779 Anchorage, Alaska 99510-0779 Dear Mr. Smith: We have received your~ letter of December 10, 1985 requesting the extension of the date of December 13, 1985 set out in Administra- tive Approval No. 105C-13 for the flaring of excess gas at Baker Platform. This extension is requested to provide additional time to complete repairs of the gas compressor. The Alaska Oil and Gas Conservation Commission has reviewed the new data available and restates that flaring of gas at Platform Baker is an operational necessity. By this 'letter, Amoco Production Company is hereby permitted to flare all gas not beneficially used on Platform Baker from this date until the completion of the remedial work on the gas com- pressor, or' until December 31, 1985, whichever occurs first. ~/very truly, Commissioner BY ORDER OF THE CO~'~ISSION be:3.AA105 November 29, ].985 A D M I N I S T R A T I V E A P P R O V A L N O. 105C-!3. Re: .The application of AMOCO PRODUCTION COMPANY to flare gas in a quantity that exceeds the current permitted volume at Platform Baker, Middle Ground Shoal Field. Mr. W. G. Smith District Manager Amoco Production Company P. O. Box 100779 Anchorage, Alaska 9951.0-0779 Dear Mr. Smith: Your application, dated November 27, 1985, requesting a flare limit exception for Platform Baker for the period of November 4, 1985 to December 13, 1'985 has been received by the Commission. The application indicates you shut-down your gas compressor on Platform Baker on November 4, 1985 for compressor modifications. You estimate that from 100 to 300 MCFD of gas in excess of the approved 700 MCFD safety flare volume will be flared until this compressor is back on line. The Alaska Oil and Gas Conservation Commission has reviewed the data available and finds that, at this time, the flaring of excess gas on Platform Baker is .an operational necessity although its occurrence commenced prior to approval. By this letter, Amoco prOduction Company is hereby permitted to flare all gas not beneficially used on Platform Baker from November 4, 1985 until completion of the modifications or until December 13, 1985, whichever occurs first. Yours very truly, Commissioner BY ORDER OF THE COMMISSION be:3.AA105 I)EI~RT~N,t~ENT ¢I,F NATURAl,, RESd,URCES O/VISION OF OIL ANO gAS / /AY S. HAMMONO, ~OVEI~#OR 3001 £O££UPIN£ O£1VE- ALASKA OIL AND GAS CC1NSERVATION COMMIYTEE November 7, 1978 ADMINISTRATIVE APPROVAL N O. 105.C.12 Application of Shell Oil Cca~pany, operator of Middle Ground Shoal Platform 'C', for approval to flare casinghead gas in excess of the amount required for safety for more than 15 days per calendar quarter. Mr. Pete Woodson .Division Production Superintendent Shell Oil Company 601 West 5th Avenue, Suite 810 Anchorage, Alaska 99501 Dear M_r. Woodson: The referenced application was reCeived on November 6, 1978 stating that the York Sales Gas Ccmpressor which failed on October 3, 1978 was found to have excessive wear which required it to be sent back to the factory for repair. The repaired assembly is expected back in Alaska within a few days but labor problems at the factory may delay the repair and the shipment. Pursuant to Rule 4 of Conservation Order No. 105.C, the Oil and Gas Conservation Ccamtittee hereby author~izes the flaring of excess gas at the referenced platform for 15 days over and above the 15 days provided for in Conservation Order No. 105.C. This authorization is valid only in the fourth calender _quarter of 1978. The Corauittee requests that a report be submitted giving the date when the cc~pressor, is back in operation. Very truly yours, / ,' / Harry W. Kugler / Executive Secretary Alaska Oil & Gas Conservation Committee Conservation ALASKA OIL AND GAS CONSERVATION CO~-f~ITTEE August 29, 1978 A D M I N I S T R A T I V E A P P R 0 'V A L N O. 105.C.ll Re: Application of Shell Oil Corapany, operator of ~iddle Ground Shoal Platform '~A" and "C'", for approval to flare casinghead gas in excess of the amount required for safety for more than 15 days per calendar quarter. Mr. Pete Woodson Division prodnction .Superintendent S'hell Oil Company 601 West 5th Avenue, Suite 810 An.choraqe, Alaska 9.9501 Dear Mr. ~ood. son: The referenced application was received on August 28',: 19.78 stating that appr~v.als by partners and the necessary equipment has been obtainedto repair the pipeline involved in carrying all ~{iddle Ground Shoal casinghead gas from the Dillon Platform to shore. The authoriz.ation for flaring of excess gas contained in Adminis- trative Approval No. 105.C.9 expires this date and additional flaring will be. required %mtil the 'repairs are made.. Pursuant to Rule 4 of Conservation Order No. 105.C the Oil and Gas. Conservatio. n Committee hereby authorized ~e flaring of'excess gas at the referenced platforms until October 1, 1978 or until the repairs are completed on the pipeline, whichever comes first, pro- viding repair procedures, expected to be finished about September I5, 19'78, are pursued diligently. The Committee requests that a weekly report be submitted givinq the details of' the work accomplished. Very truly yours, Harry W. K~gler Executive Secretary Alaska Oil and Gas Conservation Commi tree Conservation ALASKA OIL AND GAS CONSERVATION CO~-.~ITTEE August 29, 1978 A D ~.~ I N I S T R A T I V E A P P R O V A L N O. 105.C.1R Re: Application of ..Amoco Production Company, operator of ~iddle Ground Shoal Platform. "Baker" and South _~.,{iddle Ground Shoal Unit Platform '~Dillon=, for approval to flare casinghead gas in excess of the .amount required for safety for more thann 15 days per calen¢iar quarter. Mr.. Lo A. Darsow Area Superintendent Amoco P'roduction Company P, O. Box 77'9 Anchorage, Alaska 99510 Dear Mr. Darsow: The referenced applic, tlon wasreceive.d on August 28, 1978 stating that approvals by partners .and the necessary equipment has been obtained to repair the pipeline involved in carrying all Middle · Ground Shoal casinghead gas from the Dillon Platform to shore.. '~%eauthorization .for flaring, of excess gas contained in Adminis- trative Approval Noo 105.C.9 expires this date and additional flaring will be required until the repairs are made. Pursuant to Rule 4 of Conse'rvation ~Orde. r No. 105.C the Oil and Gas Conservation Committee ihereby, authorized the flaring of excess gas at the referenced platforms until October 1, 1978 or until the repairs are completed on the pipeline, whichever comes 'first, .pro- viding repair procedures, expected to befinished about September 15, 1978, are pursued diligently.. The Committee requests that a weekly report be submitted giving ~the details of the work accomplished. Very truly yours, Committee ~Conserv~ticn OIL AND C4%S (I/q~ERVATICN CXI~.~-TIS~ June 21, 1978 P. O., Box 779 Anc/xzr .age, Alaska '99510 The refer~_nced applicatic~ was r~ei~ c~ June 21, 1978 stat/rig that a leak. in the gas pipeline, has been traced to ~%e pipeline ~~ at the Dillcm Platfora~. ~As a result of this ~, gas in .excess of that z~ for safety is being f..]mred at both of the referen~ platf .cxms. Purer to. Rule 4 of ~~ratic~ Order' No. 105.C the .Oil and (k~servaticn. ~ttee here/m] authorizes f~]/~g of excess gas at the ref~ platfcxms for the.~der of the ~t calendar .and fo= the first 60 ~ of the ~ calendar quarter of 1978 or .until the z~pairs are completed on the pipeline, 'whi~ ~s fJ.~st, provld/ng repair prooad~s are. ~ diligently. The ~ttee requests that a ~kly report be s~itted giving., the details of the work ~lished. Very truly y~=s, ~r DEI%%ilTMENT I)i~' NATIJitAI. itI~SI)IJit. CES Conservation · , ALAS~ OIL AND GAS CONSERVATION COMMISTEE August 5, 1977 A D M I N I S T RAT I V E ' A P P R OVA L N O. 105.C.8 Application of Shell Oil Company, operator fOr Middle Ground Shoal Platform "A" and Platform "C", for approval' to flare casinghead gas in excess of the amount required for safety for more than 15 days per calendar .quarter... ..N~'. H. M. Ma'thiesen . Division Production Superintendent Shell Oil Cc~pany 601 W. 5th Avenue, Suite 810 Anchorage, Alaska 99501 Dear Mr. Mathiesen: On August 2, 1977, the referenced application was received 'which stated that due to piping reVisiOns at the Collier Carbon and Chemical Ccmpany Plant, all gas origina~ting on Shell ~S Platforms "A" and "C" was being flared at the Amoco Production Ccmpany's Onshore Facility. Pursuant to Rule 4 of Conservation Order No. 105.C the Oil and Gas Conservation Cc~mJ.ttee hereby authorizes flaring of excess ~singhead gas until, t31e piping at 'tile Collier Carbon and G]emical Plant is ccmpleted. Very truly yours', / ; Thos. R. M&rshall, Jr. Executive Secretary / / / III~I~,%ilT~II~'T III~ ~'.llliII~lI. II.I~III~II,~I'i~ / / OlVl$10~ Of OIL A~O ~S / Conservation JAY S. HAMMO#O, GOVEI~NOR 3001 PORCUPINE ORIVE - ANCHORAGE ALASKA OIL AND GAS CONSERVATION COMMITTEE May 16, 1977 A D M I N I S T R A T I V.E A P P R O V A L N.O. 105.C.7 Re: App.lication of Shell Oil Company, operator of Middle Ground Shoal Platform "A" and Platform "C", for approval to flare casinghead gas in excess of the amount required for safety for more than 15 days per calendar quarter. Mr. H. M. Mathiesen Division Production Superintendent Shell Oil Company 601 W. 5th Avenue, Suite 810 Anchorage, Alaska. 99501 Dear Mr.. Mathiesen: On May 16, 1977, the referenced application was received which stated that due to the Collier Carbon and Chemical Company annual "turnaround", some gas originating on Shell MGS Platforms "A" and "C" was flared commencing on May 2, 1977 at the Amoco Production Company's Onshore Facility.. For the period from May 5, until May'12, 1977 casinghead gas was flared at Shell Platform "C" due to plugging of the gas line between Amoco Production Company's Platform Dillon and their Onshore Facility. Pursuant.to Rule 4 of Conservati'on Order No. 105.C the Oil and Gas Conservation Committee hereby authorizes 'Flaring of excess casinghead gas until the annual "turnaround" of the Collier Carbon ad CheFnical Plant is com!'>'leted. Very truly yours, Thos. R. Marsha'll, Jr. Executive SecreLary ~onservatton ALASKA OIL AND GAS CONSERVATION COM~IITTEE 13, 1977 ADMINISTRATIVE APPROVAL HO. 105-C.7. Re- Application of ?unoco Production Company, operator of Middle Ground 'Shoal Platform Baker and'South Hiddle Ground Shoal Platform Dillon, for approval to flare casinghead gas. in excess of the amount required for safety, for more than 15 days per calendar quarter. Nr. L. A. Da rsoW· Area Superintendent Amoco Production Company Box 779 Anchorage, Alaska 99510 Dear Mr. Darso~: On May 12, 1977, the referenced application was received which requested that excess gas be flared at tt)e East Foreland Delivery Facility more than the 15 day per calendar quarter permitted because of a prolonged turnaround of the Collier Carbon and Chemical Plant. · The Oil and Gas Conservation Committee hereby authorizes the flaring of excess casinghead gas until the Collier Carbon and Chemical Plant is again operational. Sincerely, Thomas R. )4arshal 1, Jr. Executive Secretary T[(.M:bjm / I)EI'~II[TMENT Il, i; NATUllAI, RESI)UIICES O/V/SION OF OIL ANO ~,AS 300I PO££UPIN£ O£1VE-ANgHO£A~E 99501 Conserva ti on ALASKA Oil_ AHD GAS CONSERVATION COMMITTEE Harch 30, 1977 A D M I N I S T R A T I V E A P P R O V A L NO. 105.C.6 .Re- Application O'F Shell Oil Company, operator of Middle Ground Shoal Platform "A", for approval to flare, casinghead gas in excess of the amount required for safety f6r more than 15 days per calendar quarter Mr. }1. M. Ma'Lhiesen Division ProdUction Superintendent Shell Oil Company 601 W. 5th Avenue, SL, ite 810 Anchorage, Alaska 99501 Dear Mr. Mathiesen: On January 31, 1977, the referenced application was received which stated that the compressor on Platform "A" was shut down due to meChanical failure. Repair time is estimated to be approximately 8 weeks. The Oil and Gas Conservation Coml.~ittee hereby confirms verbal approvals given on February 2, 1977 and authorizes flaring of excess casinghead gas until April 1,.1977, or until the compressor is repaired, whichever occurs fi rst. Very truly yours, ,) } ,It ....... ..L Thos. R. Marshall, Jr. Executive Secretary ALASKA OIL AND GAS CONSERVATION COMMITTEE February 9, 1976 ADMINISTRATIVE APPROVAL NO. 105-C.~_ Re: Application of Shell Oil Company, operator of Middle Ground Shoal Platform "C", for approval to flare castnghead gas in excess of the amount required for safety for more than 15 days per calendar quarter. Mr. K. W." LaGrone Production Superintendent Shell Oil Company 601 W. 5th Avenue, Suite 810 Anchorage, Alaska 99501 , Dear Mr. LaGrone:, On February 2,1976, the referenced application was' received which stated that the compressor on Platform "C" was shut downdue to mechanical failure. The Oil and Gas Conservation Committee hereby authorizes flaring of excess casinghead gas until )larch l, 1976, or until the compressor is repaired, whichever occurs first. ALASKA OIL AND GAS CONSERVATION COMMITTEE November 24, 1975 A D )4 I N I S T R A T ! V. E A.r ,P, ? ~R O.W_, A ..L ,.NO.,....1:,05,C~,4.. Re: Application of Shell Oil Company Operator, of MidUle Ground Shoal Platform "C'" for approval to flare casinghead gas in .excess of the amount required for' safety for more than 15 days per calendar quarter. Mr. K. W.. LaGrone Producttm Superin'tenden Shell. Oil Company 601 ~1. 5th Avenue Suite Anchorage, Alaska 99501 Dear Mr.. LaGrone: On November 17, 1975, the refe~n.ced application was received which stated 'that the compressor on Platform. "C" was shu. t dOWn on October 28, t975 due to mechanical fail. ute. I~e.pair time is estimated to be .approx't'~mtely two months. The Oil an?d Gas. Conservation ,COmmitte ~hereby authorizes flaring of excess ca singhead gas until January 15, 1.976, or until the compressor is ~repai'red, whichever occurs first. 'Very truly yours, Ex.ecutive Secre.~ry ALASKA OIL AND GAS CONSERVATION COMMITTEE September 22, 1975 Re A D'M ! N ! S T R A T I V E A P P :R 0 V A L N O. 105-C.3 Application of Amoco Production Company Operator, of Middle Ground Shoal Platform Baker for approval to flare casinghead gas in excess o.f the amount required for safety for more than 15 days per calendar quarter. Mr. George J. Ross: Area Superintendent Amoco Production Company Box 779 Anchorage, Alaska g9510 Dear Mr., Ross: On September 16, 1975 the referenced application was received which stated that following the issuance of .~ 105-C.'2 ~hich pemitted flaring while a. compressor. 'package was. being replaced on Platform Baker, 'the compressor package Wars damaged and repaired tn transit resUl ting 'in a considerable time delay. The Oil and Gas Conservation Conmittee hereby authorizes flaring of excess caslnghead gas until October 31, 1975 or until, the compressor is 'replaced, whichever occurs first Very truly yours, ALASKA OIL AND GAS CONSERVATION COM~-tITTEE July 15, 1975 Re: A DN I N I S T R A T"I"v E A P P R O. VA L N O. 105-C.2 Application of Amoco Prod.~tion Company Operator, of Middle Ground Shoal Platform Baker for approval to flare i in of the · cas nghea,d gas excess amount required for safety for' more than 15 days per calendar quarter. Mr. George J..Ross Area Supertntenden't Amoco Production Company Box 779 Anchorage, Alaska 99510 Dear :Mr., Ross: On July t, t975 the refer~nced.appl:tcation was recei~ved which stated that all producing ~l~ls have been connected to Kobe lift and gas lift operations have ceased.. Consequently, the existing equipment is not properly sized to continue as a fuel and sales gas compressor and a different .compressor pack- age .should be Installed. · The Otl and r~s, Conservation C ~mamttt~. hereby .authorizes flaring of excess casinghead gas unrttl October l, 1975 or. until the compressor i's replaced, wh i chever occurs fi rs t. Very truly yours, Executive Secretary TRI4:be JAY S. HAMNOND, GOVERNOR ALASKA OIL AND GAS CONSERVATION COt~ITTEE December 4, 1974 Appltca~lon of Amoco Production Company Operator, of MiddleGround Shoal Platform Baker for approval to flare castnghead gas tn excess of the amount required for safety for more than '1~ .days per ca. tendar quarter, Mr. George J. Ross Area Super! ntendent Amoco Productt on Company Box 779 Anchorage,. Alaska 99.510 Dear Mr. Ross: On November 2't, 1974 the refe.renced application was recelved which stated tha~ d lff I cu try I n obta tn t'ng repatr parts for' a .compressor has resul ted that exceeds the '700 MCFD max)mum safety flare. 'for 13 days during the pertod of October 25 1through November 26.. . The 0tl and ~asConse~.t)on Coa~..Itfee herebyauthorlzes flartng of~'"excess.__ .casinghead gas until January I, 1975or untl:tthecompressor'ls repaired, which .ever occ.urs flrst'. :. Very truly yours., , Tho~:s R. ~rsha.:l I, Jr, Executive Secretary ~:cha STATE OF ALASKA DEPARTMENT OF NATURAL RESOUCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Re: The hearing called by the Alaska ) Oil and Gas Conservation Committee ) pursuant to Title II Alaska Admin- ) istrative Code, Section 2009 to hear ) testimony to determine if a major ) equipment failure constitutes a situa- ) tion warranting unrestricted produc- ) tion of oll and flaring of excess gas. ) Conservation Order No. 105-B Middle Ground Shoal Field Platform "A" Shell Oil Corporation, Operator I~S "A", "B", "C", "D", "E", "F" and "G" Oil Pools. August 30, 1973 IT APPEARING THAT: I. The Oil and Gas Conservation Committee on Its own motion called a hearing to hear testimony on the flaring of gas from the referenced platform. A notice of public hearing was published In the Anchorage Daily News on June 9, 1973 pursuant to Title II, Alaska Administrative Code, Section 2009. 2. A public hearing was held on June 21, 1973 in the City Council Chambers in Anchorage at which time applicant and others were heard. FINDINGS: I. The applicant has installed a centrifugal gas compressor to compress produced excess casinghead gas for movement to shore where a market exists. 2. On May 26, 1973, a major equipment failure occurred in the compresSion equipment and it became impossible to move the produced gas to shore, thereby necessitating flaring of excess gas. 3. Factory rebuilding, replacement, and alignment of damaged equipment will take at least two and possibly three more weeks. 4. Due to the urgency of a decision the Committee orally Issued substantially the order included as Rules I and 2 of this order. 5. The Committee makes no findings regarding the economics of the situation nor of potential reservoir damage. CONCLUS I ON: The temporary venting or flaring of excess casinghead gas and continued pro- duction of oil from the referenced platform is reasonable while equipment is being repaired. Conservation Order 105-B Page 2 August 30, 1973 NOW, THEREFORE, IT IS ORDERED THAT: Rule I. Flaring or venting of excess casinghead gas from Platform "A" in the Middle Ground Shoal Oil Field is permitted until 7:00 AM ADST August 3, 1973 or until such earlier date as equipment is again functional. Rule 2. By Administrative approval the Committee may extend the period pro- vided for in Rule #1 thirty days. DONE at Anchorage, Alaska, and dated August 30, 1973. ~Fhomas R. Marshall, ~lr., Exe'cutive Secretary Alaska Oil and Gas Conservation Committee Concurring: Nomer L. Burrell, Chairman Alaska Oil and Gas Conservation Committee O. K. Gilbreth, Jr., M~li~er Alaska Oil and Gas Conservation Committee ALASKA OIL AND GAS COHSERVATIOH COI~IITTEE October 13, 1972 Re: Administrative Decision No. IC)5-A.I .~'!iddle Ground Shoal Field .~.'IGS "ATM, ~!BTM· "C~:, "D~, ~:E~, ~"F~', and ~iOI~ Oil Pools Hr. John C. Schillereff Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 Dear Mr. Schillereff: Pursuant to Order No. 3 of Conservation Order klo. 105-A, the Oil and Gas Conservation Committee hereby further amends Rule No. I and Rule No. 2 of Conservation Order Ho. 105 to read as follows: Rule No. I ~tCasinghead gas in excess of the maximum amount' that' can be beneficially uti lized may be flared no later than 7:00 A. M., AST, November I, 1972.~ Rule No. 2 '*Effective no later than 7:00 A. M., AST, November I, 1972, the flaring or venting of casing head gas from the Middle Ground Shoal Field is prohibited, except for the amount necessary for adequate safety flares and except in emergencies, t~ Unexpected delay In the receipt and subsequent installation of equipment necessary to handle the excess caslnghead gas from the Granite Point Platforms Anna and Bruce has been recomnized b.v the ()il and Gas Conservation Committee. ~'~-~ ~']' M~~ i ]' ]'~] tary Alaska Oil and Gas Oonservation Committee Alaska ()il and Gas Conservation Committee Alaska Oil and Gas Conservation Committee STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska g9504 Re: THE APPLICATION OF SHELL OIL ) AND AMOCO PRODUCTION COMPANY for an ) order amending Rule No. 2 of Conser- ) vation Order No. 105 by deleting the ) date "July I, 1972" and substituting ) the date "November I, 1972'~. ) ) Conservation Order No. 105-A Middle Ground Shoal Field MGS "A", "B", ~'C'I, VID", "F'~, and '~G'~ Oil Pools June 8, 1972 IT APPEARING THAT: I. The Oil and Gas Conservation Committee published a notice of public hearing in the Anchorage Daily News on April 14, 1972, pursuant to Title II, Alaska Administrative Code, Section 2009. 2. A public hearing was held May II, 1972 in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time operators and affected parties were heard. FINDINGS: I. Immediately following issuance of Conservation Order No. 105, operators and affected parties commenced studies to determine a beneficial use or uses of the excess casinghead gas being flared. 2. Following determination of beneficial uses of the excess casinghead gas Being flared, engineering and design studies were undertaken and equip- ment and construction contracts were entered into. Gas sale contracts were also executed. 3. All of the foregoing was accomplished with due diligence, but was delayed owing to necessary engineering and design time, seasonal weather conditions, and construction and delivery time of specially-designed equipment. CONCLUSIONS: I. Operators of the referenced pools and affected parties have made a bona fide effort to comply with Conservation Order No. 105, but compliance will be delayed by conditions beyond their control. 2. Compliance with Conservation Order No. 105 can be expected by October 15, 1972. 3. The dates in Rule Nos. I and 2 of Conservation Order No. 105 should be changed to the earliest practicable date which is reasonable, but not beyond such date. Conservation Order No. 105-A Page 2 June 8, 1972 NOW, THEREFORE, IT IS ORDERED THAT- I. Rule No. I of Conservation Order No. 105 Ts amended to read as fol lows: "Casinghead gas in excess of the maximum amount that can be beneficially utilized may be flared until 7'00 A. M., ADST, October 15, 1972." 2. Rule No. 2 of Conservation Order No. 105 is amended to read as follows' "Effective at 7'00 A. M., ADST, October 15, 1972, the flaring or venting of casinghead gas from the Middle Ground Shoal Field is prohibited, except for the amount necessary for adequate safety flares and except in emergencies." 3. The Oil and Gas Conservation Committee, by administrative order or orders, may extend the date provided for Tn Rule Nos. I and 2 of this order. No such order or orders may extend the date beyond 7:00 A. M., ADST, November I, 1972, except pursuant to Title II, Alaska Administrative Code, Section 2012. DONE at Anchorage, Alaska, and dated June 8, 1972. Th R ~ar omas . Marshall, Jr , Execut~ e y Alaska Oil and Gas Conservation Committee Concurrence: Alaska (])il and Gas Conservation Committee ~. K. Gilbreth, Jr., Membe~ ' Alaska Oil and Gas Conservation Committee I:!VENTORY CO~SIT?VATI r~,iq ORDFr? (Re~tricts ga~ flowing in r':iddle Ground Shoal Field) I. Inventory 2. C.O. 105 3. Affidavit of Publication 4. l'~otice of publication Oil and Gas Conservation Committee 5. Exhibit #1: MGS Oil Field, oil and gas production, December 1965 - March 1971 6. Exhibit //2: MGS Oil Field, calculated value of gas flared 7. Exhibit //3: Alaska pipeline Company Annual gas sales history and forecast Chakachatna Group 8. Exhibit //1: MGS Platform Baker, oil and gas production 9. Exhibit /12: MGS Platform Dillon, oil and gas production I0. Exhibit /,t3: Li~t of papers by experts on Effects of Waterflood , Curtal Iment II. 12. 13. 14. 15. 16. 18. 19. SAS 20. Exhibit #1: MGS Field, Structural contour~ on SRS sand Exhibit /72: MGS Field, Net sand thickness, SRS sand Exhibit #3 Graph of bottom hole fracturing pressures versus depth Exhibit //4: MGS Field, Structural contours on A2 S Sand Exhibit #5: MGS Field, Net sand thickness, As/A2 S Sand Exhibit #6: Water injection into layered reservoir Exhibit #7: Gas injection into waterflooded reservoir Exhibit #8: Effect of water breadthrough on oil production rate Exhibit //9: Effect of reduced oil production rate on oil recovery Exhibit //10: MGS and Granite Point gathe, ring system / Inven±~-~ry C]'~n~ervation Order I~!05 Inven'tory o~ Exhibi?m page 2 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. C 34. 35. Exhibit /:11 SAS MGS gas production and umage forecamt Exhibit i?12' MGS Granite Point gam analysi~ City of Anchorage Exhibit A: invitation to Bid for gas service for the City of Anchorage, with transmittal letter, R. E. Sharp, City Manager, to H. L. Burrell, Director, Division Of Oil and Gas, dated - May 12, 1971. Addendum included Subpoenas To James R. Hendershot, dated - May 21, 1971 Reggie Elkinm, dated - May 21, 1971 Robert E. Sharp, dated - May 21, 1971 L. J. Schultz, dated - May 21, 1971 Lynn P. Bartlett, dated - May 21, 1971 Dale Teel, dated - May 24, 1971 Exhibits time~ly filed following public hearing: Statement from Walt Parker, president, Alaska Conservation Society, titled: Statement at the Alaska Oil and Gas Division's Gas Flaring Hearings, dated - May 28, 1971 Letter from Dale Teel, vice-president and gene~ral manager, Alaska pipeline Company, to Homer Burrell, Divsion of Oil and Gas, dated - June 3, 1971, concerning casinghead gas gas sales, with attachments: '.~.. Letter, Ra~hjen, Shell Oil Co. to Anchorage Natural Gas Co., dated- March I, 1967; Letter, Lacy, Alaska Pipeline Co. to Rathjen, Shell Oil Co., dated- May 22, 1967; Letter, Rathjen, Shell Oil Co. to Lacy, Alaska Pipeline Co., dated June 8, 1967: Letter, Tee I, A.N.G. Co. to Barrett, Pan American Petroleum Corp., dated - June 4, 1970; Inventory Conservation Order 11105 Inventory of E×h|bits page 3 36. 37. 38. 39. 40. 41. 42. 43. 44'. 45. 46. 47. 48 Draft of an agreement between Service Corp. of Alaska (A.P. Co. subsidiary and Phillips Petroleum Co. and Pan American Petroleum Corp., dated - August 24, 1970; Letter, Teel to Barrett, Pan American, dated - August 28, 1970; Letter, Barrett, Pan American to Teel, A.N.G. Corp., dated - August 24, 1970; Letter, believed to be from Teel, to John Houser or John Horn, Phillips Petroleum Co., dated - August 28, 1970; Letter, Teel to Olson, Phillips Petroleum Co., dated - September 4, 1970; Letter, Schillereff, Amoco Production Co. to Teei, A.N.G. Corp, dated - February 12, 1971; Letter, Barrett, Amoco Production Co. to Tee I, A.N.G. Corp., dated February 17, 1971; Letter, Teel to Schultz, Chugach Electric Association, Inc., dated - January 18, 1971; Letter, Emery to Lacy, dated - May 7, 1971 Statement by Cynthia Wentworth on behalf of the Sierra Club regarding the continuation of gas flaring in Cook Inlet, dated - May 25, 26, 27, 1971; Letter from Robert Anderson, Union Oil Company to Alaska Division of Oil and Gas, dated June 4p 1971, with attached copy of letter from R.W. Elkins, Rock Island Oil Company to E. F. Griffin, Union Oil Company. ' Letter from R. B. Gilesp Amoco Production Company to H.L. Burreil, Alaska Division of Oil and Gas dated - June 15, 1971. Letter, Gilbreth to Trimble & Swan, dated - June 6, 1971 March 20, 1986 File: FEW-077-383.3 Amoco Production Compaq~~ Mr. C. V. Chatterton, Chairman Alaska Oil and Gas Commission 3001 Porcupine Drive Anchorage, Alaska 99501 Administrative Approval No. 105C-15 Flare Limit Exception, Platform Baker Reference: Conversation between Chatterton/Siekawitch 3/12/86 As discussed, the compressor on Baker is back in service. Our computed flare for the month of February, based on integrated charts, was 3537 MCF, or roughly 126 MCFD. Thank you for your cooperation. Please address any questions to Bryan Dotson at 272-8471. / Sincerely, W. G. Smith District Engineer cc: M. E. Siekawitch L. J. Maroney B. D. Dotson BDD/jr 058/bdd4 RECEIVED APR - 1 ]986 NaSk~'oil, & Gas Cons. Commission Ancl~'a~ SHELL OIL COMPANY 601 W. 5TH AVENUE · SUITE 810 ANCHORAGE, ALASKA 99501 November 3, 1978 State of Alaska Department 'of Natural Resources Division of Oil and Gas 3001 Porcupine Drive Anchorage, Alaska 99501 Attention: Mr. H. H. Hamilton - Director Gentlemen: This letter is to confirm my telephone conversation this morning with your Mr. H. H. Hamilton in which I requested a fifteen day extension of the excess flare time limit for Platform "C", Middle Ground Shoal Field. As stated in my letter of October 6, 1978, our York sales gas compressor experienced a failure on October 3. Upon tearing down the compressor, we found some excessive wear in the impeller assembly which required it being sent to the factory for repair. We expect the impeller assembly to be repaired and ready for shipment by Monday, November 6. However there is some uncertainty in the completion time of the repairs due to labor union problems at the plant. At this time, Platform "C" has exceeded its 700 MCF/day allowable flare for eleven days during this calendar quarter.. I anticipate that by Monday, November 6 we will have exceeded our allowable flare volume for fourteen days. Due to the above conditions and the uncertainties involved in the time required to complete the repairs, I am requesting a fifteen day extension of the excess flare time limit. M. L. Woodson Division Production Superintendent Alaska Operations MLW/rrp cc: B. N. Osborn- Kenai L. A. Darsow Area Superintendent August 3, 1978 File: LAD-764-986.511 Mr. Hoyle H. Hamilton, Director Division of Oil and Gas Conservation Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99501 Amoco Production Compa P.O. Box 779 I.__-~'-C/~,~,.%"'i~--~ Anchorage, Alaska 99510 i .... Dear Hr. Hamilton: Administrative Approval No. 105.C.9 Operational Necessity Flaring Middle Ground Shoal Field Our letter of July 27,. 1978, File: LAD-744-986.$11, advised that we were seeking intracompany approval for repair of the South Middle Ground Shoal Platform Dillon pipeline. We have now obtained company approval and are soliciting our partners' approval. We will keep you advised of our progress. Yours very truly, L. A. Darsow Area Superintendent JRE:sls RECEIV£o -- 5 ;9'78 D~'Wsion of Oil and Gas Anchor~r]e C°[~sea,~tion DEPARi~.5~NT OF 'R71Tt~AL RESOLute/ES Division of Oil and Gas CGnse~tion ~ike Fi!as June 14, 197~ Thcmas R. ~.~ur~mll, Jr. /.~..',~/ Chief Petroleum Geolcgist'\ >/ Cn June 13, 1978 the Oil and Gas C~nsezm~ti~7 ~ttee met with tm~ representatives of Amoco Productic~ Ccmpsny. }~r..Gary MacGregor and ~,~. Jc~un Ea'tca.came to our offices at our z~mfuest to discuss the flaring on ~oco Prcduction platfc~s in Cook Inlet waters. They provided us with an upda~ of the flaring situm'hion and we clarified our reporting procedures to the ~moco ~.~arsonnel who ~re st~ding in for the area superintende~t during his absence. ~.~ told them of the necessity to obtain pe~r,~ssion frcr~ the Oil and Gas Consel-v~%ic~ Ccam~ttee before 15 days excess flaring cculd take place. Amoco P~d sought this permission retroactively for flaring that l~d occurred during the seccr~ quarter of 1978. Amoco had dcr~ a very careful job about notifying the people of this division about each and every flaring incident ~%at had ~ed. The problem stuns frem ~he fact that ,more ~han 15 days of flaring l~d occurred in ~ calendar quarter before they sought our pezn~ssion to c~tinue with the excess flare. Amoco agreed to %~rite us a letter det~iling their efforts -to ei/m~Tate the excess flaring ~d request pemamission for flaring beyond the 15 day period. ~ ' T~,kbjm L. A. Darsow Area Superintendent October 25, 1977 Amoco Production Company P.O. Box 779 Anchorage, Alaska 99510 File: LAD-878-960.4 Mr. O. K. Gilbreth, Jr., Director Division of Oil and Gas Conservation Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Sir: Quarterly Report of Gas Flared or Vented in Excess of Volume Required for Safety In compliance with State of Alaska, Conservation Order ~e- garding the Middle Ground Shoal Field and Conservation Order No. 102-E regarding Granite Point Field, we are submitting the Third Quarter 1977 report of gas flared or vented in excess of volume required for safety. The attached sheet sets forth the information required by Rule No. 5 of the above conservation orders. Very truly yours, L. A. Darsow Area Superintendent Attachment JDP :mis R, C vEo EXCESSIVE GAS TO FLARE MONTH SePtember 1977 COb~ENCED (DATE/TIb~)~S~ptember 24, 1977 at 11:00 p.m. NATURE OF PROBLEM. Excessive flare due to compressor repair SYSTEM FLARING Platform Baker STATE NOTIFIED (DATE/TIME) September .26, 1977 at 9:30 a.m. PARTY NOTIFIED Mr. Harry Kugler cOMMENTS Should~be'flaring an estimated'three'to four days. *STATUS AS OF LAST DAY OF MONTtl Flarin_g (terminated October 1, 1977) EXCESSIVE GAS TO FLARE MONTH August 1977 COMMENCED (DATE/TIME) July 30, 1977 at l:O0 a.m. NATURE OF PROBLEM Collier Carbon & Chemical Plant Modifications SYSTEM FLARING East Foreland Delivery Facility STATE NOTIFIED (DATE/TIME) August 1, 1977 at 9:15 a.m. PARTY NOTIFIED Mr. Kugler COMMENTS Estimated shut-in time 2 weeks RECEIVED OC, T g ? '1'97',/': *STATUS AS OF LAST DAY OF MONTH , TERMINATED (DATE/TIME) August 5, 1977 ab 4;00. p.m. STATE NOTIFIED OF TERMINATION (DATE/TIME) August 8, 1977 at 9:25 a.m. PARTY NOTIFIED Mr. Tom Marshall *Systems that are comt~n~in~ rn ~:1-,~-^ ~- .... Mr. O. K. Gilbreth, Jr. State Division of Oil and Gas 3001 Porcupine Drive Anchorage, Alaska 99501 SHELL OIL COMPANY 601 W. 5TH AVENUE · SUITE 810 ANCHORAGE, ALASKA 99501 August 2, 1977 ATTENTION: Thomas R. Marshall, Jr. Dear Sir: In accordance with Conservation Order No. 105C, Rule 4, this letter is to report to you that all gas from Shell Oil Company's Platform "A" and "C", Middle Ground Shoal Field, is being flared at the Amoco Onshore Facility due to piping revisions at the Collier Chemical Plant. This began July 30, 1977 and is estimated to last until August 15, 1977. We therefore request your permission to exceed the 15 day calendar quarter per platform gas flaring ruling. Very truly yours, HMM/rrp H.M. sen Division Production Superintendent Alaska Operations RECEIVED SHELL OIL COMPANY 601 W. 5TH AVENUE ' SUITE 810 ANCHORAGE, ALASKA 99501 June 7, 1977 Mr. Hoyle Hamilton, Chairman Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 ATTENTION: Thomas R. Marshall, Jr. Dear Sir: In accordance with Conservation Order No. 105C, Rule 3, this letter is to report to you a mechanical shut down of the sales gas compressor on Shell Oil Company Platform "C", Middle Ground Shoal Field. The shut down occurred on June 6, 1977 for a period of 8 hours. Repair is currently estimated to take four days. Please acknowledge receipt of this letter by signing and returning one copy to Shell Oil Company, 601 West Fifth Avenue, Suite 810, Anchorage, Alaska, 99501. Very truly yours, H. M. Ma' Division Production Superintendent Alaska Operations Received, Hoyle Hamilton SHELL OIL COMPANY 601 W. 5TH AVENUE * SUITE 810 ANCHORAGE, ALASKA 99501 May 31, 1977 Mr. Hoyle Hamilton, Chairman Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 ATTENTION: Thomas R. Marshall, Jr. Dear Sir: In accordance with Conservation Order No. 105C, Rule 3, this letter is to report to you a mechanical shut down of the sales gas compressor on Shell Oil company Platform "A", Middle Ground Shoal Field. The shut down occurred on May 28, 1977 for a period of 3 hours. Please acknowledge receipt of this letter by signing and returning one copy to Shell Oil Company, 601 West Fifth Avenue, Suite 810, Anchorage, Alaska 99501. Very truly yours, H. M. Mathiesen Division Production Superintendent Alaska Operations Received, Hoyle Hamilton HMM/rrp L. A. Darsow Area Superintendent May 11, 1977 File: LAD-388-986.511 Mr. Hoyle Hamilton, Chairman Alaska Oil & Gas Conservation Committee 3001 Porcupine Drive Anchorage, AK 99501 Attn: Thomas R. Marshall, Jr. Dear Sir: Amoco Production Company P.O. Box 779 Anchorage, Alaska 99510 Re: Operational Necessity Flaring Granite Point Field, Conservation Order No. 102-E Middle Ground Shoal, Conservation Order No. 105-C Pursuant with the provisions of Rule 4 of Conservation Orders 105-C and 102-E, dated January 28, 1974, Amoco Production Company respectfully requests Committee Approval for the flaring of casinghead gas from our Granite Point Platforms Anna and Bruce, Middle Ground Shoal Platform Baker and South Middle Ground Shoal Platform Dillon. On May 2, 1977, we notified your office that due to Collier Carbon and Chemical's annual "turnarOund'' we have an excessive flare at our East Forelands DeliveryFacility. We have been advised by Collier that the "turnaround" would extend to at least May 21, '1977, and possibly beyond. We request administrative approval for the excessive flare until such time that we are able to ship gas to Collier. Since May 5, 1977, we have had excessive flare on Platforms Baker and Dillon due to an obstruction that has PlUgged the gas line between Dillon and our onshore facility. At this time, we have not determined the cause of the plugged line, but are making every effort to clear the line. .Again, we request administrative approval for the excessive flare on the platforms until the gas line has been cleared. Very truly yours, L. A. Darsow Area Superintendent cc: V. J. Sheppard - Kenai SHELL OIL COMPANY 601 W. 5TH AVENUE, SUITE 810 ANCHORAGE, ALASKA 99501 January 28, 1977 State of Alaska Department of Natural Resources Division of Oil and Gas Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 SUBJECT CONSERVATION ORDER NO. 105-C As per Conservation Order No. 105-C, we request your permission to exceed the 15 day calendar quarter per platform gas flaring ruling. The York compressor on Platform "A" shut down December 6, 1976, due to Repair time is estimated to be approximately a mechanical failure. another 6 weeks. Very truly yours, ,...r;~'""/.:;::'~""<'z .... ;.. ' .... ~ ' ........ (' ,, ..~..,:%'%¢., ,,,.,.~., ,,, ...... , ~ , ,, H. M. Mathiesen Division Production Superintendent Alaska Operations HMM/rrp RECEIVED JAN 31 January 24, 1977 File: LAD-078-960.4 Mr. Hoyle H. Hamilton, Director Division of Oil and Gas Conservation Department of Natural Resources 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Sir: Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 C. G;:.?L 'i~"~ C. E F.~G '~ 2 E~..i'S- '~ ...... ....... . 2 C~:CL ~ ...... ............ .... ! ...... DRAFT [ ..................... ......... S. Ef ___ CONFER: Re: Quarterly Report of Gas Flared or Vented in Excess of Volume Required for Safety , d~,,,'" ................. ~, ~:.,~,~,,, In compliance with State of Alaska, Conservation Order No.~ 105-C rez' garding the Middle Ground Shoal Field and Conservation Ord~'"Mo'~""'102CE regarding the Granite Point Field, we are submitting the Fourth Quarter 1976 report of gas flared or vented in excess of volume required for safety. FUZE: The attached sheet sets forth the information required by Rule No. 5 of the above conservation orders. Very truly yours, L. A. Darsow Area Superintendent Attachment RECEIVED Division .cf Oil and Gas Ce~er~,tl0n EXCESSIVE GAS TO FLARE MONTH October 1976 COMMENCED (DATE/TIME) October 27, 1976 (intermittent since then) NATURE OF PROBLEM dehydrator problem SYSTEM FLARING Platform Dillon STATE NOTIFIED (DATE/TIME) 8:45 a.m., October 29, 1976 PARTY NOTIFIED Harry Kug~er COMMENTS *STATUS AS OF LAST DAY OF MONTH Al~h~t'~ T~N~T~D (D~T~/TIME) ].2:00 ~oo~ ~o~ember '17~ 1976 STAT~ ~OTTF-rED OF T~.~.~N~TZON (D~TE/TTME) 9:30 a.m.~ ~o~mb~r 18~ 1976 PARTY'NOTIFIED L0nnie Smith *Systems that are' continuing to flare at end of month will be carried forward and termination will be reported, on subsequent reports. SHELL OIL COMPANY ~O'J W. 5TH AVENUE, SUITE 810 ANCHORAGE, ALASKA February 17, 1976 State of Alaska Department of Natural Resources Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Mr. Marshall, We give the following explanation for the lengthy shut down of the sales gas compressor on Shell's Platform "C", Middle Ground Shoal. The York sales gas compressor was shut down on October 28, 1975, due to a failure of the balance piston seal. Upon opening up the case of the compressor, it was discovered that extensive damage had been done to the entire rotor assembly. On the advise of the York service manager, the entire rotor assembly was removed and shipped.back to the York factory in York, Pennsylvania, for repair. This was done on October 30. We received the repaired rotor back at the platform on December 16, 1975. The final shipment of parts to complete the repair was delayed at least two weeks because the York factory shut down for the Christmas holdiays from December 23 to January 4, 1976. We received the final ship- ment of parts on February 6. A York representative was brought on board and the reassembly of the compressor was started on February 7, 1976. The assembly continued until its completion on February 14, 1976. Test runs and adjustments were made and the sales gas compressor was back in operation on February 15, 1976. If I can provide any further information, please advise. Yours very truly, K. W. LaGrone Production Superintendent SHELL OIL COMPANY 601 W. 5TH AVENUE, SUITE 810 aNCHORAGE. ALASKA 99501 January 30, 1976 J DRAFT -I State of Alaska Department of Natural Resources Division of Oil and Gas Alaska Oil and Gas Conservation Committee Attention Mr. T. Marshall ~ tO',: , 3001Porcupine Drive t ~ CONS~2VA~ZON O:RD~ NO. 105-C r~¢¢¢~::o=~ ~.~:~V ~.. zn compl±ance ~ith Conservation Or,er No. 105-C, ~e are .again request±rig ~our permission to continue flaring the e×cess gas from Platfoz~m "g" until the ~ales gascompressor is repaireS. TheYork compressor plant shut down over the Christmas holidays and rescheduled parts of the equipment that we needed for a plant completion date of January 30, 1976. Repair time is now estimated to be about March 1, 1976, considering shipping schedules and arranging for a factory representative to be on lOcation during the repair and start-up. Yours very truly, K. W. LaGrone Production Superintendent SHELL OIL COMPANY ~501 W. 5'tH AV E N U E, S U ITE 8 'I 0 · A NCH OI::{AGIS, A L. ASK. A g g 50'I November 17, 1975 State of Alaska Department of Natural Resources Division of Oil and Gas Alaska Oil and Gas Conservation Committee Attention Mr. T. Marshall 3001 Porcupine Drive Anchorage, Alaska 99501 SUBJECT CONSERVATION ORDER NO. 105-C .! As per Conservation Order No. 105-C, we request your permission to exceed the 15 day per calendar quarter per platform gas flaring ruling. t The York compressor on Platform "C" shut down on October 28, 1975, due to a mechanical failure. Repair time is estimated to be approximately 2 months. J. H. DOUGLAS for K. W. LaGrone Production Superintendent G. J. Ross Area Superintendent September 16, 1975 File: GJR-772-986. 511 0 ~c' C,o /o5 Mr. Thomas R. Marshall Executive Secretary Alaska Oil and Gas Conservation Committee Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Sir: Re: Gas Flaring MGS Platform Baker Amoco Production Company P.O. Box 779 Anchorage. Alaska 99510 Pursuant with provisions of your administrative approval No. 105-C.2 dated July .15, 1975' Amoco Production Company has been granted approval to flare casinghead gas in excess of the amount required for safety purposes until October 1, 1975 or until our compressor installation is completed, whichever occurs first. Please be advised that we now anti- cipate compressor installation will not be completed by October 1, and we subsequently request Committee approval for theflaring of all casinghead gas through October 31, 1975. Following receipt of administrative approval No. 105-C.2, Amoco began the removal of the SLHC Worthington compressor in anticipation of the delivery of the new EII compressor package. The EII compressor package was_~a~!a~g~,.~nd repair~d....~n transit and experien~ce '~'~'~'~~ ......................... e~ys which'"~-~i~'~d'i~'~s"a~val in Anchorage on September 2. Its movement to the platform was then further delayed by inclement weather which prevented the operation of the'derrick barge. Due to the weight of the compressors, the barge was necessary for both the removal of the -2- old Worthington compressor and the installation of the new EII compressor package. This transfer was completed on September 13, however, and installation of the new compressor is now being expedited. Due to these delays, we now believe that the installation will not be complete by October 1. For these reasons we respectfully request Committee approval for the flaring of all casinghead gas from MGS Platform Baker through October 31, 1975 or until the compressor installation is completed, whichever occurs first. Very truly yours, George J. Ross Area Superintendent /0 2-. / c.., ';, fly / '7 ,sO Amoco Production Company P.O. Box 779 Anchorage, Alaska 99510 G. J. Ross Area Superintendent 5uly 1, 1975 File: GJR-567-986.51i Mr. Thomas R. Marshall, Executive Secretary Alaska Oil and Gas Conservation Committe~' Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Sir: Re: Gas Flaring Middle Ground Shoal PlatforTM Baker ,.~ I' s I .......... '.? C~rZrT:L ~ 3 G¢OL ~ ...... _ D~AFT ........... -SEC I CONFER: Pursuantwith the provisions of Rule 4 of Conservation Order No. 105-C dated January 28, 1974, Amoco Production Company respectfully requests Committee approval for the flaring of all casinghead gas from MGS Plat- form Baker for the period ~.~.~p~,.,~p~ through P,~_~~..~.,.~.~.~.~_t This is required as an operational necessity in order to replace the Platform Baker gas compressor. We estimate that approximately 1.8 MMCFD of gas will be flared during thiS construction period. Amoco is currently preparing for the replacement of the platform gas compressor as it is no longer well-suited to platform operating condi- tions. The SLHC Worthington compressor was initially installed to provide high pressure gas for artificially lifting the producing wells by gas lift. Later in the life of the field, a slip stream Was taken off the compressor discharge for high pressure fuel gas and for the sale of casinghead gas. We have now converted all producing wells to Kobe lift and have eliminated gas lift operations. Consequently, the exist- ing equipment is not properly sized to continue as a fuel and sales gas compressor. We are therefore replacing the Worthington equipment with an EII compressor package which is better suited for current platform requirements. - 2- We now expect delivery of the EII compressor in Alaska in late July. Consequently, we are requesting the authority to begin flaring all produced gas to allow the disassembly of the Worthington compressor to begin. We estimate that one month or more may be required to disassemble the compressor house, compressor, cooler, etc., for removal from the platform. This will be an extremely time-consuming task due to the physical size of equipment involved and the extensive degree of dis- assembly necessary to remove the equipment from the platform. Following removal of the compressor and associated equipment, we plan to proceed as rapidly as practical to complete the installation of the new compressor. Although we anticipate no major problems in this phase of the construction, we have allowed approximately a month for the installa- tion. We believe that these time requirements are realistic estimates for our planned construction and we respectfully request your approval to proceed. Yours very truly, George J. Ross Area Superintendent Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 November 27, 1974 File: GJR-841-986.511 Mr. Thomas R. Marshall Executive Secretary Alaska Oil and Gas Conservation Committee Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Sir: Re: Gas Flaring Middle Ground Shoal Platform Baker This will refer to your November 26 telephone conversation with our Mr. Barrett relating to the status of compressor repairs on MGS Plat- form Baker. We currently estimate that the compressor repairs should be completed on or before December 3. The repair parts have been located and are currently in transit to Alaska. Delivery is expected about November 29. We now estimate that we have exceeded the 700 MCFD maximum safety flare thirteen days during the period October 25 through November 26. _ ..... . .............. Pursuant to the provisions of Rule 4 of Conservation Order 105-C dated January 28, 1974, we respectfully request Conservation Committee approval to continue exceeding the 700 MCFD safety flare volume until the com- pressor repairs are complete. Yoursvery truly, C/John C. Schillereff Supervisor in Charge Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 November 7, 1974 File: GJR-795-986.511 Mr. Thomas R. Marshall Executive Secretary Alaska Oil and Gas Conservation Committee Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Sir: Re: Gas Flaring Pursuant to provisions of Rule 4 of Conservation Order 105-C dated January 28, 1974, Amoco Production Company respectfully requests Committee approval to flare produced natural gas in excess of volumes normally required for safety purposes from our Middle Ground Shoal Platform Baker. On the afternoon of October 25, 1974', a crack was discovered in one of the high pressure cylinders of the MGS Platform Baker gas compressor. The compressor was immediately shut down as a safety measure. As a consequence to the compressor shut-down, casinghead gas sales have been discontinued and the platform gas lift system is inoperative. We are continuing to burn casinghead gas as platform fuel gas with the excess gas being burned with the safety flare. This is periodically resulting in the platform flare exceeding the 700 MCFD permitted as a safety flare. Daily gas flaring has varied between 650 and 800 MCFD since the compressor was shut down, depending upon daily production, well downtime and fuel gas consumption. -2- We have now determined that a replacement compressor cylinder is not readily available in Alaska or the "Lower 48." Consequently, we have transported the damaged cylinder to Seattle for repair. We plan to repair the cracked cylinder with a root welding process. We estimate that the compressor should be returned to operation on or before November 15. We respectfully request Conservation Committee approval to continue exceeding the 700 MCFD safety flare volume until the com- pressor repairs are complete. Yours very truly, George J. Ross Area Superintendent STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee CONSERVATION ORDER 105-C & 102-E Granite Point Field M, idd~e Ground Shoal Field HEARING September II, 1973 II PROCEEDINGS Mr. Burrell: Good morning ladies and gentlemen. This is a hearing of the Alaska Oil and Gas Conservation Committee. Two notices are currently fi led on this, they both relate to production in the Cook Inlet Oil fields two oil fields, that goes to the East side of the Cook Inlet. One of them relates to two platforms in the Granite Point Field and the other relates to four platforms in the Middle Ground Shoal field. The operators of these two, these portions of these two fields are Amoco Production Company, Shell Oil Company, both of whom who have requested this hearing; and since the same question will be involved largely in the facts, presumally the findings of this order, we have consolidated these two hearings, at least for testi- mony purposes. Notice of both hearings are published in the Anchorage Daily News, August 6, 1973 as required by law and regulation. My name is Homer Burr~ell, I'm Chairman of the Committee; to my Reft is Tom Marshall, Exxcutive Secretary of the Oil and Gas Conservation Committee; to my extreme right at the end of the table is Mr. Gilbreth, O. K. Gilbreth, who is a member of the Oil and Gas Conservation Committee; to my right is Mr. John Reader, Assistant Attorney General of the State of Alaska. Unless somebody has something else, I'll ask the applicant or applicants to proceed with their testimony. Mro Crews: Thank you Mr. Burrell. We have been prepared Mr. Burrell: Would you identify youself? Mr. Crews: I'm Ralph G. Crews, and I represent Amoco Production Company and the Chakacatna group for purposes of this hearing and we had originally requested that the hearings be consolidated but I think you have adequately taken care of that. The purpose of our applying for this hearing on an amended order is to amend a respective conservation order to al Iow an operator by administrative action without hearing a maximum of 60 days per event per platform within which the operator may flare gas because of an operational necessity and currently there is a 96 hour rule in which you must notify the Commission for downtime or for flaring necessity, and our application would not tamper with that 96 hour regulation. For instance if we had to flare gas under the 96 hour rule, we would notify the Commission, and if it would appear that we would have to go beyond 96 hours, the 60 day time in which we applied for would begin from the first notice on the 96 hour point of time - correction from the downtime start, and we would like to ask the Commission, first I would say Mr. Bart Giles will be Amoco's first witness and we have other witnesses if necessary. Mr. Giles has testified many times before and we would ask that his qualifications for testimony be waiy~d and we also would like to ask the Commission that they with- hold any questions of Mr. Giles until the witness for Shell has testified, be- cause the testimony does in fact complement each other. Of course that is the discretion of the Commission, so as I say Mr. Giles wil~ be Amoco's first witness and we call him now to the witness stand. Mr. Burrell: Unless there is objection, let the record reflect that we accept Mr. Giles qualifications as a expert witness. Would you swear him in Mr. Marshal I? -2- Mr. Marshall: Yes. Please raise your right hand. In the matter now at hearing do you swear to tell the truth, the whole truth and nothing but the truth, so help you God? Mr. Gi les: I do. Mr. Marshall~ You may be seated, thank you. Mr. Crews-~ Would you please state your name? Mr. Giles: R. !~. Giles, with Amoco Production Company in Denver. Mr. Crews: What is your occupation with that company? Mr. Giles~ ~ am in an engineering capacity with Amoco in Denver. Mr. Crews: Mr. Giles testimony will be in narrative form unless you have ob j ect i on. Mr. Burrel~.· No objections. Mr. Giles: Gentlemen, lets turn to Exhibit I, for Amoco, which has just been handed out, which is a three page list of situations requiring flaring due to operational necessity. Mr. Burrell: Excuse me, Mr~ Giles, is it possible that there is any way to display this so the public can see any of these exhibits? Mr. Giles: There are only the 8½ by Il size Mr. Burreli, so Mr. Burrell~- How about the fold out, can we get those out in any way, or can we lay them out on the table here, then we'll take a break and let people look at them, i f anybody is intersted. Mr. Giles: Right. Do we have any more copies, why don't we just do that on the tab Mr. Burrell: ~t won't go up any way on that board, it would be a little easier if it would, but I guess it won't will it? -3- Mr. Giles: Not really. Mr. Crews: I rather doubt unless there is some way. Mr. Burrell~- I didn't bring any tape, did you? Mr. Giles'~ Sure didn't. Mr. Giles: Going thru this Amoco Exhibit I, we have listed by Platforms the four platforms and the onshore facility, the various situations that we would have planned or scheduled for inspection of the equipment, the component parts of the gas handling system. The compressors, the dehydration units, the safety shut-in valves on the pipeline, the production vessels, the main power pane~ on each of the platforms and on the on-shore facility the gas scrubbers that need inspection periodically. The second column indicates the length of down-time for this periodic inspection and the third column is how often would we need to do this, carry out this inspection and the last column is the estimated gas that would be flared under each of these situations that are ~isted. Those estimated gas ¥olumes are based on the average gas figures ~reported to you, the State, over the first six months of this year 1973. Now our Exhibit I, is strictly a tabulation of scheduled or p~anned in- spections of equipment. ~ kind of liken it to the fact that if you or I were to buy an automobile we get an owners manual and in the back of that manual based upon the recommendation of the car manufacturer, it tel Is you that, gen- erally that after 4,000 mi les or three months, which ever occurs first, you should get your oil changed at the point in time when you have driven 12,000 mi les you better get your plugs and points changed, at 36,000 mi les you better change the highpoured lubricant in the differential, and this is basically what Table I, or Exhibit I of ours tel Is us. It is based upon manufacturers -4- recommendations for the component equipment in the gas handling system as to when we should check it out and inspect it. We have tabulated on that exhibit all the items we can determine are of a regular or anticipated nature, but it does not include any unplanned situations. For your information we have a back- up of spare parts on hand or parts are readi iy available to repair essentially any part of the gas handling equipment within a four to six week period. This does not of course include a catastrophic failure but covers most of the nor- really repairable items. Our requested order today covers the need to flare gas during much longer downtime periods, however. An example would be the unusually tong plant turn- around that would include a major repair. Now, we're going to have a witness after Shell, from Collier Chemical, who will talk about plant turn-around, but this requested order of ours and Shell"!s would also cover the need for longer periods than the planned or scheduled situations, such as underwater p~ip~li~n~ breaks, perish the thought. We've had enough of those but we never know when it could happen again, and on that score ! might recite for the record that some of the breaks and the lengths of time on each break, it has taken for us to repair that pipeline break. On the Granite Point B line, which is the gas line from Granite Point to the East Forelands facility, we've had five breaks over the years. In June of 1968, it took 37 days to repair a break, in June of 69 it took 17 days, in June of 1970, June seems to be a favorite month of these breaks, June of 1970, it took 16 days to repair a break, in April of 1971, 22 days to repair a break and then on December 7, 1971 the line broke but we could not repair it until well into the following year and the repairs act- uaily started the 26 of September 1972 and took until the Ist of December, 1972, -5- which is a repair length of 66 days. I think that you'll recall that last November I was here to testify on that particular situation. Now on the Granite Point A line which is the oil line, August lO, 1972, we began a repair that lasted 29 days on that line. On the Middle Ground Shoal Pipelines, on August 7, 1966 the B line between Platform Baker and Shell's Platform A, had a leak and it took 64 days to locate the leak and then change out a spool to re- pair that line. I give you those periods of time merely to support the request that we're making for 60 days, the maximun of 60 days per event per platform within which to flare gas during operational downtime of equipment. Now since the sale of Amoco's gas 'to Union Oil Company is entirely, and solely dependent solely and entirely on Collier Chemical using the gas for fuel, a turnaround of the Collier Plant results in a direct effect u~o~, Amoco's gas handling operations. Collier plans an annual turn-around each year just to main- tain their equipment in good shape, just like we are doing the same thing by virtue of al~ the situations listed on our Exhibit I, for our equipment and every effort will be made by Amoco to coordinate it as much of its maintenance work as possible with the planned Collier turn-around. However, if you look at Amoco's Exhibit ! carefully, you'll see a number of situations that can not be hand led at that particular ti me. I'd tike now to turn to Exhibit z, which is a cletai led flow schematic of the Amoco operated gas handling systems. On the left side of this Exhibit we show the equipment that is on the platform, each of our four platforms, Bruce Anna, Baker and Dilion, the compressors~ the scrubbers, the glycol con,actors. This is designed basically to pressure up the gas for transmitting it to shore and to clean up the gas of any water vapor for transmitting the gas on to ~' ' -6- shore. In the right hand side of the Exhibit 2 is, shows the components on shore at East Forelands to dry up the gas, take the liquids out the heavier hydrocarbons, which are blended with the crude oil and the dry gas as shown just above the right hand corner of this Exhibit ~2 goes to sale to Union Oil Company. This particular Exhibit has no direct meaningful purpose for this hearing, I simply offer it into evidence to allow your staff, Mr. Burrell to have it for what ever use they may see fit internal. It was the design lay- out of the entire system at the time it was instal led. I'd like now to cover the next three Exhibits, 3 through 5~ They are per- formance curves on one Middle Ground Shoal well and two Granite Point wells to illustrate the adverse effect on oil production caused by the exposure of the formation in the producing well to produced water, whenever such a well is shut- in. I think you'll reca~ as ! certainly do that at previous hearings on gas f~aring ~ was ~nvariably asked by your Committee to present examples of wells where we do see an adverse effect, if a production restriction were imposed to eliminate the need for flaring during such times when ail gas cannot be marketed and so in advance of hearing that type of question again, I thought I'd give you three of illustrations today. Exhibit 3 is Middle Ground Shoal Well No. ~i in the BCD zone. The welt was making about I00 barrels of water per day and about ~50 barrels of oil per day when the wel~ in the middle of 1971 was shut-in while a compressor was down at that time and we lost the BCD as a producer, it was not economical to repair it and try to get it back t° the ~50 barrels a day level. The we~l is an excel lent producer on the EFG side~,at this time. Exhibit 4 is in Granite Point, the ADL 18742 #9 well, that was producing about 300 barrels of oil per day and 100 barrels of Water per day, when in -7- August of 1972, the weli was shut-in for practically the whole month, 30 days in August, during the pipeline failure and subsequent repair that I had talked about just a little earlier. And that well never did come back, it in our opin- ion lost an equilvalent of lO0 barrels of oil per day, when it was put back on production. Now whether that oil is lost entirely, forever, is debatable, if anything it may be deferred to the end of the life of that particular well's producing effort, but the present worth of the future income of cours~ is pract- ically zilch. Exhibit 5 is another well in Granite Point, the ADL 18742 #10 well. Again during the time when the well was shut-in for 30 days in August 1972, for that pipeline repair, it had been producing prior to that time about 400 barrels of oil per day and oh some 40 or 50 barrels of water per day and after being shut- in for a month, the well dropped or never came back to its former productivity and we figured it suffered about a 140 barrel a day toss. We performed a $50,000 ,. acid job to try to restore productivity of the well back to the 400 barrel a day level, but .we were not successful. It never has quite gotten back up to that pre-shut-in level, despite that expense to perform the acid job, so we think this is rather reasonably strong evidence that we do see an effect when we have a well shut down that has been produCing water along with its oil. Now there are not many examples available because very few of the wells in the fields produce water at the present time, however the water production can be expected to increase in both fields as they become deple'ted and this would 'pose an increasing problem under these situations. The last Exhibit i have is No. 6, which is an economical comparison of , the value of gas that would be flared at current rates for the Chakacatna -8- properties in each field, Middle Ground Shoal, South Middle Ground Shoat and Granite Point versus the dollar lost by virtue of pinching back the oil ~ duction that would eliminate the need to flare during such times when all the gas cannot be marketed. We have based this Exhibit on the annual Collier Plant turn-around, i think the significance of Exhibit 6 is shown by comparison to the second column under the value of pinch back oil versus the lower right hand column on Exhibit 6 the value of gas saved in each field and that sign- ificance is that the value of the pinch back oil production far out-strips the va~ue of the gas that would be saved instead of flared during the plant turn- around. Now, despite this rather obvious conclusion I want the Committee to be assured that we do receive a value now for the gas and so it does indeed be- hoove us to minimize any and all downtime when we are required to be down for operational inspection of equipment or failure. In conclusion I would suggest that we continue to report monthly to you any and all downtimes that exceed 96 hours. This is the present requirement. We believe it should be continued. Again as Mr. Crews had pointed out in his opening remarks, we're asking for a change in the present Orders only with respect to allowing a maximum of 60 days per event per platform to flare during any downtime or operational necessity. The 60 days would start when the down- time occured, it would not be tacked on to the 96 hours, we're not asking for 64 days, we're asking for 60 as the maximum. I've tried to show with Exhibit I that we do have the normal preventive maintenance program for our equipment. Nothing on Exhibit I, except for one situation, the Wurthington Compressor on Baker, wou~d exceed 96 hours as we see it. By annuai~ inspection of the Wurth- ington Compressor on Baker it would be expected to take lO days every two years, -9- which would be an average of five days a year, but we never know when ~we go into inspect equipment whether we ml§ht see something unusual or close to failure that would require a repair. We never hope for that of course but we do see the unexpected once in a while, we want your amended order to cover those situations as well as more, you might call more extensive in length of time situations like pipeline breaks and other matters that serious. I be- lieve that concludes our direct testimony. Shell will put on testimony that I understand will be a slightly different approach to the situation that I have alluded to and if you could bare with me on questions, I think after they are through, why we'd be happy to have both the Shell witness and myself come back on for any questions you may have, if that's fair enough with you Mr. Burrell. Mr. Burrel~'~ Thank you, Mr. Giles. Wou~d you identify these Exhibits you wish ~o introduce into the record. Were they prepared under your supervision? Mr. Giles: Yes, they were prepared under my supervision and we'd like to have Exhibits I thorugh 6 put into the record at this hearing. Mr. Burrell~ Very gad, unless there Ts some objection we'll enter these Exhibits I thorugh 6. i wou~d like to suggest we take a break of ten m~nutes so that any members of the audience may ~ook at these E×hibits here and if they're still looking we'll extend the break after that, otherwise we'll start after ten minutes Mr~ B~rrell: We'l~ convene the hearing, again at this time. Mr. Garnet'~ Mr. Chairman, members of the Committee, my name is Richard Garnet, i'm with Ely, Guess & Rudd and I'm here this morning to introduce Dick Bates of the Shell ARCO Standard Group. Mr. Ba'~es is the Division mechan- ical engineer, of the West Coast Division of Shell. Mr. Bates has been before this -lO- Committee in the past, most recently in June, this past June, so I would ask that his qualifications, the statement of his qualifications should also be waived, if that's agreeable. Mr. Burrel I: Unless there is some objection from the~~l~ly, Mr. Bates qualifies as an expert witness. Mr. Garnet: As Mr. Giles mentioned we would like to have questions held so that they can be presented to both Mr. Giles and Mr. Bates and their joint input can be tapped by the Committee and also as mentioned before, following Mr. Bates testimony we would like to call Mr. McMahan, Bob McMahan, who is with Collier Chemicat to give a little more detail to the run down on the nature of the Collier Plant turn-around. With that, I'!1 ~et Mr. Bates take the stand. Mr. Bur~ell: Thank you mr. Garnet. Mr. Marshal~ will you swear him in? Mr. Marshall: Will you please raise your right hand. The matter now at hearing, do you swear to tell the truth, the whole truth and nothing but the truth, so help you God? Mr. Bates: I do. As has been stated before Mr. Marshall: Thank you. Mr. Bates: As has been stated before the purpose of this hearing request that the operators be a~lowed a 60 day no flare period during operationa~ necessity periods. At the conclusion of my testimony I will request that an annual, that 60 days of operational necessity downtime per event per platform be granted administratively by the Committee. As Shell's and SAS group's repre- sentative at this hearing, ~ will review the flow schematic of shipping the excess casinghead gas from MGS Platform's A&C to the point of It~sale as fuel gas at Union's Collier Chem~ca~ Plant. I will also review our operating experience since start-up of the system in November of 1972 and provide you with information concerning equipment failures and system shutdowns during which time the casinghead gas not used as fuel gas on the platforms, was flared. In addition, I will discuss other possible events which could require flaring of casinghead gas. This testimony is intended to present the operations and problems involved with compression of gas on the offshore platforms and its shipment to its final destination. The bene- fits of gas flaring over curtailing of oil production had been presented in previous testimony, most recently in mu testimony on June 21, ~973. ! want it to be mentioned at this time. All producing casinghead gas, which is not ge- quired for fuel on our platforms and for safety flare, is compressed on each of the Middle Ground Shoal Platforms and shipped via common ~ine to the East Forelands onshore facility. Here the gas is scrubbed of all ~iquids which have dropped out in sub-sea transfer line, routed through a sales meter and shipped to Union Oil Compahy's Collier plant where this gas is used for fL~ei~ The on- shore system has been shown in detail by Amoco's representative. We have provided Exhibit No. I, which is on the board here showing the general ftow schematic of the casinghead gas from the platforms to its usage point at the chemlca~ plant. For convenience I wish to break this system down in four segments and discuss each separately in regards to its past performance and possible future operating problems. First we have the Platform Compression~Faciliti~_s_, the excess casinghead gas on both Platform A and Platform C, which are the two ~middle platforms in the flow schematic, is compressed from 50 psi suction to 250 psi discharge pressure, via centrifuga~ compressor packages located on each platform. The -12- Platform C compressor package has operated satisfactorily since start-up in November of 72, with 97% availability. I'm using the definition of avail- ability as the time on-line shipping available gas to sales as compared to total time since start-up. The Platform A compressor package as we discussed in our testimony in June 21, 1973, has experienced serious operating problems and shut-downs with resultant compressor drive shaft failure on May 25. This unit has since been rebuilt, brought back on the line on July 28, and is now operatIng satisfactorily at speeds below 90% of design rated speed. At these reduced speeds the unit is capable of shipping excess casinghead gas to shore. We are continuing to work with our compressor supplier on design modifications to assure that we have continuous operation of the package. Again as shown on Exhibit No. I the four MGS Platforms are connected via dual 8" steel, concrete coated, transfer lines. These lines are lying on the inlet bottom with risers going up the platform legs tying in at each platform. There are two 8" steel, concrete coated lines traversing from P~atform A to Shell's operated East Fore~ands Facility, these two lines here. These lines are used for shipping oil and water emulsions and are not satisfactory for shipping natural gas, as we had provided in previous testimony in 1971. Mr. Gi~breth: Pardon me, would you make that statement again? Mr. Bates: These lines are not suitable for shipping natural gas but are suitable for or are used to ship oi~ and water emulsions. Now, we provided testimony to this context in i971 at the no-flare hearings. Dual lines connect- ing the four platforms can be the lines shown horizonally across the schematic are also 8Tv concrete coated lines. However these lines were designed and are suitable for gas transmission. One of these dual lines is generally used for emulsion shipping while the other is used for naturaf gas shipping~ There are also two 8" steel, concrete coated pipelines traversing from Amoco's Platform Dillon to the Amoco operated East Forelands Onshore Facility. One of these two line in the south area, these two lines here, is used to ship natural gas to the beach, the other line is used to ship oil and water from Amoco's Platform Dillon to the facilities. The third segment, the first two being the Platform Facilities and Trans- fer lines, the third is the onshore facility where the gas is scrubbed of liquids which condense in the Sub-sea pipeline. This is again the facility shown in the Exhibit provided by Amoco. The final portion is the gas utilization point. Tthe gas is sold through a sales meter and then routed via one ~0" steel coated and wrapped buried gas line about four ml les to Collier Chemical Plant. We'll now review our operating history as the SAS platforms in Middle Ground Shoal. During 'the brief ten months of operating history during which time the No F~are Order has been effective, the system or portions of the sys- tem have been shut down with resultant gas flaring for the following reasons. I wii~ present Exhibit 2 to generally outline these periods. This is a continuation of the Exhibit we presented in June again. Flaring of a~l excess casinghead gas occured as a result of shutdown of Collier Plant during the period of June 22 to July 14. We understand this shutdown was an annual shutdown complicated somewhat by an accident on one of the process vessels. We also understand th~!'~peric~.'of approximately four weeks neces- itating complete plant shutdown wi ii be required on an annua~ basis. During this period it will be an operational necessity to flare a~! the gas in the MGS field except that gas used for fuel or safety flares. The compressor failure on MGS Platform A which occured on May 26, 1973 resulted in 63 days of downtime with resultant flaring of Platform A casing- head gas. The compressor failure occured as a result of an original inherent compressor problem and cannot be considered routine operational downtime. These problems were covered in detail in our June 21 testimony at which time the committee granted a temporarary exception to the No Flare Order for Plat- form A. Exhibit 2, general ly is a documentation of the comp. ressor on Platform A's operating history. Some other extended periods of downtime on compressor Platform A occurred in the period prior to May 26. These are generally found to be in association with our major failure as we showed again in our previous testimony. Other portions of this system have operated satisf'actorily without extended downtime to date. For convenience, I will again follow the portions of the casinghead gas system and discuss some of the potential downtimes which could occur due to operational necessity. On the platform compression facilities, our limited experience with our compression units to date, we cannot predict the amount of downtime we would have with high accuracy. However, we believe that each compressor package will require a major overhaul every 20,000 operating hours, or every two to three years. These overhauls require approximately two weeks of downtime. We keep an extensive stock of spare parts for the compressor packages on the platforms to minimize downtime due to equipment failure, however, it is still possible that unexpected failure of major compressor component parts which are not locally.stocked could cause delays of several days to several weeks. Subsea gas shipping lines are now used for shipping, that we now use for shipping were installed in years 1965, 66 and 67. We had two line failures at Platform A in the leg risers in 1966. However the lines connecting the four Plat- forms have not experienced any failures to date. On the dual oil shipping lines from MGS Platform A to the Onshore Facility we have experienced two failures, one in 1967 and one in 1968. The two south Middle Ground shoal lines required preven- tive maintenance work in the summer of 1972. These were the ones from Platform Dillon to Amoco's Onshore Facility, with resultant temporary line shutins. Due to the Cook Inlet environment/ line failures'cannot be guaranteed against. Pipe- line repair could take approximately 2-4 weeks, under the best of conditions, to as much as several months under the worst of conditions. I would say the worst condition would I~e a failure during the early part of the ice season. The East Forelands Facility as presented by Amoco, we are not expecting to have prolonged necessary operational downtime In this system, due to the design and nature of the system. The fourth item, which is Collier Chemical P~ant again, which we mentioned before, routine plant turnarounds are expected to take four weeks per year. This is an approximate number. These will require complete plant shutdowns with resultant gas flaring expected annually. Generally speaking the downtime of platform compression facilities will affect only that platform's excess casinghead gas. However, any problems occur- i~ng in the pipeline or downstream facilities will affect ali excess casinghead gas produced upstream from the problem area. We plan to schedule all necessary maintenance and operations where possible to minimize the operational necessity downtime. An example in this would be a scheduled compressor overhauls be con- current with plant turnaround. -16- There is another area that we have of concern and this is the nature of unplanned break downs. I'd like to provide you with some information as to the time required to repair a major unexpected equipment failure. I'll review chronological events of repairing the Platform A compressor after its failure on May 25, 1973. The time of the failure was lO p.mo, Friday May 25. The failure type was in parting of the gear box to compressor coupling with e×tensive damage to compressor rotating element, seals and bearings. Our engineers met with Solar, our prime supplier engineers on Wednesday May 30, to formulate plans for getting the unit back in operation. The unit was completely disassembled during the period from June i to June 3, this was the compressor disassembly, by factory mechanics from York and Solar. Com- pressor rotat~ was shipped via air freight to York's factory at ~ork, Pa~ Upon arrival ~at the factory it was further disassembled and completely rebui it. Since these compressors were specifically custom built for the job, of~f-the- shelf items were not~available for repair. Parts were machined as required working on an overtime schedule, and work was completed on the rotating element on July 9 ~ The element was then shipped to Alaska via air freight on July I0. During this time the Solar turbine was disassembled and checked for possible damage~ the Western gear box was removed and sent to the factory in San Diego for complete disassembly balance check, and the repairs were made to the seals and the bearings in the unit. it was also returned to Alaska. The compressor rotating element and gear box arrived on platform on ~uly 13. The compressor was reassembled by factory mechanics and completed on July ~8. On July 19 and 21, ~9 through the 21, start up performance test was conducted by Solar and Shell. During the startup test, shaft deflection probes were installed on the unit to continuously monitor the deflections for -17- safety precautions. The unit checked out al ri~ht to run at a 90% speed limit. The unit was then shutdown, permanent wirin~q, permanent shutdown reinstalled and the unit was brought up on line on July Although this above mentioned failure is not a part of our routine opera- tion, it does point out the time required to repair major uncommon equipment failures. Of the total 63 days downtime about 50 days were reauired to disassemble, ship, rebuild, and reassemble~ the equipm~nt. Delay or even loss of production at Middle Ground Shoal is possible if we curtail production or shutin wells. We provided data to d~onstrate this in our March 4, 1971, and June 21, 1973 testimony. Our operating experience in this multi-layered field has shown that shut-in or curtailed production gener- ally takes three months to recover to a stable condition at or slightly below its condition prior to curtailment or shut-in. We must admit that generally our data ls not totally conclusive; however, there is strong e¥idence to show that some damage and lost production is caused by restricting or shutting in production. Again the equivalent BTU value and the dollar value of the oil is considerably higher than that of the associated gas production as we haYe shown previous ly. We do recognize an operating income from the sales of gas, therefore it again behooves us for our own interest to resume sales of gas as soon as possible after a breakdown or shut-down. Our forecasts predict that for our platforms, MGS Platforms A and we will not have casinghead gas for sale a~ter 1982. ~e will then use this gas for fuel and will be required to provide an outside source of gas. -18- In summary we recommend that Order No. 105 be amended such that the Com- mittee can administratively grant the operator up to 60 days per event per plat- form of excess casinc~head gas flaring for downtime due to operational necessity. This 60 day period would be initiated upon the operational failure or shut- down. The request would be made after the 96 hours shutdown period has elasped as now available in Order No. 105. Reporting of down time should be on a monthly basis until the event is corrected. Further, gas flared onshore for any operational necessity should be considered as, and accounted as, gas flared on individual platforms. That is we are not distinguishing whether the gas is flared on a platform or onshore, if it is produced by that platform and flared then it should be considered as flared gas. We feel that 60 days per event are justified by the anticipated one month per year of downtime required for plant maintenance shutdowns and overhauls; and the time required to correct unforeseen system malfunctions as experienced with our past compressor breakdowns or' pipe- line leaks. Gentlemen, this concludes my testimony on this matter. Mr. Burrell: Thank you, Mr. Bates. Would you like to introduce your Exhibits into the record (Can't understand.) Mr. Bates: Yes sir, they were prepared under my supervision. Mr. Burrell: Shell Exhibits ! and 2? Mr. Bates: Yes sir. Mr. Burrell: Thank you, Shell's Exhibits I and 2. Mr. Bates, Mr. Marshall wants to know if you have any small copies? Mr. Bates: Yes I do. Mr. Burrell: Are they identical to the large ones? Mr. Bates: Yes they are, I have a couple copies ! believe. -19- Mr. Burrell: We would like to have those for the record then, rather than the large one, they would be very difficult to file tthose. Mr. Bates-' I do to. Mr. Garnet: Mr. Chairman, I might ask whether the Committee would prefer to ask questions of the two gentlemen who have already testified at this time or to have Mr. McMahan present his testimony first. Mr. Burrell: I think we'll just ask Mr. McMah~n to testify, to get the whole thing done at once. I will ask one thing, in fact this also applies to Mr. McMahon do you have, those of you who have testified, do you have a written copy of your oral testimony, or something typed there is a great help to our girls who type it? Mr.'"