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Home My WebLink AboutCO 553 ImagtÌprOject Order File Cover Þage XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable jY direct inspec~n of the file. G 0 553 Order File Identifier Organizing (done) D Two-sided 111IIII111111111111 o Rescan Needed I1III1I111111111111 R:1CAN ¢ Color Items: D Greyscale Items: DIGITAL DATA OVERSIZED (Scannable) D Maps: D Other Items Scannable by a Large Scanner D Diskettes, No. D Other, No/Type: D Poor Quality Originals: BY: ~ Date: f /0 00 OVERSIZED (Non-Scannable) ~9S of various kinds: Hff~:V~ D Other:: o Other: NOTES: /s/ vwJ 1111111111111111111 wP Project Proofing BY: ,,-CMaria) I ) Date: q, Db /s/ Scanning Preparation BY: C Maria ). , x 3q = I Date: I, q oh + = TOTAL PAGES I 6'3 (Count does not include cover sheet) IliA:£) /5/ V V V 1111111111111111111 Production Scanning --" . Page Count from Scanned File: 1..5 L- (Count does include "7 sheet) Page Count Matches Number in Scan ling Preparation: V YES ( Maria ") Date: I , Of 1 D0 If NO in stage 1 page(s) discrepancies were found: Stage 1 NO D m BY: /s/ Stage 1 YES NO BY: Maria Date: /5/ III . 111111111 Scanning is complete at this point unless rescanning is required. ReScanned I - III BY: Maria Date: /s/ Comments about this file: Quality Checked 1111111111111111111 10/6/2005 Orders File Cover Page. doc INDEX CONSERVATION ORDER NO. 553 Happy Valley Field Happy Valley Beluga/Tyonek Gas Pool Deep Creek Unit 1. November 14, 2004 Newspaper article 2. December 1, 2004 Unocal's application for pool rules for the Happy Valley Field (confidential portions held in secure storage) 3. December 10, 2004 Notice of Public Hearing, Affidavit of Publication, email distribution, mailings 4. January 13, 2005 Public Hearing sign -in sheet 5. January 13, 2005 Public Hearing transcript 6. January 13, 2005 Additional information filed by Unocal 7. January 27, 2005 Letter from AOGCC to Unocal regarding confidential of portions of application 8. February 3, 2005 Unocal's depth structure map 9. November 7, 2005 Email from operator to AOGCC regarding Happy Valley SSV test frequency INDEX CONSERVATION ORDER NO. 553 ,) ') STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICATION OF UNION OIL COMPANY OF CALIFORNIA (UNOCAL) for an order to establish pool rules for development of the Happy Valley Beluga/Tyonek Gas Pool, Deep Creek Unit, Kenai Peninsula, Alaska IT APPEARING THAT: ) Conservation Order No. 553 ) ) Happy Valley Field ) Happy Valley Beluga/Tyonek Gas Pool ) Deep Creek Unit ) March 8, 2005 1. By application dated December 1, 2004, UNOCAL in its capacity as Unit Operator of the Deep Creek Unit (DCU) requested an order from the Alaska Oil and Gas Conservation Commission ("Commission") to define a proposed Happy Valley Beluga/Tyonek Gas Pool within the DCU and to prescribe rules governing the development and operation of the pool. 2. Notice of a public hearing was published in the Anchorage Daily News on December 10, 2004. 3. The Commission held a public hearing January 13, 2005 at 9:00 AM at the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska. FINDINGS: 1. Operator: UNOCAL is the Operator of the property in the area proposed for development. UNOCAL uses the name Happy Valley Field in reference to this development project. 2. Development Area: The Happy Valley Field is within the northern portion of Deep Creek Unit, and located approximately six miles east of the town of Ninilchik on the Kenai Peninsula. 3. Delineation History: Unocal drilled the Happy Valley #1 discovery well in Sec. 22-T2S-R13W to a total measured depth of 10,871 feet in June 2003. The well tested gas from two different Lower Tyonek reservoirs. The Happy Valley field discovery was confirmed by the Happy Valley #2 well drilled in July, 2003. This well flowed gas from two other Lower Tyonek reservoirs not seen in Happy Valley #1. Unocal has drilled nine (9) additional delineation wells and acquired approximately 65 line miles of new 2D seismic data over the area in an attempt to delineate the structure and reservoir distribution within the field. The Beluga and ) Conservation Order 55.) March 8, 2005 ') Page 2 Tyonek Formations have been shown to be commercially productive in a number of these wells. Unocal has constructed a 15-mile natural gas transmission pipeline to, and gas production facilities at, the Deep Creek Unit, Happy Valley 'A' Pad. Gas sales commenced November 5, 2004. 4. Pool Identification: The proposed Happy Valley Beluga/Tyonek Gas Pool is an accumulation of hydrocarbons common to, and correlating with, the interval between the measured depths ("MD") of 2,997 feet and 1 0,046 feet in the Superior Happy Valley #31-22 Exploration Well. 5. Stratigraphy/Reservoir Properties: The Happy Valley field currently produces dry gas from both Beluga and Tyonek reservoirs. Gas composition is 98+% methane. The reservoirs are all relatively low permeability. The entire reservoir system was deposited in freshwater channel and braided stream environments. Individual sandstone intervals are commonly discontinuous over the areal extent of the field. The lenticular and discontinuous, low permeability sandstones form a complex reservoir. a. Beluga Formation: The Beluga Formation reservoirs vary in depth from approximately 3,070' TVD to 5,800' TVD. Porosity ranges from 10- 18%. The reservoir pressure varies from a 0.44 to a 0.46 psi/ft gradient. Obtaining measurable gas flow from the Beluga Formation has required multiple intervals to be open simultaneously. Nodal analysis has been used to estimate reservoir quality in the 0.05-0.5 millidarcy (md) range for the Beluga Formation. Intervals exist that have a lower permeability but intervals have not been encountered where a higher permeability has been calculated. It is generally accepted that the Beluga Formation reservoirs have high clay content. Based on the reservoir quality of this rock, liquid flow is inefficient at best. Water production has not been observed and it is expected that a wet interval will produce as an unconsolidated sand- providing fill into the tubing. b. Tyonek Formation: The Tyonek Formation reservoirs vary in depth from approximately 5,800' TVD to 10,108' TVD. The reservoir pressure has an approximate 0.44 psi/ft gradient. Porosity ranges from 10-18%. The lowest relative permeability to gas measured with gas flow has been 0.025 md while the highest relative permeability to gas measured has been 1.8 md. The majority of the Tyonek Formation reservoirs encountered have permeabilities less than 1.0 md. It is generally accepted that the Tyonek Formation reservoirs have a high clay content including mobile clays. Consequently, intervals deemed wet have been done so based on a fluid level rise over an extended period of time. Based on the reservoir quality of this rock liquid flow is inefficient at best. ) Conservation Order 55.) March 8, 2005 ') Page 3 6. Structure: The Happy Valley structure is an open doubly plunging anticline, oriented NE-SW with minor NW-SE trending faults. The closed area on the crest of the structure exceeds the proposed pool area. 7. Trap Configuration: Well test information combined with stratigraphic correlations indicates that typical effective drainage areas for Happy Valley Field wells are on the order of 100's of acres. These data indicate that some stratigraphic discontinuities are present in each gas sand. Future drilling may establish if stratigraphic traps are present on the flanks of the Happy Valley Anticline. 8. In Place and Recoverable Gas Volumes: The following summarizes estimated in place gas and recoverable gas volumes forthe Beluga and Tyonek Formations: Beluga Tyonek Gas in place, BCF Recoverable Gas, BCF 56.3 23 37.4 15.6 9. Reservoir Management: Due to the measured low flow rates from individual reservoirs, it will be commercially necessary for Unocal to commingle production from the Lower and Upper Tyonek and Beluga Formation reservoirs. Consistent with the approved single Happy Valley Participating Area, Unocal proposes a single Happy Valley Beluga/Tyonek Pool encompassing all of the currently identified Beluga and Tyonek Formation reservoirs within the field, and also any future new reservoirs of the same age that might be found within the mapped limits of the Happy Valley Field. This will maximize resource recovery by: · Increasing the number of take points in these low permeability reservoirs. · Improving unloading of liquid by combining production from multiple tight intervals. · Commercializing a resource otherwise likely to not be recovered. · Improving efficiency of stimulation operations. · Lowering the economic threshold of field development, reducing the abandonment flow rates of wells, reducing operating expense, thereby producing longer and recovering more reserves. To ensure optimal resource recovery, Unocal proposes to limit initial commingled producing intervals to within 4000' vertical feet within the same wellbore. Consistent with the complex nature of these low permeability reservoirs, Unocal is requesting no restrictions on wellbore spacing as tight spacing is expected necessary to maximize resource recovery. ) Conservation Order 55-, March 8, 2005 ) Page 4 10. Reservoir surveillance plans: Unocal requests that the annual bottom hole pressure measurement requirement be satisfied by a single key well pressure survey conducted at least once