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CO 130
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 DIGITAL DATA OVERSIZED (Scannable with large Color / plotter/s_~nner) items: [] Diskettes, No. [] Grayscale items: [] Other, No/Type ~ (~T~er items [] Poor Quality Originals: OVERSIZED (Not suitable for [] Other: plotter/scanner, may work with 'log' scanner) [] Logs of various kinds [] Other NOTES: BY: .~ARIA Scanning Preparation TOTAL PAGES _~'i~-~ Production Scanning Stage '/ PAGE COUNT FROM SCANNED DOCUMENT: REP_~Ai '~ ~ PAGE COUNT MATCHES NUMBER IN SCANNING P RATION' YES . NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: ~ YES ~ NO (SCANNING IS COMPLETE AT THIS POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO 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, A1 aska 99501 Re: THE APPLICATION OF ATLANTIC ) RICHFIELD COMPANY for an exception ) to Rule 2 of Conservation Order ) 98-B for 40 specified sections and ) the MOTION OF THE STATE OF ALASKA ) OIL AND GAS CONSERVATION COMMITTEE ) to hear testimony as to why Rule 2 ) of Conservation Order No. 98-B ) should not be changed for the entire ) Prudhoe Oil Pool and as to the pro- ) gress of unitization negotiations ) for the Prudhoe Bay Field. ) Conservation Order No. 130 Prudhoe Bay Field Prudhoe Oil Pool Kuparuk River Oil Pool Lisburne Oil Pool January 15, 1975 IT APPEARING THAT- 1. The Atlantic Richfield Company, by letter dated October 25, 1974, requested an exception to Rule 2 of Conservation Order No. 98-B to permit the drilling, completion, and production of two wells per section, with not less than 2,000 feet between wells and not less than 1,000 feet between a well and property line where ownership changes, for wells in the Prudhoe Oil Pool of the Prudhoe Bay Field and in the following 40 sections: Township 10 North, Range 14 East, U.M. Sections 1, 2, 3, 4, 11 and 12 Township ll North, Range 14 East, U.M. Sections 25, 26, 33, 34, 35 and 36 Township l0 North, Range 15 East, U.M. Sections l, 2, 3, 4, 5, 6, 7, 8, 9, 10, ll, 12, 14, 15, 16, 17 and 18 Township ll North, Range 15 East, U.M. Section 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 and 36 2. The Alaska Oil and Gas Conservation Committee moved to hear testimony as to why~the requested exception to Rule 2 of Conservation Order No. 98-B should not apply to the entire Prudhoe Oil Pool, and as to the progress of unitization negotiations for the Prudhoe Bay Field. Conservation Order No. 130 Page 2 January 15, 1975 3. Notice of public hearing on the application of Atlantic Richfield Company and on the motion of the Alaska Oil and Gas Conservation Committee was published in the Anchorage Daily News on November 2, 1974. 4. A public hearing was held in the City Council Chambers in the Z. J. Loussac Library, Anchorage, Alaska on December 4, 1974. Testimony was presented in support of Atlantic Richfield Company's application and response to the motion of the Alaska Oil and Gas Conservation Committee. Affected and interested parties offered statements. 5. The hearing was continued until 4:30 PM A.S.T. on December 17, 1974, so as to permit Atlantic Richfield Company to provide written answers to certain questions of the Alaska Oil and Gas Conservation Committee. These answers and additional statements were timely receiVed. AND IT FURTHER APPEARING THAT: 1. The 40 sections for which the exception to Rule 2 of Conservation Order No. 98-B are within the area currently operated by the applicant. 2. Applicant plans to have capacity to process 720,000 barrels of oil per day by mid-1977. 3. Assuming an average producing rate of 13,000 barrels of oil per day per well, nearly 56 wells would be required to attain the 720,000 barrels of oil per day by mid-1977. 4. Trans-Alaska Pipeline Capacity is expected to be 1.2 million barrels of oil per day by mid"1977 or shortly ther.eafter. 5. Drilling of wells east of the Sagavanirktok River may be delayed until construction of a bridge across that river or until the river is frozen, and proper planning for the required production capacity requires that sufficient wells be drilled to meet the production requirements prior to mid-1977, 6. Applicant and other affected and interested parties within the field are actively negotiating a unit agreement, and are coordinating such efforts through various committees, with a view 'toward presenting a unit 'agreement and requesting a hearing thereon about March 1, 1976. 7. Applicant stateS the unit negotiations are with the object of unitizing all producing formations or pools within the proposed unit area, although equities among parties may vary from one formation or pool to another. 8. Applicant states there is no present intention to change the proposed. unit boundary, although the Lisburne Oil Pool as presently defined extends outside of the proposed unit boundary. Conservation Order No. 130 Page 3 January 15, 1975 CONCLUSIONS: 1. Pursuant to Conservation Orders No.s ll7 and ll7A, the Alaska Oil and Gas Conservation Committee has previously granted BP Alaska, Inc. an exception to Rule 2 of Conservation Order No. 98-B for wells drilled to the Prudhoe Oil Pool in 19 specified sections. 2. There is no evidence a pool-wide exception to Rule 2 of Conservation Order No. 98-B will impair reservoir performance, result in less ultimate recovery of oil, or otherwise create waste. 3. A pool-wide exception to Rule 2 of Conservation Order No. 98-B shOuld enable the producers of oil from the Prudhoe Oil Pool to have the productive capacity to meet the planned capacity of the Trans-Alaska Pipeline. 4. A pool-wide exception to Rule 2 of Conservation Order No. 98-B may contribute toward the protection of correlative rights of all producers of oil from the Prudhoe Oil Pool. 5. Field-wide unitization of the Prudhoe Bay Field should avoid waste and protect the correlative rights of all parties. 6. The boundaries of the unit area should be such as to include all productive pools or formations. Conservat~'on Order No~ ~30 Page 4 January 15, 1975 NOW, THEREFORE, IT IS ORDERED THAT Conservation Orders No.s 117 and ll7A are canceled and Rule 2 of Conservation Order No. 98-B is amended to read as follows: Rule 2. Well Spacing. Not more than two wells may be completed in a governmental section or governmental lot corresponding thereto, nor shall any well be completed in this pool in a governmental section or governmental lot corresponding thereto which contains less than 575 acres, nor shall any pay opened to the well bore be closer than 1,000 feet to a property line where ownership changes or be closer than 2, 000 feet to any pay in the same pool opened to the well bore of another well. DONE at Anchorage, Alaska and dated January 15, 1975. Thomas R. Marshall, Jr., Executive Secretary Alaska Oil and Gas Conservation Committee Concurring: Alaska Oil and Gas Conservation Committee Hoyle H.~/Hamilton, Member Alaska Oil and Gas Conservation Committee BP Alaska Inc. P. O. Box 4-1379 Anchorage, Alaska 99509 Atlantic Richfield Company P. O. Box 360 Anchorage, Alaska 99510 January 26, 1976 Oil & Gas Conservation Committee Division of Oil & Gas Department of Natural Resources 3001 Porcupine Drive Anchorage, Alaska 99504 ~e~ A~4~T'''~'? ¥o. /30 Gentlemen: By letter dated December 12, 1974 you were advised that the Management Committee of the proposed Prudhoe Bay field unit had agreed to a "tentative" schedule for negotiations with the objective of submitting a formal unit agreement to the Department of Natural Resources by, or about, March 1 of this year. On behalf of the Management Committee we would like to report that all companies involved are devoting considerable manpower and effort in working towards unitizing this com- plex and important field. Even with this high level of continuing activities, it is now apparent that several more months will be required to resolve all the substantive issues involved. Therefore, we do not expect to be able to submit a formal unit agreement in accordance with our orig- inal, and somewhat ambitious, schedule. Difference on many important issues have'been narrowed and steps are being taken to expedite final resolution. For example, several wells are planned to be drilled in the next few months that will substantially contribute to the deter- mination of initial participation factors. The work of the unit committees and subcommittees is continuing and we expect considerable progress to be made within the next few months. We anticipate'that a draft unit agreement can be presented to the Division of State Lands in Jul~ In the same month it is expected that a technical revi~Q-~of our operating plans can be presented to the Division of Oil & Gas. It would then be our intention to..fully.....review unitization progress with the Division of Oil & Gas and State Lands in September. The timing of these activities will allow the unit agreement to be presented to the State and the unit formed in advance of the commencement of production. -2- As you are well aware, while these negotiations are being concluded, the two operators are continuing to develop the field in a manner consistent With an efficient unitized operation to meet the produc- tion requirements when the Trans-Alaska Pipeline is completed. · Very truly yours, K. R. Keep .! Vice President & General Manager H. A. slack. / ~ Vice. President & Regional Manager hw PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS In the Matter of the application of the Atlantic ) Richfield Company for.an exception to Rule 2 of ) Conservation Order No. 98-B to permit the drilling ) of two wells per governmental section on forty ) sections in the Prudhoe Oil Pool. ) Anchorage, Alaska Loussac Z J Library 427 F Street December 4., .1974 9:30 a.m. COMMITTEE MEMBERS: APPEARANCES: . Tom Marshall Homer Burrell, Chairman Hoyle Hamilton John Scott, Legal Division, Atlantic Richfield Company Paul Norgaard, District Engineer, · Atlantic Richfield's North Alaska Dis- trict. _ .Howard Slack, Vice President, Atlanti( Richfield Company, and Resident Manag( of Atlantic Richfield's Producing Di- vision's Alaska Regions. Glen Taylor, BP Alaska. Judd Miller, Jr., Production Manager, Western Division Exxon Company U.S.A. .Bob Swetnam,. District Land man, Phill: Petroleum Company. Cliff Richard, Amerada Hess Corporati( Bob Kubik, Mobil 0il Corporation. R A, R COURT REPORTERS · 2~ ~. BTM AVENUE:. SUITE 5 B0g ~. ~RD AVENUE 277-0572 -- 277-0573 . 274-9322 ANCHORAGE, AI.~SKA 99501 ps ! 2 3 § 6 ? 8 9 ~0 15 ..- 18 . ~.0 21 © APPEARANCES (continued): Clyde Cotton, Exploration Supervisor, Alaska Operations, Getty Oil Company. Jerry Sawyer, Consultant, Placid 0il Company. .o R & R COURT REPORTERS B25 W. ~rN AVENUE. SUITE B 509 Iff. :~RD AVENUE 277-0572 -- 277-0573 274-9322 ANCHOR. AGE. ALASKA 9950! 1 2 $ 4 5 6 '7 8 9 10 11 ... 16 18 ~ 19 20 21 -2- MR. BURRELL: Good morning ladies and gentlemen. This is a hearing of the Alaska Oil and Gas Conservation Committee. My name is Homer Burrell, I'm Chairman To my right is Tom Marshall, who is Executive Secretary and a member of the Committee. To my left is Hoyle Hamilton, Chief Petroleum Engineer for the 'Division of Oil and Gas. He is also a.member of the Committee. This hearing 'was called for two purposes. One, it was in response to Atlantic Richfield's re- quest and secondly, it was on the motion of the Committee, it- self. The application of Atlantic Richfield was for an exceptio to Rule 2 of Conservation Order number 98-B to permit the drilli of two wells per governmental section on forty sections in the · . Prudhoe oil pools in the Prudhoe Bay Field. They also footage spacing changes for these exception wells. Upon its own motion, the Alaska Oil and Gas Conservation Committee indi- cated it would seek information as to why an exception to Rule 2 Of that Conservation Order should not be changed to permit 320 acre spacing within the entire pool and would also inquire as to the progress of unitization negotiations for the field. The footage spacing proposed by Atlantic Richfield for the forty sections is 2,000 feet between wells, to.the same pool, the Prudhoe Pool, and 1,000 feet between a well and a property line where ownership changes. This hearing is held pursuant to Title II, Alaska Administration Code -- The Alaska Admin- istrative Code, Section 22.540 andnoti ce of it.was published R & R COURT REPORTERS 825 W. 8't'H AVENUE. SUITE 5 B09 W. 3RD AVENUE 277-O57~ -- 277~573 274-9322 ANCHO~G~ A~S~ 9950] .. .* : . . . .* O O. 5 6 ? 8 9 - 10 11 12 13 1'~ 15 16 1'/ '18 i9 20 21 22 23 --3-- ' in the Anchorage Daily News on November 2, 1974. Before procee~ I would ask, since this is being recorded on at least two tape recorders, I'll have to check the audience to see if there's any more going, I'd ask that whoever speaks please identify him- self to the record so that the young lady can benefit from the identity of the epeaker, when she. gets this typed up. I would add something with respect to why the Oil and Gas Conservation Committee made its request With respect to this hearing. Our primary concern is first, getting information as to why the 320 acre spacing would or would not be a good idea for the en- tire pool from the standpoint of reservoir mechanics. Secondly we're interested in correlative rights of those people who woul( not have 320 acre spaces under the proposal. And furthermore, we're interested in correlative rights if they don't have time to build their facilities, drill their wells, etcetera, prior to production without unitization. We feel it could be a seriol problem there which might impair production if it's not unitiza- tion, or might require efforts by the State under either its conservation -- Oil and Gas Conservation Stat6te, or under prov~ sions of the lease, or under legislation we have yet'to se~ to require unitization. That is our primary interest. And having so stated, I would ask Atlantic Richfield to go ahead with thei: presentation as the applicant. And I would also state that aft~ the hearing is over, that -- I don't mean after the hearing is over, after the testimony and questions from the Committee are R & R COURT REPORTERS ' 825 W. 8TH AVENUE. SUITE 5 509 %~. 3RD AVENUE 277-0572 - 277-0573 =7~932Z ANCHO~G~ A~S~ 99~01 ing, 5 6 8 10 11 12 0 14 ' ._ 15 -. 18 19 -.. 2O . ~-1 · _ · . © over with, we would welcome questions or statements from people in the audience. If there are going to be statements relating to the subject matter of the hearinq, we would ask that they be qualified as'an expert witness. If-you Want to ask question~ .. we prefer they be asked of the Committee so we can avoid un- necessary or redundant questions to the applicant. And that's all I have tO say. Atlantic Richfield may commence if they wis] MR. SCOTT: Mr. Chairman, members of the Committee, I'm John Scott from the legal division of Atlantic Rich'field Company. We will present two witnesses toda' who will cover all three of the matters raised by your order an catl.: of the hearing. The one matter raised by our application and the two matters raised by your own motion. The first witne~ will be Mr. Paul Norgaard, District Engineer for Atlantic Rich- . field Company's North Alaska District. The second witness will be Dr. Howard Slack, our Vice President and resident Regional . - Manager here in Alaska. Mr. Paul Norgaard will be speaking as a technical witness, aR. exert witness. I assume, unless you voice some objection, that you will accept him in that capacity on the basis of h~s p~ior appearances before you as you've done before. He is a petroleum engineer with a great deal of experi- ence in Alaska. And'being very familiar with the Prudhoe Bay Field, I can assure you he's no less qualified than the last time he appeared before you. Of'course, Dr. Slack is appearing as a manager and officer, and as we all know, managers~ don't R & R COURT. R,E;PORTE:R$ · ,25 W. 8'tH AVE:HUE. SUITE; 5 . ' :" ' 509 W. ~RD AVE:NU 277-0572 - 277-0573 274-932.2 ~,,NCHORAGE.,, AL4~sKA. 9950! i. 1 2 3 5 6 8 9 10 11 12 13 14 15 16 . 17 18 19 21 24: have to be qualified -- (GENERAL LAUGHTER) -- I'm not sure .I said that exactly right. So with that, I wild present to you Mr. Paul Norgaard. MR. BURRELL: Unless there's an ob- jection, we'll accept Mr. Norgaard's.qualifications as an expert witness, .since he's previously so qualified. MR. NORGARRD: This is Paul Norgaard speaking now in the testimony. Atlantic Richfield Company, as operator for itself and Exxon Company, U.S.A., has requested . an exception to.~Rule 2 of Conservation Order No. 98B; as Mr. Bur tel-just so stated. This or~er, if approved, would,permit drillJ completion, and production of two wells per governmental sectioz on forty selected sections. The sections are:°. 1 through .....~ .4, 11 and 12, Township 10 North, Range 14 East. Sections 25 an( 26, 33 through 36, Township 11 North, Range 14 East. Sections 1 through 12, 14 through 18, Township 10 North, Range 15 East. And Sections 26 through 36, Township 11 North, Range 15 East. . '. MR. BURRELL: Mr. Norgaard, excuse me. Mr. Marhall called tO my attention that we forgot to swear you in. Since you've only read your application to date, I don think there's room for chicanery, so if you would stand, Mr. Marshall will swear you in. MR. MARSHALL: In the matter now aG hearing, do you swear to tell the truth,.the whole truth and R ~' R COURT REPORTERS B2~ W. 8'rH'AVENUE. SUITE: ~: gO9 W. 3RD AVENUE 277.0572 -- 277-0573 '2~4-9322 ng, 3 4 5 6 ,/ 8 _. 9 l0 11 13 .. 14 15 .. 716 -.. 17 19 · 20 2! 