~ahnet: Al right at this time !'tl ask Mr. McMahon to come to the witness chair. Mr. Chairman I don't believe Mr. McMan has been before this Committee, if I'm not mistaken, so I will ask him to run through briefly his position, his educa- tional qualifications, his experience with the matters that we're discussing. Mr. Burrell: Could we also have his first name and spelling. Mr. Garnet: Certainly. Mr. McMahon: My name is Robert D. McMahon. Mr. Burrell: Thank you. Mr. McMahon: My current position is the Plant Manager at the Collier Carbon and Chemical COrporation Plant in Kenai. I'm a chemical engineer, graduate of the University of British Columbia in 1950. In the 23 years since graduation l:ve been employed in various engineering capacities in the oil and chemical industry both with the Mobil Oil Company and the Union Collier group. For the past two years I have been the manager of the Collier Facility in Kenai. -20- Mr. Burrell: Does anybody have any questions for McMahon, unless there is an objection, we'll accept his qualifications as an expert witness. I'll ask Mr. Marshall to swear him in. Mr. Marshall: Please stand. Raise your ri~qht hand. In~ the matter now at hearing, do you swear to tell the truth, the whole truth and nothing but the truth, so help you C~d? Mr. McMahon ~ i do. Mr. Marshall: Please be seated. Mr. Gar~et~. MW,~M~Mahon, why don't you just proceed to tell the Committee what you have to say about the nature of the Collier operation, in particular the annual turn-around procedure that has been discussed so far. Mr. MCMahon: Let me say first, that I do not have written data in support of what I say,~i will define the turn-around situation of what we do and will be happy to answer any questions that you might have. The term turn-around, just for definition is the synonym for overhaul period or,maintenance repair period, or what have you, and it is something we must do once a year to com~ly with the boiler ~nspections on, by the State requirement, and also the pressure vessel work, and we select that same period to perform the major overhauls on our compressors, turbines, pressure vessels, ~rePtace catalysts that may be exhausted, to replace defective metallury and so forth. We hope normally to accomplish all of these efforts, in our current program, in about a three week period, but ~ because of unanticipated difficulties we al Iow four weeks and in the last two years, four weeks has been standard. Historically, because the plant has been, althou~qh not entirely prototype, somewhat d~velopmental, we have run into ~roblems that have sometimes run s~mewhat longer than four weeks. On one occasion because of -21- a severe problem with a metallurgical castin~ we were down for eight weeks during the course of the turnaround. We feel however, we have set most of those major problems aside, then we'd hope to meet the four week annual turnaround that we have now established. Our target for overall on-stream efficiency for a plant of this complexity is about 90% overall stream efficiency. We look at about four weeks outage on this one major turnaround in which we would hope to accomplish everything necessary to permit us to run the remainder of the year continuously. But we do reserve the possibility of one other interruption during the course of the year and again because of the complexity of the equipment we visualize that if , too would last about one week. So our over all operating efficiency then WOuld be about 90% with a four week outage on schedule and now we're thinking in terms of September, early October each year and then maybe one other outage during the course of the year at an unspecified time for an unknown reason, we have the duration of approximately one week. In summary gentlemen I would say that is about the way we approach our main- tenance and operating philosophy. Mr. Garnet: Thank you Mr. McMahon. Mr. Burrell: Thank you Mr. McMahon. I think at this time we are ready for questions, i'm sure we will have some. Mr. Gilbreth, would you like to start wi th the questions? Mr. Gilbreth: Yes, I'd like to start back with Mr. Giles. Mr. Giles in the earlier part of your testimony you mentioned several line breaks, I figured it was one or two were oil lines, were all of the breaks that you recited, actually was that oil line breaks or were there some other breaks in the gas line, those carrying gas. -22- Mr. Giles: There were five breaks in the Rranite Point B line which is a gas line, that were repaired. There was one in an oil line in the Granite Point A line and there was one in the line between Baker B line between Baker and Shell A, which would be essentially be a gas line. Mr. Gilbreth: On your Exhibit 5, Mr. Giles, looking at the oil production curve and the water production curve, it appears that after the shutdown that you have recited that the productivity of the well itself determined by total fluids was considerably reduced. Mr. Giles: considerably Mr. Gilbreth: reduced, and then your Exhibit shows that a $50,O00..acid job was required to restore the productivity. During the interim between the acid job and the time the well was shutdown, did, have you eliminated the possib- ilities of problems with the producing equipment itself, with the equipment of this nature. In other words do you think this reduction is entirely and con- clusively due to reservoir capacity to produce? Mr. Giles: Well the acid job was to clean, basically to clean the scale from subs/~rvice equlDment, it was not ln.~h~?71~ of a~'. imagination an acid'~rack job, so we still believe that this lends pretty strong evidence. That we get an adverse effect from exposure to this produced water on the formation .face. We don't know all the answers to this question, but we are concerned as we will be producing more and more water with time and more and more wel Is can be expected to be effected, no matter what the reason for shutdown. 'Mr. Gl lbreth: i noticed in all of the curves that you did present here, that wet ls were making considerable quantities of water, anywhere from 1,000 barrels a day, -23- Mr. Giles: No, you'll have to go to the right hand side of the graph for the water. Mr. Gilbreth: I'm sorry, okay. I was reading the curve wrong. Mr. Giles: Yes, the left hand side, that's the oil ri,q.s and the right hand side the water. Mr. Gilbreth: Yes. On your Exhibit 6, I believe your testimony was that this was indicative of the values of oil and gas during the period of shutdown or turnaround. For what period of time was this calculated? Mr. Giles: This was calculated on a five weeks basis. Now if you go to Mr. McMahon's customary four week turnaround, that he states is customary, why just take 4/5 of all the values but the values will remain in relation to one '.' another. Mr. Gl lbreth: In your recitation of downtime that has occured from your propert.,f..es in the Granite Point and Middle Ground Shoals, your exhibit shows a ten day bi-annual Inspection on one of the pl.atforms. Have you had any equip- ment downtime other than line breaks that exceed the ten days. Have you had any long equipment'failures on any of your platforms? Mr. Gi les: I don't fecal I that we have, no. Mr. Gilbreth: Then most of the downtime on the platform is due to routine , ; maintenance and turnaround and things of that nature. Mr. Gl les: Yes, but I think we have to be practical about this, as the equipment gets older and we get into it on these annual inspections, I think we're going to learn that metallurigical failures are about to occur and we're going to encounter problems that here-fore we 'hage'not had, which will lengthen the downti me requ i rement. -24- Mr. Gilbreth: Well hopefully the--inspections wi l I preclude that. On your exhibit No. 2, as I read the Exhibit, all the gas produced from the Baker, Shell~ Shell/s~, and Dillon, all goes through a common line to Platform Dillon and then ctoseto shore. Mr. Giles: Yes. Mr. Gilbreth: Is that right. There's no gas going to shore from, directly from Baker or Shell A. Mr. Gi les: No. Mr. Gllbreth: The existing lines. Mr. Giles: No, those lines cannot do that. Mr. Gilbreth: i'd like to ask Mr. Bates, you mentioned the problems that you'd had with your Shell A Platform compressor, indicated it's operating now below 90% of a design rated speed, what about your platform? Mr. Bates: It's still operating, it's below 90, I belleve it's about 85 or 86%, has a f~i.:t'.~capacity to flare gas at that rate. Mr. Gilbreth: Okay, with both platforms operating in this range, are you able to still move all the produced gas to shore, ali except what is necessary for emergency purposes. Mr. Bates: Yes sir. Mr. Gi[breth: In your testimony Mr. Bates, you indicated that the failure of the compressor on Platform A had required about 64 days, at least you flared gas for 64 days, if I understood. Mr. Bates: ~ believe it was 63. Mr. Gilbreth: 63, al right. Now the order that you have requested here then would in fact not let you produce those last three days, would it not. -25- Mr. Bates: This breakdown was of an even more non-routine nature I guess you would say than a normal breakdown. I mentioned there were 50 days reauired for shipping rebuilding and reassembly, the other 13 days were consumed at the beginning, 3 or 4 days of engineering and at the end hooking up of all the safety devices and running performance tests, indeed work we had done at York, Pa. had corrected~tt~'i§ vibrator problem we had. So a procedure similar I would expect take on the order at 45 to 50 days between here and back on the llne. Mr. Gilbreth: The reason i'm asking this question, Mt. Mc Mahon indicated that normally they expect a four week turnaround or perhaps five weeks in some cases, and something longer than that would obviously be out of the ordinary. This is what you experienced on your Platform A, something out of the ordinary. Now I'm wondering if the reasc~ for you're requesting the 60 days was because Platform A type ocourrance or why the 60 days. it wouldn't fit into Platform A and yet It is considerable Io.~ger than the normal that you'd~exp~ct. Mr. Bates: I feel generally that the major abnormal types of equipment breakdown or line break could be repaired within 60 days, 30 days is too short ( --- C~an't understand --- ) ~ feel the order of magnitude of two months is ample time to repair most failures or correct most operative problems that have arose. Mr. Gl lbreth: As you have requested this order, if you had a failure that required more than 60 days, then would you advocate having another hearing then? Mr. Bates: Yes sir. ! feel that if we were over 60 days, it would not be the routine in nature and as a~matter of fact it may be very extensive, it might -26- take 62 days or something. It is very hard to Din down the exact number. Mr. Gilbreth: Would you object to an order being written with a lesser per- iod for without having to come to this Committee, but with the Committee to have administrative authority to grant up to 60 days. Mr. Bates: I believe that would be alright, I think we were really requesting is for the Committee to have the ability to grant up to 60 days°~laring. Mr. Gilbreth: As I read'the application I was under the impression you were asking for unlimited authority to flare 60 days on each occurrence and they could be consecutive. One would flare 60 days and another would flare 60 more. Mr. Bates: No, now I see what you're saying but t guess in theory that could happen, except we would have to come in after 96 hours and request the Committee's approval to flare gas.i believe that was indicated in the - where the Committee would give its approval or not give its approval, therefore if we violated our business obligation,, you still have control. Mr. Giibreth: Let me see, if I understand you right. As I understand you now, you're sayin~ that if an occurrence happened out there, that looked like it was going to take 30 to 35 to 40 days, after 96 hours, you would come to the Committee to get approval to flare durin~ this time? Mr. Bates: Yes sir,after, the 96 hours is the provision in the order now, at the end of 96 hours we would be obligated to tell you we are down we are flaring and ! feel we would be obligated to give you at least an idea of how long we would be down. Mr. Bi les: Can I clarify my view on that. i view the present 96 hour deal before the expi'ration of 96 hours, we must notify, report to the Committee, that we foresee that we're going to be down much longer than 96 hours and we must -27- follow up later on and tell you when its been fixed. We want to continue all that. I don't think that our view is that we would be asking for your approval per sey to go beyond 96 hours. Mr. Marshall: Mr. Giles, I wonder if I could interrupt here, I think we do need a point of clarification in view of the fact that both the letter from you and from Mr. LaGrone, referred to the 96 hours, in what I think is an erroneous application. Your wording here is "operating experience has shown that necessary maintenance situations can result in equipment downtime, with the resultant gas flaring exceeding the 96 hours, maximum al lowed by the Con- servation Order No. 102." Mr. LaGrone, letter uses similar language, as a matter of fact Conservation Orders 105 and 102, Rule 3 says, ~' the commencment, nature, and termination of all emergencies requiring flaring of Casinghead gas in excess of the amount required for the safety flaring shall be reported to the Committe within 96 hours after the occurrence" and 96 hours being merely a period of the time which we want to know about it chiefly by telephone communication. Mr. Giles: Yes, right Mr. Marshall: ~ know, and I think the 96 hours has come to mean something different like a time in which, flaring go on, really is a reporting rather than a flaring time, so I bring this up if we're talking about proposed language, lets bear in mind that the 96 hours is in the existing Conservation Order just recorded. Mr. Giles: Alright, but the again back to our basic request we're asking for up to 60 days per occurrence per event per platform within which to flare. We do not intend to use 60 days on each event, of course not, but as Mr. Bates points out, you never know when you're going to get into a rather extensive downtime situation that might take up to 60 days. If it required more than 60 days for that -28- event to correct the failure, or the downtime, we would expect that we would have to come before you at a public hearing to .qet a further extension, but we foresee the advisability and we would hope that you do too, that we've come to a stage in these fields when administrative approval rather than hearings on everything is the best course of action. This is what we're asking. Mr. Gilbreth= Let me throw this out at you. On the west side of the Inlet the operators have similar problems and my recollection of the, in effect, the effect of the order, I don't recall the exact language, is that an operator can utilize or can flare gas because of these problems that we're talking about up to 15 days per calendar quarter, without getting Committee approval, beyond that they have to get the Committee approval. Do you see anything wrong with something like this where your little day to day problems, you have to shutdown for 8 hours to change spark plugs or do something else to lubricate or some- thing like that. We realize that those things have to go on and we don't want you to have to come to us for every little thing like that. It's the major things - the long periods and a large volume ~hat we're concerned with. Would you have objection to an order, patterned something like that. Mr. Giles: Basically what you're then saying is rather than 60 days per event per platform, you're saying 60 days per year per platform? Mr. Gilbreth: Yes, yes. Mr. Marshall: That is, but after that time, then you've got to come to us for Administrative approval which we can give. Mr. Giles: Beyond 60 days? Mr. Marshall-' Well, beyond 15 days per quarter. The beauty of this thing is,the way we're handling it on the other side of the Inlet, is that if you have a problem which you think is going to take 60 days, then we give you administrative -29- approval to flare gas in 60 days, but it's actually 62 days, then what are we going to do, are we goi~n.q to shut you down right there, are talking about a public hearing, ~W~ don't have time to publish, its sort of like just an auto- matic, we're left with t~ alternatives in a case where you will run over 60 days and I believe that you're going to run over 60 days sometimes. Now I think we've boxing ourselves in again on the 60 day thing, I think that there's going to be times when you're going to be flaring a lot ~ess than you expect and then there are going to be a time or two when you're going to flare a little more or maybe quite a bit more and I real~y think that flexibility here is going to help both sides of the fence especially when we get in situations where if we have to hold a hearing we have to advertise and now we're looking at anywhere from 12 to 15 days to effectively do that, we've been up against this sort of thing before and ! really believe if you, ill'the Committee has discretion to administratively permit the f~aring beyond a certain time, we can look the sit- uation rlght there. It may be a catastrophic type, it may take quite a bit more time and there always, and we're never sure exactly how ~ong it takes. Mr. Giles: Let me be sure ~ understand what you're saying Mr. Marshall. You've saying if you wrote the order ~ike the one ol~ the west side, the 15 days per quarter, per platform, that's automatic and if we needed more than 15 days per quarter, we'd have to come and ask for administrative approval without a hearing, which you could grant. ~f we needed more, lets see that would cover, we'd have to forecast at that t~me how long we'd be down, would we, or how do you end, put the end date on? Mr. Burrell: Let me interrupt here, if I may. The existing orders 105 and 102, on the east side~ have no provisions for flaring for cases of operational -30- necessity, we only said you can't flare at ail. It says if you have to flare in case of emergency, however you have to let us know in 96 hours. Now we use a rather restrictive definition of emergency, until higher administrative authority or the courts assist us in our view of it, we're going to stick to it as emergency is danger to life and property. Operational necessity is the matter that is under discussion today, such as mechanical problems, and turnarounds and things like that. The order's now on the west side provide and discuss 15 days per calendar quarter per platform and any flaring onshore will be allocated back to all plat- forms. Onshore facilities, flaring serving two platforms wii~ be allocated back to both platforms, both platforms have been charged wi th flaring during that period, whatever it may be. Does that clarify the way things are now on the west side? Now if somebody wants to flare more, and use up the 15 days per calendar quarter, they come to us and tell us how much longer they think they will have to keep flaring and ask for an administrative order, which we may give them. We could give them one for I0 years theoretically. As a practica~ matter, If it looks like a major problem, he may very we~l elect to go a public hearing because any number of circumstances could justify that. Suppose the Collier P~ant went down for 90 days, for example, that's sounds like you have a pretty good reason Mr. Giles: Well, ' Mr. Burrell: Excuse me, by thar time circumstances ma~ have changed. There may be an alternative market available to you. We might really want to think of this alternative market, we might want to hold a public hearing to find out why you weren't using this so cal~ed alternative market, After all, this is . . . -31- what started the no-flare orders in the first place. It is our opinion, that there was a market and n~w it is being marketed so we're not' always right. Mr. Bates: Are you empowered now i.n.102 and 105 to al Iow us to flare by administrative order for any periods desired. Mr. Burrell: No, flaring is prohibited under !05 and 102. (except for emergencies). As a matter of fact if the Collier Plant had not had a fire, explosion which coincided, with their turnaround, we would have considered it operational necessity and not permitted by 105 and ~02. It is an emergency because of an explosion, or fire that occurred in the Collier Carbon Plant, upon which event you did win your turnaround. Does that clarify where we stand at all or have ~ just made it worse? Mr. Giles: No, that's al right. Mr. Gilbreth: We're finding more and more as you people are, there's alot of administrative headaches in tryingi~to~'adm~i~ni. St~r. ithi~s, and I'm interested in eliminating as many of them as we can and covering as much here as we can at the hearing ve pressure. The well So~we.know where we are headed. Mr. Giles: I think with that understanding, to answer your question, we could live with that. Mr. Bates: My only question here is if you have operational necessity after your 15 days in that quarter, must you go to public hearing or can the Committee administratively extend your flare period. Mr. Burrell: Under the west side orders we can give an administrative extens i on. Mr. Bates: That wou~d be the same for 102 and 105. Mr. Giles: That would be at the discretion of the Committee. -32- Mr. Burrell: yes, we could call a public hearing if we saw fit. Mr. Giles: Depends upon what you hear from us? Mr. Bates: Well, I think you have that right at all times. Mr. Gilbreth: Well, we're, I know i personally, I don't know about the rest of the Committee, but I'm concerned about the request you made. It appears to be very open ended 60 days from each occurrence, and there is nothing to say you can't have one right after the other, six times out of the year. This is something that from a use standpoint is bad. Mr. Bates: What you're reviewing and what our real objectives, are zeally about the same. What we've been after is not having to come to hearings, ti II somethina breaks down and we're notified you and you don't have any power to use your ~j~dgme. nt~ito say, yes, you have a breakdown, we understand this breakdown, but there is nothing we can do about it. Mr. Burrell: I think, speaking for myself, rather than the whole Committee, I think my position is that we have these minor items under Amoco's Exhibit I, there is nothing on there any longer than lO days, scheduled for more than I0 days. With the exception of the one instance of the Shell Platform, I don't know of anything that's been over fifteen days, since no-flare order has been in effect. I don't know of any shutdowns since the no-flare order went into effect, with that one exception who ever had that major problem. Our intent is not to harass Qou with these minor problems by having hearings or messing around with every spark plug change and that kind of nonsense~ However, if we think that you can - I. restrict production; 2.fin~ alternative use of gas; or 3. any other means to eliminate that flare, we want to reserve the right if it is one hour over that 15 days per quarter to jump in and say, well how come you don't do this, and have a public -33- hearing.on .it. Does that add anything? Mr. Bates: Mr. Burrell, has the order already been published in accor- dance with the gas lines? Mr. Burrell: It has been orally given at hearing and I think it is on my desk for signatures now. Mr. Crews: As I had discussed previously with Mr. Marshall, perhaps maybe submitting a proposed form of order for your Consideration. If we're going to do I might look at the'one already written. Mr. Burrell: I assume this draft is, this is the 37th and final draft, assuming this is the last final draft, it would be appropriate to come the last day. Mr. Crews: Our suggestion would be in conjunction with Shell's and Amoco''s. Mr. Gilbreth: I have another question to ask of both Mr. Bates and Mr. Giles. Earlier testimony in these cases indicated it was not feasible to reinject pro- duced gas because of dangers of exceeding natural reservoir containment. There's been considerable amount of fluid withdrawn from each of the oil reservoirs or the defined reservoirs in the Middle Ground Shoal field and the Granite Point F~eld. I'd like to ask you individually is it not now feasible to reinject this used. gas from these, two ,fi~elds, so that excess gas would not go through an emergency flaring. Mr. Giles: I'm Mr. Giles, back into the formation from which ~t was produced? Mr. Gilbreth: Yes. Mr. Giles: it would not do for the same reasons presented at those earlier hearings. Primarily the contrast in mobility ratio, which would just eat us alive, compared to the better mobility ratio between water and oil. -34- Mr. Gilbreth: Referring to the Middle Ground Shoal, particularly the A Pool I believe that there is a gas zone in the A pool, a free gas zone, is it not feasible to reinject into this? Mr. Bates: I believe this is Bates with regard to your point, if I remember right, it would about 3000 or 3200 psi to inject gas into this pool in our area. Mr. Bates: Wh~,i~le Mr. Giles is thinking I guess, I'll answer first of all in context with his answer about injecting in the producing formations. We would have the same mobility ratio problems. In addition we have been water flc~ding Middle Ground Shoal and we have not reduced bottom hole pressure to that great of an extent. We're replacing produced fluids with water and maintaining the reservoir above the bubble point. Therefore we do not have a situation where we're asking torreduce the injection pressure for natural gas in the reservoir. Mr. Gi lbreth: But would it, would it not be feasible to install injection equipment to do this? Mr. Bates: I believe that depends upon the definition~ of the term feasible. It could be done.~ It wou~d be from our view point ~t would not be a very safe operation, we would have to put in 5000 +~ psi gas injection equipment, large~ heavy equipment~ on the platform, we don't have space for. Yes, we could make space and spend millions of dollars to revamp the platform metering it economi- cally unproductive. Mr. Giles: We would concur it would not be economically feasible at this po int. -35- Mr. Gilbreth: Just for the record, the flow diagrams that we.had on the gas sales or gas production stream on the sales report, shows the produc- tion to go from the platform to the shore and through the line to the Collier Plant. I believe that there is a gas handling facility operated by Union. Do either of you see any possible equipment failure there that would result in down-handling about what we talked about here today, I think that had been dis~ ~ cussed. Mr. Gi les: Not knowing much about much about I~nion's system from the '~ales meter to the Collier Plant I am not at liberty to know this. I wouldn't suspect there would be, but I don't really know for sure. Mr. Gilbreth: I just wondered if we covered the possibilities of failures here, we talked about platform failures, line failures and Collier's turnaround. Mr. Giles: I think if we're operating under the objectives we've talked about today, then we would notify, or Union would notify, you before 96 hours had e~asped, that they were going to be down for a longer period of time and present the problem they have to you and you'd have the administrative decision to allow it or not al Iow ~t~ Mr. Gi lbreth: Union has no obligation to us, to the Conservation Committee, its only the producers. Mr. Gil~s: Therefore we would notify you. Mr. Bates: Alr~ght, that wou~d be the s~tuation, but again if Union were down for more than ~5 days depending on the case you'd haYe the authority to admin- istratively allow us to flare or call a hearing under the ~5 day plan. Mr. Burrell: Gentlemen, one other provision to the proposed order on the west s~de fields is also concerned with yours and I should call your attention to -36- it and that's the reportment requirement. In the event there is any flaring of operational necessity during the month, any at all for operational necessities distinguished from emergencies, would require be reported within a month after the end of the month in which it happened, especially by location of the flare. Was it onshore or on the platform and why, the location and nature of the opera- tional necessity and number of days or hours duration. Pardon me? Quarterly. Mr. Gi les: Good, much better. Mr. Gilbreth: The volume would still have to be reported monthly on your review report, but the explanation would just come once a quarter. Mr. Giles: That's much better. Mr. Burrell: i've haven't seen the last draft, obviously. Mr. Bates: We'l;i, you know we're at a little bit of a handicap, because you've looked at it 37 times, and we have not yet seen it. Mr. Gilbreth: Will you would see no objection to that type of a inclusion~. Mr. ? : No. Mr. Gilbreth: That's all the questions I have. Mr. Marsahll: I have one. question of Mr. McMahon - Tom Marshall speaking The turnaround time that your talking about Something in the nature of how many days ? Mr. McMahln: Usually a month Mr. Marshall: Usually 30 days. Is most of this time taken up in the inspec- tion or is it taken up in securing replacement of parts or services, i'm just thinking that the chemical process industry in Alaska is very very new and I would just thinking of the mechanical problem of the time involved in securing the replacement parts that your inspection indicate do need replacement, could be considerable for some of the parts you're talking about. I suppose they don't lend -37- themselves readily to come up on an airline, could you just give a little light on that please sir. Mr. McMahon: Our turnaround is usually very thoroughly planned operation and we have all of the parts on hand that we can possibly preconceive that we would need. We can get into the condition when we encounter the unanticipated, where a piece of machinery has a metallurgical failure that we're not prepared for and we haven't gotten the spares in. In this one, in the, that we just completed in June and July, we really didn't encounter any of the long term deliveries that delayed the start-up, but it is not inconce~i~val~t.e that it could happen. The one that I mentioned when I was speaking earlier where we had been down for 8 weeks, we did encounter just such a thing, where we found a hydrogen enbrittlement of the very thick forging. We had to remove one and get a new part forged and charter a airplane to get it up here and that kind of thing. That took us eight weeks. That could happen, it could happen next year, we'd tried to ferret them all out, but because of the complexity of the system, the fact we're cutting a tight rope along metalurgical and machinery new horizons, I'd say, we cannot always foresee that that kind of thing may not happen. Mr. Marshall: Thank you. Mr. Burrel~: I believe that one of you testified that you attempted to schedule your platform turnaround, compressors or whatever it may be, with the Collier turnaround. . Giles: We both testified to that point s~r. Mr. Burrell: That of course would be to your advantage with a 15 day order limit, wouldn.'.t it? Mr. ? : No, not necessarily. Mr. Gilbreth: Mr. McMahon, how far in advance do you schedule these -38- turnarounds and do you notify the operator, how much notice do you give the operator? Mr. McMahon: We try to schedule them a year in advance. We're saying right now we're scheduling our turnaround for next year and the first week- end after Labor Day and that we would foresee a four week outage at that time. Mr. G ilbreth: I see. Mr. McMahon: And our communication with the operators, we're dealing exclusively with Union Oil Company and they in turn with the operator and we give them as much notice as we can. Mr. Gilbreth: And do the operators have all the notice they need to try to do any of their own schedu~ing to coincide with the plant turnaround. Mr. Giles: Oh yes if they do what they ~ust said, why it would be fine. I exp'ect they will. Mr. Gilbreth: Well, is that, is it woffking in practice? Mr. McMahon: We must do this, obviously because of our own need to get materials if we're looking at a compressor or some complex part like that sometimes we need I0 months leave time for the manufacturer to deliver them. Mr. Gilbreth: Well, the reason I asked is the Conservation Committee be- came aware of this Friday before you were scheduled for turnaround on Monday of this year and there is an obvious violation or~:would have been if it had not have emergency because no flaring could be permitted under the exist- ing order and I just wondered if the operators were getting this kind of notice or some other way. Mr.iBurrell: Let~'.~me ask Mr. Giles and Mr. Bates a question. Can the gas from Middle Ground Shoal or Granite Point or both, casi@ghead gas can it be used in the Swanson River'.~"Field for pressure ization, in the event that the -39- Collier Plant is not available for this fuel source or as the supplier, or as the market. Mr. Giles: No. Not without a great deal of expense coult it be done, no. Mr. Burrell: In other wor~ls what is wrong with it? Is it too heavy? Mro Giles: No, it's crude oil pressure and we've already testified at previous hearings on the gas flare situation several times over that, probably will not ever receive a pay out of the investment put into this system al- ready and to compound that with added investment to accomplish something else would just compound our situation in reverse effect~ a negatiYe effect. Mr. Burre~l~ I just wanted to hear it. Does anybody in the audience have any questions of any of the witnesses or the Committee or anybody? Any- body like to make a statement? We'l~ adjourn then. Thank you. -40- 0 13. 0 ' 5 AMOCO EXHIBIT NO., I000 ' I ..... ;' ';;'-';';; ''' ..... " ;'';;'' ~;;' ' t '; -'; ...... ~ ............ I ................. -: ': ' - : -' .... ~"~:~': :':-- ]' ": " '~ .......... : : ;' : ' I :;; ........ : ..... ~'' ~ .............. ~' .' '~t. '~' .~:., .......... . _ '1' ' , .... , ; -' '~ ' ; ' ' , ; ~ ; , ' ; ' ' : , ' ' i ' · .I.. I ! ......... : ............ ,:- f...~ :~;;~,:-':...~ ....... ~_:...:.~_~.:~?~I;~!;;;:. -~;~-~.WELL SHUT-IN WHILE ;, ' ..".- .,, :..~ ~ ,11:~ ~-~Z~L_ COMPRESSOR DOWN IN ~-~ ...... : ......... :"':.7';~-~k~'~u~'~'''r ~':~,r-~f;---v:-~-7'-="?'~'' ::'-'--4 ...... ~':_;:~_:_ :~;:;~_~-~1971 ANB IT HAS NEVER:"; ............. : ,,- ~:: ,r~':,~cr,':" . ~ ;~: .. r,F~ i-~BEEN RESTORED TO ..... :-~-~g .... z~' ~ ........... I - '~ ' ~ ' ' : : t . · . ~ ....... ~ ~.~ .... ~ . ~ .... : ............ : - -~ · ' - [:-- . : : : : ' : r --; ............ i: I~- : ........ ~ ..... i~: .......... K ' ' , ' , ! ' ~ ' ........................ 4~ ' .............. * I* .... ~ ........................ ~ .............. ~ ................. "' ~ ~ .... ~ ~ ~ ..... ?' ' ..... ' 4 ~ , ...... . ...... i .......... ~ ~ ~_ .~ u _ ................. ...... ..... , ..... , ....... __ ,. . , :,. :.. . _ ........ [ ........... · w' . .~... ; _~ ~ ~. ~ ._ ...... ~ · . _~.~ ...... ;~ ............. : ....... H .... , :- · [ .... ; ...... ~ ~ --~ .... ~ ' --~-~ ---r .-~- --; ~-~-,- .......................... :~' ~ · ~ · - . ~ : ; - ' . - · , L~.' ~ .~. ~ .... ~ .... : .... ~ ...... ,- -: .... ~ ........ :~ · ~'=~--:-~:': .... ::':"= '~ ;' · -~:::~"~. ; ~'~ f':~'-::-¢m~:~x~ ;~=:? 2~ := ~ '.;~- !_:~-~i_?. ~ _:~==.:- :. ~ . ~- ,- '- ' ~--, ~-~-, ~ - · F :~-: :-~:~ ;:;-~: :-'.': '-. ;-~:-~-~ ~- ~' T' '~;'._;. ;;-;'___.~ _' ' :-~:": -' ...... - .... ' ............ ~'~ '-~r:-,~ ~ "=~r"~ .... =-:'"' '~ ''-~ .... !966 ~967 968 I !969 1970 I00 ~ I1'1 r O:Z ::~ · AMOCO EXHIBIT NO.i~j~ I0,000 C. O. /0 ff-t~ ~1000 0 Z Z o · · ,-~ 0 I0,000 I000---- 1969_ 1970 19'7[I 197A. AMOCO EXHIBIT NO. *-'WELL SHUT-IN :50 DAYS IN AUGUST, 1972 --DURING PIPELINE FAILURE AND · SUBSEQUENT -'_ * - · I REPAIR. ! I : : ! - - I_ i $50,000 ACID ,JOB REQUIRED~ TO RESTORE PRODUCTIVITY ! I . : I i · I ,. 19~_5 197..7_ 1976 197_3 ,100 I-- po 0 Z Z '0 -I · 0 "fl rtl Amoco's Exhibit No. Loss to Chak Group, if Forced to Eliminate Gas Flare During Collier Plant Turnaround, in Pinched Back Oil Production* Pinched Value of Discounted# Value Back Pinched of Pinched Back BOPD Back Oil Oil MGS 342 $ 43,450 $ 15,210 So. MGS 926 $117,650 $ 41,190 Granite Point 2304 $282,240 $ 98,810 * Based on June, 1973 production rates, GOR's and gas sales volumes. # Oil production* deferred for 20 years discounted at 10%. VS. Savings in Gas Flared During_ C°llier Plant Turnaround MGS So. MGS Granite pOint Pinched Back Value of MCFD Gas Saved 445 $1,095 450 $1,105 3200 $7,825 SITUATIONS REQUIRING FLARING DUE TO OPERATIONAL NECESSITY Amoco/ Exhibit No. 1 ' 70S-- Location ANNA Situation Solar Turbine- Compressor Drive Engine 2000-hour inspection 4000-hour inspection 8000-hour inspection 16,000-hour overhaul Solar Compressor Overhaul Dehydration Unit Pressure vessel inspec- tion and relief valve testing Pipeline Safety Shut-in Valves Testing Production Vessels Inspection of 2 and 3- phase separators, com- pressor suction scrubber and fuel gas scrubber Inspection of~flare gas and tank vent gas blow cases Main Power Panel Maintenance and inspection Length of Downtime 12 hours 24 hours 24 hours 3 days 4 days 12 hours 12 hours 2.4 hours 24 hours 4 hours Frequency of Occurence 84 days 168 days every year every 2 years every 2-1/2 yrs. every 2 .years every year every 2 years every 5 years every year Estimated Gas Flared Each Situation MCF 2100 4200 4200 12,600 16 , 80 0 2100 2'100 4200 4200 700 BRUCE Solar Turbine- Compressor Drive Engine 2000-hour inspection 4000-hour inspection 8000-hour inspection 16,000-hour overhaul 12 hours 24' hours 24 hours 3 days 84 days 16'8 days every year every 2 years 1548 309 6 3096 92'88 CP. lOS' ,. F_ Situations Requiring Flaring Due to Operational Necessity Page 2 Location Situation BRUCE (continued) Solar Compressor Overhaul Dehydration Unit Pressure vessel inspec- tion and relief valve tes ting Pipeline Safety Shut-in Valve Testing Production Vessels Inspection of 2 and 3- phase separators, com- pressor suction scrubber and fuel gas scrubber Inspection of flare gas and tank vent gas blow cas es Main Power Panel Maintenance and inspectiOn BAKER Worthington Compressor' 1000-hour inspection Semi-annual inspection AnnuaI inspection Bi-annual inspection Dehydration Unit Pressure vessel inspec- t'ion and relief valve testing Pipeline Safety Shut-in Valves Testing Production Vessels InspectiOn of 2 and 3- phase separators, com- pressor .suction scrubber and fuel gas scrubber InsPection of flare gas and tank vent gas blow cases Length of Downtime 4 days 12 hours 12 hours 24 hours 24 hours 4 hours 3 hOurs 24 hours 4 days 10 days 12 hours 12 hours 24 hours 24 hours Amoco Exhibit NO. 1 Frequency of Occurence every 2-1/2 yrs. Estimated G.~s Flared EaCh Situation MCF 12,384 every 2 years 1548 every year 1548 every 2 years 309'6 every 5 years 3096 every year 516 45 days every 6 months every year every 2 years 55 439 175 7 4392 every 2 years 218 every year 972 .every 2 years 1944 every 5 years 1944 Situations Requiring Flaring Due to Operational Necessity Page 3 Location Situation BAKER Main Power Panel (continued) Maintenance and inspection Length of Down time 4 hours Amoco Exhibit No. i .6.0, ~o~-C, Frequency of Occurence Es timated Gas Flared Each Situation MCF every year 324 DILLON Gardner-Denver Compressor' Semi-annual inspection Annual inspection 300 HP Electric Motor- Compressor Driver Overhaul Dehydration Unit Pressure vessel inspec- tion and relief valve testing Pipeline Safety Shut-in Valves Testing Production Vessels Inspection of 2 and 3- phase separators, com- pressor suction scrubber and fuel gas scrubber Inspection of flare gas and tank vent gas blow c as es Main Power Panel Maintenance and inspection 6 hours 12 hours 4 days 12. hours 12'hours 24 hours 12 hours 4 hours every 6 months every year every 3 years every 2 years every year every 2 years every 5 years every year 558 1116 8928 1116 .1116 2232 1116 372 EAST FORELAND FACILITY Gas Scrubbers Inspection of scrubbers and condensate flash tanks and testing of relief valves - MGS System Granite Point System 12 hours 12 hours every 2 years every 2 years 2088 3648' C.O, /o~ - c UNION OIL COMPANy~ COLLIER CHEMICAL PLANT COM. PRESSOR PACKAGE. CENTRIFUGAL CENTRIFUGAL COMP~F-,~SO~. PACKAGE. COMPRF-SSOI~ PACKAGE COMPI~ESSOR PACKAGE ,,~ lv[O C..O Gi~OU P 1 SA,G G~DUP I j SAS GI~OUP AMOCO GI~OUP & MIL~ DUAL 8" PIP~LINES J J DUAL B" ~ .I I,~ ~j j~ . SALES ~ETER ONSHORE FACILITY (.o. Io~-c_ EXHIBIT I RELEASED ONLY FOR: J , ~ BIDDINO ~,a,~ , CO~TR UCl'ION ' SHELL OIL COMPANY PACIFIC COA~' AllrrA ALASKA Dl~SlOfl ...... io,,.,,.~.to,.,t,:-i~:,~, {-- APPROVED: OATIE NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee Conservation File No. 105-C Re: Middle Ground Shoal Oil Field Amoco Production Company and Shell Oil Company, Operators Notice is hereby given that an application was received from Amoco Production Company on August !, 1973, and Shell Oil Company on July 31, 1973, applying for an order amending Conservation Order No. 105 to al Iow by administrative approval a maximum of 60 days of gas flaring or venting due to operational necessity downtime. A hearing on this matter will be held in the City Council Chambers at the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska at 9:30 A.M. on September Ii, 1973, at which time the operator and affected and interested parties will be heard. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Publish August 16, 1973 STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT, ) ss. ~a.rT...L...Shake ..................... being first duly sworn on oath deposes and says that.~t9. ....... 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 . . . J~ ~J ~.~ J~ . . ~ I~ .~ ~J~ as it was published in regular issues (and not in supplemental form) of said newspaper for. a 8062 period of .... ode ...... insertions, 16 commencing on the ............ day of ~.~-~..~..~.~. ........... ,19 ...~, and ending on the .... -16 .......... day of of 1~--~.- .... ' both dates inclusive, and that such newspaper was regularly distributed to its subscribers dur- ing all of sa.id period. That the full amount of the fee charged for the foregoing publication is the sum of $ 10.00 which amount has been paid in full at the rate of 25¢ per line; Mini- mum charge $7.50. Subscribed. a~d sworn to before me this '"t'6 day of...Atlg~5~t.., .... ......... ............ :,,, .- Notary Public in and for the State of Alaska, Third Division, Anchorage, Alaska /~,~ COMMISSION EXPIRES ..... ........ :./...., ,': ~,.~1~, ,, , .. ,' . ~ ,' ,i~.~,.,..~:i ,.,.'~ ~.~ ~, ~ ~,~ .,' .. ,. , . ~ .. ;':~ocQ"Predu~i~n ~any end .". '~..~J,~.jll, 0iL'~any, 0~erators : ~.~]~;., ....... . '. ' ~1{~:~':' wa~ received' from, Amice .,' ":~,i~f;.[:..'. "..".-.' ..... ' .. f:. :.~'.?~i~g.-:en:'tM=' matter wlll :~eld/~i~,':th~; City'.Council Chambers at e~a.. Z~.J:: ~uss~. ~ibra~,' ~h Avenue and;:~ ~re~t,.- Anchs~age, · Alaska w~i~:..ftme..the eperatee afld affected' · ~g:,ihl~e~t~d.. ~e~fl~'..will,bi hear~, '. ..' .h,'Z'.,¥- '- ~ .... ' "~"'""".~mae.~,. ~er~afl, ~ ' ': · '~',?:.~laska: Oil:and~ Gas >...,';, .>~1- Porcupine DHve · ' Amoco Production Company Security Life Building Denver, Colorado 80202 August 1, 1973' File: VDP-34'8-986. 511 Mr. HOmer L. Burrell (4). Alaska Oil and Gas COnserVation Committee Division of Oil and Gas BOOT PorcuPine Drive A .. Anchorage., Alaska 99504' Dear Mr. Burrell: Subject: Application for Amendment of Alaska ConserVation Order 105',. Middle GroUnd ShOal Field Amoco, Operator in the' subject field, on behalf of the' Chakachatna Gr'oup respectfully' reqUests that the' Alaska Oil and. Gas ConserVation Cornmittee'hold a public hearing . for the' Purpose of 'amending State of Alaska Conservation Order N°. 105' to allow the' flaring or venting during operational necessity downtime by administrative permission. Operating. experience has shoTM that necessary maintenance situations can result in eqUiPment downtime With the' resUltant .gas flaring .exCeeding the' 96 hours' maximum allowed bY COnservation Order N°. 105'.~ C°nseqUently, we request that the' COmmittee, as a resUlt of the' herein reqUested hearing,, grant an operator bY administrative action without .a'. hearing a maximum of 6.0 days within which' it may flare or vent .gas beCaUse of any operational neceSSity; Such'. reqUested future flaring would be' separate and. apart from the' 'amount neceSSary for adeqUate safetY flares and be' separate and apart from the' 'mount required in 'emergency situations. We Suggest that thiS application be'. heard the' Same day that Sh'elI's application for the' Same Purpose at MGS and our application for the' Same purpose in Granite Point Field, are Set for hearing,, for the' convenience Yours veryjtrul,y~ ~.. 'of all parties. ANCHC)RAGF! File:' VDP-438~986. 511 August 1, 1973. ' Page 2 CC: Mr. K.'W. L aGrone Shell Oil Company 430 7th .Avenue Anchorage, Alaska 99501~ Mr. H 'A. Slack Atlantic Ri chfield COmp any P. O. Box 36D Anchorage, Alaska 99501 Mr, F. L ~Franz ' Skelly Oil Company 1088.Lincoln TOwer Building . Denver, COlorado 8020B" Mr. J. P Denny. Phillips Petroleum Comp any 1300 SecUrity .Life Building Denver'., COlorado 802'02" Mr. J..W. Walker Standard Oil Company of California P. O. Box 7-839' Anchorage., .Alaska. 99501" Mr. W. M. Jones Arno co ProductiOn COmp any P.'. O. Box 779'~ ' Anchorage., Alaska 99501' Mr. H O. HiCkman. Amo co ProductiOn Comp any Se curity 'Life Building . DenVer, Colorado 802'02 Mr. Ralph G. Crews First National Building . 42'5:. "G" Street AnchOrage, 'Alaska 99501' SHELL OIL COMPANY 430 7th AVENUE ANCHORAGE, ALASKA 99501 July 31, 1973 Mr. Homer L. Burrell Alaska Oil and Gas Conservation Committee Division of Oil and Gas 3001 Porcupine Drive ~.~p//c.~ Anchorage, Alaska 99504 /oi -c_. Subject: Alaska Conservation Order No. 105 Middle Ground Shoa 1 Fie id Dear Mr. Burrell: Shell Oil Company, an operator in the subject field, hereby requests on behalf of itself and the Companies shown below, that the Alaska Oil and Gas Conservation Committee hold a public hearing for the purpose of amending State of Alaska Conservation Order No. 105 to allow gas flaring or venting during operational necessity downtime by adminis- trative permission. We suggest that this hearing be held on September 1973. ~--~<j...,~ ~ ~ 'l 73 Recent operating experience has shown that necessary maintenance situations can result in equipment downtime with resultant gas flaring exceeding the 96 hours maximum allowed by Conservation Order No. 105. Therefore~ we request that the Committee be allowed by administrative action without hearing to grant an operator a maximum of 60 days within which it may flare or vent gas because of any operational necessity. Ail working interest owners in the leases subject to Conserva- tion Order No. 105 have authorized us to make this request and to proceed as indicated herein. KWL: rp Yours very truly, K. W. LaGrone Division Superintendent West Coast Division STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AH~ GAS Alaska Oil and Gas Conservation Committee Re: Emergency Order July 5, 1973 Conservation Order File 105 Middle Ground Shoal Oil Field Because of a fire and explosion at the Collier Carbon and Chemical Corporation plant, Amoco Production Company and Shell Oil Company applied for the referenced order by letter dated July 5, 1973 requesting the emer- gency flaring of excess casinghead gas equal in volume to that which would normally be delivered to the Collier plant. The gas will be flared at the joint Amoco - Shell facilities on the east shore of Cook Inlet. All such excess gas originates from the Middle Ground Oil field. Pursuant to Alaska Administrative Code Section 2012 Permission is hereby granted to flare excess casinghead gas in an amount equal to the normal sales volume to the Collier Chemical Company until 7 AM A.D.S.T. July 21., 1973 or until normal gas sales are resumed to Collier Chemical Company if this occurs at an earlier date. Thomas R. Marshall, ,Ir. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 July 5, 1973 File: WMJ-369-986.511 Mr. Homer L. Burrell, Director Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Sir: Re: Emergency Flaring of Excess Gas I I ..... .... ......... 1 ....... J. DRAFT J SEC CONFER: FILE: We have confirmed with Collier Carbon and Chemical Corporation that their Kenai plant is shut down as a result of a fire and explosion of undisclosed nature. Repairs are underway and a plant turnaround is in progress in con- junction with the accident. Collier anticipates having the plant in opera- tion July 14, 1973. Repairs to the equipment involved in the explosion will not be finalized until that date at the earliest according to Collier's rep- resentative. In accordance with Alaska Oil and Gas Conservation Regulations, Section 2012,. 1969,~ Amoco Production Company and Shell Oil Company respectfully request that the Alaska Oil and Gas Conservation Committee issue an emergency order for 15 days to allow the flaring of the excess gas at the joint Amoco and Shell shore facilities in a quantity equal to that which would have normally been delivered to the Collier plant as sales gas. ShoUld this emergency situation be corrected and normal gas sales to Collier resumed prior to ex- piration of the' emergency order, we will notify you immediately. Yours very truly, . Schillereff Supervisor in Charge Amoco Production Company K. W. Lagrone Division Superintendent Shell Oil Company JUL 5 1973 DIVISION wp OIL AND GAS ANCHORAGE PROCEEDI HGS Mr. Burrell= Good morning gentlemen. This is a hearing of the Alaska Oil and Gas Conservation Committee. Subject is the Middle Ground Shoal Field Platform A, which is operated by Shell Oil Corporation and it relates to Middle Ground Shoal A, B, C, D, E, F, and G oil pools. The Notice of Public Hearfng on this subject was published June 9, 1973 in the Anchorage Daily News. The subject is the flaring of excess casinghead gas resulting from a major equipment failure in the gas system on Platform A in Middle Ground Field. The issue before the Committee is whether or not this situation is such as to warrant un-restricted production of oil and flaring of the excess gas. We'd like to hear the testimony from the applicants on this subject. My name is Homer Burrell, I am Chairman of the Committee. To my right is O, K. Gilbreth, Jr., Chief Petroleum Engineer and member of the Oil and Gas Conservation Committee, to my left, Mr. Thomas ~.~ ~shall, Jr., Chief Petroleum Geologist, of the Division of Oil and Gas and member of the Alaska Oil and Gas Conservation 'Committee. Is the applicant ready to put on the testimony? ~Ie will request that any witnesses if they have not previously been qualified as experts so' te.stify and that they be sworn. Mr, Marshall will swear them. Mr. Joe Rudd: And if I may say a few words, by way of introduction we'll Mr. Burrell; Alright, let the record show that Mr. Joe Ruddis add- ressing us. Mr. Joe Rudd: We will present two witnesses, one Mr. R. D. Bates, of Shell Oil Company, who will review the history of production at Middle Ground Shoal since the compressor was instal led, the difficulties in general terms that has been experienced with the compressor and go into some of the reservoir and economic considerations that are envolved in the request that Shell has made. Second, we would have Mr. Tom P~.i':c.h~j~.~o$' ~estt~y who is a representative of the manufacturer and then of the compressor unit which is l'n question here. Mr. Burrell: Excuse me, Mr. Rudd, would you identify both, would you both spell Mr. Psichogios name and identify the men doing it. I can neither. Mr. Rudd: Yes, Mr. Psichogios if I'm correct, he can correct me tf I'm wrong is Psi Mr. Burrell: Ts!? T Mr. Ri~ld":: '.' Ps i Mr, Burrel I: Psi Mr. Rudd: Psichogios. Mr. Burrell: Okay. Mr. Psichog?16s: That correct, that's pronounced Pslchogios. Mr. Burrell: Thank you sir. And who does Mr. Psichogios represent, for the record. Mr, Rudd: Solar Mr. Burrell: Solar , Mr. Psichogios: Solar Division International Harvester. Mr, Burrell: Solar Division of International Harvester. Thank you. -2- Mr. Rudd: With that I'd ask Mr. Bates to take the stand and be sworn and qualified as a witness. Mr. Burrell: Thank you Mr. Rudd. Mr~ Bates: My name is, my name is R. D. Bates. I'm a graduate of the University of Arizona with a Bachelor's degree in Mining Engineering. I've been employed with Shell Oil the last 13 years with assignments in Mexico, Louisiana, California and Alaska. I have had two assignments concerning Alaska. First in 1966 through 1968, when I resided in Anchorage, the second which is my current assignment, starting in May of 1972. I am currently the Dlvislon Mechanical Engineer~ West Coast Division. My responsibilities cover surface equipment and systems in the states of California and Alaska. Mr. ~i Ibreth: Mr. Bates, are you registered? Mr. Bates: No sir I am not. Mr. Burrell: Are you registered in any state? Mr, Bates: No sir. Mr. Burrell: Without objection, his educational qualifications are acceptable as an expert witness and I'll ask Mr. Marshall to swear him in. ]~r, Marshall: Would you please stand and raise your right hand. In the matter now at hearing do you swear to tell the truth, the whole truth and nothing but the truth so help you C~od? Mr. Bates: I do. Mr. ~arshall: Please be seated then. Mr, Burrell: Please proceed with the testimony in this case. Mr. Bates: Thank you. As Shell's and the SAS group's representative -3- at this hearing, I plan to review our selection of equipment which was made in 1971 to meet the requirement set forth in the State Conservation Order 105, and our operating experience with this equipment to date. I'll also review our current equipment break-down situation and our alternative methods of operating or producing Middle Ground Shoal Platform A. I will present both the advantages and disadvantages of alternate methods of operating and I will ask Mr. Tom Psichogios a representative from Solar, to present a technical dissertation on the equipment, the nature of the equip- ment, and the nature of our failure. Mr. Marshall: Pardon me just a minute, I noticed that that mike is a little funny. Are we coming through okay? MI~ Bates: Shell specified a complete gas processing package being, con- sisting of a turbine driven compressor for sales and dehydration package in later' 1971 to ship gas to the beach., to our sales pg. int. This equipment was specified to be capable of shipping four million cubic feet a day of gas at , ~ , .300 psi platform discharge. This discharge was required to meet our sales conditions on the beach,,whlch are 175 psi, A solar saturn I100 horse-power turbine driving a York 24,000 rpm compressor, was Selected for each platform. The MGS platform A compressor has a 350 psi discharge pressure capability. It can handle up to six mill ion cubic feet per day 0~ gas. This package provides sufficient pressure to allow complete dehydration, complete being defined as within specificiations of the gas and shipping of the gas to shore. You will note that it also has excess capacity which al lows it to take surges In the gas system and continue to ship the maximum volumes of gas. Such , surges would occur say when a gas lift compressor is taken off the line on the platform or when minor upset occurs on the platform and you go into some type of surging condition. -4- We selected rotating equipment because of its light weight; the nature of rotating equipment with tow orders of magnitude vibrations; and the way that these fit are limitations in our requirements in offshore environments. Our Middle Ground Shore Platforms are very tight on space. We're required to cantilever this equipment on the side of the platform so the light weight became very important] We also favored the this kind equipment because of the Iow order of magnitude of vibrations and therefore the Iow vibrations trans- mitted into our structures and our decks. Overall we have found that operating costs and equipment availability with rotating equipment generally exceed that of reciprocating equipment, which also weighed into our consideration. Now we feel that these criteria are impor- tant i'n off-shore environment and we also selected the high speed equipment because of the necessity to meet our discharge requirements and meet the market wi'th the gas at the market pressure, ;, t'd Dike to present a brief operating history of the unit, again, !'1I refer portions of the in-depth technical testimony to Mr. Psichoglos. I will hlehlight the nature of the break-down and the nature of our operating problems. This compressor on A, bas operated generally compressing about four million cubic feet a day of gas. We have generally been selling about 2.75 million cubic feet of gas. You will notice that we're over-compressing our gas volumes. This over-compression volume is put back into the suction system, the gas suction system on the platform and provides ~table suction conditions for all gas using equipment on the platform. l'd like to present my first exhibit, Exhibit I, which provides an oper- ating history of this piece of equipment on Platform A. -5- Mr. Burrell: Excuse me, Mr. Rudd, are there tacks there you can use to hold it steady? Hr . Yes, Mr,Burrell: Okay. Mr, B~..: The total availability for the - can you hear what I say? Mr. Burrell: That's what I'm trying to declde right now, we can't hear you Mr. Gl lbreth; Talk louder. Mr. ~. The total availability Mr. Burrell: Talk loudly, please sir. Mr, '" The total availability of the unit on Platform A, this is the ,, total package consists of compression equipment and dehydration equipment. From January I to May 26, when we had our major fallure, it was 88%. During the period since the start-up, we had eight major shut-downs, all of which, most of which you will note, are related to the gas compressor seal replace- ment. This was a type of failure which we find does occur quite often on equipment and as we had excessive seal leakage, not complete fai lures .but leakage, we would shut the unit down and replace the leaking seal. Now this is primarily an effort to provide adequate lubrication of the equipment and conserve the lube oil, In constrast, Platform C has had 96.5% availability of the tota~ package~ with a twin unit. All the equipment on both platforms ls the same. In late April., in this period, we begin to recognize that the compres- su~e drive~shaft was experiencing excessive vibrations, expecially while rotating at high speeds. A thorough analytical study of the unit was re- quested of Solar in Pate April and following this request a study was started. -6- This study showed that by reducing the ~learance between the output bearings and the compressor's gear boxes, the gear box not attached to the compressor, but by shaft, the gear box between the turbine and the compressor, that this vibration in the shaft could be reduced. This apparently did reduce an inherent critical type of speed in the equipment to acceptable levels. On May 25, the unit was shut down, the bearing was installed and on May 26 the unit was started up. After we ran the unit to 90% of ~t~-~-~d we decided that we should let it run at warm up period to bring everything into a steady condition and lube oil to the proper temperatures and this type of thing. We left the unit unattended for about a twenty minute period, these units normally operate unattended, and during this period we had our failure, during this warm-up period. The brief description ot the failure would be that the rotor assembly and c~mpressor apparently caused some vibration and the shaft connecting the gear box and the compressor was bent at about a 45 degree angle. The seal on the' in-board end or the end near the turbine seuzed on the shaft and the coupling between the shafts on the gear box and the shaft on the compressor fai"ted, That is not necessarily the sequence,of the failure, but those ere the failed t'tems; Visual inspection of th~s equipment has shown that th~s is the major extent of the failure and repairs are now being made to make the equipment like new. These repairs are under way. We are currently estimating that the repairs will take on the order to two to three weeks. The equipment' is at the manufacturer's plant in York, Pennsylvania. Mr. Gllbreth: Excuse me, is that two or three weeks from now? Mr, Bass: Yes sir, On June 13 and 14, a controlled performance test -7- was conducted on the twin Platform C Unit, to determlne the operating charact- eristics and to assist and to define the problems on the Platform A Unit. These same tests were conducted on competltor's units in Cai ifornla prior to conducting the tests on our platform. The tests, the units in California were s/mi'liar to our units. I will not necessarily call them twins, but they are very siml lat. The evaluation of the data on Platform C is still progressing, however, we do know that the Platform C Unit operates satisfactorily in the required ranges requi'red to ship excess gas to the beach. I'll ask Solar's repre- sentative to thoroughly describe the fal lure, the tests to date and the re- sults that we have seen. The test indicated that the vibrator, the compres- sor vibrates at a second critical speed and that this vibration is probably magnified by the gear box. This is a type of vibration that is very hard to define, it's very hard to analyze and this is the type of thing that leads to the amount of time to analyze the data. We feel now that the compressor being rebuilt with very close tolerance and very close balancing of the equip- ment wi'Il provide satisfactory operating conditions in the range that we must shi'p gas, Concurrent with this Solar with their sub-contractors is embarking on a complete re-design of the compressor gearbox package. Our intent will be to re-build the compressor, re-install it and have available the design or redesign for additional equipment should this type of thing occur In the future. We at this time will not change the compressors on A and C to the new design unitl we can analyze thoroughly and know what the design would be. Currently we have two viable gas handling methods available on Platform A, while the compressor is shut-down. The first of these is to conduct, con- ttnue to conduct production on Platform A in total and flare the excsss gas. The second of these is to reduce or eliminate the flare probably by utilizing a portion of our gas lift capacity on the platform and then be able to ship 2.75 mill Ion cubic feet per day of gas with this equipment. This will result in a production curtailment or loss during this period. Mr. Burrell: Excuse me, Mr. Bates, it's 2.75 mill ion cubic feet per day of casinghead gas is produced with the oil at your normal production rate? Mr. Bates: Yes, that sir, that ls the volume of gas which ls available for sales after emergency flare volume and after our own consumption on the platform. Mr, Burrell: And I think the emergency flare on that platform is three quarters of a roll lion Mr. Bates: Yes, we're allowed .75 m~llion a day. Mr, Burrell: That's 2.75 plus .?5 is the amount of casinghead gas thats produced at the normal rates, in other words Mr. Bates: That is produced and available for use other than own fuel on the p~atfrom. Mr, Burrell: Then on .... other than platform fuel. Mr, Bates= Yes sir. Mr. Burrell: This is roughly 3.5 million cubic feet per day of gas pro- duced from the we l Is~ Mr. Bates: That's correct. The total platform production of gas is aboUt five milllon a day. Mr. Burrell= Of which roughly !.5 mill ion is used as fuel. Mr. Bates: Yes sir. I have another exhibit which ! will - - Mr. Burrell: I wasn't trylng to get ahead of you, I was trying to get It sorted out. -9- Mr. Bates: I will go through these very quickly, this ! hope will help keep in focus with where the numbers belong. Monthly oil production 32 degree APl gravity, 9,700 barrels per day. These are all I00 % figures and not Shell's one-third fugures. Mr. Burrell: Sir would you identify this exhibit for the record. Mr, Bates: This is an exhibit which provides the premises Mr. Burrelt: Is this Shell's exhibit two? Mr,' Bates: Yes sir. Mr, Burrell: Thank you Hr. Rudd: We'll mark them Mr. Burrell when we move to Mr, Burrell: Thank you Mr. Rudd, it wi II be marked Exhibit two, Mr. Bates: Our total platform gas production is f~ve million cubic feet per day of which we burn the 1.5 mill ion as fuel in the equipment. We have a gas lift capacity on this pla:fform at ~100 psig of 12.5 million cubic feet l~er day, This is gas that is rotated on the platform for artificial lift. Our safety flare is .75 mill ion, our sales gas compressor maximum capacity is six mi'Ilion a day. The average gas volume shipped to the beach has been running at 2.75 mill ion. A value of the oil comes close to $3.30 a barrel. The value of the sale gas Is 7¢ per mcr atleast. ~/e're using the standard oil factor of ~2.5% for royalty on the production. As ~ mentioned the second option al lows us to ship gas to the beach and take a curtailment ~n production which we have calculated to be 1,200 barrels per day of oil, This oil could be considered as either deferred or curtal led to a iater time in the project life or might possibly be lost oil or there may be some proportional ratio between deferred and lost over the project and platform life. Our option, our preference would be to take an option, even if we must invest additional capital to maintain production at the highest possible rate. Gas lift piping modifications to make possible ship- ing gas to the beach and thus reduce the flare volume has some inefficiences such as the fact that we must compress the gas to Il00 psi and then reduce the pressure back to the 250 psi platform discharge pressure. We must also recycle a portion of this gas back in to the gas susction system on the plat- form. As I mentioned earlier currently our gas sales compressor recycles gas back to the platform suction system to provide the stable suction conditions. In the past the flare would be allowed to vary back and forth in cycle to take up the surges, and changes in conditions. in addition to the re-piping and work we would also require significant methanol injection or simitar material to prevent freezing as we take the pressure drop from I~00 back down to 250 pounds. The significant oil produc- tion decrease results because of available high pressure gas lift gas used for lifting production would be reduced. We've accumulated data from pre- vious gas ~ift compressor down time. This data indicates that production will be recovered only toward the end of the field life, estimated to occur in the range of 1990 to 1992, if ever. The possibilty of that this lost production , will never be recovered exists since we are not certain that the remaining platform life wll~ exist beyond its design of 20 to 25 years. This platform should be considered installed I believe i'n 1965. Our project life limit then is matching the project with platform life. I will have to admit and say that we do not know the exact reservoir characteristics and that's why I will quite often qualify the difference between lost or deferred oil. Our estimated cost to install these revisions in the piping are about $10,000 to provide pressure reduction and control equipment and this would take approx- imately two weeks for installation. In case I, with maximum oil production until the compressor is repaired, we are looking at a gross revenue of about $175. a day, that is the revenue from the gas sales, or over a month period $5,250 dollars. In case two, which would be to reduce the flare by 2.5 mill ion a day which i's equivalent to 3.4 billion btu's per day, we would have a result- ant loss in production of 1,200 barrels of oil per day or 6 billion btu's per day. The loss of daily income would be $4,000. and cost of operating for the methanol would be $100. per day, or if a 30 day period this would amount to a loss of revenue of over $120,000. You will note that the BTU content of the oil that I mentioned is slx bill ion BTtJ's per day and this i.s' the loss of 1200 barrels per day. This exceeds the BTU content of the gas which is 3.4 billion BTU's per day. Then this energy would either be deferred or lost ti l~ some later date. Also the State of Alaska stands to lose I/Sth of the $4,000 per day income or $500 per .day. The delay or even loss of production at Middle Ground Shoal ~s possible if we curtail production or shut-in wel Is as I have mentioned. We provided data to dem- onstrate this in our March 4, 1971 hearing using Well C-22-26 to represent an example. This well is still producing at rates below its maximum rate when we said water break through and had to increase gas lift capacity to the well. Of course this is interesting to bring this well back again to show that over a period since 1971 this well which has shown watering out -12- and some damages, it still has not turned back to any original production rate. Our operating experience in this multi-layered field has shown that shut-in or curtal led production general ly takes three months to recover, that is it takes approximately three months for wells that are shut-in or curtailed by some manner to show the return to a stable production rate, general ly at or below It's previous production rate. Generally our data is not totally conclusive, however there is strong evidence to show that some damage and lost production is caused by restricting or shuting-in this production. You may be aware that we recently shut-in five wells on Platform C to al Iow the safe drilling of a well through one of the legs. This shut-in from May 22 to June I resulted in production decrease from these wells from 5,945 barrels per day of oll fo 4,655 barrels per day after re-start of the wells. This is a decrease of 22%. Mr, Burrell: Excuse me, Mr. Bates, over what period of time was that you based your problem, the first ten days, the first'30 days? Mr. Bates: This decrease, the 4,655 barrels per day is what you would call the initial rate for running the'wells back.. To date these wells have ,, recovered l/5th of this 22% decrease in production, t~le have extrapolated the data as near as we can from the start-up on June I and it indlcates again , that about 90 days wlli be required to achieve the production rate that we had prior to the shut-in. '.'M~';' Burrell: Again ~ don't mean to interrupt but your conclusion ~s that in 90 days you'll back to your previous Mr. Bates: Yes~ our conclusion is that in 90 days we'll be back to the production rate that we were prior to shut-down, i%gain I must, often we don't get back entirely to the point, but we also in 90 days achieve a new stable rate, generally which is at or slightly below the previous rate. Another Well 8-32-14 which was shut In December for a pressure build-up test, this well was producing 875 barrels a day oil before it was shut-down. It , has slowly recovered back to about 800 barrels per day of oll now and it is appearing to achieve a stable production rate at this time. This well returned back initially at 400 barrels per day, very rapidly increased to 600 and then has taken the period from the middle of January till now to achieve the 800 barrel per day rate. In summary then, our recommendation is to continue to flare gas while the MGS Platform A sales compressor Is being repaired. We currently anticipate that the unit will be repaired and on the platform and operating In approxl- ma,ely six weeks. This recommendation is based upon continuing production of about I;i~200 barrels per day of oil which might be I°st If cur,ailed or at best production of which wlll be deferred several years. The following facts ,end to support this recommendation. The flaring 'at this time is a result of an emergency equipment breakdown of the sales gas compressor. The energy con- tent of the oil to be produced and quite possibly saved exceeds the ener~v content of the gas to be flared by 2.6 b~llion BTU;s per day. The loss of income of $4,000. per day, of which the State of Alaska would receive $500.. per day, exceeds the benefits in value of the gas to be saved; and fourth . the curatallment or shut, ing-ln of production could damage the oil reservoir and/or the water flood process of supplemental recovery. That will conclude my, presentation. If there are any questions, I would be pleased to answer · them. Mr. Burrell: Thank you Hr. Bates. We'll ask you or Hr. Rudd, would you rather have questions asked now or later? Mr. Bass: Now is fine. Mr. Rudd: I think it might be appropriate to ask question of Mr. Bates now. H r. Bu fi.re I I ':~- 'A.'I :r.'i-g hr," .M r'.~r BateS., ..~.:. Hr. Rudd: Okay, If ! may at this point I'd I lke to move for Introduc- tion of the two exhibits and make them part of the record. Mr. Burrell: AIright will you Mr. Rudd: ! will mark Mr, Burrel I: Were they prepared under the direction of Mr. Bates or his supervision or somethlng. Mr. Bates: They were provided underneath my supervision, by my staff. Mr. Burrell: They were provided by your staff. 'Hr, Bates: By my staff, under my supervislon. Mr. Burrell: They will be labeled as Shell's Exhibit I and 2. Mr. Bates: Yes sir. Mr. Burrell: I would ask one question, Mr. Bates, before I turn it to other people. You mentioned an economic analyses of value of the oi I, the va I ue that you .state, Mr. Bates: Yes sir. Mr, Burrell: Of o11, the other participants in what wellhead value do you use for this. Mr. Bates: I use the $3.30 per barrel. -15- Mr. Burrell: $3.30 per barrel. Is that the value on which the royalty and severance tax is being paid. Mr. Bates: Yes sir, I believe it is. That is posted price. Mr. Burrel I: You said the debt net recovery after the royalty and sever- ance tax? Mr. Bates: I believe it is ! can not say I know it is but I believe it is. Mr. Burrell: It is most interesting if you say it is another factor. Mr, Marshall do you have any questions? Mr. Marshall: I'd just like to ask Mr. Bates, do you happen to have reduced copies of those Exhibits available. Mr. Bates: I have reduced copies of the second exhibit and I can have a reduced copy of the first one. I have the reduced copy, but it is very poor of the first exhibit. Mr. Marshall: We would appreciate these copies for our public avail- ablllty folder. Is Mr. Pslchoglos going to discuss the platform from the compressor problem In more detail, then you have? Mr. Bates: Yes sir, I'woutd intend to have him Present the say technology behind vibrations, some of the design features of high speed rotating equip- ment, Mr. Marshall: I'll defer my question ti II then. Mr. Bates: Okay. Mr. Marshal I: Thank you Mr. Burre ll: Mr. Gilbreth? Mr. Gl Ibreth: Mr. Bates, you mentioned that tests were carried out on -16- some unlts operated by people other than your company in Californi'a, were these tests instituted as a result of the failure that you experienced or were they instituted prior to that? Mr. Bates: I believe that they were if they Mr. Psichogios: That's correct Mr. Bates: They had had a history, as I understand anyway, a history with these two units of trouble with one of the units, nothing comparing to what, comparable to what we have and the other unit which ran very well. When we requested Solar's assistance in analyzing the shaft vibration which we found in April, the first step was to go to these units and analyze the units which are quite similar to ours. ! would say both to prove the system of analysis plus to have three units analyzed against one. Mr. Gilbreth: So far as you're able to determine from your operations here, are the operations.:.'under pressure from your A Platform and C Platform are lncomprabable: Mr. Bates: Yes sir. t.hle¥'re instal led in a simi'lar manner, they're the same type of Condition, they're hand~ing approximately the same volume of gas. The unit on Platform C does operate at slightly lower speed~ its been Operating in the 86 to 88% of rated speed where the Platform A unit has been ,,~ , operating in the 88 to 90 or 91% of rated speed. The prime difference is , because of the difference in gravity of the gas between the two platforms and the density of gas. Mr,. Gllbreth: Insofar as you are concerned then, you have done every- thing possible from your standpoint to minimize the problem. , Mr. Bates: Yes sir, we have. The shaft or seal' leakage problem is one which you would expect to find in equipment of this nature and was not until -17- April that we could really define or start to recognize a vibration pro- blem of some kind, at that time and we approached our supplier to help analyze. Mr. Gl'lbreth: The Exhibit I you presented, did that show all of the down time on your compressor? Mr. Bates: Yes, the numbers at the bottom are all down time including down time for normal service such as lubing, or cleaning of parts or pieces or any of th is type. Mr. Gi Ibreth: You mentioned that your Well 8-32-14 goes down for a bottom hole pressure survey and I did not get the figures, I believe it was some- thlng'like'875'barrels per day before, abOut 800 back to about 800 now. Mr. Bates: At this time, yes sir. Mr. Gilbreth: At this time, Did this well make water before it was shut- l'n or has It made water since that time? Mr. Bates: Just a minute whlle i - The well ~s a 54% cut well at this time. Mr. Gllbreth: Was it Mr, Bates: and ! believe Mr, Gilbreth: Was it a heavy water cut at the time it was shut-in? Mr, Bates: The cut has ~ncreased, before it was Shut-in, it was making about 37% water. Before the shut-in it was making about 37% water, after the shut-in period it was making slightty over 50% and has recently shown some increase, I don~t know if you could attribute thls to clean-up or to additional productionat rates at this time or not. Mr. Gitbreth: From an engineering point of view, do the extrapolation of either production rate vs cumulative curves or percent water cut curves show anyth Ing abnorma I ? Mr. Bates: They do from the viewpoint that this well took the radical jump and the water cut performance prior to the shut-in had been at this approximately 37% range for three months and very stable. After and on the very first test after initiation of production it was over 50%. Mr. Gilbreth: Has it ever dropped below 50% since that time? Mr. Bates: I believe it has once or twice at 49%, so very, very small below it. Mr' Gi lbreth: is this anything unusual that you would expect in any well making that amount of water if it were shut-in that way? Mr, Bates: I would expect almost any well that is producing very sign- l'flcant amount of water if it were shut-in or severely curtailed, to show this type of phenomenon. We do have data which indicates we have water which w~l'.