per year. Bottom hole pressure may be computed from surface measurements taken with an accurate pressure gauge provided that it can be accurately extrapolated to bottom hole conditions. The pressures will be referenced to 6700' TVD. The original reservoir pressure at 6700' ss is 2948 pSla. As the proposed pool is comprised of low permeability reservoirs, wellbore pressure will be generally less than reservoir pressure limiting cross flow potential. Estimation of flow contribution and detection of cross flow within the pool will be conducted through the use of production logs. 11. Wellbore Construction: Unocal proposes that wells drilled in the Happy Valley Beluga/Tyonek Pool will have a minimum surface casing point 1000 ft TVD and a maximum depth of 3000' TVD. In addition UNOCAL requests the following drilling and operational approvals; a. Unocal requests diverterless drilling provided no shallow gas hazards are identified. b. EXCAPE technology may be employed to optimize resource recovery. With the EXCAPETM technology no production packer is utilized. Further, it is requested that production packer requirements of 20 AAC 25 .200( d) be modified to accept annular cement as a packer for EXCAPE wellbores without requirement of a mechanical integrity test. c. Unocal requests the Alaska Oil and Gas Conservation Commission (AOGCC) not establish any requirement for installation of sub-surface safety valves (SSSVs) in wellbores in the Happy Valley field. Unocal proposes to install a surface safety valve (SSV) on each well that is capable of unassisted flow to surface. Unocal also proposes to conduct annual pressure testing of the SSV to maximum anticipated shut-in pressure. CONCLUSIONS: 1. Pool Rules for the development of the Happy Valley Beluga/Tyonek Gas Pool within the Happy Valley Field in the Deep Creek Unit are appropriate at this time. 2. The Happy Valley Beluga/Tyonek Gas Pool reservoirs are composed of channelized fluvial and braided stream deposits that have poor lateral continuity and typically very low permeabilities. The pool is composed of numerous individual low productivity sandstone intervals. 3. Low individual sandstone productivity and poor interwell continuity will require commingling a large number of sands, potentially more than twenty per well. ) Conservation Order 55:' March 8, 2005 ) Page 5 4. Due to low permeability reservoirs, wellbore pressure will be generally less than reservoir pressure limiting cross flow potential. Determination of flow contribution and indication of cross flow within the formations will be conducted through the use of production logs. 5. The Happy Valley Field is in the early stages of development. Phase I development has focused upon determination of reservoir delivery and well operabili ty. 6. The Happy Valley Field is a series of gas accumulations with elements of both structural trapping and stratigraphic discontinuities. Future drilling may encounter off-structure stratigraphic traps and the Happy Valley Beluga/Tyonek Gas Pool area may need to be expanded. 7. Phase II activities may include but are not limited to additional drilling from a second pad (B), and refining pay recognition and stimulation techniques. 8. Effectively draining the complex low permeability Happy Valley Beluga/Tyonek Gas Pool reservoirs will require unconventionally close gas well spacing, the optimal spacing for these wells has not yet been determined. 9. Monitoring of reservoir performance on a regular basis will help ensure proper management of the pool. Annual reports and technical review meetings will keep the Commission apprised of reservoir performance and will ensure that future development plans promote greater ultimate recovery. NOW, THEREFORE, IT IS ORDERED: The following rules apply to development operations for the Happy Valley Beluga/Tyonek Gas Pool within the following affected area: Seward Meridian Township Range, SM T2S-R13W Lease C-061588 C-061589 ADL 384380 C-061590 Sections Section 15: SEl/4SW1/4 Section 21 E1/2NEl/4, SWl/4NEl/4, El/2SWl/4, SE1/4 That portion of US Survey 9496, lots 3 & 4 within Section 22, W1/2 and the Wl/2NEl/4, Section 22: Wl/2 and NWl/4NEl/4 excluding lots 3 and 4 of US Survey 9469 Section 27: NW1/4NWl/4 Section 28: NEl/4, NE1/4NW1/4, Sl/2NW1/4, Nl/2SWl/4, NWl/4SE1/4 ') Conservation Order 55:., March 8, 2005 ) Page 6 Rule 1 Pool Definition The Happy Valley BelugalTyonek Gas Pool is defined as gas bearing intervals common to and correlating with the interval between the measured depths of 2,997 and 10,046 feet in the Superior Happy Valley No. 31-22 exploration well. Rule 2 Well Spacing Spacing units shall be a minimum of 10 acres. The Happy Valley BelugalTyonek Gas Pool shall not be opened in any well closer than 1500' to the external boundary of the Deep Creek Unit. Rule 3 Wellbore Construction Practices a. Wellbores shall not be perforated for production through intervals exceeding 4,000 vertical feet. b. Sub-surface safety valves (SSSVs) shall not be required in wellbores in the Happy Valley Field equipped with surface safety vàlves. Rule 4 Annual Reservoir Review An annual report must be filed on or before April 1 of each year. The report shall include an overview of reservoir performance, future development and reservoir depletion plans, and surveillance information for the prior calendar year, including: a. Reservoir pressure map at datum, summary and analysis of reservoir pressure surveys within the pool. To the extent possible, estimates of reservoir pressure shall be reported by major formation (Beluga and Tyonek); b. Results and, where appropriate, analysis of production, temperature, tracer surveys, observation well surveys, and any other special monitoring surveys; c. Estimates of yearly production subdivided by major contributing zones; d. Progress of plans and tests to expand the productive limits of the pool; and e. Results of surface safety valve testing. ) ) Page 7 Conservation Order 55:.; March 8, 2005 Rule 5 Administrative Action Unless notice and public hearing is otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change does not promote waste or jeopardize correlative rights, is based upon sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater. /?) ~ Daniel T. Seamount, Jr., Commissioner Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it may file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 PM on the 23rd day following the date of the order, or next working day if a holiday or weekend, to be timely filed. The Commission shall grant or refuse the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. An atTected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court. Where a request for rehearing is denied by nonaction of the Commission, the 30 day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., 101h day after the application for rehearing was filed). :0 553 ) ) Subject: CO 553 From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Tue, 08 Mar 2005 12:42:42 -0900 T6: undi~clo~ed-r~cipierüs:; ...... . .. . . ....... ................' ..... ... . ..... ..... ..... .... . '.. ..... '.' D'Ce.:.. Rogert !EJ\1i~tz <r?~~~1pil}tz~law. st~t~:.ak.µ~<,Çl1rist~n~Hatls~l1 ~:h~sêp@i9$~9;~tat~:pk;hf ;r~rqept~þ~l~~h~bþl~tl@k~·~P~,.§o~dr~'s¡f~~~ ....... . .. .... {~.t~\Vma§D@~.P..,Q9m~.~. .~.99!~.....~.....,F~niy.,.~~y~.0~i·.~,~t~~~.q~~~t~s~.~..9~~~~.....st~ekj·.i...~st~~k:J.@uno?~I,..co111~.' .~q?I~~...<e9.~.~~:w~trlt~f~e·~i.~.~fg>~·¡.·fo~l~r~~.~.q:~IF.·:.;<~.g§.~.ra~s'd~I,e~f,?ì,~.~e~;·,....t~rnj·r·.~'.'.·.Gtr,~r.,~..~ªq·l..?o~>,.. ..... 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"Jarpes M.·Ruud" <j ames.ni.ruud@conocophiilips.com>, Brit Lrvely<mapa1aska@aknet>,jah <j ah@dnr.state.ak.us>, Kurt E Olson <kurt_olson@legis.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hartley <mark_hanley@anadarko.com>, loreu--,leman <loren_Ieman@gov.state.ak.us>, Julie Houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, Suzan J Hill <suzan_hill@dec.state.ak.us>, tablerk <tablerk@unoca1.com>, Brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us:;>, bpopp <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonmobi1.com>, marty <marty@rkindustria1.com>, ghammons <ghammons@ao1.com>, rmclean <rmclean@pobox.alaska.net>, mkm7200 <mkm7200@ao1.com>, Brian Gillespie <ifbmg@uaa.alaska.edu>, David L Boelens <dboelens@aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Schultz <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Bill Miller <Bill_Miller@xtoalaska.com>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoi1.com>, Garry Catron <catrongr@bp.com>, Sharmaine Copeland <copelasv@bp.com>, Kristin Dirks <k.ristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoi1.com>, John Tower <John.Tower@eia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, Vaughn Swartz <vaughn.swartz@rbccm.com>, Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe 1 of2 3/8/2005 12:43 PM ~o 553 ) ) <lambes@unocal.com>,.j ack· n~)Yelr «j8:ck.new~ll@acsal'lska;n~t>,.J ames· Scherr <James.Scherr@m~s.gov>, dayid rQþy·5])avid~Ropy@mms.gov>,·. rim ,Lawlor <Tim _ Lawlor@ak.blm..gov=::., LYll~da:'Kahn<Lynncla_ Kahn@fws:gov>,. Je?/· Dethlefs <J erry.C.Detþlef~@cono.cophi~lips;q01J1::>,:JeBY])e~hl~fs ..,<n161 7@?onosoph~Hips.com>,·, crockett@~?g~.org~...,Tatnr~a..SI17ffield <Sl1~ffi~ld($a()ga;Qrg>,. qynthi~·BI~civer'l , <::brçn__ rhCiyer@~dniip..sta.~~.ak.