24 25 ... nothing but the truth, so help you God? MR. NORGAARD: I do. MR. MARSHALL: Thank you. You may be seated. tion. MR. BURRELL: Sorry for the interru MR. NORGAARD: A.R.Co., as operator of the'eastern half of the proposed unit for the Prudhoe Bay Field, drilled sixteen development wells during 1970 and 1971 and then discontinued development drilling. Now, with the . pipeline approval and initial production expected during 1977, we have resumed development drilling with one rig. We will add a second rig sometime this winter. The plans we are currently · ., following are 'for the"full development Of our operating area,~ are based on a unitized operation. The location and timing of alI wells and all surface facilities currently being deSigned and installed are based on a unitized operation. Unitization discussions are now in progress and A.R.Co. is actively support: these di- -- these discussions. We expect the unit to be forme¢ before the start~of production. Thus, our requested exceptions to the current, field rules covers our drilling plans to start of production. Our development plan for the eastern half of the proposed unit has been formulated durinq the past several . wears. The. surface facilities will be transported to the Slope durina, the summer barqe season of 1974, '75, '76 and '77. We'l R 8: R COURT REPORTERS 825 W. 8TH AVENUE, SUITE 5 509 W. $~to AVENUE 277-0572 - 277-0573 ~.74-9322 AHC. HORAGr'. ALASKA 9950! ~ng 1 4 6 8 10 11 ' -~ " 15 1'/ 19 .. 2O .:. 21 24 look at the overall schedule .in a few minutes. Our development drillina*Dlan, as mentioned earlier, beqan last summer and qrow. to a two-development rig, one or*two workover rig/program by th~ summer of 1975. This development drilling program does require an exception to Rule 2 of Conservation 98-Bo as indicated In the followinq discussion, I will first cover A.R. Co.'s de- velopment plan as it relates to well location and then discuss the effect of our surface facilities installation schedule on our drilling program and thuS, in turn, on our requested excep- tion. First, our plan provides for'initial development wells to be drilled where the qross oil column is more than 200 feet thick. Studies have indicated that these wells will be long life, good productivity wells. Oil columns thinner than 200 feet lying both upstructure and downstructure of this core area will probably be drilled later. The number and location of the wells will depend on future studies and on the early production performance of the field. Next, well tests~ analyses of these tests, and studies using a radial numerical simulator indicate that'initial production rates of 10 to 15 thousand barrels per day can be expected from the wells drilled within this 200 foot thick oil column. Exhibit numbcr 1, which I'l'l*show you in a moment, summarizes the test data taken in the A.RoCo. operated area since the last Field Rules Hearing. Can somebody catch a light Or two if they know where? (Witness showing slide.) On this -- well, the two wells that have been tested are drill site re R 8g R COUR:T REPORTERS IBa'E W, 811.1 AVE. HUE, SUITE 5 509 W, 3RD AVENUE 277-0572 -- 277~573 274-~3Z2 '. · ANGHO~G~ A~S~ ~g501 5 $ 8 9 10 11 12 13 15 15 17 18 19 ~.0 ~.1 ~3 ~4 ~5 '. 1-1 and our drill site 1-3'well. The two wells that are current active in our operating area in association with the Prudhoe topping unit. I won't cover all the data there, I think you can see it. And we will provide you with a copy of it followin¢ the hearinq. The important factor is missinq. (Witness readju~ slide.) Is on the right hand side, and there's a productivity indices~ 18 and 28, these are verv similar to the indeces that have been shown at Dast Field Rules Hearinq for Sadlerochit well Can we go ahead and have the'lights iagain?- .Thank.you. Since-th have been only a limited number of .production tests, our studie~ cannot be considered precise. However, we are confident that the 10 to 15 thousand barrel per day, production rate from thes~ wells is a reasonable'expectation. The surface facilities for the Prudhoe Bay Field to be installed in the A.R. Co. operated area, will be barged throuqh the summer -- well, they beqan last summer and will continue through the summers of 1975, '76, and '77. On the next exhibit, which I'll show in one second, I have shown a simplified schedule of these surface facilities and their installation~ (Witness showing slide.) You'll see that the facilities have' been broken in to three ~rouDin~s -- 'three major qroupin~s. We have the central compression plant area, the flow stations and the pipeline system. These have been further broken in to three sub-divisions, increments, if you will, I won't deal with the central injection plant, I won't qo in to 'details of the centra~ iniection plant or the R 8: R COURT REPORTERS 825 NV.~8'rH AVENUE. SUIT; 5 S09 W. ~Ro AVENUE · 77-0572 -- 277~573 27~9322 ~CHO~G~ A~S~ 99501 -8- ly ts S. .~re . .? . . · ... O 10 11 12 13 14 15 16 1'/ 18 19 20 21 22 23 pipeline system, since they don't directly affect our reg~est. However, the flOw stations do affect the request and I will discuss them very briefly. You can see on Flow Station 1, we are currently designing, fabricating and will be shipping this increment summer barge season of 1975. This then will be erect( and installed on the Slope and should be operational by mid 197( Flow Station 2, which we are.currentlv working on in the design purchase area, will follow Flow Station 1 one year later. Flow Station 3 will then follow one year later. Thus, at production startup in mid 1977, we will have two flow stations operational Flow Stations 1 and 2. These two flow stations are designed to process 360 thousand barrels of production. At startup we therefore will have design capabilitv of 72.0 thousand barrels per day in our operating areas° ThiS, combined with BP's will give the field a processing capacity of 1.2 plus or minus'milli( barrels per day bv mid 1977. This will then increase to a maxi- mum of'aPproximately 2 million barrels per day of processing capacity by mid '78. Could I have'the lights again, please? I need to see what I forgot. Let's now look at the well re- auirements to provide this 360 thousand barrels per dav of capacity for Flow Stations 1 and 2.at startup in mid 1977. I'w already discussed our 10 to 15 thousand barrel per dav expecta- tion for our -- a well's initial rate. Assuming an average of 13 thousand barrels a day, 27+ wells will be reguired for each flow station to provide 360 thousand barrels per day of design R & R COURT REPORTERS 277~572 -- 277~573 274-9322 ANCHO~GE. A~S~ ~g501 1 3 ,t 5 6 ,/ 8 9 10 11 12 13 1,t .15 16 1"/ 19 2O 21 22 2/t -10- capacity. We cannot complete 27 wells within the*core area, 200 foo~ of the field and comply with the existing'.spacing rule of 1 well per governmental section. We, therefore, are reGuestir an.exception to this rule, 2 wells per governmental section. Exhibit 3, which I'll show in a moment also, shows the excep- tions -- the.location of the exceptions we're, requesting. Let me trouble someone one more time. This will be the last time. Thank you. In red, we have the areas or the sections where are current plan calls for two wells per governmental section withir the Flow Stations l'and 2 areas. The central area between the two dark black lines, is the area in which we'll produce in to Flow Station 1. The eastern area will go in to Flow Station 2, and the western area goes in to Flow Station 3. Additionally, in pink, we have requested exception for these sections. This is to provide some flexibility. We caa use flexibility for several reasons. An example for today, we will be drilling on the west bank of the Sag River and we currently are drilling on the west bank of the Sag River. We choose not to drill on the east. bank of the Sag River until the river has frozen and/o~ we have a bridge. Thus, we will not be.in a position to drill on the east bank of the Sag River until the winter season of . . '75-'76. Since we don't know precisely how long it will take to drill wells, we could wind up not having a particular locati to drill a well in towards the'end of '75. Also, we don't know exactly.when the river will freeze up so we can go across it. R ag R COURT REPORTER~ 82~ ~V. ~H AVENUE, SUITE 1~ BOg W. ;~RD AVENUE~ 277~57~ - 277~573 ~74-9322 ~CHO~G~ A~S~ 99g01 -11- Thus, to give us some flexibility, we do prefer to have some sections available to us to drill two wells per governmental section where we currently do not plan to drill these wells. The area shown in yellow is in the Flow Station 3 area, as I've indicated. We will be drilling in this area prior to ~roductior startup in order to have the 360 thousand barrels per-day:.~roduc capacity by mid '78. We do need to begin development drilling 'in this area prior to production startup and we need to drill two wells per governmental section in those selected sections. Our'.drilling plan calls for that. I guess that's all. Could you turn the lights back on? Thank you. In summary, I am requesting only spacing exceptions required prior to production startup in mid '77 since unitization is expected before that time. Atlantic Richfield has prepared a detailed plan of de- velopment based on a unitized operation. This plan provides for startup production from only Flow Stations 1 and 2 and 360 thousand barrels per day from each of these flow stations. At least 27'wells are required to provide 360 thousand barrels of processing capacity for each of these flow stations. These wells cannot be completed and comply with the existing spacing order of one well Der governmental section. Therefore, we are requesting two wells per governmental section in the forty sel.ected sections. We are requesting exceptions beyond our immediate needs to provide some flexibility to our plan. Let me qo on then to your first question which you stated in your R & R COURT REPORTERS B2~ W. 8~ AVENUE. SUITE 5 509 W. 3aD A~NU~ 27T~572 - ~77~573 27~9322 A~4CHO~GE. A~$~ 99501 :ion ~r 3 5 $ ? 8 10 11 15 . .. 15 19 ~-0 21 Notice of Public Hearinq where you will seek information as'to why an exception of Rule 2 of Conservation .Order 98-B should not be chanqed to permit 320 acre sDacinq for the entire Prudhoe Bay Pool. Atlantic Richfield Company has no objection to Prudhoe Bay Pool sDacinq of 300 -- of two wells Der ~overn- mental section. In fact, we seriously considered re~uestinq such an exception. We chose to limit our request, however, to startuD well requirements based on our current plan of develoD- ment. We wanted to qive maximum assurance to all Prudhoe Bay Pool owners' that this plan, which was discussed with them, wouL not be cha~ed without further discussions. That ends mv testi, mony. MR. BURRELL: Thank you, Mr. Norgaa Either Mr. Norgaard ~r Mr. Scott, what is your procedure? How would you prefer it? Would you prefer questions of Mr. Norgaar~ at this tim~, or would you prefer we wait? - MR. SCOTT: We prefer entirely to your pleasure on that, Mr. Chairman. . .~.- . MR. BURRELL: Well, why don't we let you go ahead with your entire presentation. MR. SCOTT: Fine. MR. BURRELL: Because something we might have asked Mr. Norgaard might be covered by Mr. Slack. MR. SCOTT: Very good. MR. SLACK: Mr. Chairman, members R & R COURT REPORTERS 825 W. 6~'H AVENUE, SUITE 5 509 W.. 3RD AVENUE 277-0572 -- 277-0573 274-9322 ANCHORAGE, ALASKA 99501 do © 1 2 3 4 5 6 '7 10 11 . .- 15 'It . . :" 18 :"' :- 19 20 1-21 .... © -13- of the Committee, my name is Howard Slack. I am a Vice.Preside: t .. of.Atlantic Richfield Company and Resident Manager of our-Pro2 ducing Division's Alaska Regions, I wish to report to you this morning on the progres that is being made toward unitizing the Prudhoe Bay Field. To that end, I will review activities in two'*areas, actual operations and secon'd~'v, u~itization neqotia- ti~ns. First, reqardinq operations, BP and Atlantic Richfield Company aqreed at an earlv date in anticipation of unitization to sub-divide the field into two.approximately Equal operating without regard to lease 'ownership. BP and Atlantic Richfield Company jointly prepared an initial field-wide development plan which called for wells to be drilled on all sections within the .. 200 foot qross isopach line. This plan was reviewed and appro~ by all owners in the prospective Unit area. For the BP operate( area.this inludes the A.R;Co.-Exxon and the Mobil-Philli . · acreaqe as well as BP acreaqe.. BP has requested and has spacinq exceptions on the A.R.Co.-Exxon acreage as well as on their own.. * ...' _. : .--..~' · MR. BURRELL: Excuse me, Mr. Slack. Mr. Marshall again remindS me we forgot to swear you in. If. you could stand and be sworn? We miqht make it retroactive, toe . (GENERAL LAUGHTER) MR. MARSHALL: Please raise vour riqht hand. In the matter now at hearinq, do you Swear to tell the truth, the whole truth and nothing but the truth:so held vol R ~= R COURT REPORTERS 277-057~' - 277~573 274-9322 ANCHO~GE. A~S~ 99501 ~as 5 6 8 9 10 11 12 13 . -:' 14 . _ - 15 16 17 18' · 19 2O 21 :~*, 22 23 24 25 God? start over? MR. SLACK:' Idol MR. MARSHALL: Thank you. ~R. SLACK: Would you like me to MR. BURRELL: No. Please proceed. MR. SLACK: For the Atlantic Rich- 'field operated area, which includes the A.R.Co.-Exxon, BP, and the Mobil-phillips-SOCAL leases, our plan provides for wells to be drilled on the A.R. Co.-Exxon and BP leases, and we are, as you've just heard, today requesting spacing exceptions on the BP leases as well as on the A.R. Co.-Exxon leases. The concept of unitized operation is also being followed in the design' and installation of surface facilities. BP is designing and building a central power plant ~hich will supply electrical power for both operating areas. /~R.Co. is designing and building a central compression plant to compress all gas from the Prudhoe Bay Pool for injection. Additionally, both operato: are sizing and locating production facilities to process the total volume of produced fluid from the Prudhoe Bay Pool. All of these plans have been coordinated between the two operators. Some specific examples are the sizing and location of oil and gas gathering lines, flow stations and gathering centers, the power plant, and the central compression plant° In addition to this coordination between the operators, all the Prudhoe Bay R 8: R C;OURT REPORTERS 825 W. ~TH AVENUE. SUITE: 5 509 W. 3RD AVENUE 277-0572 -- 277~573 274-9322 ANCHO~GE. A~S~ 99501 :s O. 1 $ 5 $ ? 8 9 10 11 12 13 15 I$ 17 15 ~.0 ~2 23 25 Pool owners have been contacted at appropriate times regarding thise plans and other plans for the development and operation of the field. Routine meetings of the Operations Subcommittee have been held to keep all companies abreast of field activitie: and periodic meetings of the Environmental Subcommittee have also been held. Additionally, the two operators haVe been fur- nishing, on a routine basis, all the' owners with basic log, core, test, and fluid property data as it comes available. Als( all .non-operator requests for information that have been receiv( have received the prompt attention of the operators. Now, for the second point regarding unitization negotiations, I would like to briefly reuiew this effort since its inception five years ago. You may recall the two Letters of Intent were siqne( The first, by the DrinciDal field owners, A.R.Co., Exxon, and BP, and the second, by all of the owners in the prospective are~ These two documents were submitted durinq the past Field Rules Hearinqs. Now followinq the siqninq of these two documents, Dre-unitization committees were formed and progress was rapid. Work was directed toward obtaining fair and equitable treatment for all. As it became apparent durin~ the end of 1970 that the pipeline construction would be delayed, unitization discussions slowed. Substantial effort, however, continued as evidenced by the many meetings of the various subcommittees. These sub- committees include the Accounting, Tax, and Reservoir, as well as the Operations and Environmental subcommittees mentioned ear R & R COURT REPORTERS 277~572 -- 277~573 274-9322 ~CHO~GE. A~S~ 9950] 1 § 6 ? 8 9 10 11 12 13 ._ 15 16 17 18 19 20 21 23 2~ Toward the end of 1970, it also became apparent*that tha major problem confronting unitization was an equitable relationship between the gas cap and the oil rim, the two participating area~ established in the Letter of Intent. Now these two'DarticiDatii.~ areas were established because of the difficulty of equating the relative value of the gas cap and the oil rim in forming a single participating area. With the establishment of the two participating areas agreement must be reached on a procedure which will properly credit each participating area with its liquid and qas production. Now, since the bulk of the Prudhoe Bay Pool reserves will be produced through common facilities, this becomes a complex problem of identifvin~ condensate in a ~redominantlv oil stream and solution and free ~ases of near .identical composition. Additionally, costs for each facility. and in some cases only portions of a faCilitv, must also be allocated. Now, since 1970 work has been continuing to resolve 'this problem. Naturally, prior to the granting of the pipeline ~perm~t, work .... and --.progress were · at' ~'.a rate. However, proposals were exchanged and discussions were held on several occasions between the end of 1970 and the grant of the permit -- the pipeline permit early in 1974. Now, the approval of the pipeline permit, Unitization work accelerat It was recognized that there was much work to be done and sub- stantial effort was needed immediately. However, the establish ment of a. proper relationship between the gas cap and the oil R & R COURT REPOI~I'~RS ' =77~572 -- 277~=73 274.9322 · . , . . . .... .................:.. ..................................... : ....................................... , ,,. ,.. .. 