~l I flow from one zone and back-flow to another. Thts data has been obtained by Spinner Surveys, a conventional technique used in the bt~siness, and we feel that in many of these cases this is what happens, that the water actual Iv back flows from one zone Into an another oll producing zone, then you must remove the water again, at least to the best of your ability. Mr. Gilbreth: You testified that if the flaring were curtal led you would result in a loss of 1200 barrels of oil per day? Mr. Bates: Yes sir, if we ship the total volume of 2.75 million to the beach,, which is what we've been averaging, to maintain our safety flare, we would lose about 1,200 barrels per day of production. Hr. Gl lbreth: Now in figuring this 1200 barrels per day did you assume that you would restrict only the water free wells or would it across the board deal or Hr. Bates: We assume that we would take the heaviest restriction on the poorest economic wel Is. We have -19- Mr. Gllbreth: The poorest economic wells Mr. Bates: We have a couple wel Is which are on the order of 40 to 50 barrels per day of oil running 50 to 90% cut. We would stand a chance of losing those wells. If those wells were on their own, they probably would not be commercial, however being they're on a platform with other wel Is they are commercial at this time. That is the type of wel I, that ls one of the types of wells that we could lose. We did, in our analysis we were selective on the wel Is to do our best to minimize any potential damage. Mr. Gllbreth: Well, I'd like to ask thls question then, you figured it apparently selectively? Mr. Bates: Yes sir Mr. Gl lbreth: Then how many of your water producing wells would fall Into this category that you would restrict production on. I was wondering If the test were made only on water free wells would you, would you come up with about the same figures at a later' date? Mr. Bates: Only the water free wells? Mr;'] Gllbreth: Yes · Mr. Bates: We'd probably come out much higher. We have a few wel Is which are very Iow cut that are very high volume producers, A-22-1 is running ., about 2000 barrels, I'm sorry 14-1 is running about 1900 barrels of oil and 6/loth of one percent cut. Mr. Burrell: Excuse me.r, Mr. Bates, excuse me for .tnterrupting, I didn't understand what you said a much higher what? Mr. Bates: If the oil loss could be higher if we selectively curtailed production in the high oil producing wells with Iow cuts, as adverse to reducing production from the high cut Iow oll volume weIls. -20- Mr. Gl Ibreth: Now, my next question then would be, do you have any evidence to show that delayed damage or reduction in productivi'ty on a well that did not have a high water cut, have any of those been shut-in where you exper lenc Ing th I s? Mr. Bates: They have been shut-In, they do come back slowly, not as severly as a well which is making high volumes of water Mr, Gl lbreth: But even those wells you're experiencing a reduction? Mr. Bates: Yes sir, we do not experience any large volume of Increased production over the short period after start-up, then fall back to a normalized point you might expect In say a rod pumped well where you would get what is called flush production. Mr. Gl lbreth: Well, Mr. Bates, the reason I'm asking I've seen some curves on wells in Cook Inlet which were shut-in and on a rate-cumulative basls even though they don't come back to their original rate immediately, they do come back and show no permanent loss of production. I'm wondering if you have sl'milar type Information? Mr, Bates: Yes, we see wells of this nature also. They generally are" ,, the cleaner, better producers. Mr. Gllbreth: Yes, I Mr,. Bates: And not the wet producers. = ': Mr, Gl'lbreth: I'm of the opinion and I think a lot of others are that once you shut-in or restrict a large water producer you've got problems Mr. Bates: Yes sl'r. Mr'l'' Gllbreth: But unti I you started making it I wonder if you real ly have a problem? Mr. Bates: Not as severly, all we've seen is that you will defer that oil volume till some later date on it, on a very good well, that later date ls very hard to define, but it could be anything from a short period to several years. I think we find generally in operation that we're best if we can get our operation to some steady state and then make selective individual changes to the system rather then take a very large change to this system. When we are at steady state that we can analyze our well, we do get the opportunity to find those which are having erotic cuts in their production, we have a chance to run surveys in the wel Is to determine whats going on down hole and take corrective action and then analyze the results. When we lose a compressor, gas lift system for instance~ there is a very drastic upset to the system and It throws you analysis on your process. I llke to look at a water flood process like a chemical process in your refinery system where you try to get the system at some steady condition and then vary the individual single portion of the system. Mri"Gilbreth: You're constantly running surveys to detect thief zones..and Mr. Gilbreth: Common to wel Is around here. Mr; Bates: Yes. MR. Gilbreth: Early in your testimony I understand, I understood you to say that you anticipate repairs would be made two to three weeks from now, and then later in the testimony I understood you thought you'd be back in ., operation in six weeks. Mr Bates: Yes sir. Mr. Gilbreth: The three weekds in between is that for shipping and things like this. Mr, Bates: Yes sir. -22- re-instal Iing? Mr. Bates: That's for shipping and re-installation and we plan to run this unit up through a test sequence on the start-up. We also have to re- check the gear box on the unit to make sure there's no damage in the gear box. We do have some repair work, probably to do in the out-board bearings. The out-put bearing of the unit. The difference in the two times is the ship- ing, which we intend to air-freight getting here to the platform, instal ling It, we run it through a series of tests to be ~sure that it is safe. If the vibration problem has been reduced or mitigated and then bringing the unit on the line. Mr. Gi I breth: I understood you to say that work underway would be to re-balance, among other things, did you suffer in this last mishap, did you suffer permanent damage to the case and thtngs of this nature. Mr. Bates: 1'11 refer the final part of that to Tom, however, the only damage that we have observed was that the rotating equipment or as we've observed on the platform In the seal and bearing areas, not in the case. Mr. Gilbreth: With the situation as it is now, are you able to move any gas to shore? Mr. Bates:~,~.At this point. Mr. Gilbreth: Any gas that is already committed. Mr. Bates: At this time, no, we are not without modifying our gas lift system. Mr, Gllbreth: Are you taking all of your gas lift output then to use as a system, none of it going to shore? Mr. Gates: That ls true. The excess which is the 2.75 we normally ship, to't~e volume that would be flared plus the .75 safety flare volume and our gas lift system ls operating at full capacity in artificial lift work. Mr. Gllbreth: Do you have no excess capacity then? Mr, Bates: No sir, we don't. Mr. Gilbreth: That's all I have right now. Mr. Burrell: Thank you, Mr. Marshall do you have any questions? Mr. Marshal I: No Mr. Burrell~ ! think we'll have several questions here and it doesn't mean you're through, until after Mr. Psichogios. Mr. Bates: Very good. Mr. Burrell: Thank you Mr. Bates. Mr. Bates: Thank you. Mr. Burrell: Don't leave. 'Mr. Bates; I won't, I don't have a flight till late tonight. Mr. Burrell: 'Mr. Psichogios would you state your qualifications sir. Hr. Psichogios: Yes, I'll do that in form of an introduction here. My name is Tom Psichogios and I am a Mechanica~ Engineer, with a broad back- ground in mechanical analysis~ specializing in rotor high speed dynamics. ,., received my BSME degree from General Motors Institute in 1956. For the past twelve years I've been employed by the Solar Division of the International Harvester and ! am presently ~n charge of the mechanical group responsible for stress, vl'b'ratl'on relating to all company product lines, l'm also a mem- ber of the ASME, American Society of Mechanical Eng'lneers, and l've authored and publlshed several papers on high speed bearing and toter dynamics. That -24- in sum is my qualificafion and furfher fhis morning affer I~m sworn i'n I would like fo describe fhe compressor mechanical drive sysfem fo fhe Commiffee so fhey have a full undersfanding of fhe equipmenf we're falking abouf and ifs configurafion. Hr. Burrell: We need fhaf - so !'11 ask Hr. Marshall fo swear you in - wi'fhouf excepflon your qualificafions are accepfed as an experf wlfness. Hr. Harshall: Please raise your righ hand. The maffer now af hearing, do you swear fo fell fhe frufh, fhe whole frufh, and nofhing bur fhe frufh so help you God? Hr. Psl'chogios: Yes, I do. Hr. Rudd: Hr. Burrell, would If help if we moved fhe board up closer fo fhe fable? Hr. Burrell: Yes, if sure would, only because we can~f see Hr. Psichogios: This exhibif illusfrafes fhe mechanical drive sysfem in half-scale SL. Now fhe basic parrs of fhe sysfem fhaf we'll be looking af fhis morning~' we have our solar furbine driving in af 22,300 rpm, fhrough a coupling info fhe full gear of fhe Wesfern gear box. This is fhe Wesfern gear box fhaf was purchased'by Solar, ifs a model 3103 and if fakes fhe 22,300 rpm oufpuf speed of fhe furbine, power furbtne, and if increases fhe speed up fo 22 - 24,282 rpm and now fhe enfire high speed drive frain rofafes af 24,282 rpm af 1005 design speed, The oufpuf from fhe high speed pinion of fhe Wes- fern gear box is supporfed in fhese fwo bearings which we will refer fo from now on in as fhe forward bearing and fhe afl bearing. The Wesfern gear in furn is connecfed fo fhe lnpuf of fhe compressor which is shown on fhe , far end here - fhe York model 725 7 sfage cenfrifugai compressor and ifs -25- connected to a York-plex I ¼ inch coupling, Now the coupli'ng comprises of a flexlble element here in this location and a long slender shaft which is about an inch in diameter which we refer to as the aulll shaft. Now the purpose of the coupllng ls cater to misalignments in the system. The flex- ible element wlll cater to angular mis-alignments and the long quill shaft will cater to the laterial mis-alignments, in other words, it the center Ilne of the compressor doesn't line up exactly with the high speed pinion then that mis-alignment will be taken up in this long slender shaft. If there ls an angle be~een the center llne of the York compressor and the center line of the high speed pinion, then that mis-alignment is taken up In this flexible coupling, Now in turn this flexible coupling is made up essentially of two very slender flat discs of about five inches in diameter and they're allowed Just the flex to take the angular mis-alignment. Now the~ when Solar was notified that there seemed to be a vibration problem on the horizon, we sent a man up to the Platform A, along with a Western gear representative and a York representative and we did this in order to have all concerned parties on site ~to. witness the vibration that was taking place and to try to come to some agreement as to where the vib- ration might be emanating from and how it might best be fixed. The initial data that came off of the Platform on operation of the unit indicated that . vibration levels on the cases of the compressor as well as the gear box were , , really not too indicative of what was going on in the rotor system. So the only step that was left was to observe the vibration that was taking place on this long slender quill shaft and this was done by means of a stroboscope light which was tuned to the rotational speed of thei:quill and by that means -2(5- you could observe the motion of that quill and the characteristic that was found was that at 90% everything seemed to be quite stable, but upon reducing the speed beyond 90% up to 92, 94 or 95% a notlcable width occured In the quill-shaft. It was largest at the center of the quill and then seemed to die off as you went towards the Western gear box and the same thing occured on the other end, it seemed to die off as you went towards the York com- pressor. So In observing that the first conclusion that everybody came to was that there was a problem in the York coupling as this shaft was too long and too slender, however this had been analyzed previously and it was deter- mi'ned previously that t:hat In fact was not the case, that shaft was large enough In diameter and it was short enough to preclude any critical speed of that coupling shaft on its own. However, it was still not completely agreed to, by Western Gear representatives, they felt there were still problems in the York coupling and York likewise felt there was a problem back in the gear box, that was finding its way back into the compressor shaft. So with- tn the limitations of the instrumentation that was available there was no way to accuractely determine the motion of the quill-shaft along its length .. without resorting to some more exotic instrumentation, so the only infor- ,. matlon we had at that point was with regard to what was observed with the strob and all we learned from that was there was a'sPeed at whlch the vib- ration seemed to emanate as a motion in the quill-shaft and I guess the quill shaft was really taking that form like that, and it Seemed to be agravated , with speed. So at this point havi'ng gone as far as we could with all the three representatives on the platform, it was decided to embark a rotor-.~:~dy~ ..... namlcs study whereby you would simulate the high-speed rotor system in our -27- computer program to determine critical speed of the entire system. And by that means what we hoped to do was to vary all the variables we could in the system and attempt to analytical ly produce the same sort of phenomenon which was occuring in the actual hardware. Mr. Burrell: Mr. Psichogios, the three representatives on the platform were, Solar Division of International Harvester, Western Gear Box, and York. Mr. Psichogios: That's oorrect. Mr~ Burrell: Thanl~ you, Mr, Psi'chogios: You might point that there was also Mr. Burrell: I can't hear you. Mr. Bates: I'd like to point out at this time, there was also an independent party hired by Shell as Consultant, who witnessed the test. In general, his opinion was the same as the people representing the suppliers, that Ts, that there was something in here that could not c~early define what they had and he was at, not a loss, but he could not define clearly where he thought the vibration was. Mr. Burrell: At that t~me the "guilty" party had not been determined. Mr. Bates: That's true, that's right, we hired a third party because we felt a third party which did not have an interest of Shell or the supplier, would be in the best position to determine whether Shell, one of the suppliers or all of the suppliers might be the one causing the problem. Mr. Burrell: Thank you. Mr. Psichogios: As I mentioned the analytical rotor dynamic study was initiated to more or less shed some more light on what might have been going on and attempt to pin-point where the problem might be emanating from. What we have on the bottom exhibit here are two -28- Mr. Burrell: Excuse me, for identification, can we identify the top one as Shell Exhibit 3 and the bottom, as Shell Exhibit ~.. Mr, Pstchogios: Very good. We're showing the motion of the shaft at a speed of 20,947 rpm, that results when the bearing spring rate in the gear box was lowered to a value of about 500,000 pounds per inch, which corresponds to bearings with fairly large clearances in them. That was arbitrarily done to see what effect it would have on the system and the excursion of the system resulted as we show In the dotted line here. We show a very lar.qe excursion some where near the center of quill shaft with the vibration dying off in either direction. So that seemed to fit what we were seeing on the platform. We were able to show a enlarged vibration occuring at the quill shaft and that resulted from a critical speed which manifested itself in the gear box. And it would show up if you had high clearance In the bearings and resulting Iow bea~..i~ng spring rate. That was the first correlation we found in our analytical model and what we found on the platform. Now the second thlng that was done arbitrarl ly was to do the same sort of thing in the bearings of the compressor, we arbitrarily said okay if we had large clearances In the compressor bearings and corresponding Iow bea~- lngs spring rate what might happen to the dynamics of the system, and the , ,: bottom curve again shows the same sort of characteristcs, to show the ampi i- ,., rude of the rotor along its life as you go from the gear box through the quill shaft and back into the compressor and again we're looking at the black curve. We show a fairly large ampi itude, showing up somewhere near the center of the ,,, quill shaft, with the amplitude dying off in either dlrection. So we had two cases now that we could point to, we could say if we had large clearances in these bearings of the gear box, we could possibly have critical speed that would cause the quill shaft to vibrate, and essentially what happening is if the gear, if the gear pinion is vibrating in this fashion and you have an amplitude forced at that end of the system, then the quill shaft is essen- tially just jumping rope, you can, you can envision that slender quill just going like that, and the same situation exists here. If the compressor forces an amplitude to occur here then the quill shaft'is only, as it will be excited in the same fashion, only from the opposite end. So these were two likely cases that offered an explanation as to what was going on. Now as was men- tioned previously there was an attempt to design some bearings with Iow clea- rances in them and tie them to the gear boxes in an attempt to hopefully reduce the vibration that was occuring in the quill shaft. Now this was done in the Ill-fated test where we had the failure. We did apply the post clearance bearings and then we ran to 90%, the vibrations seemed to be somewhat reduced, an attempt was made to heat up the unit and then we suffered a failure. Now before I get into that area, I'll get back to it, I would like to go on and discuss the next step after we finish the analytical model to kind of point the direction.that we might look in to help you find what was going on in the system, and that next step was to apply more extensive instrumentation. Now during the interim period from when we had Western supply us with close clearance bearings, and the time it was tested, we designed a series of proximity probes and brackets which would mount on the present system and would allow us to put non-contact probes in various locations along the part that was showing the vi'brations. Now again, we're switched around here, we're showing the compressor shaft on this end with the long quill shaft here, here's the flexible element and the coupling, which then screws in the gear shaft which is corresponding to that location. -30- Mr. Burrell: Excuse me, Mr. Psichogios, let the record reflect that we are now looking at what would be I Dresume Shell's Exhibit 5. Mr. Psichogios: Very good. Mr. Bui-r~elt'-,, Thank you. Mr. Psichogl6s: In our instrumentation brackets we're able to bolt a plate on to the compressor that al Iow two probes to be placed in this location one probe into the vicinity of the center of the qulll.'Sh~ft..,a~d also one probe on the OD of the flex element coupling to monitor what excurision it was under- going, and as was mentioned previously, thls instrumentation was fabricated very quickly and on the way up to the platform, it was decided again since we suffered a fallure on platform A of the close clearance bearing machine, that since we had the instrumentation ready to go we would put this instrumentation on Platform C, and monitor the help of that Unit so to speak and find out what vibrations, if any, occured on that Unit and along with that plan we also were able to schedule onto a platform in Santa Barbara channel on Sun Oil to look at the two units which are very slmilar to thls high speed unit. The only differences they have one more stage in the compressor. The gear box, the . coupling and the compressor are identical, except they have one more stage on the compressor and it was felt that small difference really would not reflect itself in what we were looking for. So once we had the instrumenta- tion we were able to look at two units in the Santa Barbara Channel~on Sun Platforms and then we proceeded last week, last Wednesday and Thursday, we were able to monitor the characteristics of Pilatform C. Now we do have quite a bundle of data which we're still in the process of analyzing but what i'd like to present now, are the highlights of what we've found so far, and these highlights are really presented in these vlb- ration traces which were derived from the proximity probes, mounted now on the Platform C Unit, and the characteristics we see on the Platform C Unit were very similar to the t~o units we saw in Santa Barbara. Mr. Burrell: Excuse me, Mr. Psichogios, how many of those do you propose to exhibit? Mr, Mslchoglos: I have four of these, these are the only copies I have, what we'll have to do is introduce them as exhibits, would be to make some xerox copies, if that would be acceptable. Hr. Burrell: I see. It would be one, two, three, four so far? Mr. Psichogios: That's correct. Mr. Burrell: This would be five, six, seven, eight Mr. Psichoglos= Five is the Mr. Burrell: Five on top of it, I'm sorry, six seven, eight, nine Mr. Psichoglos: Flve, six, seven, eight, nine. Five through nine. Mr. Burrell: Would you identify them before termination of this hearing? Would you identify Exhibit 6 through 9, and provide us with xerox copies? Mr. Pslchogios: Yes sir Mr. Burrell: Thank you. ~r. Pstchoglos: This vibration trace is showing speed across the bottom going from 10% all the way up to I00%. On the vertical scale, which is a log scale we're showing the amplitude as measured by proximity probe #1, which was placed as close to the compressor in-put shaft as we could get it within the confines of the configuration. The trace shows the excursion in this location as the speed is increased, and you see we go along here quite flat, we're looking at I mll here and I0 mlls up at the maximum point and that would be IO,O00th peak to peak that would be total excursion. We start off in the iow speed rate with a very long excursion come up to about 10,400 rpm and -32- notice a sharp rise, we peak out, come back down, then in the upper speed range we're showing a very sharply rising characteristic as we approach 100% and we're looking at something on the order of about 5 mi Is peak to peak vib- ration as measured at that location. Now we have a corresponding trace in the next Exhibit. Mr. Burrell: Let the record reflect that we're moving from Shell Exhibit 5 to Shell Exhlblt 6. Mr. Marshal I: Pardon me, I think we're on the wrong Mr. Pslchoglos: Six to seven. Mr, Burrell: Slx to seven Mr. Pslchoglos: Yes, we're looking at seven right now. Mr' Burrell: Shell Exhibit 6 and Shell Exhbit 7, very good. Mr. Pslchoglos: Now on Exhibit 7, we 're Sh°wing the output from the proximity probe located at the center of the quill shaft, which was real ly the point of most interest slnce our strobe data was taken at that location or we had a reference to that location. Now we see a very simllar characteristic again, we're looking at the I0 mil maximum on the vertlcal scale and we're looking at speeds for I0 to 100% again. We show the same sort of peak going through the first compressor critical speed at 10,400, we come out of. that :, speed, we level off and then in the high speed'range'again we're showing a ,: sharp r~lse in characteristics. ,, On Exhlblt 8, we're looking at the corresponding output, at this location number 4, which is on the flex element of the York coupling. Now In this case we see a fairly flat characteristic, we do not peak out in the region where we had previously encountered the critlcal speed In the compressor, that peak Is now absent.. However we do go into a peak at a slightly higher speed, . and this speed corresponds .to about 19,800 and that Speed'agaln cortes- -33- , ,; , ponds to a speed very close to where we calculate e critical speed in the Western gear pinion shaft, the high speed pinion. Then after you go through that critical you have a characteristic where the vibration drops down at this location. Now one other interesting phenomenon that we noted on Exhibit No. 9, which again is at location number 4 which ls on the fl~× element. These two traces are for the same set of data, the only difference between these two is all thts vibration Is at rotor speed, in other words corresponds, as the speed increases, we're looking at the vibration amplitude at that particular speed as we're golng up~ Now this trace looks at the overall vibration, in other words its measures the amplitude at all frequencies that are felt at that location, and on this trace again we do note that there is peak in the region of this critical speed and all of a sudden out here we get the peak where the critical speed of the Western gear is encountered and then later on we'll encounter an another peak, and that peak, the difference between these two peaks ls exactly this gear ratio, and the thing that is occuring Is, the un- balance'..~ln the Iow speed gear is thumping the high speed gear and exciting'the critical speed again, so we encounter the critical speed of the high speed ~ pinion at 19,800 rpm which occurs at that peak and then later on at 21,300 : which is that peak, so we have one other clue here that apparently there is a , fair amount of unbalance in that Iow speed gear on the Western gear and its . , something to be very careful about in the future though that we check very carefully the balance in within the required drawing tolerance. Now again, comparing back to the information that we have derived from our analytlcal model where~we said when we were able to duplicate or to achieve this kind of characteristic whereby the critical speed of the compressor was -34- causing the York coupllng shaft to bow, we can take this data which I've plotted from probe number I, probe number 3 and probe number 4, and i can come up with this red line to show you the correlation we get between, predicted from the analytical model and what we actually measured on Plat- form C at these three locations. So there's a point there, there's a point there and there's a point there, and now if I paired that in you can see there is a pretty fair agreement between what the analytical model says it could be and what we actually measured, so we feel fairly certain that at least at that particular speed the quill shaft ls being excited by a crit- ical speed in the gas compressor and further that that critical speed is lower than it should be because the bearing clearance is probably larger than ~t should be. So that would point us in that direction in terms of being able to get that critical speed up and out of the range. Again ~ mentioned that in the interim period we were able to monitor the two Sun Oil Units in Santa Barbara prior to doing the Platform C Unit and I've got a summary here which shows the highlights again of that data. At probe location number I, which is at the input of the compressor Sun Oil Unit ~ shows 3 ½ m l~ peak to peak. Mr. Burrell: Excuse me, Mr. psichogios, are we Mr. Psichogios: This will be Exhibit lO. ,, Mr. Burrell: We'll reflect, we're now discussing Exhibit I07 Mr. Psichogios: Right. Mr. Burrell: Thank you. Mr. Pslchogios: Our probe number I on the sun"Oil Number I Unit was 3 ½ thousandths, Sun Oil Unit number 2 was 5 ½ thousandths, some-what higher, ,. Shell Platform C was 4 ½ thousandths, some where in between these two limits. Probe number 3, which is at the mid-span of the quill shaft, Sun Oil number I, was 4 ½ thousandths, Sun Oil number 2 was 7 ½ thousandths, again higher than Unit I~ and Shell Platform C was again in between about 7 thousandths peak to peak. At this location at the flex element, probe number 4 on Sun Oil number I showed about ½ thousandths very small. We did not get data on Unit number 2 on Sun Oil and Shell Platform C again was about a mil, slightly larger than the Sun Oil unit was. Now the history of Sun Oil Unit number I, has had no history of failure what so ever, It has 2,300 hours of trouble free operation, with- out any down time what so ever. I can't document that, but we can do that In the future If Its required. Shell Unit number 2 did have some problems with seals in the compressor. They had some wear in the compressor seals and a loss ,, tn performance and subsequently that unit was torn down to bring back up the performance. Other than that it has not suffered any machanical problems. Shell Platform number C, of course has had a rather high utilization that was Indicated for the record previously~ and it does give you some indication now if you measure with proximity probe information and you know the absolute motion occuring along the high speed system, that you have some measure of · success here. with regard to correlating back to reasonable values back In the area of the quill shaft. Now from the strobe life, of course we couldn't get any quantitative data, all we had was qualitative data and we had esti- mates any where from 35 mi Is to 70 mi Is motion at that location. Just to give you a feel for what that comparison was to what we're measuring here, ~e're measuring In the highest case here, about 7 ½ mi Is, '7 mi Is on the Platform Unit compared to what was indicated on Platform A Unit of 35 to 70 mt Is. -36- Thls remains an area for future study to, we did not have a strobe light when we did this test on either the Santa Barbara units or the Platform C Unit, but the next time we do run a test we'll have the strobe light and we will make a comparison between what you can visually see wlth the strobe light and what a more precise instrumentation ls able to give you. So, really, the net result of this study was to show that we probably have a somewhat marginal system in terms of having everything in the high speed drive range be right. There could be two things that would go astray, three things possibly, when It comes to balance that might lead you Into trouble. One other thing I might mention In going back to Exhibit 6 - 7, which showed the excursions at the center of the quill shaft, we did operate this unlt to over- speed shut-down, to make sure that In the event the unit did undergo an over speed shut-down that the unit would be safe and we operated up to 103% speed, and I penci led in the excursions that were measured at 103% speed and it amounted to II mi Is peak-to-peak at that location and again it just accentuat_ed that rising characteristic as if we were coming into a critical speed in this area. Before I summarize, I guess the next thing we ought to talk about is the fallure of the unit when we ran it on Platform A with the closer clear- ance bearings. ~As we noted previously, the closer clearance bearings were an attempt to try to minimize the vibration that might be felt at the quill shaft in the event that the critical speed of the Western gear box high speed pinion was in fact the contributor, or was In fact the phenomenon that was exciting the quill shaft, so in an attempt to quickly get an answer to that Western gear did fabricate some bearings that were about 3-½ mil clearance which ended up being about a mil and ½ smaller than they normally use and they supplied the bearings to us and they were instal led into the gear box very Quickly. There was a Check made on the balance on the high speed pinion, the -37- Iow speed pinion was not checked orr balance however, In that build up. The unit was re-al igned, the coupling was checked, there was not any work done as far as I know on the compressor, It was operated as It was. prior to the Installation of the close clearance bearings in this area. Upon start-up of that unit a 90%, again qualitatively, the operators indicated they did feel there was some improvement in terms of observing the center stand of the quill at 90% speed with the close clearance bearings as opposed to the stan- dard larger clearance bearings. The unit was going to operate there to the polnt where the conditions would stabilize and in the period of 20 minutes we suffered a catastrophic fal lure. It appears as if there was a seizure of the seal In the compressor area, which is mounted on the end of the quill shaft, better seen up here. This is the compressor right In thls area. It appeared as If that seal seized and caused a reverse torque on the quill shaft which caused It to begin unscrewing In the compressor shaft. Thls qulll is screwed into the end of the compressor shaft and a reverse torque on it would cause i' ' it to unscrew, If the torque is in the normal drlv!ing direction It would tend to tighten that thread, so a reverse torque was applied to the quill shaft, it started to unscrew but slnced the shaft was turning at somewhere around 22,000 at 90% speed it did not take very long to begin backing out and , in backing out and unscrewing from the compressor shaft it had no where to go, its golng to force all the drive frame back towards the gear to push in that direction and the first thing that would happen, you would tend to squeeze theses flexible elements together, there's no room for this to go, it's just golng to push wlth this tremendous load, and it would fail these rather flex- .: i. ble plates very quickly and In further unscrewing, since It has no more room -38- to push anything, everything would go solid, the only thing that would happen · is that this shaft would tend to buckle out like that and tend to squirt out sideways, and when it did that, it failed this coupling completely, and we lost this portion of the coupling. The shaft, the quill shaft remained intact, it was kind of frozen Into the seal., and this shaft was bent up on that side, about like that. The quill shaft itself stayed intact, it didn't fracture it just remained bent. This portion did come loose from the rotating assembly, however, In looking at the damage on the outside of the coupling, made out of aluminum, there was very little damage on it, there were a couple of dents in it, however around the periphry there was very little damage indicating that when it came off it wasn't rotating at a vem/ high speed, it was going fairly slow. This portion of the compressor hit the enclosure and remained inside the enclosure. On disassembly, apparently the gear box is free, there Is no, the bearings In the gear box were pounded out; they had not fai led as extensively as previous bearings had failed on other failures. The compressor main bearing, the forward and the aft bearlng showed signs of scoring the journal, but again there wasn't much sign of very high heat bul Id up, so It was apparent that those bearings had not precipitated a fai lure. The seals throughout the compressor were rather heavily scored, indicating the motor was under- going some rather severe excursions, and again I would say probably this phen- omenon when we were up In the high speed end of the response curve here, where we had considerable motion occuring there that caused that whiten- !'rig action and finally failed the seal in this area which finally seized up. Agaln our initial feed back is that the closer clearance bearing did help improve things, but again we do not have quantitative information to support that, -39- So in summary, really our feel lng is that in light of these three units that we're able to monitor with our extensive instrumentation in terms of proximity probes that these three units have exhibited fairly good service life and we would feel that the problem on Platform A would come from some extenuating circumstances which we think we may have pinned down and these boil down to three. The bearings In the gear box having excessive clearance;.the bearings in the compressor having excessive clearance; or balance in the compressor or turbines, or gear box sections being at fault, or contributing high loads. So those are the three things we would look In the Platform A Unit as being cul- prits so to speak as to why that particular unit does not fare as well as the other two units we talked about here. So our recommended course of action would real ly fall into two categories, one would be a short range approach, whereby we would re-build the unit In 'its present configuration, Solar would : retain very close control over the re-bui Id of the unit, again we would look very closely at the things I mentioned, balance.. In the gear box, both , the high speed and the Iow speed gear, proper alignment of the coupling and :, fit up of the coupllng, precise balance of the compressor and control of the clearances both In the gear box and in the compressor and we would add the : instrumentatlon that we spoke about here. In terms of proximity probes on the re-build of the unlt~ we would very carefully mOnltOr the start-up of the , unit, determine the quality of the build, in terms of the excursions, and since we do have a measure of where they have to be :+o provide adequate serVice life, we do have a good handle on where we have to put those excursions and ., we would not operate the unlt at high speed unless of course we did have a clean blll of health for the unit. -40- The other thing we're thinking about is to permanently install a probe at the mid-span location number three, as part of the assembly and this would serve as a multi-purpose probe. First it would be an alarm when it reaches a certain value It would sound an alarm to give you a warning and then second- ly at a slightly higher excursion it would be a positive shut-down of the unit, not al lowing it to operate beyond a certain speed or certain vibration level. Now our engineers and our instrumentation people are looking at this and does look feasible and it is a system we use on other production equip- ment. We build our gas compressors with these types of probes in them and it looks like It will be a viable system. So that would take care of the short range program to get the platform A back into operation as soon as possible. Now the other course of action would be more of a long range program and it would go on concurrently with the short range program but would be a longer lead type of action and this would involve first the final review of all the vibration data with the other people involved, our vendors, Western Gear and the , . York Compressor people. Now, we have already made provisions to start send- ing In some of the data we've looked at here and in fact they will receive a complete set eventually and we'll review these and give them our assesment of the system of variables and indicate to them the possible areas where we feel · the system can be improved and it will be up to them to take these recommen- , dations and take some action on them along with our assistance. And again, these areas would hopefully not change the system drastically and result in ,. excessive lead time. We would hope to make as small a change as is engineer- lng feasible and put the system in a more desirable integerity standpoint. Then finally, if we can get agreement with our vendors, then we would ~ncor- porate these design changes, arrange to have a re-test with the proper , -4 I- instrumentation and make an assesment of what and any changes that might take \ place in this re-design effort. So we feel that these two actions running concurrently would not only get Platform A back into operation but in the long run would hopefully improve all units of this configuration. That pretty much concludes my statements here. Mr. Burrell: It's I1:00 oclock, Mr. Psichogios, I think we'll take a ten m i nute b teak. Mr. Pslchoglos: Very good. Mr, Burrell: We'd like to ask you some questions after that, Mr. Pslchogi6s: Very good Mr, Burrell: Thank you, Mr. Burrell: We'll reconvene this hearing now, Mr. Rudd: Mr. Burrel~, you might at this time Mr. Burrell: Mr. Rudd, yes Mr. Rudd: At this time have the witness identify the Exhibits. Mr. Burrell: Yes, if he would identify as his work product also. Mr. Rudd: Mr' Psichogios: during your presentation you referred to Exhi- bits three through ten. Were all those Exhibits prepared by you or under your superv I s i on. Mr. Pslchogios: Yes, all Exhibits three throug~ ten were personally pre- pared by myself. Mr. Burrell: Thank you, Mr. Psichogios, we' ii accept them"into the record, thank you Mr. Rudd. Mr. Pischogios, ! have one question for you sir, which is a rather large question but and ! know you covered it but what i'm really looking for is kind of a summary of the~'thing. What is the dif- ference between the mechanical and or operating procedures of Platform C -42- and Platform A that causes this problem which we're faced with on Platform A and not on Platform C? Could you Just briefly state what those are sir? Mr. Pslchogios: Yes, I think that was touched upon when Dick Mr. Burrel I: It was Mr. Psichogios: When Dick was mentioning the difference between the two units and he did mention that Platform C was operating at lower speeds, 86 to 88%. Mr. Burrell: Right, is that the only reason in your opinion sir for the problem on A as opposed to no problem on C? Mr. Pslchogios: That could be a substantial contribution in terms of the unbalanced forces which are felt. If you look at any of those Exhibits four through or six thmaugh nine you'll note the very sharply rising char- acteristic as you do go up In speed and its that sort of thing that would aggrevate the vibration characteristics. However, our feeling is that there was something more than that involved in the Platform A unit. Mr. Burrell: I detected that and I'm trying to fish it out, its not" my job to al locate responsibility between the various contractors, ~however Mr. Pslchoglos: Yes Mr, Burrell: however, I want that very clear for the record. ,, , ,. Mr. Psichoglos: I think we've pin-pointed this in terms of the critical :, factors that,would possibly cause the sort of vibration characteristics that we did see and again Just mentioning briefly those were the balanced condition in the gear box,..the balanced condition in the compressor, th'e al ignment, which wi~l assume is done properly, again its another factor that enters in, and all of these things I think have to real ly be pin-pointed before you can real ly thoroughly answer that question. -43- Mr. Burrell: I suspect it will be explored in greater detail then this Committee wi I I today. Mr. Psichogios: Very much so. Mr. Burrell: Mr. Marshall, do you have any questions? Mr. Marshall: One small question, Mr. Pslchogios. On your Exhibits six through nine, you mentioned, you used the term critical speed. Mr. Ps lchog i os: Yes Mr. Marshall: Now is this the shaft speed, at lets:~;say maximum excursion of that shaft or could you explain that briefly please. Mr. Psichoglos: Okay now, let me deflne it this way. If you speak of a critical speed, let's take a simple case where you have our old famllar beam supported at each end. Now If you were to pluck that or impact the beam it would vibrate at a certain frequency freely and that we refer to as a natural frequency. Now if that beam were round and rotating, If you were to rotate that beam at its natural frequency then you would have a critical speed, Again that beam has a certain natural frequency, we're going to begin rotating it at that very same frequency, the inherent unbalance on that shaft ls going to cause it to vibrate very violently. If you sat at that speed very precisely, it woutd begin wipping very violently and build up until finally it could go into failure If it stayed there. So that's what we refer to as a critical speed. Mr, Marshall: Thank you. That's all the questions I have. Mr, Burrell: Mr. Gilbreth? Mr. Gi Ibreth: Mr. Psichogios mentioned a series of tests that were run on Shell Platform C and also at Santa Barbara, I think your Exhibits cover three such installations. Are these the only installations for this particular ty,pe of equipment that you have? .,~ -44- Mr. Pslchogios: My understanding is that we have a total of thirty. Mr. Gllbreth: I see Mr. Psichoglos: gear boxes that have been supplied or will be supplied very shortly by Western Gear, however, all of these units are not of the same speed, some are lower speed, some are the same and some are consid- erably lower in terms of maybe 16 to 18,000 rpm output. Mr. Gl Ibreth: Then are these the only three that are comparable to Shell Platform A? Mr. Psichoglos: I bel lave there are three other units that are located, one is. in Texas and two are in the Gulf Coast applications, down In Louisana, I think there are three other ones. Mr. Gi Ibreth: To the best of your knowledge are problems I lke these existing in any of the other installations? Mr. Pslchogios: I can't answer that afflrmly. Mr. Gilbreth: I'm wondering If this particular problem is it mostly unique on Shell Platform A and I believe some mention was made of a problem l'n Santa Barbara. Mr. Pslchoglos: To my, to the' best of my knowledge that Is true. I only have knowledge of the Santa Barbara units and the Platform A and C units. That' s been my involvement. : Mr. Gllbreth: I see. On your Exhibit 8, i'm just curious, there's a sudden reversal there in the curver I can't even read the rpm reading or anything, but what causes something like that, that sudden reversal? You've got amplitude going down and it immediately goes up. .Mr. Psichogios: Okay that occurs because of a phase shift within the rotor system prior to going through a critical speed, that's the best way ! -45- can answer that. I can try to give you more detail if you like. Mr. Gi Ibreth: That's good enough. Mr. Pslchogios: It's a phenomenon we've seen in other cases and the reason you see it on that trace is because you'll notice that the Iow speed, the amplitude is still quite high, indicating there is a fair amount of Iow speed run-out in that area to begin with and we've noted that phenomenon before. If those other traces had higher displacements at Iow speed, you'd have seen this sort of thing occur there Mr. Gl Ibreth: I see. On the test that you were running on Platform A, ,. at the time it was left unattended to warm up did you have to have a constant speed control on the equipment at that time? You were running a test at a certain rpm, as I understood the testimony and then left it to warm up. Could the equipment itse I f have increased speed. Mr. Pslchogios: I was not personal ly in attendance on this test but I understand the turbine was set on manual control, indicating that Its not very likely that the speed would have gone up. Mr. Gilbreth: I see. Mr. :Pslchogios: The initial reports were that there was in fact some sort of speed increase, but apparently its been confirmed that the unit was on manual control and that most likely would not have suffered a speed in- crease or undergone a speed increase. · Mr. Gi Ibreth: Now, from your testimony and that of Mr. Bates, we under- stand that there has been some damage done here and that the equipment at least some of It is being re-manufactured or re-turned or re-sized, ls the earliest that the equipment could be placed In operation, making the necessary repairs, this three weeks that we heard a while ago. Is that what the present schedule calls for? Icc ask that. -46- Mr. Psichoglos: As of yesterday that was my understanding, that was the best date It could be achieved with expediting parts through York and that was their appraisal as to when they might be able to deliver their compressor rotor to us. Mr. Gilbreth: Okay is, Is that the controlling factor, Yorks delivery of the compressor rotor to you? Is there any problem in the Western Gear Box hook up. Ms. Psichogios: The bearings will have to be replaced. Mr. Gilbreth: Will they be ready by that time? Mr. Pslchogios: Yes, the bearings would offer no problem, however, we had not 'up to the present time looked at the gear to ascertain whether there is any re-work that might be required there. I would assume that there would not be any modification and if any would be minor and we would rely on Western Gear to give us their apprasal of that equipment prior to our using it any further. ': Mr. Burrell: Excuse me Mr. Gi lbreth, just interrupt one second on this point and I'Ii turn it back to Mr. Gilbreth. Do I understand that you may have to look into other components other than the York, in which you haven't done anything yet and you may, six weeks may run and get your york gear or ,: York compressor in and find out it's not fixed yet, and then start another period of time? Mr. Pslchog los: No Mr. Burrell: is time running concurrently? Mr. Psichoglos: No, the period whlle we're waiting for the York hard- ware would certainly be used to prepare the rest of the system and make sure -47- that there weren't any lead items in the assembly, so between now and the when we receive the York, we'll certainly know the condition of the rest of the system and have that pretty well in hand. So my feeling ls there won't be any other lead items other than the York compressor and coupling. Mr. Burrell: Mr. Gilbreth. Mr. Gllbreth: I'd like to ask one final question. In the handling of this problem, is there anything that your people or the York people could have done to expedite the solutlon of this that hadn't been done, or is there , any thing that Shell could have done to accelerate the solution of this that hasn't been done? Mr. Pslchogios: I would say no, judging from my involvement as of last May, from the beginning of May and looking back on the history and the se- quence of events that took Place and all the Information that had to be corn- Pi' led before we got to the point where we 'are now and knowing whats lavolved now, well i could really see no short cut to getting to the same point where we are now any sooner. Mr. Gllbreth: That's all I have, · Mr. Burrell: Mr, Marshall~ do you have any further questions? · Mr. Marshall: No further questions. . Mr, Gllbreth: I'd like to ask If Mr. Rudd is going to summarize I have another question or so. Mr. Rudd: I intend to summarize Just very briefly. ,, Mr. Burrell: Before Mr. Rudd summarizes I will ask if there ls anybody in the audience who would like to be heard on this matter, this is a public hearing, If you like to make a statement, if you would like to ask a question -48- of any of the witnesses or testify or anything else. Is there anybody so , inclined if not so testify? Let the record reflect that nobody wishes to testify, make a statement or ask a question. The Committee is at least tem- porarily through with the questions until Mr. Rudd summarizes. Mr. Rudd: Thank you sir. G~ntlemen the witnesses have presented the testimony and I belleve quite fully regarding the nature of the break-down and the re~mmended course of action Shell asks that the, that Conservation Order 105 be modified to permit the flaring of gas in excess of that used on the platform for fuel and in excess of that permitted for the safety flare for a six week period whlle the repairs that have been described are under- taken. The reasons for recommending this course of action were stated by Mr. Bates. Principally we point out the energy and hours lost by the shut-in would far exceed the value~, either heatlng value or dollar value of the gas that would be flared during this period if production were al lowed to go .unrestricted. Mr. Bates, also discussed the :possible reservoir damage, the · damage to the wells, which is a subject that has been discussed at this hear- ing and others like it to some length, We have not suggested precise language, I believe that the language for extension for this, extensions of this sort is .fairly routine and It has been adopted in other orders, If you made a re- quest for us::to'..:.prepare language we would be ·happy to do so. We have , nothing further. Mr. Burrell: Thank you Mr, Rudd. May I ask you a question sir? ,,] Mr, Rudd: Yes Mr. Burrell: You indicated you wanted a modification of Conservation .; Order 1057 Mr, Rudd: Yes, or 105 as amended. -49- Mr. Burrel I: Yes, right. Would you have any objection of the Committee finding this as an emergency. Mr. Rudd: No, I believe this Is an emergency situation. Mr. Burrell: Well, you asked for modification of it, as rule 2 of 105 or Order to 105 it says flaring or venting etc. prohibited except for the amount necessary for adequate safety flares and and except in emergencies. Mr. Rudd: Emergencies - It, we could, if this is classified as an emergency Mr. Burrell: That was my intention. Mr.. Rudd':" There ls no need for modtfication but rather a declaration Mr. Burrell: A finding Mr. Rudd: of an emergency. Mr. Burrell: I just wondered about that. I just wanted to clarify that one point. Mr. Marshal I, do you have a question? Mr. Marshall: No. Mr. Burrell: Mr. Gilbreth? Mr. Gilbreth: Mr. Rudd, you mentioned this six weeks, I'm interested In when this six weeks would start or when It would end? , Mr. Rudd: Our calculation have been based on today. Mr. Gi Ibreth: Six weeks from today? Mr. Rudd: Six weeks from today which ! bel leve takes it to August 3, if ~ recall. , Mr. Burrell: i'm not that good with a calendar. Mr. Rudd: I counted it out once, but I Mr. Burrell: August 3 Is fine. -50- Mr. Rudd: Alrlght if we follow the court rules we'll eliminate today and start tomorrow as number one, It would be the third. Mr. Burrell: Right. We'll go off the record for about five minutes, the Committee will rule from the chair on this situation. Mr. Burrell: Gentlemen, the Committee has agreed to modify Con- servation Order 105 as amended, or to further amend it, which ever Is the appropriate language to provide that the flaring or venting of excess caslnghead gas from the Middle Ground Shoal Field, Platform A is permitted until 7:00 AM, Alaska dayllghtSs~~'~'"'-" time, August 3, 1973 or until such earlier date as the problems with .the equipment are remedied with a further provision that this order may be extended for not to exceed thirty days by further order or orders of the Committee, by Administrative Orders of the Commit*ee, and furthermore make no finding as to the economics of' the sit- uation which we don't believe we're required to by the statutes. Secondly we make specifically no findings as to the potential of reser- voir damage. This order will be written but In vlew of the circumstances we feel It appropriate to issue it orally today. ,. Are there any further comments or questions from anybody? Okay? Does anybody have any anything else? Adjourned. -51- M G 5 "PL/~T E 0 R M "A" .- PRODUC'T.~ON CA.PACITY ¢~ O'TH, ER OPEP~A'T'. lNG DATA · · PRODUCTION (6B055~ ..-3Z~ APl. OIL. GAS PRODUCT I'O'N 3woo BOP/t)' s.o UucF/D' 1.5 MMCF/O FUEL 6AS .R E'Q.U IREM E t~T 5 GAS LIFT CAPACITY (5'.'1 ?516-1100'PSI6'~.IZ.5 bl~r,F/13' '" ,. 5AFET'Y FLIkRE RE(~U%REMEN'T5 , ,"/5 i~CF/B ~. ,:.. 5 I~L E S ,6 i 5;, ,:CO t~ ?,RE C,,APA.¢ I T'f',,i,.: 6, 0 ~ b4 C .::,:i:::, ., :,~, ,; U t PPF_.O -. ""'~;Z.,'lS 14UCF/D FRODUCTION LOSS USING G~l:k5. LIFT'" COMPRESSOR5~'0 5~Lt. GAS . · · · I,ZOO,BBO /0 ~o .40 .I ~o 50 &o 70 ' ' ' i ~ ' ~ ....... ' ' ' ..................... : ........................... ~ .... ~ ........ ~ .... ~'"' ~ '-'~"-'" .... ; '--' .... i:!:.~-.! "~ if. : '" ' · · ' · ' · '. ~ . , · ': ' ' ~ ' " .... ~ : ~.~.-,- ..... ~-~.--~-.,~.. --...4 _ :,--. ,. .... l~ .... ;-..: ~..- -: - - · ' ·- - ~ ..... ', ........... · ..: - .! ....... ~... ! ~ ~ " I ! ~ · ' ! I ~ · I ! ! 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I .' ~ ' I ' J ,. ; , , ,..I . .. · J. ., .... · ~ ' ' ' ' ? ..... ' ' ........ ' ' ' ':' ..... .":" ? ............ '. ...... i' ............................ ~ ....... ;,:~: ,t-:~'"-'1 '~::.~"i'. : .~ ~ I..-i · !· ~ : [ "I : -"~.";: ~ , .I I* I ' ~ ' : I I I ' j I I j I j .... ~ I I ' I ..... 1-- ~ ..... ] . . ' .... :'- I ...... : ......... , .... : ....... : ...... J .............. ~ I - ' -. .'. ' I ' i , s ' ' ' , ' ' ' ": ........... I J ' ' ' ' ' I J .... ~ · . .~ , , , , , ','1 ...... t I .... ?eo6g~ i i IL.. t NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee Conservation File No. 105-B Re: Middle Ground Shoal Field Platform "A" operated by Shell Oil Corporation MGS "A" "B'? v'C~? "D" "E" "F" and "G" Oil Pools The Alaska Oil and Gas Conservation Committee will hold a hearing pursuant to Title II, Alaska Administrative Code, Section 2009 in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska at 9:30 A.M. on June 21, 1973. Flaring of excess casinghead gas resulting from a major equipment failure in the gas system of Platform "A" is now taking place. The committee will hear testimony as to whether present circumstances constitute a situation warranting unrestricted production of oil and flaring of excess gas. Thomas R. Marshall, Jr. Execut i ve Sec reta ry Alaska 0il and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Publish June 9, 1973 STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT, ) ss. ..... ..Ma.l~..L...Shalce ............... being first duly sworn on oath she deposes and says that ................ is the....L..e...g.~.~....g.~.e-.-X'-~.-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 .LeR-n-:].----No~-ie.e- as it was publTsl~ed in regular issues (and not in supplemental form) of said newspaper for. a 3o~o period of ..... o~q.e ...... insertions, commencing on the 9 .day of .....d:'.~..t..i)...e. ............ ,19 ...~, and ending on the .... -9 ............ day of of ....~..L!..lq...e. .................. , 19..7...3.., both dates inclusive, and that such newspaper was regularly distributed to its subscribers dur- ing all of sa.id period. That the full amount of the fee charged for the foregoing publication is the sum of $ lO°OOwhich amount has been paid in full at the rate of 25¢ per line; Mini- mum ch.arge $7.50. .,/ ~II :; .,.. /"' ,4 Subscribed a.n~,~;orn to before me this -9- .... ~day of.j~l,~,e ........., 19..?..3.. ..... ......... ......... Notary Public in and the State of Alaska, Third Division, Anchorage, Alaska MY COMA/USSION EXPIRES ....... Il ....... NOTICE" OF ,P[IBLIC HEARING STATE OF ALASKA DSPARTMENT OF NATI~P,.AL RESOURCES DIVISION OF OiL' A~ GA~ Alesk~ Oil and~Gns Cons.e~e~ion, , . , ',,, ,,,,~' ,,' C0nser~,,~ ,. ,' , ,~, ~ ~ , ', , ' ' ~,~:~ion · ",',,: S~tl~, II, '~l,s~"~inl~i~, '.. ~.~,_~.. 1973. e~to,.w~eth~r. res~j~i~d prb~uctlon of' bi.I and flar- ing':~'::i~?as. · .,' ,."" T', '~:" ." .,.~ ' :. ;~..,> ~.~. . " ~tloa" ~ommittee :~1 ,:~r~Jn.e Driw , ~L~I 'fl,~fi~:. '~.. ~50'..:. /Form SA 1 DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS TO: F Fi les FROM: 0. K. Gi I breth, J r. /~-" Chief Petroleum Engineer DATE: June 5, 1973 SUBJECT: CO # 105 - A On June 5, 1973 Mr. Terry Smith of Shell Oil Corporation called to advise that the compressor in their platform '~A" was still down. The two specia- lists from York have been examining the equipment and had determined that there is internal damage to the compressor. The service engineers boxed up the parts and took them back to Pennsylvania for balancing. It may take up to several weeks and may even be necessary to re-manufacture the parts again. Mr. Smith advised that the installation of this unit cost Shell 600,000 dollars and it has never functioned satisfactorily. Solar was the prime contractor on the job and Shell is looking to Solar to make necessary repairs and see that a satisfactory installation results. He said that the entire Shell Corporation was behind this move and the company was very concerned and bringing all the pressure to bear that they could on Solar. Mr. Smith advised that it is his personal opinion that the compressor will be down for several weeks and it is not a matter of a few days. I advised him I would have to check Conservation Order No. 105 and determine what course of action must be followed. ,/~ SA 1 / / // / F. ORAN OM / / TO: I-FILE I DEPARTMENT OF NA JRAL RESOURCES DIVISION OF OIL AND GAS FROM: O. K. Gilbreth, Jr. [~ Chief Petroleum Engineer DATE : May 30, 1973 SUBJECT: CONSERVATION ORDER #105-A On Thursday May 30, 1973, Mr. Terry Smith of Shell Oil Corporation called to advise that the compressor on their platform "A" was still down. Solar and York service engineers were on the way to Alaska via airplane to inspect equipment and attempt to determine the problem areas. At this time it appears to be a substantial failure although they are unable to determine the extent of it. They have no estimate of the down time but will advise us early next week when they find out how long it will be from these service engineers. September 29, 1972 File: WMJ-554-986.511 Mr. Homer L. Burrell, Director Division of Oil and Gas Department of Natural Resources State of Alaska 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Sir: Amoco Production Company P. O. Box 779 Anchorage, Alaska 99510 ~ 'C. EN.G .... J 1 ENG ..... 2 ~.NG ...... . .... 3 ~NG ..... I' .... r= 2 G:_QL ....... ...... REV ......................... DRAFT SEC ........... ~NFER: _ _ . ,_. Re: Extension of October 15, 1972 date provided in Rule Nos. i and 2 of Conservation Order No. 105-A to November 1, 1972 We have experienced unexpected delays in receipt and subsequent in- stallation of gas metering equipment necessary to handle the excess casinghead gas-T~t~e~~-~*~s-J~ platforms. Installation of this equipment cannot be accomplished by October l5,'1972 but can be com- pleted by November 1, 1972.. Consequently, we request that administra- tive order or orders be issued to permit the flaring of casinghead gas in excess of the maximum amount that can be. beneficially utilized until November 1, 1972,. rather than October 15, 1972 as provided in Conserva- tion Order No. 105-A. You very truly, · W. M. Jones District Pr tion Superintendent cc: Mr. H. T. Hunter SHELL OIL COMPANY SHELL BUILDING 1008 WE,ST SIXTH ,STREET LOS ANGELES, CALIFORNIA 90017 August 30, 1972 Alaska Oil and Gas Conservation Committee State'of Alaska Department of NaturalResources 3001 Porcupine'Drive Anchorage, Alaska 99504 PHONE: 482-3131 The undersigned Shell Oil Company, as Operator of .SAS PlatfOrms ."A" and "C" under that certain Offshore.Joint Operating .Agreement dated January 1, 1972, hereby makes application ~ for the. extension of .the date' provided, for in 'Rule Nos. 1 and 2 of Conservation Order .No. 105 to' permit, flaring of gas ~from .SAS PlatfOrms ."A" and "C" until November 1, 1972...We~ ask that .this extension of time .be'granted by administra- tive order as 'provided for in Conservation 'Order. No. 'I05-A~in Paragraph 3 of .the 'order proper appearing on P. age 2.. This two-week extenSion is necessary.due to delays.beyOnd~our control in manufacturing equipment.which.mustbe installed~tO~comply with.ConserVation'OrderNo. 105. .Such equipment is now.SchedUled to.depart fromHouston, TeXas on'or about September il4, 1972. and should'arrive in Kenai,.Alaska the SecOnd week ofiOctober, 1972.. It is estimated that this equipment will be installed during.the.month of .October and should be operational bY November 1, 1972.. .All.working interest owners in.the leases.subjectto.theabove.mentioned~ Operating .Agreement'have~authorized us tOmake this application and.to'proceed as indicated herein. Very'truly yours, F. H, RichardSon ~ Division 'Production Manager West Coast Division .cc -.Standard Oil Company of'California Post Office.BoXy7'839 Anchorage, Alaska '99501 Attention Mr. C, V. Chatterton ~cc -.Atlantic Richfield Company Post Office Box.360 Anchorage, Alaska 99501 Attention Mr. H. A..Slack ~., '1 KENAi ,PENf'~>ISULa ChaPTER /'/'~~ ..... ,'~ ALASKA 99669 Division of Oil and Gas 3001 Porcupine Drive Anchorage, Alaska DIVISION OF OIL AND G:,,.~ Co, RE- Request for delay on termination of Cook Inlet offshore flaring This organization would oppose a delay in termination of offshore flaring for the following reasons: 1. 'Continued flaring provides obvious air pollution which can be seen from Kenai almost any day as a low-lying cloud of black (the evening of 4/25/72, it looked yellow-greenish) smoke over the I.nlet. 2. The flaring of the offshore casinghead gas is a waste of a resource. 3. The additional wasting of the resource should not be permitted to continue--- lest it make the installation of another LNG1 plant or other such type of gas reprocessing for trans-shipment ess' economically feasible. Does not the fact that the proposed plant under consideration by Pacific Electric Service Co. contradict 'the earlier statements regarding lack of feasibility for the usage of the gas from the offshore platforms? 4. Even if it may be essential to extend the deadline, this organization recommends that it be done on a month-to-month basis with the review required for continuing extensions of an additional month. tFiSHER ' ", P.S. The Pipe coating is not Be g accomplished in Alaska for' the project. Is the lack of the 60-80 jobs involved in the required e ipe coating considered by this Division in its,deliberations over the lay in gas flaring termination deadline? Io '-A i SOPD i ......... ]"' :.' i gL;- '. :',, · . i i~, _,il .;...~: .... .',i ~., . . ,,. ~ ....' j T, · ~;r i · T T-? '-- .; " ' : I,'~.~'' I. ' I!' !!l I ! ' ! I ] : '... .~ . ~.1 ~---~' .-~---'q=~';F~ ': Ti, .~ · i~ J ' ' ~ ]-F' · '." ' i ~ ' ',_.4 '-4 ~M .. ..... _, 4-4-- .... · . i . ;~ i !1 ' . · : :' ~ .--. ' "iH- i ' ? II .: · .v. i I - i ~i -I ' ' ' . ..... ~ .... ii~, Ii . i, '"~''i'"~ i] .... ;' I i ilTiTT'". .......... · · !iii:,i; ...... 44 ....... ~ ....:_~ ~ ~ ........ '.., ~ ! l,I III,Il_, ... ...... · .... ...~ . , · i.' ' I!II!1 ~ · '" I I I1~ · ' ., ...... ~ :' · I , · ~-~' 1 ~ ' ~'I I' ' ' ' ' ~ ,I ' ~' ~ ' ~ I~1 !-' I I ..... · i ' "" " ' ' I ~!~ : :-'i!'.,''~ -,-~,~:1 ~ !1 I .... ~ , ,~,!!~. :.., .,~,~ ill ;~ .:'~;"~,l!: ,"i!~iliil ! i.':'~"i' ',~ !i iii!l '~;~.~i ' .. · '~: - ' i !II I ' , ., , lm . ~ : ~.. , : I . . [ ~ .... -- ~..'..~ ~ ,~,'i,;~.~ ....... '. '- · r · - . ! ................. OF STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT, ) ss. ..... i';s.n~z..,I,..SR h a k,e. .................... being first duly sworn on oath · she deposes and says that ................ is the .... .L..e./.~.a...1....O..l..e...r..k. ..... o.f 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 Le~.a.I Notice 1930 as it was published in regular issues (and not in supplemental form) of said newspaper for. a period of ..... .o. ~..e. ...... insertions, commencing on the .~.14 .... day of ....A.t!~.~, ............ ,19 7.~,., and ending on the ...... ~!.t ......... day of j-~ · of ..._pr.zl ................... , 19...72., both dates inclusive, and that such newspaper was regularly distributed to its subscribers dur- ing all of sa.id period. That the full amount of the fee charged for the foregoing publication is the sum of $ 12.50 which amount has been paid in full at the rate of 25¢ per line; Mini- mum charge :$7.50. ,n // Subscribed ~sa~cl sworn to before me this .~..~i. day of..~pr~'l .......0 19.7Z., ? · ~ ,...i ~'..~.~, ,..~.. NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATUKAL RESOURCES Alaska Oil and Gas Conservation Cammiltae Conservation File Nos. 102, 103, 104 and '105 Re: The application of Union Oil Company of California, Atlantic Richfield Com- pany, Shell Oil Company, end Amoco Production Company for ordere emend- ing Rule No. 2 'of Conservation Order Nos. 102, 103, 104 and 105 by delet- ing the date "July 1, 1972" and sub- stituting in its place the date "Novem- ber 1, 1972." Notice is hereby given that the refer- enced companies have requested the Oil end Gas Conservation Commiltee to issue orders ~which extend the period of time from July 1, 1972 to November 1, 1972, ~urino which casinghead oas in addition to the amount necessary for safety can be flared from the oil pools identified in the refer- lanced conservation orders covering the fol- lowing fields: Granite Point, Trading Bay, ~cArthur River, and Middle Ground Shoal, The hearing will be held et 9:00 a.m., May I1, 1972, in the City Council Cham- bers of the Z.J. Loussac Library, 5th Ave- inue and F Street, Anchorage, Alaska, at which time operators of the identified oil pools and affected and interested porte#,, will be heard. I Thomas R. Marshall, Jr. ', J Executive Secretary ~ Alaska Oil and Gas Conservation " J Committee J 3001 POrcupine Drive Anchorage, Alaska 99504 |Publish: April 14, 1972 /LoQal Notice No. 1930 NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Alaska Oil and Gas Conservation Committee Conservation File Nos. 102, 1,03, 104 and 105 Re: The application of Union Oil Company of California, Atlantic Richfield Company, Shell Oil Company, and Amoco Production Coml~any for orders amending Rule No. 2 of Conservation Order Nos. 102, 103, 104 and 105 by deleting the date "July I, 1972" and substituting in its l) lace the date "November I, 1972". Notice is hereby given that the referenced companies have requested the Oil and Gas Conservation Committee to issue orders which extend the period of time from July I, 1972 to November I, 1972, during which casinghead gas in addition to the amount necessary for safety can be flared from the oil pools identified in the referenced conservation orders covering the following fields: Granite Point, Trading Bay, McArthur River, and ~.iddle Ground Shoal. The hearing will be held at 9:00 a.m., May II, 1972, in the City Council Chambers of. the Z. J. Loussac Library, 5th Avenue and m Street, Anchorage, Alaska, at which time operators of the identified oil 0ools and affected and interested parties will be heard. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish: April 14, 1972 1972. APR 12 PM 4 57 ALS61 YQYP PST APR 12 72 LAI64 NSA225 NS NSA~50CI-OI2071AIO~)PD 04/12/72 1800 T W X AMOCO PROD DNV Z CZC001 D ENVEOELO 4/12/72 PNS MR. HOMER L. BURRELL, CHAIRMAN ALASKA OIL AND GAS CONSERVATION CO ,.: D IVISION OF OIL AND GAS 3001 POROUPINE DRIVE PLEASE DELIVER ANCHORAGE, AL BT AMO CO R Ei~UESTS MAY 11 HEARING TO AMEND CONSERVATION ORDERS 105 AND FOR MID D LE GR OUND SHOAL AND GRANITE POINT FIELDS RESPECTIVELY BY E'~ m r-r--TJ'~-Y,/D ING JULY 1, 1972, FLARE CURTAILMENT DEADLINES TO NOVEMBER 1, 1972, AND R E(~UESI NORMAL $0 DAY ADVERTISING PERIOD FOR SUCH HEARINGS BE WAIVED IA/ ~w~S~o~ oF Ol L COM ?ANY ~'1 ~[LL ~UiLDINQ 1008 WtiST ,SIXTH 5TRF:,FiT Ap=i: 12, 1972 Alaska Oil and gas Conse~,ation State of Alaska 3001 ?orcupin~ '~'~' '~ 99504 Gentleman: ~ne undersigned $?~LL OIL C~P~2,Ff,~ as Operator ~dar certain 0ffShor~' ~oin'~ operatfns Agreement dated J.a~uarY I~ 1962, dated J~e ..,O, 1971 to pa~z~, unli, t aovam.~=z 1, 197~ ~h_ .l,.,.in: o. venting of .~ from SAS Platfor~ ~'A~ and ~'~C~ in th~ l~ddle sion of t~:a ~m..~y b.e <,>~ff~t¢:t.ad by substituting the ,date "Novammer i, C,ons~rvatz. on Order No 105 and Parag'z-.a:ph~ ~ ,and 2 of ~ha Order proper appearing a~ Cae boutom o said P"~-~'-- o -- o':::' :.: :.:.:::t .A::'.5'~: 28, 1972 and should arrive in '"<",'i Alaska ........ -:.:,....:lie of Sapt..a~bez 1972. It is es~tg:d that installatio: ':- . ......... will be comp ].e t,.ad ~'~ing ~he ~a~h of :"f a l~:?'~!'~c H, eart~g on tat.~, appli, ca: cn la ce. ama:: nec.,:<. ...... : ,. f:ny "::7"Lo?,? -::o ~::;:c,:~ re.quira:d 't~ ,connie t ion ,:.:d, :n ,' ~-., ':.:. ::r ...p....,. :: :: :::. ,,:_~.,, and :.~ad ,, a .. ~ ~ cvlSenc ..:~::.. :, Very truly yours .~. ' ).:,:,;.t: ,?,['pco' ,.:.~ ,,p~.,?-' June 15, 1971 File: AMR-1034-986o511 Re: Supplemental Informatiol for Record of 'MGS and Granite Point Hearings May 25 and 26, 1971 ×, ~ a.-~<----x~ o/'"' i--~.'m'~'-'i%-",A.~, (:., ' ' I . Amoco Production Compa~ Security Life Building It ~-~' 'i~l Denver, Colorado 80202 ~EOL~ QEOL ~"~o~'-12 1 ~EvI ~ DRAFT I secI ........ CONFER: Mr. Homer' L. Burrell, Chairman Alaska Oil and Gas Conservation Committee Division of Oil and Gas 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Mr~ Burrell: Amoco asked for and was given permission to supplement the record in the hearing held May 25, with respect to the Middle Ground Shoal Field and the hearing held..May.26, on the Granite Point Field, and to amplify our answers to Mr. Marshall's questions directed toward establishing whether or not there were any known dry gas reserves which could be developed from any of the platforms operated by Amoco in these two fields. As we understand the purpose of Mr, Marshall"s questions, he desires evidence in the record upon which the Committee could base a finding that dry gas reserves are available'which could be used to supplement or "back-up" the casinghead gas reserves and solve the problem of interruptibility presented by the casinghead gas supply. Neither actual tests nor inference from log analyses indicates the presence of any dry gas reserves at or in the immediate vicinity of the two platforms operated by Amoco in the Granite Point Field or the Dillon Platform in the southernmost end of Middle Ground Shoal Field. Baker Platform, the northernmost platform in the Middle Ground Shoal Field, is located upon Lease ADL 17595. The Department of Natural Resources, in' its capacity as lessor., 'has already determined that gas in commercial quantities has 'been ~dis- covered under this lease. This determination has been affirmed by the Supreme Court of Alaska. D~VI~iON OF OIL AND AI',!¢;H OP, AG ~ c.o. /05 Mro Homer L. Burrell June 15, 1971 Page 2 There are two basic reasons why this dry gas reserve should not be used as a source of "back-up, gas. The first is that we feel we have a better use for this gas as future platform fuel. The second is that these offshore dry gas reserves are subject to much of the same interruptibility problems as is the casinghead gas. Fuel will be needed for lease operations in the near future, and these reserves are considered to offer a reliable econom- ical and efficient means of supplying such fuel. If these reserves can be used for lease fuel, the economic life of the oil producingoperation may. be substantiallyextended and the ultimate recovery of oil materially increased. While the problem of interrUptibility is a serious one, and one which materially reduces the value of the casinghead gas, it is a problem which we can better solve by the use of on- shore dry gas reserves. The one problem for which we as yet have no solution is that presented by the difference between the highest price we can hope to receive for this casinghead gas and the cost we must incur to make this gas available to any potential purchaser. If we could dehydrate the casinghead gas, extract the liquid hydrocarbons from it and sell them, and transport the residue to market at a price which was competitive with the ~price of already available dry gas and would allow us to "break even" on the total operation~ the problem of interruptibility and any other problems could be solved without any need for development of any additional offshore dry gas reserves. Ail of our studies and discussions of the various possibilities for securing a market for the casinghead gas have taken i~to account the fact that these onshore dry gas reserves are avail- able. Since they are, and they are entirely adequate to provide the necessary "back-up" gas~ we feel the question of whether there are or might be additional dry gas reserves, either on- shore or offshore, which also might be developed is academic in these hearings. Development of additional dry gas producing capacity will not help solve any.of the problems of marketing casinghead gas presently being flared. In fact, by increasing the available supply of dry.gas at a time when there is already a more than adequate supply available, such development would be more likely to compound the problems and make residue gas derived from casinghead gas even less competitive than it now is. YOurs ver~ truly, cc: H. W. Patterson - Phillips - Denver F L. Franz - Skelly -Denver H. A. Slack '-, Atlantic Richfield - Anchorage union June 4, 1971 State of Alaska Union Oil and Gas~ 'ision: Western Region Union Oil Company of California 909 W. 9th Avenue, Anchorage, Alaska 99501 Telephone: (907) 279-7681 Department of Natural Resources Alaska Oil and Gas Conservation Committee $,001 Porcupine Drive Anchorage, Alaska 99504 Gentlemen: Attention: Thomas R. Marshall, Jr. Executive Secretary Re' CONSERVATION FIL~ 105' Enclosed for entry in the hearing record of Conservation File ~;~r~s a copy of a letter dated June l, 1971, from Reginald W. Elkins, Alaska Division Manager, Rock Island Oil Company to Eugene F. Griffin, District Operations Manager, Union Oil Company of California. Said letter is an offer to purchase a minimum of 2,350,000 cid casinghead gas from the Mobil- Union Granite Point Platform. It should be again noted Union and Mobil are currently' supplying Atlantic Richfield gas for their operations in the Trading Bay Northeast Field from their Granite Point Field Platform. Very truly yours, UNION OIL COMPANY OF CALIFORNIA II CONSERV~%.T~ON Cf2M",~41'i"Tu.E, !! il c.o. i! A orney-zn-Fact ~ ,, ALASKA PIPELINE COMPA (- ooo o. ANCHORAGE, ALASKA 99502 Mr. Homer Burrell State of Alaska :~ "~.-':, ~ ~. E' ~.: ~ ' ' ":. ~ ~~--~ Division of Oil and Gas 3001 Porcupine Drive Anchorage, ~aska Dear Mr. Burrell' I have gone through several files and extracted items which in one way or another relate to our possible involvement with casinghead gas, either at Nikishka (MGS/Granite Point) or elsewhere from the Cook Inlet platforms. The first series has to do with Shell and runs from March through June of 1967 and broke off as we (Mr. Hilton Lacy, one of Alaska Interstate's vice presidents in Houston) learned the 'problems and investment involved in the transaction then being considered. Also, about this time we were able to re-contract with Union- Marathon for additional reserves from the Kenai Gas Field. The second series began June 4, 1970, with Pan American. Again I visualized a "banking" arrangement, or a "trade." Thinking that Phillips might be able to burn the gas as LNG plant fuel, I drafted a proposition (no date) and sent them. I received no response. I should comment that the "entity" called "SeCoA" in this proposition did not and still does not exist in fact--it was just a theoretical technique to explore the matter and was so described in a handwritten note, of which I have no copy. This series ended September 4, 1970. The later correspondence is from Amoco (Pan American) and doesn't add much. I have included copy of our letter of January 18, 1971 to Chugach offering "flare gas" for their Benice Lake power plant at an effective incremental price of 20¢ per million btu, on an "if and when available basis," compared to dry gas at 25¢ per million btu. I'm not sure whether or not Chugach has ever given serious thought to this offer: I have been offering dry gas at that location since 1966, with no success. The only corres'pondence we have received on other Cook Inlet casinghead gas is a sentence in a letter to Mr. Lacy (which I failed to recall in testimony, inadver- tently) from Marathon on the status of negotiations for Kenai _t~iDld gas~_which is. . enclos ed. i~ _ :r~ .'~ -... _--_ ,,, 7;, ~:.". . '~ aCCEPTED. ¢' ' 1[. CONSERVATION COMMITTEE z / , q ....... .......... 