~S?, ! ! ! ' , ',,:;:,'1 ;" : ' I ~ : , ; , ; : I I " I ;1 :' I,:;:" ¡ " ,:i: : :' ~ ; : , ; !" ":(:·i! II 1',,:;-, I ,: !':¡';', 'I ',;:i:', '1,;" I';,:!", 2 of2 3/8/2005 12:43 PM Citact Petrole urn Corporation 'Þo Box 3758 Tulsa, OK 74136 Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Robert Gravely 7681 South Kit Carson Drive Littleton, CO 80122 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 Jerry Hodgden Hodgden Oil Com pany 408 18th Street Golden, CO 80401-2433 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 John Levorsen 200 North 3rd Street, #1202 Boise, 10 83702 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 David Cusato 200 West 34th PMB 411 Anchorage, AK 99503 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Darwin Waldsrnith PO Box 39309 Ninilchick, AK 99639 James Gibbs PO Box 1597 Soldotna, AK 99669 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Richard Wagner PO Box 60868 Fairbanks, AK 99706 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 North Slope Borough PO Box 69 Barrow, AK 99723 4~d. /$/~ • • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7 Avenue, Suite 100 Anchorage, Alaska 99501 Re: AN ORDER rescinding those rules within ) Docket Number: CO -10 -21 existing Conservation Orders relating to ) Other Order No. 66 well safety valve systems. ) ) Statewide, Alaska ) January 11, 2011 IT APPEARING THAT: 1. On October 13, 2010 the Alaska Oil and Gas Conservation Commission (AOGCC or Commission) formally adopted new regulations relating to well safety valve systems, at 20 AAC 25.265. 2. The newly adopted well safety valve system regulations underwent final review by the Regulations Section of the Alaska Attorney General's Office and were forwarded to the Alaska Lieutenant Governor's Office on October 28, 2010. 3. The new regulations were signed by the Lieutenant Governor and took legal effect on December 3, 2010. 4. To ensure consistency with the new regulations, the AOGCC, on its own motion, proposed to rescind part or all of the outdated rules within existing Commission Orders relating to well safety valve systems. 5. On November 4, 2010, pursuant to 20 AAC 25.540, the Commission published in the Alaska Daily News notice of opportunity for public hearing on December 6, 2010. 6. The Commission received written comments in response to its public notice, and held a public hearing on December 7, 2010. 7. Oral testimony and written comments were provided at the December 7, 2010 hearing. FINDINGS: 1. Well safety valve systems are regulated under newly- adopted 20 AAC 25.265, which consolidates the requirements previously established in legacy documents, policies, and statewide guidelines relating to safety valve systems. 2. Thirty -four existing Commission Orders contain rules governing well safety valve systems. Twenty of those Orders contain broad regulatory requirements for safety valve systems that are now covered by the newly- adopted regulations. The remaining fourteen Orders include field- or pool- specific safety valve system requirements. Other Order 66 • • Page e 2 Statewide, AK January 11, 2011 3. Within existing Commission Orders are rules unrelated to well safety valve systems; these rules will continue in effect, unmodified. 4. Existing Commission Orders containing individual rules relating to well safety valve systems are enumerated in the attached Table. CONCLUSIONS: 1. Eliminating redundant requirements and standardizing wording for those field - and pool- specific safety valve system requirements deemed appropriate to retain will improve regulatory clarity. 2. Twenty existing Commission Orders that include rules relating to well safety valve systems are rendered unnecessary, and can be replaced by newly- adopted 20 AAC 25.265. As more fully set forth in the attached Table, those Orders are Conservation Orders 98A, 207A, 300, 311B, 317B, 329A, 341E, 345, 402B, 432D, 452, 457B, 471, 477, 484A, 505B, 553, 559, 570, and a Commission unnumbered Order signed March 30, 1994 (policy dictating SVS performance testing requirements). 3. Fourteen existing Commission Orders include field- or pool - specific safety valve system requirements that the Commission considers appropriate for retention. Wording for the same safety valve system requirements existing in different Commission Orders has been standardized. As more fully set forth in the attached Table, those Orders are Conservation Orders 406B, 423, 430A, 435A, 443B, 449, 456A, 458A, 562, 563, 569, 596, 597, and 605. NOW, THEREFORE, IT IS ORDERED THAT individual rules in thirty -four existing Commission Orders that relate to well safety valve systems are hereby rescinded or revised as enumerated in the Table. Remaining rules unrelated to safety valve systems within affected Commission Orders remain in effect, unmodified. DONE at Anchorage, Alaska, and dated ary 11, 2011 Adop ...- Daniel T. Se. r o r., Commissioner, Chair , ij _ it . • : , s Conservation Commission , ., f� ' '5 rman, Co M rA il 4- - • fillit .0 -,--' a Oi - , • a Conserva ion Commission '�c1 -; A O C y t PP. oerst r, Commissioner r l, "' ; `1 Alaska it and Gas Conservation Commission Other Order 66 • • Page 3 Statewide, AK January 11, 2011 RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the Commission grants for good cause shown, a person affected by it may file with the Commission an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The Commission shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 -days is a denial of reconsideration. If the Commission denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the Commission mails, OR 30 days if the Commission otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the Commission grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the Commission, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the Commission mails, OR 30 days if the Commission otherwise distributes, the order or decision on reconsideration. As provided in AS 31.05.080(6), "[t]he questions reviewed on appeal are limited to the questions presented to the Commission by the application for reconsideration." In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. • • Fisher, Samantha J (DOA) From: Fisher, Samantha J (DOA) Sent: Tuesday, January 11, 2011 4:08 PM To: Ballantine, Tab A (LAW); '(foms2 @mtaonline.net)'; '( michael .j.nelson @conocophillips.com)'; '(Von.L .Hutchins @conocophillips.com)'; 'AKDCWelllntegrityCoordinator'; 'Alan Dennis'; 'alaska @petrocalc.com'; 'Anna Raff; 'Barbara F Fullmer'; 'bbritch'; 'Becky Bohrer'; 'Bill Penrose'; 'Bill Walker'; 'Bowen Roberts'; 'Brad McKim'; 'Brady, Jerry L'; 'Brandon Gagnon'; 'Brandow, Cande (ASRC Energy Services)'; 'Brian Havelock'; 'Bruce Webb'; 'carol smyth'; 'caunderwood'; 'Chris Gay'; 'Cliff Posey'; 'Crandall, Krissell'; 'D Lawrence'; 'dapa'; 'Daryl J. Kleppin'; 'Dave Matthews'; 'David Boelens'; 'David House'; 'David Steingreaber'; 'ddonkel @cfl.rr.com'; 'Deborah J. Jones'; Delbridge, Rena E (LAA); 'Dennis Steffy'; 'Elowe, Kristin'; 'Erika Denman'; 'eyancy'; 'Francis S. Sommer'; 'Fred Steece ,Gary Laugh lin'; 'Gary Rogers'; 'Gary Schultz'; 'ghammons'; 'Gordon Pospisil'; 'Gorney, David L.'; 'Greg Duggin'; 'Gregg Nady'; 'gspfoff; 'Harry Engel'; 'Jdarlington (jarlington @gmail.com)'; 'Jeanne McPherren'; 'Jeff Jones'; 'Jerry McCutcheon'; 'Jill Womack'; 'Jim White'; 'Jim Winegarner'; 'Joe Nicks'; 'John Garing'; 'John Katz'; 'John S. Haworth'; 'John Spain'; 'John Tower'; 'Jon Goltz'; 'Judy Stanek'; 'Julie Houle'; 'Kari Moriarty'; 'Kaynell Zeman'; 'Keith Wiles'; 'Kelly Sperback'; 'Kim Cunningham'; 'Larry Ostrovsky'; 'Laura Silliphant; 'Marilyn Crockett; 'Mark Dalton'; 'Mark Hanley (mark.hanley @anadarko.com)'; 'Mark Kovac'; 'Mark P. Worcester'; 'Marguerite kremer'; 'Michael Dammeyer'; 'Michael Jacobs'; 'Mike Bill'; 'Mike Mason'; 'Mikel Schultz'; 'Mindy Lewis'; 'MJ Loveland'; 'mjnelson'; 'mkm7200'; 'nelson'; 'Nick W. Glover'; 'NSK Problem Well Supv'; 'Patty Alfaro'; 'Paul Decker (paul.decker @alaska.gov)'; 'Paul Figel'; 'PORHOLA, STAN T'; 'Randall Kanady'; 'Randy L. Skillern'; ' rob.g.dragnich @exxonmobil.com'; 'Robert Brelsford'; 'Robert Campbell'; 'Ryan Tunseth'; 'Scott Cranswick'; 'Scott Griffith'; Scott, David (LAA); 'Shannon Donnelly'; 'Sharmaine Copeland'; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); 'Sondra Stewman'; 'Steve Lambert'; 'Steve Moothart'; 'Steven R. Rossberg'; 'Suzanne Gibson'; 'tablerk'; 'Tamera Sheffield'; Taylor, Cammy 0 (DNR); 'Temple Davidson'; 'Teresa Imm'; 'Terrie Hubble'; 'Thor Cutler'; 'Tina Grovier'; 'Todd Durkee'; 'Tony Hopfinger'; 'trmjrl'; 'Valenzuela, Mariam '; 'Vicki Irwin'; 'Walter Featherly'; 'Will Chinn'; Williamson, Mary J (DNR); 'Yereth Rosen'; 'Aaron Gluzman'; Bettis, Patricia K (DNR); caunderwood @marathonoil.com; 'Dale Hoffman'; 'David Lenig'; 'Gary Orr'; 'Jason Bergerson'; 'Joe Longo'; 'Lara Coates'; 'Marc Kuck'; 'Mary Aschoff; 'Matt Gill'; 'Maurizio Grandi'; Ostrovsky, Larry Z (DNR); 'Richard Garrard'; 'Sandra Lemke'; 'Talib Syed'; 'Tiffany Stebbins'; 'Wayne Wooster'; 'William Van Dyke'; Woolf, Wendy C (DNR); Aubert, Winton G (DOA) (winton.aubert@alaska.gov); Brooks, Phoebe L (DOA) (phoebe.brooks @alaska.gov); Colombie, Jody J (DOA) (jody.colombie @alaska.gov); Crisp, John H (DOA) (john.crisp @alaska.gov); Davies, Stephen F (DOA) (steve.davies @alaska.gov); Foerster, Catherine P (DOA) (cathy.foerster @ alaska.gov); Grimaldi, Louis R (DOA) (lou.grimaidi @alaska.gov); Johnson, Elaine M (DOA) (elaine.johnson @ alaska.gov); Jones, Jeffery B (DOA) (jeff.jones @alaska.gov); Laasch, Linda K (DOA) (linda.laasch @alaska.gov); Maunder, Thomas E (DOA) (tom.maunder @alaska.gov); McIver, Bren (DOA) (bren.mciver @alaska.gov); McMains, Stephen E (DOA) (steve.mcmains @alaska.gov); Mumm, Joseph (DOA sponsored); Noble, Robert C (DOA) (bob.noble @alaska.gov); Norman, John K (DOA) (john.norman @alaska.gov); Okland, Howard D (DOA) (howard.okland @alaska.gov); Paladijczuk, Tracie L (DOA) ( tracie.paladijczuk @alaska.gov); Pasqua!, Maria (DOA) (maria.pasqual @alaska.gov); Regg, James B (DOA) (jim.regg @alaska.gov); Roby, David S (DOA) (dave.roby @alaska.gov); Saltmarsh, Arthur C (DOA) (art.saltmarsh @alaska.gov); Scheve, Charles M (DOA) (chuck.scheve @alaska.gov); Schwartz, Guy L (DOA) (guy.schwartz @alaska.gov); Seamount, Dan T (DOA) (dan.seamount @alaska.gov); Shartzer, Christine R (DOA) Subject: Other 66 Safety Valve Systems Attachments: other66.pdf Samw vtthcv Fihr taa-'0iLa c wCo v ,iNa r,,.CcTnvvt4sio (907)793 -1223 (907)276 -7542 (fcx ) 1 4 • • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 1 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 Ft. Worth, TX 76102 -6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton 408 18 Street President 6900 Arctic Blvd. Golden, CO 80401 -2433 P. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Bernie Karl CIRI Baker Oil Tools K &K Recycling Inc. Land Department 795 E. 94 Ct. P.O. Box 58055 P.O. Box 93330 Anchorage, AK 99515 -4295 Fairbanks, AK 99711 Anchorage, AK 99503 North Slope Borough Jill Schneider Gordon Severson P.O. Box 69 US Geological Survey 3201 Westmar Circle Barrow, AK 99723 4200 University Drive Anchorage, AK 99508 -4336 Anchorage, AK 99508 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Kenai National Wildlife Refuge Penny Vadla Cliff Burglin Refuge Manager 399 West Riverview Avenue 319 Charles Street P.O. Box 2139 Soldotna, AK 99669 -7714 Fairbanks, AK 99701 Soldotna, AK 99669 -2139 Richard Wagner P.O. Box 60868 Fairbanks, AK 99706 O M� \`\ Orders Establishing Requirements for Well Safety Valve Systems 1/7/2011 Conservation New Regulation Provisions Revised Rule - "Well safety valves stems' (2) Comment UnitlField Pool Order (1) Rule Rescind Rule? Existing Order Requirement Addressing Regts from Order y Y ) fail -safe auto SSV and SCSSV; injection wells (except disposal) require "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve 25.265(a); 25.265(b); 25.265(d)(2)(H); Check valve requirements for injectors are not covered by Colville River Unit Qannik 605 5 no (i) double check valve, or (ii) single check valve and SSV; injection . arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or 25.265(h)(5) readopted regulation valve satisfies single check valve requirement; test every 6 months ( )( 5 ) SCSSV satisfies the requirements of a single check valve." fail -safe auto SSV and SCSSV; injection wells (except disposal) require 25.265(a); 25.2659(b); wells (excludin dis injectors) must be equipped with(i) a double check valve b); 25.26 Check valve requirements for injectors are not covered by Oooguruk Oooguruk - Nuiqsut 597 6 no (i) double check valve, or (ii) single check valve and SSV; injection 25.265(h)(5) arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or readopted regulation valve satisfies single check valve requirement; test every 6 months SCSSV satisfies the requirements of a single check valve." fail -safe auto SSV and SCSSV; injection wells (except disposal) require 25.265(a); 25.265(b); 25.265(d)(1); "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve re q uirements for in j ectors are not covered by Oooguruk Oooguruk - Kuparuk 596 6 no (i) double check valve, or (ii) single check valve and SSV; injection arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or valve satisfies single check valve requirement; test every 6 months 25 SCSSV satisfies the requirements of a single check valve." readopted regulation fail -safe auto SSV and SCSSV; maintain list of wells w/ removed or 25.265(a); 25.265(b); 25.265(d)(2)(F); Requirement to maintain a wellhead sign and list of wells with N/A deactivated SVS was replaced with requirement to maintain a Prudhoe Bay Unit Raven 570 5 yes deactivated SVS; sign on wellhead 25.265(m) tag on well when not manned fail -safe auto SSV and SCSSV; injection wells (except disposal) require r "Injection (exc di injectors) must be e with(i) a double check valve 25.265(a); 25 25 on we Check valve requirements for injectors are not covered by Colville River Unit Fiord 569 5 no (i) double check valve, or (ii) single check valve and SSV; injection 25.265(h)(5) arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or readopted regulation valve satisfies single check valve requirement; test every 6 months SCSSV satisfies the requirements of a single check valve." fail -safe auto SSV and SCSSV; injection wells (except disposal) require 25.265(a); 25.265(b); 25.265(d)( "Injection wells (excludin dis injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Colville River Unit Nanuq - Kuparuk 563 6 no (i) double check valve, or (ii) single check valve and SSV; injection . arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or 25.265(h)(5) readopted regulation valve satisfies single check valve requirement; test every 6 months ( )( 5 ) SCSSV satisfies the requirements of a single check valve." fail -safe auto SSV and SCSSV; injection wells (except disposal) require wells (excludin dis injectors) must be equipped with(i) a double check valve 25.265(a); 25.265(b); 25.265(d)( Check valve requirements for injectors are not covered by Colville River Unit Nanuq 562 6 no (i) double check valve, or (ii) single check valve and SSV; injection . arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or 25265 h readopted regulation valve satisfies single check valve requirement; test every 6 months ( )( 5 ) SCSSV satisfies the requirements of a single check valve" fail -safe auto SSV; SSSV landing nipple below permafrost; test as 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Put River 559 3 yes prescribed by Commission 25.265(h)(5) replaces SSSV nipple requirement for all wells Deep Creek Unit Happy Valley 553 3 yes SSV or SSSV 25.265(a) N/A fail -safe auto SSV; SSSV landing nipple below permafrost; test as 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Orion 505B 3 yes prescribed by Commission 25.265(h)(5) replaces SSSV nipple requirement for all wells fail -safe auto SSV; SSSV landing nipple below permafrost; test as 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Polaris 484A 3 yes prescribed by Commission 25.265(h)(5) replaces SSSV nipple requirement for all wells Milne Point fail -safe auto SSV; SSSV landing nipple below permafrost; gas /MI r 25.265(a); 25.265(b); 25.265(d); Readopted 25.265(d) dictates which wells require SSSV; Milne Point Unit Schrader Bluff 477 5 yes injection well require SSSV or injection valve below permafrost; test 25.265(h)(5) N/A replaces SSSV nipple requirement for all wells every 6 months fail -safe auto SSV; SSSV landing nipple below permafrost; gas /MI 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Borealis 471 3 yes injection well require SSSV below permafrost; test every 6 months 25.265(h)(5) replaces SSSV nipple requirement for all wells fail -safe auto SSV and SCSSV; test as prescribed by Commission; 500- Existing pool rule established a minimum setting depth for the Northstar Northstar 458A 4 no ft minimum setting depth for SSSV 25.265 ( a ), ; 25.265(b); b ) 25.265 ( d )( 1 ) "The minimum setting depth for a tubing conveyed subsurface safety valve is 500 feet." SSSV fail -safe auto SSV; SSSV landing nipple below permafrost; test every 6 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Aurora 457B 3 yes months 25.265(h)(5) replaces SSSV nipple requirement for all wells fail -safe auto SSV; gas /MI injectors require SSV and single check 25.265(a); 25.265(b); 25.265(d); "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Kuparuk River Unit Meltwater 456A 5 no valve and SSSV landing nipple; water injection wells require (1) double arrangement or (ii) a single check valve and a SSV. A subsurface-controlled injection valve or readopted regulation; readopted 25.265(d)(5) does not include check valve, or (ii) single check valve and SSV; test every 6 months 25 SCSSV satisfies the requirements of a single check valve." SSSV requirement for MI injectors fail -safe auto SSV (all injectors and producers capable of unassisted 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; Prudhoe Bay Unit Midnight Sun 452 6 yes flow to surface); test every 6 months 25.265(h)(5) replaces SSSV nipple requirement for all wells fail -safe auto SSV and SCSSV; SSSV may be installed above or below 25.265(a); 25.265(b); 25.265(d)(1); "The setting depth of a required subsurface safety valve must be located in the tubing either Existing pool rule established alternate SSSV setting depth; Duck Island Unit Eider 449 7 no permafrost; injection wells require double check valve; LPS trip above or below permafrost. Injection wells must be equipped with a double check valve check valve requirements for injectors are not covered by pressure; test every 6 months 25 arrangement." readopted regulation fail -safe auto SSV and SCSSV (producers and gas injectors); water "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Colville River