1' 2 4 5 6 rim continued to be the essential and majOr requirement in unitizing the Prudhoe Bay Pool. Since the Management Committee of all owners of the Prudhoe Bay Pool had charged the major interest owners in late 1970 with preparing a recommended gas cap oil rim relationship, discussions were reinitiated by A.R.C(., BP, Exxon, and Sohio in January of this year and many meetings have been held.' On six occasions meetings were held at the or management level. Additionally, six meetings of technical people were interspersed with the management meetings. Also, 10 during the year five proposals have been exchanged and es 11 in positions contained in these proposals have narrowed sub- 12 13 14 Stantially. The problems are complex, a's indicated earlier, but.progress to date makes us optimistic that agreement will 'soon be reached.. A .measur~ of this complexity is the t~me 15 expended. A fair estimate of just Atlantic Richfields' time committment to these 1974 discussions and proposals is. 12,000 man·hours·° I would prefer not to discuss the co~tent of these proposals or the discussions in any further detail since any public comment on private negotiations could run the risk of 2O impeding progress. And certainly, we are anxious to complete the current efforts and mo~e forward with the other unitization issues. To this end the Prudhoe Bay Management Committe% which - includes all owners in the prospective unit area, has been in- vited to a meeting next'week to review past unitization discus- sions and future unitization scheduling. An estimate of future Fi & R COURT RE:PORTE:RS - 825 ~'~'. 8~'H AVENUE, SUITE 5 BOg NV*. :~RD AVENUE Z?7-O57Z - 277~573 274.9322 ................................................................ . .............. . ...... : .':"....-.*~-: ............................ .' '~ . . .. o. 1 2 3 5 6 8 9 10 '11 14 : 15 15 r'/ 18 .- · 19 ~.0 2). · '18- Progress and thus timing for completing these negotiations and for submitting the Unit Agreement and Operating Agreement is hazardous to predict, particularly when considering that 13 companies will be participating in the negotiations. Atlantic Richfield's timetable, however, calls fo~ sufficient progress to request a unitization hearing early in 1976. In summary, the two operators' plans.have been coordinated and are designed for a unit operation. Work has progressed steadily toward resolution of the proper relationship between the gas cap and the 0il rim. Proqress has been substantial and the differe: have been greatly narrowed. Atlantic Richfield is optimistic that these negotiations will soon be completed and discussions can move 'to the other issues that must be resolved prior to preparing the ·final documents. Finally, a meeting of the Management Committee of all Prudhoe Bay Pool owners has been called to discuss unitization status and schedule. And that concludes my formal testimony, Mr. Chairman. .r · . MR. BURRELL: Thank you, Mr. Slack. · - · . · .' ' MR. SCOTT: Mr. Chairman? . .. MR. BURRELL: Mr. Scott? MR. SCOTT: One other matter. I · have here 3 duplicates of the slides presented bv Mr. Norqaard in a form that will be more convenient for your record, and I'd like to submit them to you. MR. BURRELL: I'd like to ask Mr. R & R COURT REPORTERS 825 W. 8TH AVF-_NU£, SUITE 5 509 W. ~RD ~V£NUE 277-0572 -- 277-0573 2?.4-9322 .ces 1 2 3 4 5 6 ,/ 8 9 10 *' 11 12 . 15 16 "; .... 18 .. 19 _ , 2O © -19- Norgaard, were these that are beinq offered as exhibits, were these prepared under your direction? MR. NORGAARD: Yes.- MR. BURRELL: Are you qoinq to offe them as Atlantic Richfield's Exhibits A, B, C? MR. SCOTT: Well, they're already labeled A.R.Co.'s Exhibits 1, 2, 3, if that's -- MR. BURRELL: We'll accept them. MR. BURRELL:. We'll enter those in the record as A.R.Co.'s Exhibits 1o 2 and 3. (HEARING EXHIBITS ~1, 2, 3 marked for identification.) '.,i, *MR. BURRELL: In the order in whic they were presented on the board -- on the slide.screen. Do you have anvthin~ else. Mr. Scott? MR. SCOTT: That concludes our -~ MR. BURRELL: That concludes A.R.Co testimony? MR. SCOTT: That's correct. MR. BURRELL: Direct testimony? MR. SCOTT: That's correct. MR. BURRELL: Mr. Hamilton, do you have some questions of either of the witnesses? MR. HAMILTON: This is Hamilton speaking. I address this question to Mr. Norqaard. It's my R & R COURT REPORTERS 277~572 - 277~573 274-9322 ANCHO~G~ A~S~ 99501 1 2 4 $ ? 8 9 10 11 12 /3 14 *:. 15 . ~ . ' 16 1'/ . . 18: '. ~ - 19 20 21 · 24 25 -20- understanding that you're planning for a startup of production of approximateiy:l.2 million barrels'a day, is that correct? MR. NORGAARD: We're -- production is beinq planned compatible with Alveska's capabilities, yes.~ MR. HAMILTON: And BP earlier testi lied in February th~"the~ plan to take 1/2 of that offtake from .their oDeratinq area. Is this consistent to your plans? MR. NORGAARD: Yes, sir. MR. HAMILTON: Has your company made any.studies relatinq to the well density in the Prudhoe Bay Oil Pool that you could comment on? MR. NORGAARD:. Yes, we have. We've made studies that are -- carry a wide range of reservoir manaqe- ment plans from natural depletion, to full pressure mainentance. And these wel.ls that we are reouestina, the exceptions that we are asking for are compatible with all of these plans that we'vE studied. '. MR. HAMILTON: In these studies have you come up with any maximum rate that the pool might sustain with the particular density of wells? MRo~..Norgaard: We have not specific~ addressed that question, but naturally as fall out from the stu we can make observations° And I would say today that the maxi~ rate from the field that we have seen, would be.in excess of ar rate that we would recommend takinq from the field.' · .77-0572 - 277~573 274-9322 ~CHO~G~ A~S~ g950~ lly Y, 1 $ 6 8 9 10 11 17 18 ~-0 · MR. HAMILTON: We're talkinq today about 320 acre spacinq or two wells per section. Can you possi! fOresee an even denser spacinq necessarv? MR. NORGAARD: Yes, we do. But as in our first aDDlicationo which we withdrew, we did seek excep- tions which would have put wells on 160 acre sDacinq. And we definitelv see 160 acre sDacin~ as reauired in a reasonable period of time. I can't define reasonable other than just bracke,c it saying 5 to 7 years, something in that range. And we definitely see the..need for 160 acre sDacin~ and it may be that with additional studies, with additional data and with reservoir performance itself, we could go to even closer spacin! .. MR. BURRELL: He hasn"t given up. Be wants to,regroup. This is Burrell, and I have a question. Paul, as I understood your remarks, you said a rate of 1.2 milll barrels a day on July'l, 1977, *at*~ startup. Did you mean that would be the throughpu~ ra~e*,_*/did you mean that would be the -- you would have the wells and field facilities on line so you could make that rate? Or what'exactly .did you mean? -MR. NORGAARD: This is Paul Norgaar We mean that when Alyeska says that the line is capable of taki 1.2 million barrels a dav, we will have it there, which at this point in time is mid 1977. For simplicity, I may have said July 1, 1977. That's.--*that's the concept. We will have the 1.2 million barrels per. day of processing capicity available R & R COURT REPORTERS 825 W. 8TH AVE:NUE:. SUITE: 5 509 W. ~3RD AVENUE: 277.*0572. - 277-0573 27~9322 ANCHO~G~ A~S~ 99501 -21- 4 6 9 10 11 12 15 17 · 18 ~.0 · ~.1 - 24 in the field when the pipeline is commissioned. . MR. BURRELL: The reason I asked this is we're wearinq another hat. We make revenue forecasts for the State and we've got 9 months before it gets up to 1.2 million. That's shake-down time for these various production facilities as-well as pumpinq stations and pipeline valves, terminal at Valdez and evervthinq·else. MR. NORGAARD: Please include our facilities. MR. BURRELL: I thought I did. I think they might need a little shake-down.. And I just wanted to verify what you said. Is it -- as I understand it. that you think You can. if Alveska's ready to aet it. you can throw 1,2 million in to the line mid 19777 Mr. Marshall? yes, sir. · . MR. NORGAARD: This is our plan, MRi BURRELL: Okay. Thank you. MR. MARSHALL: I'm Tom Marshall '_speaking. I have one question for Paul Norgaard. Paul, have your well spacing studies that you just referred to, have they been coordinated with all the other 13 operators -- or companies rather, involved in the field? MR. NORGAARD: This is Paul again. We, naturally, went ahead and did many studies. And R & R COU[=~r REPORTERS 82~{ W. B?N AVEN.UE. SUITE ii 509 W. :~lmD AVENUE 2.~?-0572. -- ~7-0~73 2~9322 ~CHO~G~ A~S~ 99501 1 .2 3 4 5 6 ,/ 8 9 10 11 12 13 14 15 16 1'/ 18 19 20 21 24 25 -23- most of our studies, independently.' We have reviewed these -- or portions of these studies with all 13 companies, yes. Does · that answer your question? MR. MARSHALL: Yes. Does -- do these studies which you referred to -- are they dependent -- that is the development of further studies on let's say, well spacing, are they developed -- dependent on development of the field? In other words, do you need to acquire more data from the field before let's say, you talk in terms of 160 acre spacil What -- what in essence then is preventinq vou from appl¥inq for 160 acre spacing at this time? MR. NORGAARD: Let me say in the -- any reservoir simulation study that is conducted without production history to match, there are different interpretation of its validity. Every technical person has certain background certain understandinq that qives him a confidence level of the study. Naturallv, iust within our own company, there are dif- ferences of opinion, of confidence levels of our study. We are confident -- Engineering and I believe our Manaqement, is confi · dent that we can today desiqn and predict the 160 acre spacinq requirement qiven a reasonable time frame. We can't predict the exact day at which we need 160 acre spacinq, but we can say we're confident that 160 acre spacinq is required within a reasonable time frame. MR. MARSHALL: In other words, R &: R COURT REPORTERS 825 Vi'. 8TH AVENUE. SuI'rE ~ 509 W. ~O AVENUE 2~T~572 -- 277-0573 2T4-9322 ~CHO~GE. A~S~ 99501 ~g? 1 2 5 6 8 9 10 12 16 18 19 20 9.1 2~ your -- your application for 160 acre sDacinq will be dependent on acquirinq more reservoir ~erformance data? And production data? MR. NORGAARD: Certainly reservoir performance data will improve confidence level~ I believe I misinterpreted your question. The reason or the application -- the timing for requesting 160 acre s~acinq~ I believe, is really a unit decision, a unit matter. And it's best handled with the unit submission. ~ ~ MR. MARSHALL: Yes. This -- you're answerinq mv question, I believe. Well, the underl¥inq purpose of it is, of course, that the unitization procedure, I believe, usually encompasses -- I mean addresses itself at least to the - _ . matter of well sPacinq in a development plan, and it appears to me that our present hearinq today and possibly another futur~ hearinq on 160 acre sDacin~ would have somehow, rather ma~icallv been taken care of, let's say, had unitization been a fact toda, And what I'm ~ettin~ at is for this reason and several other reasons which we haven't qotten in to, it appears that the earl the unitization, the less administrative problems we are ~oinq to have with the Prudhoe Bav Field and, of course, I think the no one that disputes the underlying value of unitization as a conservation measure. I notice in a letter which was written by a Mr. E. M. Benson on -- in 1969, on October *the 29th, that he laid out a time table for unification, final form and execut~ R & R COURT REPORTERS 82~ W. 8TH AVENUE, SUITE 5 ~09 W. 5RD AVENUE 277~572 - 277~573 274-9322 ANCHO~G~ A~S~ 9950! .,r 'e's 1 2 5 6 ? 8 9 10 11 12 13 14 15 · 16 . 17 20 21 2~ -25- of April 1, 1970. And, you know, we know that the pipeline de- lay has been a factor, but this was an executed unit aqreement in 1970 and -- and I would like to hear a comment from you as to wh¥,iin 1974, we still have many unresolved problems. Our -- is unitization becoming more difficult as time goes on? MR. NORGAARD: I that -- that's an extremely difficult question to answer. MR. MARSHALL: I realize that. MR. NORGAARD: Everyone is .the room would answer i~ a little differently. We, firs~ of'all, you indicated that it's very desirable to unitize early. And cer- tainly, we agree with that. I'm. sure all companies -- all owne] of the Prudhoe Bay Pool agree with that. It is desirable to unitize as early as possible. On the other hand, it's very important.~that all get a fair and equitable treatment in formin( the unit. ' And in a unit as complex as the Prudhoe Bay Field, this is a monumental task. And it is a task that we addressed ourselves to early in 1969 and with anticipation of early pro- duction, were given a time table. Naturally, as you said, that time table did change as the pipeline was del.aved. We now, aqain, have given ourselves a time table which Dr. Slack mentio] and this is I believe a realistic time table, certainly one tha~ we desire and hopefully, it will be acceptable to yourselves and acceptable to the other companies involved in the Prudhoe Bay Pool. Beyond that, I really don't know that I can answer R · R COURT REPORTERS 277-0572 - 277~5'73 Z7~9322 ~CHO~G~ A~S~ 9950! ~ ' Led -26- Your Question more fully. MR.'MARSHALL: Thank you. I had one ouestion of -- of Dr. Slack. Concerning ¥0ur time table, you mentioned that you felt that your company would be in a pos: tion in earl~ 1976 for a unitization hearing. ~ould you clarif what hearing -- what type of hearing that would be, Dr. Slack? MR. SLACK: It's our plan that by early in '76, and by that we did mean the first quarter in '76, that we would have agreement amongst the 13 companies. And that they, as a unit, would be asking for a hearing before vour Com- mittee. So that by that we would infer that agreement would be reac~d by the end of 1975 ..... 'MR. MARSHALL: Would you expect a precise time table to -- that iS, for further unit.'-- neqotiatior · to spring out of your meeting this coming week with the other -13 operators? Would that be one matter on your agenda? _* . .' MR. SLACK: It certainly would be. -. ·' MR. SCOTT: Mr. Chairman, I -- Mr. Marshall, if I may make one comment? I've been doing a bit of arithmetic about Mr. Benson's prediction in 1969. You could sa, that he predicted that it would be ,about -- that the unit agree* ment would be completed a year and a half ahead of the pipeline · schedule at that time, and in that sense, our prediction hasn't changed a bit I don't think. We're saying essentially the same thing now. And I think, again, i'm merely magnifying what Mr,. R & R COURT REPORTERS 825 W. 8Ttl AVENUE. SUIt'E 5 509 W. 3RD AVENUE 277~572 -- 277~573 274-9322 ~CHO~GE. A~S~ ~9501 'r ! 2 § ? 8 10 ~ 11 12 13 : 14 1§ 16 .- 17 18 - . 19 ~ 20 91 24 Norgaard has already stated· that. the time table for all of'thi is tied to the completion of the pipeline and I hate to over simplify things, but that probably hits the nail on the head as to the -- the real reason for the apparent long delay. MR. BURRELL: Thank you. Mr. Hamilt hav~·"~ou'~egrouped? MR. HAMILTON: I have another quest: for Mr. Norgaard. This is Hamilton speaking. I assume that at startup that ..vou'll have a gas injection capacity to handle the produced gas. volumes to be injected in to .the gas cap? MR. NORGAARD: That certainly is our plan. I miqht elaborate on that a little bit. On the schedule that you have, you have the increment 1 and increment 2 in the central, compression plant. They are to be installed and operable bv mid '77 and that will Drocess gas from over a million and .a ·half-feet~ bf oil production, solution gas. _ . · . ..~..:~. ~ : MR. HAMILTON: So have you made any studies -- well, first of all, back up a minute, since a. qas -sales line for the Prudhoe Bay Field is somewhat uncertain as far as timing right .now, also the route· have you made any stud: on what the affect would be to the reservoir for prolonged gas reinjection' say; beyond a 3 year period? Something longer thai that? MR. NORGAARD: Yes, that has been part of our different reservoir management schemes that we" evall .. R ~¢ R COURT. REPORTERS B~'~ W. BTH AVENUE, SUITE 5 ~Og Wo :~RD AVENUE 277-0~72 -- 2.??-0D73 274-g322 ANCHORAGE. ALASKA ~)gso! on · .. -. .on ..~ : '~, ,. · .. - . 1 2 3 4 5 6 ? 8 '9 10 11 12 13 14 15 16 17 18 19 20 21 · 24 25 -28- We have evaluated early and late gas sale. MR. HAMILTON: And do you foresee any adverse affect for a prolonged period of reinjection in cas~ the gas sales line isn't available? MR. NORGAARD: It's difficult to define "adverse." No, we don't see anything that is very -- th~ is obviously detrimental to the reservoir. MR. HAMILTON~ Mr. -- Dr. Slack, you mentioned that next week you'll have a management meeting regarding your unitization efforts. Do you foresee an activa- .tion of most of the committees shortly after this meeting? MR. SLACK: Yes, I -- I would cer- tainly anticipate that that would occur. MR. HAMILTON: Getting back. to Mr. Norgaard again. In your reservoir studies, I think you mention. that you have looked at possible' schemes of pressure maintenanc( and so forth. Have you -- have your studies indicated a -- ver~ much of a response from the Aquifer? _ MR. NORGAARD:' Would you define "vel · · much"? MR. HAMILTON: Well, I'll put it thJ way. In order to keep the pressure sufficiently high or not to drop the pressure extremelv low, one way or the other, would it reauire injection of water in the Aquifer? MR. NORGAARD: Well, we see pressur~ R & R COURT REPORTERS 825 W. 8TH AVENUE;. SUITE 5 509 W. 3RD AvENuE: · .77~057~ - 277~573 274.9322 ~CHO~G~. A~S~ ggSO~ 4 $ $ ,/ 8 9 10 11 12 13 14 15 16 · _.'