27.. ALASKA PIF~ELINB COI~II~ANY ANCHORA(3E, ALASKA Mr. Homer Burrell June 3, 1971 Page Two My reaction to the foregoing was in conversations, with no formal corres- pondence. I visualized a "trade" rather than purchase of casinghead gas from MacArthur River and Trading Bay. We have no idea as to the prospect for further developments in this matter. We hope it is clear from the above that we have been and still are genuinely interested in assisting if possible in finding markets for the flare gas, and you may be sure of our continuing interest in this matter. Specifically, of course, we would like the opportunity to supply the new power plant of Chugach Electric Association at Bernice Lake, and we have standby fuel available which should make this possible. Very truly yours, Dale Teel Vice President and General Manager DT :bb F, nc. CP. /e,g' · June 4, 1971 .% ", .' · Re: 0il and Gas Conservation Committee Cases ].02 and 105 . · -. }b.'. P. J. Trimble <----' }lobil Oil Corporation · Pouch 7-003 Anchorage, Alaska 99501 v }Ir. Oscar E. Swan Amoco production Company Security Life Building Denver, Colorado 80202 . 15..Donald B. ,Houge & James Caylor .: ............................... ~ ...... 7" '~'''' "':"=7'Oklah°ma -City, Okla. ....... .-·'-'16, Gish' & Dane '.".' ...... .-~'"' ?.' ;' .... Anchorage, Alaska · . · .. '17. Je~ry Ganapole 'Anchorage, Alaska · . ..' 7mchorage, Alaska Anchorage, Alaska Midland, Texas . . Tokyo, Japan .Tokyo, Japan Calgary, Canada · 9. Ken }Iinchey "' 10. Robert Sharpe 11. Risher Thornton · 12. Michitata Ueno* ...: 13. 1-laSami Suzuki* , 14. Bill HcBean · '. 7. W. B. Wood & John Bergquist Los Angeles, Calif. ' 8. S. L. Lindsey Anchorage, 'Alaska 1. I';inor T. Meining 2. Jack Moore "' ':3. Robert W. Armstrong · 4. 'James }tendershot 5. Dale Teel 6. Bernard J. Perry~' port Nikiski, Alaska ~ Alaska Anchor, age, San gn'tonio, Texas Anchorage, Alaska · Anchorage, Alaska Los Angeles, Ca]if _c.ompan>i · ' ih th~'time we .have available. Self Self Tesoro Petroleum' Co. North Star Fuel Anchorage Natural Gas Co. So, Calif. Edison Co. Pacific Lighting Service Co. Petrolane Gas Services, Inc. Self City of Anchorage Aztec Gas Processing .Toyo Koatsu Industries, Inc. Suraitomo Shoji Kaisha McBean and Assoc. Cleary Petroleum Self 0nidentifi~d, Cl/:m3t s Our files indicate that in many cases more than one individual with a company has contacted our' office regarding a.gas aw~ilabi].ity project analy,~Jis and we have attempted to consolidate these. The files show that7 at-least 37 different people have been in our office on these matters. Due to incomplete records we are unable to give a corapreh'ensive listing Cent leman: · · , In response to a request made by;.Mr. Triml~le in the Oil and Ga~. Conservation Cmmmittee }Iearing on Case 102, we-have made a hurried check of info'creation on visitors who have indicated an interest in gas in the Cook. Inlet area. · · . . . ': · . . · . .. _ . ./ ~IVlSlO)l Of OIL ittiO 6A$ / 3001 ?0,~CU?1)1£ P2,11'[ t,I,'CliOL'/,~E ~950,I .o · . Mr. P. J. Mr. Oscar E. Swan '18. Rodger Williams & R. W. Elkins , 19. Kirk stanley Location Wichita & Anqhorage , ~chorage, Alaska · Rock Island Oil Co. Un~ntzfied clients * ,Ueno.and 8uzuki ara believed to be part of a group of 10 or so companies who were working on a methanol project to use Cook Inlet gas. . . ., .. .. . The following representatives discussed gas availability but our records are not complete enough to determine if they were'interested in buying, developing, .Selling or just studying, . .. . " · .. 1. Juntcbi Tsuboi ..~ -,. ,.. .. -. · "2. Lewis Rogers 3. Albert T. C. Rutgers '4. R. S. Lemon tlouston, Texas CAlgary E1 Paso, Texas .,':': ... ...... Alaskan Petroleum Develop. · . ...,'";"-..,. Co. Ltd, · .Transwestern ' : Consolidated Pipeline Co, E1 Paso Natural Gas Co. Very truly ypurs, · . . .. · - O. K. Gilbreth, Jr. · /' .~ ;~:.~.~: ~ Chief Petroleum Engineer :.~ ~'::"':-,'~ "~" Rock Island(3il Company DIVISION OF KOCH INDUSTRIES INC I(I:}CH June 1, 1971 ~-~=,~. F. Gr~_~fzn District Opsrations ~,:anager Union Oil Company of California 909 West ?th Avanus Anchorage, Alaska 99501 Dear Mr. Griffin: If Mobzl-unmon can supply us with a minimum of 2,3>0,000 cfd (onshore) and Atlantic Richfield Company will let us use their line for delivery, Rock Island is prepared to set up a plant at Granite Point, dehydrate, compress and strip liquids and deliver dry gas to the Tyonek generator and Atlantic Richfield Company at 275 PS/. Rock Island is prepared to deliver this gas within 3-4 months after Mobil- Union ~ives us the go-ahead. !~e are prepared to pay Mobil-Union 2C/mcr and will take it at a minimum pressure of !0 PSI. The liquids stripped out will be given back to Mobil-Union (approximately 20 b/d) in a stabilized state. Any liquid storaEe will be furnished by Mobil-Union. Mobil-Union must let us set the plant on their property. Also Rock Island will have to rely on Mobil-Union or the Tyoneks to provide a small amount of electricity to run our lights and instruments. Rock Island can do the above provided Atlantic Richfield purchases 800,000 cfd at 40~/mcf, '~ -'~ ~'" ' z~oo.~.~-~n~on purchases 300,000 cfd at 25C/mcr and the Tyoneks purchase 1~2~0~OOO cfd. The Tyonek price will have to be negotiated. Sincerely, · AiNCHOEAGI~ P. O. BOX 1228 II ANCHORAGE,' ALASKA 99501 1{ Ji~ C l,: ! V b-: J') ,ANrJF C.';'~ ',',%[ £::1:',, TELEPHONE: 907-279-9913 CONSERVATION SOCIETY UPPER COOK INLET CHAPTER BOX 3395 ANCHORAGE, ALASKA 99501 May 28, .lC~ 'Z Date " ALASKA OIL and GAS CON SE R VAT'I Old. ,CO ~'¢tlT TEE :---:: .... ,.-, , ~, ~7~1 lllF~l J " rPhe ~pD~,~l~ Cook I.l~let g'}:,,~,a,T)te..P o~ tl,::~.~ A],.a,s].,~,~, C~ .... Co,~z~.it:t~e fop havinr~ these hearings. We re~:~~h, em as abi]zty" tore~u~ te :e,?,source extva, ctio~ a~d to maxi~;~.i,ze O~r the public i~:t, te~est i~ its pet~oleu,~ resouPces. T.?..~.~ oil zndusvzy has b®e~ telling us steadily for three year~ tha. t the United States faces a shortage of oil and gas unless restri~tio~,~.s are lifted o~ o~ shove and offshore exploration, This sm~.e argt.~tent is sued to justify the industries tax ii~cei~.ti~es. At tim~ they ~o~tsta~tly apv~ar befor~ you and stat~ th. at they ~aust waste on.~ so~e r~sou, r~, the ga.s~ to get another~ th~ oil, I~ the ~xt breath, a. spokem~ta.~ will d~la'im th~ ~r~ ~risis o~ th~ ~ast ~oast clue to th~ laok of nat~. gas~ Ther~ ter~mbl~ irratio~al i~ th.ms w~ew ~he oil i~ad. ustry obviously wa:...ts it both ways - ~o treat gas m~d ~ital ~o~t~.odi~y i~ o~e i~st~.~ and as ~ fr~ good i~ the I~ the industry can,~ot find a consume, z' for a, ,p.vod~ct it should not oroduce the product~ It is as si~pl~ as that. was'bing scarce gas. If both cannot be used t:h,e~ pvod. uctio~. sb. ould be halted u:~til the gas ca.~ be rei~,jected or used., The industry d,,..~ring these hearings has co~nstant!y stated that they have no i~c~ntive to ~.,rk~t Oook Inlet "~ A possible J..~centive wo~.,~:!.,d be to charge the operator the going market vrice for gas th. at is wasted, This see~s fa.ir m~.d eq..ui~able since t:h~ public is b~iug forced to forgo its future used o~ th~ gas to satisfy the i~..ed, iate ~,d for crude. ~/~,~ ,, , OFFICE FILE CONSERVATION FILE NO. 105 Middle Ground Shoal Field MGS "A" "B" '~C" "D" "F'~, and "G" Oil Pools HEARING May 25, 19 71 STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee CONSERVATION ORDER NO. 105 Middle Ground Shoal Field MGS "A" "B" "C" "D" "E" "F", and "G" Oil Pools HEARING May 25, 1971 PROCEEDINGS MR. BURRELL: We will call this hearing to order. First, I would point out that there was an error in the call of the hearings. This is Conservation File No. 105, not 101. We erroneously assigned the wrong number. I'm Homer Burrell-- I'm Chairman. To my left is Tom Marshall, Executive Secretary, Chief Petroleum Geologist for the Division of Oil and Gas. Mr. O. K. Gilbreth is a member of the Conservation Committee, and Chief Petroleum Engineer for the Division of Oil and Gas. To his left is Lonnie Smith, Petroleum Engineer; to his left is John Levorsen, Petroleum Geologist; next, John Miller, Petroleum Engineer; next, Karl VonderAhe, Petroleum Engineer; and at the end of the table, Harry Kugler, Petroleum Geologist. To my right is Bob Hartig, from the Attorney General's Office; and John Norman, from the Attorney General's , Office. Before we start this thing, I believe we have a procedural matter which you want to take care of right away. , MR. CREWS: Yes, Mr. Chairman. My name is Ralph Crews and I'm here representing the Middle Ground Shoal's operatOr at 'the hearing today, and Mr. Oscar Swan who the Committee knows from previous hearings will be presenting the case for the operator of Middle Ground Shoal. And I would like to ask permission of the Commission to be excused at approximately 9:30, or 9:45 to attend to another matter. MR. BURRELL: Permission is granted, Mr. Crews. First, this is a public hearing on Conservation File No. 105, Middle , Ground Shoal Field, MGS "A", "B", "C", "D", "E", "F" and "G" Oil Pools. -2- The Alaska Oil and Gas Conservation Committee is holding this hearing pursuant to Title 11, Alaska Administrative Code, Section 2009, to consider issuance of an order or orders effective July 1, 1972, restricting flaring or venting of casinghead gas from the referenced oil pools to the amount required for safety. The hearing will be held at 9:00 A. M. May 25, 1971, and so long thereafter as the hearing may be continued, in City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time operators of the referenced pools, and affected and interested parties may be heard. Evidence shall be sought as, but not limited to, the following: 1. Can excess casinghead gas be marketed, injected into any reservoir or pool, or otherwise beneficially utilized by July 1, 19727 2. Will flaring or venting of casinghead gas after June 30, 1972 in excess of the amount required for safety constitute waste, as waste is defined in AS 31.05.170(11)? 3. Will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for safety flares?~ Signed by Thomas R. Marshall, Jr., Exe~,,t~v~ R -'. who Just came in, a petroleum 2eologist, of the Division of 0il and Gas. JOHN MILLER: (indiscernible - static) This first chart sho~s the cumulative oil and gas production from the Middle Ground Shoal Oil Field by pools. Kens/ Oil Pool, 1,387,000 barrels; Kenai B, C & D Pools 5,544,000; Kenai E, F & Hemlock G Pools, 43,526,000 barrels, for a field total of 50,457,000. The estimated value of the field total, and this is based on payments to the state for royalty' oil, so in most cases transportation has been subtracted out, $148,480,000. On the gas side for the Kenai A, there are 3,395,582,000 cubic feet of gas. For Kenai B, C & D Pools, 3,341,153,000 cubic feet. And for the Kenai E, F and Hemlock G Pools, 17,909,664,000 cubic feet. This is a grand total of 24,646,399,000 cubic feet. This is further split up over here under utilized and flared. We have 3,122,462,000 cubic feet of utilized gas, or 12.77~ of all of the field gas produced. The other 87.3Z of the gas, or 21,523,937,000 cubic feet is flared. On a heat, or BTU content basis, we took the gas analysis of the separator gas and BTU content of the oil and equated on a heat content basis, the oil to the gas, to make some comparisons of the equivalent amount of oil that would be flared based on the gas, and then based on current field oil postings determined the value of this gas that is being flared. The heat value of the gas in BTU's per cubic foot is 1,446. The heat value of the oil in BTU's per barrel is 5,831,639. The equivalent value in cubic feet, then, of a barrel of crude, on this heat basis, is 4,033 cubic feet of gas per barrel of oil. Now currently, this is based on March production, there are 11,488 MCF of gas per day flared. The heating value, then, would be 16.612 billion BTU per day. Then in barrels of oil the BTU equivalent ot the gas, if these cubic feet of gas flared were converted to the barrels of oil of ~he same heat -4- content, would be 2,838 barrels of oil per day flared. The average price of the oil, this is from current postings, is $3.25, so merely multiplying one times the other we get a dollar value of the gas flared, based on the oil price, of $9,256.00 per day. Now, in the future, and we base these values on the curves submitted by operators at the March 3 hearing, Conser- vation File No. 100, in Juneau, future total gas to be flared in millions of cubic feet is 18,250, and this is the area between your utilized curve and the total produced curve, or which you said would be excess gas to be flared. The BTU equivalent, oil BTU equivalent of this gas, using the same basis as we did before, is 4,525,167 barrels of oil to be flared in the future. The dollar value of this gas or the equivalent oil to be flared in the future, w~uld be 14,706,793 dollars. This is a graph showing the history of annual gas sales in billions of cubic feet for Alaska Pipeline Company, and then a 20 year prediction of sales, and you can see it's an extrapolation of this curve and we used other contract predictions to firm up this forecast. MR. BURRELL: Thank you, John. I would like to speak into the record here about the gas shortage. I have here in my hand hearings before the Subcommittee on Minerals & Fuels of the Committee on Insular Affairs, U. S. Senate, hearings held November 13 and 14, 1969. It's entitled, "Supplies of Natural Gas". Testimony of Assistant Undersecretary of the Interior Hollis M. Dole is on page 11 of that study. He reports that the Emergency Advisory Committee for Natural Gas advised the Office of 0il and Gas, Depart- ment of the Interior, as follows: "A serious supply problem does exist with respect to the mid-range and long-range outlook, and action must be taken now if adequate gas supplies are to be available to meet the growth and -5- demand during those periods." I also quote from the Wall Street Journal of May 7, 1971. It says the FPC lifts the price of gas produced along the Texas coast; Anchorage Daily Times of May 17: The government asks the nation to conserve electrical power to avoid power shortages resulting from shortage of gas; The Oil Daily of May 18, 1971: Pacific Lighting Corporation publicly stated they are negotiating for natural gas reserves in Southern Alaska which could be liquefied and shipped to Southern California by tanker. The Oil Daily of May 21 says as follows: "The Federal Power Commission has warned the Environmental Protection Agency that there is Just not enough gas available to meet the gas demands for oil pollution control under standards established ~wo weeks ago by the EPA." I merely wanted to let the record reflect the shortage of natural gas in' the United States. We've got six people under subpoena today and I would like to give them the opportunity to testify first, and then the Committee may have questions of them and the operators of the field, and other interested parties may also ask them questions, upon their testimony. We have a letter from Mr. Bartlett -- no, I beg your pardon, Mr. Elkins -- I'll get it right yet -- Mr. Bartlett, I was right the' first"time, asking to testify first. Is Mr. Lynn Bartlett here? MR. BARTLETT: Yes, Mr. Chairman. I'm here, but there are other repre- sentatives of the Native Village of Tyonek who are flying over from the village and I would like to ask that we hold off until they arrive. MR. BURRELL: We'll defer it then until you tell us that you're ready. MR. BARTLETT: Thank you, I appreciate that. MR. BURRELL: Ail right. Mr. Marshall calls my attention that the -6- record should reflect that these were Committee Exhibits 1, 2 and 3, in the sequeace in which they were presented by Mr. Miller. Mr. Elkins, did you want to testify next, or anybody on your behalf? MR. MARSHALL: Would you please raise your right hand, in the matter now at hearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you, God? HR. ELKINS: Yes, I do. MR. BURRELL: Mr. Elkins, would you state your position, who do you work for and what your position is with them, please, sir? MR. ELKINS: Alaska Division Manager for Rock Island 0il Company. MR. BURRELL: Thank you. Will you tell me what Rock Island Oil Company does or at least what it is trying tO do in Alaska? MR. ELKINS: Well, presently, Mr. Burrell, we are engaged in setting up a small propane plant over at West Foreland and we hope to finalize this and have it ready for production around 3uly 1, and we are also looking at the economics on several other projects here concerning Cook Inlet gas, one being the recent proposal by the City of Anchorage to build a pipeline' to the west side. This pipeline we definitely plan to put in a bid and try to supply the gas for the City of Anchorage. And, as you know, the specifi- cations for this pipeline were only put out last week, so this is something that is a little further on down the road for us. And, also, we are looking at the economics on the gas that is being put ashore at East Foreland. Again, we don't have this worked out, but we do plan within a few weeks to present a proposal to Amoco and Shell. MR. BURRELL: Excuse me, sir. How long was that? Two weeks, or a few weeks? MR. ELKINS: A few weeks. -7- MR. BURRELL: A few weeks. Thank you. Can you tell me something about establishing your plant and whether or not you will offer them something for the gas delivered at the East Foreland processing plant? HR. ELKINS: We'll offer them something, but this depends upon the economics. MR. BURRELL: I understand that. MR. ELKINS: That' s everything we ' re working on at this moment. MR. BURRELL: Only the latter portion of your remarks dealt with the Middle Ground Shoal Field. Would you plan to be here the rest of the hearing or would you like your remarks to be entered into the record on future hearings? MR. ELKINS: I would like this entered into the record for future hearings. MR. BURP. ELL: Your remarks will be entered into the hearing for future hearings. Does anybody have any questions of Mr. Elkins? HR. GILBRETH: Yes, sir. Mr. ilkins, in your analyses of gas utilization on the east side, are you considering the tail gas from a plant for marketing or extraction, or are you looking at the overall problem? MR. ELKINS: There would be an extraction process. We' re looking at taking the propane, to be specific. MR. GILBRETH: Taking the propane out ? HR. ELKINS: There would still be some methane flaring, I'm sure. MR. GILBRETH: I see. Then -- MR. ELKINS: Unless we found a market for it. MR. GILBRETH: Then what you're looking for right now is the possibility of extracting and not of marketing the methane that may be left. Is that right? MR. ELKINS: That is right. -8- MR. GILBRETH: What about the -- if this is going to be made a part of the record, what about the west side? Are you looking simply to extraction there, also? Except for the bidding for the City of Anchorage? MR. ELKINS: Except for the bid with the City of Anchorage, that is right. I would also like the record to show that in our studies we contacted most of the major companies that have production in these fields, and our relationship with these companies has been very cooperative and very helpful. They have given us all the information that we need to make these studies. Also, my company has only been here Just a few months and we have a problem. Our people are busy, and we don't have anything that we can formally present to these people right now, but we are working on it. MR. BURRELL: Mr. Elkins, my advisor advises me that you are excused subject to recall. Will you be available by phone within the next few days? MR. ELKINS: I will be available. MR. BURRELL: (indiscernible) Are there any other questions from the Committee? Does anybody with the Division of Oil and Gas have any questions? Does anybody, any interested or affected party at the hearing, have any questions of Mr. Elkins, Division Manager of Rock Island Oil Company? I believe that is all. Thank you very much, sir. I don't have any particular sequence for the rest of the people who have been subpoenaed. If anybody does want to get out the door, they can wave a hand at me. Mr. Sharp wants to leave. MR. MARSHALL: Swears in Mr. Sharp. MR. Burrell: Thank you, Mr. Sharp. We'll let the record reflect that you' re the City Manager of the City of Anchorage. We are here to find out what possible gas market there may be for this gas that is being flared today -9- with respect to the ~fiddle Ground Shoal Field. I wonder if you can tell us about the City of Anchorage's plans. (indiscernible) ~R. SHARP: Mr. Chairman about -- over part of a month, you kno~, we were holding hearings. We sent you do~n a copy at that time of an invitation for bids for gas supplies for the Municipal Light and Po~er Department's gas turbines and generators, and I didn't kno~ then that your invitation would be so compelling this morning, to make me return to these chambers where I work about 40 hours a week in here at nights. But I am pleased to be here and to present for the record today a copy of the invitation to bid for gas supply and I might Just say bids are scheduled to be opened on August 17, 1971, at 10:00 A. M. local time. We have scheduled on June 14, 1971, at 10:00 A. M. also, at the Municipal Light and Po~er Department's Conference Room, a pre-bid conference. At that time, depending upon comments in it before the bid opening date in August. In fact, we have it under review no~, particularly the quantities that we're forecasting that you'll find on page 4-1. The engineering report which we based these estimates on we issued in mid-1970 and it contained about a 9I forecast of load growth on the electric utility. Since that time our growth has been substantially greater. In fact, this year we are setting about a 30I increase over last year. We don't think we'll sustain that rate of increase, but we do know we started at a different plateau on the service than what we contemplated a year ago. I'm not going to try to crystal-ball what the engineers will be doing in their review, but I bring to your attention that we may revise the 1973-93 estimate upward from where it looks today. As to the quality and other terms of invitation, we'll be considering the industry's views in 3une, and it is warranted we'll be amending the invitation at that time. This project -10- was developed following an engineering report in 1970 that I mentioned previously. That recommendation was, in fact, that the City build a pipeline from a gas source to supply our gas turbine. We did give it considerable consideration. In fact, we haven't entirely discounted that approach yet, but we decided first to see if private industry would do a better Job, produce a lower cost fuel, because we in turn would pass along whatever savings that we have to electric consumers in the area. Mr. Chairman, I have really nothing more than to submit the document for your hearing, each day for the record, and if we could supply you with additional information I'd be glad to bring the engineers and others who worked on this from a technical standpoint in for you. MR. BURRELL: Mr. Sharp, your remarks were not directed toward any one field. Would you be willing to have your remarks as well as the invitation to bid package entered into the record of the hearings for all four days? MR. SHARP: Yes, no objections. If it is of value to you, I would be happy to present it to you. MR. BURRELL: Does anybody have any questions of Mr. Sharp? Mr. Gilbreth? MR. GILBRETH: Mr. Sharp, in the bid invitation that is going out to the industry, are the quality standards such that gas from Cook Inlet will meet the standards? MR. SHARP: We think that it will, although we may want to take a good look at the quality requirements before the final bid. MR. GILBRETH: And on whether or not the requirements are such that the casinghead gas, if the liquid were extracted (indiscernible) MR. SHARP: That's what the engineers advise me. But the cost factor we may want to change our quality for that reason. MR. GILBRETH: I see. What about interruptibility? Is your bid, or -11- will it have provision for interruptibility in it? MR. SHARP: We want a firm supply, but we recognize that we do have interruptions and an alternate source of fuel is required to be supplied to us under this invitation. We reco§nize there may be interruptions. MR. CILBRETH: In other words, gas could be supplied, but if the source were interrupted, the alternate would be -- MR. SHARP: It would have to be made under these terms and we would expect that the bidder would take this into consideration. MR. GILBRETH: I see. I think that is all I have. MR. BURRELL: Mr. Sharp, as I understand this invitation to bid, the City not only requires the successful bidder to pay the additional cost of the alternate fuel at times when the gas is not available, but it also reserves the right to cancel the contract if this occurred too often, or something like that. There are some riders. MR. SHARP: No, I think that -- Yes, there are specifications in that regard, but we think they're well within limits of the industry's standard to meet. The fact of the matter is, we reviewed a number of such contracts in existence over the country before this one was decided upon for the quality standards and technical procedures that are outlined in it. MR. BURRELL: Are these procedures similar to, or common to such con tracts ? MR. SHARP: Yes. MR. BURRELL: May I ask you one additional question, then. Are these other contracts to which these provisions are common, are those casinghead gas contracts or dry gas contracts? In other words, in the case of the casinghead gas, there is a considerably larger problem of interruptibility -12- than with the dry §as supplier. MR. SHARP: I would hesitate to say because actually the engineers who worked this and have the files on it are in Seattle and I would hesitate to say at this time. I would be glad to find out for you. MR. BURP, ELL: We'd appreciate that. Or a letter to that effect. MR. SHARP: Yes. MR. BURRELL: Does anybody else have any questions? MR. GILBRETH: Mr. Sha~, in preparing your contract providing for growth, did I understand you to say that what you had put out to the public right now contains a 9Z growth factor? MR. SI{ARP: Based on our annual growth factor of MR. GILBRETH: But that may be revised upward? MR. SHARP: At least a base to start in the first four or five years. MR. GILBRETH: But there is, in your opinion, a definite growth factor in the market for gas here in Anchorage over the next several years? MR. SHARP: As far as our electric utility, very definitely. And I think as far as industry is concerned generally, because I'm quite well aware of the growth that is going on this community today, and I am sure that those in the gas field are going to compete and compete very well. MR. GILBRETH: Thank you, sir. MR. BURRELL: Does anybody else have any questions of Mr. Sharp? Do any of the operators have any questions of Mr. Sharp? MR. SWAN: Yes, sir. I'm Oscar Swan representing Amoco Production Co. MR. BURRELL: Can you come over here a little bit? We're having trouble picking you up. MR. 5WAE: Oscar Swan with Amoco Production Co. We have received a copy of your bid, or the papers that you have here, and I imagine the other operators have, also, In reviewing this, you have answered some of my questions. For instance, I think the evidence will show here that we can't meet the quality specifications with this Cook Inlet gas. But as I understand, you are willing to negotiate on that point, if we can show you that the gas we have will be of satisfactory fuel. MR. SHARP: Yes, that's the purpose of the June meeting, to develop industry reaction to our entire specifications. MR. SWAN: The other thing we can't meet is the quality. I mean, the quantity. In other words, the gas produced from the fields with which we are concerned today simply can't supply what you're talking about there. Are you willing to negotiate on a piecemeal basis? In other words, would you take what gas we do have available at a price, at a reasonable price? Can we negotiate on that basis? Or in order to sell our gas, are we going to have to go and supply the deficiency ourselves by purchasing? We need to know this really before we can tell how to go about trying to make a deal. MR. SHARP: You've almost asked me how long a string is -- MR. SWAN: Well -- MR. SHARP: Because you don't give me any quantity or anything, I can't -- MR. SWAN: Well, let me put it this way. Ordinarily a utility buys gas from a producer -- buys what he has got. They don't require the producer to go out and get some more gas in order to sell the gas he has already got. As I read your bid, you're saying if you can't provide all of our needs, we don't want to deal with you. Now, we can supply part of your needs, I think, if we can agree on price, but we can't supply all of it. Will you deal with -14- us on that basis? 1/R. SHARP: 1/y suggestion this morning and my response is -- come to our June meeting and lay the facts on the line with what you've got. We'll consider the situation, but what we may do, I'm not going to answer in two minutes this morning. MR. SWAN: Well, I think you have given me the answer. You're saying the door is not shut. Okay, that's all. That's what we wanted. MR. BURRELL: Any further questions, Mr. Swan? MR. SWAN: No, that's it. MR. BURRELL: Thank you. Tom Marshall Just reminded me we are going to enter this bid package, invitation to Bid, City of Anchorage, as Exhibit A for the record. Does anybody else have any questions of Mr. Sharp? (NO RESPONSE) Thank you very much, sir. MR. BURRELL: Mr. Schultz or his representative of Chugach Electric. MR. SCHULTZ: Mr. Chairman, if it please the Commission, I would like to have our presentation made by Bill Schoephoester, my staff member. MR. BURP, ELL: Thank you very much. MR. MARSHALL: Swears in Mr. Schoephoester. MR. SCHOEPHOESTER: My name, and I'll spell it out for the record, it's S C H 0 E P H 0 E S T E R. I am a staff engineer for Chugach Electric. Mr. Chairman, gentlemen, Chugach Electric Association has a need for gas to fuel its Bernice Lake powerplant. This powerplant is located adjacent to a Standard Oil refinery approximately 11 miles north of Kenai. The plant presently consists of one gas turbine which is being fired with a No. 4 distillate oil. A second unit will be added to this plant in October of this year. This new unit will be fired with gas and the existing unit -15- is scheduled to be converted to gas in 1972. To operate dependably over a long period of time with these gas turbines requires a fuel which meets certain specifications. Gas must be dry, free of contaminates, and have a steady lower heating value of between 950 and 1,000 BTU's per cubic foot. The nature of our business requires the fuel supply be continuous. The delivery pressure must be between 225 and 275 psig, and once established should not vary more than plus or minus 2 psi. The temperature of the gas should be between 30 and 150 degrees Fahrenheit. The quantity of gas required at the Bernice Lake Plant depends to a large extent on its price, relative to the fuel price in other parts of the system. In the absence of any unanticipated circumstances, the plant will require about 20 billion cubic feet between 1971 and 1980. The initial requirement will be about 1 1/2 billion cubic feet per year in 1972 and the consumption is expected to increase to about 2 1/2 billion cubic feet per year by 1979. The maximum possible amount which this plant could take of a gas supply is about 10 million cubic feet per day. This figure represents demand associated with the peak low ambient capacity of both units combined. The chance of such a demand is remote, however, and the more reasonable plant demand to expect from normal operation is 4 1/2 million cubic feet per day. These specifi- cations are not absolutely rigid and a potential for compromise exists in some areas. The prospect exists for a standby fuel and if this materializes, an interruptible gas supply will be acceptable. It is also possible to make allowances for varying fuel heating value. A variation of plus or minus 10 percent is permissible, but this change must be gradual enough to permit fuel control systems to compensate and prevent damage to the turbine. Chugach Electric Association is willing to investigate further the possibility of using any gas available in the vicinity of its Bernice Lake -16- Plant. We would welcome the opportunity to discuss the use of any source which meets the tests of purity, deliverability, and economy. MR. BURP. ELL: Thank you, sir. Can you tell me, have you discussed this with any of the operators of Middle Ground Shoal Oil Field? Have you made any proposals to them? MR. SCHOEPHOESTER: We have discussed it with them. We haven't gotten down to specific proposals. MR. BURRELL: You have discussed it with them. I assume you think you could use that gas. MR. SCHOEPHOESTER: Yes, we definitely feel there is a possibility this gas could be used. MR. BURRELL: Are there any other questions? MR. GILBRETH: I have a question. You heard the gentleman from Rock Island. He mentioned that they were looking at the feasibility of extraction. If the produced gas from Middle Ground Shoal was dryed up or at least extracted, would it' be usable for your type of operations? MR. SCHOEPHOESTER: Well, really, that's a step in the right direction, but I would have to know more about the dry gas and the price at which it would be available. MR. GILBRETtt: How about the interruptibility? Can you live with the interruptibility that you might have with the casinghead gas supply? MR. SCHOEPHOESTER: I'm not exactly sure how much interruptibility we would be subject to. MR. GILBRETH: Is there any standby fuel that you can have or utilize if you have an interruptible dry gas supply? MR. SCHOEPHOESTER: We're working on a source of standby fuel right now. -17- MR. GILBRETH: You think it is feasible to have one? MR. SCHOEPHOESTER: I think we will have one. MR. GILBRETH: That' s all. MR. BURRELL: Does anybody else on the Committee have any questions? Would any of the operators or other affected or interested parties have any questions? Mr. Swan? MR. SWAN: Yes. Mr. Schoephoester, I will ask you somewhat the same questions I asked Mr. Sharp. Are you willing to negotiate with the operators for the gas we have available? Incidentally, I think we can probably supply or meet the quantity requirements, at least where the gas is available and not being interrupted, and I think we can probably get together on specifica- tions. The big problem is interruptibility. Are you going to require whoever sells the gas to you to furnish the backup fuel, or are you willing to negotiate for that separately? In other words, what I'm getting at, are the producers , ,, going to have to give you a package or do we Just sell you what we've got? MR. SCHOEPHOESTER: We're willing to talk about buying what you have. MR. SWAN: In other words, you would then be willing to make a separate deal for your backup fuel, realizing that you would have to have backup fuel? MR. SCHOEPHOESTER: Yes. MR. BURRELL: Does anybody else have any questions? If not, we will excuse you, subject to recall, sir. Your statement will be read into the record of the other hearings, with your permission. MR. SCHOEPHOESTER: Yes, as it's applicable to the other hearings. MR. GILBRETH: The other hearings are on fields on the other side of the Inlet. Can you use gas from the other side of the Inlet? MR. SCHOEPHOESTER: If we can get it to this side of the Inlet. -18- MR. BURP. ELL: We'll include your remarks into the official record of all the hearings. MR. SCHOEPHOESTER: Okay. MR. BURP. ELL: Mr. Bartlett, are you -- MR. BARTLETT: Yes, I am, Mr. Chairman. MR. MARSHALL: Please raise your right hand. In the matter now at hearing, do you swear to tell the truth, the whole truth and nothing but the truth, so help you, God? ME. BARTLETT: Yes, I will. MR. MARSHALL: Thank you. MR. BURP. ELL: Mr. Bartlett, will you state your name and your official title? MR. BARTLETT: Yes, my name is Lynn P. Bartlett and I'm General Manager of the Native Village of Tyonek. The Village of Tyonek is an Indian village located about 30 miles down the west side of the Cook Inlet. It's below Beluga Gas Field, and Just north of Granite Point. On behalf of the Native Village of Tyonek, I'll present this testimony. There are three villagers here who have been able to come in for the hearing and I would like to give them a chance to add any comment or make any corrections to any of the statements that I might make. It's Daniel Standifer, who is the Vice President of the village, Lecon Chuitt, who is on the council, and Adam Cutter, who is Secretary of the village. MR. BURRELL: We will be very pleased to have any comments -- MR. BARTLETT: Good, thank you. As I say, the village is about 30 miles west, and it is reached by airplane or during the winter months it can be driven to. Back in '64 they leased their lands out for oil and gas -19- exploration. There was exploration for oil and gas, and gas was discovered on the reservation. They were able to take gas under their lease provisions, utilize it for village purposes, and to ChaC end they installed two generators and a powerplan~ which they sec up about 10 miles south of the village. These §eneracors thac they puc in -- one was a turbine, which produces about -- I chink i£ has an indicated capaci£y of about 12 megawacts. They have a standby generator which is Cwo megawatt, 2000 KW's. They have been utilizing these engines for the paso several years to produce electricity for the village. The village itself has about 70 homes and i~ has several scores, a general food store, clothing score, hardware score. IC has a large shop. and iC has a substantial school, I believe the school goes up through the 9Ch grade, and all of ~hese buildings are heated by electricity. It is an all-electric villa§e. They don't use fuel for heating or any ocher purpose other than running their generator. They have drawn on these two gas wells thac I mentioned -- or they drew on the one gas well until about February of 1970, and in February they began co have problems with the gas well. Subsequent Co that, approximately nine months later, they connected Co a second gas well and drew on thac for a shore period. They have had problems with chat~ also. They are hoc now able to draw on either of those gas wells~ and for a period of approximately a year they have been using diesel fuel Co run their scandby generator, their small 2 meg. generator. They haven't during Chis period of Cime~ run the other generator, except for an intermittent period. The Cwo engines are dual-fired. They can be fired on either oil of gas. I should state that they can be fired on gas or they can be fired on oil and gas -- with regard co the 2 megawatt. ~ich regard co the burbine, it runs solely on gas. It has presented a tremendous problem to -20- the villagers on how to resolve this fuel problem so that they can continue operation of their powerplant. As I said, in the intermediate period since the gas was lost to them, they have used diesel fuel which presents a tremendous expense to them-- not only in the purchase but in transporting it over. On some occasions we have driven it around the ice road during the winter, on some occasions we barge it, and on some occasions fly it over to the village. The village would be interested in perhaps purchasing casinghead gas, if it were available. I would like to say at this point, the village has talked with two of the oil companies over there, those companies which are situated on Granite Point, has had discussion with them and they have been very helpful not only on this particular problem, but on all problems that Tyonek has had. Particularly Mobil Oil Company and Arco and Texaco, as a matter of fact, have shown concern over the problems of Tyonek, and have been helpful in trying to help us get our problems resolved. I might mention, in addition, that they also buy electricity from us over there at Granite Point, so in addition to the power generation for the villagers' power, there is generation for Granite Point oil companies, which include Texaco, Arco and Mobil and Cook Inlet Pipeline. It's our understanding from the engineering study that was done -- a very brief engineering study that was done for us by the Bureau of Indian Affairs -- that the casinghead gas could be utilized. There are obvious disadvantages -- as expressed to us by the oil companies -- and they are obvious to us: (1) the gas has to be processed -- it has to be apparently dehydrated and stripped or scrubbed and it also has to be pressured, and this presents a rather heavy expense that I'm not sure that we can afford right at the moment. I gather that it is in the neighborhood of one hundred thousand dollars that it would -21- cost us to put in Just the pressuring plant to get sufficient pressure in the gas to drive it approximately 10 miles from Granite Point up to where the powerplant is. The attractiveness of using the casinghead gas, to us, is that at the present time there is a gas line which we -- which the village owns -- which runs south from the powerplant approximately four to five miles and connects to a gas well which is no longer operating. From that point there is an additional gas line which runs south to Granite Point which isn't owned by Tyonek, but which is -- I believe -- owned by Atlantic Richfield. So there is an existing line in and there is an attractiveness to us and I suppose perhaps even to them in utilizing that line to transport gas to the powerplant. The other obstacles -- so far as pressurization, dehydration -- we haven't completely worked through -- but I will say that the attitude of both Mobil and Arco and the other companies who are involved. there has been to try to help the Tyoneks in their problem. I suppose, in summary, I should say that the village is interested in exploring the possibility of getting this casinghead gas. We are looking at other alter- natives, perhaps going north to Beluga Gas Field -- I don't know whether that's feasible to either construct a line or whether we would have an available supply of fuel up there. That's one alternative that we have looked at. We have looked at the possibility of continuing to produce with diesel, which is tremendously exp. ensive. There are several other alternatives that we are looking at and it wouldn't be fair to say that our whole power program hinges on casinghead gas, but I think it is probably in proximity to geographical -- in proximity to the plant and it's some- thing that we want to continue to explore. Thank you. MR. BURP. ELL: Thank you, Mr. Bartlett. When was this pipeline laid -22- from the village south to the well and on down south to Granite Point? MR. BARTLETT: The pipeline was started in about October -- wasn't it? -- of this past year. MR. BURRELL: How did they ever get a pipeline permit? MR. BARTLETT: That's one of the details that I would like to check with someone else about. MR. BURP. ELL: Your remarks dealt more specifically with the matter of hearing tomorrow on the Granite Point. I wonder -- you will be available tomorrow? MR. BARTLETT: Yes, I would, if necessary. I would be available. MR. BURP, ELL: Well, let us -- for the record we would like to put your remarks into tomorrow's hearing. MR. BARTLETT: No, I would have no objection. MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: Yes, sir. Mr. Bartlett, what kind of a volume of gas do you need to run your turbine? MR. BARTLETT: Well, we've never operated the turbine at its full capacity. We have operated it at quite a bit less than full capacity. It's a 12 megawatt, over 13 megawatt, and we have run it at probably two or a little more at the most, but at that operating level we have used between 1.25 million cubic feet and 1.4 million cubic feet. I think the most we have ever used is 1.4 million cubic feet. MR. GILBRETH: Relatively speaking then, this is one of the low produced volumes. Have you -- uh -- had any problems in working with the operators, let's say in the Granite Point Field, in particular, where the lines go to Granite Point facilities. There is quite a bit of gas -23- being flared there. Is this something that has Just turned up recently, or have you had this problem a long time? MR. BARTLETT: Are you speaking now of the flaring or our problem of not having gas. MR. GILBRETH: The problem of shortage. MR. BARTLETT: Our shortage started in February of 1970, when our first gas well went down. That was the Moquawki No. 1, and from that period until approximately December -- roughly 11 months -- we were without gas. MR. GILBRETH: Did you make any contact with the operators during that time? MR. BARTLETT: Yes, sir. There were contacts made with them. I don't think specifically with regard to casinghead gas. MR. GILBRETH: I assume, then, like the other gentlemen, that if there is not a line across the Inlet then you couldn't use the gas on the east sise of the Middle Ground Shoal Field? MR. BARTLETT: That's correct. MR. BURP. ELL: Does anybody else have any questions of Mr. Bartlett? Mr. Marshall? MR. MARSHALL: Could you tell us the size of the pipeline connected with the Granite Point onshore facilities? MR. BARTLETT: The pipeline running from the powerplant to what is called Kaloa No. 1 Well, which is roughly half way to Granite Point -- I believe -- is 2 and 3". Some 2" ID and some 3" ID pipe. MR. MARSHALL: I understand that you had a connection to the Granite Point shore facilities. -24- MR. BARTLETT: Well, it's not technically -- it's not -- the pipeline itself is not meant to be interconnected for the purpose of transporting through the full length. What it is is a connection to the well for the pipe running to the north and a connection to the well for the pipeline running south. But they are right together. MR. MARSHALL: I see. The line that does run to the shore facility, can you tell me the diameter of that? MR. BARTLETT: I believe that's a 3" ID, but I'm not sure about that. That's not our pipeline. MR. GILBRETH: Did I understand you to say the line running from the wells toward the Granite Point facilities is probably owned by Arco? MR. BARTLETT: I believe it is. MR. GILBRETH: And the line running from the well north is owned by whom? MR. BARTLETT: The Native Village of Tyonek. MR. GILBRETH: That ' s all. MR. BURRELL: Does anyone else have any questions of Mr. Bartlett? No questions? UNIDENTIFIED VOICE: Homer, I would like to clarify a point. MR. BURRELL: Come and sit down and identify yourself. MR. COOK: My name is Ron Cook with Atlantic Richfield, and I testified in the June 4 hearing and, frankly, some of this belongs in tomorrow's and possibly the following day's hearings, but the pipeline from the Kaloa Well to the Granite Point facility was installed and began service December 10, 1970. And as I spoke to the hearing in Juneau this well sanded -25- up in January and during this period, from December 10 to January, the Native Village did receive gas from that well so, consequently, the problem as far as the casinghead gas or use of casinghead gas -- really only stems from January of this year. That's the only point I wanted to make clear. MR. BURRELL: Thank you, Mr. Cook. Go ahead. MR. GILBRETH: Mr. Cook, I sorry, I didn't quite understand that. The line was installed in December of '70 and the well sanded up in January of '717 Is that what you are saying? MR. COOK: Yes, that's correct. MR. GILBRETH: And during that time, did casinghead gas go through the line from December '70 to January '717 MR. COOK: No, we were using gas from the Kaloa Well going back -- going both ways. MR. GILBRETH: Alright. MR. MARSHALL: Mr. Cook, would you confirm the size of the pipeline -- MR. COOK: It is 3" ID. MR. MARS~L: 3" ID? MR. COOK: Yes. MR. MARSHALL: Thank you. MR. BURRELL: Thank you, Mr. Cook. Does anyone else have any questions? Would any of the officials of the Native Village like to make any comments? MR. BARTLETT: No comments at this time. MR. BURRELL: Perhaps they can stay and testify tomorrow for the Granite Point Field, if they'd like. MR. BARTLETT: Thank you for the invitation. I will extend it to them. -26- MR. BURRELL: Mr. Hendershot? HR. MARSHALL: In the matter now at hearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you, God? MR. HENDERSHOT: I do. MR. MARSHALL: Be seated. MR. BURRELL: Mr. Hendershot, will you state your position. MR. HENDERSHOT: My name is James Hendershot and I'm presently Commissioner of the Alaska Public Utility Commission. However, I was subpoenaed to come here and my understanding was that this subpoena was relative to a function i performed prior to taking that position. MR. BURRELL: Let's clarify the record. We will let you testify with one hat on at a time. MR HENDERSHOT: I would appreciate that. MR. BURP. ELL: Let us ask you to testify in your capacity prior to your entering public employment. Can you tell us what that was? MR. HENDERSHOT: Yes, sir. I worked as a consultant to a propane, fuel oil and lube oil retail sales company. MR. BURP. ELL: Alright, can you tell us what you did in that -- MR. HENDERSHOT: Well, primarily I was hired to develop major sales, to assist with logistic problems, to develop new business, and to try to develop new methods of operation. MR. BURRELL: Did you have any occasion to negotiate for any of the casinghead gas that is currently being flared in the Middle Ground Shoal Field? -27- MR. HENDERSHOT: Yes, at one time I formulated an idea, and did considerable study to determine the feasibility of utilizing the flared gas to make propane. As a matter of interest, it is very similar, I believe, to the program presently under consideration by the prior witness with Rock Island Oil Company. MR. BURRELL: Would you tell us about that? What your plan was and who you talked to and what happened? MR. HENDERSHOT: The firm that I was working with was interested in obtaining approximately three thousand gallons of propane per day from sources within Alaska. At that time they were shipping propane by rail, tank car and train ship from the South 48. I obtained from Pan American Petroleum an approximate gas analysis of the associated gas being flared from the platforms capable of supplying my needs on the Kenai side of the Inlet, that is, in the Point Niktski area. I had discussions with. Shell Oil. They indicated a tentative agreement to allow me to use certain space at their Point Nikiski treatment facility -- as a matter of fact, that is very close to the onshore flaring facility right now. I further ascertained that the Reid vapor pressure of the gas was such that the heavier than propane elements extracted could be sold directly to Shell and delivered into their pipeline in the immediate vicinity. I was aware that Anchorage Natural Gas or Alaska Pipeline had facilities constructed at this point and discussions were held with Mr. Teel relative to the possible sale and utilization of the cleaned-up tail gate product from the proposed stripping plant. In essence, that outlines the thinking to that point. HR. BURP, ELL: Well, what happened? MR. HENDERSHOT: Well, primarily, again I made an effort to purchase -28- some type of supply, and kept getting the response that of course this would have to be not firm. I don't know if we call that interruptible. assume we call that interruptible, but let's say not firm. The plant that I had in mind was not really susceptible to the fluctuations that were indicated. As it applied to the overall gas flare from the Cook Inlet Fields, it was small in nature and as the amount of gas that was being flared over there -- excuse me, from the East Cook Inlet Fields -- was small in nature and with the amount of gas that could be effectively sent to the beach, I didn't see any problems. In the event of a catastrophic failure over a limited period of time one would have to -- no one would be injured irreparably. This is to say that if the plant would have to be shut down for a month's period for pipeline repairs or if plant changes were effected, no real harm would have been done other than a loss of revenue to me or my company. I was able to actually obtain a -- to a certain extent -- a commitment, I guess it might be called a commitment -- I was given the opportunity to purchase the gas. If I purchased all of the gas, a considerable amount of this would have to be flared by me and that amount apparently would be subject to change or increase by the supplying company or companies. In essence, I had the converse of Mr. Sharp's problem. I had too much. The company elected to indicate in their letters to me, which I believe were made part of the prior hearings, that if I couldn't use it all they were not really interested in selling it. MR. BURRELL: Did you ever discuss price? Were you willing to buy it? MR. HENDERSHOT: Yes. MR. BURRELL: And interruptibility was no problem? Or one you could -29- live with? MR. HENDERSHOT: I don't believe it was one that we could not have lived with. As to discussing price, we never really got to that point, because I accepted the letter on face value that if I wanted it I had to take it all. MR. BURP. ELL: Were you willing to take the gas as it came to shore at the onshore processing facility at Nikiski, or were you requiring the company to do something to it other than Just delivering it to you? MR. HENDERSHOT: It was my understanding in verbal discussions that the company, to supply the needs, would have had to put compression on one of the platforms, or on the platforms. This is one of the reasons I felt that I would have to pay for it. I didn't figure they were going to give it to me. The real problem was that I couldn't be assured of the amount of gas that would have been sent to Nikiski for my "utilization". It -- they could have broke me pretty quick by really putting it over there to me. So this was the situation. I spoke to the principals that I was involved with and they said, "let's don't waste any more time on it." MR. BURRELL: Do you think the volume you proposed to use was too small to Justify the cost of compression on the platform? MR. HENDERSHOT: No, I don't. We were interested in approximately 300 -- or excuse me, 3000 gallons of propane,, but from that 3000 gallons of propane we would have probably wound up with the same amount of butanes and heavier ends, looking at the analysis. Possibly more, I don't know --I can't really remember. The figures were transmitted to the principal and that was the end of my involvement in that particular issue. We were taking a relatively fair volume plus the fact that it's interesting to note there is gas being flared in that facility right now. Or there was. -30- MR. BURRELL: Did you ever offer to pay for the compressor for the platform? MR. HENDERSHOT: No, I didn ' t. MR. BURRELL: Do you know what one would cost -- ? MR. HENDERSHOT: Well, I don't know. I guess we're looking at a Solar compressor-- I don't really know. MR. BURP. ELL: Do you have any more statement here? MR. HENDERSHOT: Not relative to that function, no, sir. MR. BURP, ELL: Does anyone have any questions? MR. GILBRETH: Yes, sir. I have a question. Mr. Hendershot, when making an analysis of this situation, was it your opinion from your study that a profitable operation, profitable stripping operation, could be set up on the beach if gas could be delivered at some nominal value? MR. HENDERSHOT: Well, it looked real good, primarily because all three facets were involved. We could sell the propane, we could sell the heaviers, and we could sell the natural gas. Anchorage Natural Gas built a line out there to supply the Shell facility and I may be wrong here, but it is my understanding that Shell now basically serves their own gas needs at that facility with the exception of standby provided by Anchorage Natural Gas. That facility could certainly, I am sure, use cleaned up tailgate products from a stripping plant. You might ask Mr. Teel that when he gets up here. MR. GILBRETH: I was wanting to ask you, did you ever get far enough along in planning to try to determine if there was a market for the tail gas? MR. }~NDERSHOT: We were far enough along to discuss it with Mr. Teel. He thought, I believe, that he could have utilized some gas. I can't really -31- remember all that was said, but I did discuss it with him. MR. GILBRETH: Could you give us any idea at the time of the amount that was being utilized as compared to what was being flared? Are you talking about iOZ of gas being flared, 25 or 50Z, or what? MR. HENDERSHOT: I ' d like to give you that volume, but I can ' t remember it and I can only tell you that my study was based on the production of 3,000 gallons of propane. Now you can take it from there and do a little figuring and back it out. I looked through in my files at home last night and the figures and not there. They are with the principal. MR. GILBRETH: It would Just be a matter then of taking the CPM and taking the -- MR. HENDERSHOT: That is correct. Take the analysis and the GPM and work backwards and come up with the volume of both the heavier and the propane. This was the thing that really made it look good, because even if the propane and the tailgate gas were a washout, you still had the butanes plus. MR. GILBRETH: Then, if I understand you right, you were working for a principal trying to put a stripping plant in, and you thought you could economically do this if you had a market for the tailgas and you didn't want all the gas that was available? MR. HENDERSHOT: That is correct. MR. CILBRETH: And you were told that would have to have to take all of it or nothing? MR. HENDERSHOT: That was my understanding of the letter, and I reread the transcript and I guess it's the understanding of Mr. Cil's, I believe is his name, too. -32- MR. GILBRETH: Giles. MR. HENDERSHOT: Giles? MR. GILBRETH: That's all I have, Mr. Chairman. MR. BURP, ELL: Does anybody else have any questions? Do the operators have any questions of Mr. Hendershot in this capacity? MR. SWAN: Yes, I do. Mr. Hendershot, I'm Oscar Swan with Amoco Production Company. I don't have the letter with me this minute, but it's my recollection that what we said was that we are currently negotiating with a possible purchaser for all of the gas and if we're able to make a deal, there will be no gas available to sell you. Apparently there was a failure of communications. Do you recollect that that was what the letter said? MR. HENDERSHOT: No, I don't. I don't recollect that. It possibly could have. The best that I have before me right now is page 64 of this last transcript where I guess Mr. Giles was quoting from that letter. MR. SWAN: Do you think it would have been fair for us to continue to negotiate with you without advising you that we might sell all of the gas? Then, in effect, leave you high and dry without any gas source after having made quite an effort to put a plant together? MR. HENDERSHOT: No, sir. I don't think that it would have been fair to me, but I also think that it might possibly have been fairer to me to tell me when you didn't wind up this negotiation. MR. SWAN: Well, frankly, we're still negotiating. MR. HENDERSHOT: Uh huh. MR. BURRELL: Mr. Swan, this field went on production in October 1965, and you' re still negotiating? HR. SWAN: Yes, sir. -33- MR. GILBRETH: I'd like to ask a question. If you have that transcript, what was the date of that letter? MR. HENDERSHOT: I believe all the gentleman said was sometime in February of -- yeah -- 1969. HR. GILBRETH: February of '69, and you're still negotiating? MR. SWAN: Yes, sir. And I think some of the people who have been here today, frankly, you have done us a favor. You subpoenaed some people to give some information that we haven't been able to give you until now because we would have been revealing what we felt was confidential informa- tion. But we haven't given up. I think that the testimony today shows that we haven't given up. MR. CASBARIAN: My name's Casbarian with Shell. I would like to put into the record that the volume Mr. Hendershot is talking about is on the order of one million cubic feet per day. MR. GILBRETH: Can you speak up a little louder, please? MR. CASBARIAN: The volume that, to recover 3,000 gallons a day of propane, would be on the order of a million cubic feet per day. MR. BURRELL: A million cubic feet of casinghead gas. MR. CA~BARIAN: That is correct. MR. HENDERSHOT: Thank you very much. I certainly accept that. HR. BURRELL: Mr. Swan, do you have any further questions? MR. SWAN: No, that's all. MR. BURP, ELL: Does anybody else in the audience have any additional questions of Mr. Hendershot in his capacity as a negotiator before he went to work for the state? MR. SWAN: I do have one more question. Since he has gone to work for -34- the state, I think he is at least one person that we can no longer negotiate with. MR. HENDERSHOT: I think it precludes me from any further negotiations, yes. MR. BURRELL: Mr. Hendershot, would you be willing to put Mr. Swan into contact with the principal in your contract? MR. HENDERSHOT: Certainly. I think he is aware of the principal. In fact, I believe it is involved in the transcript, the prior transcript. MR. BURRELL: Mr. Hendershot, would you like to give anything in your official position as Commissioner of the PUC? MR. HENDERSHOT: Well, I, as a commissioner, will make a statement. I have read this statement to the other commissioners and found no negative response. I have only this to say, and that is that it is a crying shame that the fantastic amount of energy available is being wasted. As a graduate petroleum engineer, I am painfully aware of the difficulty in compressing and cleaning up the associated gas. But as an Alaskan utility rate payer and one who is closely associated with the rate problems of our various power companies, I say it is extremely unfortunate that a solution of the quandary of flared gas has not been found. I'm not totally aware, nor do I. profess to be, of the overall structure of formations of the fields, both on the east. and west side of Cook Inlet. It seems inconsistent to me to utilize the fact that associated gas cannot be classed as a firm gas supply when, for a minor investment, dry gas wells could be developed to firm this supply. When an individual approaches any company to purchase associated gas the first thing the company tells them is that the sale will have to be on a non-firm basis. Now, I've got to ask a question. How do you -35- expect anyone to finance any type of project with that hanSing over his head? Even though the chances of well shut-in or supply failure is negligible? Look at the record. People have been trying to develop schemes for utilizing flared gas on these platforms since their inception. How many times have any of us flown over that field and found all the flares out? Well, this reminds me of the story of the earthquake expert who , says that with each passing day Anchorage is getting closer to its next earthquake. Now that's a profound statement and might be reasonably applied to the flared gas situation. Might go something like this. As of the first day that gas was flared in Cook Inlet, we're getting closer to the point where there will be no gas to flare. Of course, this is hindsight and could have been, or should have been, said some years ago -- and while I'm on the subject of saying that, I may have said too much already. So, thank you. MR. BURP, ELL: Thank you, Mr. Hendershot. Are there any additional questions of Mr. Hendershot? (NO RESPONSE) Thank you, sir. We have one more person under subpoena, Mr. Dale Teel. I would like to take a break now, but in deference to Mr. Teel who may have something else to do, I'll a~k him whether he would rather go ahead and testify. MR. TEEL: I think you can take the break. MR. BURRELL: Mr. Hendershot, your're excused, subject to recall. BREAK MR. BURRELL: We' 11 reconvene the hearing now. I've been told that Mr. Griffin wants to make a brief statement to correct something that was said earlier, so we'll let him do so before we have the next witness. -36- MR. GRIFFIN: My name is Gene Griffin, I'm Operations Manager for Union Oil Company in Anchorage, and it is not my desire to correct the statement made, but to perhaps clarify. Mr. Hendershot indicated that the interruption of the casinghead gas was a rare occasion, and I Just want, for the record, to state that during the first quarter of this year, on the west side, the production from the Trading Bay Unit and Trading Bay Field were curtailed for 28 days because of very severe icing conditions where we could not get ships in to load at Drift River. At one point in time we were within 100,000 barrels of completely shutting the entire production in. Also, in April of this year we had another five days of curtailed production because of mechanical reasons, so these flows are curtailed and we came extremely close to having to shut the entire, both the entire fields in. MR. BURRELL: Mr. Griffin, did you have to shut any of the wells in completely? MR. GRIFFIN: Yes, we did shut, Mr. Burrell, the wells that are the low cut wells and kept the high cut wells that we are always concerned might have water block damage caused if MR. BURRELL: Does anybody have any questions of Mr. Griffin? MR. MARSHALL: Mr. Griffin, if it became a matter of interruptibility of the casinghead gas and not Just the producing oil to limitation on oil production not at the storage, have you any setup to cycle crude oil producing the casinghead gas and reinJecting the crude oil? MR. GRIFFIN: No, we do not. MR. MARSHALL: Thank you. MR. BURRELL: Do you have a -- MR. HENDERSHOT: One question -- uh -- do you presently purchase your power from the Native Village of Tyonek, or are you involved while in the -37- Trading Bay Unit area? MR. GRIFFIN: No, we generate our own power. MR. HENDERSHOT: With what? MR. GRIFFIN: The castnghead gas. MR. HENDERSHOT: How many times have you been down? MR. GRIFFIN: The casinghead gas? MR. HENDERSHOT: On that particular generator. MR. GRIFFIN: We have been down quite a few times. We have a multitude of generators on which you have the normal maintenance problems. We have never been totally without power. MR. BURRELL: Does anybody else have any questions of Mr. Griffin? (NO RESPONSE) Thank you. ME. GRIFFIN: Thank you, Mr. Chairman. DALE TEEL is swor~ in by MR. MARSHALL. MR. BUREELL: Mr. Teel, do you want to state your position, sir? MR. TEEL: My name is Dale Teel. I'm Vice President - General Manager of Alaska Pipeline Company, and President of Anchorage Natural Gas Corpora- tion, now renamed Alaska Public Service Corporation. ME. BURRELL: What are the responsibilities of your positions there? What is the objective of your corporation or corporations doing business in Alaska? MR. TEEL: We sell utility gas fuel to the Anchorage area, the Soldotna area, and the area on the north road of the Kenai Peninsula. MR. BURRELL: Well, in that capacity you are a major purchaser of gas, is that not right? MR. TEEL: We may be the largest local consumer of gas, but we are -38- small in terms of the gas reserves of Alaska, the total operations of gas in Alaska including exports. MR. BURP. ELL: Do you purchase any casinghead gas at all? MR. TEEL: No, we do not. MR. BURRELL: You purchase all your dry gas from the Kenai Gas Field? MR. TEEL: Yes, we do. Kenai Field supplies all of our gas. MR. BURP. ELL: Natural gas, you have enough? MR. TEEL: Yes, we do. MR. BURP. ELL: Do you have enough to meet projected demand? MR. TEEL: Yes, we do. MR. BURRELL: Ail from the Kenai Field? MR. TEEL: Yes, sir. MR. BURRELL: Do you have a question, Mr. Gilbreth? MR. GILBRETH: Yes. Mr. Teel, did you say that you have enough gas now for your auticipated future demand? MR. TEEL: Yes, sir. We do. MR. GILBRETH: Do I have you mixed up with somebody else who was in the Commissioner's office a few weeks ago saying that they needed more gas? MR. TEEL: That was some time ago. I think things have changed since then. MR. GILBRETH: Things have changed. Do you now have enough gas supply? MR. TEEL: Yes, sir, we do. MR. GILBRETH: Well, this is quite an about. There have been no wells drilled. Did you make some other deals? MR. TEEL: We reached an agreement on a new quantity of reserves. -39- MR. GILBRETH: I see. Could you tell us whather it was dry gas or casing- head gas? MR. TEEL: It's dry gas from the Kenai Field. MR. GILBRETH: Then you, in the future, don't need any additional gas, other than what you estimated n~w. MR. TEEL: I would say that this can change in the future. We don't kn~w the future accurately, but we believe we have prudently covered our requirements for the foreseeable future. MR. GILBRETH: If a prospective purchaser were to establish a processing plant or an extraction plant on the east side of Cook Inlet to extract the liquids from gas produced from the Middle Ground Shoal Field and that is moved to shore from Granite Point, would you have enough room in your system to take the tailgas at your plant? MR. TEEL: We don't have much market in that area today. We have been working through the years to find new ways to sell gas and we do have a facility that could carry some gas, It's not a large amount, not nearly as much as the gas I understand you are speaking of, but approximately one-third of it, or something like that. MR. GILBRETH: N~w, the gas that is coming out of the field, you do have a line to the facility where gas is being flared now, do you not? MR. TEEL: Yes, we do. MR. GILBRETH: Are you telling me then that you could not utilize but one-third of the amount of gas that is coming to be flared now? If it were coming through a plant? MR. TEEL: The facilities we have could only handle about a third of what I understand the quantity to be. -40- MR. GILBRETH: Could you elaborate a little more by what you mean by the facilities? MR. TEEL: We have a small line, a four inch line, from the onshore point back to the potential area of use of that gas. It could not carry -- it is rated-- not built to carry the full quantity. MR. GILBRETH: Could you give me any idea of how far the facilities are located from the line that could carry it, if it were available?. MR. TEEL: I don't quite und .... MR. GILBRETH: Would it be necessary to lay a ten mile line to enlarge it? MR. TEEL: It would be less than ten miles. MR. GILBRETH: I see. MR. TEEL: To carry more, but I don't really have an idea that we could sell all of this gas, even if we got it under an arrangement. MR. CILBRETH: Well, of course, you realize, Mr. Teel, that we have a problem here. There is a tremendous amount of energy being flared on both sides of the Inlet and you're making new contracts, apparently, picking up gas all the time to be utilized in your system. Is there any reason that if the casinghead were cleaned up that you couldn't use it in your system? I realize this is a matter of your choice -- MR. TEEL: I think perhaps I didn't quite understand your other question. The ten mile figure does not relate to the basic transmission system and distribution systems that we have. It relates only to the gas load at Kenai. MR. GILBRETH: I see. MR. TEEL: Actually, it is much more than that to get somewhere near -41- our transmission system. So I want that to be clarified. I don't know how to answer your second question. I'll ask you to restate it. MR. GILBRETH: If, I think simply it might be stated this way, if were made available to your system, your large system, clean gas, could you or would you utilize it? Gas that the liquid had been extracted from -- casin§- head gas. I am Just tryin§ to find out if there is a potential market in your system for this casin§head gas if somebody is willing to clean it up? MR. TEEL: As I mentioned, we have a supply for our present markets. MR. GILBRETH: Well, then, your answer is no? , . . MR. BURRELL: Let me interrupt to focus on this question. What govern- mental agency approval do you have to get to §et an additional commitment of . . . reserves from the Kenai Gas Field? Or do you have to get any governmental app royal ? MR. TEEL: I'm not aware of any governmental approvals. MR. BURRELL: The PUC doesn't enter into this at all? MR. TEEL: No. MR. BURRELL: I wonder if there isn't a need for something here where we can leave the dry gas undedicated, and force people to use the tail gas? Obviously, you'd always rather use dry gas. It's cheaper, and it's easier to flare the other. MR. TEEL: That's the way we try to run our business, the most economical way possible. MR. BURRELL: R~ght. I didn't know that -- I thought some PUC approval was required somewhere along the line here, that was an expansion to my -- MR. TEEL: We are contemplattn§ the future growth of Anchorage, yes, and the service area on the Kena~ Peninsula. -42- MR. BURRELL: Well, then, the approval would come for an expanded service area, is that correct? Rather than to provide additional services to the existing area? MR. TEEL: No. We are talking about basically our present service area. MR. BURP, ELL: You're not talking about expanding your present service area, appreciably? MR. TEEL: That's right. MR. BURP. ELL: Then there' s no PUC approval required? MR. TEEL: That's what I understand. MR. BURRELL: In the future, as far as you see right now. MR. TEEL: That is correct, We have the approvals necessary. MR. BURP. ELL: I see. Mr. Marshall? MR. MARSHALL: Mr. Teal, before you made a commitment for additional reserves in Kenai Gas Field recently, had you been discussing a source of gas from the operators in Cook Inlet which would derive their gas from casinghead? MR. TEEL: Not in any broad fashion. We have looked a long time at how we might make use of the gas that is being flared at what I call Nikishka, Middle Ground Shoal area. We have never been able to put anything together that was economic. But other than that we have never looked at casinghead gas seriously. MR. MARSHALL: Thank you. MR. GILBRETH: Mr. Burrell, I am sorry I still haven't got a satis- factory answer. If an operator, not an oil operator, but anyone who wants to put in a gas plant at Nikishka, dries up the gas, would you be willing -43- to take what could be put through your existing system -- of the tail gas that could be put through your existing system? MR. TEEL: I would say we're not opposed to it in principal, but it has got to be economic for us and we have to be able to make arrangements with our present supplier who has dedicated his reserves to us. MR. GILBRETH: I see. In other words, you have an exclusive supply contract. MR. TEEL: Essentially. We pay for our requirements. MR. GILBRETH: That's all I have. MR. BURRELL: Does anybody else have any questions? MR. TEEL: May I defer one moment? My attorney is waiting and I believe he has no further points to make, but we are available and will be glad to answer questions later. MR. BURRELL: That covers all the issued subpoenas. Is there anybody else who wishes to put on any testimony at this time? Mr. Swan? MR. SWAN: The operators have some testimony. MR. BURRELL: The operators have some testimony? Would they like to testify now? MR. SWAN: Unless somebody else is ready, we are. MR. BURRELL: Nobody else is raising their hand. MR. SWAN: Alright. Maybe we can. get through by lunchtime. UNIDENTIFIED VOICE: Mr. Chairman, I have a little personal problem. If anybody has an extra tablet sitting next to them -- mine is not where it was before the recess. There is nothing new in it, but I have a beck of a good transcript of the proceedings I would enjoy having. (TABLET RETURNED) Thank you, gentlemen. -44- MR. BURRELL: Mr. Swan, before you start, may I ask you, are you going to be giving any testimony yourself? MR. SWAN: I'm going to be giving some legal arguments. If you think I'm testifying, yes. I think an attorney is always under oath. The mere fact that he's taking over as an attorney. MR. BURRELL: We'll accept that you concede you're under oath. MR. SWAN: If you can't accept -- MR. BURRELL: Go ahead, sir. MR. SWAN: I do have an opening statement that I would like to make. I hope it will put our evidence in a little better focus. First, let me start out by answering the three questions that the Committee has asked in the call for this hearing. I think our evidence will support these answers as being correct, although they are pretty brief answers. Your first question is, can excess casinghead gas be marketed, injected into any reservoir or pool or otherwise beneficially utilized by July 1, 19727 First, let's rephrase the question. Gas can be injected into some of the reservoirs or pools in this field and under some conditions it might be a beneficial utilization, under others it would be an extremely detrimental utilization. But, if you restate the question to ask, can the excess gas be marketed, beneficially injected into any reservoir or pool or other- wise beneficially utilized by July 1, 1972, the answer is we don't know. All we can tell you is today we are still trying and we have been trying, as I have pointed out, for quite a few years, and if it can be done by 1972, we'll do it, and I think we'll show you some of the problems we have had and why it can't be done. The second question is, will the flaring or venting of casinghead gas after June 30, 1972 in excess of the amount -45- required for safety constitute waste as waste is defined in Alaska Statute Section 31.05.1707 The answer to this, of course, depends on the answer to the first question. If gas can be beneficially utilized, it is waste to flare it. If it can't be beneficially utilized, it is not waste to flare it and, as a matter of fact, I think it is waste not to flare it. Further, any action which might be taken to prevent the flaring of gas which cannot be beneficially utilized would also cause waste. The final question, will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is bene- ficially utilized or is required for a safety flare? This one we will answer, it is a flat-out yes. And there are no ifs, ands or buts about it. First, there would be a serious economic waste which would result from any such restriction and this would be suffered not only by the oil industry,, but by the state. And this economic loss will far outweigh any possible benefit that might be realized from selling the gas or any other utilization you might make of it. In addition, this Middle Ground Shoal Field is being waterflooded successfully. There is a real probability that a production restriction would materially reduce ultimate recovery of oil. The magnitude of this loss and the seriousness of the probability are such that we feel it would be foolhardy to take the risk of the loss because by the time you know whether or not you're really going to have it, it is too late to do anything about it. In other words, the dsmage is done and you can't come back and undo it. This is basically what our evidence is to show you today. We have told you all this in previous hearings and we've had no substantial evidence to the contrary from anyone, but after our last hearing in Juneau it is apparent that somehow we aren't getting through, par- ticularly we aren't getting through to some members of the general public -46- who lack the expertise that this Committee has, and there is something we need to do and I'm not sure I know what it is, but I would like to explain this argument if you would permit it a little bit and see if we can supply some of the basics. I think maybe we started our case in the middle some- times and we haven't emphasized some of the things that have really handi- capped us. Of course, we have got some problems here that they've got everywhere, for instance, we can't produce this oil without producing the gas, as we've told you, but that is true everywhere. As a matter of fact, the gas is a blessing in that respect -- it is not a handicap. We couldn't produce the oil if that gas wasn't in solution. But there are some things that make Alaska a little different, and I know you have heard them all, but your isolation makes the market problem a serious one. As Mr. Teel points out, he is the largest marketer of natural gas in Alaska, but what he can market locally is Just a drop in the bucket to what Alaska can produce and we have got to go outside of the state to sell it and, of course, this sets up some problems. Let me discuss a little of that later. Perhaps the biggest natural handicap is the conditions under which we operate in the Cook Inlet. You've heard all about that, but this interruptibility business is serious. Our pipeline from Granite Point that carries gas has broken every winter since we put it in. We have had to repair it. Apparently it goes across a trench there and the currents Just whip it around until it breaks. There is nothing we can do about that, we can't stop the current in the Cook Inlet. There are other problems, for instance, we have got a field out there, as this Committee has heard, or actually the Department of Natural Resources, rather -- we have a substantial oil reserve out there we can't even develop under present conditions. If that was an~,here -47- else in the world almost, any other oil producing area, it would be developed and they would be glad to develop it, but economically it Just can't be. So I think if that's true of oil, for which your marketing problems are a lot simpler, you have to realize that we can't achieve the same utilization of gas that they can in Texas, or some other