Unit Alpine 443B 5 no injection wells require (i) double check valve, or (ii) single check valve 25.265(a); 25.265(b); 25.265(d)(2)(H) arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or and SSV SCSSV satisfies the requirements of a single check valve." readopted regulation fail -safe auto SSV; gas /MI injectors require SSV and single check 25.265(x); 25.265(b); 25.265(d); "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Kuparuk River Unit Tabasco 435A 6 no valve and SSSV landing nipple; water injection wells require (i) double arrangement or (ii) a single check valve and a SSV. A subsurface-controlled injection valve or readopted regulation; readopted 25.265(d)(5) does not include check valve, or (ii) single check valve and SSV; test every 6 months 25 SCSSV satisfies the requirements of a single check valve." SSSV requirement for MI injectors fail -safe auto SSV (S /D well and artificial lift); sign on well if SVS Requirement to maintain a wellhead sign and list of wells with deactivated; maintain list of wells w /deactivated SVS; test as 25.265(x); 25.265(b); 25.265(h)(5); deactivated SVS was replaced with requirement to maintain a Kuparuk River Unit; to on well when not manned; administrative approval CO 25 m Kuparuk 432D 5 yes prescribed by Commission; CO 432D.009 modifies Rule 5(b) - LPP N/A 9 pP Milne Point Unit may be defeated on W. Sak injectors w /surface pressure <500psi w/ 25.265(m) 432D.009 remains effective [re:defeating the LPS when surface notice when defeated and placed back in service injection pressure for West Sak water injector is <500psi] Page 1 of 2 Orders Establishing Requirements for Well Safety Valve Systems 1/7/2011 Unit/Field Pool Conservation Rule Rescind Rule? Existing Order Requirement New Regulation Provisions Order (1) Addressing Reqts from Order Revised Rule - "Well safety valve systems" (2) Comment fail -safe auto SSV; gas /MI injectors require SSV and single check 25.265(a); 25.265(b); 25.265(d); "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Kuparuk River Unit Tarn 430A 6 no valve and SSSV landing nipple; water injection wells require (i) double arrangement or (ii) a single check valve and a SSV. A subsurface controlled injection valve or readopted regulation; readopted 25.265(d)(5) does not include check valve, or (ii) single check valve and SSV; test every 6 mo nths 25 }( y SCSSV satisfies the requirements of a single check valve" SSSV requirement for MI injectors Milne Point - Sag fail -safe auto SSV; injection wells require double check valve; test Check valve requirements for injectors are not covered b Milne Point Unit 423 7 i ti ll i no y I q 25.265(a); 25.265(b); 25.265(h)(5) "Injection wells must be equipped with a double check valve arrangement." by River every 6 months readopted regulation fail -safe auto SSV; gas /MI injectors require SSV and single check valve and SSSV landing nipple; water injection wells require (i) double "Injection wells (excluding disposal injectors) must be equipped with(i) a double check valve Check valve requirements for injectors are not covered by Kuparuk River Unit Kuparuk - West Sak 406B 6 no check valve, or (ii) single check valve and SSV; test every 6 months; 25.265(a); 25.265(b); 25.265(d); arrangement or (ii) a single check valve and a SSV. A subsurface - controlled injection valve or readopted regulation; readopted 25.265(d)(5) does not include CO 4068.001 modifies Rule 6(e) - LPP may be defeated on W. Sak 25.265(h)(5) SCSSV satisfies the requirements of a single check valve. The Low Pressure Pilot may be SSSV requirement for MI injectors; administrative approval CO injectors w /surface pressure <500psi w/ notice when defeated and defeated on West Sak water injectors with surface injection pressure less than 500psi." 4068.001 remains effective [re:defeating the LPS when surface placed back in service injection pressure for West Sak water injector is <500psi] fail -safe auto SSV and SCSSV; LPS trip pressure; readily accessible Badami Badami 402B 6 yes control unit; SSSV below permafrost; NTE 210days between tests; 25.265(a); 25.265(b); 25.265(h); N/A submit test results electronically within 14days; SVS defeated /removed 25.265(m) only if well SI or pad continuously manned fail -safe auto SSV (S /D well and artificial lift); sign on well if SVS 25.265(a); 25.265(b); 25.265(h)(5); Requirement to maintain a wellhead sign and list of wells with Prudhoe Bay Unit North Prudhoe 345 4 yes deactivated; maintain list of wells w /deactivated SVS; test as N/A deactivated SVS was replaced with requirement to maintain a prescribed by Commission 25.265(m) tag on well when not manned fail -safe auto SSV (S /D well and artificial lift); if SSSV installed it must Prudhoe Bay Unit Prudhoe 341E 5 yes be maintained and tested as part of SVS; sign on well if SVS 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; deactivated; maintain list of wells w /deactivated SVS; test as 25.265(h)(5) replaces SSSV nipple requirement for all wells prescribed by Commission Prudhoe Bay Unit Niakuk 329A 5 yes fail -safe auto SSV and SCSSV; maintain list of wells w/ removed or 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; deactivated SVS; sign on wellhead 25.265(h)(5); 25.265(m) replaces SSSV nipple requirement for all wells Prudhoe Bay Unit Pt. McIntyre 317B 8 yes fail -safe auto SSV and SCSSV; SSSY may be rermoved as part of 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; routine well ops w/o notice 25.2650); 25.265(m) replaces SSSV nipple requirement for all wells Prudhoe Bay Unit West Beach 311 B 6 yes fail -safe auto SSV; sign o n well if SVS deactivated; maintain list of wells 25.265(a); 25.265(b); 25.265(d); N/A Readopted 25.265(d) dictates which wells require SSSV; w /deactivated SVS; test as prescribed by Commission 25.265(h)(5); 25.265(m) replaces SSSV nipple requirement for all wells West Fork West Fork (Sterling A &B) 300 5 yes fail -safe auto SVS on each production tubing 25.265(a); 25.265(b) N/A Prudhoe Bay Unit Lisburne 207A 7 yes fail -safe auto SSV; sign on well if SVS deactivated; maintain list of wells 25.265(a); 25.265(b); 25.265(h)(5); Requirement to maintain a wellhead sign and list of wells with w /deactivated SVS; test as prescribed by Commission 25,265(m) N/A deactivated SVS was replaced with requirement to maintain a suitable automatic safety valve installed below base of tag on well when not manned Prudhoe Bay Unit Prudhoe - Kuparuk 98A 5 yes y permafros to 5 Readopted 25.265(d) require prevent uncontrolled flow 25.265(d) N/A pied 25.265 d dictates which wells re uire SSSV; replaces SSSV nipple requirement for alt wells Statewide N/A N/A N/A yes Commission policy dictating SVS performance testing AOGCC Policy -SVS Failures; issued by order of the y requirements 25.265(h); 25.265(n); 25.265(0) N/A Commission 3/30/1994 (signed by Commission Chairman Dave Johnson) Footnotes (1) No SVS rules found in Injection Orders (2) New title for Revised Rule; "N /A" means entire pool rule to be rescinded Page 2 of 2 Public Hearing Record And Backup Information available in Other 66 #9 RE: Happy Valley SSV test fTequency e e Co 5'53 Subject: RE: Happy Valley SSV test frequcncy From: "Greenstein, Larry P" <greenstcinlpcq)lI1ocal.com;::· Date: Mon, 07 Nov 2005 15:34:55 -0900 To: James Rcgg <jim...rcgg@admin.statc.ak.us> \ \ ,.., /1 Il1 D'"' '\~t( Thanks Jim...that sounds good to us. Larry From: James Regg [mailto:jim_regg@admin.state.ak.us] Sent: Monday, November 07,20053:22 PM To: Greenstein, Larry P Subject: Re: Happy Valley SSV test frequency Given the circumstances and confusion, we do not view the "missed" 6 month test as a deficiency. Jim Regg AOGCC Greenstein, Larry P wrote: Jim, Thanks for so thoroughly answering my questions. We understand the determination and will comply going forward. At this time, we don't see the need to amend the Order, your e-mail explanation is more than sufficient. We also understand the change in frequency required when failure rates exceed the 10% level and will schedule the tests accordingly. Along these lines then, we must self-report that due to this misunderstanding of the Conservation Order frequency, we missed a 6 month cycle test this last summer. We are asking for some leniency in this instance so as to not fall into a 'delinquent' category, but we simply made an honest mistake in interpretation of the Order. We are hoping that you concur and excuse us. Thanks again for your time and efforts settling this test frequency issue for our Happy Valley gas wells. We are scheduling the next state witnessed testing for 3 months from now. La rry From: James Regg [mailto:jim reqq@admin.state.ak.us] Sent: Friday, November 04, 2005 3:11 PM To: Greenstein, Larry P Subject: Re: Happy Valley SSV test frequency I have researched the Conservation Order 553 (Happy Valley Pool Rules) file and Commission's policy regarding safety valve system (SVS) test frequency for the Happy Valley wells. Unocal's application for Happy Valley pool rules requested the Commission not establish subsurface safety 10f3 11/7/2005 4:42 PM RE: Happy Valley SSV test fTequency e e valve (SSSV) requirements, and proposed the installation of surface safety valves (SSV s) with annual testing. In Conservation Order 553 the Commission acknowledges Unocal's request by requiring a SSV in wells that do not have a SSSV but remained silent on the proposed test ftequency. Because CO 553 