. 1'7 18 20 21 24 declining without augmenting the natural water encroachment wit! · source water, yes. '* MR. HAMILTON: Do you think the -- the Ultimate operation of the field would require water injecti¢ *. in the Aquifer? MR. NORGAARD: Well, you must -- having done the studies that you have done, you must realize the data on the Aquifer is very sparse. And that before making a prediction on that, it'd be awfully nice to have some produc- tion history. MR. HAMILTON: Yes. MR. NORGAARD: And I believe that with our studies today., it would indicate that augmenting the Aquifer is desirable. But here is a line where I guess I feel the simulation study without history begin to run the borderlin~ of being able to make a deicison on it. It's a little differen~ .: case, in my opinion, than' looking at well spacing. MR. HAMILTON: If it was necessary, . or you felt it was the proper type management for the reservoir to inject water up there, what time frame are you looking at for getting something installed in that type of an environmen~ an operating? .. MR. NORGAARD:- To design, build transport and ship the facilities to the Slope, it would be in .the order of 4 -- 4 ye*ars, possibly 5 years. R & R COURT REPORTERS B2~ W. BTH AVENUE. surrE ~ 509 W. SRD AVENUE 277-0572 - 277-0573 274-9322 ANCHORAGE. ALASKA. 99501 1 2 3 4 5 6 ,,/ 8 9 o 10 11 · 17 19 ~.0 21 .. · . MR. HAMILTON: I see. I think that's all the questions I have. MR. BURRELL: This is Burrell again Dr. Slack, I have two or three questions for you about some of your direct testimony. I think you commented that the operator: were exchanging geological and reservoir information among them- selves and likewise, when the.,non-operators requested this info] mation the operators gave those requests prompt attention. Did you give them the data along with the attention? MR. SLACK: It would be my under- standing that that was certainly the case, Mr. Chairman. I may ask Paul to comment on that. He'd be more directly involve, in that. MR. NORGAARD: This is Paul Norqaar( The data distribution does flow through me. And we have provid~ all of the companies with routine log, core, tests, etcetera, date without their requests. On a routine basis, we have just provided them with it as quickly as it comes in to our hands. It is other information such as budgets, thinqs such as that that we provide on request.. MR. BURRELL: Thank you. I think that answers that bit of the question. I don't want to get in to any sensitive areas that might affect negotiations, therefor I'm going to ask some questions and if you feel you cannot answ them, please say so. And don't identify the companies if you R 8~ R COURT REPORTERS 825 W. 8TH AVENUE, SUITE 5 509 W. 3RD AVENUE ~'77-0~72 - 277~573 274-9322 ANCHO~G;, A~$~ 9950! 1 2 3 5* 6 8 9 10 11 ].3 ],5 16 18 19 2O 9.1 give me an answer. I don't want to know which of the five proposals in involved or anythinq. The first question would be is can you tell me whether or not it is Drobabl¥ or if it's de- termined it's qoing to be a grass roots unit, ie. from the lowest most Droducinq formation to the top? That is all three identified pools? MR. SLACK: Yes, that still is the intent, as was stated in the Letter of Intent. That it be a grass roots unit. Although we do recognize the imperativeness of getting the .permotriassic:.unit uhi~ized. ·But~'i%'s s%ill 'the intent'for a~"qrass roots unit'·~'' .. MR. BURRELL: Secondly, has a unit boundary been agreed to? Or is that'still a matter that is _ open to fUrther discussion? That is, the surface boundary, the exterior limits of the unit area? . · MR. SLACK: May I refer that to my qualified technical witness? ,. MR. BURRELL: Sure. MR. NORGAARD:c·This is Paul Norqaar . . We did provide you with the unit boundary in the draft of the unit agreement. I guess tha~ ~as in 1970, yes, 1970. MR. BURRELL: ·Yes, that's riqht. MR. NORGAARD: Late 1970. And we have not had any additional discussions.amonqst all the unit owners since that point in'time, so I think that brinqs you up R & R COURT REPORTERS; B25 Ih'. BTN AVENUE. SUITE 5 50~ %Y. ~RD AVENUE 2.77-0572 -- 277-0573 274-~322 ANCHO~GE. A~S~ 9950~ 1 2 3 4 $ 6 '7 8 9 10 11 12 13 14 ,. ~_ 15 '.. 16 . 1'7 18 19 . ; 20 2,~ (..5 -32- · . to date on the thinking of the unit participants concerning the unit boundaries. MR. BURRELL: Then I'll point out, as you know, the boundaries of the Lisburne Pool do not coincid with'the unit boundaries. Which means either the unit should be changed -- the unit boundaries should be changed or the pool boundaries should be changed. Has this escaped your attention? Were you aware of this. MR. NORGAARD: I guess I'd have to . . admit I was.aware of it, I hadn't realized that it caused a problem. MR. BURRELL: Well, the general philosophy in a unitization is that the entire reservoir is sup posed tO be -- reservoir, reservoirs, are supposed to be unitiz. And it seems as though one or the other is wrong. Will this matter be. discussed at the management meeting next week, or do 1 you have any knowledge of that? .. MR. SLACK: I don't believe it's presently on the aqenda for the manaqement meetinq this week. BUt it certainly could be added and we will certainly consider the need for discussion of this at that time. MR. BURRELL: I Doint out that currently drilling or the incomDleted wells and wells that are proposed to be drilled to the Lisburne eastern portion of the field may very well chanqe the boundary of. Lisburne Pool anyhow R & R COURT REPORTERS ANCHO~GEo A~S~ 99~0! '* d. 1 2 3 5 6 'I' 8 9 10 11 12 13 · 1~, 15 16 1'/ 19 20 21 · 2,~ so this may be unnecessary at this time. But at the time that the final unit boundary is submitted to us, I think that we wou~ want to know that it covers the pools. We're going to have to move one or the other is what I'm saying. Do you think that .you can give a unified position after next week's management meeting as to one, whether it's a grass roots unit or not, two, as to its boundaries? MR. SLACK: Well, as I stated in my testimonvo these thinqs are rather hazardous to predict since there are so many companies that are involved. We certainly will -- will be doing our best at that time to reach agreement on as many of these thinqs as we possibly can. I'm afraid that the best answer I can give you.~at this time, Mr. Chairman. MR. BURRELL: I'1i go back to one other thing before I come back to that. And that is you men- tioned the discussion as to two participating areas, one for .. · .the gas cap and one for the oil rim. As far as I know that's associated gas cap.' These participating areas presumably, with. out delving'deepl~ in to this, would be -- relate between the working interest owners and not as to the royalty owner. Is that the correct interpretation of -- MR. NORGAARD: Yes, I'm certain tha' correct. MR. BURRELL: Back to where I was a minute ago. We've thought about holding this hearing record R & R COURT REPORTERS 11~2~ W. ~ AVENUE. SUIT~ ~1~ ~O~ W. SRD AVENUE 2'7?-05?2 -- 277-0573 274-9322, AHCHORAGE. ALASKA 9~501 *'S ! open briefly for a few days, a .few weeks to see if we could get 9. and answer from the management committee, even if it's an-answe] 3 that-you can't answer at. the next week's meeting on those two 4 questions I raised. Do you think it would be possible to get an answer even if it is we can't aqree or can't make up our 6 mind or it will take further discussions? 7 MR. SLACK: Yes. ! 6 .MR. BURRELL: I realize when I say that, I know that's the answer I'll probably get~ but I thought I'd try anyhow. Do you have the two questions? .. MR. SCOTT: Tell you what we'd like to do is caucus and answer that one during your intermission O later on. MR. BURREI.,L-- Well, shall we take 15 - - one right now? -. .' MR. SCOTT: Fine. MR. BURRELL: Let's take a five -. minute break. .. . . ~' (OFF THE RECORD) ·. · R &: Ii: COURT RE:PORTE:RS ~'~5 W. 8TH AVENUE. SUITE: 5 509 W. 3RD AVENUE 277-0572 - 277-0573 ~.74 9322 . . ~ ! ANCHORAGE.. ALASKA ! 2 3 4 5 6 ? 8 9 10 11 12. 13 15 18 19 ~-0 21 (ON THE RECORD) MR. BURRELL: We'll reconvene the hearing n~w. We had a question and there was a caucus on over here in response to our question. MR. SLACK: Yes, Mr. Chairman. is Howard Slack again. We were a little hesitant in. replying immediately to your request for keeping the hearing open in so far as it might affect our operations and not reaching a decis n on the spacing aspect of the hearing which was really the main reason the hearing was set up in the first place. However, we -- we would be agreeable to having the hearing record remain open until after our management meeting next week. And at that time, supplying you with a written statement of the decisions reached on the two questions which you raised. If the record could then immediately be closed thereafter, so that we may have.the decision on the spacing exception. MR. BURRELL: Dr. Slack, two things .I'd add one question to that and that is -- it is Mr. Marshall' question actually, could we have a new agenda', or the n~w sched le I should say? The new schedule for unitization, accom~ thereof? Whatever you -- if you come up with a new unitization schedule, like you indicated to Mr. Marshall you thought you would do, -- MR. SLACK: That's right. · MR. BURRELL: -- could we be provid, d R & R COURT RI:'POF~TERS 82~ VI~. ~'H AVENUE. SUITE B hog W. ~RD A~NUE 2TT~572 - 277~573 274-9322 ~CHO~GE. A~S~ 99501 -36i ., 0 .. ! with that information? 2 MR. SLACK: We would -- we would make that a part, too, of our written -- · 4 .~ MR. BURRELL: That's three question § or -- 6 MR. SLACK: Three questions. 7 MR. BURRELL: -- request for infor- 8 mation. And you tell us when you want the -- when you'd have 9 your answer to us, and that's the day we'll close the hearing '. 10 unless somebody has some other thoughts or subsequent testimony · What day do you want -- pick a date. Next Friday's the 13th. MR. SLACK: That's a good date. MR. BURRELL: Friday the 13th to close the -- 15 .... MR. SLACK: Wait a minute. No. . ' 1§ Could we -- .. MR. SCOTT: Do it the first Tuesday 18 following the 12t.h, whatever that works out. 19 MR. SLACK: First Tuesday following 20 the 13th. 2! MR. BURRELL: That'd be the 17th. ~ MR. SLACK: 17th. ~ MR. BURRELL: Now, that's Tuesday. 17th of December, 4:30 local time? Anchorage local time. R & R COURT REPORTERS 2TT~5?Z -- ~77-0573 ~74-9322 - :, 1 2 4 '5 6 ? 8 9 10 11 12 13 15 16 17 18 '19 20 21 23 25 -37. MR. BURRELL: Fine. Fair enough? MR. SLACK: Fair enough. MR. BURRELL: Keep the hearing reco open until then. Does that.complete your comments and respecti, questions? questions? have any more questions? MR. SCOTT: It does. MR. BURRELL: Do you have any more MR.'HAMILTON: No. MR. BURRELL: Marshall, do you MR. MARSHALL: No. MR. BURRELL: I don't either. Is there anybody in the audience who wants to make a statement? '..I so, will.you come forward and identify themselves and use the microphone right where those two chairs are. MR. TAYLOR: My name is Glen Taylor and I'm here on behalf of~.~E?Alaska. Management doesn't have to be qualified to answer technical questions and lawyers just have to be qualified to read, so I'll read my statement. MR. BURRELL: Excuse me, Mr. Taylor are you going to testify or read a statement. MR. TAYLOR: I'm going to read a statement. R 8: R COURT REPORTERS 825 w. BTH AVENUE. SUITE 5 509 W. :~RD AVENUE 277-0572 - 277-0573 274-9322. ANCHORAGE. A~S~ ~950! 'd O. 1 2 3 5 6 8 9 10 11 13. 14 - 15 16 17 19 '~.! 2~ 25 MR. BU~RELL: Thank you. MR. TAYLOR: Mr. Chairman, members of the Committee, as I said, I'm Glen Taylor, I'm appearing on behalf of BP ~laska. And we wish to submit a statement indicat: BP Alaska's position with regard to the Atlantic Richfield's request for an exception to Rule 2 Of Conservation Order 98-B _ concerning well spacing in the Prudhoe 'Pool. We also wish to submit a statement supporting Atlantic Richfield's comments concerning unitization of the pool. We believe these statement are appropriate, as BP Alaska is the operator for'Sohio for lea~ included in the Atlantic Richfield request. Sohio, as you know is a major ieaseholder_ in the field, and BP Alaska is the pro- western .- posed operator for the ~part~of.the Prudhoe'Bay Field~ The..i~i objective of the two proposed unit operators is for each to · . · establish a productive'potential of 60Q,000 barrels per day . . before late 1977 for the anticipated initiar throughput.of the pipeline of 1.2 million barrels per day. We believe that this Offtake rate can be technically justified, as can considerably higher rates as additional pipeline capacity becomes available. T~ achieve this productive potential, applying sound reservoir . . and production engineering ~ractices, more than one well per section will initially be required in the central part of the £ field. We believe that approval of the Atlantic Richfield re- quest, to drill two wells in any of a number of sections, while keeping these wells at least' 2,000 feet apart, will neither be R & R COURT REPORTERS AVENUE. SUITE 5 509 W. ~RD AVENU~ 27~572 -- 277-0573 274-9322 ~CHO~GE, A~S~ 99501 es ial 5 7 8 10 11 12 15 . -- . . 2O ~-1 wasteful nor detrimental to recovery, but will enable them the flexibility to follow and modify as necessary a sensible unitiZ~d- development scheme from both economic and reservoir management- viewpoints. . (Interruption by lady coming in to room.) MR. BURRELL: The lady's looking for Margaret Wolfe. MR.. TAYLOR: The results of our studies to date based upon our drilling,'coring and testing results leads us to the flew that a denser spacing will ultimately be required over a large part of the field. Our drilling program and that of Atlantic Richfield have acknowledged this, although we have approached the question of well locations in a differeht practical manner. This point, that there is a need to make provision .for further development,-has been made. in our previou~ well spacing requests. It is made again now in the context tha~ we would welcome the State's own proposal for a fieldwide allowable of two wells per section, but would consider that this is only an intermediate requirement in an overall efficient field devel¢ D- ment plan. Atlantic Richfield has, at your request, addressed the subject of the progress of unitization negotiations. Clear] y our plans for efficiently developing the field as a field, rather than the development of a number of individual leases, is an indication of our commitment to' effecting unitization prior to the commencement of production. BP Alaska has. been distributing in R & R COURT REI~OFtTER.S .82~ W. BTH AVENUE. SUITE 5 509 W. ~tRO AVENUE 2?7°0572 - 277~573 274-9322 ANCHO~GE. A~S~ 99501 1 4 5 $ ? 8 9 10 11 13 14 15 16 17 ~.' 18 19 '~.0 ~.1 ~.4 -40- good faith all relevant data from our drilling operations to all potential unit participants. Operational and related matte. have been regul.arly discussed with all these companies. It is It is'clearly not,a simple matter to effect a unit agreement fo: the Prudhoe Pool; nothing of this magnitude has been attempted before and the establishment of equitable participation terms i: a very difficult task. Although delays in the issuance of the pipeline permit removed'the immediate incentives which were evidenced in the 1969-1970 unitization progress, work did con- tinue on these problems and the incentives have now returned. During this year' BP/Sohio, Arco, and Exxon have made considerab progress in identifying and attempting to propose equitable approaches to the problems which most concern their relative po sitions as principal participants. We consider it timely that ~he other, companies will be apprised of these efforts next week as further progress towards establishing unitization terms acce' table to'all participants. We share with Atlantic Richfield 'their concern as to publicly discussing these sensitive issues while negotiations are in progress between the companies. We ~ant to 'keep the State informed as progress is made; at this time we can only give our assurance that.we are now working as quickly as possible towards completing a unitization agreement that all companies can present to the State, and we have every .expectation that this will be possible well in advance of any production from the field. I'd be glad to submit a copy of R 6: R COURT REPORTERS ~2~ W. 8TH AV£NU£, SUITE 5 ;$09 W. 3lO AVENUE ~7~572 - 277-0573 274-9322 ANCHO~GE, A~S~ 99501 1 3 4 5 6 ? 