areas that don't have to buck quite as many of the handicaps as we do up here. Now we're not asking you for your sympathy, we came here with our eyes open and we're going to stay. But what I'd like to have you realize is that every lessee who is partici- pating in these producing operations in Cook Inlet has proved the hard way that it has got conviction and courage, and the engineering ingenuity and the financial resources necessary to conduct producing operations under most adverse conditions. We have shown our willingness to stake millions on the soundness of our business Judgment and our ability to continue to stake millions on the soundness of our business Judgment is due to the fact that our business Judgments have been, as a whole, sound. Sure, we've made mistakes, we've drilled some wells we wish we hadn't and we've built some platforms we wish we hadn't. But to continue to have this ability we've got to continue to operate in accordance with sound business Judgment. Now the State of Alaska has benefited from the operations we have conducted and I think when we tell you it's impossible to achieve a higher level of utilization than we have achieved or to move faster than we have moved, it isn't because we lack the guts or the know-how or the cash to do it. It is because of conditions which neither you can control nor we can over- come, as yet. And you laugh a little when I say we're still trying. We are still trying and we feel quite frankly that it's better to sell a part of the gas for a fair price that it is to give it all away, and the -48- best deal we were able to work out at any time would have amounted to worse than giving it away. It would have cost us money to give it away. And the state as a royalty owner -- I think the state itself benefits if we are able to secure a market for, at any price, for any part of the gas that is left. You are better off than if we gave it away and you got no royalty. And, of course, I have got some doubts about your legal right to even give it away under those circumstances. Anyway, I don't think you can lust shrug off testimony from witnesses from these operators. You've got to have testimony, and competent testimony comes from somebody with equal or equivalent knowledge and experience in these operations. I haven't heard any such testimony. We have heard some testimony today that, as I told you in Juneau, we couldn't present. There are people we are talking to and there is a possibility, a real possibility, that we'll sell some of this gas and make a profit. We hope someday we can come back and tell you we've started, but we can't today. Ail we can tell you is the same thing these other witnesses have, they're working on it and we're working on it. We hope we'll continue to get your understanding and cooperation. We feel we've had it in the past and we appreciate it. But there are some artificial handicaps we have to operate under, too. These are man-made handicaps which are created by unwise laws and regulations, and governmental policy. And, unfortunately, there is not much the oil industry or the State of Alaska, or this Committee can do about the ones I'm complaining about. You can't eliminate them. We Just ask you to realize that we have to operate under them and they do have a real effect. Now I'm not talking about regulations with respect to conservation or prevention of pollution, or safety, or protection of environment. We con- sider that reasonable regulations to accomplish these purposes are a part of -49- the cost of doing business and that the benefits outweigh the cost. In other words, it is an economically sound proposition. I am not talking about the anti-trust laws. We have mentioned this, but if my engineers and my marketers can solve the economic problem of getting a market for this gas, we can figure out a way to solve any legal problems that are presented by the sale. There are two examples of laws and regulations which are economically unsound; which, in effect, try to nullify the basic economic law of supply and demand. These are the two I'm complaining about, not to you because you can't do any more about them than we can. I have already mentioned that if we're going to market this gas we've got to go outside of Alaska for most of it to find a market. The obvious market is the Lower 48. They have a shortage there. They need the gas, and from some of the things which Mr. Burrell read into the record, they are beginning to wake up to the fact that they have made some bad mistakes in the past. Well, there are two ways to get the gas moved. One is by pipeline and from the Cook Inlet that's a physical impossi- bility. I don't see how it could be done and even if it were physically possible, there are sometimes other problems connected with pipelines, as we all know. The other way is to liquefy it and put it in tankers and take it to market. We run into the Jones Act, and I know you all are tired of hearing about the Jones Act, too, but to pay an inflated freight rate to take the gas down, and sell it at an artificially low price, you Just can't do it. So we go into the international market. Gas comes from all over the world, a lot of it produced in greater quantities even than Alaska can produce, and produced much more cheaply than Alaska can produce it simply because the operating conditions are different. But we are selling some of it and from newspaper articles there is the possibility we may sell some more. -50- There is also the possibility that they will wake up in the lower 48 and give a realistic price. I don't think you'll ever get rid of the Jones Act, but, as I think Mr. Burrell mentioned, there is a California outfit that thinks they will get a realistic enough price, so maybe they can look at the possibility of taking it in liquid form to the Lower 48. I hope it works out, but I'm afraid it is not going to work out in time to do any good for this field. But, basically, what the Jones Act has done is just make us have to pay more than the transportation is worth in order to get it there. This is Just another example of the way the federal government and the large population centers continue to treat Alaska and some of the other undeveloped western states as colonies rather than states. It frustrates your development and it frustrates us, too, but we can't lick it by taking our frustrations out on each other. I'm from a western state and I know Wyoming gets the same kind of stuff Alaska does, and there is not much you can do about it but complain. Another problem is presented by the unwise federal pricing policies on gas. And let's review a little history on that, maybe it will help us avoid some of the mistakes that they made down there. For many years in the Lower 48 there was an excess supply of gas. During World War II most oil and gas producing areas had more than they knew what to do with, Just like Alaska does today, and as a result a lot of it was flared. Most areas that didn't produce oil or gas relied on other fuels, coal or fuel oil, which could be moved much more easily, but after World War II they started putting in these big interstate pipelines to the eastern and midwestern consuming areas and at first there was more than enough gas to supply this market, too, and gas was cheap. They practically gave it -51- away, and because they did it displaced a lot of these other fuels. The fuel oil and coal. But as demand began to catch up with supply, the pro- ducers began to ask for higher prices and at first they were going to get them from the consumers, but the utility companies and the consumers got a little greedy, they didn't want to pay what the gas was worth in a market determined by supply and demand, and they imposed the FPC price regulations which, in effect, required the producer to sell the gas for less than its true value, and we tried to tell them what was going to happen and they ignored the warnings and ridiculed it, but it did happen and a shortage of gas resulted. It took a little while, but it's here and it's bad. And two things contributed. First, although they continued to develop known gas reserves, people with money to spend in exploration for oil and gas devoted as much of it as they reasonably could to exploring for oil, and most of the new gas reserves found were Just sort of discovered by accident while they were looking for something else. Another thing happened. Because of this artificially low price for gas sold for domestic consumption, the producers looked for other markets that could pay a little more. Some of it went into manufacturing, or went into electric power generation, where it displaced coal. You can get some pretty good arguments as to whether this is or is not a waste of the use of the gas. I'm not going to get into that, but what's happened is that a lot of the gas in the Lower 48 is committed to these uses. You would think this would make a home for Alaska's gas, but the trouble is, another way we might find a home for it is to manufacture products up here. A start has been made on that, but again you have to compete with these large reserves in the Lower 48 that are -52- committed on lonE-term contracts at artificially lower prices. And the result of that shortage, instead of creattn~ a market for Alaska's gas, unless they come to their senses, is that it has always handicapped us in sellin§ it. And I think something more important to realize from this FPC problem is that it happens every time when you try to nullify a basic economic law, the law of supply and demand, you are going to accomplish ultimately the direct opposite of what you set out to do. They were tryin§ to protect the consumer. They were trying to give him a low price for his gas, and he got it for awhile, and then they figured they had the §as producers where they wanted them and they could make them, make the gas producers, sell their gas at whatever price they fixed. And now the law of supply and demand has caught up with them, they have a critical shortage, and even at this time raising the prices is not going to solve that shortage. It is goin§ to take about as long to solve it as it took to create, and it may never be solved. Particularly if they are as unrealistic in their solutions as they were in the way in which they caused the problem. But how does that apply to this situation? We mi§hr as well be frank about it. We know a great many people have recommended that this Committee adopt an order or a regulation, or that the legislature pass a law which would require the producers to do something to eliminate the flaring of gas in the Cook Inlet. Even thouEh the ac~on which was necessary was economically unsound and the proponents of this, of course, argue the same way that the argued on the FPC. The oil producers have so much at stake they will have to comply with this order or regulation and take the economic loss that it would impose on them, and there would be nothin§ we could do about it. First, let me say I'm not so sure that there wouldn't be something we could do about it. I think the committee's orders -53- in the past have been supported by competent evidence. I think they have to be supported by competent evidence in the future. I don't think there is any competent evidence that can be produced that can show that gas which is being flared, or will be flared, can economically be recovered. And there are even some limits on the legislature, but let's forget this. Let's assume that you can do it, that you can do Just like the FPC, that you can get away with it, and make us take these uneconomic steps. What will happen? The first thing that will happen will be that the oil companies make these expenditures with the full knowledge that the income which results will not replace the money expended. Okay, that's waste, by itself. Look in the dictionary. But it isn't Just the oil industry's resources that will be wasted. Funds for further exploration and development are limited no matter what some people think, and if we have to take this money and dedicate it to an uneconomic venture, it means we have to take it away from economic ventures which can produce income for us and can produce income for the state. That may take some time for the result of this to become apparent, Just like, again, the FPC regulations. But the ultimate loser of any unwise economic policy is going to be the State of Alaska. Sure, you'll hurt us, too, but you will achieve the direct opposite of what I think your intention is which is to get maximum development of Alaska's natural resources. This brings me back around full circle to what the Committee asked in its call to hearing, when is the flaring of gas waste? It's waste when the gas that is flared could have been beneficially used. It is not waste whenever the gas which is flared could not have been beneficially used. Now, I am talking about oil well gas, not gas well gas. -54- Well, that's not a complete answer. You have to define what a beneficial use is, and a use is beneficial if the value of the benefits derived from the use exceeds the value of the detriments or cost which may be suffered in order to achieve the use. The use is detrimental if the benefits derived from the use are less than the detriments suffered in order to achieve that use. In other words, if it costs you more to use it than it's worth, it's a detrimental use. So these Oil and Gas Conservation Statutes which clearly provide that the flaring of gas unavoidably produced with oil is not waste if the gas cannot be economically sold or used, are simply giving statutory recognition to the basic unchangeable economic laws. They are not making a new law, they are Just simply recognizing the basic fact of life, and when a statute doesn't give clear statutory recognition to these economic laws, and Alaska's does not, I think the Committee in enforcing the statute is still required to recognize them. I think, as a matter not only of law but of common sense, and I think any regulation which does not and which attempts to nullify these economic laws will simply boomerang. It will defeat the purpose for which it is intended and it will cause and not prevent waste. This argument is directed primarily to your second question which I considered to be asking for a legal opinion. Now, we do have three witnesses, Shell as operator of two of the platforms, and Amoco as operator of the other two in Middle Ground, have essentially the same evidence that we have presented before. Maybe we can present it a little differently. At least, we're going to try a d~fference'i,.'tn...~o~der. Pan American appeared first last time, and Shell is going to appear first this time. And I would like to Just present the witnesses and let them give their testimony in narrative -55- form and then they will be offered for cross-examination, each witness at the end of his testimony, with the understanding, of course, that you can recall them if you think of something else during another witnesses' testi- mony. Mr. Logan, would you lead off? MR. BURRELL: Before you have the witnesses come up, I think it is possible somebody Just might have a few questions of you. MR. SWAN: Oh, okay. MR. BURP. ELL: A few questions of you on your testimony. MR. SWAN: On my testimony? That's a legal argument. MR. BURP. ELL: Mr. Swan, I think I'll start with your latter remarks and work back. You pointed out that Alaska's Oil and Gas Conservation Act, unlike the conservation act of any of the other states, does not define waste in economic terms. MR. SWAN: Well, not quite the same way. MR. BURRELL: It doesn ' t use the word "economic". MR. SWAN: No. What it does, basically, as the legislature, in effect says, it is waste if the Committee finds it waste and it isn't waste if you don't find it's waste. But they didn't give you any guidelines, so I am saying you have to exercise your common sense and, hopefully, the same sound business judgment that we have to exercise in protecting the State of Alaska. MR. BURP. ELL: Would it be unrealistic, then, for us to consider that the legislature, in adopting that statute and not using the word "economic", perhaps meant for us to consider other values? MR. SWAN: Well, what I tried to point out is that if they did, I don't think they had the power to do it and, second, if they had the power -56- to do it, I think it is a very unwise thing. Again, as I have pointed out in connection with the federal power regulations, the Supreme Court upheld the regulations, but the Supreme Court couldn't overrule the law of self- supply and demand. And that's what I'm saying, that you can't overrule those basic economic laws. Now, it's Just that simple. MR. BURP. ELL: You have stated, I believe, that you thought it was the Committee's objective, that is, the Committee's objective is to promote maximum development of Alaska's resources. MR. SWAN: The ones under your -- MR. BURP. ELL: Right. MR. SWAN: Supervision. MR. BURRELL: Right. That's not the way we read the Oil and Gas Conservation Act. To me it talks about preventing waste and protecting correlative rights. It doesn't say a darn thing about promoting development. Maybe I missed something. MR. SWAN: Well, the way to prevent waste and protect correlative rights is to get that maximum development. Certainly if it's not developed it's left in the ground and wasted. And I think your statute says that if oil is felt in the ground and not recovered, that constitutes waste. MR. BURP. ELL: I think it is probably less waste to leave it in the ground than to burn it up. At least it is still there. MR. SWAN: Well, it doesn't do anybody any good there. MR. BURRELL: That's right. It doesn't do any good to burn it, either, does it? MR. SWAN: Yes, if it produces -- now, are you talking about oil? MR. BURP. ELL: Whatever. Resources. -57- MR. SWAN: This would be an awful cold place to live in the winter if you couldn't burn some of it. MR. BURP. ELL: Well, I don't mean in your home. I meant out on location. MR. SWAN: Well, there again, the oil which it produces and from which it cannot be separated until it is produced brings in an awful lot of income, and it has been income that's, quite frankly, I think it has saved the State of Alaska. MR. BURRELL: You commented quite early in your remarks about the engineering and financial resources which the oil companies, your own included, brought to bear on this development out on the Cook Inlet. I Just wondered if all these highly qualified engineering personnel and all this great amount of financial resources could not perhaps be pointed toward solving this problem. It is rather large for us. MR. SWAN: It has been. We have been working on it, Mr. Burrell, as I said, but we haven't been able to tell you, or at least I didn't feel we were authorized to tell you some of the people we have been negotiating with, some of the problems we've been trying to solve, and that's why I appreciate the fact that you subpoenaed them in. We didn't feel that we could, but, Lord, if we can make any profit at all out of this -- MR. BURRELL: But these negotiations have exceeded the combined periods of those of PanmumJom and Paris, I believe, haven't they? MR. SWAN: Yes, sir. MR. BURRELL: From about 1965 to '717 MR. SWAN: That's right. But I still haven't heard anybody come in and say that he could have done better. MR. BURP, ELL: That's true. I also understood you to say quite early -58- in your remarks, that it would be better for the state, in your opinion, if you sold Just a little of the gas, rather than giving it all away, and I wonder if I understood that right or understood the meaning of it? Did you mean that it would be better for the state to get a little royalty and taxes on a iow price, concededly a iow price, because of these tremendous costs of getting it processed, than it would be to have it utilized free and not burned? MR. SWAN: From the standpoint of the state's income, yes, I think it would be. MR. BURRELL: Short term income. Immediate income, right now. Not looking down the road. MR. SWAN: Well, seriously, Mr. Burrell, we've raised this question at Juneau and, frankly, if we could, if we could work out a deal to Just give this gas away and get our costs back, we'd be to the state and ask you. MR. BURRELL: Get what costs back? MR. SWAN: The cost of giving it away back. MR. BURRELL: Not the cost of drilling for it. MR. SWAN: No, no. Just the cost of whatever it takes to get it to the man who is going to take it. I think we'd come to you and say, do you think you have the legal power to agree to do this for no royalty? Frankly, we haven't even got that dood a deal yet. We're still trying. MR. BURRELL: Royalty and taxes are both based on value and if you give it away, there is no value, there would be no royalty or taxes. MR. SWAN: Well, I think we would want you to agree that we were not making an improvident disposition. MR. BURP, ELL: If it were an'in-house transfer, we might be quiite -59- suspicious. (LAUGHTER) MR. BURP. ELL: Does anybody else have any questions? Mr. Marshall? MR. MARSHALL: No, I don't think so. MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: No. MR. BURRELL: Any of you fellows? (NO RESPONSE) Okay. MR. SWAN: Thank you. MR. BURRELL: You can bring on your witnesses. MR. SWAN: This may take us past lunch. I wonder if it wouldn't be a good idea -- MR. BURRELL: Can you give me an idea of how long it might be? Just roughly. An hour? MR. SWAN: Oh, I think an hour. We'll get it in an hour or less, unless you've got an awful lot more questions. MR. BURP. ELL: I believe we ought to break for lunch until 1:00, how's that? MR. SWAN: That sounds fine. MR. BURRELL: We' 11 break right now. LUNCH Mr. BURRELL: We'll call this hearing back to order. Mr. Swan, bring on your witnesses. If that's where we were, I guess it was. MR. SWAN: Yes, sir. I think we are. We have three witnesses, Mr. Logan, Mr. Casbarian, who are employees of Shell, and Mr. Giles who is an employee of Amoco. Ail three of them testified in Juneau and I believe their -60- qualifications are in the record. May that be waived at this time and may they simply be sworn and proceed to give their testimony? MR. BURl{ELL: Inasmuch as they have qualified previously, they will be accepted without going through their qualifications again, but I am glad you mentioned it because if anybody wants to give any expert testimony as a professional from now on, we will have to, of course, get their qualifications. So far, we haven't had that type of testimony. (LAUGHTER) MR. SWAN: Are you asking for my qualifications? (LAUOHTER) MR. SWAN: Well, I'm probably the only man here who doesn't have a college degree. I'm not sure that I do have the qualifications. Mr. Logan -- well, why don't we swear all three of them in. MR. MARSHALL swears in all three men. MR. SWAN: Mr. Logan, why don't you state your name for the record so that they'll know you're the same man who testified previously, and then Just proceed to give your testimony in narrative form. MR. LOGAN: I'm Tom Logan with Shell Oil Company, operator for a large portion of the Middle Ground Shoal oil field. A number of hearings have been held previously to discuss the problem of the gas flaring in Cook Inlet fields. The intent of these hearings, the last of which I attended in Juneau on March 4 of this year, has been,primarily, to try to determine: One, if the flaring of this gas constitutes a waste of our natural resources; two, does a market exist for this gas; and three, is the maximum possible use being made of casinghead gas in our operations? In testimony given at all of the previous hearings Shell, as operator of the SAS portion of the Middle -61- Ground Shoal field, has tried to show that the principal beneficial use of the casinghead gas is the expenditure of the natural energy required to bring this crude oil to the surface. There is no way this oil can be produced without producing the associated gas, inasmuch as the two substances exist as a single phase, that is, a liquid, in the reservoir, and the gas is only released from solution following the pressure reduction associated with producing the oil to the surface. We maintain that the principal con- servation effort to be made for the Middle Ground Shoal Field, which is an oil reservoir, is to maximize the economic recovery of the crude oil using the most efficient expenditure of gas energy present in the oil at reservoir conditions. Our waterflood operations, the first ever attempted in Cook Inlet, have resulted in higher oil rates and eliminated the potential waste of reservoir energy by maintaining pressure above the bubble point and, based on our current predictions, should increase ultimate recovery of oil by more than twice what could have been expected without secondary recovery operations. One definition of conservation is the efficient and wise use of our natural resources. From a conservation viewpoint, we, Shell, feel that we have done a clearly acceptable, if not outstanding, Job of operating the Middle Ground Shoal Field in an efficient manner. Neverthe- less, the fact that we are flaring gas on our platforms is a matter of concern to you, the Oil and Gas Conservation Committee, to Shell and the rest of the oil industry, and I'm sure to many others who are present here today. In the notice calling, for this hearing, three questions were posed to indicate the type of testimony we should be prepared to give. Number one, can excess casinghead gas be marketed, injected into any reservoir or pool, or otherwise be beneficially utilized by July 1, 19727 This question has been raised and -62- answered several times in the past. Today we will attempt to go into more detail on the marketing aspects and also on our position of the injection' of this gas into a reservoir or pool. We still maintain that the gas is otherwise being beneficially utilized in the oil producing process, as I mentioned earlier. I will discuss the problems associated with the injec- tion of casinghead gas into (a) shallow water aquifers, (b) existing shallow gas sands, and (c) the oil producing measures themselves. Dr. Casbarian, who will follow me, will discuss the problems of marketability, that is, the demand for or opportunity to sell the gas. Question No. 2, will the flaring or venting of casinghead gas after June 30, 1972, in excess of the amount required for safety, constitute waste, as waste is defined in Alaska Statute 31.05.170(11)? Under paragraph (a) of this section of the Alaska Statute, the definition of waste includes the operating or producing of any oil or gas well in a manner which results in or tends to result in reducing the quantity of oil or gas to be recovered from a pool in the state under operations conducted in accordance with good oil pool engineering practices. I feel that our operations which currently include the flaring of some casinghead gas do not fit into this definition of waste. On the contrary, it is quite likely that any of the suggested alter- natives to our current operating procedures; i.e. the injection of this gas into a pool or a reservoir, or the restriction of production to a lower rate, will result in waste, as defined in this paragraph and other paragraphs in this section of the statute. I will try to illustrate this later on in my discussion. The third question was, will more waste be -63- caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for a safety flare? The preliminary results of en§ineerin§ studies to evaluate this alternative indicate that substantial oil reserves could be lost or wasted if production was restricted. I hope to show you why this will happen and illustrate what the potential oil loss is, in terms of either dollars or fuel energy, and that this would be many times that we are forecasting as excess casinghead gas in the next several years. Let me first discuss the injection of gas into a reservoir or pool at Middle Ground Shoal. I would like to start with our prospects for injecting gas into a shallow water aquifer. To study the desirability of using an aquifer for gas storage, considerable geological information is needed. We must determine the size and shape of the storage container, the quality and extent of the cap rock, and the mechanical condition of all wells which penetrate the zone of interest. My first two exhibits will illustrate a structural contour map and isopach map of the SRS sand which occurs at about 3500 feet beneath our platform area in the field. In 1967 this sand was studied in some detail as a possible source of injection water for our waterflood and a well was drilled to test this possibility. In addition to being able to map it with reasonable accuracy, some core data and productivity data is available. As you can see, the shape of this reservoir shows no closure in the vicinity of our platforms, which are enclosed in the red outline. There appears to be some closure on the northern end where our data becomes limited. This area is not underneath our leases. Although the shape of -64- the reservoir did not look promising we continued our study. In addition to the shape and size of the underground structure~ information is needed on the continuity of the rock layers serving as caprock. The emphasis on caprock quality, already proven for converted oil and gas fields to be competent by the presence of hydrocarbon deposits, is overriding in studying aquifers. Faulting is known to exist in our area and, of course, any large ones can be mapped with come confidence by geological correlation. However, it is the small faults, which may be present but are virtually impossible to find or map with the well control available, that we are worried about. In Katz and Coat's book, "Underground Storage of Fluids" it is mentioned that to obtain the basic geological information for the Ancona-Garfield Aquifer Gas Storage Project in Illinois over 100 correlation wells were drilled and logged and ten wells were cored both in the reservoir sand and the overlying caprock. The strongest admonition t to geologists investigating aquifer prospects is to be on the lookout for anomalies. Faults, fractures, and evidence of .earlier solution processes are anomalies which can cause the low permeability of the caprock to be interrupted in a local area of the structure. Obviously, our control data on the SRS sand and its caprock is nowhere near what is described as adequate in reports of existing gas storage projects in other areas. · i!.~!> .O~e'~impor~ant,.fact, found through experience in Illinois, is that a shale to shale fault can hold gas with an overpressure of only 100 psi below it. Of course, sand to sand contacts at a fault will transmit fluids readily. Although our work to this point showed that the shape of the reservoir is poor for our purposes and the control data on the sealability of the -65- caprock was insufficient when compared to what was required for other storage projects, we proceeded to run a simulation study of injecting gas into this zone. The computer simulation showed that the injection of this gas would require wellbore sand face injection pressures of over 1700 psi and would gradually raise the reservoir pressure in the vicinity of the gas bubble created to about 1670 psi. This is some 320-350 psi over the normal pressure for this zone and considerably more than the 100 psi limit I mentioned earlier. This, of course, is one of the main reasons why depleted oil or gas reservoirs are always preferred over aquifers when considering a gas storage program. My next exhibit shows a correlation between depth and bottom hole fracture pressures developed by Perkins and Kern using field data from hundreds of wells that had been fractured. MR. BURRELL: Excuse me, Mr. Logan. Should we not identify these exhibits? MR. LOGAN: Okay. The first two exhibits were Exhibit 1, The Structural Contour Map on the SRS Sand, and Exhibit 2 was Net Sand Isopach of the SRS Sand. Exhibit 3 which I now submit is a correlation between depth and bottom hole fracture pressure. The large red dot on the exhibit shows clearly that for the SRS zone the injection pressure and ultimate increase in reservoir pressure falls inside the envolope where fracturing could occur. Again, this is not a theoretically developed envelope but is based on field data from hundreds of wells. I think it should be clear why we are unwilling to take the risk of injecting gas into an aquifer in the vicinity of our Middle Ground -66- Shoal Field. Should fracturing occur the best thing that might result would be that the gas would migrate and dissipate in other shallow zones. This, of course, would mean the loss of this gas and would constitute waste. However, the major concern is that fracturing would occur and the gas might escape to the surface causing not only a pollution problem but creating a very dangerous fire hazard. This situation clearly fits the definition of waste in AS 31.05.170(11). Shell, as operator for the SAS group at Middle Ground Shoal, is unwilling to risk gas injection into the shallow water aquifers for storage purposes. Let us look next at the possibility of injecting gas into a shallow gas sand which is present in the field. I'd like to introduce my next two exhibits, Exhibit 4 is a Structural Contour Map in the A2S Sand, and Exhibit 5 is an isopach, a net sand isopach, of the A2S Sand. This zone contains about 8 billion cubic feet of gas in place of which we might expect to eventually recover 70 to 80 percent or about 6 billion ., cubic feet of gas. This is our reserve gas which we will use when the gas usage requirements in our operations exceed the casinghead gas avail- able which we estimate will occur around 1980 under our current mode of operations. Again, we conducted geological and engineering studies to see what happens if we inject additional gas into this zone. Like the aquifer problem, the A2S is an undepleted zone, that is, the reservoir pressure is essentially at virgin conditions as we have not produced this well except for very brief testing purposes. -67- The computer runs simulating gas injection into this zone showed injection pressures reaching 3600 psi and a gradual buildup of reservoir pressure from 2525 to 3600 psi. Returnimg to Exhibit 3 the large black dot shows where this puts us in the envelope of possible fracturings. Like the aquifer case, from a safety viewpoint, the best thing that could happen should a failure occur is that the gas would migrate and dissipate into other shallow zones; however, in this case we are not only risking the loss, or waste of the injected gas, but also that of our backup supply of gas volumes and considerably more in terms of dollars to replace this supply. This occurrence would certainly constitute unnecessary waste. Again, however, the greatest concern is that fracturing would occur and if the gas would escape to the surface a potential disaster situation would be created. So again, I must say that the consequences of fractures are too serious for us to take the risk of injecting casinghead gas into the A2S sand. The last case to consider under gas injection programs is that of injecting into the current oil producing zones along with our water injection. At the last hearing this possibility was brought up. and I stated that this was very undesirable. At Middle Ground Shoal, and I believe in all the other Cook Inlet fields, our reservoirs consist of a large number of layers of sandstone of varying quality. That is, the thickness and/or permeability of one zone may be many fold times as great or less than another zone or layer. In our water flood program we find it is SOmetimes very difficult to get our injection water to go into all the oil-bearing layers in desired proportions. The problem is serious in a few of our wells at this time and we anticipate this to be an increasing problem in the future. Our success in solving this problem will have a significant bearing on the economics and ultimate recovery from our flood. To very simply illustrate the problem -68- I offer my next exhibit, No. 6, which illustrates a layered water injection into a layered remervoir. This exhibit shows four layers being water flooded with layer two, second from the top, being the most permeable one. The receptivity of this layer is far greater than the others and you can see the water moving much faster through this layer. Because we have a very favorable mobility ratio at Middle Ground Shoal, the oil is very effectively displaced in a more or less piston-like manner. Therefore, the big problem does not present itself until this layer is completely displaced and water breaks through into the producing well. Then our process becomes very ineffic- ient unless we can plug off or isolate this "thief" zone. Not only are we merely cycling water through this layer, but there is a good chance that water will backflow into the other oil zones in the producing well since these zones are less pressured up as compared to the "thief" zone. I will later show you an example of what happens to the production well as this occurs when I discuss the effects of cutting back on production from our wells. So the layered reservoir then presents special problems when trying to waterflood. We recently spent over $150,000 attempting to plug up a thief zone in our "C" line well in a 10 foot plus or minus section which is taking considerably more water than is desirable. Our attempts have been only mildly successful and additional well treatments are planned for this well and others in the near future. Operating expenses of this nature could have a significant bearing on where our final economic limit, that is, barrels of oil per day, is reached. Now if we consider injecting gas along with our water, I'm afraid we can only count on aggravating the channeling situation. My next exhibit -69- shows the same layered system with large amounts of gas entering the most receptive members, which of course will occur. The gas is the solid dark lines. Now we create a very unfavorable mobility ratio situation and instead of a piston-like displacement process the gas will tend to move rapidly through the oil in very thin fingers. Gas will break through to the producers in a much shorter time and with a considerably lower sweep efficiency as far as oil recovery from any member is concerned. We would then end up cycling gas through this zone with no apparent benefits at all. To try to correct the situation by discontinuing the gas injection and switching back to water only would not help as the water would then follow through the gas channels without recoverying any significant additional oil. We can see nothing but a loss of oil reserves resulting from the in- jection of gas along with water in our waterflood operationm and for that reason we are unable to seriously consider this alternative. In discussing the problems associated with injecting casinghead gas in the three type reservoirs, I think I have shown that theme are not reason- able alternatives to the flaring problem. Not only might dangerous situations be created but in all cases we can see as much or a significantly greater tendency to result in the waste of oil and gas. In addition to the reservoir problems associated with gas injection, the following problems should also be noted: (1) Large reconditioning programs will be required to put all wells in mechanically sound condition if aquifer and gas zone injection programs were considered feasible. The main concern would be that we have adequate cement across these zones in all wells in the field where the zone exists. This would require squeeze- cementing operations in numerous wells to assure us that the zone was sealed off at each of these points. The average cost to do this is estimated at $150,000 per well. (2) In all three cases large compressorm would be -70- required to reach the necessary injection pressure requirements. We will have a difficult time, if at all possible, in finding platform space for this equipment. I'm sure you will hear more about this problem during the course of the hearings. For the final portion of my testimony, I would like to give my answer to question number three, that is, will more waste be caused than prevented by restricting production to a rate whereby all casinghead gas is beneficially utilized? Let's say we were to do this on July 1, 1972. At that time, our estimate of excess casinghead gas without changing our operations is about 6.5 billion cubic feet of gas over the next 7 1/2 years. If you assume the gas is worth, say, 15 cents per MCF, if it were marketable, then this would be worth about $975,000° Converting this to oil, this is equivalent to about 300,000 barrels of oil. The remaining oil reserve for the SAS portion of Middle Ground Shoal is in the neighborhood of 100 million barrels of oil. This gas then is roughly equivalent to about~.3 of one percent of the oil reserves. At this point I would like to note that this 15¢ per MCF is fairly reasonable whmn considering what is being paid for gas in the Cook Inlet area, as compared to the roughly 80¢ per MCF that you have used in the earlier illustration up here. I don't think that's a reasonable estimate. Our engineers are currently doing a comprehensive reservoir simulation study to determine the effects on ultimate recovery of the earlier mentioned profile control problems. We are setting up a very complete computer model of the layered reservoir whereby we can see what happens under various producing and injection schemes. Of course, this model will be able to analyze the effects of restricting production tosome lower limit. We do not at this time have the complete answer, but I think some of our preliminary results will indicate what the magnitude of POtential loss of oil reserves would be if the wells are not produced.~mt maximum rates, -72 I'd like to submit Exhibit 7 which shows Well A-22-26 production performance for the last few years. MR. MARSHALL: What exhibit number did you just cover up? MR. LOGEN: That's 8. I'm sorry. In 1969 you can see the oil production rate increasing due to response to water injection. In 1970 the water broke into the well, probably through some thin permeable streak, and severely damaged the well's productive capacity. We interpret this as being caused by water backflowing into some of the less pressured up layers and cutting off oil rates from these layers. To alleviate the problem' we very quickly increased gas lift gas injection to enable us to pull the well harder, that is to lower the bottom hole producing pressure to a level where all this water is produced, amd not allowed to enter and damage other layers. Subsequently, we were able to return the well to about 1500 barrels per day oil rate, which although a good rate is estimated to be some 500 barrels per day below what it might be if the other layers had not been damaged. This is one reason why we feel that cutting back on our rates will result in less oil recovery. Extrapolating this individual well problem to the field as a whole, the estimated effect on ultimate production is shown on my next exhibit, No. 9, which shows the effect of cutting back on oil rates. We estimate a loss of several million barrels of oil if the field is not produced at maximum rates. This will accrue whether we cut back each well or shut in some wells while producing at maximum rates. The loss of reserves is attributed both to the damage due to allowing the backflow of water, as described earlier, and due to the changing of the economic producing limit by extending the life of the field. Incidentally, we interpret this damage caused by backflow of water, if done knowlingly, to fit the definition of waste in Alaska Statute 31.05.170(11) which includes the drowning with -73- water of a pool or part of a pool capable of producing oil or gas, except insofar as and to the extent authorized by the Department. In my opinion, any operating procedure which unnecessarily lengthens the life of a project under a harsh environment such as Cook Inlet carries a very definite risk of waste of oil reserves. The design life of our platforms and wells are of the order of 20 to 25 years. While I am sure this life can be extended through costly maintenance and replacement methods, this would necessarily change our economic limit considerations to a point where a lower ultimate recovery would be a certainty. To conclude my testimony, I believe my discussion has shown why we do not wish to inject our excess casinghead gas into any pool or reservoir in the vicinity of our operations. Safety considerations, along with the potential waste of oil and gas reserves far in excess of what we anticipate from flaring, make this a senseless risk. The alternative of cutting back on production to a rate whereby all gas is beneficially utilized is not a sound recommendation and would only result in additional waste of our natural resources. Although I have chosen to minimize economic considerations, I should memtion that in all the cases discussed, the potential economic loss, both to the SAS group and to the State, far exceeds the economic worth of the casinghead gas that we are unable to utilize and, therefore, must flare. Dr. Ao O. P. Casbarian, Shell's West Coast Division Mechanical Engineer, who will follow me in testimony, will appraise you of our investigations into the marketability of the excess casinghead gas, and I would be willing to answer questions now or following his testimony, whichever you please. MR. BURRELL: Do you have a question, Mr. Swan? MR. SWAN: It occurs to me that some of the questions you may want go ask may be answered by some of the other witnesses, if you don't mind deferring until they are all -- if you've got something in your mind, that's -74- fine, but I think-- MR. BURP. ELL: I think my main concern is in the line that they give the questions. MR. SWAN: Are the other witnesses going to testify on the reservoir thing? Why don't you go ahead and examine each one at the end of his testimony and if he thinks somebody else is going to answer it, why he can tell you. MR. BURRELL: Let's do it that way. MR o SWAN: Okay. Thank you. MR. GILBRETH: Mr. Logan, just starting with your last two exhibits first, you show a loss of productivity and possibly reserves due, as you say, to backflow water with the channelling in a thief zone. This back- flow that you mention, could you tell us just what causes this? MR. LOGAN: This is Just strictly an effect of the different pressure levels in various members. As you pressure up the reservoir or the numerous layers with your water injection, actually the zone taking a larger amount of water is going to pressure up fast and it is going to reach the producing well, the pressure wave, surge, or whatever you want to call it, is going to reach the producing well faster than in the tighter member, and therefore, you have a pressure imbalance in the producing well. So unless you can -- MR. GILBRETH: Would it not follow then that if you reduced injection rates and gave the pressures a little more time to equalize throughout the zones that this possibility .would be minimized? MR. LOGAN: No. MR. GILBRETH: Why not? MR. LOGAN: Because if you reduce the pressure or the injection rates the odds are that the zone taking more water than the others would tend to take even a greater proportion of the water, because by pressuring up on -75- your injection well you are forcing other zones to accept water that might not accept it under a lower injection rate. MR. GILBRETH: Won't the pressure, though, I'm not talking about volume -- won't the pressure tend to be equalized? MR. LOGAN: I don't think so. MR. GILBRETH: Is it not true that if production rates were restricted that injection rates could be restricted, also? MR. LOGAN: Yes. Certainly. MR. GILBRETH: Right now you're injecting to achieve a maximum capacity production. Your production is governed almost entirely by the amount of fluids that you inject, is it not? MR. LOGAN: To a large extent, yes. MR. GILBRETH: To a very large extent. If your injection .volumes were curtailed, the production could be curtailed without any loss of ultimate recovery, could it not? MR. LOGAN: I don't feel that way. I feel that if you reduce your injection rate that you will still have the same problem and perhaps even worse. Especially if you curtail your production rate by shutting in some wells and water were to break into those wells, then I think you wo~ld severely damage some of those things. MR. GILBRETH: At what point do you think that this might happen? All wells making water, or making significant water? MR. LOGAN: Well, I really don't know. That's why I say we haven't completed this simulation study that we could very easily demonstrate it with -- MR. GILBRETH: When do you anticipate that the simulation study will be completed? -76- MR. LOGAN: Oh, sometime this summer. This is a very comprehensive s t udy. MR. GILBRETH: It won't be completed before an order would be necessary here? MR. LOGAN: No, but we have preliminary runs that are showing us this sort of effect. Anyway, I feel the examples that I have shown you on the previous exhibit show what happens. MR. GILBRETH: Are injection pressures in Middle Ground Shoal Field now significantly higher than reservoir pressure? MR. LOGAN: No, not significantly. I think some of our wells are up as high as 2900 psi. MR. GILBRETH: I believe one of your exhibits showed a fracture envelope. Could you tell us if, right now, in your injection project, if you have any wells that are below the fracture envelope that don't fall outside the envelope? MR. LOGAN: Would you repeat that? MR. GILBRETH: You presented a fracture envelope saying that anything within those heavy lines would tend to fracture,. I believe that is what you said. MR. LOGAN: No, I didn't say that, I said it is possible that a fracture could develop. MR. GILBRETH: I believe that you're exerting a considerable injectiOn pressure on the surface, a terrific hydrostatic head, and consequently a high bottom hole pressure. Are any of your pressures outside below the envelope or do they fall in the envelope at the present time? MR. LOGAN: To my knowledge, they all run in the bottom of that envelope, or below it. MR. GILBRETH: They all run inside the envelope? MR. LOGAN: We have a couple of examples where we think we have developed small fractures in those water injection zones, where we are very close to the bottom part of that envelope. MR. GILBRETH: I see. Could you tell us, just for our information, what kind of a pressure you calculate will be necessary to inject gas here and what kind of a bottom hole pressure you have ? MR. LOGAN: In the waterflood operations? Well, I haven't calculated but it would at least be the same as the water injection pressure, so it would be at least 3000 pounds and probably much more than that. MR. GILBRETH: Bottom hole pressure, in either case, would be approximately the same. MR. LOGAN: Yes. MR. GILBRETH: Okay. In other words, there is a lot of danger by having to inject the gas if some were fractured? MR. LOGAN: I have not mentioned fracturing as a problem in the water injection zones. MR. GILBRETH: Well, you mentioned this as one of the reasons why you didn't want to inject any gas, .~' .~ MR. LOGAN: Any gas into the gas zone or to the aquifer. MR. GILBRETH: Alright. Let me ask you another question, Is there a gas cap in the MGS "A" Pool? MR. LOGAN: There is gas, what we have mapped as an individual gas sand. It is not a gas cap. MR. GILBRETH: Is there any reason why produced gas could not be in- jected into this gas cap? -78- MR. LOGAN: Just the reasons I just went through. MR. GILBRETH: The reasons you went through would not hold to the reinjection of gas caps, would they? MR. LOGAN: No, there is no gas cap that I know of. This is a separate gas sand. I know of no gas sand, no gas cap. MR. GILBRETH: That's what I asked. I thought you said there was a gas cap in the MGS "A" Pool MR. LOGAN: In the A Pool on Shell's portion of the MGS sand, it is a gas sand, to my knowledge. That is the gas sand that I exhibited there. MR. GILBRETH: Well, are we talking about the same sand? MR. LOGAN: I think we are, except that there is a separation between Amoco's. production and our production. We have gas in the A sand and they have oil. We don't produce any oil from the "A" sand in our operations. MR. GILBRETH: Are they in contact then? MR. LOGAN: Not unless I've got my zones mixed up. MR. SWAN: Bart may be the better one to answer that question. MR. GILBRETH: I'm sorry I misunderstood you on that. Mr. Logan, in some of the past hearings we have heard time and time again that there is an insufficient volume of gas available for too short a period of time to make it attractive to market. If production rates were restricted, would oil production and gas production be available for a longer period of time? MR. LOGAN:' Well, probably so. MR. GILBRETH: But the recovery would be extended also. Have you made any studies with regard to the possibility of imbibition in your water- flood project? I think this is a facet that requires time, this slow imbibition, the slow injection rates. Would there be any advantage to slOWing down your injection rates here for imbibition or have you looked at it? -79- MR. LOGAN: Well, I haven't particularly looked at it, no. I don't know the answer to that. MR. GILBRETH: Do you think it would be of any benefit? MR. LOGAN: No. MR. GILBRETH: Have you had any occasion to restrict injection rates or shut down your injection program for any appreciable period of time? MR. LOGAN: Yes, we have restricted our injection rates into a couple of wells where this thief zone problem has gotten bad where we put too much water into one zone we have cut back on our injection rate for those wells until we can come up with some solution. MR. GILBRETH: When you did cut back on the rate did it help the thief zone, the production of water? MR. LOGAN: Yes. MR. GILBRETH: Yes, but you haven't had any occasion to shut the whole project in to see if detrimental effects would materialize? MR. LOGAN: No, not that I know of. MR. GILBRETH: That's all I have for right now. MR. BURRELL: Mr. Logan, you have indicated that reducing injection rates, along with reducing the production rates, would reduce the recovery of oil, in your opinion. Do you have any authority for that? Ail I have, maybe I missed something, but all I've got so far~--- MR. LOGAN: No, I've got reservoir simulation studies that show it and I think Mr. Giles will quote several authorities on this in his presenta- tion. MR. BURP. ELL: Alright. I'll defer this ..... MR. MARSHALL: Mr. Logan, could you give us an estimate of the delivera- bility of your gas well from the A2S sand, or do you just have one? -80- be? MR. LOGAN: I just have one gas well. MR. MARSHALL: Could you tell me about what that deliverability would MR. LOGAN: Well, I would only be guessing, because we never really have pulled this well because we had nothing to do with the gas, but it's probably a 3 or 4 million a day well, I would guess. MR. MARSHALL: Are there undeveloped locations that could be produced from the A2S sand? MR. LOGAN: No. We have, I think sufficient wells to the zone to map it and we don't see any reason to drill additional wells to this zone. One well can completely drain it. MR. MARSHALL: Is this sand, do you consider it to be associated gas? It is, you say, the same interval that produces oil in the Pan Am Platform area. In this well, does the gas that you're getting presently from the A2S sand contain heavier hydrocarbons than methane? MR. LOGAN: I should point out that this gas sand is down dip from the oil sands that are produced from the Amoco side. So this is definitely an isolated accumulation. It is not part of the oil accumulation. I can't say that there is not a possibility that there is a very small oil rim in this particular accumulation. We don't know. MR. MARSHALL: Would you consider this to be a dry gas source? MR. LOGAN: Well, I don't know. I don't know if we have a gas analysis on it. MR. MARSHALL: Have you investigated the possibility of developing dry gas production that could be coordinated with the casinghead gas source to remove the interruptible aspect of gas production from your platform? -81- MR. LOGAN: Not in that light. We, I mentioned the reserves that we think are in this zone. I mentioned why we don't produce it. The interrupti- bility would be the same whether that well was there or not, unless we built separate pipelines to shore to bring the gas to shore. If the gas well gas is interrupted, I'm sure this gas would have to have been in the same line and it would be interrupted also. MR. MARSHALL: Are you saying that this is a mechanically impossible problem to utilize the gas from a dry gas well with the casinghead gas system? Have I got you right there? MR. LOGAN: I'm not sure if you have or not. I'm saying that this gas well which we are saving for our future supply is on the same platform with oil wells. Therefore, the gas, if it were marketed, would be brought to shore on the same gas line, and the interruptibility would be due to, say, an oil line leaking, or the gas line leaking. If this occurred the gas well gas, along with the oil well gas, would be interrupted, under those cir tums t an ces. MR. MARSHALL: I see. Then 'as far as transportation facilities, they would both be affected by the interruptibility. However, as a production matter on the platform there could be mechanical arrangements made to mani- fold the dry gas into the same line as the casinghead gas. MR. LOGAN: Yes. MR. MARSHALL: We have a few questions that, I think, would probably require a look at your Exhibit No. 1 .................... MR. LOGAN: I have a type' log here, if you would like to look at the type log. -82- MR. MARSHALL: Thank you. Did you go down through the Hemlock on your type log? MR. LOGAN: Yes, it goes all the way and the zones that I've talked about today are outlined on it. In fact, I can introduce this as another exhibit. This is the water sand, and A2S is the gas sand we discussed today. MR. SWAN: Mr. Logan, I don't think this is getting on the record. Could you speak up a little bit? MR. MARSHALL: I think it would probably work best if we would utilize our own copies of these logs and make committee exhibits from them, rather than using your logs, because we have our own markings on our logs. If you'll give us a minute to put those up. MR. BURRELL: Mr. Logan, how many exhibits did you have? MR. LOGAN: Nine. MR. BURRELL: We'll let the record show that those exhibits are Shell Exhibits through 9. Mr. Marshall, there are three committee exhibits so far, is that right? MR. MARSHALL: Yes. MR. BURRELL: Alright. Then the logs you put in now will be committee exhibit No. 4 and 5. Is that right? MR. MARSHALL: That's right. MR. KUGLER: Do you want to put UP your log as an exhibit, Mr. Logan? MR. LOGAN: I don't care, if you've got your own. MR. MARSHALL: Mr. Logan, we have a number of sand intervals which we have looked at which indicate to us that there may be some possibility that they would contain gas. We would like to indicate these sands on one of your logs. This happens to be the C-43-23 well, and we would like -83- to ask you if you have made any evaluation studies of these particular intervals or if you have tested them for gas production? ~fR. LOGAN: I'm sure we haven't tested any of these zones for gas pro- duction, but I -- just within the last month, I've had my petrophysical engineers go over these logs with a fine tooth comb to see if we had any additional gas sands besides the one I have shown today and they have not come up with anything that they describe as commercial gas or usable gas. MR. MARSHALL: This was under both leases? MR. LOGAN: No, this is under just -- both Shell leases. That's what I was told. MR. MARSHALL: I see. Well, then, let's say just for the record, then, in picking out a particular sand interval in ¥.here, would you be familiar with whether or not that specific sand had been evaluated by your petro- physical crew or-- MR. LOGAN: No, I would have to check that out. MR. MARSHALL: I see. Well, perhaps that statement there is sufficient testimony that the sands have all been evaluated and you found nothing that would excite you to thinking they would be productive as gas. In other words, on a calculation basis you found no evidence that there were potential gas-producing sands that hadn't been exploited? MR. LOGAN: This is what my instructions to my petrophysical engineers were, to just let me know of any gas sands on our leases. MR. MARSHALL: I believe, to conclude, we would just indicate to you, perhaps, one sand interval at considerable depth and if you could respond to us on this particular interval then we could have some very pertinent testimony as to a particular interval. Mr. Kugler's favorite sand here would be one in the interval 5550 to 5600 hundred, or more -84- precisely, pardon me, 5552 to 5593. And that well is .... MR. LOGAN: A-14 A-1 MR. MARSHALL: -- The Shell Oil Company gas well. MR. LOGAN: Is that not the same log that I have? MR. MARSHALL: What was it you were speaking of? MR. KUGLER: This is Shell's A-14 A-i, the gas well, and this was completed in the A2S sand, the top sand in the A pool. MR. LOGAN: There is one other sand above it, so this is not the top of it. MR. MARSHALL: And at one other interval on yeur Shell Oil Company Middle Ground Shoal C-43-23 well, the interval 7408 to 7445. This would be a deeper sand in a different well. MR. LOGAN: I would be pleased to run the petrophysical analysis on it and supply it for you. MR. MARSHALL: Thank you. MRe BURRELL: Mr. Marshall, would you identify the log name again by exhibit number? We've got committee Exhibits 4 and 5 up there, but we don't , know the names of the wells. I'd like to know for the record here which one is Exhibit 4 and which one is Exhibit 5. MR. MARSHALL: Okay. For the record, the well C-43-23 is Exhibit 5, and the well A-14 (A-l) Shell Oil Company Middle GrOund Shoal Field is Exhibit 4. MR. BURRELL: Mr. Logan, is it correct that you have not tested any of these zones ...... that were identified by Mr. Marshall ................ ? MRe LOGAN: To the best of my knowledge, I have only been working on this field for a year or so, I'd have to triple check that, but I'm pretty sure that none of these zones have been tested. -85- MR. BURRELL: What incentive do you have to test the gas well, any? What would you do with it if you did have 10 times the gas that you have now? What would you do with it out there? In other words, I'm asking, is there any incentive to Shell Oil Company to test the well? MR. LOGAN: If there were sufficient, if it looked like there was sufficient gas there, it might be. MR. BURRELL: What would you do with it? If you did have gas in the zones? MR. LOGAN: Of course, this would give us a bigger gas reserve from what we have now. MR. BURRELL: But what would you do with it? What incentive have you to test it and what would you do with the gas? MR. LOGAN: On the platforms? MR. BURRELL: Right. MR. LOGAN: We have no incentive on these particular platforms. MR. BURRELL: Alright. Mr. Gilbreth? MR. GILBRETH: Mr. Logan, you made a statement back during the testimony about using a 15¢ value for gas as being somewhat reasonable as the value of the gas. We understand that the gas has no value ..... there is not a market for it, some people say it has a 15¢ value, and so forth. The exhibit you were referring to was a comparison on a heat basis only. Just on the basis of a BTU comparison, do you find anything wrong with the exhibit? MR. LOGAN: Yes, because the price of gas and the price of oil is not compatible on a BTU basis. MR. GILBRETH: No, but so far as BTU's are concerned, do you find anything wrong with the number of BTU's of gas equivalent or equal to a barrel of oil? MR. LOGAN: No. -86- MR. GILBRETH: And if it may be worth as much on a heat basis would you say that the figures would be representative, then? On a heat basis, now. Not a market basis. MR. LOGAN: I don' t know that. MR. GILBRETH: But you don't see anything wrong with the figures that we have presented so far as far as them being true or untrue? MR. LOGAN: Yes, I do see something wrong. You are saying that 4 MCF of gas is equivalent to one barrel of oil -- MR. GILBRETH: On a heat basis -- MR. LOGAN: On a heat basis. MR. GILBRETH: As an engineer, you would say that 4000 cubic feet of Middle Ground Shoal gas would not give out the same number of BTU's as a barrel of Middle Ground Shoal oil? MR. LOGAN: No, I didn't say that. I said there was something wrong ~ith your exhibits, because you have brought that down to a dollar value based on the BTU comparison, and that is not logical. MR. GILBRETH: Well, my question is, on the BTU's alone, the BTU comparison, not the dollar, because I might say that the gas is worth 80¢ an MCF and you might say it is worth nothing, but on the BTU's alone, do you find anything wrong with the exhibit? MR. LOGAN: No. MR. GILBRETH: That's all I have. MR. BURRELL: Does anybody else have any questions of Mr. Logan? We' 11 have him back, by the way. We want him to make himself available. Do you have a question, Mr. Kugler? MR. KUGLER: Yes, Mr. Logan. You were saving the gas in the A2 sand as backup gas and you think you might use it in 19807 -87- MR. LOGAN: Yes. MR. KUGLER: And what do you think is the life of the platform? Or a platform? MR. LOGAN: Well, we see roughly a 25 - 30 year life, to recover the reserves. We think we can. MR. KUGLER: So, that's 1996, or in that vicinity. MR. LOGAN: Our simulation studies indicate that we would use that gas up in a period of about seven years or so, starting about 1980. MR. KUGLER: And how long would the gas in this backup sand last you? MR. LOGAN: That is what I have just referred to. MR. KUGLER: Oh, you're going to have to start using it in about 1980 and you think it will last seven years. MR. LOGAN: Yes, plus or minus. MR. KUGLER: So we've got 14, 15, 16 years from now. MR. LOGAN: Yes. MR. KUGLER: Thank you. MR. BURRELL: Does anybody in the audience have any questions? DR. CASBARIAN: My name is Casbarian, Division Mechanical Engineer for Shell Oil Company. Mr. Logan has presented testimony to demonstrate the effect of subsurface injection of the casinghead gas into the reservoir in the MGS Field. He has also demonstrated the effect of curtailment of production on ultimate hydrocarbon recovery. In all cases, he has shown that the loss or waste of gas and/or oil can result, in addition to the potential safety hazards and a potential serious pollution problems associated with each of the alternatives mentioned. My testimony, on the other hand, is to discuss the problems associated with the development of a market for this excess casinghead gas. I will present in detail the costs and assumptions used in arriving at the costs -88- to deliver this gas to certain locations on shore. I will then discuss the gas well gas prices at these locations and then point out the basic differences between casinghead gas and gas well gas which, so far, has precluded the development of a market. In my testimony of March 4, 1971, I reviewed with you the gathering system as it presently exists in the MGS Field. Exhibit 9 shows that each platform is interconnected by two flowlines and the A and D platforms each have two flowlines to the SAS and Chak Group's onshore facilities. It was pointed out that this system of flowlines provides a loop for all MGS platforms, provides a route to shore and provides an alternate fuel source or gas lift source for each of the platforms. It was also pointed out that these pipelines provide the. backbone of a system that can be utilized for gathering all gas in the MGS Field to a point onshore as a possible sales outlet. MR. BURRELL: Excuse me, Mr. Casbarian, I think you referred to Exhibit 9. It is marked Exhibit 10o MR. CASBARIAN: I'm sorry. It' s Exhibit 10. MRo BURRELL: Alright. Thank you. MR. CASBARIAN: In addition, at the hearing on March 4, 1971, I pointed out the secondary beneficial use of this casinghead gas in our operations. The total estimated gas requirements for our operations on the two MGS platforms amount to some four million cubic feet per day. The next exhibit shows total forecasted gas production versus our estimates of gas used in our operations. This is Exhibit 11. As of mid-1972, we anticipate that the excess gas flared would amount to some 5500 MCF per day tapering off to zero by mid-1980. The total surplus gas available from our operations, and that's the area between the use curve and the gas production forecast -89- curve, amounts to some 6 1/2 billion cubic feet. At the March 4 hearing the question of costs was raised and the SAS and Chak Groups presented to the Conservation Committee the capital costs and the operating costs of two possible s~¢hemes to bring gas to shore, and the price required for this tail gas, or this excess casinghead gas, to recover our investment without interest and/or profit. At the present time we have no firm offer for our gas in the Middle Ground Shoal Field. However, I would like to review with you some additional alternatives that I have analyzed and their associated costs. Let me first start out with a summary of the gas composition which is based on tests we ran in the past few weeks. And this is our next exhibit, No. 12. As you can see the carbon dioxide content is .1%, the nitrogen content is 2 1/2%, the methane content is 72.7%, and so on. And the gallons per MCF of recoverable propanes was 2 1/2, or I should say the 2 1/2 gallons per MCF of propane, and 2 1/2 gallons per MCF of butanes plus. This is -- well, I'll go into that a little later. Consider the case of collecting and shipping all MGS and Chak's Granite Point Gas to shore, of compressing the gas to approximately 1200 psi and delivering this gas through a six mile long .pipeline to Nikiski. The , capital investment required in this case for compression on the six plat- forms and onshore is 3.3 million dollars. The capital cost of the pipeline is on the order of $600,000 for a total outlay of 3.9 million dollars. The present value worth of operating costs for an ~ight-year life amounts to some 1.7 million dollars for a total PV capital and expense outlay of 5.6 million dollars. Thus, the required revenue to recover this investment is some 22 cents per MCF based on a total of 25.3 billion cubic feet excess gas available over eight years from the MGS and Granite Point Fields. -90- I would like to emphasize here that this price I have quoted is based on the premise that all the gas is taken. The price, of course, would be somewhat higher if only part of the gas was available because of interrup- tions due to compressor downtime or events beyond our control. Another alternative I looked at is to install a gasoline plant onshore to recover propane and butanes plus, in addition to a pipeline to Nikiski. The value I have placed on the propane, assuming a propane market were to exist or were~.to develop, was 4 cents per gallon. No market for the volumes we are talking about presently exists. In addition, based on these very recent gas analyses, the average propane content in the MGS and Granite Point gas is about 2.5 gallons per MCF, and the butanes plus are also 2.5 gallons per MCF rather than the 3 gallons per MCF reported to you in our March 30, 1971, testimony. The capital cost in this second case amounts to $6.4 million dollars and the PV operating cost is 3.93 million dollars for a total PV investment outlay of 10.3 million dollars. Subtracting the PV revenue of the butanes plus and the propane leaves a value of 5.89 million. dollars. Thus, the required revenue to recover this investment, with zero profit on the tail gas, would be 23 cents per MCF. No royalty or taxes are included in these values. And again this assumes that all the propane can be marketed and all the gas taken. Based on published prices on record, the gas price, and this is gas well gas, at Nikiski on which royalty is based on or paid on is approximately 16 cents per MCF. Another alternative I considered is to lay a pipeline to the Kenai Gas Field and determine the required revenue for the gas at that point to recover our investment. The first scheme would just gather all MGS and Chak's Granite Point gas and ship the gas to shore, compress this gas and ship through a pipeline to the Kenai Gas Field, and the second s~heme is to instail a gasoline plant and recover the propane and ship the tail gas to the Kenai Gas Field. The additional capital cost for the 8 inch 30 mile -91- pipeline is approximately 2.8 million dollars. The required revenue to recover our investment for zero PV profit in the two schemes previously mentioned are 31 cents per MCF and 34 cents per MCF, respectively. Again, this assumes that the market is available to consume all the propanes and that all the gas is taken. The priee for natural gas at that point where royalty is based is approximately 20 cents an MCF. These are direct comparisons between gas well gas prices and this excess casinghead gas, and does not consider interruptibility, the low available reserves and short life, the quality of the gas, etc., which could place an additional penalty on this casinghead gas. Thus, you can see the difficulty in coming up with a plan that could be attractive to a prospective purchaser. I wish to review one other aspect at this point. In my previous teStimony I pointed out that the Kenai, North Cook Inlet and Beluga River Gas fields have sufficient reserves, or had sufficient reserves, to attract markets and our MGS excess gas in comparison was miniscule. In addition, I pointed out that the availability of gas is short, less than nine years; that the excess gas available declines with time; and, of primary importance, that this source of gas is interruptible. I received last week a copy of the invitation to bid on providing gas service to the City of Anchorage. I would like to quote a few passages from this bid request, and the first one is on page 3, I should say Article 3, Special Provisions, Section D, Dirmness of Delivery, Item 1: Supplier quarantees a continuous uninterrupted supply of gas to City. The next page I would like'to quote from is page 4, Item 1, Quantity: The maximum peak day gas requirements, 19 million cubic feet for calendar year 1973. The total amount of reserves that are required for a potential bid amounts to some 250 billion cubic feet~ -92- And the last section, Article 4, Section B on Quality: As you can see, I will quote from there, "that the nitrogen content has to be less than one percent, the carbon dioxide content has to be less than 0.05%, the methane content has to be greater than 99%, and the ethane and propane have to be less than .105 or .05 percent, respectively. Even with the gasoline plant onshore, there is no way one can recover the ethane without going to considerable more expense than we have, than the costs I have used in my calculations. Thus you can see, based on the bid specifications, that this is directed toward gas well gas and that for the volumes and conditions requested that our MGS gas could not be utilized because of (1) limited reserves, (2) interruptibility, and (3) and perhaps to a lesser extent, quality. Based on all the various cases that I have looked at, it is my opinion that a cost per MCF of gas to recover the investment to bring this casinghead gas to shore far exceeds the worth of this gas when compared to gas well gas and when one also considers the disadvantages of this casinghead gas, namely, small volumes and short life, declining rates, interruptibility and quality, it is easy to see why a market for this gas has yet to materialize. Despite~these shortcomings, we will continue to explore for and evaluate any proposal that might lead to the use of this excess casinghead gas. That concludes my direct testimony. MR. BURRELL: Were you here this morning, sir? Did you hear Mr. Sharp testify? MR. CASBARIAN: Yes, sir. MR. BURRELL: The June 14 conference, pre-bid conference, we would be very much interested in modifying -- MR. CASBARIAN: We will be glad to review it in that light. MR. BURRELL: Does anybody have any questions of Mr. Casbarian? -93- MR. MARSHALL: Mr. Casbarian, this is Tom Marshall speaking. Your chart on the wall, MGS Granite Point Gas Analysis, is representative of a wellhead sample of the gas. Is the liquid that is stripped from that, or in other words, if we were looking at an analysis of a tail gas, it would look considerably different than that, would it not? MR. CASBARIAN: Yes, it would. You'd recover the propanes and most of the butanes. You will recover about 80% of the propanes and most of the butanes, but you would still have the ethane which, of course, volumetric- wise would increase, the nitrogen at the same time would also increase volumetric-wise, and, therefore, you would have a lesser amount of heavier ends. It does change, yes. HR. BURRELL: Dr. Casbarian, are you aware that the volume of gas flared in 1970 from this pool is approximately three months' average use by the City of Anchorage? DR. CASBARIAN: I realize that. MR. BURRELL: Are there any further questions? HR. ,GILBRETH: Mr. Casbarian, your last statement was that you would continue to explore for and evaluate proposals for the sale of this gas. If the proposal that the City of Anchorage has out, I believe Mr. Logan Just said that there wasn't much of an incentive for Shell to process this gas, there is virtually no prospect without the processing to get rid of casinghead gas because of your interruptibility unless some alternate supply can be found? DR. CASBARIAN: That is correct. MR. GILBRETH: Do you foresee any exploration along this line? DR. CASBARIAN: Not necessarily for Shell Oil Company per se. It could be in conjunction with some other operator or some other company. -94- MR. GILBRETH: I see. You may or may not be the one to answer this, but can you tell me how much gas is required to keep the safety flare burning? DR. CASBARIAN: It will be on the order of 50 cubic feet a barrel and that would be something on the order of one half a million a day, roughly. MR. GILBRETH: Okay, then, for safety purposes is it necessary to have more than one flare going at a time? DR. CASBARIAN: That is correct. MR. GILBRETH: One on each side? DR. CASBARIAN: One on each platform. MR. GILBRETH: One on each platform. Is your company now negotiating with anyone on the market for ca$inghead gas? DR. CASBARIAN: We are exploring the possibility, yes. MR. GILBRETH: Are you negotiating? DR. CASBARIAN: Well, we're -- we're talking to them and we still haven't come down to the offering stage. MR. GILBRETH: Are you now negotiating with anyone for removal of LPG' s now? DR. CASBARIAN: No. Other than ourselves. MR. GILBRETH: I noticed you pointed out some figures there on the marketability of gas. You might be aware that some gas has sold as high as 44¢ per MCF in the close vicinity of your flare down there, so it may be rapidly approaching the area of being economical. It is becoming more valuable all the time. DR. CASBARIAN: Unfortunately, the cost of the gas keeps going up, as the reserves decliners, as the excess available gas declines~ It is not a direct relationship, unfortunately. -95- MR. GILBRETH: When there is no more gas here it will all be dry gas and it will all have a high price, won't it? DR. CASBARIAN: I wouldn't say that. MR. GILBRETH: Is there any way, any feasible way to move gas from your platform to shore, or compression to be utilized on the platform, to be moved back to the platform? Or is this completely out of the question? DR. CASBARIAN: I don't quite understand your question. MR. GILBRETH: We've heard testimony to the effect that you can't put compression equipment on the platform, among other things. DR. CASBARIAN: It depends on the size, now. The testimony that Mr. Logan gave was primarily discussing injecting gas into a reservoir which requires a high pressure gas and, therefore, the size of the compressor that we are talking about in that instance is quite a bit larger than the size for getting gas to shore at 50 pounds. MR. GILBRETH: Alright. Then let's take the large compressor. Is it feasible to put the large compressor on the shore - to get it back to the plat form? DR. CASBARIAN: You would have to get it to the shore first and then put in several other lines to bring it back to the platform. It is feasible, s ute. MR. GILBRETH: Is one of the lines in existence, would it carry high pressure gas ? DR. CASBARIAN: No. They're 1000 pounds maximum. MR. GILBRETH: It would require installation of a high pressure line? DR. CASBARIAN: That's right. MR. GILBRETH: In the 120 day progress reports that operators have previously submitted, I believe there were nine separate reports in all, -96- and in only one report did your company report that they were contacting anybody about gas. Were they actually trying to sell gas here in this town or waiting for somebody to come talk to them? DR. CASBARIAN: I don't remember which one -- was this in a report itself that we sent you? MR. GILBRETH: Yes, sir. DR. CASBARIAN: Uh -- MR. GILBRETH: The report of what you were trying to do to beneficially utilize gas. DR. CASBARIAN: Whether we were trying to sell it or trying