is silent on the test frequency, you must comply with existing Commisison requirements that are outlined in the Safety Valve System Failure Policy signed by then Commission Chair David Johnston March 30,1994 (this time I have attached the referenced document; my apologies for not attaching it before). This policy implements the provisions of 20 AAC 25.265(d) - "...tests at intervals and times as prescribed by the commission to confirm that the SSV system, SSSV system, and associated equipment are in proper working order." The safety valve system in Happy Valley wells must be tested every 6 months to be compliant with our requirements, and to be consistent with other required SVSs in the state. Another point of clarification, also associated with CO 553, deals with reporting the safety valve test results. Rule 4.e says that test results need to be reported as part of the Annual Reservoir Report. The SVS test results need to be reported to the Commission in the proper electronic form within 1 week of completion; the annual report only needs to summarize the test results. One final point, specific to failure rates. When the failure rate for a facility (platform, pad, or other pre-approved grouping of wells) exceeds 10 percent, the testing will be increased from once every 6 months to every 3 months or more frequent as appropriate. You asked about the need to adjust CO 553. While I do not think it necessary, we certainly could amend the order to detail the required test obligations. Jim Regg AOGCC Greenstein, Larry P wrote: Thank you very much Jim. I appreciate you digging somemore on this to settle this question once and for all. We just went through our first sequence of testing the Happy Valley SSVs (yearly cycle) . Do you think the Conservation Order might need revision or amendment to detail the required test frequency, once this has been determined?? Talk with you later. Larry -----Original Message----- From: James Regg [!11~~)t:<?:j~!11_~~99(~?:?1'.1:iJ!:?~:<"J!::~.:?:~.:~~:?] Sent: Thursday, November 03, 2005 12:27 PM To: Greenstein, Larry P Subject: Re: Happy Valley SSV test frequency Our normal test cycle for safety valve system is 6 months; that can be found in an AOGCC Policy signed by Commissioner Dave Johnston in 1994 (copy attached). Test cycle was discussed during the AOGA/AOGCC Safety Valve System Task Force (final report issued June 13, 2003) with the recommendation to retain the 6 month requirement. I'll have to do some 20f3 11/7/2005 4:42 PM RE: Happy Valley SSV test fTequency e e more research about the Happy Valley test frequency and find out who authored the order so I can understand what their intent was (annual testing as Unocal suggested, or semi-annual as required by AOGCC policy). I'll be in touch. Jim Regg Greenstein, Larry P wrote: Hi Jim. Would like some clarification on the testing frequency for the SSVs at Happy Valley field. In the Conservation Order, Unocal offers to install SSVs and test them annually. In the rules, Unocal is required to install either SSVs or SSSVs and have them tested. Nowhere does it address the frequency in the rules. As the SRF foreman oversees Happy Valley and the SRF SSVs are tested annually, we placed the Happy Valley SSVs on an annual schedule also. Is this correct?? Thanks for checking up on this for me. Larry 30f3 11/7/2005 4:42 PM #8 ) \ ') ,..:1 ,f UNOCAL(; RE(~E~\!ED FEB 0 3 2005 February 3, 2005 Alask~ Oil & Robert Crandall Senior Petroleum Geologist Alaska Oil and Gas Conservation Commission 333 W. 7th Avenue, Suite 100 Anchorage, AK 99501 RE: Deep Creek Unit Happy Valley Field Pool Rules Structure Map Dear Mr. Crandall: Please find enclosed three copies of the Happy Valley Field depth structure map suitable for general public use. Sincerely, ~~ Judy Stanek Land Specialist Enclosures Unocal Alaska I Union Oil Company of California 909 West 9th Avenue, P.O. Box 196247 Anchorage, Alaska 99519-6247 ,0 ~ § 2000 I 219/JOO - - - 2J8000 o I t/,~ #7 -" - -.;:'. ) ~r~1JŒ WJ~ !Æ~!Æ~~~ ') " AI,A.SIiA. OIL AND GAS CONSERVATION COMMISSION / / I .I FRANK H. MURKOWSKI, GOVERNOR 333 W. ]TH AVENUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 January 27, 2005 Kevin Tabler UNOCAL PO Box 196247 Anchorage, AK 99519 Dear Mr. Tabler: You have requested confidentiality for portions of your application for Pool Rules in the Happy Valley Field. The items you have requested the Commission to withhold from public access and our decisions regarding confidentiality of the specific items follow: Figure 1, a plat of the Happy Valley BelugajTyonek PA. This map is in publicly available DNR document, and a metes and bounds description of the area is the affected area of this order. Confidentiality for this document will not serve any purpose and is denied. Figure 2, "Wells within the Happy Valley Field Area, Deep Creek Unit." This table contains confidential information (perforated intervals) on a number of Happy Valley wells. The most recently completed well in the list is Happy Valley 11 (awaiting testing, no completion date yet assigned). The portions of this table that relate to wells still in confidential status will be held confidential until the wells in question are released to the public (20 AAC 25.071 Geologic Data and Logs and 20 AAC 25.537 Public and Confidential Information) Figure 3, Log Section, Beluga Coal Marker, Happy Valley 8. This will be held confidential until September 27 2006. (20 AAC 25.071 Geologic Data and Logs and 20 AAC 25.537 Public and Confidential Information) Figure 4, Log section, Tyonek Coal Marker, Happy Valley 3. This will be held confidential until April 12, 2006. (20 AAC 25.071 Geologic Data and Logs and 20 AAC 25.537 Public and Confidential Information) Attachment 1, Reservoir Information. This document contains basic information in an aggregated form that is necessary for characterizing the Happy Valley reservoirs and justifying the development rules for these formations. It does not disclose confidential well data for specific wells and is the type of material that is routinely cited in Commission pool rule orders without confidentiality claims or objections by applicants. Accordingly, confidentiality for this document is denied. :)...... ... '"=' ') ') Kevin Tabler January 27,2005 Page 2 of2 Plates 1 through 17, Reservoir Maps and Cross-Sections. This information incorporates confidential well data, proprietary seismic data and proprietary interpretive techniques. As to the well data, this material or affected portions of it will be maintained confidential as long as the wells in question are in confidential status. As to the seismic data and interpretive techniques, this material or affected portions of it will be maintained confidential as long as their confidentiality continues to have economic value to Unocal. (If the Commission receives a future request to release any of the material in question, it will notify Unocal before determining whether to disclose it.) However, I note that the pool rules order needs to refer to some generalized structural information. It would be helpful if Unocal could provide us with a publicly available version of a structure map that illustrates the general form of the Happy Valley structure, omitting control. If you can supply us such a document within 10 days, the Commission can proceed to issue its order in this matter. SinCerelY..~f ~.... ..../"7 Æ4 ,f) ?' ~. ".,", /,,-:: Robert Crana . Senior Petroleum Geologist #6 ) Unocal Alaska ') Union Oil Company of Calif Ollila 909 West 9th Avenue, PO. Box 196247 Anchorage, Alaska 99519-6247 Telephone (907) 276-7600 Fax (907)263-7698 UNOCAL8 RECEIVED JAN 1 4 Z005 Kevin A. Tabler, Manager Land/Government Affairs Alasi(i) Oil ¿~ Gas Cons. Commission January 13, 2005 Anchorage Mr. Bob Crandall Alaska Oil and Gas Conservation COlnlnission 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501 DEEP CREEK UNIT Pool Rules Application Additional Requested Infonnation Dear Mr. Crandall: Per the request of the Alaska Oil and Gas Conservation today during the hearing for application of Pool Rules for the Deep Creek Unit, I have enclosed a plat and the legal description of the area to be included in the Pool Rules. Additionally, I have enclosed the requested type log showing the Inarkers for the affected interval. ¿incerelY, r , '-~0, c-/o--lc Kevin A. Tabler Enclosures ·~__~C_'~~~'~~':':_·_____~~"'·__',0'_"'·'''·'<·''':«·:""'""_.;y,,,,,":._,,,"_.,«w.;.;..;~v-;.;.. 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In~, hdct Rt:fi:)~L h~:..~ 1 Of) .{~f{~-t {::\}{~a}~:~~}f~~t~Ht~x~~- A:~<:~~¿~::-~};, IH-~;: \V'Jrking Inîe(>;'$1 (h,<'nCT:<' l}¡g:::(ttrHH¡~{t-d lJtÜt¡:~:~ (:Ht·(~~:>n~~1-jni.·- ~_:d 'C:;JnH:~-r ~;iú OlŒI P.;rtttH 1,\;1% l.sn% ~_ 5{E{~ ! : 5-Ú~~:-~)- \VJ)rking: lntefest Owm:rshìp WOdi:îní~ ]ukn?st Owner '% J Ü-~¥- (J{t~·{- ---.,........ {)I:~:h~J ()] C-üu?J~)ny ~}r'(:t!H~~~~nØg ~_ÜÜ:-ÜÜ%~ th1i~~~~ ~}ij C:~-}~:~~p~1n}'- ·s)f(\~f~r~A:h~;'~ ~ út}:-_(:~(n-~ ~ 5Ü-::\~ li;;flUr'A P..A% ü,.n~}:~k{K:- Lh¡k:.H (Hi (:. >,:n:~p~H<j-- f::.{(::'~dHi:~:;::n~;t "- «"",0 üf ¡ Deep Creek Unit Exhibit Happy Valley Participating Area Happy Valley Participating Area I State Leases CIRI Leases Effective September 1 , 2004 Scale: 1:100,000 #5 ¡¡' ~ RE· ,.¡'f'"\E' ~1 I!r-~D- . '~-,. \ ~~ .' "f: 1'\/ i1""" ~. .' l... ,I:h.