8 9 10 11 14 15 15 18 2O ~.1 -41- this for the record. -' MR. BURRELL: We'd appreciate havin¢ a copy for the record. It's a lot easier for transcript time. Does anybody have any questions? Thank you Mr. Taylor, thank you very much, sir. Is there anybody else in the audience who cares to m~ke a statement or testify? MR. MILLER:. Mr. Chairman, I'm Judd Miller, Jr, I am Production Manager for the Western Divis of Exxon Company U.S.A. And I have with me Tom Krueger, an attorney on our staff in Los Angeles. I believe I'll plead the same qualifications as Dr. Slack. Mr. Chairman, members of the Alaska Oil and Gas Conservation Committee, I am Judd Miller, Jr Production Manager, Wester Division, Exxon Compan~ U.S.A. I am appearing before you as the representative for Exxon Company. U.S.A., so-lessee with Atlantic Richfield of the Prudhoe Bay Leases, to introduce into the record a statement of Exxon's ~-- position regarding A~lantic Richfield's request for an exceptiol to Rule 2, Conservation Order No. 98-B. Exxon fully supports A.R.Co.'s request for selected 320 acre exceptions. We have made many sgphisticated reservoir studies of the Prudhoe Bay Pool since the'initial field rules were adopted in 1971 and are convinced by these studies that A.R.Co's proposed development il needed if the field is to have adequate producing capacity when the Alyeska line is ready for production. We are further con- vinced that efficient producing rates will not be exceeded with .- 825 W. B-r'H A~NUE. SUITE ~ 509 W. ~RD AVENUE 277~572 - 277~573 274-9322 ANCHO~GE. A~SKA 99501 on ,,.;. .-. . '. -42- ! this program, and that additional field development, to at leas 2 160 acre spacing, will .ultimately be needed. Therefore, in 3 response to your question, we would have no objection to changi] 4 the existing spacing rules to permit 320 acre spacing fieldwide 5 However, as we are anticipating a unitized operation, we regard ~ any change in the existing spacing rule as an interim measure 7 until unitization, at which time revised spacing rules could 8 be proposed by the unit owners. Regarding your question as to 9 the progress of unitization, Exxon endorses the objective of 10 unitization prior to production start-up and strongly supports 11 efforts to achieve that objective. Throughout the development ~9. Prudhoe, and particularly for the past year, Exxon has devoted 15 substantial manpower towards this goal. We will continue our 14 commitment to this effort, as well as our support.of appropriat 1§ unitization committees which encourage similar involvement · by all the prospective unit owners. We fully recognize that th~ success of this effort is dependent on the commitment and good faith efforts of every owner.~ Based on the past efforts of all 19 owners, we are optimistic that such commitment will continue and that unitization will be achieved in the time frame outline. by Atlantic Richfield. And that concludes my statement. MR. BURRELL: Thank you, Mr. Miller Do you have any questions? Thank you very much, sir. Could we have two copies of that for the record? MR. MILLER: Yes, sir. R & R COURT REPORTERS 825 W. 8TH A~NUE, SUITE 5 50g W. ~R~ A~NUE 277.0572 - 277~573 274.9322 e~, ~ ANCHOR. AGE, A~SKA g950! ]. 2 § 6 '7 8 9 10 11 12 13 16 1'7 18 19 2,~ MR. MARSHALL: How about 3 copies? MR. MILLER: Do you need more? MR. BURRELL: That's fine. Does anybody else wish to make a statement or testify? MR~ SWEATNAM: My name is Bob Sweat- nam, Phillips Petroleum Company, District Land man in Anchorage. Mr. Chairman, members of the Committee, I'd like to read a state ment on behalf of Phillips in to the record. Phillips Petroleum Company owns interests in oil and gas leases located within the Prudhoe Bay oil .pool and is a party signatory to agreements for unitization dated August 6, 1969, and October 29, 1969, which have been introduced in prior hearings before this Commission. Atlantic Richfield Company is designated as the operator for the easterly portion of the Prudhoe Bay oil pool and has sub- mitted its application and testimony reflecting its judgment as to the necessity fOr spacing exceptions in the area covered by its application. Phillips prefers a development plan~.follo~ lng a regular 320 acre pattern,, however we recognize that a com- promise between reservoir development objectives and drilling economies may be necessary. We accept Atlantic Richfield's representations and testimony that in its judgment as operator, the requested spacing is required in order to maximize early production 'from the Prudhoe Bay oil po01 for the benefit of the working interest owners therein and the State of Alaska, and accordingly Phillips Petroleum Company does not oppose the R · R COURT REPORTERS 825 W. 8TH AVENUE. SUITE 5 ~09 W. ~RD AVENUE 277~572 -- 277~573 274-9322 ANGHO~GE. A~S~ 99501 i 1 3 4 5 6 8 9 10 11 12 13 14 15 16 1'/ ~-0 ~-1 '~.~. application. With respect to unitization, we ~.are disappointed that more progress has not been made toward completiOn of a def~ nitive unit agreement and a definitive unit operating agreement. We strongly urge that all of the' affected companies and the Stat of Alaska set completion of these documents in the year 1975 as a firm goal. MR BURRELL: Thank you, Mr. Sweatni Any questions, Tom? MR. MARSHALL: No. MR. BURRELL: Thank you very much. MR. 'RICHARD: Mr. Chairman, my name -. is Cliff Richard, representing Amerada Hess Corporation. I am the Project Coordinator for the Prudhoe Bay Field f~r that com- pany. · ' '' ..... '' : .. . "Shaw", 'sir? .l -. MR. BURRELL: Excuse me, was that MR. RICHARD: Richard, R-.I-C-H-A-R-I · MR. BURRELL: Thank you. MR. RICHARD: I have a question I would like to direct to you. Since the hearing has been held open until December 17th, would it. be possible to provide a statement after -- MR. BURRELL: Yes, sir. With the hearing record held open until December 17th, that me'ans anybod] can submit, anything they want.to that's relevent to the matter I~ 8~ !~ C:OUI~i' REPORTERS 82~ W. 8TH AVENUE, SUITE ~ ~09 W. ~o AVENUE · 77~572 -. 277.0573 ~7~9~22 ANCHO~GE. A~ 99501 6 ? 8 9 1,0 11 12 19 -45- this hearing. MR. RICHARD: Okay, thank you, sir. Amerada Hess Corporation will submit a statement following -- MR. BURRELL: Submit a written state ment between now and then? Thank you very much~ sir. Are there .. . ~:~.*, ~ .~. more? . '~ *~"' ' MR. KUBIK: Gentlemen, I'm with MobJ Oil Corporation, my name is Bob Kubik, and I'd like to read a statement. MR. BURRELL: Could you spell your last name, sir? · · . , ~ . .. '*- *MR. KUBIK: In the notice for today public .hearing, the Committee stated that it would seek informa' MR. KUBIK: K-U-B-I-K. MR. BURRELL: Thank you. as to why an exception to Rule 2 of Conservation Order 98vB sho~ n6t be changed to permit 320 acre spacing for the entire PrudhoE Oil Pool and that it would inq6ire as to the progress of unitiz~ tion negotiations for the Prudhoe Bay Field. Mobil supports 320 acre spacing for the entire Prudhoe Oil Pool. We recognize that 320 acre spacing will be required to *efficiently develop : the Prudhoe Oil Pool and sustain production rates. In regard to the Conservation Committee's inquiry as to the status of unitization, Mobil is not aware of significant progress between mid 1972 and the start of construction on the TAPS pipeline. !~ & R COURT REPOI~TERS' · 2~$ W. ~t'H AVENUE. SUITE 5 509 W. ~RD AVENUE 277-0572 - 277-0S73 274-9322 S ' ion ld O1 2 3 4 5 6 ? 8 9 10 · . I1 .. 15 . · 17 18 - -19 _- 21 0 -46- ~ Indications are that the unitization' effort will commence in earnest now that the pipeline'is underway. Mobil's planning the Prudhoe Oil Pool has been made with the full expectation there will be a field-wide unit. We believe that a unit will result in the .maximum benefit to all concerned, including the . State and the participants. It is Mobil's aim that an equitabl~ unit be accomplished as soon as possible, and no later than the end of 1975. from you? MR. BURRELL: Thank you, Mr. Kubik. MR. KUBIK: I have copies of that. MR. BURRELL: Could we get some . .... MR. MARSHALL: I want at least 3. -- . . ..- .: MR. KUBIK: As many as you want. ~.' ,~ ~ .._,..~. . MR. BURRELL: Do we have anybody .. · , . else who wants tO make a statement or testify? Apparently · not -- oh, there's two more. · _ MR. COTTON: My name is Clyde Cotto . Exploration Supervisor for Alaska Operations for Getty Oil pany. And we would like to, 'in.view of holding the meeting open, submit a written statement rather than an oral one today, .and we will do so by the 17th of December. -. MR. BURRELL: Thank you, Mr. . MR. SAWYER: Mr. Chairman, members of the Board, my name is Jerry Sawyer, Consultant representing R ~¢ R COURT REPORTERS ~2~ W. BTH AVENUE,'$UITE 5 $Og W. 5RD AVENUE 277.0572 - 277-0573 274-9322 ANCHORAGE. A~S~ 99501 .o .O 1 3 4 6 8 9 10 11 12 13 14 15 '16 1'/ 18 19 ~.0 21 24 Placid Oil Company. In light that the hearing is being held open, Placid would like to defer, making a formal statement until after the.management meeting next-.w~ek. MR, BURRELL: Thank you very much, Mr.. Sawyer. Is there anybody else who cares to make a statemen Or testify? Last call. Now, is there anybody that wants to make -- to ask any questions of any of the witnesses who have previously testified? If so, I'd like you to direct it through the committee. I gather nobody here has anYthing else to say, then, and I'm going to adjourn the hearing unless somebody tell: me otherwise. Adjourned. Thank you. (OFF THE RECORD) -? R & R COURT REPORTERS 625 W. 8TH AVENUE. SUITE 5 509 W. :~RD AVENUE 277-0572 -- 277~573 2~4-9322 ANCHO~GE. A~S~ 99501 1 CERTIFICATE 3 I, Robyn Gerrard, Notary Public, in and for the State of Alaska, 4 and Electronic reporter for R & R Court Reporters, do hereby certify: That the Public Hearing of.the Department of Natural Resources Division of Oil and Gas was taken before me on the 'O 8 9 10 11 12 13 14 15 16 1'7 18 19 20 4th day of December, 1974, beginning at the hour of 9:30 a.m, at the Loussac Z J Library, 427 F Street, Anchorage, Alaska. That this hearing, as heretofore annexed, is a true and correct transcription of the testimony of said hearing, taken by me electronically and thereafter transcribed by me: I am not a relative or employee or attorney or counsel of any of the parties, nor am I financially interested in this action. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 5th day of December, 1974. No~~l i~~d~, f~oor .~ska 21 23 My commission expires: 10/4/78 24 25 !~ ~ R COURT REPORTERS B2~ W. BTH AVENUE. SUITE 5 gO9 W. :~RD AVENUE ~CHO~G~ A~S~ 99501 -. r i':c,'l 1. No., Test Dat~ s-lo. is ~,1i417i (~.s, i~i) 6-10-!5 ' ('o. ~. ]-3) 7/29172 · 1650 1530 RXHIBIT 1 ' ~io~ Tests o~ ~zud~oe' ~a¥ s~iierocmt Oil ~veii~ · Choke 'Size Rate 1,360 GOR % ,. 3,580 32/64 P. roductivitX Index (s'rB'l'D/ps i') J 28' 18 PRUDHOE BAY FIELD A.R. Go. OPERATING AREA CONSTRUCTION CENTRAL GAS INJECTION PLANT INCREMENT (I) :3 UNITS ~ FIELD FUEL GAS UNIT INCREMENT (2) 5 UNITS INCREMENT (;3)4 UNITS . FLOW STATIONS FLOW STATION - I . FLOW STATION - 2 . FLOW STATION - :3 PIPELINE SYSTEM {I) SUPPORTS (2) GATHERING LINES (:3) FLOW LINES AND DEVELOPMENT SCHEDULE 7-1-77 STARTUP EXHIBIT 1973' 1974 [ 1975 1976 1977 1978 ~ I FABRICATE BI INSTALL i i I I I FABRICATE BI IN~.~ALL i FABRICATE ~ INSTALL I ! FABRICATE _Bi .INST~LL iii i ii . IF*B.,C~TE BI ,,ST*~L I . i MANUFACTUR~ i I .ANUFACTURE B! ,NSTALL ! I BP OPERATING 'AREA ' · · · . ARCo OPERATING AREA AR.Ca _; AtlanticRichfieldCOmpany: ( PRUDHOE OIL POOL REQUESTED SPACING EXCEPTIONS · / - · ?? f:- . .. F. Y X ON ,~, F~ C.: -CxXON Telephone call received 12/17/74 12:15 p.m. from: Amerada Hess Corporation, P. O. Box 2040, Tulsa, Oklahoma. Following letter put in mail today: Mr. Homer L. Burrell Chairman Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Dear Sir: The Amerada Hess Corporation, at the "exception to Rule 2, Order No. 98-B" hearing on December 4, 1974, in Anchorage, elected to submit a written statement before the December 17, 1974 closing date of the hearing. Our position is that we support ARCO's proposed two wells per section; however, we prefer that a regular 320 acre spacing pattern with wells in diagonal quarter sections be adopted. Amerada Hess Corporation comcurs with ARCO's proposed unitization date of early 1976 and is pleased that work has now been resumed to accomplish this goal. Very truly yours, C. R. Richard cc: Every member of the field development subcommittee AMERADA HESS E:OI~POI~ATIEIN DEC DIV!SIC, N ,..~: OIL AND GAS AI'~CHORAGE December 16, 1974 Mr. Homer Burrell Chairman Oil & Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 p. o. Box 2040 TUb_SA, OKLAHOMA 74102 18-584-5554 Dear Sir: The Amerada Hess Corporation, at the "Exception to Rule 2, Order No. 98-B" hearing on December 4, 1974 in Anchorage, elected to submit a written statement before the December 17, 1974 closing date of the hearing. Our position is that we support ARCo's proposed two wells per section. However, we prefer that a regular 320 acre spacing pattern, with wells in diagonal quarter sections, be adopted. Amerada Hess Corporation concurs with ARCo's proposed unitization date of early 1976 and is pleased that work has now been resumed to accomplish this goal. Very truly yours, AMERADA HESS CORPORATION C. R. Richard CRR:par cc: Members of Field Development Subcommittee AtlanticRichfieldCompany North American Producing Division Alaska R~ Post Office Box 360 Anchorage, Alaska 99510 Telephone 907 277 5637 Howard A. Slack Vice President & Resident Manager OEC DIVISION Gl: g)l~ AN.D December 12, 1974 Mr. Homer L. Burrell Oil and Gas Conservation Committee Division of Oil and' Gas Department of Natural Resources 3001 Porcupine Drive Anchorage, AK 99504 Dear Mr. Bu~,rell,,: ," ~'"~ ..... ~"~ ~' .': ~', ..... '""" · ~, ,~ ¢ ~ ~,. ,,, In the public' hearing held on December 4, 1974, the Oil and Gas Conservation Committee considered Atlantic Richfield Company's application for an exception 'to Rule 2 of 'Conservation Order #98-B and made inquiry into the progress of unitization negotiations for the Prudhoe Bay Field. At the hearing the Committee asked the following questions: 1. Do the owners intend' to modify the boundary of the proposed unit which was described in the draft agreement submitted to the State of Alaska by letter dated November 25, 19707 2. Do the owners intend to form a "grass roots unit" including all formations within the boundaries of the Prudhoe Bay Field? 3. Have the owners adopted a schedule for comple- tion of unitization negotiations and will they submit the schedule for unitization negotiations? Responding chronologically to the Committee's in- quiry, we submit the following on behalf of the Management Committee for the proposed Prudhoe Bay Unit: 1. The boundary of the proposed Prudhoe Bay Unit resulted from discussions between the lease owners Page 2 and representatives of the Division of 0il and Gas of the Department of Natural Resources and included all tracts which were believed to contain hydro- carbons capable of being produced in commercial quantities. The Management Committee does not be- lieve that a change in the proposed unit boundaries should be made at this time. 2. At the time of the submission of the draft agree- ment, the lease owners considered it appropriate to propose a plan of unitization for the Prudhoe Bay Field which would permit separate reservoirs dis- covered within the Unit Area to be developed and operated as separate participating areas. At this time the Management Committee does not consider a change necessary. 3. The Management Committee has agreed to a tenta- tive schedule for negotiations during 1975 and sub- mission of a Unit Agreement to the Department of Natural Resources on or about March 1, 1976. We trust that this response to the questions of the Committee is sufficient and that the Committee will now close the record on Atlantic Richfield Company's request for an exception to Rule 2. Very truly yours, Howard A. Slack cc: Management Committee Members Proposed Prudhoe Bay Unit 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. 130 Re: The application of the Atlantic Richfield Company for an exception to Rule 2 of Conservation Order No. 98-B to permit the drilling of two wells per governmental section on forty sections in the Prudhoe Oil Pool. Footage spacing changes for these exception wells are also proposed. On it's own motion the Oil and Gas Conservation Committee will seek information as to why an exception to Rule 2 of Conservation Order No. 98-B should not be changed to permit 320 acre spacing for the entire Prudhoe Oil Pool and will inquire as to the progress of unitiza- tion negotiations for the Prudhoe Bay Field. Notice is hereby given that the Atlantic Richfield Company has requested an order granting exception to Rule 2 of Conservation Order No. 98-B which would permit Atlantic Richfield Company to drill at a density of two wells per governmental section on forty selected sections within that portion of the Prudhoe Oil Pool which Atlantic Richfield Company expects to operate upon unitization. Footage spacing for these forty sections is proposed as follows: Two thousand feet between wells and one thousand feet between a well and a property line where ownership changes. Pursuant to Title II, Alaska Administrative Code, Section 22.540, a public hearing to consider this request will be held December 4, 1974, at 9:30 A.M. in the City Council Chamber of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, at which time the applicant and affected and interested parties will be heard. Thomas R. Marshall, Jr. Executive Secretary Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Publish November 2, 1974 ~r. Chairman, my name is Howard Slack. I am a Vice President of Atlantic Richfield Company and Resident Manager of our Producing ; Division's Alaska Region. I wish to report to you on the Progress that is being made toward unitizing the Prudhoe Bay Field. To that end I will review activities in two areas -- actual operations and unitization negotiations. Regarding operations, BP and A.R.Co. agreed at an early date in anticipation of unitization, to subdivide the field into ~vo approximately equal operating' areas without regard to lease ownership. BP and A.R.Co. jointly prepared an initial field- wide development planwhich called for wells to be drilled on all sections within the 200' gross isopach line. ~his plan was review'ed and approved by all owners in the 'prospective unit area. For the BP operated area this includes A.R.Co.