to obtain gas ? MR. GILBRETH: Market the gas. DR. CASBARIAN: We're still trying. MR. GILBRETH: This is something that concerns me. We have had four or five hearings and everybody keeps coming in and saying we're trying, but this is all that we know. DR. CASBARIAN: I understand your position and that's the reason why I'm trying to provide the, we've continued our studies. I haven't prepared this testimony on the costs and the economics just for the hearing. We have continued to try to come up with a reasonable cost of placing our gas, to try and recover our investment, and this is what I have tried to point out today. When you compare it to gas well gas, and you consider its interruptibility and you consider -- MR. BURRELL: Can you please speak a little louder? They can't hear .you in the back. DR. CASBARIAN: Okay. When you consider the price at which we would have to recover our investment, at various points onshore, and then take into account interruptibility and the declining reserves and the volume of -97- gas available, and the low life, it is quite hard to compete with available gas well gas reserves, or gas well gas - period. And this is the reason why we are having some difficulty in coming up with a market. MR. GILBRETH: Well, what you're really telling me then is that so long as there is dry gas available you're just not going to be able to compete as long as it is still under its present pri~e. Is that right? DR. CASBARIAN: That's basically it, yes. MR. GILBRETH: That's all I have. MR. BURP, ELL: Dr. Casbarian, you're aware that some 20% of the gas which Alaska Pipeline is running through is sold at 25¢ per MCF? DR. CASBARIAN: Yes. Well, the first billion, as I understand it, the first 8 billion is 25¢ and the next 8 billion is 16¢ and it's quoted an average price of 20¢. MR. BURRELL: Does anybody else have any questions? Mr. Marshall? MR. MARSHALL: I believe you made an unqualified statement that no market exists for these natural gas liquids. I wonder if that isn't a little like saying that, let's say that in 1959 or 60 no market existed for oil from the Swanson River Field. Mr. Burrell has read in the record about these fuel gas shortages in the south 48 and these liquids are trans- portable, probably to a considerably greater extent than crude oil, but could you comment on any activity you may have had to try and find'a market for liquids? DRe CASBARIAN: Yes, I would like to quote a study that was made. Well, not a study, but numbers that were provided by U.S. Bureau of Mines and this evaluated or tabulated the amount of propane that has been used in the State of Alaska for the past several years going through 1969. And the total demand for propane in Alaska is at present on the order of 5 to 6 million gallons per year. This is with a percent change, an average percent -98- change, from '63 to '69 to 8.2% per year. This is an average increase in demand. Based on that, the amount of volume that we can recover, assuming we were to recover 80% of the propanes from the remainimg reserves, we would start off with something on the order of 49 thousand gallons a day which over a year's period is on the order of 14 to 15 million gallons per year, and at the present time I don't see how we can flood the market or at least have that propane available when there is no market for it. MR. MARSHALL: I would certainly agree that the market for propane in Alaska would not increase any more dramatically possibly than our popula- tion which hasn't moved a whole lot. My question was directed at the south 48 states and, to rephrase it then, would not 15 million gallons a year of propane warrant some investigation into ocean barge or ocean ship transport of liquids? DR. CASBARIAN: Yes, sir. And the total volume that we've been able to calculate on the basis of Granite Point gas, at least the Chak's Granite Point gas, and MGS gas, amounts to some 50 million gallons of propane, total, over eight years which has to justify, has to recover an investment to bring it down to the south 48. Now, the problem associated with moving propane is part of the Jones Act, as Mr. Swan mentioned. The cost of storage is extremely high because of the fluctuating market in the lower 48, and I .have figured it would cost us somewhere on the order of 5¢ a gallon Just to ship propane down to the lower 48. When you compare it to the 7 1/2 cents maximum posted price that I have been able to determine, the netback to the plant is 2 1/2 cents which is more, or less, than the 4¢ I have tried to use in my calculations to come up with these values of tail gas, at Nikiski and at the Kenai Gas Field. MR. MARSHALL: Would the basis for these mathematics be just Shell Oil Company leases? -99- DR. CASBARIAN: That is correct. MR. MARSHALL: This does not include the-- DR. CASBARIAN: I beg your pardon, includes the Middle Ground Shoal Field and Granite Point, total. In other words, the Chak Granite Point gas and Shell's -- and the Middle Ground Shoal Field excess available gas. It is just the East Forelands gas, if you like. MR. MARSHALL: Thank you. MR. GILBRETH: Mr. Casbarian, the analysis that you have on the wall, I can't see the exhibit number. DR. CASBARIAN: That's Exhibit 12. MR. GILBRETH: Does that represent a calculated composite of both Granite Point and Middle Ground Shoal? DR. CASBARIAN: That is correct. On the basis of three ............. . MR. BURP. ELL: Dr. Casbarian, I trust your remarks then pertain to casinghead gas as being inferior to gas well gas, for economic reasons. DR. CASBARIAN: At the present prices. MR. BURRELL: It occurred to me that the automobile has replaced the horse and buggy, perhaps the liquids or the gas can replace some fuels we're burning. Do those things happen to be possible? DR. CASBARIAN: I have even looked at that, Mr. Burrell and the hea~ing value for a gallon of propane is 95,000 BTU's versus one million for an MCF of gas, and an equivalent cost for, say, if you have gas at 20¢, the equivalent cost of propane would be 2¢ as netback to the plant. In other words, you'd have to come up with 2¢ propane or the price of propane would have to be 2¢ to compete with 20¢ gas for the same heating value using the same heat basis example. MR. BURRELL: Do you have any charges for fuel oil? -100- DR. BASBARIAN: No, I don't, but it is on the basis of 80¢ and MCF. We're talking a different -- it's on the order of 8¢. It's a 10 to one ratio, roughly. MR. MARSHALL: The statement about transporting liquids, petroleum gas liquids, I think is considerably different than just dry gas. The ocean transport could pick up on both the east and west sides and I don't think it's quite realistic to base the economics of LPG's on a particular company's operation when the markets could service all companies in the Inlet. DR. CASBARIAN: I have not spent any time looking at other people's economics right now or the other reserves. There certainly is a possibility that that may be the case, but I have not had the opportunity. MR. BURRELL: Does anybody else have any questions? (NO RESPONSE) MR. GILES: I am Bart Giles with Amoco Production Company. Our first comment on the first question posed on the notice of this Middle Ground Shoal hearing, can excess casinghead gas be marketed, be injected into any reservoir or pool, or otherwise beneficially utilized by July 1 of 19727 Well, on the marketing aspect our prior testimony still holds true, namely, we have found it is uneconomical to prepare the gas for market if no firm market exists and we have no firm in-hand proposals at this time. When I say it that way I recognize fully that the City of Anchorage has invited us to bid and the~e has been much talk today about that supply and the fact that there is a June 14 before-bid conference at which time certain aspects of these bid specs may be re-vamped and may make it to where our casinghead gas has a possible market in this City of Anchorage need. But we probably couldn't be in a position to serve a market before July 1, 1972, and Just as we've said on numerous previous occasions, we continually look at this business of finding a market and we entertain any proposal that anyone wants to make to us, and this will hold true. -101- Now on the injection of gas, yes, we could inject the excess casing- head gas back into the producing horizons at Middle Ground Shoal by July 1, 1972. However, there will be no benefit to current oil production by doing so and there will be no benefit in ultimate oil recovery by doing so because there Just is not enough gas volume to do any beneficial good. Now the injection of gas will do four things. It will congest platform space, but we could do it. We could put the compressers on the platforms. Injection of gas will increase the total investment and I'll touch on that further as to what it would cost. Injection of gas, of course, will cut into any profits that may be realized, and fourth, it will initiate a hazardous condition, all for the dubious benefit of eliminating the flare. Nor, on the hazardous angle, there is some risk right now in having 800 pound gas-lift-gas on our Baker Platform, and to have to handle two thousand to three thousand pound injected gas on a platform does introduce a high risk situation from a safety standpoint. Oscar, did you hand out the Baker curve? MR. SWAN: Yes, sir, I did. MR. GILES: Alright, And I have a little larger scale one on the board. What I am about to look into is how much excess gas would we have available July 1, 1972 and what would it cost to inject it? MR. BURP. ELL: Excuse me, Mr. Giles. Do you have a number on that? MR. GILES: No, I haven't numbered my exhibits. I'll have three all told, and we'll call this number one° MR. SWAN: That's the Middle Ground .Shoal Baker curve? MR. GILES: Yes, that will be No. 1 MR. BURRELL: Why don't you keep them consecutive? MR. GILES: Alright. No. 13. Is that what it is? -102- MR. BURRELL: Thirteen is the next number, right. MR. GILES: We have assumed for the July 1, 1972 conditions that the oil producing rate will be 5300 barrels of oil per day ...... MR. BURRELL: Excuse me. We've decided that we want to make that Amoco #1. Thank you. MR. SWAN: Technically we should make it Chakachatna #1. MR. GILES: 5300 bmrrels of oil per day on July 1, 1972, and the average gas/oil ratio we estimate will be about 700 cubic feet per barrel. This is the average of all MGS pools. The current fuel requirements are about a million a day and those will increase to 1336 MCF per day after we get through expanding our water injection facilities this summer. We touched on that at the March hearing where we intend to add another injec- tion pump for the B, C, D pools, to get a positive withdrawal balance for that pool. And we have assumed an operational flare of 50 cubic feet per barrel would be allowed. This 50 cubic feet per barrel is simply from fluid analyses that show us how much gas is coming off of a 50 pound separator at atmospheric pressure and would be flared. So 5300 barrels a day times 700 cubic feet per barrel gives you about 3.7 million cubic feet a day produced gas, and less 1336 MCF per day fuel and an operational flare of 265 MCF a day, we come down to 2100 MCF a day, 2.1 million, that we would have as excess gas to inject. And compressor costs to inject the excess gas would be on the order of $360,000, roughly 900 horsepower, or about $400.00 to install per horsepower. Now this is just capital cost, it does not include any operating costs in that figure of $360,000. Now for Dillon, the same type of analysis, let's call this Chakachatna No. 2. I assume you have handed out ~he smaller Dillons here. '71-'72 conditions again. We figure about 6100 barrels of oil per day at that -103- point in time and we have a constant solution ratio of 325 cubic feet per barrel and we would assume that Dillon continues to receive a million cubic feet a day for fuel from Granite Point. And further, we would assume an operational flare of 50 cubic feet per barrel again. And going through the same mathematical gyrations for DillOn, we find that we would have approxi- mately 1.7 million cubic feet of excess gas, over and above fuel needs and operational flare, at that time. And since this gas volume is on the order of the gas volume for Baker, a compressor cost estimate of $350,000 is in the ball park. Mr. Swan in his remarks before lumch answered the question which we thought was a legal question, No. 2 in the notice, and so on question 3 in the notice, will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for a safety flare? The answer is yes by loss of current income, yes by loss in present worth of future income, yes in the loss of ultimate oil recovery. Plus the fact that we would be inefficiently using the existing equipment which would be oversized for operating at the reduced oil rate. Let's go to Baker again. Under such a restriction order as question 3 contemplates, we would shut in the highest gas/oil ratio wells first, We would cut thoSe back first. And based on a well-by-well review of doing it in this manner, we find that the average gas/oil ratio under Baker would drop below the 700 cubic feet per barrel figure that I quoted earlier. It would go to about 530 cubic feet per barrel. We had estimated that .by July 1, 1972 our fuel needs on Baker Platform would be 1336 MCF per day. The operational flare would be 140 MCF per day, not as high as some of the other analyses because we have had a reduced oil rate. So, we end up with dividing the fuel and operational flare figure of 1476 MCF per day by the 530 cubic feet per barrel and find that we have been producing at the rate -104- of 2800 barrels of oil per day. So, we now would be at this point. This represents the difference on July 1, 1972 represents a current income loss of 2500 barrels of oil per day. Now we have used the figure of $3.10 per barrel for our analysis - choose any figure in that ball park you like, gentlemen, but the oil company's share of this loss would be $6550 per day and the state's share of this current income loss would be $1200 per day, or $36,000 that first month lost to the state. We figured it this way, 12 1/2% on the royalty plus about 3% in taxes. Bear in mind that the discovery royalty at Baker would be off at that time. We'd be on the 12 1/2% royalty rate. The loss in present worth of future income at 10% discount factor which is probably representative of an industry average, would give the representation to the time value of money, would be $3,700,000 of which the oil companies share in this present worth loss would be $3,126,000, and the state's share would be $574,000. Now, these are conservative losses because we have considered the ultimate oil recovery would not be affected. We believe all of the oil recovery would be lower if restrictions were imposed with a water-flood in operation. Particularly in view of the narrowness of the structure under Baker. I'll touch on that some more later. Now let's go to Dillon. Under a restriction order we assume that an investment of $200,000, about $200,000, would be necessary on the platform for dehydration and compression equipment, so that Dillon could use its own produced gas for fuel. Incidentally, we have used Dillon produced gas on an emergency basis, a very short duration type basis, and it sure does foul up our engines. We used it very recently when for three weeks we had a break on the Granite Point B pipeline, a gas line, which is now repaired. But a million a day for fuel at Dillon plus 190 MCF per day operational flare at the rediced oil rate would give us about 1190 MCF per day divided by the solution ratio of 325 cubic feet per barrel tells us we would be -105- producing at 3800 barrels of oil per day. So here again we sustain a loss in current income under that type of restriction order of 2300 barrels a day. The difference between the two, red arrow, and at $3.10 a barrel this is $7130 a day, the oil company's share would be $6,000 a day and the state's share would be about $1100 a day, or $33,000 that first month. The loss of present royalty at 10% discount factor, would be $490,000. The state's share would be $76,000 of that, the oil company's share would be the remainder, $414,000, but we also had a $200,000 investment for the dehydration and compression, so we had $614,000 present worth loss if we were to operate under that type of restriction order that is posed by question 3 in your notice. Now all of these calculations of present worth income reductions assumed that the ultimate oil recovery remained the same, with or without restrictions upon oil rates. So we have to label these loses as conservative because it is the opinion of many highly qualified people in the industry that ultimate oil recovery would be reduced if waterflood projects are prorated. Some of the articles and the authors which have devoted time to this subject are listed on the sheet that I hope Oscar passed out to you which we will call Chakachatna No. 3. There is not unanimity on the subject of ultimate oil recovery losses by restricting waterfloods, but the great preponderance of the experts feel there is a loss in ultimate oil recovery. I would like to cite to you some of the comments on these papers that I have cited on the Chakachatna No. 3 Exhibit. The first one was in the Oil and Gas Lournal on June 16, 1958, and these authors believe water- flood oil recovery is lessened by restricting rates and this was a paper presented by Joe F. Buckwalter, G. H. Edgerton, W. E. Stiles, R.. C. Earlougher, Go L. Buckles, and P. M. Bridges. Several of those names are well known in -106- the industry for their contributions on papers and technical treatises. These people say in two sentences here, the gist of their paper, "effect of restricted rates on oil recovery by waterflooding is a damaging effect. Oil recovery is reduced by restrictions of rates." The next citation I have on Chakachatna No. 3 is a laboratory study of gravity segregation in frontal drives and it is virtually impossible to pick any part of the text out of context and have it make sense. You will have to read the whole paper. So I will leaVe that citation for everybody to look up yourself, if you choose to do so. The third paper listed is in A.I.M.E. Petroleum Transactions, series number 2. It is "The Effect of Rates on Performance in the Browning Unit Water Flood," by F. F. White, who at that time was with the Sinclair Oil and Gas Company. It is concluded in that paper that performance has been more satisfactory at the higher rates of injection. The next one is an article called "Don't Prorate Waterfloods" by Burt Murphy that appeared in the February 18, 1957 Oil and Gas Journal. You can tell, gentlemen, that he made a rather exhaustive literature search on this subject and when they presented to me the list of all these papers I wondered who Burr Murphy was, and I think for the record I should tell you who he is. He is a graduate of Stanford University in engineering and did considerable graduate work in reservoir engineering and evaluation at Southern Cal. In '48 and '49 he worked for Continental Oil Company, in 1950 he joined Signal Oil and Gas Company where he was through the ranks advanced to the status of project engineer and supervisor of a west Texas flood project. In 1954 ~e was engaged as chief engineer by an F. Kirk Johnson who was made assistant manager of a waterflood division just prior to the incorporation of the firm which became Ambassador Oil Corporation. Since 1955 he served as chairman of the joint study committee of the Permian -107- Basin Waterflood Association, the West Central Texas Waterflood Association, and West Central Texas Oil and Gas Association studying the effect of rates on waterflood performance. In a summary of this paper this is what he says: "The preponderance of information indicates that the greatest recovery and the most favorable waterflood operations will be accomplished if wells are produced by pumping at or near capacity and if no shut-down or reduc- tion in injection or in production occurs." And last but not least is a study of the curtailment of production on oil recovery from waterfloods and other secondary recovery projects compiled by the Interstate Oil Compact Commission in 1960. The summary of this rather voluminous text, you can tell it is quite comprehensive, let me read from the summary here: "The studies of the committee at special meetings and conferences as well as the literature available on the subject point out that curtailment of waterfloods and other secondary recovery projects is chiefly an economic problem rather than a physical one. Curtailment affects the rate of recovery, and th~s may increase costs of operations. Certainly the recovery of oil is a business which must cease when it becomes unprofitable. Consequently, practical recovery of oil from leases and from projects pertaining only to a portion of the field, that is a reservoir, may reach the economic limit or a point of no profit before all the oil physically possible of recovery:has been produced. In conclusion, the experiences in this area indicate the loss of recoverable oil by radical changes in operating schedules, whether these changes represent reduced injection rates or interrupted pumping schedules. Part of the Interstate Oil Compact Commission's study included the Burr Murphy article, "Don't Prorate Waterfloods" that I mentioned before, and incidentally, at the -108- end of Mr. Murphy's paper he recites 54 different papers and authors that treat on this subject. "The influence of curtailments on recovery and oil recovery by Water- flooding," by Walter Rose is a part of this compact study. The paper dis- cusses the influence of curtailments. I'm reading from it. The paper discusses the influence of curtailments on the efficiency of the waterflood- ing process. Curtailments are interruptions in production, such as shut-in periods or controls put upon production such as proration. The efficiency includes the idea of the cost of recovery, the rate of production and the total cumulative recovery. Minimum costs are desired for economic reasons. High initial rates of recovery are favored for marginal operations and maximum ultimate recovery is consistent with the conservation principle that a natural resource should never be lost. My analysis shows that the recovery process, including the waterflooding variant, is rate sensitive in a way that is related to the dominance of capillary forces. Hence, curtailments will.influence recovery. There was an article by Mr. E. T. Heck, Vice President of Monard Oil Company in Bradford, Pennsylvania. Any restrictions on the rate of produc- tion on a waterflood would, at the very least, result in a corresponding increase in the length of time necessary to continue the operation. This means either additional repairs and replacement or premature abandonment of the lease with a resultant loss of recovery. Since both the original investment and the cost of operations are so much greater for the water- flooder, such restrictions place a burden on the waterflood operator. Indeed, the rate of production is vital in the planning of any water- flood and this factor alone, if unfavorable, can result in the decision not to subject the reservoir to waterflooding with a total loss of any existing reserves. -109- And finally, I would quote from an article by Jack Tanner, technical advisor to the Vice President of production for Phillips Petroleum Company in Bartlesville. I'm quoting, "Observation of the performance of water- flood operations causes me to draw the conclusion that ultimate oil recoveries may be less from a pattern-type waterflood operation, if oil wells are produced at restricted rates. This conclusion has been drawn after observing the performance of pattern-type waterfloods in eastern Kansas and northeastern Oklahoma that were subjected to restricted producing rates by an order of a regulatory body. Or that was shut in because of surface flooding from a nearby river. Not all of the properties subjected to the restricted rates can be shown to have lost ultimate oil recovery, but there is sufficient evidence that ultimate oil recoveries were less from some of the properties to cause serious concern over any artifical restruction on producing wells. The loss in ultimate oil recovery was most evident on those properties producing large volumes of water with the oil." Mr. Tamer concludes in this fashion, "I do not believe that ultimate oil recoveries from waterflood operation- are affected by rates of production nor rates of water input, provided the approximate rate of oil production is known at the time that the flood is started and the program of operations is engineered to meet that rate. However, once a flood has been engineered to meet cettain conditions, ultimate recoveries may be lessened by restricting oil production from individual wells." In recognizing, gentlemen, the fact that ultimate oil recovery would be reduced if waterfloods were curtailed, the Texas Railroad Commission lifted proration restrictions for many, many water- flood projects in Texas. This is a little corollary, a sidelight to the discussion on this effect upon rate restrictions on oil recovery, but -110- we're kind of proud of the waterflood at Dillon. Our Dillon flood is now producing 2 1/2 times its estimated primary production. The waterflood on Dillon was placed on stream in late 1969, and we have now injected over 4.3 million barrels of filtered Cook Inlet water. When the waterflood was started the platform producing rate was about 4300 barrels of oil per day. Now without waterflooding we put this line on here to indicate an extrapola- tion of primary. We would have been at 3400 barrels a day today. But with waterflooding the producing rate has gradually increased through 1970 and now appears to have peaked at around 7500 barrels of oil per day during January of this year, and current production is averaging about 6500 barrels of oil per day. On the basis of these rates, we estimate that the water- flood production through May of this year will amount to about 1.4 million barrels of oil since this 675 thousand dollar project was started. The last thing I would like to cover is that, in the Cook Inlet fields, we have movable clays within these oil reservoirs which seem to be quite sensitive to interrupted flow or exposure to some types of water, and this has been demonstrated by a number of wells which produce at lower rates following a shut-in period. Operators within the Trading Bay Unit have given previous testimony attesting to the fact in their application to allow use of gas well gas for lift purposes when the gas lift compressors were down for repairs, and I have with me, if the Committee would like to see it, a curve on our Baker Well No. 6 which shows 'the effect of killing that well back in 1968 with calcium chloride water during the well workover where we intended to install an electrical submersible pump. This MGS 17595 Well No. 6, it produces from the B, C, D Pools, was producing on the order of 1500 barrels of oil per day before we killed it with calcium chloride water for this submersible pump installation and afterwards, we -111- were producing in the range of 500 to 600 barrels per day and it fell off quite sharply. I believe that concludes my testimony, Mr. Chairman. MR. BURRELL: Mr. Giles, are you introducing that as an exhibit? MR. GILES: I've only got the one copy. I grabbed it at the last minute, but you're welcome to have it. Yes. MR. BURRELL: Do you want it as an exhibit? MR. GILES: Yes. Yes, I think I would. Let's call this Chakachatna No. 4. MR. SWAN: May we make some copies and furnish them later to put into the record? MR. BURP. ELL: If you want to supply that later, it's up to you. MR. SWAN: Do you just want to give it to them? MR. GILES: Why don't I just give it to them. MR. BURRELL: FO~ the record, let me take care of the housekeeping here. We accepted Shell exhibits 1 through 12 and Chakachatna exhibits 1 through 3 and we want to withdraw committee exhibits 4 and 5. Mr. Marshall advises me that these are our only logs and that they served their purpose when they clarified the formations. Thank you. Mr. Giles, in those articles, as I recall, you quoted that conservation means maximum recovery of a natural resource. Would that natural resource include flared gas? MR. GILES: Yes, if it can be beneficially used. MR. BURRELL: You went to a lot of work, I'm sure, in getting all these papers together, and we'll have to look at them a11, as well as the footnoted articles, and you also stated that it was a matter of on which there was no unanimity of opinion. -112- MR. GILES: Yes. MR. BURRELL: And I wondered if you had a list of the other side? (LAUGHTER) MR. GILES: You will find the other side included in the Interstate Oil Compact's 1960 study, but I do want to emphasize, Mr. Burrell, that the preponderance of evidence favors the position I stated for these authors. MR. GILBRETH: Mr. Giles, I had raised a question earlier about whether or not there is a gas cap in the Middle Ground Shoal "A" Pool. Do you have any more on that? MR. GILES: There is a gas cap in this oil pool A, yes. MR. GILBRETH: Is it an associated gas cap? MR. GILES: Yes. MR. GILBRETH: Can you see any reason why gas couldn't safely be injected into the gas cap of that pool since oil is being withdrawn down- dip obviously? MR. GILES: It could be done, but it has a Problem. We have a situation in the MGS "A" pool, where we aren't putting enough water into that A pool to offset the "A" pool total withdrawals at this time and so if we were to inject produced gas into the cap we would aggravate and compound our present problem with increasing gas/oil ratios from that pool in the down-dip oil column. MR. GILBRETH: You would enhance your volumetric replacement, but you'd run into a gas/oil ratio problem? MR. GILES: Yes, sir. That's what we're saying. MR. GILBRETH: And from this standpoint the water cycling would be too much volume to handle? MR, GILES: Yes. -113- MR. GILBRETH: It would not be, from the standpoint of prorationing penalty or anything like that? MR. GILES: No. MR. GILBRETH: Can you tell me, has water injection proven feasible in the Middle Ground Shoal Pool to the extent that gas injection can be ruled out completely as a recovery mechanism in these pools? In earlier testimony, the first testimony indicated that this would take some history to determine -- Do you have some history on ..... MR. GILES: Yes, we do. We are quite pleased, as I told you on Dillon and we're not at all displeased with Baker. And I would answer your question much as at the March hearing, I made the, you might call, off the cuff, comment that injection of gas could mess up our waterfloods. You may recall that. And let me elaborate, there are two ways that this could happen. To answer your question now, I don't think it's right to inject gas into these waterfloods. HR. GILBRETH: Do you think that it ever will be in these particular pools? MR. GILES: I don't foresee it, no. But let me explain the two ways , that'we feel it could foul us up, so to speak.. First, we can't afford to drill wells solely for injection. We've got to convert existing wells instead, and if we have to use a couple of existing water injection wells for gas injection, then we rob from the waterflood program the use of these wells for water injection service. And, consequently, we could slow down the waterflood project and this, in turn, in the eyes of our reservoir people, could cause the flood front that's built up now to slump and it could hurt us and not only in current oil income, but perhaps in ultimate -114- oil recovery. Now the second thing is that gas quite naturally is far more mobile than water. And the gas could channel when injected, could channel through fractures in a reservoir to the nearby producers, and this at Dillon, as an example, would affect the efficiency of the Kobe pumps that we have on Dillon to lift the oil because' the gas would have to be handled through the pump and lifting the oil at the most efficient rate possible in our view is critical to the success of the flood. To maximize oil recovery when the flood front oil reaches the well bore to be produced, it should be produced at maximum rates. Now, at Baker, if channeling didn't occur we might very well cause secondary gas caps to occur around the nearby producers, and this would bother us quite a bit. So I'd have to say now we've got some water- floods that are turning out pretty nice and we would not want to inject gas. MR, GILBRETH: I'd like to go back to this "A" Pool gas cap. Do you know, Mr. Giles, if the Shell completion that was mentioned earlier in the testimony that is now shut in is in the gas, the associated gas cap of the "A" Pool? MR. GILES: I don't know, I don't have the wherewithal about their A2 well, but I would rationalize from the testimony given today that they are in a separate source of supply from the MGS "A" Pool that I am talking about on our side. MR. GILBRETH: In other words, from your standpoint on your side of the reservoir, there is a gas cap in the A Pool, but you're not sure whether that is the same gas cap that is present over on Shell's side, is that right? MR. GILES: I don't visualize it being part of the same pool. MR. GILBRETH: I see. Do you have enough history yet to give us any idea of the relative efficiency of your project? Are you getting effectiveness from half of your water, or 2/3 of your water, 25% of your water? -115- MR. GILES: We're getting nearly total effectiveness from the flood at Dillon because we never did go below the bubble point and so we have, as Mr. Logan pointed out, a definite piston effect there. I don't know the, how to answer your question on Baker. We are pleased with what we see so far. That's all I can say. MR. GILBRETH: I would like to ask you the questions I asked of the Shell witness. Is your company now negotiating with anyone on a market for the casinghead gas being flared? MR. GILES: We have continual, not continuous, but continual appraisals of talk offers, but as I say we have nothing concrete written down firm at this time to look at. But this does not say that next week we might not have a firm in-hand written proposal. MR. GILBRETH: I have heard, through three hearings now, the statement made that we will entertain any proposal brought to us. I would like to ask, is anybody going out and trying to find a market? Or are your people sitting back waiting for someone to come to you? MR. GILES: Well, we're talking the law of supply and demand again. MR. GILBRETH: Well, we've had 100 people come through our offices in the last three years wanting gas and you people keep saying we'll entertain any proposal. Are you trying to find any of these people? MR. GILES: Well, Mr. Gilbreth, do they then after they see you come talk to Amoco? MR. GILBRETH: I don' t know. MR. GILES: I don't either. They should, by all means they should, and we welcome them coming, but a lot of them come and talk to our gas people and they see certain wrinkles that are not appealing, whether it be they or we. We can't get together, let's say, and it's just a talking proposition. -116- Nothing was ever put down firmly in writing that you could sink yourmeat hooks into and evaluate properly. Now this is what we really need from a potential marketer. MR. GILBRETH: Could you tell me if your gas sales people have ever talked to Anchorage Natural or Chugach Electric about selling casinghead gas? Homer Electric or Tesoro Refining, as an example. Ail those people are buying gas and have wanted it in the last couple of years,~ have you talked to these people? MR. GILES: I think that they have talked to them. I can't say for sure. MR. SWAN: I don't know that we've talked to all of them. MR. GILES: No. We have talked to some of them. MR. GILBRETH: Well, as I say, we have heard the statement continually made and there is no evidence presented to us whatsoever that anybody has done anything .......... and it is a matter of concern to me that so many people come in wanting gas and then we find that they are not able to get it, or something. So, you know, we've got a communication problem. MR. GILES: Um hum. I appreciate this. MR. GILBRETH: On your side of the reservoir, then, the Middle Ground Shoal Field, have you made any efforts to develop a dry gas supply to supple- ment your deficiency period? MR. GILES: Not yet, no we have not. MR. GILBRETH: You wouldn't then have anything available for a backup supply if you were going to try to sell casinghead gas to bridge across the interruptible period? MR. GILES: Not at this time, no. We know we have some shallow gas sands at Middle Ground under our Chakachatna leases, but we have not tried to develop them yet. -117- MR. GILBRETH: Does it also follow along the lines that Mr. Burrell asked awhile ago that there is no incentive at all to develop the dry gas? MR. GILES: This is correct, Mr. Gilbreth. Not at this time. MR. GILBRETH: That's all I have for right now. MR. BURRELL: Mr. Giles, the thrust of a great deal of the testimony, including yours, has been that there are no economics in getting this gas to shore and to market. How can you reasonably expect to consummate any of these eternal negotiations? Do you expect the economics to change? Why is there any hope at all? Why not just forget it and just give up? MR. GILES: Well, the supply is changing all the time. As a matter of fact the supply is going down and I would hope the demand would pick up and if the two can, interracting forces, can work its way to a match, why, we could have a market for it. MR. BURRELL: You wouldn't want the Committee to in any way exert influence over the laws of supply and demand. MR. GILES: I would not. MR. BURRELL: Even although it appears as though the laws of supply and demand do not solve the problem. MR. GILES: They haven't yet, Mr. Burrell. This does not rule out its happening even though the gas reserves are diminishing. We remain hopeful, we really do. MR. BURP, ELL: Since 19657 MR. GILES: Yes, sir. MR. BURP, ELL: Mr. Mmrshall? MR. MARSHALL: Mr. Giles, have you ever considered a program of actually developing your dry gas in the Middle Ground Shoal Field that is under your leases with the thought that it in itself may be a marketable product? -118- MR. GILES: We have not actively done this, no. Again, we have no incentive at this time to do this. MR. MARSHALL: You mentioned in answer to Mr. Gilbreth's question that you do recognize gas production on your leases, dry gas production, and that this is in an undeveloped status now. MR. GILES: It's undeveloped, that's right. MR. MARSHALL: Have you made any calculations or estimates as to the reserves of dry gas which may be under your leases in the Middle Ground Shoal Field? MR. GILES: I have no knowledge of those, no. MR. MARSHALL: But if you made an exhaustive study of the sands and this dry gas potential, it could provide the stimulus to some sort of marketing or sales effort for dry gas, possibly. Since you are in the oil and gas business, if you had a sufficient quantity of it, you would probably think in terms of some marketing method for it? MR. GILES: Well, really, Mr. Marshall, we have in the back of our minds that this shallow gas in Middle Ground would serve as a backup supply when we become fuel deficient. This is what we~have tentatively programmed in our own shop. MR, MARSHALL: Well, of course your own company in-house plans, we're not parti.~ularly privy to these on a continuous basis, but at numerous hearings we keep hearing that the major problem is the interruptibility of the gas supply, and it always seems like good arithmetic to us if an indigenous gas supply underneath the platform and on the leases that couldbe developed from it could be coordinated with the interruptible supply, thereby elimina- ting this inte~ruptibility aspect. Now I realize that there are certain mechanical problems, but I haven't heard from anyone that these are insur- mountable. -119- MR. GILES: Well, one of the problems we have with this shallow gas supply at Middle Ground is that it is so shallow and it is so far horizontally removed from our platform that we couldn't develop it from Baker. MR. MARSHALL: Well, how do you develop it when you need it later on? MR. GILES: This is a very good question. We'll have to look at this versus buying gas when we become fuel deficient. This would be another economic analysis at that time. Though we have no cinch for making up fuel deficiency from that source alone, we have to evaluate it versus buying outside gas or some other means. MR. BURRELL: Mr. Giles, have you ever thought about cleaning up this gas and running it to shore and maybe trading it to Anchorage Natural and when you become fuel deficient you would get it back? MR. GILES: That's another approach. MR. SWAN: We have and we have talked to them about that very thing. MR. BURRELL: Is this the same negotiation? MR. GILES: I tried to work up what kind of a contract we would work up if we could agree on a price. MR. BURRELL: How about just a trade? MR. GILES: Well, this is what it boils down to. We feel in effect we're storing our gas for awhile. MR. BURP. ELL: How are those negotiations coming, Mr. Swan? MR. SWAN: I~'m not sure, after the testimony of Mr. Teel, if there is any further room to negotiate, but I Can check on that and let you know. MR. BURRELL: I don't have any more q~stions. Mr. Gilbreth? MR. GILBRETH: I just wanted to reiterate one point, Mr. Giles. The large number of authors you have cited here have indicated that restrictions in rates would harm ultimate recovery. They are talking mainly of restrictions in oil producing rates, are they not? -120- MR. GILES: Well, quite a number of them talked about restrictions on injection rates, too. MR. GILBRETH: Would you say for the record that it is fairly common knowledge that there are a large number of authorities who take, who hold, the opposite view? MR. GILES: Yes, but the preponderance of the authors take the view that I cited. MR. MARSHALL: Tom Marshall. Mr. Giles, you mentioned that you consider most of your dry gas reserves on the Middle Ground Shoal Field to be at a rather shallow depth. Mr. Kugler on our staff has itemized a number of potential gas sands or gas sands which appear as though there is at least a possibility of gas production, or let's say a hydrocarbon content which aren't currently perforated or under production. Rather than make an exhibit of an electric log, I would Just like to ask you: In your Middle Ground Shoal 17595 #4 Well, the interval 5,095 to 5140 feet, which is at considerable depth. I would like to ask you if you have made calculations or any formation tests that would indicate gas production? And, likewise, on your MGS 18746 #1 Well, the interval 6610 to 6670 feet, have you ever tested that zone or have made calculations to evaluate for hydrocarbon potential, specifically gas? MR. GILES: We shall let you know. MR. MARSHALL: Thank you. MR. SMITH: Mr. Giles, in reference to your statement about gas well injectors where you would have to displace a couple of water injectors, has any thought been given or is it not possible to recomplete as dual gas/ water injectors? MR. GILES: Perhaps that could be done. We couldn't really drill a well. This is the main point. -121- MR. SMITH: Is the production rate directly proportional to the injection rate on the platforms? MR. GILES: Let me see if I really understand what you're saying there. We're trying to inject all the water we can with our pumps and we're trying to produce at the maximum efficient rate. MR. SMITH: You cut your injection rate, though, 30%. It shows up immediately in your production? MR. GILES: It would show up quite well at Dillon. MR. SMITH: It's directly sensitive to your injection rate? MR. GILES: Yes. MR. SMITH: How are your injection rates set? How do you determine the injection rate? MR. GILES: Well, this is economics that are involved in how much water we should put away to get a rate of return on our waterflood investment in a reasonable period of time. It's a matchup of what we should inject to get our waterflood recovery in a reasonable period of time. MR. SMITH: I notice, for instance, there is great variation, by wells, at least, in the injection rates. What is th~ reason for this? MR, GILES: Well, you would have some wells that are tighter reservoir characteristics than other wells. If you converted all your best wells to injectors, you might not have any good producers left, so you have to again equate the merits of which wells shall we convert and we must take enough good wells and mix them with the poor wells to get the injection rate, the optimum injection rate, to sustain the project. MR. SMITH: You mentioned the optimum injection rate° Is that the economical optimum? MR. GILES: Yes. MR. SMITH: Is that the same, is this optimum point, do you know, is it the same for Shell in their projects? -122- MR. GILES: Oh, no. Oh, no. MR. SMITH: So there is variation then in injection rates and productivity? MR. GILES: Oh, yes. Yes, sir. MI{. SMITH: The productive capacity and the injection rate capacity too is a design thing in the project, individual project? MR. GILES: Yes, yes. You will recall I cited one author, I believe it was Mr. Tamer, we talked about engineering the project and then sticking with it. Don't curtail injection, don' t curtail the production, but stay with the engineered program. Yes, this is true. MR. SMITH: Of course, that's from the standpoint of the economics of the individual project by operators and not necessarily from the conservation of the natural resources. Isn't that right? MR. GILES: Well, we have a dual objective. We, being ourselves, and the state. You want optimum oil recovery by virtue of the waterflood. We do, too, and we strive for this optimum point in the design, the engineering design, of our floods. MR. SMITH: Thank you. MR. BURP. ELL: Does anybody else have any questions? MR. KUGLER: Mr. Giles, is there, are there any dry gas reservoirs under your Dillon platform that you know of? MR. GILES: Let me counsel with somebody in the hearing room here to answer that. The answer is no, Mr. Kugler. Not to our knowledge. MR. KUGLER: I have one more interval here that I would like to include on the list that Mr. Marshall gave you. MR. GILES: Which well? MR. KUGLER: 3310 to 3330 feet. MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: Mr. Giles, I have two last questions. In your testimony you gave some dollar figures for loss to the operator and loss to the state. -123- As I recall, the figures ranged somewhere on the order of three to five million dollars. Can you tell me for what period of time that was? MR. GILES: This is the loss in present worth of future income. MR. GILBRETH: For the total life? MR. GILES: For the total life. In other words, on Baker here, if we were cut by a restriction order, then we would be at this level of production. Now undiscounting money there is no loss. It is just we produce over a longer period of time, but this would equate to that time. But discounted 10% present worth and those are the loss figures I gave. MR. GILBRETH: Okay. That's what I didn't understand. One other question, in answer to Mr, Smith you said you feel the effect of the injection rates rather rapidly. MR. GILES: At Dillon I think we would, but at Baker I think the effect would not show up as quickly. MR. GILBRETH: This is what I was wondering. Is this in terms of a week, or a month, or 6 months, or what? How long does it take from the time that you change something in your injection system until you can see the effect in your producing wells? Do you have any information on that? MR. GILES: Not specific information at my command. Give me a moment and maybe I can get some. The answer we have rationalized is 30 days, maybe a little longer, it would depend upon the particular MGS pool. MR. GILBRETH: I see. Mr. Giles, if it became necessary to restrict production in these pools, do you have any idea which wells should be exempted or where any lines should be, or anything like that? Where would the least damage occur? Where would the most damage occur in the well? Or do you think the damage would be in all wells? -124- MR. GILES: Well, that's a tough one to answer. That's a loaded question if I ever saw one. (LAUGHTER) MR. GILBRETH: Do you think the most damage will occur in the high water-cut wells, or high gas/oil ratio wells? MR. GILES: I think there would be substantial damage to the high water-cut wells, yes. Call it backflow or movable clays, or whatever. Several reasons might occur. I think this could be very damaging. MR. GILBRETH: Which category would follow next, then, to the high water- cut wells ? MR. GILES: The whole thing sounds bad. (LAUGHTER) MR. GILBRETH: Well, of course, in a normal solution-drive reservoir, supposedly it's not rate sensitive. MR. GILES: That is correct. MR. GILBRETH: Well, we have an induced water drive which in itself makes the reservoir ra~e sensitive to some extent. MR. GILES: Yes. MR. GILBRETH: Now, to what degree depends on the effectiveness of the injectivity and productivity of the reservoir, the wells, the completions, and a lot of other factors. MR. GILES: Right. MR. GILBRETH: Several different factors. In these reservoirs I thought there might have been something come to light as'a result of your waterflood, that shows some particular segment that was having more effect than others, some particular property that has more effect than others on the recovery. -125- MR. GILES: I just don't know how to answer that, Mr. Gilbreth, except to reiterate that I think the highest water cut wells would be hurt the worst. MR. GILBRETH: I realize also that this is a theoretical question. MR. GILES: Yes, and we have to look at each well individually after you have made this reduction that you talk about. MR. BURRELL: Does anybody else have any more questions? MR. SWAN: Mr. Giles, what causes the interruptibility of gas supply from these platform projects? MR. GILES: Pipeline breaks. MR, SWAN: Will having the gas well on the platform solve that problem? MR. GILES: Oh, no. Not in the least. MR. SWAN: Now we've talked about using the gas that is fuel in the future. Suppose it were possible to develop these shallow gas wells, shallow gas reservoirs, and sell the gas now at prices which appear to be giveaway prices. Would that shorten the producing life of the platforms when we run out of that gas and have to buy gas from another source or go to an alternate fuel? MR. GILES: No. MR. SWAN: Wait. Did you understand that question? (LAUGHTER) MI{. BURRELL: It's pretty long. MR. SWAN: If you run out of gas and have to get an alternate source and pay for it? Does that make a difference in your economics, in operating the plat form? MR. GILES: Oh, sure. MR. SWAN: In other words, you have free gas there that you can use. MR. GILES: That's right. -126- MR. SWAN: And it would be foolish to give it to somebody else, for instance. MR. GILES: That' s right. MR. SWAN: As long as you have a need for it. MR. GILES: Correct. MR. SWAN: I'm sorry I confused my own witness. (LAUGHTER) MR. SWAN: I think this concludes it. MR. GILBRETH: I have a few more brief problems. (LAUGHTER) MR. GILBRETH: Along these same lines, you said it would cost more. The present worth factor that you put into the other calculations would also be applicable here, would they not? MR. GILES: Um hum. MR. GILBRETH: And you would get the income sooner rather than late. MR. GILES: That' s right. MR. GILBRETH: And the other question that I wanted to ask, I believe, in response to Mr. Swan's question you said that the interruptions were due to pipeline breaks. Isn't this really maybe only 1% of your interruptions? MR. GILES: Well, we have other reasons that we have interruptions. MR. GILBRETH: It is a very minor point, isn't it? MR. GILES: Well, like Mr. Swan pointed out, we had a break in our Granite Point line every year and this becomes most paramount in our thinking when you talk about interruptibility, now. Percentage-wide, well, it may be a lesser percent of the total do~n time than some other factors that lead to interruptibility. This is true. MR. GILBRETH: Okay, there are a bunch of factors, then, that enter into interruptibility. -127- MR. GILES: But that break each year that we seem to sustain at Granite Point costs a load of money to repair each time. This is why that becomes so paramount in our thinking. MR. VONDERAHE: How long is this break usually? MR. GILES: Well, it will vary, Mr. VonderAhe. This time it was on the order of three weeks. We just got it fixed. MR. BURP, ELL: Mr. Giles, with respect to Mr. Swan's question which you answered, would it not be true that the additional gas that you would sell, that is, the gas you would sell now, discounting present worth, would somewhat go toward balancing this later cost of buying gas, and in addition to that you have the excess gas here now flaring which you could also sell which would also help on that side, and furthermore you have the pipelines. ........... Is that all not true? MR. GILES: Could be true. MR. BURRELL: Anybody have any further questions? Thank you, Mr. Giles. MR. LOGAN: This is Tom Logan with Shell and I have the petrophysical analysis from Los Angeles on the Zones that were requested. In Well A-14-A1 the zone from 5552 to 5593, our analysis of that, we call that the A sand. This has a porosity of 6 to 12 percent with an average of 8%, and we call it wet. MR. KUGLER: Could you give us the water percent there? MR. LOGAN: I Just gave you that. 65% water. Well 43-23, the interval from 7408 to 7445, this is what we call the FL sand in the top of the "B" pool with a porosity of 12%; calculated oil saturation of 40%; no gas. We consider this to be probably a high residual oil saturation. We have looked at this zone closer and Well A-32-11 with sidewell cores which look bad and we believe this zone is produced under platform B, Baker. -128- I would also like to reiterate on this A-2-S pool what I said before. Mr. Gilbreth's questioning seemed to indicate that he didn't understand what I had said. I mentioned that our A-2-S pool is down dip of the A sand on the Amoco's leases. Therefore, by virtue of being gas down dip from oil there has to be a separation in the pools. MR. GILBRETH: Is this down dip from the oil bearing section? MR. LOGAN: Yes. We completed that well anticipating oil, and we were fooled. And it is dry gas. That concludes my testimony. MR. SWAN: May I make a closing statement? (LAUGHTER) I promise this time I will be brief. There are two points I would' like to cover. You keep saying that we tell you we're trying, we're t~ying, we're trying, we're trying -- and as Mr. Giles says, we have some real hopes still. I don't apologize for being optimistic, but frankly we keep hearing about these people who want gas but we don't hear from anybody who says I'll offer you so much for your gas. We haven't had a firm offer from anybody, and I think before this committee can find there is a market for this gas, you've got to have somebody that says, I'm willing to buy it. And there isn't any such testimony from anybody. One other thing, I've been accused of testifying. I'll admit I am not an economist. Maybe my economic theories are 'a little simplified and I realize that there are economists who are really economists who have very fine theories that proved that no gas shortage could 'result from the FPC price policy and as far as I'm concerned, they are like the engineer who proved that the bumble bee can't fly. Ail they proved was that their theories were wrong, because it has happened. And I think the same thing will happen here if you enter an order that's not sound economically. It may take a long time, but it'll bite you back, Just sure as the world. And, incidentally, we do appreciate your setting each of these hearings on a separate day, and I think we've showed you today that we need a full day. -129- MR. BURRELL: Thank you, Mr. Swan. I would take exception to your remarks that there's no evidence of a market for gas. Does anybody else wish to take the stand? Is there anybody who would like to make a statement? We have some information I believe that we requested which we don't have here. Did you decide to make a telephone call to Los Angeles? Mr. Giles, I believe, was going to provide a couple of answers. How much time do you need, Mr. Giles? MR. GILES: I hope to give it to you this week. MR. BURP, ELL: Would you like the record of this hearing held open? MR. GILES: Please. Through Friday. MR. BURP. ELL: We'll hold it open until the close of the hearing on Friday, hopefully before this hour on that day. Will that be adequate? MR. GILES: Plenty. MR. BURRELL: Thank you very much. We'll adjourn. -130- ,,'-',i,~r-' H © RAG r, 'oo'i" 3"Z Re~arding tile Continuation of Gas ]i'l. arin6 in Cook Inlet SuBmitted by C yn t h i a VCen t wot t h On behalf of the Sierca C].ub ?~'tay 25 26 27 ~ .... ALASKA O~L and OAS :~. ':.,~:r:::'",::"w","(r-'r::;:'r~"~~r.r::,r:~zz..::::::-:: !~e in the Sierra C].ub have been told that gas continues to be flared in Cook Inlet because it is not economically profitable at this time to clo anyt~"ing else with it. As a recent college graduate with a de~ree in '!'lcono:~icm, I understand fully what this ~neans. I.{owver, among college i)rofessors and others, the t~rd "economics" is be~innin~ to have wider imp[[ications than it has had in the past. Cost-benefit analysis is befinning to weigh social and resource costs as well as money costs. ~iven that a particular'decision must be made::', in this case, to flare or not to flare gas:: Along ~dth determining money costs versus money benefits to industry, it is necessary also to examine the money and resource costs and 'benefits to society. '!~e believe that the costs to society of flaring gas. and thereby wasting a '~)ubli. cly o~,.~,~ned, non-renewable resource far exceed the be.~.efits. Because we va]..ue o'~r.'natural resources% we favor wise use of them, even if it means leavli~.g them in the ground until such time as-they can be used. most economically from the 7)oint of view of society as a Whole.. 'By this I mean that the costs to society, in terms of air I~ollution and waste of a 'public resource as well as waste ef money, ~ust be '~'~inimized., while benefits to society, in terms of wise and. efficient use of public ~3esources, must be maximized, If gas, as the public's resource, can be thought of as the 'pUblic's invest~nent (gas safely in the t~'rou, n(] is like inve'st:i.ng money - no returns ~.ow but maximum future return, s are ho"l~ed for) then the public deserves a maximum return on its investment. Otherwise stated,: society deserves th~,.t its resou:rces be used as ~;~isely and efficiently as pos~,:.~i'ble. Letting t'he public's gas bur~'~, up as it comes out o'f solution gives the pu'bT~..ic a negative return on its investment. :ii,?he future:~ valz~.e of the public resour-ce is bein~ lost. To cite an example, society is using fuel for transportation in a very un-economic ~ray.. (Largely because it has no'choice, but that is' another to~.'~ic for discusl~ion.) Quoting from a recent article in the ~qhora~e Dail~ News: ':~ A ten-car, d.c)uble-~].ecker subu~ban ]~ai].road train, Zike those used. on the No~t'hwestern in the Chicago area, is the ~;~.ost efficient peo'~.'~le-mover available. Such a train can haul 200 ~ersons one '~,~J~le on a ,~'allon of fuei~. '.Buses are a little better than half t~is efficient (120 l~assen~er miles, per ¢~allon) a~.d automobile is far ~.own. lhe ladder of efficiency at only ~50 passenger miles ~er Callon.~' If the A~nerican "system"' as we know it is to survive, it seems imperative to me that the oil companies be respor'~.sive to the financiaI~, social, and resource cost-benefit ratios,of the ipublic and their resource, as well as to the cost-benefit ratios of the:~ oil companies. Today's ipr, ofit for the oil. companies may be tomorrow's:~ loss to tb.e people. Testimony Presented Before the Conservation Committee of the Oil & Gas Division of the Department of Natural Resources on May 25, 1971 Chugach Electric Association, Inc. has a need for gas to fuel its Bernice Lake Power Plant. This power plant is located adjacent to the Standard Oil Refinery approximately 11 miles north of Kenai. The plant presently consists of one gas turbine which is being fired with No. 4 distillate oil. A second unit will be added to this plant in October of this year. This new unit will be fired with gas and the existing unit is scheduled for conversion to gas in 1972. To operate dependably over a long period of time, these gas turbines require a fuel which meets certain specifications. The gas must be dry gas which is free of contaminates and has a steady lower heating value of between 950 to 1,000 BTU/CF. The nature of our business requires that the fuel supply be continuous. The delivery pressure must be bet'ween 225 and 275 psig and once established should not vary by more than -+ 2 psi. The temperature of the gas should be between 30° a'nd 150°F. The quantity of gas required at the Bernice Lake plant depends to a large extent on its price relative to the fuel price in other parts of the system. In the absence of any unanticipated circumstances, the plant will require about 20 billion CF between 1971 and 1980. The initial require- ment will be 1½ billion CF per year in 1972 and the consumption is expected to increase to about 2½ billion CF per year by 1979. The maximum possible F;/.c. C,o./05 demand which this plant can place on the gas supply is about 10 MMCF per day. This figure represents the demand associated with the peak, low ambient capacity of the two units combined. The chance of such a demand is remote, however, and a more reasonable plant demand to expect from normaI operation is 4.5 MMCF per day. These specifications are not absolutely rigid and a potential for compromise exists in some areas. The prospect exists for a standby fuel supply and if this materalizes an interruptible gas supply would be acceptable. It is also possible to make allowances for a varying fuel heating value. A variation of-+ 10'~0 is permissable but the change must be gradual enough to permit the fuel control system to compensate and prevent damage, ,to the turbine. Chugach Electric Association is willing to investigate further the possibility of using any gas available in the vicinity of its Bernice Lake plant. We would welcome the opportunity to discuss the use of any source which meets the tests of purity, deliverability and economy. ~,?,.,~L...~'.j.~..~.~.~., .. ~?.,,~, ,' QUESTION' Would you .te your name, address ail ccupation ? ANSWER- My name is James R. Hendershot, Commissioner of the Alaska Public Utilities Commission at 1100 MacKay Building, Anchorage, Alaska. QUESTION' Mr. Hendershot, in 1968 what was your occupation ? ANSWER' I worked as a consultant to a propane, fuel oil and lube oil retail sales company. QUESTION' What were your responsibilities with regard to this position ? ANSWER' I was to develop major sales, assist in logistics problems, and where possible develop new business and new methods of operation. QUESTION' In this regard did you make any effort to utilize the gas being flared on the east, or Kenai side of the Cook Inlet ? ANSWER- Yes, at One time I formulated an idea and did considerable stu. dy to determine the feasibility of utilizing the flared gas to make propane. QUESTION' Would you expound on your thinking in a little more depth ? ANSWER' The firm with which I was working was interested in obtaining approximately 3000 gallons of propane per day from a source within Alaska. At that time they were shipping propane bY rail tank car and train ship from the South 48. I obtained from Pan American 'Petroleum an approximate gas analysis of the associated gas being flared from the platforms capable of supplying my needs on the Kenai side of the Inlet, that is, in the Pt. Nikiski area. I had discussions With Shell Oil and they indicated a tentative agreement to allow me the use of certain space at their Pt. Nikiski treatment facility. As a matter of fact, very close to the present on-shOre flaring faci~.ity. I further ascertained that the Reid vapor pressure of the crude was such t at the heavier- than-propane elements extracted could be sold directly to Shell and delivered into their pipeline in the immedi- ate area. I was aware that Anchorage Natural Gas or Alaska Pipeline had facilities constructed at this point. Discussions were held with Mr. Dale Teel relative to pos- sible sale and utilization of the cleaned up tailgate product of the proposed stripping plant. QUESTION· Would a system of this type require a firm commitment of gas supply ? ANSWER: Not really, because of the small size of the facility con- siderable fluctuation in supply, as it applies to the over- all gas flared from the east Cook Inlet fields, would have had little effect upon the operation of this plant. In the event of c~t~st~'ophic failui'e over a li~i~d ~o~ time, no one would have been injured irreparably· This is to say, if the .plant would have had to be shut down for a months period while pipeline repairs or plant changes were effected, no real harm would have been done other than a loss in revenue to the plant operator. QUESTION' Were you able to obtain this gas supply ? ANSWER' Yes and no. I was given the opportunity to pUrchase the gas if I purchased all of the gas. A considerable amount of this would have had to be flared by me and that amount apparently would be subject to change or increase by the supplying company or companies. QUESTION' Why didn't you accept this ? ANSWER' If they ha .~iven it to me for 1~ per F I couldn't have afforded it. Primarily because I couldn't be assured of the amount of gas that would have been sent to Pt. Nikiski for my "utilization." In essence, what I am saying is that I had a limited market and it would have been totally impractical for me to utilize all of the associated gas that was available. QUESTION' Relative to your present position as Commissioner of the Alaska Public Utilities Commission, would you care to comment regarding these proceedings ? ANSWER: I have only this to say, and that is that it is a crying shame that the fantastic, amount of energy available to us is being wasted. As a graduate petrole%un engineer I am painfully aware of the difficulty in compres~sing and cleaning associated gas, but as an Alaska utility rate payer and one who is closely associated with the rate prob- lems of our various power companies, I say it is extremely' unfortunate that a solution to the quandary of flared gas has not been found. I am not totally aware, nor do I profess to be, of the over- all structure or formations of the fields in both the east and west sides of the Cook Inlet, but it seems inconsistent to me to utilize the fact that associated gas cannot be classed as firm gas supply when,for a minor investment dry gas wells could be developed to firm this supply. When an individual approaches any company to purchase, associated gas, the first thing the company tells him is that any sale will have to be on a non-firm basis. Now, I wil{ ~sk a question. How do 5 expect anyone to finance any type of project with that hanging over his head even though the chances of well shut-in or supply failure is negligible ? Look at the record- people have been trying to develop schemes for utilizing flared gas on these platforms since their inception and how many times have any of us flown over that field and found all of the flares out ? Well, this reminds me of the story of the earth quake ex- pert who said that with each passing day Anchorage is getting closer to its next earth quake. Now that. is a profound statement, and it might be reasonably applied 'to the flared gas situation. It might go something like this -- as of the first day that .gas was flared in Cook Inlet, we are getting closer to the point where there will be no ~as to flare. Of course this is hind sight and could have, or should have been said some years ago. And while on the sub- ject of saying, I may have said too much' already. Thank you. NATURAL GAS SUPPLY STUDY HEARINGS BEFORE THE SUBCOMMITTEE ON' MINERALS, MATERIALS, AN]) FUELS OlP THE '.' : '' ~' " C0~MITTEE 0 UNITE3 STATES FIRST SESSION '. SUPPLIES 'OF N~TU~L GAS , NOVEMBER ,13 AND: 14,, 1969 SENT TO YOU BY' YOUR UN~TED S-I-ATE~NATO R 3?-792 Printed for the use of the Co~nmittee on Interior and Insular Affairs U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1970 "::i.X roforlll :., of pctro- '"' action ,'5 llOg nOW -,rta,ge. hq)qndent -to insure i ~rice they 'j not only price and "4 of wit- ' ~1 in seek- ::.turM gas fr.e]ing of ~ted in an .Xassikas' .,n:mission .~tural gas ~e sale{ it :iust and 'o the gas ::t. ributed cexamine q ,. ,r. I make rare, and I[altcr J. ~3t~, reason :i.mnder- ,the fact ~ntinuing burdens kteci that n:ttional exist- callin_~ useful i'C~l. Of. 11112 ~A O1 {I.l lllSOllI. I' its tills linl~ortant energy reset,fcc ~s Thank rou, Mr. ChMrman. Senator ~'~s. Ihank you, Senator tlan~en, for rmt' fine staff'- merit. You ~ ~rlined agtfin for us the fact that the chi( ~er is very nUlC}t to }~ considered in this matter. It isu't a matter of simpl~, rtfisin~ the price and taldng it out of the consm]ler. ] n )act. that is probably the las~ place we ought to look for a remedy, am'l we a~re hoping that~out of this list of witnesses which are ,listin,zuished, that we c:m gain information as to how we might remedy tnt s~tuatmn, ~f ~t ~s indeed as bad as it would seem on the surface, and hmv the Congress should react, to it. I mikht add at this time that one of our witnesses will be Mr.. Edwar3 Berlin, the general counsel of the Consumer Federation of America. tlis appearance as a witness is not on the mimeogra.pheG sheet we have~ bu[ i~ will be there when the sheet for tomorrow is issued. We will now turn to the witnesses, and we do have a great linenp to hear. Our first witness will be the Assistant SecretaW of the Interior for Mineral Resources, the Honorable t-Iollis M. Dole. We would like to have you come to the table, and~ if you wish, t0 bring any of your staff with you and introdu~ them. STATEmEnT 0F ~0~. ~0LLI8 ~. D,0L~, ASSISTANT SECRETARY 0~ T~ ~T~RIOR Y0g ~I~ERA~ R~S0URC~S, AdO0~A~D ~0BERT ~. S2~R, d~I~F, BR~C~ 0~ 0IL ~D ~AS 02~RATI0~S, ~.S. ~EOL00IdAL 8~gV~Y; ~0~T~ d~IELD, C~I~, DIVISI0~ 0F ENEgGY AND ~INERALS, BUREAU 0F LAND ~ANAGE~'; ' DAVID H0CHANADEL; S~EC~LIST, NATURAL GAS, 0~ICE O~ AND GAS; AND JOHN O'L~ARY, DIR~CTOR, BU~U 0F ~I~S Mr. DOLE. Thank you, ~r. Chairman. I would like to bring some of the ex~erts in the Department of tho Interior up here ~ accompany me in orcer that we can 'make this discussion more meaningful. I would like to have ~r. John F. O'Leary~ Director of the Bureau of Mines; Mr. Robert E. Speer, Chief~ Branc~ of Oil and Gas Opera- t3ons; Mr. Monte Canfield, Chief~ Division or Energy and Minerals; Bureau of Land ~anagement; and ~r. David I{ochanadel~ specialist; natural gas, from th.e O~ce of Oil and Gas. Senator Moss. We are glad to have you with us. You have the first team here. Mr. DOLE. ~r[ Chairman~ indeed we do have the first team here~ as I consider this a very important discussion that you have opened up. I wish to congratulate you ~for bringing this mattel which is of si~ificant importanc~ to the people of the 'United ~tates, m a ~1'1 hearing. . It is with great pleasure that I appear before you.' .~rt- Otlr :~'th ,on - :lnfl ired. '4'0- de- 311- :!0n ?,~I.1 , on ply 11 There are two components of the prospective gas supp}y situation, a shot,-term component and a longer term component. O; er the short run, the natural gas demand and supply situation already h~ pro- duced some local deficiencies for cm"r. ain types of new service and will result in general deficiencies of gas for certain new service around 1972. Those deficiencies will affect prospective new customers for indus- trial-type, lower cost service presently and in the future, but most probably will not result in cutbacks in service to existing customers ]/or their present needs and normal increases in their demands. The longer term component of the problem is that serious deficien- cies of natural gas supplies will develop after 1975 if current demand trends persist and immediate corrective action is not taken. The lack of supply could produce such results as cutbacks in existing service to industrial customers, denial of new service, and similar results. In short, the longer term problem is one of demand exceeding the available supply of.gas at present prices. Now, as to the short term, that is the period from the present to 1975: As a re.suit of publicity .alleging that a major shot. rage of gas might occur this winter and that some customers cduld be denied gas service, the Office of Oil and Gas requested that.the Emergency Advisory C. om- mittee for Natural Gas (EACNG) assist it in ma]~ing an authoritative assessment of the immediate outlook for gas s~u~pply. The Emergency Advisory Committee for ~ aturM Gas is a 30-mem- ber group of top-level officials of :the gas 'transmission and distribution industries formed in 1962 to advise the Secretary' of the Interior on measures to assure continuity of gas' supply in a'national emergency. At a meeting held in Washington, ]D.C., on September 29, 1969, a subcommittee of EACNG advise8 the Ofilce of Oil and Gas that it saw no gas shortage in prospect for the .coming winter season. ~'~t the sa~e ¢me, it wa2~ed that a serious deficiency in gas supply is developin~ m er the lo.n_er term, unless early and positive action is taken. The spe.eifie conclusions reached by the group were: i. G~..,..:~.~ sapply in the United States will be adequate for .all uses over the conC:~g winter heating season. 2, Preliminary.. indications for next Year~s heating season.. (1970-71) are that there will be no shortage, although a firm conclumon cannot be reached at this time. A meeting will be held early next year to obtain a more complete assessment of the outlook at that time. ... '"'37, A serious .supply problem does exist with respect to the midran~e a-nd' lon~-rana'e outlook, and a.ctmn must be taken now ff adequate ~as suppl, i~' are .~) be available to meet the growth in demand during t~his period. A 'few days after the EACNG subcommittee reported its conclu- sions t.he FPC released, its staff report on national gas supply and demand. The two reports, developed by entirely separate groups, reached substantially the same conclusions as to the outlook for natural gas supply. _' . Now, turning to the long term, that xs the period after 1975: Nearly one-third of the total U.S. ener~o3r needs is now provided by natural gas. The demand has increased at an average ,annual rate of 6.9 percent over the past 20 years, whereas total energy demand has only increased an average of 8.1 percent. ' PUBLIC HEARING ON TI~E BENEFICIAL USE OF CAS INGHEAD GAS IN COOK INLET, ALASKA Z. Jo LOUSSAC LIBRARY ANCHORAGE, ALASKA 9:00 A.Mo - MAY 25, 1971 SHELL OIL COMPANY - WEST COAST DIVISION OPERATOR FOR SAS GROUP MIDDLE GROUND SHOAL FIELD TESTIMONY BY To Lo LOGAN- DIVISION' PETROLEUM ENGINEER A. O. Po CASBARIAN - DIVISI.ON MECHANICAL ENGINEER .~UA,,L.IFICAT IONS MY NAME IS THOMAS L. LOGAN. I AM A GRADUATE OF THE UNIVERSITY OF HOUSTON WITH BACHELOR OF SCIENCE DEGREES IN PETROLEUM ENGINEERING AND MATHEMATICS. I HAVE BEEN AN EMPLOYEE OF SHELL OIL COMPANY FOR THE PAST TEN AND ONE-HALF YEARS. MY PETROLEUM ENGINEERING EXPERIENCE CONSISTS OF DEVELOPMENT, PRODUCTION AND RESERVOIR ENGINEERING ASSIGNMENTS IN OKLAHOMA, TEXAS, OFFSHORE LOUISIANA, CALIFORNIA, AND NOW ALASKA. I ALSO HAVE SPENT TWO YEARS AT SHELL'S RESEARCH CENTER IN HOUSTON WHERE I WAS BRIEFLY INVOLVED IN THE EARLY RESERVOIR SIMULATION STUDIES TO DETERMINE THE FEASIBILITY OF WATER FLOODING IN THE MIDDLE GROUND SHOAL FIELD. HOWEVER, MOST OF MY WORK AT THE RESEARCH CENTER INVOLVED DEVELOPING 'COMPUTER PROGRAMS FOR AIDING IN OPTIMIZING GAS FIELD DEVELOPMENT AND PRODUCING OPERATIONS. I AM CURRENTLY THE DIVISION PETROLEUM ENGINEER FOR SHELL'S WEST COAST DIVISION - NORTH WHICH COVERS ALL OF SHELL'S ~EST COAST PRODUCING OPERATIONS FROM THE SAN JOAQUIN BASIN OF CALIFORNIA NORTHWARD TO ALASKA. ,QUAL IF I CAT IONS MY NAME IS PETER CASBARIAN, DIVISION MECHANICAL ENGINEER WITH SHELL OIL COMPANY AND A GRADUATE OF THE ROYAL COLLEGE OF SCIENCE AND TECH- NOLOGY, GLASGOW WITH A BACHELOR OF SCIENCE IN CIVIL ENGINEERING, OF HARVARD UNIVERSITY WITH A MASTER OF SCIENCE AND OF CORNELL UNIVERSITY WITH A DOCTOR OF PHILOSOPHY, ALSO IN CIVIL ENGINEERING. I HAVE BEEN WITH SHELL OIL COMPANY SEVEN YEARS AND DURING THAT TIME HAVE WORKED INITIALLY IN RESEARCH, AND FOR THE PAST FIVE YEARS IN OPERATIONS, PRINCIPALLY ON FACILITIES HANDLING OIL AND GAS. MY TIME HAS BEEN SPENT IN THE GULF COAST AND CALIFORNIA AND FOR THE LAST SEVEN MONTHS MY RESPONSIBILI- TIES HAVE INCLUDED THE MGS FIELD. I AM A REGISTERED PROFESSIONAL ENGINEER IN THE STATE OF LOUISIANA.. A NUMBER OF HEARINGS HAVE BEEN HELD PREVIOUSLY TO DISCUSS THE PROBLEM OF GAS FLARING IN COOK INLET FIELDS. THE INTENT OF THESE HEARINGS, THE LAST OF WHICH WAS ~IELD IN JUNEAU ON MARCH 4 OF THIS YEAR, HAVE BEEN PRIMARILY TO TRY TO DETERMINE 1) IF THE FLARING OF THIS GAS CONSTITUTES A WASTE OF OUR NATURAL RESOURCES, 2) DOES A MARKET EXIST FOR THIS GAS, AND 3) IS THE MAXIMUM POSSIBLE USE BEING MADE OF CASINGHEAD GAS IN OUR OPERATIONS. IN TESTIMONY GIVEN AT ALL OF 'THE PREVIOUS HEARINGS" SHELL , AS OPERATOR OF THE SAS PORTION OF THE MIDDLE GROUND SHOAL FIELD, HAS TRIED TO SHOW THAT THE PRINCIPAL BENEFICIAL USE OF THE CASINGHEAD GAS IS THE EXPENDITURE OF THE NATURAL ENERGY REQUIRED TO BRING THE CRUDE OIL TO THE SURFACE° THERE IS NO WAY THIS OIL CAN BE PRODUCED WITHOUT PRODUCING THE ASSOCIATED GAS INASMUCH AS THE TWO SUBSTANCES EXIST AS A SINGLE PHASE, THAT IS A LIQUID, IN THE RESERVOIR AND THE GAS IS ONLY RELEASED FROM SOLUTION FOLLOWING THE PRESSURE REDUCTION ASSOCIATED WITH PRODUCING THE OIL TO THE SURFACE° WE MAINTAIN THAT THE PRINCIPLE CONSERVATION EFFORT TO BE MADE FOR THE MIDDLE GROUND SHOAL FIELD, WHICH IS AN OIL RESERVOIR, IS TO MAXIMIZE THE ECONOMIC RECOVERY OF THE CRUDE OIL USING THE MOST EFFICIENT EXPENDITURE OF GAS ENERGY PRESENT IN THE OIL AT RESERVOIR CONDITIONS. OUR WATER FLOOD OPERATIONS, THE FIRST EVER ATTEMPTED IN COOK INLET, HAVE RESULTED IN HIGHER OIL RATES, ELIMINATED THE POTENTIAL WASTE OF RESERVOIR ENERGY BY MAINTAINING PRESSURE ABOVE THE BUBBLE POINT, AND BASED ON OUR CURRENT PREDIC' TIONS SHOULD INCREASE ULTIMATE RECOVERY OF OIL BY MORE THAN TWICE WHAT COULD HAVE BEEN EXPECTED WITHOUT SECONDARY RECOVERY OPERATIONS. ONE DEFINITION OF CONSERVATION IS: THE EFFICIENT AND WISE USE OF OUR NATURAL RESOURCES. FROM A CONSERVATION VIEWPOINT, WE (SHELL) FEEL THAT WE HAVE DONE A CLEARLY ACCEPTABLE, IF NOT OUTSTANDING, JOB OF. OPERATING T. HE MIDDLE GROUND SHOAL FIELD IN AN EFFICIENT MANNER. NEVERTHELESS, THE FACT THAT WE ARE FLARING ~AS ON OUR PLATFORMS IS A MATTER OF CONCERN TO YOU (THE OIL AND GAS CONSERVATION J~MMITTEE), TO SHELL AND THE RE 0F THE OIL INDUSTRY, AND I'M SURE TO MANY OTHERS WHO ARE PRESENT HERE TODAY. IN THE NOTICE CALLING FOR THIS PUBLIC HEARING, THREE QUESTIONS WERE POSED TO INDICATE THE TYPE OF TESTIMONY WE SHOULD BE PREPARED TO GIVE: 1) CAN EXCESS CASINGHEAD GAS BE MARKETED, INJECTED INTO ANY RESERVOIR OR POOL, OR OTHERWISE BE BENEFICIALLY UTILIZED BY JULY 1, 19727 THIS QUESTION HAS BEEN RAISED AND ANSWERED SEVERAL TIMES IN THE PAST. TODAY WE WILL ATTEMPT TO GO INTO MORE DETAIL ON THE MARKETING ASPECTS AND OUR POSITION ON THE INJECTION OF THIS GAS INTO A RESERVOIR OR POOL. WE STILL MAINTAIN THE GAS IS OTHERWISE BEING BENEFICIALLY UTILIZED IN THE OIL PRODUCING PROCESS AS I MENTIONED EARLIER. I WILL DISCUSS THE PROBLEMS ASSOCIATED WITH THE INJECTION OF CASINGHEAD GAS INTO .A) SHALLOW WATER AQUIFERS, B) EXISTING SHALLOW GAS SANDS AND C) THE OIL PRODUCING MEASURES THEMSELVES. DR. CASBARIAN WILL DISCUSS THE PR~OBLEMS OF MARKETABILITY, THAT IS, THE-DEMAND FOR OR THE OPPORTUNITY TO SELL THIS GAS 2) WILL THE' FLARING OR VENTING OF CASING HEAD GAS AFTER JUNE 30, 1972, IN EXCESS OF THE AMOUNT REQUIRED FOR SAFETY CONSTITUTE WASTE, AS "WASTE" IS DEFINED IN AS 31.05.170(11)? UNDER PARAGRAPH (A) OF THIS SECTION OF THE ALASKA STATUTES THE DEFINITION OF WASTE INCLUDES THE "OPERATING OR PRODUCING OF ANY OIL OR GAS WELL IN A MANNER WHICH RESULTS OR TENDS TO RESULT IN REDUCING THE QUANTITY OF OIL OR GAS TO BE RECOVERED FROM A POOL IN THE STATE UNDER OPERATIONS CONDUCTED IN ACCORDANCE WITH GOOD OIL FIELD ENGINEERING PRACTICES." I FEEL THAT OUR OPERATIONS WHICH CURRENTLY INCLUDES THE FLARING OF SOME CASING HEAD GAS DOES NOT FIT INTO THIS DEFINITION OF WASTE. ON THE CONTRARY, IT IS QUITE LIKELY THAT ANY OF THE SUGGESTED ALTERNATIVES TO OUR CURRENT OPERATING PROCEDURES I oEo THE INJECTION OF THIS GAS INTO A POOL OR RESERVOIR OR THE RESTRIC- TION OF PRODUCTION TO A LOWER RATE WILL RESULT IN WASTE AS DEFINED IN THIS PARA- GRAPH AND OTHER PARAGRAPHS IN THIS SECTION OF THE STATUTE. I WILL TRY TO ILLUS- TRATE THIS LATER ON IN MY DISCUSSION. -2- 3) WILL MORE WASTE BE CAUSED THAN PREVENTED BY AN ORDER .