~ II; ~\ '~;:JIJ':t~"'~' ~I 1 FES 0 1 ZOOS ALASKA OIL AND GAS CONSERVATION c~~~~g~i~J~ Com;. CGrD;":Ù~s¡tHJ ~m!:h;~n~ge 2 PUBLIC HEARING 3 4 In Re: 5 Happy Valley Pool Rules Application 6 7 TRANSCRIPT OF PROCEEDINGS 8 9 Anchorage, Alaska January 13, 2005 9:00 o'clock a.m. 10 11 12 COMMISSIONERS: 13 JOHN NORMAN, Chairperson DAN SEAMOUNT (' 14 15 16 17 * * * * 18 19 20 21 22 23 24 25 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Ala.çka 99501 (907) 276-3876 - ^' ^ A . I ORIGINAL v v 't' 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING * * * * OPENING REMARKS BY CHAIRPERSON NORMAN . Page 3 TESTIMONY OF KEVIN TABLER . Page 7 I 24 TESTIMONY OF ED TURNER Page 11 TESTIMONY OF MARK LYNCH Page 14 TESTIMONY OF RALPH AFFINITO Page 19 DISCUSSION Pages 26 - 38 END OF PROCEEDINGS Page 38 TABLE OF CONTENTS ~. { 25 24 23 22 21 20 19 18 17 16 15 14 ( 13 12 11 10 9 8 7 6 5 4 3 2 1 ( 3 ( 1 PRO C E E DIN G S 2 (On record) 3 CHAIR NORMAN: Good morning, my name is John 4 Norman, I'm Chairman of the Alaska Oil and Gas Conservation 5 Commission. With me, seated to my left, your right, is 6 Commissioner Dan Seamount. The forum of the Commission is 7 present for the conduct of legal business and I would like to 8 call this hearing to order. The date is Thursday, January 9 13th, the time is approximately 9:05 a.m. The location of 10 this hearing is 333 West 7th Avenue, Anchorage, Alaska, at the 11 offices of the Alaska Oil and Gas Conservation Commission. 12 With us in the room today are also members of the 13 Commission staff as well as Assistant Attorney General Rob ( 14 Mintz. Others present, if you haven't done so, we would 15 appreciate it if you would sign in on the sheet. 16 The purpose of this hearing is to consider an 17 application from Union Oil Company of California to establish 19 pool rules in conformance with 28 AAC 25.520, for gas productive intervals in the Tyonek and Beluga formations in the northern portion of the Deep Creek Unit in the Happy 18 20 21 Valley field. The field is located in Township 2 South, Range 22 13 West, on the Kenai Peninsula of Anchorage, Alaska. 23 Notice of this hearing was duly published in the 24 Anchorage Daily News on December 10th, 2004, and any persons 25 desiring to receive a copy of the affidavit of publication may ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 $45.00 a share. But I think that my experience with the 24 4,000 to 5,000 shares of Unocal stock, presently valued at I still have not divested 23 account consisted of Unocal stock. 22 during my employment with Unocal, all of my 401K retirement 21 prospect, and also estimated it's volumetric reserves. Also, 20 recommended leasing acreage, evaluated the geology of the 19 discussing today. While I worked on the prospect, I Unocal I did some work on what was called the Deep Creek prospect after it was discovered. After I had left Unocal it has been renamed the Happy Valley field, which is what we're 18 17 16 15 Commissioner. From 1999 'til the end of my employment with 14 until the year 2000. Year 2000 I was appointed as a AOGCC ( 13 transferred to the Unocal Alaska office and I worked there 12 Unocal in the Rocky Mountains from 1988 to 1993, when I was I was employed by COMMISSIONER SEAMOUNT: 11 CHAIR NORMAN: Mr. Seamount. 10 9 that I need to make a disclosure at this time on the record. I feel COMMISSIONER SEAMOUNT: Mr. Chairman. 8 7 hearing. 6 and no written comments have been received prior to this 5 The file reflects that there have been no objections 4 requested to receive such notices. 3 persons on the Commission's distribution list who have 2 Columbie. Additionally notice of the hearing was sent to all 1 do so by seeing the Commission's special assistant, Jody ( 4 ( ( METRO COURT REPORTING 745 We.çt Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 Commissioner Seamount had by virtue of prior employment, and 24 Chair also takes note of the limited involvement that 23 notes for the record that no objections have been made. The 22 continuing to participate and rule on this? Okay. The Chair 21 persons present in the hearing to Commissioner Seamount CHAIR NORMAN: Is there any objection from any 20 COMMISSIONER SEAMOUNT: Yes. 19 18 this? 17 that you can be fair and impartial and objective in ruling on CHAIR NORMAN: Okay. And it is your feeling 16 COMMISSIONER SEAMOUNT: No. 15 14 activity, had any wells been drilled at that time? ( CHAIR NORMAN: And was there any drilling 13 12 specifically but I think it was December, 1999. I can't remember COMMISSIONER SEAMOUNT: 11 10 unit with Unocal, was when? 9 which you did any work on this particular area, the Deep Creek I have one question. The last date on 8 State Ethics Act. 7 Seamount for making that disclosure as is required by the CHAIR NORMAN: Okay, thank you Commissioner 6 5 Unocal Alaska. 4 the value of the Unocal stock, or the operational viability of 3 don't think it would have any impact -- virtually no impact on 2 to make a fair and impartial decision on this matter and I 1 prospect and my employment at Unocal won't impair my ability ( 5 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 We will then continue with the hearing. The hearing 25 24 Commissioner should not participate. 23 opportunity to object if they detect any reason that any is that you know something about it and so - - but it also is equally important that each time we make a full and complete disclosure on the record so that all parties have an 22 21 20 19 nothing about. Part of the advantage of having Commissioners 18 difficult to have a matter come before us that you know 17 Alaska we are a relatively small community and so it is often 16 objections and I appreciate your indulgence in that here in 15 proceeding? Okay. The Chair notes that there are no Is there any objection to my 14 then we will consider it. { 13 object, I would appreciate it if you could let us know and 12 question of those in attendance, if any person wishes to 11 could not act fairly and impartially. But I will ask the same 10 special knowledge, nor do I have any reason to believe that I 9 I've had no continuing involvement with this unit, nor any 8 was a specific assignment in my private practice of law, and 7 on some matters involving the Deep Creek Unit. Likewise, that 6 worked with Cook Inlet Region prior to joining the Commission 5 Along that line, I should disclose that at one point I 4 appreciate your disclosure. 3 participating in this particular hearing, although I do 2 would constitute a conflict of interest so as to bar him from 1 the Chair, based on what I've heard, does not find that this ( 6 ~l t METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( CHAIR NORMAN: I'll then ask if you wouldn't 25 24 pool rules for the Deep Creek Unit. 23 Commissioner Seamount as well, to present our application for 22 the opportunity to come before you today and -- and MR. TABLER: Yes, Chair Norman. Appreciate 21 20 TESTIMONY BY KEVIN TABLER 19 will you be the first one to testify to the application? 18 We will proceed now with the applicant and Mr. Tabler, 17 identification and attached to the transcript of this hearing. 16 by date and we may want to have a copy marked for 15 had to be read at a later date, please describe the document 14 documents, again, so that the transcript will be clear, if it ( 13 that the record will be clear. If you are referring to any 12 your qualifications and identify yourself before speaking, so 11 Also, when you testify, we would ask that you state 10 not insist that persons be sworn but I will ask that. 9 greater weight to the testimony given under oath. But we will 8 give sworn testimony, then the Commission is entitled to give 7 person is giving sworn testimony, another does not wish to In other words, if one 6 there is any conflict in testimony. 5 oath for obvious reasons will be given greater weight, if 4 The Commission's regulation state that testimony given under 3 we will receive, it may be either under oath or without oath. 2 Ms. Janice Scott of Metro Court Reporting. The testimony that 1 is being recorded and will be transcribed. Our reporter is ~, 7 I{ ~ { 8 ( 1 mind if you'll raise your right hand. 2 (Oath administered) 3 MR. TABLER: Yes, sir. 4 CHAIR NORMAN: Please proceed. 5 MR. TABLER: With me today we have three other 6 gentlemen, seated to my immediate left is Ed Turner, he is the 7 project manager for this project, the Happy Valley project as 8 we refer to it, also known as the Deep Creek Unit. To my 9 immediate right is Mark Lynch, he is our geologist, self- 10 proclaimed extraordinaire, for this project, and to his 11 immediate right, is Ralph Affinito, he is a senior reservoir 12 engineer. My name is Kevin Tabler, I am the Land and 13 Government Affairs Manager for Unocal here, 909 West Ninth ( 14 Avenue. Do you need my telephone number as well or.. ... 15 CHAIR NORMAN: No, sir, we have that in the 16 file, thank you. 17 MR. TABLER: Okay. To begin with, we -- on 18 December 1st, 2004, we submitted an application to the 19 Commission for the establishment of pool rules and in that we 20 asked for certain portions of that to be maintained 21 confidential as it would relate to a regional geographic 22 interpretation of the area and also to some unleased state 23 acreage in the area. So, throughout our presentation we will 24 -- we do not have any visual posters or displays, but we do 25 have copies that we can disclose and show, that have already ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 have any objection to proceeding as Mr. Tabler has requested? 