-Exxon and Mobil-Phillips-SOCAL acreage as well as BP acreage. BP has requested and received spacing exceptions on A.R.Co.-Exxon acreage as well as their own. For the A.R.Co. operated area-- which includes A.R.Co.-Exxon, BP, and Mobil-Phillips-SOCAL leases-- our plan provides for wells to be drilled on A.R.Co.- Exxon and BP leases, and we are today requesting spacing ex- ceptions on BP ]eases as well as A.R.Co.-Exxon leases. Page 2 The concept of unitized ope~ations is also being followed in the · design and installation of surface facilities. BP is designing and building a central power plant which will supply electrical power for both operating areas. A.R.Co. is desig~ning and building a central compression plant to compress all gas from the Pruc~oe Bay Pool for injection. Additionally, both operators are sizing and locating production facilities to process the total volume of produced fluid from the Prudhoe Bay Pool. Ail of these plans have been coordinated between the two operators. Some specific ex~ples are the sizing and location of oil and gas gathering lines, flow stations and gathering centers, the power plant, and the central compression pIant. In addition to this coordination between the operators, all Prudhoe Bay Pool owners have been contacted at appropriate times regarding these plans and other plans for the development and operation of the field. Routine meetings of the Operations Subcommittee have been held ~o keep all companies abreast of field activities and periodic meetings of the Environmental Sub- committee have also been held. Additionally, the two operators have been furnishing on a routine basis all owners with besic log, core, test, and fluid property data as it comes available. Also, all non-operator requests for information have received the prompt attention of the operators. Page 3 Regarding unitization negotiations, I would like to briefly review this effort since inception five years ago. You may recall that nvo Letters of Intent were signed, the first by the principal field owners, A.R.Co., E~xon, and BP; and the second by all the owners in the prospective area. These two documents were submitted during the past Field Rules Hearings. Following the signing Of these two documents, pre-unitization committees were form, ed and progress was rapid. Work was directed toward ob- taining fair. and equitable treatment for all. As it became apparent-tc~,'ard the end of 1970 that pipeline construction would be delayed, ~mitization discussions slowed. Substantial effort, hc~vever, continued, as evidenced by the many meetings of ~arious subcommittees. These subcommittees include the Accounting, Tax, and Reservoir, as well as the Operations and Enviror~nental mentioned earlier. 'Foward the end of 1970 it also 'became apparent that the major problem confronting unitization was an equiteble relationship bet~veen the gas cap and oil rim, the two part. icipating areas established in the Letter of Intent. These ~vo participating areas were established because o.[ the difficulty of equating the relative value of the gas cap and the oi]~ rim and forming a single participating area. With the establishment o~[ t~'o participating areas agreement must be reached on a Page 4 procedure which will properly credit each participating area with its liquid and gas production. Since the bulk of the Prudhoe Bay Pool reserves will be produced through con, non faciJities, this becomes a complex problem of identifying condensate in a predomonantly oil stream and solution and free gases of near identical composition. Additionally, costs for each facility, and in some cases only portions of a facility, must also be allocated. Since 1970 Work has been continuing to resolve this problem. Naturally, prior to the granting of the pipeline permJ, t, work and progress were at a reduced pace. However, proposals were exchanged and discussions were held on several occasions between the end of 1970 'and the granting of the pipeline permit ~n early 1974. Following a~pproval of the pipeline permit, unitization work ac- celerated. It was recognized that there was 'much work to be done and Substantial effort was needed immediately. Itowever, the establishment of a proper relationship between the gas cap and the oil rim continued to be the essential and major requirement in . unitizing the Prudhoe Bay Pool. Since the Management Committee of al. 1 owners of the Prudhoe Bay Pool had charged the major interest owners in late 1.970 with preparing a recommended gas cap-oil rim relationship, discussions were 'reinitiated by A.R.Co., BP, Exxon., and Sohio in January of this year .smd many have been held. On six occasions meetings were held at the senior management level. Additional. ly, six meetings of technical Fcopl. e were interspersed with the Page 5 management meetings. Also, &n'ing the year five proposals have been exchanged and differences in positions contained in these proposals have narrowed substantially. The problems are complex, as indicated earlier, but progress to date makes us optimistic that ao~reement ,,viii soon be reached. A measure of this complexity is Time expended. A fair estimate of Atlantic Richfield's time com~i~_ent to these 1974 discussions and proposals is 12,000 man hours. I would prefer not to discuss the content of these proposals or the discussions in any further detail since any public comment on private negotiations could xxm the risk of impeding progress, and certainly we are ar~xious to complete the current efforts and move fon~ard with the other unitization issues. To this end the Prudhoe Bay ~Ianagemen~ Committee, which includes all o~ers in the prospective unnit a'rea, has been invited to a meeting next week to review past unitization discussions and future unitization scheduling ~ Ar, estLm~te of future prog~-ess and thus timing for completing these negotiations and submitting the Unit Agreement and Operating Agreement is hazardous to predict, particularly when considering tha.~ t]xirteen co.~an/es will be participating in the negotiations. At.~=n~.xc Rich£ie!d's timetable, however, calls fox' sufficient progress to request a unitization hearing early in 1976. Page 6 In st~O-, the t~vo operators' plans have been coordinated and are desib~ned for a unit operation. Work has progressed steadily to-,,'m~-d resolution of the proper relationship between the gas cap and -~Y~e oil rim. Progress has been substantial and differences ha'~-e been greatly narrowed. Atl-antic Richfield is optimistic ~.n~s~ negotiations will soon be completed and discussions caa .,._~oYe to the other issues that must be resolved prior to pre- paring the final docL~nents. Finally, a meeting of the ~,'Ianagement Cc~--~ittee of all Pn~dhoe Bay Pool owners has been called to diszuss unitization status and schedule. WELL SPACING HEARING TESTIMONY Atlantic Richfield Company, as operator for itself and Exxon Company, U.S.A., has requested an exception to Rule 2 of Conservation Order No. 98-B which, if approved, would permit drilling, completion, and production of two wells per governmental section on forty selected sections. The selected sections are: Sections 1, 2, 3, 4, il, 12 Sections 25, 26, 33, 34, 35, 36 Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18 Sections 26, 27, 28, 29, 30, 31 32, 33, 34, 35, 36 T10N R14E U.M. TllN R14E U.M. T10N R15E U.M TllN R15E U.~ A.R.Co., as operator of the eastern half of the proposed unit for the Prudhoe Bay Field, drilled sixteen develOpment wells during 1970 and 1971, and then discontinued development drilling. Now, with.pipeline approval and initial production expected during 1977, we have resumed development drilling with one rig this summer. A second rig will be added sometime during the winter. Page 2 '.i. ~i The plans we are currently following for full development of our operating area of the Prudhoe Bay Field are based on a unitized operation. The location and timing of all wells and surface facilities currently being designed and fabricated are based on a unitized operation. Unitization discussions are now in progress and A.R.Co. is actively supporting these unitization discussions. We expect the unit to be formed before the start of production..Thus our requested exceptions to the current field rules covers only our drilling plans to production Our development planfor~ the eastern half of the proposed unit has been formulated during, the past several years. The sUrface facilities will be transported to the Slope during the '74, '75, '76, and '77 barge seasons. We will look at the overall schedule in more detail later. Our development drilling plan, as mentioned earlier, began last summer and grows to a two- development rig, one~workover rig. operation by the summer of '75. This development drilling schedule requires exceptions to Rule 2 of Conservation Order 98-B, as indicated earlier. In the subsequent discussion'I will first cover A.R.Co.'s development plan as it relates to well location and then discuss the effect of our surface facilities installation schedule on our drilling prOgram and in turn on our exception request.. Page 3 First, our plan provides for initial development wells to be drilled where the gross oil colu~m is more than 200' thick. Studies have indicated that these wells will be long life, good productivity wells. Oil columns thinner than 200' lying both upstructure and downstructure of this core area will be drilled later. The number and location of these later wells will depend on future studies and the early production performance of the field. Next, well tests, analyses, and studies using a radial n~nerical simulator prOgram indicate that initial production rates of 10- 15 Y~8OPD can be expected for Wells drilled within this 200' thick oil column. Exhibit 1 ~su~narizes the test data taken in the A.R.Co. operated area since the last Field Rules Hearing. Since there have been only a limited number of production tests, our studies cannot be considered precise, .H°Wever, we are confident that the 10"]~5 MBOPD initial production rate from these wells is a reasonable iexpectation. The surface facilities for the Prudhoe Bay Field to be in- stalled by A'R.Co. will be barged to 'the SlOpe beginning this '76 and '77 summe~r and continuing through the summers of '75, , . On Exhibit 2 I have. shown a simplified schedule for the installation of these surface facilities. Page 4 You will note they are broken into three major categories, the central gas injection plant, flow station, and pipeline system. Each of these major segments is broken into three increments shipped in sequential years from '74 through '77. This schedule, together with the BP Alaska Inc. schedule for facilities installation, will provide the field with a design processing capacity of 1.3+ ~.~BOPD by summer 1977 and 2.0 + by mid '78. I will not go into detMls of the central gas injection plant or the pipeline system since.theydo not directly affect our development drilling program..However, the flow'station scheduling does affect the development drilling program, thus I will. discuss the fl°w station schedule in a little more detail. Flow Station #1, as you see, is 'scheduled for shipment in mid '75 and will b.e operational by mid '76. Flow Station #2 is scheduled for 'Shipment one 'year later, Flow Station #3 then ,, follows oneyear later. Thus, a.t startupin mid '77 we have only Flow Stations #1 and #2 ready forproduction. Each of these :flow stations will.'have 36'0 MBOPD Processing Capacity and will. require a sustained throughput of 300 MBOPD i.f the ' 1..2 MMBOPD initial piPeline throughput, is to be maintained. Let us now look at well. requirements to provide this 360 MBOPD for' Flow Stations'#1 and #2 at startup in mid '77. Page 5 I have al.ready discussed our 10-15 NfBOPD expectation for a well's initi.al production rate. Assuming an average of 13 ~fBOPD, 27+ wells will be required to provide the 360 MBOPD design processing capacity for both Flow Stations #1 and #2. We cannot complete 27 wel. ls within the core area of the field and comply with the existing spacing rule of one well. per section. We, therefore, are requesting as exception to this rule, two wells per gOVernmental section.. Exhibit #3 shows the exCeptions which we are requesting. The sections colored in red are the sections where wells will. be dril. led in. the Flow Station #1 ~.nd .#2 area under our current drilling schedule. A.R.Co'Exxon and BP acreage are included in ·this 'red area. In Order , to provide some flexibili:ty in our drilling plans, additional sec~i, ons shown in pink have been requested. For 'example, there will be no bridge across the Sag River , , , , until the spring of 1976; we prefer not to drill east of the river unti1. freezeup' in the 1975-76 winter season. The time requ:fr'ed to drill any given wel. il is not known precisely today; therefore, flexibility, in mOVement of rigs west of the Sag River may be required if we are to efficiently utilize our drilling equipment prior to 1976. The sections shaded in yel. low will produce into Flow Station #3 and will not be supplying crude to the pipeline until sometime in 1.978. Wells, however, are scheduled to 'be drilled in these sections prior to production, startup. This early drilling is required if we are to ha'Ye 360 MBOPD Page 6 production capability available for Fi]ow Stations #3 when it is completed and placed onstream in mid ]978. In summary, I am requesting oni~y spacing exceptions required prior to product~ion startup in mid '77 since unitization is expected before that time.. Atlantic Richfield has prepared a detailed plan of development based on a unitized operation. This plan provides for startup production from only Flow Stations #i! and #2 and capacity of 360 ~4BOPD for each of these flow stations. At ]~east 27 wells are required to provide this 360 MBOPD for each fl°w station. These wells cannot be completed and comply with the existing spacing orde~r of one well per governmental section. Therefore, we are requesting tw° wel]~s per goverrm~enta~ section in~ several selected sections. We are requesting exceptions beyond our immediate needs to provide some f]e×ibility in our plan, both for unit. ization considerations and for field operations. Page 7 You stated in your Notice of Public Hearing that you would seek information as to why an exception of Rule 2 of Conservation Order No. 98-B should not be changed to permanent 320-acre spacing for the entire P~udhoe Oil Pool. Atlantic Richfield Company has no objection to Prudhoe Bay Pool spacing of two wells per governmental section. In fact, we seriously considered requesting such an exception. We chose to limit our request, however, to startup well requirements based on our current plan of development. We wa~lted to give maximum assurance to all Prudhoe Bay Pool owners that this plan, which was discussed with them, would not be changed without further discussions. ' EXHIBIT 1 ATLANTIC RICItFIELD COb~%~Cf l~rcll No. 8-10-15 (D.S. i-i) 6-10-15 (O.S. i-~) 'rest Dat~ 7/i4/7i 7/29/72 %Vll'FP 1650 1530 · Flow Tests of Prudhoe Bay Sadlerochit Oil Wells Olokp 'Si ze Rate GOR (STBP~) (SCF-~TB) NA P_.roduc_tivity Ir~,.x (STBVD/pS i)- - 32/64 1,360 696 28 3,.580 790 18 EXHIBIT PRUDHOE BAY FIELD A.R.Co. OPERATING AREA CONSTRUCTION AND DEVELOPMENT SCHEDULE 7-1-77 STARTUP CENTRAL GAS INJECTION PLANT INCREMENT (I) 3 UNITS 8~ FIELD FUEL GAS UNIT INCREMENT (2) 5 UNITS INCREMENT (3) 4 UNITS FLOW STATIONS FLOW STATION FLOW STATION FLOW STATION PIPELINE SYSTEM (I) SUPPORTS (2) GATHERING LINES (3) FLOW LINES 1973 1974 19:75 I~J76 1977 1978 ! i FABRICATE BI INSTALL F~RICAT~ ~ INST~LL ~' ~,' FABRiCAYE 8~ ~NSTALL ' F~C~TF B~ INSTALL iFA~NICA7 E .IINSTALL il I ! i" I 1 3Z ~,3 34 BP OPERATING AREA ~ , ARCo i'-,. A~.~ -EXXO~ OPERATING AREA A. R.Cd~ XXON = A.R.Co.- EXXON '¢;:- .oo, ':='i!i.i:. 4 P.o.c o ~.' :: SOCAL · A.R.Co.-' EXXON 8 55 o i '-'m,,, Xr~N ' A R.C.4Z-. EXXON ARCo AtlanticRichfieldCompanyv'~"" d.-c 9 . PRUDHOE OIL POOL REQUESTED SPACING EXCEPTIONS ~P A.R.Co.- EXXON 4 ~ EXXON' AR.C,o.':EXXON AR.Co ': EX XON ' * PHILLi{ PETROLEL%'[ COklPANY's STAI< ENT WELL SPACING EXCEPTION HEARING PRUDHOE BAY FIELD CONSERVATION FILE NOo 130 DECEMBER 4, 1974 PHILLIPS PEIxO:_.t..i~M CO~'iPANY o~vns interests in oil and gas leases located within the Prudhoe Bay oil pool and is a party signatory to agreements for' unitization dated. August 6, 1969, and October 29, 1969: which have been introduced in prior hearings before this Commission. Atlantic Richfield Company is designated as the operator for the easterly portion of the Prudhoe Bay oil pool and has submitted its application and testimony reflecting its judgment a.s 'to'the necessity for spacing exceptions in the area covered by its application. Phillips prefers a development plan foliow-~ ing a regular 320 acre pa..ttern~ however, we recognize that a compromise between, reservoir development objectives and drilling economies may be necessary. We accept Atlan. tic Rich:field's representations and testimony that in its judgraent as operator, the requested spacing is required, in order to maximize early prodUction from the Prudhoe Bay oil pool for the beneEit of the working interest owners therein and the State of Alaska, and accordingly Phillips Petrolemt Company does not oppose the appiicati, on. With respect to unitiza, tion~ we are disappointed tha.