~ESTRICTING PRODUCTION OF OIL TO A RATE WHEREBY ALL PRODUCED CASINGHEAD GAS IS BENIFICIALLY UTILIZED OR IS REQUIRED FOR A SAFETY FLARE? THE PRELIMINARY RESULTS OF ENGINEERING STUDIES TO EVALUATE THIS ALTER- NATIVE INDICATE THAT SUBSTANTIAL OIL RESERVES COULD BE LOST (OR WASTED) IF PRODUCTION IS RESTRICTED. I HOPE TO SHOW YOU WHY THIS WILL HAPPEN AND ILLUS- TRATE THAT THE POTENTIAL OIL LOSS, IN TERMS OF EITHER DOLLARS OR FUEL ENERGY, WILL BE MANY TIMES WHAT WE ARE FORECASTING AS EXCESS CASINGHEAD GAS IN THE NEXT SEVERAL YEARS. ~LET US FIRST DISCUSS THE INJECTION OF GAS INTO A RESERVOIR OR POOL AT MIDDLE GROUND SHOALS. I WOULD LIKE TO START WITH WHAT OUR PROSPECTS ARE FOR INJECTING GAS INTO A SHALLOW WATER AQUIFER. TO STUDY THE DESIREABILITY OF USING AN AQUIFER FOR. GAS. STORAGE CONSIDERABLE GEOLOGICAL INFORMATION IS NEEDED. WE MUST DETERMINE THE SIZE AND SHAPE OF THE STORAGE CONTAINER, THE QUALITY AND EXTENT OF THE CAPROCK, AND THE MECHANICAL CONDITIONS OF ALL WELLS WHICH PENETRATE THE ZONE OF INTEREST. MY FIRST TWO EXHIBITS ILLUSTRATE A STRUCTURAL CONTOUR MAP AND AN ISOPACH MAP OF THE "SRS" SAND WHICH OCCURS AT ABOUT 3500' BENEATH OUR PLATFORM AREA IN THE FIELD. IN 1967 THIS SAND WAS STUDIED IN SOME DETAIL AS A POSSIBLE SOURCE OF INJECTION WATER FOR OUR WATERFLOOD AND A WELL WAS DRILLED TO TEST THIS POSSIBILITY. THUS, IN ADDITION TO BEING ABLE TO MAP IT WITH REASONABLE ACCURACY, SOME CORE DATA AND PRODUCTIVITY DATA IS AVAILABLE. AS YOU CAN SEE, TIiE SHAPE OF THIS RESERVOIR SHOWS NO CLOSURE IN THE VICINITY OF OUR PLATFORMS. THERE APPEARS TO BM SOME CLOSURE ON THE NORTHERN END WHERE OUR DATA BECOMES LIMITED. THIS AREA IS NOT UNDERNEATH OUR LEASES. ALTHOUGH THE SHAPE OF THE RESERVOIR DOES NOT LOOK PROMISING WE CONTINUED OUR STUDY. IN ADDITION TO T~ SHAPE AND SIZE OF THE UNDERGROUND STRUCTURE, INFORMATION IS -3- NEEDED ON THE CONTINUITY OF THE ROCK LAYERS SERVING AS CAPROCK. TI{E EMPHASIS ON CAPROCK QUALITY, ALREADY PROVEN FOR CONVERTED OIL AND GAS FIELDS TO BE COMPETENT BY THE PRESENCE OF THE HYDROCARBON DEPOSIT, IS OVERRIDING IN STUDYING AQUIFERS. FAULTING IS KNOWN TO EXIST IN OUR AREA, AND OF COURSE, ANY LARGE ONES CAN BE MAPPED WITH SOME CONFIDENCE BY GEOLOGICAL CORRELATION. HOWEVER, IT IS THE SMALL FAULTS, WHICH MAY BE PRESENT, BUT ARE VIRTUALLY IMPOSSIBLE TO FIND OR MAP WITH THE WELL CONTROL AVAILABLE. IN KATZ AND COAT'S BOOK 1 "UNDERGROUND STORAGE OF FLUIDS" IT IS MENTIONED THAT TO OBTAIN THE BASIC GEOLOGICAL INFORMATION FOR THE ANCONA-GARFIELD AQUIFER GAS STORAGE PROJECT IN ILLINOIS OVER 100 CORRELATION WELLS WERE DRILLED AND LOGGED AND TEN WELLS WERE CORED BOTH IN THE RESERVOIR SAND AND THE OVERLYING CAP ROCK. THE STRONGEST ADMONITION TO GEOLOGISTS INVESTIGATING AQUIFER PROSPECTS IS TO BE ON THE LOOKOUT FOR ANOMALIES: ~' FAULTS, FRACTURES, AND EVIDENCE OF EARLIER SOLUTION PROCESSES'ARE ANOMALIES WHICH CAN CAUSE THE LOW PERMEABILITY OF THE CAPROCK TO BE INTERRUPTED IN A LOCAL AREA OF THE STRUCTURE. OBVIOUSLY, OUR CONTROL DATA ON THE "SRS" SAND AND ITS CAPROCK IS NO WHERE NEAR WHAT IS DESCRIBED AS ADEQUATE IN REPORTS OF EXISTING GAS STORAGE PROJECTS IN OTHER AREAS. ONE IMPORTANT FACT, FOUND THROUGH EXPERIENCE IN ILLINOIS, IS THAT A SHALE TO SHALE FAULT CAN HOLD GAS WITH AN OVERPRESSURE OF ONLY 'LO0 PSI BELOW IT. OF COURSE SAND TO SAND CONTACTS AT A FAULT WILL TRANSMIT FLUIDS READILY. ALTHOUGH OUR WORK TO THIS POINT SHOWED THAT THE SHAPE OF THt~ RESERVOIR IS · POOR FOR OUR PURPOSE AND THE CONTROL DATA ON THE SEALABILITY OF THE CAPROCK WAS INSUFFICIENT WHEN COMPARED TO WHAT WAS REQUIRED FOR OTHER STORAGE PROJECTS WE PROCEEDED TO RUN A SIMULATION STUDY OF INJECTING GAS INTO THIS ZONE. -4- THE COMPUTER SIMULATION SHOWED THAT THE INJECTION OF THIS GAS WOULD REQUIRE WE'LLBORE SAND FACE INJECTION PRESSURES OF OVER 1700 PSI AND WOULD GRADUALLY RAISE THE RESERVOIR PRESSURE IN THE VICINITY OF THE GAS BUBBLE CREATED TO ABOUT 1670 PSI. THIS IS SOME 320-350 PSI OVER THE NORMAL PRESSURE FOR THIS ZONE AND CONSIDERABLY MORE THAN THAT 100 PSI LIMIT I MENTIONED EARLIER. THIS, OF COURSE, IS ONE OF THE MAIN REASONS WHY DEPLETED OIL OR GAS RESERVOIRS ARE ALWAYS PREFERRED OVER AQUIFERS ~HEN CONSIDERING ~ GAS STORAGE PROGRAM. MY NEXT EXHIBIT SHOWS A coRRELATION BETWEEN DEPTH AND BOTTOM HOLE · 2 FRACTURE PRESSURES DEVELOPED BY PERKINS AND KERN USING FIELD DATA FROM HUNDREDS OF WELLS THAT HAD BEEN FRACTURED. THE LARGE RED DOT SHOWS CLEARLY THAT FOR THE "SRS" ZONE THE INJECTION PRESSURE AND ULTIMATE INCREASE IN RESERVOIR PRESSURE FALLS INSIDE THE ENVELOPE WHERE FRACTURING cOULD OCCUR. AGAIN, THIS IS NOT A THEORETICALLY DEVELOPED ENVELOPE BUT I.S BASED ON FIELD · DATA FROM HUNDREDS OF WELLS. I THINK IT SHOULD BE CLEAR WHY WE ARE UNWILLING TO TAKE THE RISK OF INJECTING GAS IN AN AQUIFER IN THE VICINITY OF OUR MIDDLE GROUND SHOAL FIELD. SHOULD FRACTURING OCCUR THE BEST THING THAT MIGHT RESULT WOULD BE THAT THE GAS WOULD MIGRATE AND DISSIPATE IN OTHER SHALLOW ZONES. THIS, OF COURSE, WOULD MEAN THE LOSS OF THIS GAS AND WOULD CONSTITUTE WASTE° HOWEVER, THE MAJOR CONCERN IS THAT FRACTURING WOULD OCCUR AND THE GAS MIGHT ESCAPE TO THE SURFACE CAUSING NOT ONLY A POLLUTION PROBLEM BUT CREATING A VERY DANGEROUS FIRE HAZARD. THIS SITUATION CLEARLY FITS THE DEFINITION OF WASTE IN A.S. 31.05.170(11). SHELL, AS OPERATOR FOR THE SAS GROUP AT MIDDLE GROUND SHOAL, IS UNWILLING TO RISK GAS INJECTION INTO THE SHALLOW WATER AQUIFERS FOR STORAGE PURPOSES. LET US LOOK NEXT AT THE POSSIBILITY OF INJECTING GAS INTO A SHALLOW GAS SAND WHICH IS PRESENT IN THE FIELD. EXHIBIT 4 IS A STRUCTURAL CONTOUR MAP ON THIS ZONE ("A. 2S" SAND) AND EXHIBIT 5 IS AN ISOPACH OF THE SAND. THIS ZONE CONTAINS ABOUT 8 BCF OF GAS IN PLACE OF WHICH WE MIGHT EXPECT TO EVENTUALLY RECOVER 70 TO 80 PERCENT OR ABOUT 6 BCF. '5- THIS IS OUR RESERVE GAS WHICH WE WILL USE WHEN THE GAS USAGE REQUIREMENTS IN OUR OPERATIONS EXCEED THE CASING HEAD GAS AVAILABLE, WHICH WE ESTIMATE WILL OCCUR AROUND 1980 UNDER OUR CURRENT MODE OF OPERATIONS. AGAIN, WE CONDUCTED GEOLOGICAL AND ENGINEERING STUDIES TO SEE WHAT HAPPENS IF WE INJECT ADDITIONAL GAS INTO THIS ZONE. LIKE THE AQUIFER PROBLEM, THE "A2S" IS AN UNDEPLETED ZONE, THAT IS, THE RESERVOIR PRESSURE IS ESSENTIALLY AT VIRGIN CONDITIONS AS WE HAVE NOT PRODUCED THIS WELL EXCEPT FOR VERY BRIEF TESTING PURPOSES. THE COMPUTER RUNS SIMULATING GAS INJECTION INTO THIS ZONE SHOWED INJECTION PRESSURES REACHING 3600 PSI AND A GRADUAL BUILDUP OF RESERVOIR PRESSURE FROM 2525 TO 3600 PSI. RETURNING BACK TO EXHIBIT 3 THE LARGE BLACK DOT SHOWS WHERE THIS PUTS US IN THE ENVELOPE OF POSSIBLE FRACTURINGS. LIKE THE AQUIFER CASE., FROM A SAFETY VIEWPOINT, THE BEST THING THAT COULD HAPPEN SHOULD A FAILURE OCCUR IS THAT THE GAS WOULD MIGRATE. AND DISSIPATE INTO OTHER SHALLOW ZONES, HOWEVER, IN THIS..CASE ~WE ARE NOT ONLY RISKING THE LOSS, OR WASTE OF THE INJECTED GAS BUT ALSO THAT OF OUR BACKUP SUPPLY OF GAS VOLUMES AND CONSIDERABLY MORE IN TERMS OF DOLLARS TO REPLACE THIS · SUPPLY° THIS OCCURANCE WOULD CERTAINLY CONSTITUTE UNNECESSARY WASTE. AGAIN, HOWEVER, THE GREATEST CONCERN IS THAT FRACTURING WOULD OCCUR AND IF THE GAS WOULD ESCAPE TO THE SURFACE A POTENTIAL DISASTER SITUATION WOULD BE CREATED. . · SO AGAIN, I MUST SAY THAT THE CONSEQUENCES OF FRACTURES ARE TO© SERIOUS FOR US TO TAKE THE RISK OF INJECTING CASINGHEAD GAS INTO THE "A2S SAND. THE LAST CASE TO CONSIDER UNDER GAS INJECTION PROGRAMS IS THAT OF INJECTING INTO THE CURRENT OIL PRODUCING ZONES ALONG WITH OUR WATER INJECTION. AT THE LAST HEARING THIS POSSIBILITY WAS BROUGHT UP AND I STATED THAT THIS WAS VERY UNDESIRABLE. AT MIDDLE GROUND SHOAL, AND I BELIEVE IN ALL THE OTHER . COOK INLET FIELDS, OUR RESERVOIRS CONSIST OF A LARGE NUMBER OF LAYERS OF SANDSTONE OF VARYING QUALITY° -6- THAT IS, THE THICKNESS AND/OR PERMEABILITY OF ONE ZONE MAY BE MANY FOLD TIMES AS GREAT OR LESS THAN ANOTHER ZONE OR LAYER. IN OUR WATER FLOOD PROGRAM WE FIND THAT IT IS SOMETIMES VERY DIFFICULT TO GET OUR INJECTION WATER TO GO INTO ALL THE OIL BEARING LAYERS IN THE DESIRED PROPORTIONS. THE PROBLEM IS SERIOUS IN A FEW OF OUR WELLS AT THIS TIME AND WE ANTICIPATE THIS TO BE AN INCREASING PROBLEM IN THE FUTURE. OUR SUCCESS IN SOLVING THIS PROBLEM WILL HAVE A SIGNIF- ICANT BEARING ON ECONOMICS AND ULTIMATE RECOVERY FROM OUR FLOOD. TO VERY SIMPLY ILLUSTRATE THE PROBLEM I OFFER MY NEXT EXHIBIT (NO. 6). THIS SHOWS FOUR LAYERS BEING WATERFLOODED WITH LAYER TWO BEING THE MOST PERMEABILE ONE. THE RECEPTIVITY OF THIS LAYER IS FAR GREATER THAN THE OTHERS AND YOU CAN SEE THE WATER MOVING MUCH FASTER THROUGH THIS LAYER. BECAUSE WE HAVE A VERY FAVORABLE MOBILITY RATIO AT MIDDLE GROUND SHOAL, THE OIL IS VERY EFFECTIVELY DISPLACED IN A MORE OR LESS PISTON LIKE MANNER. THEREFORe, THE BIG PROBLEM DOES NOT PRESENT ITSELF UNTIL THIS LAYER IS COMPLETELY DISPLACED AND WATER BREAKS THROUGH INTO THE PRODUCING WELL. THEN OUR PROCESS BECOMES VERY INEFFICIENT UNLESS WE CAN PLUG OFF OR ISOLATE THIS "THIEF" ZONE. NOT ONLY ARE WE MERELY CYCLING WATER THROUGH THIS LAYER BUT THERE IS GOOD CHANCE THAT WATER WILL BACKFLOW INTO THE OTHER OIL ZONES IN THE PRODUCING WELL SINCE THESE ZONES ARE LESS PRESSURED UP AS COMPARED TO THE THIEF ZONE. I WILL LATER SHOW YOU AN EXAMPLE OF WHAT HAPPENS TO'THE PRODUCTION WELL AS THIS OCCURS WHEN I DISCUSS THE EFFECTS OF CUTTING BACK ON PRODUCTION FROM OUR WELLS. SO THE LAYERED RESERVOIR PRESENTS SPECIAL PROBLEMS WHEN TRYING TO WATER- FLOOD. WE RECENTLY SPENT OVER $150,000 ATTEMPTING TO PLUG uP'A THIEF ZONE IN OUR "C" LINEWELL IN A 10'± SECTION WHICH IS TAKING CONSIDERABLY MORE WATER THAN IS DESIREABLE. OUR ATTEMPTS I~VE BEEN ONLY MILDLY SUCCESSFUL AND ADDITIONAL WELL TREATMENTS ARE BEING PLANNED FOR THIS WELL AND OTHERS IN THE NEAR FUTURE. -7- OPERATING EXPENSES OF THIS NATURE COULD HAVE A SIGNIFICANT BEARING ON WHERE OUR FINAL ECONOMIC LIMIT (THAT IS B/D OF OIL) IS REACHED. NOW, IF WE CONSIDER INJECTING GAS ALONG WITH OUR WATER, I'M AFRAID WE COULD ONLY COUNT ON AN AGGRAVATING THE CHANNELING SITUATION. MY NEXT EXHIBIT SHOWS TKE SAME LAYERED SYSTEM WITH LARGE AMOUNTS OF THE GAS ENTERING THE MOST RECEPTIVE MEMBERS, WHICH OF COURSE WILL OCCUR. NOW WE CREATE A VERY UNFAVORABLE MOBILITY RATIO SITUATION. AND INSTEAD OF A PISTON LIKE DISPLACEMENT PROCESS THE GAS WILL TEND TO MOVE RAPIDLY THROUGH THE OIL IN VERY THIN FINGERS o GAS WILL BREAK THROUGH TO THE PRODUCERS IN A MUCH SHORTER TIME AND WITH A CONSIDERABLY LOWER SWEEP EFFICIENCY AS FAR AS OIL RECOVERY FROM THIS MEMBER IS CONCERNED. WE WOULD THEN END UP CYCLING GAS THROUGH THIS ZONE WITH NO APPARENT BENEFITS AT ALL. TO TRY TO CORRECT THE SITUATION BY DISCONTINUING THE GAS INJECTION AND SWITCHING BACK TO WATER ONLY . WOULD NOT HELP AS THE WATER WOULD THEN FOLLOW THROUGH THE GAS CHANNELS CREATED WITHOUT RECOVERING ANY SIGNIFICANT ADDITIONAL OIL. WE CAN SEE NOTHING BUT A LOSS OF' OIL RESERVES RESULTING FROM THE INJECTION OF GAS ALONG WITH WATER IN OUR WATERFLOOD OPERATIONS AND FOR THAT REASON WE ARE UNABLE TO SERIOUSLY CONSIDER THIS ALTERNATIVE. IN DISCUSSING THE PROBLEMS ASSOCIATED WITH INJECTING CASINGHEAD GAS IN THE THREE TYPE RESERVOIRS, I THINK'I HAVE SHOWN YOU THAT THESE ARE NOT REASONABLE ALTERNATIVES TO THE FLARING PROBLEM. NOT ONLY MIGHT DANGEROUS SITUATIONS BE CREATED BUT IN ALL CASES WE CAN SEE AS MUCH OR A SIGNIFICANTLY GREATER TENDENCY TO RESULT IN THE WASTE OF OIL AND GAS. IN. ADDITION To THE RESERVOIR PROBLEMS ASSOCIATED WITH GAS INJECTION, THE FOLLOWING PROBLEMS SHOULD ALSO BE NOTED: -8- 1) LARGE RECONDITIONING PROGRAMS WOULD BE REQUIRED TO PUT ALL WELLS IN MECH- ANICALLY SOUND CONDITION IF AQUIFER AND GAS ZONE INJECTION PROGRAMS WERE CONSIDERED FEASIBLE. THE MAIN CONCERN WOULD BE THAT WE HAVE ADEQUATE CEMENT ACROSS THESE ZONES IN ALL WELLS IN THE FIELD WHERE THE ZONE EXISTS. THIS WOULD REQUIRE SQUEEZE-CEMENTING OPERATIONS IN NU~IEROUS WELLS TO ASSURE US THAT THE ZONE WAS SEALED OFF AT EACH OF THESE POINTSo THE AVERAGE COST TO DO THIS IS ESTIMATED AT $150,000 PER WELL° · 2) IN ALL THREE CASES LARGE COMPRESSORS WOULD BE REQUIRED TO REACH THE NECESSARY INJECTION PRESSURE REQUIREMENTS. WE WILL HAVE A DIFFICULT TIME, IF AT ALL POSSIBLE, IN FINDING PLATFORM SPACE FOR THIS EQUIPMENT. I'M SURE YOU WILL HEAR MORE ABOUT THIS PROBLEM DURING THE COURSE OF THE HEARINGS o FOR THE FINAL PORTION OF MY TESTIMONY, I WOULD LIKE TO GIVE MY ANSWER TO QUESTION NUMBER THREE, THAT IS, WILL MORE WASTE BE CAUSED THAN PREVENTED BY RESTRICTING PRODUCTION TO A RATE WHEREBY ALL CASINGHEAD GAS IS BENEFICIALLY UTILIZED? LET'S SAY WE WERE TO DO THIS ON JULY 1, 1972. AT THAT TIME, OUR ESTIMATE OF EXCESS CASINGHEAD GAS WITHOUT CHANGING OUR OPERATIONS IS ABOUT .6.5 THOUSAND MCF OVER THE NEXT 7~5 YEARS. IF YOU ASSUM~ THE GAS IS WORTH SAY 15 CENTS PER MCF (IF IT WERE MARKETABLE) THEN THIS WOULD BE WORTH ABOUT $975,000. CONVERTING THIS TO OIL, THIS IS EQUIVALENT TO'ABOUT 300,000 B~RRELS OF OIL. THE REMAINING OIL RESERVE FOR THE SAS PORTION OF MIDDLE GROUND' SHOAL IS IN THE NEIGHBORHOOD OF 100 MILLION BARRELS. THIS GAS THEN IS ROUGHLY EQUIVALENT TO ABOUT .3 OF ONE PERCENT OF THE OIL RESERVES. OUR ENGINEERS ARE CURRENTLY DOING A COMPREHENSIVE RESERVOIR SIMULATION STUDY TO DETERMINE THE EFFECTS ON ULTIMATE RECOVERY OF THE EI~RLIER MENTIONED PROFILE CONTROL PROBLEMS° WE ARE SETTING UP A VERY COMPLETE COMPUTER MODEL OF THE LAYERED RESERVOIR WHEREBY WE CAN SEE WHAT HAPPENS UNDER VARIOUS PRODUCING AND INJECTION SCHEMES. OF COURSE, THIS MODEL WILL BE ABLE TO ANALYZE THE -9- EFFECTS OF RESTRICTING PRODUCTION TO SOME LOWER RATE. WE DO NOT, AT THIS TIME, HAVE THE COMPLETE ANSWER BUT I THINK SOME OF OUR PRELIMINARY RESULTS WILL INDICATE WHAT THE MAGNITUDE OF POTENTIAL LOSS OF OIL RESERVES WILL BE IF THE WELLS ARE NOT ALL PRODUCED AT MAXIMIIM RATES. LET ME SUBMIT EXHIBIT 7, WHICH SHOWS WELL A-22-26 PRODUCTION PERFORMANCE FOR THE LAST FEW YEARS. IN 1969 YOU CAN SEE THE OIL PRODUCTION RATE INCREASING DUE TO RESPONSE TO WATER INJECTI, ION. IN 1970 WATER BROKE INTO THE WELL, PROBABLY THROUGH SOME THIN pERMEABLE STREAK, AND SEVERELY DAMAGED THE WELL'S PRODUCTIVE CAPACITY . WE INTERPRET THIS AS BEING CAUSED BY WATER BACKFLOWING INTO~ SOME THE LESS PRESSURED UP LAYERS AND CUTTING OFF OIL RATES FROM THESE LAYERS. TO ALLEVIATE THE PROBLEM, WE VERY QUICKLY INCREASED GAS LIFT GAS INJECTION TO ENABLE US TO PULL THE WELL HARDER, THAT IS TO LOWER THE BOTTOM HOLE PRODUCING PRESSURE TO A LEVEL WHERE ALL THIS WATER IS PRODUCED, AND NOT ALLOWED TO ENTER AND DAMAGE OTHER LAYERS. SUBSEQUENTLY, WE WERE ABLE TO RETURN THE' WELL TO ABOUT 1500 B/D OIL RATE, WHICH ALTHOUGH A GOOD RATE IS ESTIMATED TO BE SOME 500 B/D BELOW WHAT IT MIGHT BE IF THE OTHER LAYERS HAD NOT BEEN DAMAGED. THIS IS ONE REASON WHY WE FEEL THAT CUTTING BACK ON OUR RATES WILL RESULT IN LESS OIL RECOVERY° EXTRAPOLATING THIS INDIVIDUAL WELL PROBLEM TO THE FIELD AS A WHOLE, THE ESTIMATED EFFECT ON ULTIMATE PRODUCTION IS SHOWN ON MY NEXT EXHIBIT (NO. 8). WE ESTIMATE A LOSS OF OIL OF SEVERAL MILLION BARRELS IF THE FIELD IS NOT PRODUCED. AT MAXIMUM RATES. THIS WILL OCCUR WHETHER WE CUT BACK EACH WELL OR SHUT IN SOME WELLS WHILE PRODUCING OTHERS AT MAXIMUM RATES. THE LOSS OF RESERVES IS ATTRIBUTED BOTH TO THE DAMAGE DUE TO ALLOWING THE BACKFLOW OF WATER AS DESCRIBED EARLIER AND DUE TO A CHANGING OF THE ECONOMIC PRODUCING LIMIT BY EXTENDING THE LIFE OF THE FIELD. INCIDENTALLY, WE INTERPRET THIS DAMAGE CAUSED BY BACKFLOWING WATER, IF DONE KNOWINGLY, TO FIT THE DEFINITION -10- OF WASTE IN AoS. 31.05.170(11) WHICH INCLUDES "THE DROWNING WITH WATER OF A POOL OR PART OF A POOL CAPABLE OF PRODUCING OIL OR GAS, EXCEPT IN SO FAR AS AND TO THE EXTENT AUTHORIZED BY THE DEPARTMENT." IN MY OPINION, ANY OPERATING PROCEDURES, WHICH UNNECESSARILY LENGTHENS THE LIFE OF A PROJECT UNDER A HARSH ENVIRONMENT SUCH AS COOK INLET, CARRIES A DEFINITE RISK OF WASTE OF OIL RESERVES. THE DESIGN LIFE OF OUR PLATFORMS AND WELLS ARE OF THE ORDER OF 20 TO 25 YEARS. WHILE I'M SURE THIS LIFE CAN BE EXTENDED THROUGH COSTLY MAINTENANCE AND REPLACEMENT METHODS, THIS WOULD NECESSARILY CHANGE OUR ECONOMIC LIMIT CONSIDERATION TO A POINT WHERE A LOWER ULTIMATE RECOVERY.WOULD BE A CERTAINTY. TO CONCLUDE MY TESTIMONY, I BELIEVE MY DISCUSSION HAS SHOWN WHY WE DO NOT WISH TO INJECT OUR EXCESS CASINGHEAD GAS INTO ANY POOL OR RESERVOIR IN THE VICINITY OF OUR OPERATIONS. SAFETY CONSIDERATIONS, ALONG WITH THE POTENTIAL WASTE OF OIL AND GAS RESERVES FAR IN EXCESS OF WHAT WE ANTICIPATE FLARING, MAKE THIS A SENSELESS RISK. THE ALTERNATIVE OF CUTTING BACK ON PRODUCTION TO A RATE WHEREBY ALL GAS IS BENEFICIALLY UTILIZED 'IS NOT A SOUND RECOMMENDATION AND WOULD ONLY RESULT IN ADDITIONAL WASTE OF OUR NATURAL RESOURCES. ALTHOUGH I HAVE CHOSEN TO MINIMIZE ECONOMIC CONSIDERATIONS, I SHOULD MENTION THAT IN ALL THE CASES DISCUSSED, THE POTENTIAL. ECONOMIC LOSS, BOTH TO THE SAS GROUP AND TO THE STATE, FAR EXCEED THE ECONOMIC WORTH OF THE CASINGHEAD GAS THAT WE ARE UNABLE TO UTILIZE AND, THEREFORE, MUST FLARE. DR. A20.P.. CASBARIAN, SHELL'S WEST COAST DIVISION MECHANICAL ENGINEER, WHO WILL FOLLOW ME IN TESTIMONY, WILL APPRAISE YOU OF OUR INVESTIGATIONS INTO THE MARKETABILITY OF THE EXCESS CASINGHEAD GAS. -11- TESTIMONY - A.O.P. CASBARIAN - SHELL OIL CO. MR. LOGAN HAS PRESENTED TESTIMONY TO DEMONSTRATE THE EFFECT OF SUB- SURFACE INJECTION OF THE CASINGHEAD GAS INTO A RESERVOIR IN MGS FIELD. HE HAS ALSO DEMONSTRATED THE EFFECT OF CURTAILMENT OF PRODUCTION ON ULTIMATE HYDROCARBON RECOVERY. IN ALL CASES, HE HAS SHOWN THAT A LOSS OR WASTE OF GAS AND/OR OIL CAN RESULT, IN ADDITION TO THE POTENTIAL SAFETY HAZARDS AND/OR POTENTIAL SERIOUS POLLUTION PROBLEMS ASSOCIATED WITH EACH OF THE ALTERNATIVES MENTIONED. MY TESTIMONY, ON THE OTHER HAND, IS TO DISCUSS THE PROBLEMS ASSOCIATED WITH THE DEVELOPMENT OF A MARKET FOR THIS EXCESS CASINGHEAD GAS. I WILL PRESENT IN DETAIL THE cosTs AND ASSUMPTIONS USED IN ARRIVING AT THESE COSTS TO DELIVER THIS GAS TO CERTAIN LOCATIONS ON SHORE. I WILL THEN DISCUSS THE GAS WELL GAS PRICES AT THESE LOCATIONS AND THEN POINT OUT THE BASIC DIFFERENCES BETWEEN CASINGHEAD GAS AND GAS WELL GAS WHICH, SO FAR, HAS PRECLUDED THE DEVELOPMENT OF A MARKET. '' IN MY TESTIMONY OF MARCH 4, 1971, I REVIEWED WITH YOU THE GATHERING SYSTEM AS IT PRESENTLY EXISTS IN THE MGS FIELD. EXHIBIT 9 SHOWS THAT EACH PLATFORM IS INTERCONNECTED BY TWO FLOWLINES AND THE A AND D PLATFORMS EACH HAVE TWO FLOWLINES TO THE SAS AND CHAK GROUP'S ONSHORE FACILITIES. IT WAS POINTED OUT THAT THIS SYSTEM OF FLOWLINES PROVIDES A LOOP FOR ALL MGS PLATFORMS, PROVIDES A ROUTE TO SHORE AND PROVIDES AN ALTERNATE FUEL SOURCE OR GAS LIFT SOURCE FOR EACH OF THE PLATFORMS. IT WAS ALSO POINTED OUT THAT THESE PIPE- LINES PROVIDE THE BACKBONE OF A SYSTEM THAT CAN BE UTILIZED FOR GATHERING ALL GAS IN THE MGS FIELD TO A POINT ONSHORE AS A POSSIBLE SALES OUTLET. IN ADDITION, AT THE HEARING ON MARCH 4, 1971, I POINTED OUT THE SECONDARY BENEFICIAL USE OF THIS CASINGHEAD GAS IN OUR OPERATIONS. THE TOTAL ESTIMATED CALL GAS REQUIREMENTS FOR OUR OPERATIONS ON THE TWO MGS PLATFORMS AMOUNTS TO SOME 4000 MCF/D. EXHIBIT 10 SHOWS OUR TOTAL FORECASTED GAS PRODUCTION VERSUS OUR ESTIMATES OF GAS USED IN OUR OPERATIONS. AS OF MID-1972, WE ANTICIPATE THAT THE EXCESS GAS FLARED WOULD AMOUNT TO SOME 5500 MCF/D, TAPERING OFF TO ZERO BY MID-1980. THE'~TOTAL SURPLUS GAS AVAILABLE FROM OUR OPERATIONS (THE AREA BETWEEN THE USE CURVE AND THE FORECASTED TOTAL GAS PRODUCTION CURVE) AMOUNTS TO SOME 6.5 BCF. AT THE MARCH 4TH HEARING THE QUESTION OF COSTS WAS RAISED AND THE SAS AND CHAK GROUPS PRESENTED TO THE CONSERVATION COMMITTEE THE CAPITAL COSTS AND OPERATING COSTS OF TWO POSSIBLE SCHEMES TO BRING GAS TO SHORE, AND THE PRICE REQUIRED FOR THIS TAIL GAS TO RECOVER OUR INVESTMENT WITHOUT INTEREST AND PROFIT. AT THE PRESENT TIME, WE HAVE NO FIRM OFFER FOR OUR GAS IN THE MIDDLE GROUND SHOAL FIELD. HOWEVER, I WOULD LIKE TO REVIEW WITH YOU SOME ADDITIONAL ALTERNATIVES THAT I HAVE ANALYZED AND THEIR ASSOCIATED COSTS. LET ME FIRST START OUT WITH A SUMMARY OF THE GAS COMPOSITION WHICH IS BASED ON TESTS RUN IN THE .PAST FEW WEEKS. EXHIBIT 11 MOL% CO2 0. O9 2.49 N2 METHANE 72.70 ETHANE 9.66 GALS/MCF PROPANE 8.91 2.5 BUTANES + 6.15 2~5 .. I HAVE CONSIDERED THE CASE OF COLLECTING AND SHIPPING ALL MGS AND CHAK'S GRANITE POINT GAS TO SHORE, COMPRESSING THE GAS TO APPROXIMATELY 1200 PSIo AND DELIVERING THIS GAS THROUGH A 6-MILE LONG PIPELINE TO N ~KISKI. THE CAPITAL INVESTMENT REQUIRED IN THIS CASE FOR COMPRESSION ON THE SIX PLATFORMS AND ONSHORE IS $3,300,000. THE CAPITAL COST OF THE PIPELINE IS $600,000 FOR A TOTAL OUTLAY OF $3,900,000. THE PRESENT VALUE WORTH OF OPERATING COSTS FOR AN EIGHT YEAR LIFE AMOUNTS TO $1,710,000 FOR A TOTAL PV CAPITAL AND EKPENSE OUTLAY OF $5,610,000. THUS, THE REQUIRED REVENUE TO RECOVER THIS INVESTMENT -2- IS SOME 22 CENTS/MCF BASED ON A TOTAL OF 25.3 BCF EXCESS GAS AVAILABLE OVER EIGHT YEARS FROM THE MGS AND GRANITE POINT FIELDS. I WOULD LIKE TO EMPHASIZE HERE THAT THESE PRICES I HAVE QUOTED ARE BASED ON THE I PREMISE THAT ALL THE GAS IS TAKEN. THE PRICE, OF COURSE, WOULD BE HIGHER IF ONLY PART OF THE GAS WAS AVAILABLE BECAUSE OF INTERRUPTIONS DUE TO COMPRESSOR DOWNTIME OR EVENTS BEYOND OUR CONTROL. ANOTHER ALTERNATIVE I LOOKED AT IS TO INSTALL A GASOLINE PLANT ONSHORE TO REcovER PROPANE AND BUTANES PLUS, IN ADDITION TO A PIPELINE TO NIKISKI. THE VALUE PLACED ON THE PROPANE ASSUMING A PROPANE MARKET WERE TO DEVELOP WAS 4 CENTS/GALLON. NO MARKET FOR THE VOLLrMES WE ARE TALKING ABOUT PRESENTLY EXISTS. IN ADDITION BASED ON VERY RECENT GAS ANALYSES, THE AVERAGE PROPANE CONTENT IN MGS AND GRANITE POINT GAS IS 2.5 GAL/MCF, AND THE BUTANES PLUS ARE ALSO 2.5 GALS/MCF RATHER THAN THE 3 GALS/MCF REPORTED TO YOU IN OUR MARCH 30, 1971, TESTIMONY. THE CAPITAL COST IN THIS SECOND CASE AMOUNTS TO $6,400,000 AND THE PV OPERATING COST TO $3,930,000 FOR A TOTAL PV INVESTMENT OUTLAY OF $10,330,000. SUBTRACTING THE PV REVENUE OF THE BUTANES + AND THE PROPANE LEAVES A VALUE OF $5,890,000. THUS, THE REQUIRED REVENUE TO RECOVER THIS INVESTMENT FOR ZERO PROFIT FOR THE TAIL GAS WOULD BE 23.3 CENTS/MCF. NO ROYALTY OR TAXES ARE INCLUDED IN THESE VALUES. AND AGAIN THIS ASSUMES THAT ALL THE PROPANE CAN BE MARKETED AND ALL THE GAS TAKEN. BASED ON PUBLISHED PRICES ON RECORD, THE GAS PRICE AND THIS IS GAS WELL GAS AT NIKISKI ON WHICH ROYALTY IS PAID ON IS APPROXIMATELY 16 CENTS/MCF. ANOTHER ALTERNATIVE I CONSIDERED IS TO LAY A PIPELINE TO THE KENAI GAS -3- FIELD AND DETERMINE THE REQUIRED REVENUE FOR THE GAS AT THAT POINT TO RECOVER OUR INVESTMENT° THE FIRST SCHEME WOULD JUST GATHER ALL MGS AND CHAK'S GRANITE POINT .GAS AND SHIP THE GAS TO SHORE, COMPRESS THIS GAS AND SHIP THROUGH A PIPE- LINE TO THE KENAI GAS FIELD AND THE SECOND SCHEME IS TO INSTALL A GASOLINE PLANT AND RECOVER PROPANE AND SHIP THE TAIL GAS TO THE KENAI GAS FIELD° THE ADDITIONAL CAPITAL COST FOR THE 8 INCH 30 MILE PIPELINE IS APPROXIMATELY $2,800,000. THE REQUIRED REVENUE TO RECOVER OUR INVESTMENT FOR ZERO PV PROFIT IN THE TWO SCHEMES PREVIOUSLY MENTIONED ARE 31 CENTS/MCF AND 34.3 CENTS/MCF RESPECTIVELY. AGAIN, THIS ASSUMES THAT A MARKET IS AVAILABLE TO CONSUME ALL THE PROPANES AND THAT ALL THE~ GAS IS TAKEN° THE PRICE FOR NATURAL GAS AT THAT POINT WHICH ROYALTY IS BASED ON IS APPROXIMATELY 20 CENTS/MCF. THESE ARE DIRECT COMPARISONS BETWEEN GAS WELL GAS PRICES AND THIS EXCESS CASINGHEAD GAS, AND DOES NOT CONSIDER INTERRUPTIBILITY, THE LOW AVAILABLE RESERVES AND LIFE, QUALITY OF GAS, ETCo, WHICH COULD PLACE AN ADDITIONAL PENALTY ON THIS CASINGHEAD GAS° THUS, YOU CAN SEE THE DIFFICULTY IN COMING UP WITH A PLAN THAT COULD BE ATTRACTIVE TO A PROSPECTIVE PURCHASER. I WISH TO REVIEW ONE OTHER ASPECT AT THIS POINT° IN MY. PREVIOUS TESTIMONY I POINTED OUT THAT THE KENAI, NORTH COOK INLET AND BELUGA RIVER GAS FIELDS HAVE SUFFICIENT RESERVES TO ATTRACT MARKETS AND OUT MGS EXCESS GAS IN COMPARISON WAS MINISCULE° IN ADDITION, I POINTED OUT THAT THE AVAILABILITY OF GAS IS SHORT, LESS THAN NINE YEARS; THAT THE EXCESS GAS AVAILABLE DECLINES WITH TIME; AND OF PRIMARY IMPORTANCE, THAT THIS SOURCE OF GAS IN INTERRUPTIBLE. I RECEIVED LAST WEEK A COPY OF AN INVITATION TO BID ON PROVIDING GAS SERVICE TO THE CITY OF ANCHORAGE. I WOULD LIKE TO QUOTE A FEW PASSAGES FROM THIS BID REQUEST. PAGE III - 4 ITEM 1 PAGE IV - 1 QUANTITY PAGE IV - 7 QUALITY -4- THUS, YOU CAN SEE BASED ON THE BID SPECIFICATIONS THAT THIS IS DIRECTED TOWARDS GAS WELL GAS, AND THAT FOR THE VOLUMES AND CONDITIONS REQUESTED THAT OUR MGS GAS COULD NOT BE UTILIZED BECAUSE OF 1) LIMITED RESERVES, 2) INTERRUPTIBILIT' AND 3) QUALITY. BASED ON ALL THE VARIOUS CASES I HAVE LOOKED AT, IT IS MY OPINION THAT THE COST/MCF OF GAS TO RECOVER THE INVESTMENT TO BRING THIS CASINGHEAD GAS T0. SHORE FAR EXCEEDS THE WORTH OF THIS GAS WHEN COMPARED TO GAS WELL GAS, AND WHEN ONE ALSO CONSIDERS THE DISADVANTAGES OF THIS CASINGHEAD GAS, NAMELY SMALL VOLUMES AND SHORT LIFE, DECLINING RATES, INTERRUPTIBILITY AND QUALITY, IT IS EASY TO SEE WHY A MARKET FOR THIS GAS HAS NOT YET MATERIALIZED° DESPITE THESE SHORTCOMINGS WE WILL CONTINUE TO EXPLORE FOR AND EVALUATE ANY PROPOSAL THAT MIGHT LEAD TO THE uSE OF THIS EXCESS CAS INGHEAD GASo REFERENCES . KATZ, D. Lo, AND COATS, K. Ho, "UNDERGROUND STORAGE OF FLUIDS," 1968, DISTRIBUTED BY ULRICH BOOKS, INC., ANN ARBOR, MICHIGAN° ~ l, "WIDTHS OF HYDROLIC FRACTURES, PERKINS, To K., AND KERN, Lo R o, JOURNAL OF PETROLEUM TECHNOLOGY, TRANSACTIONS A oI.MoEo, VOLUME 222, PAGE 937, SEPTEMBER, 1961. 8 6 4 2 0 0 · i · · · · · · · · · · · · ® · ......% ~-- ~!PRmSSURES PR'EDICTED IFOR GAS STORAGE AT MIDDLE GROUND SHOAL PRES SURES / PREDICTED FOR V'ERTICAL FRACTURES FROM PERKINS A KERN. JOURNAL OF PETR. TECH., SEPT. 8, 1961 4 6 8 !0 ! DEPTH , (THOUSANDS OF FEET) WATER i NJECTi ON iNTO LAYERED RESERVOIR °~° WATER ~IdECTOR PRODUCING WELL GAS INJECTION INTO WATERFLOODED GAS . INJECTOR I i.~!~~ AT~.R AS ! ...... OIL RESERVOIR PRODUCING WELL EFF~.O I Or WA I cR oREAKTHROUGH ON O! L PRODUGTION RATE WEL'L MGS SAS A-22 26 4000 ~ 3000 ~ 20O0 <:[ !000 . .o t,q o 11 m ~ ~ ; R 'ItNOREASED LIFT CAPAOITYm il ,~ M* ~ i~' il .........../ ESTIMATED RATE WATER 4O00 3000 2000 I000 '8 EFFECT OF REDUCED OIL PRODUCTION · RATE 0~' ,.,~ OiL RECOVERY ' . SAS- MGS FIELD 25,000 '- § Oo -- 25,000 -- _ ~ o ~ -- 20,000 20,000 15,000 ~ m ~ -- 15,000 ~ ~ OIL B/D LOSS OF RESERVES DUE TO i0,000 / ~ ~ .~.[~ uco~o~c u~ ~.~ . = 7 MILLION BARRELS ~ I0,00~ 5,000 -- , ~ ~ -- 5,000 ' / 1965 1970 !975 ~980 ]985 1990 1995 2000 2005 GRAN~T~ ?O~NT GATHERING SYSTEM M. G. S. GRANITE POINT B CRUDE TO PIPELINE SAS/CHAK JOINT SHORE FACILITY CRUDE CHAK SHORE FACILITY TO pIpELINE LEGEND CRUDE LINE GAS LINE ACCEPTED Date S t ALASKA O~Land GAS CONSERVATION COMMITTEE ~'iI~ ~S EXHIBIT~ ~..,; ................... ,,, C.O. FILE II- I0- 2,-" SAS MGS GAS PRODUCTION 8~ USAGE FORECAST % % % % ~.~ ,,~,~GAS PRODUCTION FORECAST 1965m 66 m 67 ~ 68 m 69 / 70 m 71 ~ 72 ~ 73 ~ 74 ~ 75 m 76 m 77 ' ~ ~ ~' ~ m ~ m ~ ~ ~ ~ m ~ m ~ ~ ~ 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 1994 EXHIBIT It MIDDLE GROUND SHOAL GRANITE POINT GAS ANALYSIS Mol % Gals/MCF Carbon Dioxide Nitrogen Methane Ethane Propane Iso Butane Normal Butane Iso Pentane Norma 1 Pentane He xane Heptanes 0.09 2.49 72.70 9.66 8.91 1.59 2.69 0.60 0.59 0.53 0.15 2.5 100.00% BUtanes+ 2.5 ACCEPTED ./ ~ Date, r/.z3-/7~' ALASKA OIL and GAS CONSERVATION COMMi'i' tEE 3,~S, EXHIbiT~ I~ C.O. FILE ~' EXHIBIT 12 ADDENDUM NO. 1 TO SPECIFICATIONS CONTRACT DOCUMENTS FOR GAS SERVICE olv~s~o~ OF OIt ~.,,~O SAS Dated: July 8, 1971 ~Ncso~n A. ARTICLE III - SPECIAL PROVISIONS, SECTION D - FIRMNESS OF DELIVERY, paragraph 4 is amen~e~ to rea~ as follows: 4 If the supply of gas service is interrupted or curtailed by Supplier for any reason other than force ~ajeure, or if the fuel 9rovi~e~ by Su991ier fails t'o meet the specifications set forth in Article IV, Section B, paragraph 1 of this contract, the City may substitute gas or equivalent service at, Supplier's expense. B. ARTICLE III ,- SPECIAL PROVISIONS, SECTION F - TE~INhTION, paragraph 2 is amended to rea~ as follows: , 2. In the event of a suspension or ~iminument of gas service under this Co~tract becauSe of force majeure for a period of ten (10) days or more, the City may give' the Supplier twenty (20) day's written notice of intent. to cancel. Zf the Supplier has not restored the fuel service anti provi~e~ information sufficient in the opinion of the City to establish that Supplier will be able to continue ~erformance un,er this Contract an~ that future interruptions are not anticipate~, City may cancel this Contract without further notice and buy fuel from any available source. C. ARTICLE III - SPECIAL PROVISIONS, SECTION G - GENE~L, paragraph 2 - Right of Way, is amen~e~ to read as follows: 2. Right of Way: City grants to Supplier the right to lay and ~aintain pipe lines and to install metering stations and other necessary equipment on City's plant sites for the purpose of supplying gas hereunder at locations on the plant sites designated by the City. Supplier may construct and install lines and other necessary equipment in the public rights of way Within the City of Anchorage. All construction shall be per- formed in compliance with applicable statutes, codes and ordinances and the Supplier shall pay all fees and obtain all permits required by law prior to commencing construc- tion. All lines and other equipment placed by Supplier on plant sites shall remain the personal property of Supplier and, subject to the terms of this Contract, may be re- moved by Supplier. Supplier .shall remove, at his sole expense, all lines and equipment from City's plant sites within ninety (90) days after terminatiOn or cancel- lation of this Contract and repair all damage produced by. the installation or removal. Lines and equipment not removed within ninety (90) days shall be considered as abandoned by the Supplier. The City may, at its option, remove the abandoned lines and equipment and utilize or sell the lines or equipment. Supplier shall reimburse City for any expense incurred to remove abandoned lines or equipment less the net proceeds of a sale to a third party. page 2 ARTICLE IV - TECHNICAL CONDITIONS, is amended to read as follows: 1. from dust conforms to the following specifications: Minimum pressure ................ 250 Minimum heating value (dry basis, at 60° F. and 14.73 SECTION B - QUALITY, Supplier shall deliver to City gas that is free and sand and other objectionable solids and Which lbs. per square inch PSIA ............................ 900 BTU per cubic foot Maximum heating value (dry basis at 60° F. and 14.73 PSIA) .... , ............... 1200 BTU per cubic foot Water Content .... , ............. Not to exceed 4 lbs. per million cubic feet of gas. Chemical Components Volume in Percent -0- s than 7.25 s than 0.10 -0- ater than 73.00 s than 8.50 s than 11.00 55 to 0. 725 Oxygen. ............................. , NitrOgen ........... , ................. Les Carbon Dioxide ....... ................. Les Hydrogen Sul'fide & Sulfur ............ Methane ............ .................. Gre Ethane ........................... -....Les Propane ............................... Les Specific Gravity ..... ,.. .... ......... 0.5 2. Supplier shall submit to City chemical test results obtained by an agreed upon independent laboratory from samples of the gas being delivered taken at or near the point of deliVery at intervals of not more than six (6) m°nths, showing the heating value and the quantity of chemical components listed in paragraph 1 above. Supplier shall give City notice of the date and time of the sampling and tests to the City at least one day before the and City shall samples and samples are taken and the tests conducted, be permitted to observe the taking of the performance of the tests. page 3 3. If the gas tendered for delivery by Supplier fails at any time to meet the specifications stated in paragraph 1. of this Article , City may notify Supplier of the defic- iency and refuse to accept further deliveries until the deficiency is corrected by Supplier. During the period of deficiency the City may substitute gas or equivalent ser- vice at Supplier's expense. If Supplier fails to correct the deficiency within three (3) days after notice is given, ~City may accept delivery of the gas and alter it to conform with the specifications at Supplier's expense, substitute an equivalent service at Supplier's expense, or terminate the contract as provided in Article III, Section F of this Contract. 4. At any time when City is utilizing a boiler to , operate a steam turbine, Supplier shall notify City at least one (1) day prior to any anticipated .change in the heating value of delivered gas exceeding five per cent (5%). The notice shall state the date, time and extent of change in BTU content anticipated to permit City to make necessary adjustments to its engines or boilers. A11 adjustments necessitated, by a change in the heating value of gas delivered will be made 'at Supplier's expense. , If the heating value of gas delivered is changed at a rate exceeding five percent (5%) per minute while the City is utilizing gas turbines, City may elect to discontinue its use until the heating value has stabil- ized and.substitute other fuel at Supplier's expense. page 4 If the recorded heating value of the gas delivered exceeds the maximum heating value or falls below the minim~n heating value established in paragraph 1 of this section for any period of time in excess of four (4) consecutive hours, the quantity of gas delivered by the Supplier not conforming to the established tolerances, including gas delivered during the four (4) hou'r period, shall be billed and paid for at one- half (1/2) of the unit price applicable under Article I, Section C, paragraph 9, of this Contract. 5. Supplier shall take all necessary steps to insure that precipitated hydrocarbons do not enter City's gas distribution system at any point of delivez'y, Supplier shall be liable for any.damage to City's equipment or facilities caused by the presence of precipitated hydrocarbons in City's'gas distribution system and for any loss of revenues resulting from the inoperative condition of equipment or facilities so damaged. page 5. Oil Pool Kenai "A" Kenai "B, C & D" Kenai "E & F" & Hemlock "G" TOTAL MIDDLE GROUND SHOAL OIL FIELD Cook Inlet, Alaska OIL AND GAS PRODUCTION, DECEMBER 1965 THRU MARCH 1971 Oil Estimated Value Based on Cumulative Production Payments for Royalty Oil . .(Th°usand Bbls.) (Thousand Dollars.) Gas Produced ,(MCF) , Utilized Flared ~MCF) , (%) (MCF) (%). 1,387 3,395,582 5,544 3,341,153 43,526 50,457 $148,480 17,909 ,,667 24,646,399 3,122,462 12.7 21,523,937 87.3 MIDDLE GROUND SHOAL OIL FIELD Cook Inlet, Alaska CALCULATED VALUE OF GAS FLARED Basis: Heat Content Heat Value of Gas - BTU/CF Heat Value of Oil - BTU/Bbl. Volume (CF) Gas Equal to One Bbl. Crude (Heat Basis) 1,446 5,831,649 4,033 Current Gas Flared - MCF/D (March 1971) Heat Value of Gas Flared - Billion BTU/D Oil BTU Equivalent to Gas Flared - Bbl./D Average Price of Oil - S/Bbl. (March 1971)* Dollar Value of Gas Flared - $/D (March 1971) 11,488 16.612 :~ 2,848 $3.25 $9,256 Future Future Estimated Total Cas to be Flared - MMCF ** Oil BTU Equivalent to Future Gas to be Flared - Bbl. Dollar Value of Future Gas to be Flared 18,250 4,525,167 $14,706,793 Field Crude Oil Posting at Pipeline Connection as of 3/31/71. Gas Volumes from Operators' Exhibits submitted for Conservation File No. 100 on March 4, 19 71. 70 K,i,H IO X 10 TO 1~ INCH A6 1323 . .~ ' ? x lO INCHES PAD[ IN g.i.&, · - ~ ~ -''~ KEUFFEI. & [BSER CO. ALASKA Pi PELI-NE 'COMPANY ANNUAL GAS SALES HISTORY ~ FORECAST ~) Z z ~ 20 MIDDLE GROUND SHOAL BAKER I0,000~ 1,000 MCFD SOUTH MIDDLE G{' 'UND SHOAL DILLON × 0 _ 0 I0,000~ ~ 1,000 0 I0( LIST OF PAPERS BI: EXPERTS ON '~n'~ OF ~,~,~.,~,~n~,~.~- 1. Oil and Gas Journal~ June 16, 1958 : ~ n', V., .. .. a ~i 'Li !% C) r b e i e v ,~ ~s-' s i ~aterflood oil recovery is lessened by restricting rates': by J. P. Buckwalter, G. H. Edgerton, V E Stiies, R C Earlouo'her, G L Buckles, and ~ M. Bridges. 2. AiHE Petro!e~.,~,~ ..... Tra~sac:-~ions,_, Vol. 2]0~_ 1°~7~..~ "A Laboratory Stud'/ of Gravity Segregation in Frontal Drives,': bye. ~ w'. F. Craic,~ J'r .... , J L Sanderlin~ D W. Moore, and T. M. Geffen, Pan ~.a~erican Petroleum Corporation. 3. AI...d:, Petroleum Trans. ns Reprint S~'ec~z s,. . ,, acLz. e No 2 Water Plooding '~Effect of Rat. es on Performance In Browning Unit Water by F. F~ Wright.~ Sinclair Oil and Gas Company. _ =*' '.~ 1957 4. 0il and Gas Journa~ , F~,bz~ary 18, "Don't Prora. tc:~ Water Floods" by Bert Murphy. 5. in'terstate Oil Compact Co.w~mission, 1960 "A Study' of the Effect of the Curtailment of Product. ion on Oil Recovery from Waterfloods and Other Secondary Re coverl/ Projects." (a) "Waterflood '~ ~ Cum. tailment Experiences in ApPalachian Area" by Arthur C. Simmons (b) Inc:ludes paper No. 4 above (c) "!nf!uenc',e of Curtai. lments on Recovery in Oil Recovery by Waterfloouzn~ by Walter Rose Edited Written Comments - Yellowstone Papers: (2) }.ir. Jack ~'~.,~.nc.~r, Technical Advisor to the Vice Pres'ident'~' of Producti. on~ Phillips Petr'oleum ACCEPTED AL;." ' "- :IS CONS[,:','- ':', 'TEE ....... C,O. FIL~ MUNICIPAL LIGHT AND POWER DEPARTMENT City of.Anchorage, Alaska SpeCifications and Contract Documents for Gas Service To City of Anchorage, Alaska Power Plants SPECIFICATIONS AND CONTRACT DOCUMENTS GAS SERVICE CONTRACT MUNICIPAL LIGHT AND POWER DEPARTMENT CITY OF ANCHORAGE ALASKA TABLE OF CONTENTS ARTICLE I BID PROCEDURES Section A - Notice of Invitation ...................... Section B - Instructions to Bidders 1. Contract Documents 2. Examination of Documents and Site .......... 3. Interpretations 4. Form of Proposal 5. Completeness of Proposal ................... 6. Alterations in Proposal 7. More than One Proposal 8. Execution of Proposal ...................... · 10. 11. Submission of Proposal Modification of Proposal Withdrawal of Proposal ..................... 12. 13. 14. Postponement of Opening Opening of Proposals Evaluation of Proposals .................... 15. 16. 17. 18. Rejection of Proposals Acceptance of Proposal Subcontracts Special Instructions ....................... 19. Supervision of Construction ................ Section C - Proposal .................................. Section D - Agreement ................................. I-1 I-3 I-4 I-5 I-6 I-7 I-8 .I-9 1-10 1-18 Section A - l· ARTICLE II GENERAL CONDITIONS Definitions, Time, and Written Notice Definitions ................................ 2. Time 3. Written Notice ............................. II-1 I I- 2' ARTICLE III SPECIAL PROVISIONS Section A - Hold Harmless Section B - Force Majeure ............................ III-1 Section C - Payment .................................. III-2 Section D - Firmness of Delivery ..................... Section E - Regulatory Bodies ........................ Section F - Termination .............................. Section G - General ................................. ~ . .Section H - Term ..................................... III-4 III-5 III-6 iii-7 III-il ARTICLE IV TECHNICAL CONDITIONS Section A Quantity SeCtion B Quality Section C - DeliVerY and Connection Facilities ....... Section D Measurement IV-1 IV-7 IV-9 IV-12 ARTICLE I BID PROCEDURES SECTION A - NOTICE OF INVITATION NOTICE IS HEREBY GIVEN that sealed proposals will be received by the City of Anchorage at the office of the Purchasing Agent at City Hall, P. O. Box 400, Anchorage, Alaska 99501, until August 17, 1971, at 10 a.m. (A.D.S.T.) for gas service for the City of Anchorage ------.-----____ as fully described and set out in the Specifications of this Contract, and will then and there be opened and publicly read aloud. Proposals received after the time announced for the opening will not be considered. Copies of the proposal form and other Contract Documents may be obtained at Room 200, City of~ Anchorage, Purchasing Agent, City Hall, 524 Fourth Avenue, Anchorage, Alaska. There will be a pre-bid conference on jUne 14, 1971, at 10 a.m. (A.D.S.T.) in the Conference Room of the Municipal Light and Power Department, 1200 E. First Avenue, Anchorage, AlaSka. Each proposal shall constitute an offer to the City of Anchorag as outlined herein and shall be irrevocable for a period of sixty (60) days after the time announced for bid openings. A bidder who withdraws his proposal after the time announced for the opening and before award of the Contract, or wh° fails to execute the Contract set forth in the Specifications and COntract Documents within twenty (20) days after notification of acceptance, shall be liable for damages to the City arising from such withdrawal or failure. I-1 The City of Anchorage reserves the right to reject any or all proposals and to waive any and all irregularities or informalities in any or all proposals. Each proposal shall be submitted as prescribed. There will be a post-bid conference on August 24, 1971, at 10 a.m. (A.D.S.T.) in the Conference ROom of the Municipal Light and Power Department. CITY OF ANCHORAGE, ALASKA clair Iverson Purchasing Agent Published: May 11, 18, and 25 of 1971 I-2 ARTICLE I BID PROCEDURES SECTION B - INSTRUCTIONS TO BIDDERS 1. CONTRACT DOCUMENTS The Notice to Bidders, Instructions to Bidders, Proposal, Agreement, General Conditions, Special Conditions, Technical Specifications, Addenda, and Change Orders shall constitute the Contract Documents. 2. EXAMINATION OF DOCUMENTS AND SITE a. Each bidder shall thoroughly examine and be familiar with the Technical Specifications, and other Contract D°cuments. Submission of a proposal is an acknowledgment upon which the CitY may~rely that the bidder has thoroughly examined and is familiar with each of the documents The failure or neglect of a bidder to receive or examine any Contract Document~or any part thereof shall in no way relieve him from any obligations with respect to his proposal or to the contract. No claim for additional compen- sation will be allowed based upon a lack of knowledge of any information or condition contained in any Contract Document. b. Prior to the opening of proposals, each bidder shall thoroughly examine and be familiar with the initial deliVery site and its improvements and submission of a Proposal shall constitute an acknowledgment upon which the City may rely that the bidder has thoroughly examined and is familiar with the site, and its improvements, both as to surface and subsurface conditions and that he waives any claim for any discrepancy between the site and its improvements and the Contract Documents. The failure or I-3 neglect of the bidder to fully familiarize himself with conditions at the project site shall in no way relieve him from any obliga- tions with respect to his proposal or to the Contract. No claim for additional compensation will be allowed which is based upon lack of knowledge of the site and its improvements. 3. INTERPRETATIONS No oral interpretations will be made to any bidder as to the meaning of any of the Contract Documents. Every.request for an interpretation shall be made in writing and delivered to the Purchasing Agent ten (10) days or more before the time announced for opening of proposals. Every interpretation made.to a bidder shall be in the form of an Addendum which will be sent by Registered or Certified United States Mail as promptly as is practicable to all partieS to whom the Specifications and Contract Documents have been issued. 4. FORM OF PROPOSAL Each proposal'shall be made upon the Proposal Form bound in a complete set of the Specifications and Contract .Documents. Each proposal shall give the amount bid for the service in figures and it shall be enclosed in a sealed envelope addressed to the'City at the location announced for receipt of proposals and marked "PROPOSAL DOCUMENTS" with the full name of the Project and the invitation to bid number, as shown on the cover of the Specifications and Contract Documents, the date and time for opening, the name and return address of the bidder. '5. COMPLETENESS OF PROPOSAL a. Bidders shall quote on all specified items. I-4 '~ b. ~ Altern~' !ve, additive, or deducti~'' bids will nor be considered. ~ c. Each proposal shall include specific acknowledgment of receipt of all Addenda issued during the bidding period. i~o do so may result in the proposal being rejected as not responsive. 6. 'ALTERATIONS IN PROPOSAL Except as otherwise provided herein, proposals which are conditional in any way, or which contain erasures or interlinea- tions not authenticated as provided herein, or which contain items not called for, items not in conformity with applicable law, changes, additions, recapitulations, or any other modifica- tions of the Proposal Form which are not specifically called for in the Contract Documents, may be rejected at the option of the City as.not responsive. Erasures, interlineations or other corrections.shall be authenticated by affixing in the margin, immediately opposite the correction, the handwritten signature of each person executing the proposal. 7. MORE THAN ONE PROPOSAL If, in addition to his proposal, a bidder has the control- ling interest in a bidder offering another proposal, all proposals by such bidders may be rejected. A subcontractor or supplier who has quoted prices to a bidder for construction or services which constitutes less than one-half of the amount of such bidder's bid is not disqualified from quoting prices to other bidders for portions of the construction or services, or from submitting a proposal directly to the City for the Contract. 8. EXECUTION OF PROPOSAL A proposal submitted by a partnership shall contain the Failure . I-5 name and address o~ each partner and shall b ~xecuted in the firm name, followed by the 'handwritten signature of a partner authorized to execute the proposal for the partnership. If a proposal is made by a corporation, it shall be executed in the name of the corporation, followed by the handwritten signature of an officer authorized to execute the proposal for the corporation, and the printed or typewritten designation of the office he holds in the corpbration. Another partner of the firm or officer of the corporation shall attest to the authority of the person executing the proposal. The City may require any bidder to furnish certified copies.of extracts of the minUtes of meetings of the governing body authorizing execution of the Contract Documents. 9. SUBMISSION OF PROPOSAL It is the responsibility of each bidder to deliver his proposal to the City at the Place for receiving proposals prior to the time ~.for opening proposals announced in the Notice or in modifying Addenda. Any proposal received after the time last announced for opening of proposals shall be rejected. 10. MODIFICATION OF PROPOSAL A modification of a proposal already received will be considered only if the modification is received prior to the time announced for opening of proposals. All modifications shall be made in writing, executed and submitted in the same form and manner as the original proposal. Telephone or telegraphic modifications will not be considered. 11. WITHDRAWAL OF PROPOSAL After the time announced for the opening of proposals and until award of the Contract, no bidder may withdraw his pro- posal unless the award is delayed due to acts of the city I-6 for a period exceeding sixty (60) days after the time announced for opening proposals. 12. POSTPONEMENT OF OPENING The City reserves the right to postpone the date and time announced for opening of proposals. Such postponement may be made at any time prior to the time announced for the oPening of proposals and the City will give written or telegraphic notice of any such postponement to each party to whom Contract Documents have been issued, followed by issuance of an Addendum confirming the changing of the announced date and time for opening of proposals. 13. OPENING OF PROPOSALS At the time and place announced for the opening of pro- posals, each proposal received from a qualified bidder, except those which have been properly withdrawn, will be publicly opened and read aloud, irrespective of any irregularities or informalities in such proposals. Bidders may have two representatives at the opening. 14. EVALUATION OF PROPOSALS In evaluating the proposals, the City will consider those matters specified in S9A-8 (VII) of the Anchorage City Code, the date on which bidder will commence service, if before November 1, 1972, bidder's experienCe, bidder's plan of service, past record of the bidder in meeting commitments, qualifications of bidder's personnel, availability of equipment and facilities to bidder for performance of this Contract, the total, cost to the City of commitments under this Contract, technical and financial data required to be submitted by bidder with his proposal, and any other factors that may~determine which proposal best serves the interests of the City. I-7 15. REJECTION OF PROPOSALS The City reserves the right to reject any or all proposals without cause. Without limiting the generality of the foregoing, the City may reject any proposals which are incomplete, obscure or irregular, and any proposals from bidders who have previously failed to perform satisfactorily or to complete on time contracts of any nature. 16. ACCEPTANCE OF PROPOSAL Within sixty (60) days after the time announced for opening proposals, the City may act either to accept a proposal or to reject all proposals. Failure of the City to accept a proposal within the stated time shall constitute rejection of all proposals. The acceptance of a proposal will be evidenced by a Notice of Acceptance in writing signed by a duly authorized representative of the City and delivered., in the manner provided for Written Notices, to the bidder whose proposal is accepted. No other act of the City will constitute acceptance of a proposal. The accep- tance of a proposal shall obligate the bidder whose proposal is accepted to execute the Contract set forth in the Specifications and Contract Documents. 17. SUBCONTRACTS The Contractor shall list on the Proposal Form the names of all'subcontractors who will provide in excess of ten percent (10%) of the total Contract. Failure to do so will entitle the City, at its option, to reject the bid or terminate the Contract, pursuant to the~termination provision of the Contract. 18. SPECIAL INSTRUCTIONS Bidders shall comply with all Special Instructions to Bidders which are provided in the Special Conditions. I-8 19. SUPERVISION OF CONSTRUCTION The City reserves the right to follow the progress of construction of plant and other facilities being constructed to furnish service under this Contract and to inspect the facilities to ensure conformance with the Contract. I-9 TO: ARTICLE I BID PROCEDURES SECTION C - PROPOSAL City of Anchorage Box 400 Anchorage, Alaska 99501 MUNICIPAL LIGHT AND POWER DEPARTMENT NATURAL GAS SERVICE Date Pursuant to your Invitation for Proposals for the service described in the Contract Documents of which this~Proposal is a part, the undersigned bidder hereby certifies and represents that, a. he has examined and is thoroughly ~familiar~with all of the. Contract Documents, and b. he fully understands the manner in which payment will be made for the .service furnished. The undersigned bidder, having made such examinations and reached such understandings, a. accepts the obligation of a bidder incurred by sub- mitting this Proposal, and agrees to the rights reserved to the City for the taking and evaluation.of proposals and the execution of Contract as set forth in the Contract Documents, and b. proposes to ~execute the Contract as set forth in the Contract Documents which are a part of this Proposal, and c. proposes and agrees that the character and performanCe of the service will conform with the information Pro- 1-10 vided on.the Technical Data'Sheets which are a part of this Proposal. It is understood that the service under the Contract shall be commenced by the undersigned Bidder, if 'awarded the Contract, on or before November 1, 1972. If Bidder quarantees an earlier commencement date, such date will be considered in the bid evaluation. The Bidder's guaranteed earlier commencement date is . The Contractor declares that he understands the rights reserved by the City in the letting and' awarding of the Contract and the method specified for the preparation of the Proposal. If written Notice of Acceptance of this Proposal is mailed, telegraphed, or delivered to the undersigned within sixty (60) days after the date of opening the proposals, the undersigned agrees that he Will execute and deliver a Contract as required by the Contract Documents, in accordance with the Proposal as accepted, with twenty (20) days after the prescribed forms are presented to him for signature, unless a longer period is agreed to by the City. Data submitted by the bidder will be considered in accord- ance with the provisions hereunder. Each bidder shall initial the space after one of the following provisions: . a. The bidder warrants that the service offered in his bid is in strict accordance with the intent of the Contract Documents, and the bidder further warrants that he is ready, willing and able to comply with all the requirements of the Contract Documents ...... b. The service offered by the bidder deviates from the requirements of the Contract Documents ...... 1-11 If the bidder fails to initial one of the foregoing provisions, the bid will be considered on the basis of Provision "a" and the bidder agrees to accept award in accordance with that provision. If the bidder elects Provision "b" he shall submit with his bid a full explanation of the deviation or deviations he intends to make. Failure to supply a full explanation will cause rejection of the bid. If the service offered by the bidder under Provision "b" fails to comply substantially with the requirements of the Contract Documents, the bid will be rejected as nonrespon- sive. The following statements of experience, personnel, equipment, financial and other qualifications of the bidder, including his plan of service and substantiation of ability to perform, are sub- mitted as a part of the Proposal and the bidder represents and guarantees the truthfulness and accuracy thereof: (Attach sheets and incorporate by specific reference if space inadequate.) (ye'a~) 1. Our organization has been in business continuously from 2. Our organization has had experience in supplying gas comparable with that required under the proposed contract for years. 3. The primary source of the gas will be Estimated wellhead pressure is psig. The source, if not owned by the bidder, is owned by A copy of the bidder's supply contract or commitment with the source owner must be attached to this proposal. 4. The estimated capacity of the source field(s) is 5. The facilities existing or to be constructed to furnish gas under this proposal are described below. (Number, diameters, locations and lengthS of pipelines; number, capacity and location of compressors; descriptions and locations of regulators, meters, screens, filters and other plant facilities required to furnish the proposed service. 6. The'operating plans, including plans for an alternate available source of gas, in the event the primary source or any of the major plant, facilities are lost, are as followS: 1-13 7. Bidder's plans for serving other customers from the ~ource facilities which will serve the City, the amounts to be delivered to such customers, the number and identity of such customers are as follows: 8. Additional information for bid evaluation: 1-14 9. (a) The price per therm (100,000 BTU) to the nearest one-hundredth of one cent for gas to be delivered to City's plan~'~"Sites is: (i) From commencement of delivery through October 31, 1977, ( ¢)~ (ii) From November 1, 1977, through October 31, 1982, ( ¢)~ (iii) From November 1, 1982, to October 31, 1987, ( ¢)~ (iv) From November 1, 1987, to termination of this Contract ( ¢). (b) If any Federal or State production, severance~ gathering or similar tax is levied that is in addition to or greater than those being levied on the date of award of this Contract, relating or applicable to the gas delivered pursuant to this Contract and for which Supplier is liable either directly or indirectly through an obligation to reimburse others, so long as such additional or greater tax is in effect and paid by Supplier on the gas, City will reimburse Supplier for three-fourths (3,/4) of the amount by which the additional or greater tax exceeds the taxes levied on the date of this'Contract. The amount for which reimbursement is due shall be included by Supplier in the billing for the month'in which the tax liability is incurred, but if all or any part of the liability of Supplier is not determined or determinable by the end of any month, that portion shall be set forth in a statement rendered by Supplier to City on or before February 1 of the ~ollowing year and City shall pay the amount due within sixty (60) days. 1-15 (c) If any Federal or State tax specified in (b) of this subsection is repealed or reduced, so long as that repealer or reduction is in effect, Supplier will reimburse City for three-fourths (3/4) of the amount by which Supplier's tax bur.den is decreased as a result of the repeal or reduction from the taxes levied on the date of award of this Contract. The amount of reimbursement shall be set forth as a credit and deducted from the billing for the month in which the tax liability would have been incurred, but if all or any part of the reduction in tax liability is not determined or determinable by the end of any month, that portion shall be set forth in a statement rendered by Supplier to City on or before February 1 of the folloWing year, and one-half (1/2) of that amount shall be dedUcted from the billings for each of the next two succeeding months. 1-16 SEAL: ATTEST: Title: DATED this day of , 1971. BIDDER: By: Title: 1-17 ARTICLE I BID PROCEDURE SECTION D - AGREEMENT THIS AGREEMENT, made and entered into this day of , 1971, by and between the CITY OF ANCHORAGE, hereinafter called the "City," and hereinafter called "Supplier.'' WITNESSETH: WHEREAS: The City has caused the preparation of certain Contract Documents, and, WHEREAS: The City has invited proposals frOm suppliers, has received and analyzed the proposals and duly given Notice of Acceptance to the Supplier as herein set forth and as provided in the COntract Documents which are as follows: (a) (b) (c) (d) (e) Notice of InvitatiOn (f) Instructions to Bidders (g) Proposal (h) Agreement (i) General Conditions Special Conditions Technical SPecifications Addenda Change Orders all o'f which Contract Documents are made a part hereof and which constitute the whole Contract between the City and the SUpplier, and WHEREAS: The Supplier has offered in his PropOsal to undertake and provide the services required by the Contract Documents, NOW, THEREFORE, IT IS HEP~BY AGREED THAT: 1-18 (1) Subject to the terms and provisions hereinafter set out, Supplier agrees to sell and deliver to City and City agrees to purchase and receive from Supplier, at the'points of delivery herein provided for, gas for the operation of City's power plants during the term hereof, up to but not in excess of the Maximum Peak Day and the Maximum Annual Gas Requirements provided for in Article IV hereof, to the extent of, and in accordance with, the terms, conditionS, and limitations hereinafter stipulated. (2) Nothing contained herein shall be construed as obligating City to pay SUpplier for any gas,~or the equivalent thereof, which is purchased from any other person, firm or corpor-~ ation and consumed in City's Plants in excess of the Maximum Gas Requirements set forth in Exhibit "A" of Article IV hereof, or for any of City's gas reguirements less than the Maximum Gas Requirements which Supplier fails or declines to supply. IN WITNESS WHEREOF, five (5) identical counterparts of this Contract, each of which shall for all purposes be deemed an original thereof, have been duly executed by the parties herein- above named on the day and year first above written. 1-19 CITY 'OF ANCHORAGE( Business Address: P. O. Box 400 Anchorage,' Alaska 9950 By Title Date The undersigned hereby certifies and represents to the Supplier that the person signing.this Contract on behalf of the City is authorized to do so. By Title Date CONTRACT DOCUMENTS APPROVED AS TO FORM: Harold' W. Tobey City Attorney SUPPLIER Business Address: By Title Date By Title Date The undersigned hereby certifies and represents to the City that the persons signing this Contract on behalf of the Supplier is authorized to do so. By Titl~ Date Copies City Supplier 1-20 ARTICLE II GENERAL CONDITIONS SECTION A - DEFINITIONS, TIME, AND WRITTEN NOTICE 1. DEFINITIONS As used in this Contract: a. "Acceptance" means written notice of acceptance by the City given to the Supplier as provided in paragraph 3. hereof. b. "Act of God" means an earthquake, fl'ood, cyclone, or other cataclysmic phenomenon of nature. Rain, windstorm, high water, or other natural phenomenon of unusual intensity for a specific locality, but which might reasonably have been antici- pated from historical records of the general locality, shall not be construed as an "Act of God" and shall not excuse the Supplier from supplying gas hereunder, or for damages to facilities or resulting delays. c. "Addenda" means the written notices of modification of the Specifications, or other Contract Documents issued by the City to holders of Contract Documents prior to the opening of proposals. d. "Change Order" means a written supplemental agreement entered into by the City and the Supplier to modify the contract after its execution. e. "City's plants" means the plant presently located at 821 E. First Avenue, Anchorage, Alaska, and all other plants operated by the City. after the date of this 'Contract for the generation of electricity for City of Anchorage Municipal Light and Power Utility. II-1 f. "Contract" means the Contract providing for the furnishing of the services and payment therefor as described in the Contract Documents. g. "Inspection" means the general surveillance of the services provided in order to permit the City to evaluate Supplier's compliance with all terms of the Contract. h. "Satisfactory" means satisfactory in the Opinion of the City Manager. i. "Specifications" means the written technical descrip- tions for the services to be furnished which are included as a. part of the Contract Documents. ', j. ',Supplier" means the person, firm, or corporation whose proposal has been accepted by the City and who has executed the Contract to furnish the services described herein. 2. ~ TIME All times and time limits stated in the Contract Documents shall be of the essence of the Contract. References to days shall mean.calendar days and the time within which acts are to be dOne shall.be computed by excluding the first and including the last day, except that if the last day is a Sunday or a legal holiday where the act is to be performed, the act shall be completed on the next business day. 3. WRITTEN .NOTICE Written notice is effective when delivered'in person to the individual, or to a partner of the firm, or to an officer of the corporation which is the Supplier, or to the City Manager of the City, or when mailed by Registered or certified United States Mail to the business address of the party to be served as shown in.'the Contract Documents. II-2 ~RTICLE III SPECIAL PROVISIONS SECTION A - HOLD HARMLESS The Contractor shall hold and save the City, its officers, agents and employees, harmless from liability of any nature or kin,~, including costs and expenses, for or on account of any or all suits or damages of any character whatsoever resulting from injuries or damages sustained by any persons or property by virtue of performance of this Contract. SECTION B - FORCE MAJEURE If, by reason of force majeure, either party hereto is rendered unable in whole .or in part to carry out its obligations under this Contract, that party .shall give written notice, including full particulars of the damage and cause to the other , , party as soon as possible after the occurrence of the cause relied'on. The °bligations of the partY giving suCh notice, to perform tasks made impossible by force majeure, shall be sus- pended.during the continuance of any inabilit.y so caused. The party excused under this provision shall, to the extent possible, correct all damages or defects preventing continued performance with all reasonable dispatch. As used in this Contract, "force majeure"means acts of God, acts of the public enemy, wars, insurrections, riots, epidemics, fires, and restraints of the goVernment and. people, civil disturbances, explosions, or other similar forces not within the control of the party claiming suspension and which, by the exercise of due diligence, such ., party is unable to prevent or overcome. This paragraph does not apply to any obligation to make payments due under the Contract. III-1 ARTICLE III SPECIAL PROVISIONS SECTION C - PAYMENT 1. For the purpose of billing and payment for gas delivered hereunder, the day shall begin at 12 midnight and extend to the next following 12 midnight, and the month (herein sometimes called the "Billing Month") shall begin at 12 midnight on the last day of the calendar month and extend to 12 midnight on the last day of the following calendar month. 2. All meters shall be read daily at 12 midnight, as nearly as practicable, and SUpplier shall report the results of such meter readings to City not later than the cloSe of the next following business day. 3. On or before the tenth (10th) day of each calendar month, Supplier shall tender to City at its office in Anchorage, Alaska, statements of the amount of gas delivered by Supplier to City at each point of delivery during the preceding~Bil, ling Month showing vOlumes in cubic feet, daily average heating value, and therms, and a corresponding bill for the gas delivered. City shall make full payment to Supplier at Supplier's.office in Anchorage, Alaska, within thirty (30) days after receipt of the bill. 4. Each party shall have the right, at reasonable hours, to examine the books, records and charts of the other party to the extent necessary to verify the accuracy of calculations for payment hereunder. If any examination reveals, or if either party discovers, any error or inaccuracy in its own or the other party's statements, payment, calculations or determinations, written notice shall be given to the other party and prOper. 111-2 adjustments and corrections shall be made as promptly as practi- cable thereafter. No adjustment or correction shall be made with respect to any error or inaccuracy which occurred more than four (4) years prior to the discovery thereof. III-3 ARTICLE III SPECIAL PROVISIONS SECTION D - FIRMNESS OF DELIVERY 1. Supplier guarantees a continuous, uninterrupted supply of gas to City. 2. If Supplier fails for any reason not specifically permitted by this Contract to supply ninety-five percent (95%) or more of the gas requirements of City's plants during any billing period, up to but not in excess of City's estimated peak day gas requirements and maximum annual gas requirements, City may elect to cancel this Contract by giving notice of intention to cancel as hereinafter provided in this paragraph. 3. City shall notify Supplier in writing of any deficiency in the amount of gas provided and the details of the computation of that amount within ten (10) days after any curtailment of gas ~elivery by Supplier. City's determination of the amount of the deficiency shall be final and binding on both parties unless protested in writing by Supplier within ten (10) days after receipt by Supplier of such notice. 4. If the supply of gas service is interrupted or cur- tailed by Supplier for any reason other than force majeure, the City may substitute gas or equivalent service at Supplier's expense. III-1'4 ARTICLE III SPECIAL PROVISIONS SECTION E - REGULATORY BODIES 1. This Contract and all operations hereunder are subject to applicable federal and state laws and the applicable ordinances, orders., and rules and regulations of any local, state or federal government authority, having or asserting jurisdiction; but nothing contained herein shall be construed as a waiver of any rights to contest such law, ordinances, charter, rule or regula- tion in any forum having jurisdiction. .2. If City'or Supplier is required by judgment or order of any governmental authority having or asserting jurisdiction to pay or charge prices for gas supplied pursuant to this contract that are higher or lower than the prices provided for herein, City and Supplier shall each have the option of cancelling this Contract by giving the other party written notice of its intention to do so within six (6) months after the date of such judgment or order, which cancellation shall become effective at the end of the sixth (6) month from and after the date of such notice. III-5 ARTICLE III SPECIAL PROVISIONS SECTION F - TERMINATION 1. If either party fails to perform any of the covenants or obligations imposed upon it by virtue of this Contract, except where such failure shall be excused under any of the provisons of this Contract, the other party may, at its option, terminate this Contract by proceeding as follows: The party not in default shall serve a written notice on the party in default, stating specifically the cause for termination of this Contract and declaring it to be the intention of the party giving the notice to terminate; whereupon, the party in default shall have t~n (10) days after the service of the notice to remedy or remove the cause or causes of default stated in the notice of termin- ation, and if within the period of ten (10) days the party in default does remedy and remove the cause or causes, the notice shall be nullified and this Contract shall continue in full force and effect. If the party in default does not remedy and remove the cause or causes of default within the period of ten (10) days, the other party is relieved from further performance under this Contract and may rescind or seek remedies for breach. 2. In the event of a suspension or diminument of gas service under this Contract because of force majeure for a period of ten (10) days or more, City may cancel this Contract and buy. fuel from any other available source. 3. A termination of this Contract pursuant to the provisions of this Article shall be without prejudice to the right of the party not in default to collect any amounts then due it without waiver of any other remedy to which the party not in default may be entitled for breach of this Contract. III-6 ARTICLE III SPECIAL PROVISIONS SECTION G - GENERAL 1. Warranty: Supplier warrants the title to the gas sold · hereuni~er and Supplier's right to sell the gas. 2. R~ght of Way: City grants to Supplier the right to lay and maintain pipe lines and to install metering stations and other· necessary equipment on City's plant sites for the purpose of supplying gas hereunder, and the lines and other equipment placed by Supplier on plant sites shall remain the personal property of Supplier and, subject to the terms of this Contract, may be removed by Supplier. Supplier shall remove at his sole expense all lines and equipment from City's plant sites within ninety (90) days after termination or cancellation of this contract and repair .all damages produced by the installation or removal. Lines and equipment not removed within ninety (90) days shall be considered'abandoned by · Supplier and may, at the option of City, be sold or removed at SupPlier's expense. 3. Indemni~y: As between the parties, Supplier shall be in control and in possession of the gas deliverable hereunder and responsible for any damages or injuries caused thereby until it has been delivered to City, at the points of deliverY, except injuries and damages which are occasioned solely and proximately by the negligence of City. City shall be deemed to be in exclusive control and possession of gas after delivery and responsible for any injuries or damages caused thereby, except injuries and damages which are occasioned solely and proximately by the negligence of Supplier. Supplier agrees to assume all liability for personal injury or property damage occUrring on or at any facility under control of the Supplier and to hold the City of Anchorage, its employees, agents and representatives harmless as more fully set out in Article III, Section A. 4. Waiver of Breach: The waiver by either party of any breach of any of the provisions of this Contract shall not consti- tute a continuing waiver of other breaches of the same or other provisions of this Contract. 5. ~.ap~ti.~n.s 0r.Headin~s: The captions or headings pre- ceding the various parts of this Contract are inserted and included solely for convenience and shall not be considered or given effect in construing this Contract or any part of this Contract, or the intent, duties, obligations, or liabilities of the respective parties heret°. 6. Assignment: This Contract shall be.binding upon the parties and their respective successors and assigns. All or any part of the rights or obligations of either party hereto may be assigned at any time, but assignment, unless'accepted in writing by the other party, shall not relieve the assignor of its obligations hereunder if the assignee fails to perform in accord- ance with the terms of the Contract. 7. Anti-Discrimination:· During the performance of this Contract supPlier agrees as follows: III-8 (a) The Supplier will not discriminate against any employee or applicant for employment because of race, religion sex, color, or national origin. The Supplier will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, religion, sex, color, or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion, Or transfer; recruitment or recruitment adver- tising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The Supplier agrees to post inconspic- uous places, available to employees and applicants for employment, notices setting forth the provisions of this nondiscrimination clause. (b) The Supplier will, in all solicitations or advertisements .for employees placed by or on behalf of the Supplier, state that all qualified applicants will receive consid- eration for employment without regard to race, religion, sex, color, or national origin. (c) The Supplier will send to each labor union or representa- tive of workers with which he has a collective bargaining agreement or other contract or understanding, a notice advising the labor union or workers' representative of the Supplier's commitments under Section 202 of Presiden- tial Executive Order No. 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (d) Supplier will comply with all provisions of Presidential III-9 Order No. 11246 of September 24, 1964, and of the · rules, regulations, and revelent orders of the U. S. Secretary of Labor. (e) When requested by the City Manager, the Supplier will furnish all information and reports required by Pres- idential Executive Order No. 11246 of September 24, 1965, and by the rules, regulations, and orders of the U. S. Secretary of Labor, or pursuant thereto, and will permit access to his books, records, and accounts by the City or any one the City shall designate for purposes of investigation to ascertain compliance with such rules, regulations, and orders. (f) If the Supplier does nOt comply with the nondiscrimin- ation clauses of this Contract or with any of the rules, regulations, or orders, this Contract may be cancelled, terminated, or suspended in whole or in part, and the Supplier may be declared ineligible for further contracts. (g) Supplier will include the provisions of Paragraphs (a) through (f) in every sub-contract or purchase order so that such.provisions will be binding upon each subcon- tractor or vendor. The Supplier will take such action with respect to any subcontract or purchase order as the City may direct as a means of enforcing these pro, visions, including sanctions of noncompliance. III-10 ARTICLE III SPE'CIAL~ PROVISIONS SECTION H - TERM Subject to the other terms and provisions hereof, this Contract shall be effective from the date of commencement of delivery or 12 midnight on October 31, 1972, whichever is 'earliest, and shall continue and remain in full force and effect for a period extending to 12 midnight on a date twenty (20) years from the date of commencement but not later than 12 midnight on October 31, 1992. III-il ARTICLE IV TECHNICAL CONDITIONS SECTION A - QUANTITY 1. The quantity of gas, computed for the purpose of this Article on the basis of a heating value of one thouSand ten (1,010) British Thermal Units per cubic foot, which Supplier is obligated to sell and deliver to City and which city is obligated to purchase and receive from Supplier, during each~ calendar year of the term of this Contract, is a volume of gas equal to City's .fuel requirements for its plants, up to but not in excess of City's Maximum Peak Day Gas Requirements and Maximum Annual.Gas Requirements for eaCh year, as set forth in the following Exhibit "A": Exhibit "A" Calendar Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Maximum Peak Day Gas Requirements (Million Cubic Feet) 19 21 24 26 29 32 · 36 40 43 47 50 54 59 63 68 74 80 86 93 100 109 Maximum Annual Gas Requirements ' (Million Cubic Feet) 4,394 4,877 5,414 6,010 6,670 7,404 8,219 9,123 .9,853 10,641 11,402 12,412 13,404 14,476 15,634 16,885 18,236 19,695 21,270 22,972 24,810 IV-1 2. Without limiting the obligation of City to take and pay for the gas requirements of its plants, up to but not in excess of the Maximum Annual Gas Requirements set forth in Exhibit "A", during each calendar year of the term of this contract, beginning with the calendar year 1973, City agrees to pay for, to the extent tendered by Supplier, during the calendar years 1973, 1974, 1975 and 1976, a minimum volume of gas equal to ninety per cent (90%) of the City's~Estimated Annual Fuel Requirements for each calendar year as set forth in the following Exhibit "B": Calendar Year Exhibit "B" Estimated Annual Gas Rgquirements (Million Cubic Feet) 1973 4,394 1974 4,877 1975 5,414 1976 6,010 On or before October 1, 1974, City will submit to Supplier written notice setting forth the Estimated Annual Gas Requirements of City for the calendar year 1977, and on or before October 1 of each year thereafter up to and including the year 1990, City will submit to Supplier similar written notice, giving the Estimated Annual Gas Requirements of City for the calendar year which begins two (2) years and three (3) months in the future. During the calendar year 1977 and each calendar year thereafter, City will pay for, to the extent tendered by Supplier, a minimum volume of gas equal to ninety per cent (90%) of the Estimated Annual Gas Requirements established for such calendar year. IV-2 .,. 3. Unless mutually agreed in writing, the Estimated Annual Gas Requirements of City for any calendar year may not exceed the Maximum Annual Fuel Requirements for that year as set forth in Exhibit "A" of paragraph (1) of this Article; the Supplier's obligation to deliver gas shall not exceed, in any calendar year, City's Estimated Annual Gas Requirements as provided for in paragraph "2" of this section, and such obligation shall not exceed, in any hour of the day, one-fourteenth (1/14) of the Maximum Peak Day Gas Requirements for the calendar year which includes such day. If City, by written notice to Supplier establishes its Estimated Annual Gas Requirements for any calendar year at less than the Maximum Annual Gas Requirements for that year ~as set forth in Exhibit "A", the MaXimum Peak Day Gas Requirements for such calendar year shall be reduced to th'e same proportion that the Estimated Annual Gas Requirements so estab- lished for such calendar year bears to the Maximum Annual Gas Requirements for said calendar year. City's Estimated Annual Gas Requirements for any calendar year may not exceed City's Estimated Annual'Gas Requirements for the immediately preceding calendar year by more than twenty-five percent (25%). City may not establish its Estimated Annual Gas Requirements for any calendar year at an amount less than eighty percent (80%) of the highest.Estimated Annual Gas Requirements previously established by City for any calendar .year subsequent to the calendar year 1973, nor may the amount be less than the Estimated Annual Fuel Requirements for the calendar'year 1973 as set forth in Exhibit It B I1! · IV-3 4. Nothing contained in this Contract shall be construed to prohibit the City from purchasing gas from any other person, firm, or corporation, whether for use in City's plants or for any other purpose, in excess of the Maximum Annual Gas Requirements set forth in Exhibit "A" of. this Article, or for any of the City's gas requirements less than the Maximum Annual Gas Requirements set forth in said Exhibit "A" which Supplier fails or declines to Supply, and nothing contained in this Contract shall prevent Supplier from selling and City from buying any additional quan- tities of gas in excess of such Maximum Annual Gas Requirements which Supplier has available and desires to sell and which City desires to purchase. · 5. If, during any calendar year, City fails to purchase the minimum volume of gas required by this Contract to be purchased during that year, Supplier shall give written notice to City within fifteen (15) days following the end of such calendar year that City failed to purchase the minimum Volume of gas required, and shall include an itemized statement of the payment due suPplier by reason of the deficiency. The payment shall be computed by using.seventy-five percent (75%) of the unit price per therm applicable to gas delivered during the period of deficiency in accordance with Section C of'Article I. 6. During each billing month of the next succeeding calendar year, commencing with the billing month ending January 31, Supplier's bills to City for gas delivered shall be increased by adding to the bills an amount equal to one-twelfth (1/12) of the total payment due Supplier by reason of C~ty's failure to purchase the minimum volume of gas during the preceding calendar year, subject to the option of the City to make the payment due in one l~mp sum within thirty (30) days of receipt of Supplier's IV-4 written notice. 7. For the purpose of determining whether the City has incurred a deficiency in the purchase of gas during a given year, it shall be assumed that, during periods in which Supplier fails for any reason to supply gas, the City would have taken its normal requirement based upon record of its usage of a substitute gas or equivalent. 8. If, during a year immediately following a year in which City failed to purchase at least ninety percent (90%) of the Estimated Annual Gas Requirements, and for which City was billed for the deficiency, City purchases an amount of gas in excess of the Estimated Annual Gas Requirements, for that year, City may recover the deficiency payment made to Supplier up to, but not exCeeding the Maximum Annual Gas Requirement fOr the year in which the excess .Was purchased, by giving written notice to Supplier within fifteen (15) days following the end of the Calendar year that City haS purchased excess gas. The written notice Shall state the quantity of gas purchased in excess of the Estimated Annual Gas Requirements and the monetary amount recoverable for that quantity at seventy-five percent (75%) of the unit price applicable during the deficiency year. During each billing month of the next succeeding calendar year, commencing with the billing month ending January 31, Supplier's bills to City for gas deliVered shall be reduced by' deduCting an amount equal to one- twelfth (1/12) of the~ recovery value of the excess gas purchased. Supplier shall have the option of making the payment due in one lump sum within thirty (30) days of receipt of City's written notice. IV-5 No recovery of deficiency payments will be permitted for '~xcess .gas purchased in any year other than the year immediately following the deficiency purchase. IV-6 ARTICLE IV TECHNICAL CONDITIONS SECTION B - QUALITY 1. Supplier shall deliver to City gas that is free from dust and sand and other objectionable solids and which conforms to the following specifications: Minimum pressure ............. 250 lbs. per square inch Minimum heating value (dry basis, at 60 degrees F. and 14.73 PSIA) ........... 1,010 Btu per cubic foot Maximum heating value variation ................. See Paragraph 4 Water content ................ NOt to exceed 4 lbs. per million cubic feet of gas Chemical Components Oxygen .......................... Nitrogen ........................ Carbon Dioxide .................. Hydrogen' Sulfide & Sulphur ...... Methane ......................... Ethane ......... ~ ................ Propane ......................... Specific Gravity ................ Volume in % -0- Less than 1.00 Less than 0.05 -0- Greater than 99.00 Less than 0.15 Less than 0.05 0.555 to 0.580 2. Supplier shall submit to City chemical test results obtained by an agreed upon independent laboratory from samples of the gas being delivered taken at or near the point of delivery at intervals of not more than six (6) months, showing the heating value and the quantity of chemical components listed in paragraph 1 above. The City shall be permitted to observe the taking of samples for such tests. 3. Failure by the Supplier to deliver gas conforming to the specifications stated in paragraph 1. of this Article shall constitute cause for termination of this/z6ntract pursuant to Article III, Section F. '~ ~ IV-7 4. During the period when City is generating electric power solely by means of simple cycle gas turbines, variations in heating value of delivered gas shall not exceed 30 BTU per cubic foot (dry basis, 60°F., 14.73 p~ia) above or below 1,010 BTU per cubic foot. If City generates power by means other than simple cycle gas turbines at any of the plant sites to which Supplier delivers gas, variations in heating value of the delivered gas to those plant sites shall not exceed 10 BTU per cubic foot (dry basis, 60°F., 14.73 psia). If the recorded heating value of the gas varies in excess of the applicable tolerances set forth above for any period of time in excess of four (4) continuous hours, the quantity of gas not meeting the tolerances delivered by Supplier during that period of time, including the four hours, shall be billed and paid for at one-half (1/2) of the unit price provided in Article I, Section C, of this Contract. IV-8 ARTICLE IV TECHNICAL CONDITIONS SECTION C - DELIVERY AND CONNECTION FACILITIES 1. The points of delivery of gas to be furnished by Supplier to City shall be at the outlet side of Supplier's regulating and metering stations, which shall be constructed, installed and main- tained in permanent housing by Supplier at locations mutually acceptable to City and Supplier on the sites of City's plants. Supplier will construct, operate and maintain the necessary main, tap, or lateral lines from its pipeline System to the regulating and metering station. City will furnish to Supplier~without charge suitable space at its plant sites for Supplier's pipelines, regulat- ing and metering stations and appurtenant equipment necessary to performance of this Contract. City will install and maintain the necessary lines to connect'With Supplier's lines at the outlet side , of Supplier's regulating and metering stations. City will not authorize a person other than an agent of Supplier, or a person otherwise lawfUlly authorized, to tamper with, inspect or remOve Supplier's lines, stations or equipment and Supplier shall have free ingress to and egress from City's premises for the construction, maintenance, repair and replacement of its property, or for any. purpose connected with the supplying of gas under this Contract. Supplier agrees to maintain its properties, facilities and structures in good condition and compatible in appearance with. City's facilities and structures on the same premises, and City reserves the right of inspection of Supplier's facilities dUring normal business hours for the purpose of ascertaining compliance herewith, IV-9 2. Supplier an~ City agree to commence and proceed with due diligence in the construction of the facilities which are necessary to enable Supplier to deliver and City to receive gas commencing on the date specified in the proposal at City's existing plant and at such later date or dates as may be mutually agreed upon for future plant locations of City. The delivery and acceptance of gas shall begin as herein set out, and the title to and ownership of the gas delivered shall pass to, and absolutely vest in, City at the points of delivery provided for. 3. Supplier and City agree to promptly notify the other party of expected changes in operating conditions which will effect the delivery and receipt of gas hereunder, and the reasons for such expected changes. City proposes to construct additional electric' generating facilities during the term of this Contract at locations not now known. City agrees to notify Supplier in Writing at least twelve (12) months prior to the date on which City will be ready to receive gas for the requirements of additional electric generat- ing stations at other locations, setting forth in the notice the estimated date when the additional station or stations will be placed in operation and the estimated annual and peak day require- ments of gas for each station. 4. City.will construct the necessary lines to connect the regulating and metering stations placed by Supplier on each new plant site to Supplier's gas lines. City will have the option of installing the necessary lines to connect with Supplier's line at the input side of the regulating and metering station on an existing plant site or to the point on Supplier's line in closest proximity to the new plant site where connection is feasible. IV-10 At least ninety (90) days before commencement of construc- tion of a connecting line to a new plant site, City shall provide Supplier with a complete set of design plans and specifications for the line. Supplier shall, within thirty (30) days after receipt, give written notice to the City approving the plans or setting forth in detail any aspect"of the plans or specifications that do not meet industry standards of construction necessary for safe and uninterrupted operation. Design deficiencies · specified by Supplier shall be corrected prior to construction. Supplier shall have a right to observe and inspect all phases of the construction and shall notify City of any failure to complete construction' in accordance with design plans and specifications. 5. Supplier agrees to execute a written lease for the constructed gas line to the new plant site prior to commencement of gas service. The lease shall be for a term equal to and con- current with the term remaining under this contract, and provide for an annual rental of one dollar ($1.00) per annum. Supplier will be obligated by the lease to provide all necessary inspection and maintenance for the line and to assume all liability to all persons for any injuries or damages resulting from the 'operation of · the line. City will'provide the easements necessary for inspection and maintenance of the line, and, upon completion of this cOntract, City shall be entitled to sole and exclusive possession of the pipe- line and all other equipment and fixtures provided by City for its connection and operation. IV-il ARTICLE IV TECHNICAL CONDITIONS SECTION D - MEASUREMENT 1. The quantity of gas delivered shall be measured by means of an orifice meter which shall be installed, operated, and main- tained by the Supplier at Sup~lier's sole expense, in the regulating and metering stations at the points of delivery. 2. For the purpose of payment under this Contract, the unit of gas shall be one therm (100,000 BTU). Accordingly, measurements of the quantity of gas shall be converted to therms by applying the daily average heating value for the Billin~g Month to the computed deliveries in cubic feet at a pressure base of fourteen and seventy- three one-hundredths (14.73) pounds per square inch absolute and at a ~emperature base of sixty degrees (60°) Fahrenheit. Meter measure ments shall be computed by Supplier in accordance with Boyle's Law for volume variations due to pressure and corrected for deviation, using daily averages of recorded specific gravity (determined to three decimal places) and flowing temperature and using a value for atmospheric pressure of fourteen and four-tenths (14.4) pounds per square inch absolute. 3. The daily average heating value of the gas delivered, expressed in British Thermal Units per cubic feet and computed on the basis of a pressure of fourteen and seventy-three one-hundredths (14.73) pounds per square inch absolute and a temperature of sixty degrees (60°) Fahrenheit, shall be determined at Supplier's eXpense by the use of recording calorimeters of Thomas type, which shall be installed and operated by Supplier. IV-12 4. City shall have access to the metering equipment at all times, but the reading, calibration and adjustment thereof and the changing of charts shall be done only by the employees or agents of Supplier. Charts and records from such metering equipment shall remain the property of Supplier and shall be kept on file by Supplier for a period of not less'than five (5) years. Upon request of City, Supplier shall submit to City charts and records from its metering equipment, together with pertinent calculations for City's inspection and verification, subject to return by City within thirty (30) days after receipt. 5. City may, at its option and expense, install and operate check meters, instruments and equipment to check Supplier's meters, instruments and equipment, but the measurement of gas for the pur- pose of this Contract shall be by Supplier's meters only, except as specifically provided herein. The meters, instruments and equipment installed by City shall be subject at all reasonable times to inspection or examination of Supplier, but the reading, calibration and adjustment thereof shall be done only by City. 6. Each party shall give to the other party written notice of the time of all tests of meters sufficiently in advance of 'such tests so that the other party may conveniently have its representatives present. If either party has given such notice to the other party and the other party is not present at the time specified, the party giving the notice may proceed with the test as though the other party were present. IV-13 7. Meter measurements computed by Supplier shall be deemed to be correct except where the meter is found to be inaccurate by two percent (2%) or more, fast or slow, or to have failed to register, in which case Supplier shall repair or reDlace the meter within twenty-four (24) .hours. The quantity of gas delivered while the meter was inaccurate or failed to register shall be determined by the readings of City's check meter, if installed and in good operating condition, or by correcting the error if the percentage of error is ascertainable by calibration or mathem'atical calculation. If not so ascertainable, then it shall be determined by estimating the quantity on a basis of deliveries under similar condition when the meter was registering accurately. No adjustment or correction shall be made for a period longer than thirty (30) days. 8. Each calorimeter, meter and related instrument or measur- ing device shall be tested for accuracy by Supplier at regular six-month intervals and if any test shows it to be inoperative or recording in error as much as ten (10) British Thermal Units, plus or minus, proper correction of recorded values shall be made for the period during which the recorder was inoperative or recording in error, and if this period cannot be ascertained, correction shall be made to the values recorded during the latter half of the period elapsed since the last previous test. The degree of saturation by water vapor of the gas to be delivered shall be ~etermined monthly by Supplier, using standard instruments and methods, and the results shall be properly taken into account in determining the heating value of the gas delivered. IV-14 Tests of the calorimeter and other measuring deviCes shall be made more often if requested by City, but if the additional tests show an error of less than ten (10) British Thermal'Units, plus or minus, the City shall pay the reasonable cost of making the additional tests requested. IV-15 ALASKA OIL AND CAS CONSERVATION · I'ATI~ OF ALASKA Re: ~ ~0~ OF THE ~ OIL hold e he~i~ co -consider issusuee of ~n order a~fect~ ~ use of Sas ) ) produced as -~e r~ult o~. e~ oil ) ) ) Cook Inlet oil f~s ) Conservat~ton l~ile ~o, 105 ~iddle Cround Shoal Yield l~S' 'A', "B", "C", "9". "E", "Y", and "O" Oil Pools C~~ati~ ~ No. ~le len~ Oil Conse~atim Fib ~o. 103 ~a~ ~y Field ~d "~" Oil Pools ~~k Oil P~i '~" ~ Oil ~1 ~xk ~ Oil Pool anaemia File Ho. 101 ~r~hur ~r ~t~le bna! 'G" Oil a~o~ Oil Pool ~ Forel~ Oil ~ool SUBPOENA YOU ~ ~ ~o appe~ ia the CiCy Council Chambers of tim Z. J. Loussac Avenue and "1~' Street, ~ehora~e, ~taska, on ~ 25, 26, 27, and ~8, i~71, at 9:00 o~clo~ A, ~i., end so long ~he~eaf~.er as tlm referenced hear~s ~ b~ continued:, ~o eesttiy on behalf of ~he State of Alaska in OIL AND OAS CONSERVATION CO~EE him and by -~nd~ins Co btu the f~m for each day's a~endance and the ~lea~e p~eribed by ~ R~s ~rnt~ t~e ad~riuis~ration of all Courts o ic, n i'ii.a ~;o~ i02 ...... ~ 62! Pool ~:~.:,L ;'~" "C') "g" ~,.~-, Oil Pool "G ' Kc~z~::.L Oil Pool Oil ?ooi ALA~ OIL A~D CAS CO~~ATiO~ CO~TT~E STATE OF ALAm~ Re~ ~ HOTIO~ O~ T~E ~i~S~.~ OIL AND GAS ~SERVATION ~TER to ) hold a he~ln~ ~o consider issuauc~ ) ) of ~ order ~f~uS ~e ~ ~ 8as ) ) pro~d ~ ~ r~t ~ ~ oil ) ) p~du.c~ ~ra~i~s ~ ~r~n ) ) C~k I~t oil fields ) Conservation File No. 105 ~-- ltiddle Cround Shoal Field ~ "A" ~ "B", "C" ~ "D", '~", "F", and "C" Oil Pools Conservation File No, 102 Orant~e Point Field Hiddle Kenat Oil Pool Conservation File No, 103 Trading Bay FieLd Middle lenai '~", "C"~ "D", and 't" Oil Pools Henlock Oil Pool "G" NE- Oil Pool Hemlock NE Oil Pool Conservation File No, NeAr,hut River Field ~iddle ~enai "~" Oil Pool Hemlock 0il Pool ~es~ Forsland Oil Pool SU~PO~A TO: ROBERT- E. SHARP YOU ARE -CO~fIAHDED to appear in ~he City Council Chambers of the Z. J. Loussac Library, 5~ Avenue and "F' S~reet, Anchorase, Alaska, on May 25, 26, 27, and 28, 1971, a~ 9:00 o'clock A. M., and so long ~hereafter as ~he referenced hearings may be ~tin_ued, to ~es~tfy on behalf si ~he State of Alaska in ~ OIL AND OAS CONSERVATION Ch~.tre~n I ho~by re~ t~at ! served the ennexed sUbpoeua on ~m ~ by ~~ ~o ~m ~ f~ for ea~ ~y's aC~end~ ~d C~ ~~ p-~~ed by ~e ~ ~ove~g ~ ~~scra~ of all C~s. Se~ ~e~ ~ ~0~ OF ~ ~ OIL ) ) hold a hearing to c~~ ~~ ) p~u~d ~ ~ ~s~l~ o~ ~e oil ) ) ) K~ai Oil ~i ~~ 0tl Pool 0tl ~ool ~~ur ~~ Field ~ "C" Oil F~lo~ Oil Fo~I~ Oil YOU ARE ~ED to appear in the City Counci! Cheers of ~ Z, 3. L~sac L~r~, 5~ A~ ~ *~' St~t, ~~e, ~ka, ~ ~ 23, 26, 27, ~d X heweby ~e~ ~hat ! so~ed ~he mme~d subpoena on bin ~ by t'ende~ t~o h~Ln ~ fee ~or ~eb day's aCeeudance and the ~ OF ALASI~ Re~ TEl NOTIO~ OF ~ ALASI~ OIL ) produced as the resul_-~ of c~e oil ) ) ) ~ in~t otl f~s ) Conservation File No. 105 Middle Oround Shoal Field ~ "A" "B" "C" '~" "E" "l", ad "G" Oil POo~ C~e~a~t~ ~le No, 102 ~r~t~e Potn~ F~ld ~tddl~ ~i Oil ~1 C~e~a~ ~ ~o. 103 Trad~ Bay ~d "~" Oil Foo~ ~1~ Oil ~ool "C" ~ Oil Fool H~lo~ ~ Oil Pool ~thur ~r ~ ~ral~d Oil Pool OAS CONSERVATION COI~IITTEII I hereby re~ _~at I served the annexed subpoena on ~m~ by ~~ to h~ t~ ~ for e~h d~'s a~dancn and OIL AND ~AS ~)N.~ERVATION COMMTI~EE STATE OF ALASKA Re: THE MOTIO// OF ~ ~ O~ hold a hearin~ to' ooueider issuance of am onler affee~in~ the use of §as ) p~oduced as the resul~ o£ trade eli ) ) p~odu~ln~ operations ia certain ) Cook Inlet oil £1elds ) Conservation File No. 105 Middle Ground Shoal Field Ntis "A" "B" "C" "D", "E" "F"o ~d "~' Oil Fools C~e~a~ion File No. 102 CeSta Point Y~ld Mille ~K~ 0tl Pool ~~a~i~ Pile No. 103 Twang B~ Field Mille K~ai "B", 'C", "D", ~ '~" Oil Pools H~l~k Oil Pool "g" ~ Oil Pool ~logk ~ Oil Pool C~e~a~i~ File No. ~r~ur Ri~r Field ~d~e ~n~ "G' Oil P~I H~to=k ell'Pool W~t Forel~d 0il Pool ~E~A YOU ~ ~ to appear in the City Council Chsmbers of the Z. J. Loussac L~rary', 5t~ Avenue and "'1~' $~reet, Anchorage, Alaska, on ~y 25, 26, 27, ~d 197'1, ~ 9:~ o'cI~ .A, M., ~d so 1~ t~re~ter ~ the refe~nced ~a~s ~y ~ c~tin~, ~o ~att~ ~ beh~f of ~he S~a~ of ~ka in these-hea~gs. ALASKA O~L AND ~AS CONSERVATION i hereby return ~at I nerved ~he annexed oubp~na ~ ~m ~d by ~~ to h~ ~ i~ for e~h day's a~nd~ce ~d ~he ~le~e prescribed by ~he Rutes gorging the a~ainist, ration of all Courts, roads of the rid Mr. Homer L. Burrell, Director Division of Oil and Gas Alaska Dept. of Natural Resources 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Mr. Burrell: May 12, 1971 I am enclosing a copy of an Invitation to Bid for gas service for the City.of Anchorage. This service'is for the Municipal Light and Power Department gas turbines. POST OFFICE BOX 400 ANCHORAGE. ALASKA I C. ENG __1 l._J ~ONFER~ ' .~,_ . Your attention is particularly invited to Article IV, page IV-i, Exhibit "A", which contains the maximum peak day gas requirements and the maximum annual gas requirements for the years, 1973 to 1993, inclusive. It would be appreciated if you would enter this letter and enclosed Invitation in the record of the hearings scheduled for May 25, 26, 27, and 28, 1971. RES:f Enclosure: a/s Very truly yours, City Manager ACCEPTED ' ....... ...:-, ~'. ,~ O~ :,..,..c:~' :t G %,~ ,,.,,, ~ ,,, ; t"/'IAF~,,/a,'THC3, i'".] OIL C.?,C3~N/11';,"'XbJ"~' FINDLAYOHI[) 4.5040 p[:ll.')OI, JCTIOi'J-I.JNIT 60 5q'FATES AND CANAIDA IxIAT IJ r:l.%l. GA,S' May 7, ig'i'l 7~laska Pipeline Coi::loany P. O. Box 6554 Houston, Texas 77005' Attention-J,~r". ]iilton Lacy Dear Sir': In accordance with ]~y ~-~" .~o ' = .... o~eme~:t a~, .She m,_~t].no with Ds3. e Teel on the afternoon of ,May 3, 1971 in Los Ange!es~ I will s~m..narize in writing below the. unders'~anding which I believe we .reached at that time. l'a~en we na~e bad a r s?o~se from you~ which ws ~mderstand couD. d be in a vez'y 'short ti:ne,we will then ,.~oceed to strive to obtain ap.vroval~ of the propesed arrangements from our Executive Co~muittee. The proDosal as I ~ndarstand it is as follows: ...... NOTE' The remainder of this page and the top port~on of page 2 concern only the details of renegotiation of reserves etc from the Kenai Gas Field and are not involved with flare gas in any way, and thus have been omitted from this copy. In addition to the £oregoing~ Marathon has offered for sale to Alaska Pipeline its share of the casinghead gas now being produced from the MacArthur River and Tr4~ding Bay Oil Fields at a price of 5 cents ~er Mcf if Alaska Pipeline. can arrsmge for transportation .of the gas from the delivery point at the outlet of the liquid extraction plant on the west side of the Cook inlet. %'~EII:des Dale Teel - APL / C. E. Smith- Union W. L. Bradford- Union Yours Yery truly, AFFIDAVIT OF PUBLIC ATION ¢~AIE OF ALASKA, ) -r~::;,RD JUDICIAL DISTRICT, ) ss. being first duly sworn on oath deposes and says that ...... .S_.h..e. .... is the .... ._L..e.g.a.]...0.1.ez'k .... 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 ....0...n..e. ........ insertions, commencing on the ...~.Lf.. .... day of ./it?..r..i...1. ............. ,19 ..2..1.., and ending on the ............ .2..if .... day of of ~..a.!?.r..i...l_ .................... , 19.?..]:_.., both dates inclusive, and that such newspaper was regularly distributed to its subscribers dur- ir~g ali of sa,id period. That the · Cull amount of the fee charged for the foregoing publication is t:he sum of $ 16'2~Swhich amount has been paid in full at the rate of 25¢ per line; Mini- mum charge $7.50. SuLfscribed a/~'sworn ro before me 'this .... 2~_ day of .... Lip..r..i..1. ..... , 'i? ..... ?1 ........ ........ Notary Public in ~nd roi/ '~he State of Alaska,' Third Division, Anchorage, Alaska /~,Y CON~I~ION EXPIRES ...... ........ ../../..: ....... casinghead" gas. ai~er .Ju~e'.' 30, 1972 in exces.s 'bi the amount.,re. cori,sU~ttte ' :' '"' ~ f~: ,"beneit'eiatl~" U~,ed .,o~' t ; ,:, equi'~ed .~o~:" e, 8~e~, ~e,? ', , NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Alaska Oil and Gas Conservation Committee Conservation File No. ~NAIgL Re: Middle Ground Shoal Field MGS "A", "B", "C", "D", "E", "F", and "G" Oil Pools The Alaska Oil and Gas Conservation Committee will hold a hearing pursuant to Title 11, Alaska Administrative Code, Section 2009, to consider issuance of an order or orders, effective 3uly 1, 1972, restricting the flaring or venting of casinghead gas from the referenced oil pools to the amount required for safety. The hearing will be held at 9:00 A. M. May 25, 1971 and so long thereafter as the hearing may be continued, in City Council chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time operators of the referenced pools and affected and interested parties will be heard. Evidence will be sought as to, but not limited to, the following: 1. Can excess casinghead gas be marketed, injected into any reservoir or pool, or otherwise beneficially utilized by July 1, 19727 2. Will the flaring or venting of casinghead gas after June 30, 1972 in excess of the amount required for safety constitute waste, as "waste" is defined in AS 31.05.170(11)? 3. Will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for a safety flare? Thomas R. Marshall, ,Ir. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish April 24, 1971 ": :?:".1 ,. 'TS Chica g:~[ , .. ..,: ~e~.P~.ce of natural g'~s is g~2g up.. ': ~j'~o~ages won't end' fey thr~e, to five :' yeg~b:~g~.. ' " - , ' · · -V ','-. ,.-'. :~...' .:. ':~j:i~'""{he ~12~y rict~a. ~at emerges: .,~,..;- .- . ~ .~: , .,. ~.~ ~ ,. o~:du~ers, pipelin~ .~a.t~rs and dis~ribu- . .¢ ~$~ ..'.:.' ., ......... , . . .,,~'~ 's~s,:to' be no visible solution . , . . . ,- ~ ~ ~~.s) between now.and .19~o, ~ays an of- ' ff~i"~'S~audard Oil Co. (New Jersey), the na- · ~ ",s:' .: ; .. . . .. ti ~ s. b~gest:ggs ·producer. :: .:5 -, '.' ..: . <;~he. pro.bl~m..i$ twofold: Discoveries of new . .. ,2' ,.:~...... res.erves:...gre .d~lining while demand is in~/::..;"' ..... .' .,'~'~' producers ' bls'r.,: "~"?:~:.::~:'~- 'c': .... p~'~: .~et:'.'~y 'federal '". ;'...',., ' · ~,.~ c,'.'~- d~:gd i~, One state an :" .:" .: c . .... o ",c The' p~odub'ers have M1 but quit drilling fora[new :'ft~lds"'for. the~ tinterS.rate marke~s. Add{tiofi- ' glIy~" they claim,., lh~ .restricted prices a~d':~o · the problem' .by '~yrbcketing :~ems'~ for their view. that prices 'chi~ly...among the ~as Utilities and yo~" ~ade Stri~:~'s'i~16i~ , .burger. you would ~gt~,~".z of strip sir~oifl.s,"'"~gy~':.~aekson C. Hinds., preside:. den~ of Un,ted Ga~, ~c:.~ a Houston-ba~ed dis-? t~xb~ox.: of gas m Texas, Lqmsx~a and ~s~xs sxpp%:..~.,~...~. . .. .., .-. . ~.. ~ej.~'~er~l'j~0Wer C0~mission,%~vh{ch reg-? ulates interstate gas .from .wellhead-~o.~burner tip, also is beginnin~ to se'~.some merit in the producers' arguments. Alarmed. at the critical level of interstate suppl'ie~]:'":th6' FPC is ex-' petted to allow some inc~e'a~es soon in the prices charged by produflerS. .... . ~., ,::..~:~..~ ' to determine' ff 'f. he' 'pr0dti~ers ax;e' indeed riggiaglshorta~:i~'" - ' "This' 'is' an overall ~i~-r~t'" r~;le'~" Of the "''~ energy field, s'? s~ys an,'FTC, i.~qkesm~,: "but :~ '!:' ':' ers) ;' and we are looking '~fi'fi~li~' ~:"gaS. I Thednvestigati0n' he .adds, Will require', several ¢ onths.. , .. . .::. ~'~'uzzling Aspects fo SCarcity. ' ' ' ':'i. ,~ The pro'lice:ers aren,t c0'~:~'~h~ ~ tend the ~e : en '~ .is` ' '" '~'~" '~ · .. , Y,.ag . cF, ,,.the Federal Power Corn- are gas, in ~h'e:i-~ studies ' "" '. "- - : - '. <:~:.!: ,.ii It's true th,.er~:,,~a~e s6rne..Pu'~.zling asreets t0'.,~i '" ?~'" ,,,, . ·1 ~ , , ,~ .... ~.- ~, ,,,, ,,., ~ tl~e searmty "s[nee"lt seems to Sha~e u~' a~'baekdroP o~,.abund.dhce.~,, But. evidence of shortageS;:'... ~ .... . :: ....: .' - 7¥7 ,~.:,:.:' .:..~ .. "~'We ha~efi'~'t'"been a~',t~..~t~'.~n, a hew..~. tomer nor se~.additi.on~..gas to 'exis~ng..:cUs.. ~:~,- Corp.~F a major ',piPeliner, of.'. ~e. fuel.. ~o~ ¥.,~fle~) gas-rich South. We.~.~ t0 .uti!it~.e,s. o~ bcth c°asts.¢' ,, .:~: .' ~.~uneb i~:pa%~d ;n to. gas;utilities and :.'" ,.' { ,~ , : ~ ,,, .., ,., ,.t~ ..,,,, ,, .~., ....... .<J2'; ...... · ,,, ~ ,, 'consumers' at,.t~e ends of the P~eti~e~.'.Peoples , ~ ~.'.'.~..' Gas Co.; a'~,fiflwe~te~ supplier, ~epbrts a wait- ' mg list of .17 00'0'applieati~s fro ~hiea oans r . ' ~ g · ,'.,: '~0, desperat~F~want:~,but~ea~i get-it. :-." · : '.;~,.'.~'-;".. .. , .,: :.,2. AStronomical.' :,,, ~....¥::...~, ~:;. ,..:'. ........ . ¥ on'e~reason or-.suah sho~ag, es ~ ': .~,.~.~?;~ '~eans btam it ~.astronomical 'amounts.-22 tril.?~.' '. ...... '~o.~. ~¢.pie..'-fee't:l~st~;~.year:..:,~ed..~,Ow aS~a p0ilu,,:~ nor the ai~; gas fire~ i'rd'.~'r:,':; ~.,:,~-,,,.., ,..::'.i '". . , ..... r2l"-; p.a:ces~ fu~ls electric power plants and'goeS into~;' ::~' ~h~n three mitlio.n~.b~sinesseS; It 'accoUnts fo~' . .'°~e:third :of all ~.U'.S..~., energy eon~umpti0n, and~ '":. :: .',:~' ~.:'~ ent Usage. BUt,'gas eXper.ts .insis~,':that the:'real .,' Cause"for .alarm i~ tha't',,t~.~e :PrOved rebeC:eS. '~'ave":'be~'rl' dr~pping for the past three years..". ~he problem, ~they say, is tha~ ·.producers are ~" ~rilling feW~ wells--because, t~ey claim, they '~ack incentive--'~nd thus, a~e finding far less· . gas than is being c~'nsumed. ' .... ' Until 1968, addi.tionS.;io ga~ 'reserves"~rom '. ': diSc°veries'of new fieldS~ had been a~eraging 19 .' .~ ', trillion" ch~ic ~e~t~'~ ~nhu~li~; 'm0~' th~n, enbug~ to meet.~.dem~nd:.But in,that year adaitions....t°'~'.':: rese'~es dropp.ed:.:.to.~iess., m~n' ..i'4.,t.rillion eUbic:.~ . feet while : ~:0nsump~i~n;.,. 'ahd .... ppoduc, tion :~: ' ' climbed'. ~0' m6~e +~ ,~ .~,,,:~, ......... ' .."".."' ,. 1'9:6.9, '",addit'iofis:' ~>~"~'~, ','d 'o', ~h4 ~h.n~ ~;~*,: ~?".':~.'".'" se t'b' :20?7':.~trifii~'~::e~fe~.~', '.'::~'~""~,~¢./:.:~'..~;:~',.: ..:~. :.~... '. an m' 1970 dmcoverms failed by far to re- ] all the .gas used up from the older fields. /er than 30,000 oil 'and gas wells Were //led, [he lowest level.since 1946. But produc- ~n. incre' ased to 22..~rilli~m .cUbic feet, 1resulting please Turn to. Page 8, (Jolum~ I . .. ,,,:(:,,Shrinking Supphes: Price.of Gas Corpus Christi', Texas, which operates under, more lenient rules than .the. federally regulated ~,:ill pipeline companies. By offering Texas produc- ers, more than the interstate lines are autho. .. :.rized to pay,' Co. ast~l States is ~tying up semele, of the state's most prolific fields--and has surplus .gas for sale .to industrial customers and utili- ties in bustling iHo.uston and Dallas. In Texas, the biggest ga.~-Produ'cing .~tate. ,~....~ -, ahout'~lthree-fonrths,ot, all the .g.~:.-: now being discovered is going to expanding .markets xvithin, the state largely because :th~~ intrastate buyers~' bid the highdst ,'~rices'. In Loui'siak4a, which ranks behind Texas in output but still ac- .counts for n/ore .than a third of the nation's gas "su.pplies~ up to 40% of all that is produced stays at home, .and the state is trying to keep~,.an e?en bigger Shl/tre there.' 1. i · . : .. 'Producers say they're perfec,tiy:willing to sell more gas to the..intersta~e..markets if,:the ~larice is increased enough to offset their climb. ina costs. George P. MitChell of Houston, whose Texas wells already supply nearly 20% of Chicago's gas, is pledging 50 billion cubic feet of his new West Texas, reserves to'Trans- western Pipe Line Go. for delivery to Californfa, if the FPC w~1 agree to his charging 26x/~ cents a thousand cubic feet. That would be a record . price for interstate gas in Texas and 10 ceiats · RiSes, but Shortage Seen Continuing,,... ~oniinued From F~rst l~,dge above the previous I~PC ceiling for,' that area. in a drop in proved reserves in the U.S. of So far, the. FPC has agreed to let-Mr. Mitchell more than 10 trillion cubic feet, or ~early 4%i .sell some of the gas at 22 cents. i "Frankly, there is no incentive for wildcat- Pessimistic Drilling Outlook ' · ting," says W. W. Keeler, chairman of Phillips But even if all producers were :given. 10 Petroleum Co., a major gas producer. "until cents more for interstate gas, Mr. Mitchell"pre- there is a break in these FPC regulations," ihe 'dicts "it will 'be at least five years before we addS, "I. don't think we'll spend a lot of. monp. y see a meaningful impact on drilling and 10 trying to find gas.'" years before there is 'a complete turnaround in .There still is gas being found. But much' of. the critical situation." i{ iS being.siphoned off by intrastate entrepre- Equally pessimistic about the domestic neurs like Coastal States Gas Producing Co.!of drilling outlook, the interstate pipeline compa- hies are trying .t~r~supplement their 'dwindling supPlieS with ga~ ,~rom abrqad, Alaska and.: ", '" : ,. r ~': ~ , ' '~"",'~ ~ ~ ' Canada and fr0m.pl;oces'sing',of, coal;"'None, ~f these, sourees~ la'0we~ve/', is:.ex~0ected,'to be. much help for some "Y/earS. And~ ,all: 'are ekti~emely Costly. One of the most promising prospects is liq. uefled natura! gas, 'or'LNG. Some bf thig' sd~er-' chiqed ~d: to As a rule of thumb Cub~ie l fe,e~' a capital cost.utilitieS on the. East~Coast 60 c ~,e~.. ts ., to 80 ,cents or m6re.a ~hot~sa~d...cttbi,c Ie.el, t~1 ,~bove the' pri, c~ ~eY ~ay pipeline comp~s. ~so, LNG }ik, ely ..w~'t ~cco~t for'more th~.. five 'bi~lion cubic ~et of gas a day.~t its peak~, a~d c=ly smallest q~n~titie,s can be ~r~ght ,~ 't6r at least five' ;,years. qThe'suDply,de~and ,~.1 for gas is 'so large 'l'~w '~h~ a~.l~ :~:..~ pc.:~.r:..~,! sourees.d.6ntbe ntofill~t, -;~1[ ~ - ',l- o,m, m,~a.~er o,f LNG "s~er~ce~' for J~rsey Standard. For the long term, the experts ~gree ,that the burden for easing the shortages ~11 be off the gaX'~roducer~'' in ~tlxe U.S, To accomplish this, the producers maintain 'that the price .they get ~or inter~tate gas, now averaging about 18 ce~ts a thousand cubic feet compared to some intrastate 'o'ffe~ as high as 40 Cents,. should be doubled. ~" ' " quiet Brice Rises Already The FPC probably wffi permit, rate in- creases of 3.5 cents to 11.~ cents, a thousand cubic feet, depending on the area, as recom- mended by the agency's staff studies. The indi. qated" increases likely will applg only to gas frbm newer fields, but thiS should stimulate d~lling. .' Any.price increases for gas likely will be op- posed, by vociferous consumer blocs in the Eastern states.. But the cost to the consumer ,!readyis going up quietly 'because of some ur- ~ent s. te~S being taken by the'FPC and bY the atersia.t.:g~.pipelines,... The FPC, .for ;rodu~'~r~':-" .those accounting .'c?' :..>~:::. tie n~g~;~: .gas, f~0~:".Cont"' .'.. '..": .... :'~ .... the ntersta:te'. ~i.pelines. . ..~ .....,. · .pipelines are makink ;'e~hergeiacy" purchase.~ o.f' gas from-intrastat~ ms/r"~tS: .at prices ranging'up 'to' 30' cents-.a..thoua .a~.~'::cubic i 'f~et. Many 'of t~e'in-terstate. ~om~nieg;:'~s6 a~:'. advancing "risk" '~one~. th' ~0du'ceri;' .s~i. i · dizing drilling so that the P~elihes c~'.~tb~' call on any gas that is fo~d. ' ;:,'~ ~::' "~-~t: '1 J. P. Owens of La.fayette~ La., 'a 7~7~iai-old. n k, nowmas ~king" of the.wilde~{t~¢S, re-I '.adVanced :a ~' :.~. X:.s' turned up25 billion cubic feet oth'e~... ., r,.scrxcs ir Sou~eru l.m:isiana, 'thanhs':'td-.t~.' : , ,"1 . ,, I, I1,I j. ~hl- ii Y .',.-' ' ". ~];;'¢ p our Y~kee . ". . 'FPC Lifts Price "On Gas ProdUeed Along Agency Aut HoPes to' B°?t. ~':;, .'....: ..:....: ' ~,%:., '. :,. Decade-Old ?oliey WASHINGTON ~411The Federal' Power Com- mission; Charting ~ a: m'.w regulatory course, au-1 '~h6rlzed .sharPlY' hig'~er PriCes ,fO~l~ natural ga~j produced in the Texas 'Gulf' 'coaSt a?e~ and ated additional incg~tives ta bMng gas into the interstate marke; .: '.:'' ' ~:' ': "'~;'" r The agenc~ se~ 'a ~ling price,of. 24 cents fo each 1,000 c~iC'(~e~off'..:g~'-.~ld" tracts dated aft~ "0'el'.. 1',' 196~, b~'fa~f.}~':.h$gg" est, price the commission has allowed in the~ course of its decade-old pra.c~ce of setting gas prices according 'to ~e area where it is. 'pro- duced, Prices for Texa~ GUlf gas ~ontracts dated ~,e~?ee~ ~an, :~-, ~0, 1968, ran~e:,~r0,m;. ~,.:ce~t~ 'ceiling price '.fO,r ga~ ~roduced p~o.r t0 196i ~s:~ ::~'~n:~'s':~I' ' In its unantm~fis '6pinio~,.'{he FPO]"~a~'a' it -hoped the ,;new ':price le~l:.~i}l, search for natural gas ~ese~es ~ the GUlf' ~oast &rea "~'. men~'' to prompt... :m~re- .d~lling::.~nd "exp]cfa'' tion. The nation's second-ranking gas Production · area~ after southern Lo~isian~,.t.~he;:~a~' GUlf 't stretches 450' miles from Louisiana''tq Coos '" ' ~";'-O' Mexico and includes both ..onshpre aha ,,o~mg r~ wells.,It supplieS{:~as to the~'s~fltfi~em'~ .Midwest. ern and Easter~;"~eas' of the country. ' ..... 2~,a.~:, a thrivin~ local market the large m'oun~g¢~[:~S ~have been..attraeted by . . ..... "'~'" ' 'rke~'~, ,hi her the unregul'~ted intrastate ma . prices. · ~.. Depa~ing from its policy of concentrating' primarily on the 'cost of prOdUCing .gas when determiffing price~ the' FPC l~oked' at the eom- ' etin demand for gas and other eeogomic .fae- ~J'~s In the Gulf Co~st area and set.Prices it', '.hopes ,are htEh enough to lum. Significantly[ m6re gas into .the .interstate. ma~etSl;..where shortages have occurred in $°m~, sections loi ,} 1. ?~ ~., , i,: .,' ' . ,the COU~g~. . The case, the ,pleted by the FPC, examiner re [13,~', cents to 17.4 cen~ Guideline prices for'.', when the area rate .cents toI 16 cents, been charging higher ~The FPC hasn't compu,;t.'ed the .~mount of re, !funds owed. ' -J:)' '.~' · ~ : The agency's decision 'e'§tabli~hes "aii' tncen, . ,,,. ~, .~ , , ~, . . :, .. .~, ,~.,.~ ~,~G '~j~', r.' ~"~; ': '~'~;"~'~ ~ ~' .~ ~'~' :' -'~ ' ":' '"' ' duce their ~efunds by committing' new gas re &~ve8 ,gO~ ~[gter~te, sgle.,', ~ .', - , ,': ~:',, ;, ' ,' ,', '': e~ch i~000' cubic .feet of" newly?discove~e~'ga~ dedic~'ed( to, interst~te,':'$~e~ .betwee~ ~e e~t Yield, Jan.. ~,~:~. l~g6', ~',~ ,~a ,,~roduc~r ~limi~ate2., .h's. ,r" ~ ~ :, ......... .. -~..:.,..,.... ~'~"~h'~n f~c'~eaSe the price Be can charge __~',, ..',' ,1:',~'1 , .~ i,.,.~,'.:.. ' , . f'e'd e r'a"l" g o'".v ii r'n rn ~"li t resotirces,' admitted, thatmb/,e ' announced.'..today 'a .ma.?,,r. fuel would . not:..., solve.., this'/ . ~..~,~ p~ogram ',: to 'p:ersU'//de.. :.i' ~" )samm~'a'e!,.ectric-pm..b"l/~ll~s;.as nation ?~to consente: eleetrli~ power pllntsalready~p~ared'/ i/o~er, 'as the ..l~_'st. way' of well-stocked, .".' "-" avoiding.po,we~" ' shOrtages':.thls. . ,,,The". .OEP... ,report, 'saidt summer.andm the futUre,- · ....e..!ectric...p...ower'can .ser~[. tion] ~...-.~::: .om~-'; ~f ~. ~~/i~'~'""~i~ithi" tl~/~~ ~f .peak' usage preparedness; a branch'of'the the -key 'to~ av. oitii.ng., m'ajor~' White. Housei:.s/td::brbwhohii:.'i~'swer interruptions" 'this . and.blackouts.:may; rbsult thil re. miner.'. ,l' , ,] ' , I ' O'Ep direCtor '. 'Ge0r/e temperatureS" · · .. ~, ',,., j .... ,, ............... ,,,',, S arcl P ®ssecJ OIL DAILY NEWS SERVICES SAN FRANCISCO -- Pacific Lighting Corp is pursuing a number of natural gas reserve projects in a hempishere-wide effort to obtain future supplies for its more than 3.1 million customers in central and southern California. President Paul A. Miller and executive vice president Joseph R. Rensch said at the company's annual shareowners' meeting here that efforts are centered in the south-central United States, Alaska, the Arctic Islands and areas · in Central .and South America. , Miller also told the shareholders that the company anticipates a 25 percent increase in earnings in 1971. Last year's earnings were $38.6 million, or $2.03 per share. Miller said the forecast was dependent on average ~temperatures which affect gas sales by Pacific Lighting's natural gas distribution utility companies. Earnings could fluctuate as much as 40 cents Per share for the balance of the ,year due to - weather, he cautioned. Rensch said increased demands for natural gas, combined with reduced drilling, have created a national energy shortage. While Southern California does not face the prospect of a waiting list for gas service, as do other parts of the nation, sales of natural gas to large interruptible industrial consumers, such as electrical generating utilities, will have to be substantially curtailed until deliveries from the new supply, sources commence. Rensch listed the following activities in the broad-scale search program: ii The company, along with Transwestern Gas Supply Co. a subsidiary of Texas Eastern Transmission Corp, Houston, has purchased half interest in more than 10.000 acres of prime lease holdings in Texas and Oklahoma which cover several attraCtive drilling prospects. 2{ Drilling is underway on a 22,000-foot test well in the Gomez Field area in Pecos Country, Tex. This 'is a joint effort with ' Transwestern. Other negotiations are being finalized on another deep test in the West Covonosa Field area of West Texas. 3~ Negotiations are underway to purchase a block of uncommitted gas in 'the Anadarko Basin of Oklahoma. four The company is negotiating · . natural gas reserves in southern Alaska, which would be liquefied and shipped to Southern California by tanker. 5~ It is al§o partibipating in studies, to determine the feasibility of obtaining gas from northern Canada and the Prudhoe Bay field in Alaska. Similar studies are underway covering the Arctic Islands. ' '61 Negotiations are underway for the company to participate in two offshore exploration projects in Panama and two exploration projects in Colombia. 7 ~ The companv is reviewing the feasibility of shipping gas from offshore Ecuador to Southern California. Rensch cautioned that it will take time and money to obtain gas from these new distant fields. Approximately $75 million mav be required over the next four years to finance facilities to bring these gas supplies to Southern California, Miller told the stockholders. Miller said the company also ,~ill need $100 million for normal utility improvements and expansions over the same period of time in order to maintain a high standard of service. "All of the $175 million, needed, will be handled with debl financing," he said. PENNZOIl, DIVIDEND Pennzoil United lnc ha~, declared a regular quarterly dividend of 20 cents, payable June 15 to stockholders of record, Ma.v 28. OIL DAILY s~U~EAU WASHINGTON -- _The Federal Power Commission has warned the Environmental Protection Agency that there is just not enough gas available to meet the 'gas demands for air pc!lution ,control under standards established two weeks ago by the EPA. In a lengthy letter to the chief of the Air Pollution Control office of the EPA, FPC chairman John Nassikas said that the commission's principal concern with respect to the proposed reguia",.i:..~::~ "is the possible bearing they may have on present and future adequacy of electric power supply." The EPA had warned. 'in unveiling its air standards, that a ,number of big cities across the nation would require substantial additional amounts of natural gas if they were to meet the tough air standards. EPA administrator Ruckelshaus had said New York City, for example, would need a 300 percent increase in' its gas supply. In the' letter to Air Pollution Control office associate commissioner Dr. John .VIiddleton, Nassikas said EPA's regulations could have an impact in two ways: Nassikas said the probability is "high" that many of the accentuated demands "cannot be met in the short run in particular areas.'" He warned that adequate gas supplies to satisfv all 'potential" demand for air pollution control "are not presently available." During air pollution -alerts, Nassikas added, power plants may bi/ requir_ed tO use-fuels having "the loWest ash and Sulfur content," quoting EPA's regulations, and this might require power plants to stockpile such fuel for emergency use. Nassikas "said EPA' should spell out how many days of standby fuel is re. quired. "Since the emergency regulations," he added, "may result in many plants depending upon natural gas . during emergencies, serious consideration should be givn to the current gas supply situation." Concluding, Nassikas urged that the EPA"review the availability of resources to meet environmental and energy commitments before final action is taken on these regulations." 1 ~hev do no('adequately take account of the electric power supply situation. 2) Certain "latent ambiguities'"' in the regulations "may interfere with compliance with those regulations." The FPC chairman said under EPA's rulds each state will be developing implementation plans independent of each other, and each one will be "assuming the availability of the same limited national resources needed to achieve improved air quality conditions while control and improvement' technology 'is still developing." These limited resources, Nassikas emphasized, include low- sulfur natural gas, low-sulfur oil and coal, technology for modified combustion . methods, stack control equipment and productive - capability for providing whatever equipment ~s commercially usable. (Continued from page 1) from Cuba." Nevertheless, he said, the political leaders of his country and its armed forces are "always alert to stop any attempt to change the continuity of the Venezuelan democracy." Turning to the economy, he said Venezuela considers the American dollar as basic to monetary stability. "Venezuela obtains many more benefits in the dollar. market'than which exists in the European market," he said. As a Venezuelan congressman, he said, "I am obliged to give full support to American oil, petro- chemicals, and the steel industry, which are helping! w-,:,~ ,, ~,, ;, !o bolster my country's economic deyelopment." It is because of this support, he said, that the Venezuelan Bolivar (its counterpart to the dollar) has the greatest stability in the world. Because he is representing his country at the IPE, he said he would refrain from any comment on the political situation' in Venezuela. Pineda is a member of the Action Demoeratica, an opposition party to the present' government. He expressed confidence that in the 1973 elections, his party will win, "based on our popularity and the previous 10 years in government from 1959 to 1969." Pineda predicted the election of Romulo Betancourt, who previously served two terms as president, and is a potential candidate for president two years from now. "Let us hope:~hat world peace will prevail and the understanding between countries, especially the United States and Venezuela, will continue with the same friendly OIL, '¢ Oil & G, Amerada Hess .20g Am Nat Ga, ~.~ Am Petrol .~6b Apache .~ Apco Oil 4k Ark La Gas Asamera Ashland Oil 1.20 A O lndust Atl Richfield 2 Atl Rich pf 2.80 Atl Rich pf 3.75 Ail Rich pf 3.00 Austral Oil Aztec Oil 6i Barber Oil 4k Barnweli Ind Beleo Pet British Pet .30b Buttes Gas Oil Canada Super Christiana Cp Cities Service 2.20 Clark Oil Ref .40 Coastal St Gas ' Coastal St Gp! 1.1~ rolo Interstate Comwlth Oil Consol OG Contl joil 1~ Contl Oil pf 9. Creole Pet CrownCen Pet 5i Crystal o~ Dia Shamrk 1 Dome Pet Edgington Oil ElPaso Nat 1 Empire Gas Fateon Seaboard Felmont Oil GenAm Oil .C~g Getty Oil 1.1ab Global Marine Gt Basin Pet~ Gulf Oil 1% Helm Payne .20 Holly Corp Home Oil .~0 "HudsonBay OG .rio Imperial. Oil · Inexco Oil JeffersonL Pt Kaneb Sve .80 Kerr Mc Gee 1~ Kewanee Oil .90 Kin Ark Cp - Kirby Ind .36 LaLd Expl 1~ Lone Star Gas 1.2 LVO Corp Magna Oil Marathon Oil L60 McCulloch Cp Mc Dermott 1 Mapco Inc .90 Mesa Pet ,10 Midwest Oil 3 Mission Corp 2.41kl OIL DAILY BUREAU LOS ANGELES -- Independent oil producers from throughout the . country were gathering here at the weekend for the Independent Petroleum Assn. of America's annual spring meeting -- with their attitudes indicating an "up- beat" tone of greater optimism about the outlook than for several years past. Ti~e producers are taking seriously the new concern shown bx' top ~ederal officials in w:~shin~ion that there is a growing for the oil and gas wildcatter and producer are required. They believe that when Gen Lincoln in his report to President Nixon on last November's crude price rise found this increase· might have been needed for long- term security, the day of clear recognition of the independents' plight, particularly, had come close to hand. They also feel that Lincoln's recommendation to the President that tax incentives be differentiated on relations,", he concluded. J (Continued from page 1) association saidl-' Another Mobil station in the same town was said 'to post a 2-cent differential at a self-service island. Self-service will be tested at Dallas and San Antonio by combination grocery-service station units to be operated by Gulf Oil Corp and National Convenienee ~Stores, the survey reported. However. attendants will man the pumps of the first of ~:g~enf~nc~ fo ~onf~rm~ Miss River 6k Mobil Oil 2.60 Mt Fuel Suply Murphy Oil ,60 Nat Fuel Gs 1.68 Nat Indust Natomas .25 North Nat Gs 2.60 Occidental Pet 1 Offshore Co OKC Corp .80 Okla Nat Gs 1.24 Ormand Ind Pacific Pet .30d Panhdl EPL 1.80 Pargas Inc Pennzoil Utd .80 Peoples Gs 2.0~ Petrolane Gs .66 Phillips Pet 1.30 Pioneer Nat Gs Provo Gas .C~ Pubco Pet .15 Quaker StOil .80 Reading Bates .~$ Reserve OG Royal Dutch .88b 8abi~o Royal ~4 Amoco Production Company Security Life Building Denver, Colorado 80202 Producing Department February 17, 1971 File: AHB-99-960.4 Re: Flare Gas East Forelands Onshore Facility H. T. Hunter D,ws,on Produchon Manager J. E. Fox, Jr. Drilhng A. H. Barrett Gas Sales S. G. Baker ' Admmlstrabon Mr. Dale Teel, President Anchorage Natural Gas Corp. P. O. Box 6288 Anchorage, Alaska 9950~ Dear Sir: We are still interested in marketing the East Foreland onshore flare gas and thus far Phillips Petroleum Co. has not made any proposal to us to assist us in marketing such gas. If you have any firm proposal to make in regard to utilization of such gas, we would appreciate hearing from you prior to March 1. Amoco Production Company ?. O. Box 779 Anchorage, Alaska 99501 February 12, 1971 File: JCS-81-960.4 Re: Possible Sale of Flare Gat, East Forelands Onshore Facility, Cook Inlet, Alaska Mro Dale Teel, President Anchorage Natural Gas Corp. P. O. Box 6288 Anchorage, Alaska 99502 Dear Sir: You have recently contacted personnel .in this office regarding several sales possibilities for flare gas at the Amoco operated East Forelands Onshore Facility. We appreciate your interest in this gas stream and desire to pursue all reasonable avenues to possible beneficial use(s) of this gas. Of particular interest at this time is the possibility of utilizing the gas as boiler fuel and/or in gas turbine driven power generating equipment which you recently discussed with us. Although we are anxious to sell this gas stream, we believe that your ideas and plans can be better handled by our Gas SaleS Group in our Denver Division office. These people are more familiar with gas sales contracts, predicted delivery rates, and other factors which might affect potential uses for this gas than we are. In view of this, we prefer that future contacts regarding possible sale of gas streams in this area be made by correspondence with: A. H. Barrett Gas Sales Supervisor Amoco Production Company Security Life Building Denver, Colorado 80202 Yours. very truly, ~..."J. C. Schillereff Supervisor- In- Charge P. O, [3OX 6288 ANCHORAGE, ALASKA 99502 3000 SPENARD ROAD PHONE 277-5551 Mr. L. I. Schultz, General Manager Chugach ]3icct;ic As .... ~"'^.~ Inc .~?. ?. ~ Po~t O,x~cu ~ -' ~ux 35i8 Anchorage, Alaska C-,eh ~le,nen Our five-year contract v¢ith you to serve gas to the International Stat;.on and Knik Arm po'~ver plants is, by "'"' ~' z,., terms, now subject to 90 days notice o¢. 'can- ,/L. .c°lIatl°n'. This letter is wri'~'~en to give you such notice, so that. p~'io~' to .... ~ J-,p, Jl.l~, 197! ,,on.e otne~ a~,ange,ncn~ be~ve~n ~s will bo toques'ed ~ you are /%~ to continue rcceivlng gas from us. The 90-day notice period is adequate time ; ~o develop such an arrangement. Your con'~ract, at Schedule PP, has been used by you for "poakin. g sorvlco," . spare cal)c~clty In fut'u/o ycar~ to bo used hours or co!des'~ days of the year, unless &,ere Is sufficient base load involved to warrant the added investment we will have to make to sexwe such peak loads. A v,;~rioty of alternatives have been discussed with you over the years, which involw~ con]btnations of our rate schedules now in effect., copies of which are attached. Brlofly, some of these alternative, s are: . Firm service to either or bo~ of these plants under Schedule P, With gas priced as low as 3.8¢ per t~herm. Firm s(~rvteo to .oil:her or both of i.l'}c.);;o pl.ants un('Ir)r Sc:}~odu]o f"i', ar: to t:)~'ovldo tho cor~osponding,Lransi~l~on Cal')aclty; such (IdVG['lCO WOL~ld be returnable to you at 5% of revenues realized from service to the plant (or plants) so se~od, again as provided tn your present conk'act %'¢ith us. The amount necessary relates to the installed cost fo~~ (gas ~rbine-po~vered) compressors which we v¢ould have to install to assure continued farm se~c.~ ~o those two plants--sized to suit your rcquiren~ent2. . intc. rn.tptible service to oitlmr or both plants on your choice of"Sclzodute 1'1' ,,v Fl'l:, F~,,r Ct~,"l~ ~¢rvld,o, ill~lallall~,ll ~[ afl oil, l~l,l'iiok' ~'~1~,,,, ~,li through March., The Cl~y of Anchorage is se~ed on this Schedule. Rca- sonable time ~ould be a,lo%vod, for installing oil burners if ~ho work &s o;'dered and we arc so advised. "AL.A. St'TA I-Uz,LJ.t. o~'k.'¢iCE 0t~r'' '~ ........... P. O. I30X 0288 ANCHORAGE. ALASKA Chugach Elac'~-ic Association Ianuary 12, 1971 Page Two ~-~,m or intorruptible se, vice, to include your ~.rasent and proposed now gas turbine uni'~(s) u, ~.u,n~co Lake, as wail as Knik and In~u,n~,,onal. We are prepared '~o nego'~iato various aspects of so,ice under this gene?al plan. Specifically, if sufficienl new revenue could be assured to us fron~ service to Bernice Lake, we m~gn, be able lo renew sec'ice to "'"' ........ ' -' Sic'don and "- .......... ~,,l~ Ann a% zhe ra~e and conaz~zons of Schedule PP a~ at pro- sent, wi,nou~ a2 advance. Allernatively, using elthor Schedule Pi or PPI for Intcn~ational and. Knik, while providing [~rm service to Eec"nice Lake, we would comblna de,ivories ~t all ~hrea plants fo;' billing -' '-. ~'.~,- '~' ' pu. po..~ ~ thc. re were no obi cctlon Alaska Public U,,lida~ ~ ~ ., . ~omm~ssion to such a tariff chan~a Und. or '"' aiternatlva, tho effectlva incremental cost for gas for Bernice be as low as 2.5¢ per 'd~arm, or oven lass. If an'angaments were made u$iliza high b~ "flare gas" ~hich is now being wasted, your af[ectlvo · , incremental'cost could be under 2.0¢ per 'd'mrm. Your use... on an "if and as available basis," would be widely apprecie~ad In "'~n~ ~'~ intere .... . .:,, o~ consc~a~ion and con'a'ol of ei~' pollution During such %line, if any, fl'm'~ ~',f].are gas'~ were not ~vailable, we could supply 0'as from the Kenai ~e].d, and il would bo ~o our mutual oen~'~ ~o u~iltze as much o[ tho "flarG gas" as prac~i~bio.. As wa have wrD'tan to you p~'ovi.ously, we believe ~hat one or another of our proposals will give Onug~-,cb the oD~lmum of flexiblli'~y, reliability, and economy of operation. %~e look iOrward to working ou~ with you ~ho best possible arrangement for service to any or all of your various plants, and we ara ready a~ any lin'l~ %o continue dis~ cussion of 'Q%ese matters wi'~h you. ~VO consider that all throe of '~he~3,3 pi~n'~s ara wi[bin our cer[ificai:ed area, and we would inie~ene in any action by others to invade this so~'vicc arco. ~Vo have fai'f:hfuliy honored our contract with you and have proved that wc are fit, willing, and able to pr'ovtqe fl'lo service you require. · ~'I " Executive Director cc. r. Don l-]all, Ala~a Fubli¢ Utilities Commission Enclosures: Schedules Pi PP, PI, PPI Very truly yours /,7 ,. Dale Tool /..., /,1/ 'I ~ .f~ :.. · ~/ ,~ ' ~ ,, / . / '., 1,¢ , ,I / · t, ~., ¢.,.' ' / .. ., ~ .-~- . ~- ,z.,/.~.~M.<,-~.."~ / . ~.t i, . - /v~.c.L, ' I" '~ " ~,~ ,;, / .,'I/' '.,,.,'..' fl "" "' J' ' t ¢ ,: '" ' , ,~ ,., / · ~,, (,, ,~ ,~, , , · . . ,'., .(,~. - f ~ ¢ ,' ¢ ,'/ ,.. ,. . . . ,) ,./, ,,' . . . I. -,j /../ ? I /" .. ,, September 4, 1970 Mr. Bud Olson LNG [:'tent Superintendent Phillips ?etroleum Company Norfl'~ Kenai Road Kenat, Alaska Dear Bud: There are a couple of items t have learned since I saw you: I talked to the Joy comp~ssor factory (engineer) and learned that the compressor I hoped to use in the proposed flare gas operation is limited to 225 psig discharqe pressure and 150 psig differential pressure. This means that our initial capacity would be only 3 million cid, assuming the, com~;~ressor to be installed at the I. NG plant, discharging into your plant fuel system. # Our 4" pipeline on the North Road. now serves about 50 residential and commercial customers. It is desirable that these customers should not b~ affected, by the flare gas operation we are co.ns~deringo if we could tap Fhillips' 16" line in the vicinity of Island Lake Road, we could continue serving these custom,rs with methane gas, while operating the 4"'line with flare 9as, and only' one customer (the "North Kenat School")' would be converted to flare) gas service. I would hope that our take from your 16" line could be handled as an exchange, rather than a sale, in which vie would offset our take of your gas with an equg.~l volume of flare gas,. giving you the btu advantage. The daily rate and annual volume quite small--about MCF per day at peak, and MCF per year. ~ It now appears to me that if we could get started at this reduced delivery rate, our possible future step could be to consider installation of a large enough corapressor at the inlet to our line to take the maximum amount of flare gas for delivery to your total plant stream. Since you own a sub- stantial share (25% I think), probably a different, arrangement should be Mr. Bud Olson September 4, 1970 Page Two dcveloped at that time--possibly we could then trade "delivery of your share" as exchange for compressor fuel (supplied out of your share) and work out some other exchange or "banking" arrangement for the remainder (Pan Am/Shell). I still haven't had any reaction flora Bartlesvflle, but maybe there can be some con- versations next week. I'm still encouraged to believe Pan Am ts seriously interested in the posslbtIltles. Cordially, cc: Mr. John Houser or Mr. John Horn Phillips Petroleum Company Bartlesvtlle, Oklahoma Dale Teel Pre sident bcc: Mr. Floyd Krebil, Alaska Manager Pan American Petroleum Co. Au{m~t 28, 1970 Mr. Atto s H. ,,...C,~ri~ Life ~'" '% Denver, C;;olo,radc~ 80202 Dear Mt-o Barrett: c,o~sicer :: ~Ii~ p~.~ t};ic're g'hould" to h~'ve $om¢~ o~hera,;~,~l..lia~ns ''<'''~' ' ,~ wi~:~ ~,hlll!p~"" "which I don'~ understand 7ke one place where your gas co,lid be pit to early u~e is at the Phillips LNG gl:re (blin~l).copy i'm encloi:lnq'~o ~ou is sct:f--e>,:l;~:lanato='y. My coave, rsation all as yat ~'om Darttesvlll~:. in. a few' weeks. Very truly yours Dale Teel Mr, L. E, Claaen Atlantic alchfield Co. Mr. Bill . ~ This letter Was addressed to Phillips Petroleum, either to John Houser or John Horn, I can't remember which. August 28, 1970 Dear John: I had a pleasant visit yesterday with Bud Olson and Buck Steiner at your plant and gave them a copy of the untyped letter I wrote you a week or so regarding the possible delivery of Fan Am/Shell flare gas to the plant for credit against our possible future purchases of LNG for Alaska markets. I also showed them the recent letter from Pan Am asking for a "progress" report, copy of which is enclosed to yOUo I learned that the raw gas fuel requirement, at 200 psig approximately, is pro- bably less than 5 mmcfd although the total fuel stream is about 20 mrncfd includ-- ing low pressure process gas. I believe there is some prospect for flare gas, under 5 mmcfd, being acceptable because the available delivery pressure for flare gas and the. total fuel stream quantity are such that blending could be practical at a low .rate. We also discussed the alternative of mixing flare gas into the total plant stream-- about 200 mmcfd--where the btu difference wOuld have relatively little effect even at the maximum flare gas delivery rate we could provide. The catch here is that the flare gas delivery pressure would have to be 700 pstg. To reach this pressure, a compressor would have to be installed at the inJ~.ct~.on point because of pipeline condensation problems from downstream cooling of the high pressure flare gas stream. The h~[~her flare gas rate would have advantages and might justify the compression, but ! am reluctant to consider ownin9 and operating a compressor inside your plant, as it would have to be. My current thougbtls that the Project should be considered in two phases: first, as l~3rtlal displacement of your raw g~s fuel requirements; and, subject to exper- fence, later on as partial c~isplacement of your total plant gas stream. %~.:e could thus get sta~ed and develop our pill!ne operation with its compression (and probably dehydration) at some rate which is easily tolerable in the fuel gas stream. ~ter this experlence, a deoision could be ~ached on the funding, installation, and operation of the 'terminal-end compressor to inject a larger volume at the higher ~essure of the total plant stream. Copy of the flare gas analysis i~ enclosed. I don't have a formal estimate of the po[ential quantity of this gas which is expected to be available, but I expect as part-owner you may already have access to this information. Anyway, I think we are limited by line capacity (compression/pipeline condensate), rather than production at the platforms, s to our facilities, we would have about 20,000 feet of 4" plus about 4,000 feet of 6" (at the low.~.pressure end) pipeline. V/e would have two CMC 671's driving a single .~.eciprocating compressor at the Pan Am-Shell location. We own the engines, and the compressor is a new unit, sur- plus, at the City of Anchorage power plant, l^/e don't know the limit of the com- pressor--it may handle all the engines can pump, and we have asked the factow for advice on this point. Incidentally, I intended to say in my earlier letter that the btu differential is the factor which.would make this project feasible for us. I visualize that we would owe on exchange to ?an Am/Shell a volume of gas equal to our take of flare gas from them, but would receive credit from you on the btu basis since it would have "btu value" ~o you either as plant fuel or as LNG. Further, we would contemplate that our arrangement with Pan Am/Shell would be conditioned that we would not owe them a greater volume (of methane gas) than the equivalent volume of LNG which we ~.coutd sell in Alaskan markets, regardless of the amount of flare gas taken from them. Thus if we were to take a total of 5 billion cubic feet of flare gas over a particular period, and sell only .3 billion feet (methane equivalent Rs LNG.) then our obligation would be to return 3 billion feet of methane to them, or to pay them an amount equal to our then applicable cost for 3 billion cubic feet of methane. I hope the intent here is clear even if my language may be deficient. I realize that there may be factors which could make it impractical for Phillips to consider this proposal and I do not mean to presume too much too soon. But I wanted to report the possibilities to you because it appears to me to be practical and mutually beneficial. cc: Mr. Bud Olson Phillips MqG Plant Superintendent PRODUCING DEPARTMENT H. T. HUNTER DIVlStt)N PROf)I~C'rION ]~ A N AGI:.R SECURITY LIFE BUILDING DENVER, COLORADO 80202 August 24, 1970 File: AHB-368-960.4 Re: Exchange Gas with Anchorage Natural Gas Corporation Middle Ground Shoal and Granite Point Fields, Cook Inlet, Alaska DRILLING J. E. Fox. GAS SALES A, H. .4, D,M I NI S'l'}~ ,'. S. G. B.~KER Mr. Dale Teel Anchorage Nstural Gas Corporation P. O. Box 6288 Anchorage, Alaska 99502 Dear Mr. Teel: We are informed that during your meeting of July 15, 1970~ with Mr. Fred Nabors of Pan American Petroleum Corporation and Mr. L. E, Clasen of Atlantic Richfield Company you were going to undertake developing marketing arrangements for the gas referenced above. We would be very interested in learning your progress to date. .... Yours very trul/~.., / // cc: L. E. Clasen Atlantic Richfield Co. ~une 4, 1970 Mr. A. ~. Barrett Pan American Petroleum Corporation Security Life Building Denver. Colorado Dear M.r. Barrett: Several years have passed since we reached agreement with you to supply gas to your h~ater-treater Installation at Nikishka on the l(enai Peninsula north coast~ which insofar as I know has worked out sa~sfactorily for bo~ DaVies. It appears ~at yo~ "~ake" under fire agreemen~ may be at mi~mum as a result of your having gas sut%able for fuel use coming in from th.~ platform. Vffe understand you have 5 mmcfd or lnor~ of 1400 b~m gas now flying, at a dew polnt of about !5O, and at a shore pressure in the order of~?-pstg. %,Ve understand that wi~ a rearrangement of the compressor(s) on your/~lauorm,, somewhat higher pressure may be really Our 4 ~ne to your' ~lan~ could car~ {~s ~as to the industt~al a~ea on ae No~ Kenai Road, tf suitable applications could be found, which woUld reduce the flare and should be desirable ~oln several viewpoints. It is our idea ~at we might amend our con.act v~th you to allow us to take t~s gas and ~eat it as an "advance payment In kind for future gas deliveries" by us to you -- wherein we would deliver "~y gas" (from f:he Kenat field) on an mci-for-mci basis at your call. We vJ. sualize that your deliveries to us could be on an "if and as available~' basis and might be seasonal. Vie tn turn woUld ~ to develop ol~ deliveries of this gas on an "if and as available" basJ. s, also possibly seasonal, wherein we might exchange the gas for future deliveries of LNG (or LPG~ or poEsibly make end use sales, to applt- ca~ons such as: 1. Shell's heater-treater at Ntklshka. 2, LNG plant compressor turbine fuel or heater fuel (Phillips). 3, Power plant turbine fuel (Chugach Electric). 4.' Refinery process heat/ng fuel ('Zesor°). Mr. A. E. Barrett June 4, 1970 2 ~Ne hope that either Phillips or Tesoro may be interested in exchanging this gas for LNG or LPG respectively, tn either such case our next problem would be to find a market for the liquid product, and we have tbls matCer under study. If a sale to Chugach could be developed, we would be in the strongest position. For several years Chugach has been telling us that their fuel contract with the SOCal refinery (for a heavy gas oil side cut) does not allow them to use natural gas at present. However, they recently announced plans to build a new gas turbine-generator unit at Bernice Lake and presumably it would not be subject to $OCal's discretion. I suspect that Phil. lips or possibly SOCal may be con- sidering providing fuel to rise unit, although under Alaska's new PSC law if a pipeline sells to a utility, the pipeline itself thereupon becomes a ut/llty; this could discourage direct sales by producers, I expect. I believe the exchange, especially using flaring gas, could neatly avoid this complication and have deflr~te political appeal as well. We hold the PSC certificate to serve the North Kenai area, with facilities already installed. In fact, we may be able to use an existing compressor and gas engine drivers if sufficient outlet for your gas can be found, and.require less than a mil~ of new pipeline. Our idea would be to use our present supply from the Kenai field as a resen.~e supply and to. develop outlets for your gas gradually, We have not yet opened discussions with Phillips, Tesoro, or Chugach; but.if you believe the proposition has merit we would like to do so at. an early date, as soon as we can reach a preliminary understanding with you. The questiOn is, then, would yea consider an operation ("exchange") as outlined, and if so, can we get together to discuss details which could eventually constitute an agreement? Very truly yours ANCHORAGE NAI~JRAL GAS CORPORATION co: Mr. Floyd Krebtl Alaska Manager Dale Teel President Di{Ai'T OF A'i'i{Oi'OSi A(ji~EMENT Service Corporation ',.'alaska ("SeCoA"), a wholly-owr{_ ~, non-utility subsidiar7 of ALASKA PIPELINE COMPANY); PHILLIPS PETROLEUM CORPORATION ("Phillips"); and .PAN,AMERiGAN PETROLEUM CORPORATION (!'PanAm"), do hereby agree as follows' A. Installations 1. SeCoA will install the metering, piping, and other facilities necessary to receive "flare gas" from PanAm at'!PanAm's on-shore facility at NikishkaBeach, North Kenai. 2. SeCoA will install pipeline extensions,t'.m'etering, and other facilitie~ necessary to receive "dry gas" from Phillips" 16" pipeline at or' near its intersection with Island Lake Road, North Kenai, Alaska. 3. SeCoA will install pipeline extensions, metering, compression, and other facilities necessary to deliver "flare gas" into Phillips' LNG plant fuel system at Nikiski, North Kenai, Alaska. B. Gas Deliveries l. If and when suitable flare gas is available to SeCoA from PanAm, but without obligation to do so, SeCoA may take up to 3 p~illion cid of flare gas from PanAm, for redelivery at Phillips' LNG plant. At such times, and without obligation to do so, SeCoA may take up to 1 ~nillion cid of dry gas from Phillips as mentioned above. 2. If and when suitable LNG is available to SecoA from Phillips, but without obligation to do so, SeCoA may take LNG from Phillips in exchange for "net flare gas" received by Phillips from SeCoA, <dyer a !period not exceeding 5 years from the date of delive,~/ of said flare gas, in the ratio of one btu of LNG for each 3 btu of "net flare gas" delivered to Phillips. Af the option of Phillips, LNG not taken by SeCoA within said . $ year period will forfeit to Phillips. As used hereinabove, the term "net flare gas" shall mean the amount of total "flare gas".~tq delivered .into Phillips' plant fuel system less the percentage share owned by Phillips at its production (approximately 25To), and less the amount of "dry gas:': b~tu~ received hereunder by SeGoA from P]~illips. 3. If and when LNG is taken by SeCoA from Phillips as exchange for flare gas, SeCoA shall pay to PanAm an amount calculated las the then prevailing cost for such ¢iuantity (bt~ul from the lowest-cost supply source then available to SeCoA's parent, Alaska Pipeline Company. jAlternatively, PanAm may, at its option, upon the discontinuance of deliveries of flare gas to SeCoA, and over a period not eXceeding 5 years following sf~chdiscontinuance of deliveries, elect to receive dry gas from SeCoA in the ratio of one ~ubic foot of dry 'gas per 1,000 bfu of LNG taken as exchange by SeCoA from Phillips, up to the maximum daily rate and annual rate applicable to Se~0A's take of flare gas from PanAm, C. Operations 1. SeCoA shall have the obligatbn to install, operate, and maintain all metering 'f~cilities necessary to measure all gas delivered or exchanged hereunder, except LNG, which (if any) shall be measured by Phillips. 2. P. anAm shall have the obligation to monitor delivery of flare gas to SeGoA per paragraphA-1 hereof, and to provide reasonable notice to both SeGoA and Phillips of any material change in the quality or quantity (pressure) of said "flare gas"j it being understood~:..:~that its quality is approximately as represented by the attached analysis sheet; that its ~5ressure is approximately 180 psig; that the quantity expected to be available is substantially in excess of 3 million cfd~for approximately 4 years; and that it will be delivered to SeCoA free of entrained liquid or solid material, at a moisture dew point not higher than 10 OF at 180 psig, and free of sulfur and sulfur compounds and free of corrosive impurities. 3. Phillips lshall have the obligation to monitor operation of SeCoA's facilities installed per paragraph A-3 hereof, and to provide reasonable notice to both SeCoA and PanAm of any material change in its ability to receive said flare gas, and to shut down SeCoA's facilities if and when same may become desirable or necessary at the option of Phillips. 4. Each.party hereby conveys to the other parties the'right of ingress' and egress upon the other's, property as necessary to install, operate, inspect, and maintain its facilities , but each party also grants to the other parties the right to require such facilities to be relocated or removed or abandoned for reasonable cause. 'D. Royalties and Taxes; Regulation This agreement is predicated upon the understanding that flare gas conserved hereby shall be free of all royalty and severance taxes, and shall be null and void if such understanding is not ]~ccepted by governmental authority. This agreement is further predicated .upon the understanding that operations hereunder are not subject to the jurisdiction of public' utility regulatory authority, and shall terminate immediately in the event such jurisdiction may be asserted and enforced. , E.'Deposits; Termination of Agreement It being that SeCoA's costs for ~a'king the installations per paragraph A above are approximately $150,000, PanAm[~hil%:iDs~l ea. ch have deposited the sum of $50,000 with~CoA upon the execution hereof, and JSeGoA agrees to make annual r~pa.yment of these deposits to each PanAm and Phillips at the rate of 5¢' per M'CF of flare gas.:.'. received from PanAm. T, hi:~.:~agre:.emenl::shall.~b~ in effect until deposils made to SeCoA have been returned, and thereafter until notice, is given by any party; but either Phillips or PanAm may elect to terminate operations hereunder at any time. In such event, e~tcepting by reasonof force majeure or by p~rvision of paragraph D above', Same shall forfeit any unrefunded deposit to SeCoA. SHELLOIL COMPANY SHELL BUILDING 1008 WEST SIXTH STREET LOS ANGELES 54, CALIFORNIA TELEPHONE HUI'-,ITLEY 2.~i13t June 8, 1967 Mr. F. Hilton Lacy, Jr. Alaska Pipeline Company P. O. Box 6554 Houston, Texas 77005 Dear Mr. Lacy: Thank you for your May 22, 1967 letter stating conditions which would Per~,nit you to sell your existing pipeline from the shore facilities on the Kenai Penin:~ula to the tezaninus near the Stg~ndard refinery. At the present time wa do not have e need for the line. As the situation develops, it is entirely possible that we may have a specific use for the line. At that time, we will be in a position to evaluate, the reservations and con- ditions required hy you in connection with use of this line. Ik~ring our discussion~ on March 8, 1967, in Los Angeles, you indicmted a possible interest in taking t,~iddle Ground Shoal gas at about 300 psig at the. Cabin Five site and delivering it at ~.bout 1i00 psig into the Stmndard-Atl;~ntic line to Swanson River. You also indicated an interest in installing a line to take gas from the Standard-Atlantic line ahead of the Swanson River field and delivering that g~.s to your line to Anchorage. At the present time, alternate ~thods for u~ing Middle Ground ~hoal gas 'are being considered. In the event your further consideration permits you to make a specific proposal, we will need this infor~.tion at an early date if it is to be considered. For evaluation purposem we will need to tm%ow the following: (a) Specifically what will Anchorage l~atural do with regard to the installation and operation oi the required gas lines a~d co'mpressors . (b) When and what volume with respect to time (perhaps a cuz~ze) do you predict Anchorage Natural will have need for Middle Ground Shoal gas. (c) What value, in te~nns of cents per Mcf, will Anchorage ~atural offer to p~y for gas that it takes into its Alaska line. Mr. F. Milton Lacy, Jr. Please contact either this office or our Anchorage office if additional facts are required to complete your proposal. Very truly yours, 6riginal .~ig~,?d ~y F. H. R~ti?.n F. H. P~nthjen, Manager Gas Department FHR: lp . cc - Mr. Dale Teel - Anchorage Natural Gaa Company. · , . P. O. BOX 6554 · HOUSTON 5, TEXAS May 22 ~ 1967 Mr. F. H. Rathjen, Manger Gas Department Shell Oil Company 1008 West Sixth Street Los Angeles, California 90054 Dear Mr. Rathjen: We have considered various approaci~es' to the use by Shell of' our existin9 pipeline from your heat treating facilities on !'he Kenai Peninsula' to the terminus of our line near the Standard refinery~ and we believe that the simplest, fastest, and most expeditious procedure would be for us to sell you our existing line at a fi9ure approximating our actual book cost with the £oliowing reservations and conditions: '[hat we be able to continue to supply our customers from taps on such line with our own gas not to exceed 10 MMcf/day. (2) That upon completion of the Swanson River repressurin9 program or 15 years, whichever occurs later, we be given the option to re-acquire the tine at a reasonable depreciated value. (3) That we be given an optiOn to purchase gas from you off this line at a price sal'isfactory to you and in reasonable amounts not exceeding your del ivories into the I ina. We do not believe that any of these reservations or conditions will cause you any undue concern as the use of our gas theoretically flowing in the opposite direction to your gas would increase the capacity o£ such line for your gas. Also, if we elect to take gas from you fror~ points along the line, the capacity would ~lsa be increased. V~'e doubt that you would have any further use of such a line upon completion of the Swanson River repressuring program Whereas we would hope that we could continue to use ~uch facilities in servin9 our customers regardless of the source of ga~ at that time. We necessarily would .incur some additional expense in upgrading the line, taps, and metering t~acilities from the present low pressure stat'us to the high pressure condition which we believe. P. O. IBOX 65.54 · HOUSTON 5, TEXAS Mr. F. H. Rathjen, Manager Gas Department Shell Oil Company May 22. t t 957 Page 2 would be required for your operation. V/e assume you probably wouJd want to use your own gas at your heat treating facilities anci that some equitable arrangement could be made with regard to our agreement with you to provicle gas For those fecil ities. if this approach appears reasonable and sensible to you~ we can get together almost immediately and work out any of the details in a manner satisfactory to bo','h of us. Very truly yours~ FHL:hf cc Mr. Dale Teel ~ ..... ALASKA PIPELINE COMPANY Or~g~t~J sig~ed by J::. I:IILI'ON LACY~ JR? F- Hilton Lacy~ .Ir. Vice President z~' z.- SHELL OIL COM?ANY SHELL BUILDING 1008 WEST SIXTH STRSET LOS ANGELES, CALIFORNIA 90054 TI::LEPHONI: HUNTLEY 2-3131 March 1, 1967 Anchorage Natural Gas Company P. O. Box 6288 Anchorage, Alaska 99502 Attention Mr. Dale Teel Gentlemen: gl, VISION OF OIL AND GAS ANCHO~Ag~ , ,, This is to confirm the telephone discussion on February 28, 1967 between Mr. Teel and Mr. Robinson of Anchorage Natural and Mr. Rathjen of ~:,all regarding natural gas and possible con~nercial propane from the Middle Ground Shoal, Alaska, field. C 1. As was agreed, during the discussion in Anchorage on Februa. z-y 3., 1.7 between Mr. Teel, Mr. MacDougall and Rathjen, both Standard and Atlantic '..,.hfield have been requested to consider the possible use of Middle Ground '_oal field gas for pressuring the Swanson River field. A reply is expected ~Don. Anchorage Natural agreed to consider the possibility of using its existing line to transpo.r..t, for a fee, gas from the Middle Ground Shoal shore facilities to the termitY~,s of the Anchorage Natural line near the Standard refinery and the Kenai '~'D pipeline. Any gas to be transported would be for own use or for a direct sale to an industrial user. 2. Shell is currently completing engineering and economic studies regarding the transporting of gas as well as liquids from the platforms to shore. It is also engineering onshore facilities to produce pipeline quality natural gas and commercial propane. Shell has a market for all of the butane and he,~.vi:..: 'zvarocarbons and is developing several possible markets for the be sold either as a cormmercial liquid propane produ or as part of the pipeline quality gas. 3. The two Standa'='-Atlantic-Shell approximately 6 'MMcf/d of g&~., at, ..:s All four of the pla.~"orms will produce a combine~'. approximately 13 M>Icf/d. It' is anticipated that the full be available for any reasonabi~, s market. -, \ ,, Anchorage Natural Gas Company - '----2-__ On the basis of 13 ~XD~cf/d of gas, about 20~000 gallons per day of con~nercial propane could be extracned if the propane price is sufficient to justify the additional plant and storage facilities. 4. In bringing gas to shore and for processing, it is not necessary that the gas be at a pressure in excess of 300 to 400 psig-,-- Therefore, any gas sale that requires a higher delivery pressure will need add.itional compress ion. It is our understanding that the Union-Marathon gas sale requires tha~ they deliver at 750 psig or at a higher pressure if it is available. 5. Anchorage Natural now thinks it may be able to make an offer to 'buy the gas plus propane at the Shell shore facility location) the propane to be either in the gas stream or possibly as a separate commercial product. ~ 6. Additional details as to such things as gas volume with respect to time, pressure and calculated composition which Anchorage Natural maY require to complete its evaluation so as to be in a position to make a firm offer may be obtained by calling or writing Shell's Los Angeles office or ~y contacting Mr. MacDougall in Anchorage and he will work with the Los Angeles office. 7. As soon as Anchorage Natural and Shell agree that they have a real basis for a reasonable business deal, we shall be anxious to meet in Anchorage to negotiate details. · We shall appreciate an early reply to the following two questions: (a) Is Anchorage Natural in a position to transport gas through its existing line for a fee, for a line rental charge, or .for a line lease payment~ or is Anchorage Natural interested in selling this line? if this line can be made available to Shall on so~na basis~ please let us know the specific conditions. (b) Is Anchorage Natural in a position to make an offer to purchase the Middle Ground Shoal field gas? If so, what are the major terms and conditions. ~ I enjoyed talking with you and I hope we can get together soon to work out solutions to some of our mutual interest problems in a manner that will be pleasant and profitable to both parties. FHR: lp cc - Mr. F. A. MacDougall Very truly yours, F. H. R,:.~hjen, Manager Gas Deoa. rtment DiVISiON OF OIL ;~ixlD"OA5