~: more progress has not been made toward completion of a definitive Unit Agreement and a definitive Unit Operating Agreemen. t. We tron~ xr s ~.o]-.~ urge that all of the affected companies and the State of Alaska set completion of these doct~nents in the year 1975 as a firm goal~ STATE?lENT OF ~.!OBIL OIL CORPORATION REGARDIf~G WELL SPACIHG HEARI~'.IG PRUDHOE BAY FIELD CO:'ISERVATIO~I FILE ['lO. 130 DECE~.tBER 4; 1974 Gentlemen: In the Notice for today's Public Hearing, the Committee stated that it would seek information as to why an 'exception to Rule 2 of · Conservation Order 98-B should not be 'changed to permit 320-acre spacing for the entire Prudhoe Oil Pool and that it would inquire as to the progress of unitization negotiations for the Prudhoe Bay Field. Mobil supports 320-acre spacing for the entire Prudhoe Oil Pool. We recognize that 320-acre spacing will be required to efficiently develop the Prudhoe Oil Pool and sustain production rates. In regard to the Conservation Committee's inquiry as to the status of unitization, Mobil is not aware of significant progress between mid-1972 and the start of construction on the TAPS pipeline. Indications are that the unitization effort will commence in earnest now that the pipeline is underway. Mobil's planning for the Prudhoe Oil Pool has been made With the full expectation that there will be a field-wide Unit. We believe that a Unit will result in the maximum benefit to all concerned, including the State and the participants. It is Mobil's aim that an equitable Unit be accomplished as soon as possible, and no later than the end of 1'975. December 4, 1974 Mr. Chairman, Members of the Alaska Oil anJ '-as Conservation Committee, I am . . and T .... ~=~ing for BP Alaska We w.ish to submit a stare..-...enr_ indicating BP Alaska's position with r~-':~ r.~ ~he A~lantic Richfield request for an ex- ception ~.o Rule 2 of Conservation Order 98B concerning well spacing ~n the Prudhoe Pool. We also ~sh ~o submi~ a statement supporting Atlantic Richfield's . ccy~menrs concerning unitization of the pool. We beiia';-e ~hese statements are appropriate, as BP Aiaska is the operator for Sohio for leases in- cluJed in the Atlantic Richfield request. Sohio is a majsr ieasehotder in the field, and BP Alaska is the ~osed~ .~ operator for the western part of the ,fi e !d. The initial objective of the-two proposed unit operators is for each to establish a productive porenria! of 600,000 b/d before late 1977 for the an~i~inated initial throughput of the p:ipeline of 1.2 =:i'ilion b/d. We believe that this offtake rate can be technically justified, as can considerably hi£ine? rates as additional pipeline capacity beeches ~vailable. To achieve this productive potential, aFy. lving sound reservoir and production engineering pta-rices, more than one well pe'r section will initially be required in the central part of the f. ~ei.d. We believe that approval of the At].antic Ri c'hfie!d request to drill two wells in any of a ~.~ ....... sections, .while keeping these wells at lea~sr z'O00 feet apart, will, neither be wasteful nor ~ ......... zal to recovery, but will enable them the /iexibility to follow and modif[ as necessary a sensible unitized development scheme from both eccnonic and reservoir management viewpoints.. The results of our studies to date based on our drilling, coring and testing results leads us to the view that a denser spacing' will ultimately be required over a large part of the field. Our drilling program and that o~ Atlantic Richfield have acknowledged this, although we have approached the question of well locations in a different practical. manner. 'rhis point, that there is a need to make p?ovision for further deve].opment, has been made in our previous well-spacing requests. It is made again now in the context that we would welcome the S~ate's own proposal for a fieldwide allowabl, e of t;,,'o wells per section, but would consider that. this is only an intermediate requirement in an overall efficient field development pl. an. Atlantic Richfield has, at your request, addressed the subject of the progress of unitization nelotiations. Clearly our plans for efficiently dove.loping the £ield as a field, rather than the de~elopment of a number of ~.ndividual leases, is an indication of our commitment to effecting unitization p~-~or to the commencement of production. BP Alaska has. been distributing in good fai~h all relevant data from our drilling operations to all potential unit pa:'~icipants. Operational and related matters have been regularly discussed with all. these companies. It is clearly not a simpl, e matter to effect a unit agreement for the Prudhoe Pool; nothing of t}:is magn~itude has been attempted before and the establishment of equitable participation terms is a very difficult task. Although delays in the issuance of the pipeline permit removed the immediate incen- ~i','es which were evidenced in the 1969-].970 unitization p~-ogress, wo~'k did continue on these problems and tb.e incentives have now returned. -3- During this year BP/Sohio, Arco, and Exxon have made considerable progress in identifying and attempting to propose equitable approaches to the problems which most concern their relative positions as principal participants. We consider it timely that the other companies will be apprised of these efforts next week, as further p'~'ogress~ towards estab- lishing unitization terms acceptable to all partici- pants. We share with Atlantic Richfield their concern as to publicly discussing these sensitive issues while negotiations are in progress between the companies. We want to keep the State informed as progress is made; at this time we can only give our assurance that we are now working as quickly as possible towards completimg a unitization agreement that all companies can present to the State, and we have every expectation that this will 'be possible well in advance of any production from the field. ! Statement of Exxon's Position A.R.Co.'s Request for Exception of Rule 2, Conservation Order No. 98-B State of Alaska Hearing-Prudhoe Bay Field December 4, 1974 Mr. Chairman, members of the Alaska Oil and Gas Conservation Committee, I am (Name, Position, Company). I am appearing before you as the representative for Exxon Company, U.S.A. ~ co-lessee with Atlantic Richfield of the Prudhoe Bay Leases, to introduce into the record a statement of Exxon's position regarding Atlantic Richfield's request for an exception to Rule 2, Conservation Order No. 98-B. Exxon fully supports A.R.Co.'s request for selected 320-acre exceptions. We have made many sophisticated reservoir studies of the Prudhoe Bay Pool since the initial field rules were adopted in 1971 and are convinced by these studies that A.R.Co.'s proposed development is needed if the field is to have adequate producing capacity when the Alyeska line is ready for production. We are further convinced that efficient producing rates will not be exceeded with this program, and that additional field development, to at least 160-acre spacing, will ultimately be needed. Therefore, in response to your question, we would have no objection to changing the existing spacing rules to permit 320-acre spacing fieldwide. However, as we are anticipating a unitized operation, we regard any change in the existing spacing rule as. an interim measure until unitization, at which time revised spacing rules could be proposed by the unit owners. Regarding your question as to the progress of unitization, Exxon endorses the objective of unitization prior to production start-up and Strongly. supports efforts to achieve that objective. Throughout the development of. Prudhoe, and particUlarly for the past year, Exxon has devoted substantial manpower towards this. goal. We will-continue our commitment to this effort', as well as our support of apprOpriate unitization committees which encourage similar involvement by all the prospective unit owners. We fully recognize that the success of this' effort is dependent on the commitment and good faith efforts of every turner. Based on the past efforts of all owners, we are optimistic that such commitment will continue, and that unitization will be achieved in the timeframe outlined by Atlantic Richfield. # IPMAFUA AHG g-O 17567E338 12/04/74 ICS IPMBNGT. CSP 504.5227621 TDBN NEW ORLEANS LA 8'7 12-04 OI~IP EST ANCHORAGE AK 99591 THIS IS TO ADVISE THAT THE LOUISIANA LAND AND EXPLORATION COMPANY, AND OWNER OF INTEREST IN THE PRUDHOE BAY FIELD HAS NO OBJECTIONS TO THE APPLICATION OF THE ATLANTIC RICHFIELD COMPANY IN WHICH IT SEEKS AN EXCEPTION TO RULE 2 OF CONSERVATION ORDER NUMBER 98B WE DO, HOWEVER, URGE THE RESUMPTION OF UNITIZATION EFFORTS. DEVELOPME.NT OF OUR INTERESTS IN THE FIELD IS KEYED SOLELY TO A UNITIZED OPERATION. WE ARE AWARE OF THE STATEMENT PRESENTED ,BY PLACID OIL COMPANY, OPERATOR OF OUR GROUP, AND SUPPORT THAT ST ATEME NT THE LOUISISANA LAND AND EXPLORATION COMPANY DAVID E SIBLEY 1303 EST ~',"~.,,'~ IPMAFUA AHG · PLACID 0IL COMPANY STATEMENT DECEMBER 4, 1974 PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL & GAS OEO '_ 6 i974 Mr. Chairman, Members of the Alaska Oil and Gas Conservation Committee, I am Jerry R'' Sa~er, Consultant, representing Placid 0il Company. I would like to submit the following statement on behalf of Placid. Placid, as an owner in the Prudhoe Bay Field, concurs With the spacing exception as requested by ARCO. We recognize the ultimate need to drill additional wells on 320 acre spacing, and are in accord with amending Rule 2 of Conservation Order No. 98-B to permit 320 acre spacing for the entire Prudhoe Bay 0il Pool. In respOnse to the State's inquiry on the progress of uniti-' zation negotiations, Placid would like to state that all involved parties have acknowledged the significance of unitizing Prudhoe Bay. This fact is verified by prior efforts of all participants to achieve unitization on or before the anticipated date of pipeline start-up. These efforts were in the main suspended in mid-1972 when it became evident there would be an indefinite delay in obtaining the pipeline permit due to reasons beyond the control of the participants. Development plans for Placid, as well as all minor interest owners, are based entirely on fieldwide unitization; to develop their properties otherwize would defeat many of the primary purposes for unitization. To the best of our knowledge little ,' has been accomplished since mid-1972 towards achieving unitization. Indications are that unitization negotiations will resume shortly, and Placid strongly urges that £ull participant participation be reactivated at once. With pipeline construction start-up, a de£initive deadline £or achieving equitable unitization can be established, and it is Placid's intention to diligently work towards this goal. Unitization is o£ vital importance to all concerned and Placid believes unitization should be and can be accomplished by early 1976. (Hand Delivered to Alaska 0il and Gas Conservation Committee by William Van Alen, Placid 0il Co., December 16, 1974) STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT, ) ss. being first duly sworn on oath she deposes and says that ................ is the .... .L..e.'.~.~_~...~.'-.L.~.~..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 as it was pulS[ished in regular issues (and not in supplemental form) of said newspaper for. · o]9e period of .................. insertions, commencing on the ............ day of ]~T OV er~b eI' ,19 ...~, and ending on the .... 2 .......... :.. day of ofl~7°v ember 19. ?4 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 $29'40 which amount has been paid in full at the rate of 30 f per line; Mini- mum charge $10.00. .. Subscribed~l sworn to before 2 ~/ ]~Tove~ber me this ........day of ..................... 19....?.!+ Notary Public in and for the State ,of Alaska, Third Division, Anchorage, Alaska MY COMMISSION EXPIRES Rul 98- ~.i' N.:t~.~ ques' 'entire sect Oil Afl.antic. ;' Richfiel uhi' k~pdr~t~ upon F~a'g!;:"." A~c~n'd"f0r .these f~tY ' ti~ns is' p.~p0sed ~s follows~ . ', Two t~i~:~ '~,ef between ~elll'' :~']': .an~ aL{'pfoRet~ line where' ~n,er, ehi~ c~g~: '.'., ' .' ~ ',, ,'~,'~,':;' ~.,,,~,,,',,,:.;~: ~ ., ~streti~. '~.od~, S.~]on. 22;. 1ic .hearing to' consider 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. 130 Re: The application of the Atlantic Richfield Company for an exception to Rule 2 of Conservation Order No. 98-B to permit the drilling of two wells per governmental section on forty sections in the Prudhoe Oil Pool. Footage spacing changes for these exception wells are also proposed. On it's own motion the Oil and Gas Conservation Committee will seek information as to why an exception to Rule 2 of Conservation Order No. 98-B should not be changed to permit 320 acre spacing for the entire Prudhoe Oil Pool and will inquire as to the progress of unitiza- tion negotiations for the Prudhoe Bay Field. Notice is hereby given that the Atlantic Richfield Company has requested an order granting exception to Rule 2 of Conservation Order No. 98-B which would permit Atlantic Richfield Company to drill at a density of two wells per governmental section on forty selected sections within that portion of the Prudhoe Oil Pool which Atlantic Richfield Company expects to operate upon unitization. Footage spacing for these forty sections is proposed as follows: Two thousand feet between wells and one thousand feet between a well and a property line where ownership changes. Pursuant to Title II, Alaska Administrative Code, Section 22.540, a public hearing to consider this request will be held December 4, 1974, at 9:30 A.M. in the City Council Chamber of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, at which time the applicant and affected and interested parties will be heard. Thomas R. Marshall, Jr. Executive Secretary Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 Publish November 2, 1974 A F NOTICE OF PUBLIC HEARING ~I. STATE OF ALASKA ~ DEPARTmeNT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee Conservation File No. ~ ~ Re: The application of the Atlantic Richfield Company for an exception to Rule 2 of Conservation Order No. 98-B to permit the drilling of two wells per governmental section on forty sections in the Prudhoe Bay Field. Footage spacing changes for these exception wells are also proposed. Notice is hereby given that the Atlantic Richfield Company has re- quested an order granting exception to Rule 2 of Conservation Order No. 98-B which would permit Atlantic Richfield Company to drill at a density of two wells per governmental section on forty selected sections within that portion of the Prudhoe Bay Field which Atlantic Richfield Company expects to operate upon unitization. Footage spacing for these forty sections is proposed as follows' Two thousand feet between wells andcne thousand feet between a well and a property line where ownership changes. Pursuant to Title II, Alaska Administrative Code, Section 22.540, a public hearing to consider this request will be held , 1974, at :" ~: .~ .m. in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, at which time the applicant and affected and interested parties will be heard. Publish Thomas R. Marshall, Jr. Executive Secretary Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99501 , 1974 Atlantic'Ri6'hfie~dCompany North AmeY'~ ~n Producing Division A~aska Ref[ Post Office Box 360 Anchorage, Alaska 99510 Telephone 907 277 5637 O. G, Simpson North Alaska District Manager October 25, 1974 Division of Oil and Gas Department of Natural Resources 3001 Porcupine Drive Anchorage, AK 99504 I-so 2 77,~,.?, "~ 3 'E ,' ,~ ~', ' ~ ~.., .,. O f'7." .-, R ~"/ ........ DRAFT Attention: Mr. Homer Burrell, Chairman Oil and Gas Conservation Committee Dear Mr. Burrell: EXCEPTION TO RULE NO. 2 CONSERVATION ORDER NO. 98-B (Well Spacing) Prudhoe Bay Field - Prudhoe Oil Pool Rules Atlantic Richfield Company, as operator for itself and Exxon Company, U.S.A. requests exceptions to Rule 2 of Conservation Order 98B on selected sections in the proposed Atlantic Richfield Company operating area in the Prudhoe Bay Field. Specifically, we are requesting exceptions which, if approved.will permit drilling, completion, and production of two wells per section on forty selected sections. The selected sections are: Sections 1, 2, 3, 4, 11, 12 T10N R14E U.M. Sections 25, 26, 33, 34, 35, 36 TllN R14E U.M. Sections 1, 2, 3, 4, 5, 6 7, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18 T10N R15E U.M. Sections 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36 TllN RiSE U.M. Mr. Hi ~r Burrell, Chairman Oil anu Gas Conservation Committee October 25, 1974 Page 2 We are further requesting spacing of 2,000 feet between wells and 1,000 feet between a well and a property line where ownership changes. Below is a brief summary of Atlantic Richfield Company's current plans for development of the Atlantic Richfield Company operated area of the Prudhoe Oil Pool. Atlantic Richfield Company's plan is to produce initially into the center and easternmost flow stations when the ?rudhoe Bay Field is placed on production, expected in mid 1977. The western flow station will be placed on production one year later. A total of 66 wells are expected to be drilled at production startup, with 27 wells completed to produce into both Flow Stations #1 (center) and #2 (east) and 12 wells drilled but not completed which will later produce into Flow Station #3 (west). These 66 wells will be drilled where the gross oil sand thickness is expected to exceed 200'. Additional wells will be drilled to supply crude to Flow Station #3 for its startup in mid 1978 and will be drilled on an uninterrupted basis also within this 200' gross sand thickness. These wells have not been included in our request since we expect the reservoir to be unitized prior to production startup and our unitization submission will address the spacing for these wells. Development of the field upstructure and down- structure of this 200' thickness is expected but will be dependent on future reservoir studies and production performance of the reservoir. Except for the changes in spacing noted above, all wells will be drilled according to the existing pool rules and applicable statutes and regulations of the State of Alaska. Mr. H~,.~er Burrell, Chairman Oil and Gas Conservation Committee October 25, 1974 Page 3 Should a public hearing for the above requested exception to Rule 2 of Conservation Order No. 98-B be necessary, we would appreciate your scheduling the hearing on November 12 or November 13, 1974. Very truly yours, OGS: PBN: j a IPHAFUA AHG 1-052506C$50 12/16/74 TWX GETTY OIL HOU 01 HOUSTON, TEXA~ PHS THOMAS R, MARSHALL, JR. E XEC UT I VE SE CRET AR Y "~ OIL AND GAS CONSERVATION COHHITTEE $001 PORCUPINE DRIVE ANCHORAGE, ALASKA 99.50 1 WITH REFERENCE TO THE DECEHBER 4, 1974 PUBLIC HEARING TO CONSIDER EXCEPTION TO RULE 2 OF CONSERVATION ORDER 95-B, PRUDHOE BAY FIELD, GETTY OIL COHPANY SUPPORTS SRO-ACRE SPACING FOR THE PRUDHOE BAY OIL POOL, WE FEEL THIS SPACING DENSITY WILL EVENTUALLY BE NECESSARY TO HAINTAIN ANTICIPATED FLOW RATES FOR THE ALYESKA PIPELINE, GETTY OIL COMPANY WAS A SIGNATORY PARTY TO AGREEMENTS PERTAINING TO UNITIZATION DATED AUGUST 6, 19GD, AND OCTOBER 29, 1969. IMMEDIATELY THEREAFTER AND UNTIL MID-ID72, GETTY OIL PROVIDED PERSONNEL FOR PRE- UNIT COMMITTEES AND ACTIVELY PARTICIPATED IN THE WORK OF THOSE COMMIT TEES, DEVELOPMENT PLANS FOR GETTY OIL COMPANYS PROPERTIES IN THE FIELD HAVE BEEN BASED ENTIRELY ON THE ASSUMPTION THAT A FIELDWIDE UNIT WOULD BE FORMED PRIOR TO START UP OF PRODUCTION, WE LOOKED TO THE MAUOR INTEREST OWNERS IN THE FIELD BACK IN 196~-7~., AS WE DO TODAY, TO TAKE THE LEAD IN FINDING SOLUTIONS TO THE MANY TECHNICAL PROBLEMS THAT MUST BE RESOLVED TO ACCOMPLISH FI~-LDWIDE UNITIZATION AND IN SEEKING A BASIS OF PARTICIPATION WHAT WILL ENSURE THAT EQUITY IS PRESERVED FOR ALL OWNERS, BOTH LARGE AND SMALL, , IT IS GETTY OIL CO.~PANYS GOAL TO WORK TOWARD EQUITABLE UNITIZATION OF THE PRUDHOE BAY FIELD AT THE EARLIEST POSSIBLE DATE AND HOPEFULLY NO LATER THAN EARLY IN CLYDE B, COTTON EXPLORATION SUPERVISOR ALASKA OPERATIONS GETTY OIL CO~IPANY !74~- EST IPMAFUA AHG T. elaphone call received 12/17/74 12:15 p.m. fro~.~.: Amerada Hess Corporation, P. O. Box 20~0, Tulsa, Ok'l~ho~a. Following letter put in mail today: Mr. Homer L. Bu_~:~-ell Cha irman Oil and Gas Conservation Committee 3001 Porcup'~.~e Drive Anchorage, Alaska 99501 Dear Sir: The Amerada Hess Corporation, at the "exception to Rule 2, Order No. 98-B" hearing on December 4, 1974, in Anchot'age, elected to submit a written statement before the December 17, 1974 closing date of the hear ing. Our position is that we support ARCO's proposed two wells per section; however, we prefer that a regular 320 acre spacing pattern with wells in diagonal quarter sections be adopted. Amerada Hess Corporation concurs with ARCO's proposed unitization date of early 1976 and is pleased that work has now been resumed to accomplish this goal. Very truly yours, C. R. Richard cc: Every member of the field developinent subcommittee TESTIMONY PRESENTED BY A. K. HOWARD, BP ALASKA INC. REQUEST FOR EXCEPTION TO SECTION 2159 ALASKA OIL AND GAS c~NSERVATION REGULATIONS AND STATUTES STATE OF ALASKA HEARING - PRUDHOE BAY FIELD FEBRUARY 16, 1973 Mr. Chairman and members of the Alaska Oil and Gas Conservation Committee. It is our intention at this hearing to present testimony in support of our request for an exception to Section 2159 of the Alaska Oil and Gas Conservation regulations and statutes. This exception, if granted, would permit BP Alaska to produce gas, without interruption, from a well in order to provide fuel to operate~an electric power plant. Reference is made to the letter on this subject, dated January 17, 1973, from BP Alaska Inc. to the Director of the Division of Oil and. Gas, with Exhibits A, B and C attached thereto. . BP Alaska intends to install and commission the first stage'of a central electric power plant which will ultimately provide power for the whole Prudhoe Bay Field operation. At the same time, it is the intention to install and commission an operations camp in the BP Operating Area. The camp will be a permanent facility and will require a supplylof electricity for light and heat. The power station commissioning will'meet this requirement. In addition, the Power Plant will supply electricity for heat ~nd light to gathering centers to permit installation work to be carried out within them (see Exhibit C for general layout of facilities to be Supplied with electric power during this initial stage). -1- Commissioning of the first stage of the power plant and the camp complies with the work plan for the orderly development of the field prior to the start of production to the trane-Alaska pipeline. The Committee will appreciate the need to commission this power plant, which is a vital part of the Prudhoe Bay development and which will enable other installation work to proceed as well as permitting the commissioning and operation of the new permanent camp. Once oil production to the pipeline is established, associated gas will become available and some of this gas will. be used for power plant fuel. In the meantime, it is our intention, subject to your approval, to obtain gas to fuel the plant from a well on Pad C, which is conveniently located nearby. One well, C-3, will be drilled from Pad C for. gas supply~and another from the same pad, Well C-4, will be used. for injection~of separated liquids. These wells Will be drilled and completed in accordance.With~Prudhoe Oil Pool Rules. The gas supply well, although initially, completed in the gas zone, will be deepened and completed as an oil well when gas from this source is no longer required. A gas treatment plant will be installed at Pad C to separate liquids from the stream and prepare, the gas for transmission to the power plant. The final process design for this plant is currently being prepared and will conform with state of Alaska regulations and statutes in respect of metering and other requirements. The separated liquids will be injected into the Sadlerochit oil pool below the gas/oil contact via the Well C-4, referred to as the injection well. -2- , Our request for an exception to Section 2159 arises from the need to ensure the continuous operation of the power plant when other factors may dictate an interruption of the fuel gas supply. Our understanding of the Oil and Gas Conservation regulations and statutes is that our required gas production will generally fall within the allowable offtake specified in Section 2159, based upon. the daily oil production to the ARCO/Exxon topping plant. Our calculations, based on an average day's oil production to the tOpping plant, indicate that.our expected gas requirements of 5 million SCFD with peaks of 8 million SCFD fall within the allowable, but to guard against occasions when oil production is interrupted or for other reasons, we request the exception'.so that we may be permitted to produce this gas independently of oil production. To give an idea of the'quantity of gas represented by this project . . we calculate that, over the period from the start of the power, plant operation until associated gas is available from oil produced, from 3/100ths to 5/100ths of 1% of the total recoverable gas cap gas will have. been produced. To conclude, gentlemen, BP Alaska requests permission to produce gas from the Prudhoe Oil Pool gas cap. The normal production rate will be approximately 5 million SCFD, which is the estim~d quantity required to operate the first stage installation of the power plant at the forecast 16ad. On occasions, particularly during the winter months, the power plant . load will increase, requiring up to 8 million SCFD of gas. The duration of the requirement for this gas production is pl'anned to -3- be from early 1974, until associated gas in sufficient quantitites becomes available from oil production to the trans-Alaska pipeline.-- an estimated 3-year period. We believe the proposed use of the gas is essential to the development of the field and will constitute a beneficial use of the gas. Your favorable consideration of this proposal would be appreciated and I wish to thank you for your attention. -4- REQUEST FOR EXCEPTION TO RULE 2, CONSERVATION ORDER NO. 98-B STATE OF ALASKA HEARING-PRUDHOE BAY FIELD February 16, 1973 Testimony Presented by A. K. Howard, BP Alaska Inc. Mr. Chairman and members of the Alaska Oil and Gas Conservation Committee. Since the discovery of the Prudhoe Bay Field, two hearings have been held (November~13-14, 1969 and February 9, 1971) to establish Pool Rules. During the course of this presentation, I shall refer to testimony presented to you at both of these hearings. BP Alaska Inc. has requested this hearing to seek an exception to Rule 2 of Conservation Order No. 98-B which, if approved, wOuld permit the completion of two oil wells per governmental section in 19 selected sections within the BP Alaska operating area. In this context, reference is made to a letter from BP Alaska Inc. to the Director of the Division of Oil and Gas, dated January 16, 1973, and to Exhibit "A" attached thereto, which counsel has asked to be included in the record. As is generally known, Bp Alaska is operating in the western part of the Prudhoe Bay Field. An initial plan for this operating area, showing actual and proposed bottom hole well locations, is presented as Exhibit "A". The 72 wells shown corn. prise the first stage development wells in this Portion of the field. At the present time, development drilling is proceeding with one active rig and 41 scheduled future production wells have been drilled and suspended. It is BP Alaska's wish to continue drilling first stage development wells and the planned sequence for this drilling calls for a number of so-called 320 acre spaced wells. It is readily apparent from the Field Development Plan Map (Exhibit "A") that, having drilled three more wells, no programmed addi- tional wells could.be completed in the BP Alaska operating area within BP Oil -2- Corporation's lease area under existing rules. Testimony presented in February 1971 indicated that negotiations were proceeding with the objective of forming a Prudhoe Bay Unit. These negot-. iations are continuing and BP Alaska's development plan anticipates the successful conclusion of the negotiations prior to production. For this reason, it is not BP Alaska's wish to drill wells within BP Oil Corporation leases situated in the ARCO operating area, which could be completed under existing pool rules. Similarly, until a unit is formed, there are difficulties associated with drilling wells on other companies' leases, and the development drilling program for the immediate future confines the wells to be drilled to BP Oil Corporation leases in the BP Alaska~' operating area. / Having disclosed our progress and outlined our immediate future plans for the development of our operating area, I will now elaborate a little on the overall philosophy which has led to our request at this time for an exception ¢ to Conservation Order No. 98-B, Rule #2, regarding infill wells. The Committee will be aware that, primarily as a result of delays in the issuance of the construction permit for the trans-Alaska pipeline, drilling activity is at a low ebb on the North Slope, as compared with the work being conducted at about the time of the 1969 North Slope lease sale. At that time, in the Prudhoe Bay area alone, several rigs were actively engaged in develop- ment or appraisal drilling and numerous support services camps were located in the area, providing employment for many hundreds of people. During the past year, only one rig has been continuously utilized in this area and the support consists mainly of sporadic projects which provide barely sufficient justifi- cation for many service companies to continue operating. If the rig currently -3- on contract to BP Alaska and engaged in drilling Prudhoe Bay development wells were to shut down, there would be further reductions in employment levels which would not only affect the drilling contractors, but have serious reper- cussions in other companies as well. During the years that BP Alaska Inc. has been engaged in drilling and evaluating the Prudhoe Bay Field, it has acquired expertise in dealing with the problems peculiar to the area. Its staff, and those of the service . companies, have become aware, through training and experience, of acceptable and efficient methods of dealing with such matters as the cold environment, the permafrost, the delicate ecosystem, and many others. We believe that it is in the interest of our company, the oil industry in Alaska, and the State of Alaska, to continue operating and so maintain these personnel as an effective force. I will now make a few remarks concerning the approach BP Alaska Inc. has adopted for the initial development of its operating area for the Prudhoe Bay Field. Your committee was presented with geologic and other information on the Prudhoe Oil Pool, at the Field Rules Hearing held on February 9, 1971, which gave a general description of the field. Since that hearing BP Alaska has c,onducted a number of additional well production tests, the results of which are now presented as Exhibit "B" (For the sake of completeness, we have summarized the production test results obtained by BP Alaska to date in Ex- hibit "B". ) The President of Alyeska is on public record as having indicated the trans- Alaska pipeline is being designed for an initial capacity of 600,000 BPD, which -4- capacity may be increased to an ultimate throughput of 2,000,000 BPD. We cannot commit ourselves to a maximum oil producing rate for the Prudhoe Oil Pool at present, particularly as Unitization has not yet been concluded. However, we are confident that the reservoir will sustain a substantially higher rate than the initial pipeline capacity of 600,000 BPD. It is not uncommon in reservoirs of this nature to anticipate as a rule of thumb a 25/30-year life. The recoverable reserves have been quoted at 9.6 billion barrels and this leads us to believe the reservoir could average a crude oil production rate of approximately 1,000,000 BPD over a 25-year life. During the early stages of production, it can be reasonably expected the production level could be significantly higher than the average rate. BP Alaska's first stage development plan is predicated on its ability to pro- duce half of the total field offtake during these early stages of production. Verbal testimonY presented by Mr. Anderson '(ARCO)"at the November 1969 Field Rules Hearing (refer to R & R Court Reporter's transcript, Page 59), indicated that one well could adequately drain a 640-acre section and, assuming each well were capable of producing 10,000 BPD, 100 wells could produce 1,000,000 BPD. We support this testimony, although struct'ural features could influence the drainage pattern, in certain areas. In pursuing this matter further and with reference to the production test results shown in Exhibit "B", it is evident that not all wells will be capable of sus- taining a production rate of 10,000 BPD, and some. allowance must be made for wells shut in for service or other reasons. Similarly, by assuming a production rate higher than 1 milliOn BPD, a need for additional wells arises. Hence, the 72 wells programmed should adequately provide the required pro- duction from the BP Alaska operating area. -5- The committee will note that the proposed infill wells are located in areas of the field where a relatively thick oil column can be ex- pected and not on the flanks of the structure. We believe that, by loc- ating the wells here, the maximum producing life can be expected from them while minimizing overall well requirements. It may well be necessary later to locate wells on the flank of the structure; however, at the present stage of our knowledge of the field, we have not planned such wells. In concluding this testimony, the Committee will be aware that an exception to Conservation Order 98-B, Rule 2, is required only at the time of well completion. The Committee, however, will appreciate that BP Alaska could not commit funds for drilling without receiving the assurance that this proposal is acceptable to the State. Gentlemen, I wish to thank you for your attention and I will'be glad to answer any questions you may have to the best of my ability. Well No. 27-11-14 04-!1-13 Test Date 6/30/69, 7/01/69 8/21/70 · BP ALASKA INCo prOductivity of Oil Wells FlOw-Tested in the Prudhoe Bay Field ' Sadlerochit Reservoir WHFP psig 1360 1105 Choke Size 86. Rate STBPD 10,020 15,500 GOR Scf/bbl 837 722 Exhibit B Productivity Index ' STBPD/psi 25 30-11-14 14-11-13 18-11-13 01-11-12 26-11-13 11/10/70 7/26/71 9/27/71 ' 7/12/72 · 11/02/72 1265 1076' 1100 1240 1095 '64 -. 12,000 19,400 1,700 2,500 5,400 741 .- "750 . " 730 690 '710 .. · · 68 22 10