24 right now, are there any persons present in this hearing that 23 objection, then we can deal with it then. But first I'll ask 22 request, but if at some point some party does raise an 21 would like to reserve ruling on that. We will proceed as you 20 then is I'm going to ask first, is there -- I think the Chair CHAIR NORMAN: Okay. What I would like to do 19 MR. TABLER: That is correct. 18 17 period of confidentiality? 16 remains or most of it remains within the two year, 24-month 15 maintained confidential and that some of the information 14 previously filed with the Commission with a request that it be ( CHAIR NORMAN: And the fact that it was 13 MR. TABLER: Yes, sir. 12 11 confidentiality is the proprietary nature of the information? CHAIR NORMAN: Okay, your basis for requesting 10 9 something that you can -- that the Commission can look at. 8 answer those, and we can lay before you a log if necessary, 7 So, if you do have questions, we'll do our best to 6 aides inasmuch as we've asked for them to be confidential. 5 happy to answer questions, but we will not have public visual 4 confidential and so as we speak to these things, we'll be 3 to mention that much of what we have within our application is 2 you however you would like to handle that. But, I would like 1 been disclosed, but for discussion purposes, we can lay before ( 9 f ~' t ~j ~. 10 ( 1 Okay. Please proceed. 2 MR. TABLER: Thank you. The -- in the Deep 3 Creek Unit, back September 1, 2004, Unocal received approval 4 from the Division of Natural Resour- -- Department of Natural 5 Resources, Division of Oil and Gas, the approval of the 6 initial participating area for the Beluga, Tyonek 7 participating area. At such time we felt that we had enough 8 information to determine the areal extent of that accumulation 9 and that it was now appropriate for us to apply for pools, and 10 -- which we have done. But, given the tight sand nature of 11 this reservoir, and the difficulty we've had and the capital 12 expenses that have been -- we've had to expend to develop this 13 field, we are probably going to be seeking at some point, some ( 14 sort of legislation for tight sand development and wanted to 15 just mention that, you know, in the interest of going on the 16 record, that the development of this field is -- has been a 17 very expensive venture, given the unique nature of it. It's 18 not unique in the sense of fields throughout the world but in 19 Alaska, this field has tight sands, low permeability, and it 20 is a difficult reservoir to develop. So we will probably 21 there will be a hearing February 13th I believe in Kenai that 22 Senator Wagner has asked for, asking for individual companies 23 to express their views on how additional development in Cook 24 Inlet might take place. But, perhaps some sort of incentive 25 legislation might come out of the -- this proceeding, in terms ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 "t {' 11 ( 1 of the need for legislation to help incentivize companies to 2 do this sort of development. So, I just make that as a 3 statement, not as part of our application, but as a general 4 comment. 5 That pretty well summarizes my opening introductory 6 comments and what I would like to do then is turn this over to 7 Ed Turner, he's the project manager, he'll give a little bit 8 of a background on the development, the exploration, the 9 development, what's going on to set the stage for Mark Lynch, 10 our geologist, who will then talk a little bit about the 11 geological and geophysical nature of the field, and then it 12 will be -- the summation will be with the reservoir 13 characteristics and Ralph Affinito, our engineer, will talk a ( 14 bit about those and then we'll be available to answer any 15 questions that you may have. So, with that, I will turn this 16 over to Ed Turner. 17 TESTIMONY BY ED TURNER 18 MR. TURNER: Good morning, gentlemen. 19 CHAIR NORMAN: Mr. Turner, I'll go ahead and 20 swear you right now so I don't forget to do that. If you'll 21 raise your right hand. 22 (Oath administered) 23 MR. TURNER: Yes, I do. 24 CHAIR NORMAN: Please proceed. 25 MR. TURNER: Gentlemen, I just wanted to spend { METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 12 :(' 1 literally two or three minutes to set some context. A lot of 2 things have been accomplished in a very short period of time, 3 in what we call our South Kenai gas business. I'm going to go 4 back to November of 2000, where Unocal signed an Enstar 5 contract which basically set up our market, so that if we 6 could find the gas, and continue to meet commitments, we would 7 have a place to sell that gas. 8 We got together with Marathon and in December of 2000, 9 we drilled a discovery well, what we call the Go Number 1, and 10 we spent about a year or a little more drilling some 11 confirmation wells, and by November of -- or May, excuse me, 12 of 2002, Marathon and Unocal agreed that we had a viable 13 project and so we, as a joint -- as a group or as a ( 14 partnership, committed to installing the KKPL transmission 15 line, building the facilities for the Ninilchik field and also 16 proving -- or moving on with the development of that field. 17 That was very successfully brought on-line a month or two 18 early in September of '03. 19 During this time Unocal had hoped to add to the 20 momentum of that project by drilling exploratory wells on its 21 own. We busted our pick, so to speak, we drove three dry 22 holes, spent about 10 million dollars and were unable -- were 23 not successful. To the credit of local management and people 24 like Mark Lynch and others in the office, we tried again and 25 we were successful by drilling Happy Valley 1 in about mid- ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 will help us try to make this economically viable. The good 24 pool rules in a sense that we have asked for some things that 23 project has been difficult and that kind of leads us to our 22 But as Kevin eluded to, the capital nature of the 21 part has been extremely successful. 20 four or five days after our target of November 1. So that 19 actually came on-line November 5th of 2004, which was only 18 dollars there. We did get the facilities in on time and we 17 extension to the transmission line, spent about 13 million 16 infra-structure side. We did accomplish the 14 or 15 mile 15 been very effective in my opinion on the facility side or the 14 been kind as far as how she has distributed the gas. We've ( 13 drill an additional five or six wells. Mother Nature has not 12 our paperwork, we are on Happy Valley 11. We have had to 11 As it turns out, those of you that are familiar with 10 project. 9 would, I'll say provide the backbone for this phase of the 8 rather continuous in nature and four or five development wells 7 our Tyonek reservoir, what we call the T70, was going to be 6 five additional development wells. At that time, we believed 5 like to build facilities, and we would like to drill four or 4 would like to add a Zone 2 to the transmission line, we would 3 management and said we believe we have a viable project, we 2 confirmation well. Unocal in November of '03 went to upper 1 2003. We followed up with Happy Valley 2, that was our (, 13 c' i~ It' \ ( 8 9 10 11 12 13 ( 14 15 16 17 18 19 20 21 22 23 24 25 ( ( ~~ 14 1 news is we have infra-structure in place now. The facilities 2 are in place, the pipeline is in place, but we're still at the 3 beginning of our learning curve as far as being able to make 4 this an on-going venture. 5 With that, I'll pass some of the details of our pool 6 rules to our technical experts, but I wanted to set the stage 7 for the idea that in a four year period, Unocal and Marathon have made great in-roads, but we do have a ways to go. Thank you. CHAIR NORMAN: Thank you, Mr. Turner. STATEMENT OF MARK LYNCH MR. LYNCH: Messieurs, my name is Mark Lynch, I'm a j ob. . . . . CHAIR NORMAN: Mr. Lynch, if you'll raise your right hand I'll swear you. (Oath administered) MR. LYNCH: I do. CHAIR NORMAN: And if you are going to be testifying based upon your technical expertise, I'll need to ask you to state in the record a background so that the Commission can evaluate your credentials. What would be helpful is to know your educational background and experience, and your specific area of expertise. MR. LYNCH: Certainly. I have been in the employment of Unocal for the last 15 years, actively exploring METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( reflect that Mr. Lynch will be -- has just handed us a one, 25 CHAIR NORMAN: Thank you. The record should 24 COMMISSIONER SEAMOUNT: Thank you. 23 22 available it would be useful, otherwise, we can access it. CHAIR NORMAN: If you have a copy readily 21 20 along. 19 you gentlemen would like to have copies so that you may read 18 December I, addressed to Mr. Bob Crandall. I have copies if 17 am going to reference the letter that we submitted to AOGCC on 16 discussing, I am going to try not to use visual displays. I 15 confidential nature of the information that I would be MR. LYNCH: Okay. Again, given the 14 ( 13 an expert witness, please proceed Mr. Lynch. CHAIR NORMAN: Okay. The Chair accepts you as 12 11 objections. COMMISSIONER SEAMOUNT: No questions, no 10 9 questions on the professional credentials? CHAIR NORMAN: Mr. Seamount, do you have any 8 7 the Cook Inlet Basin. 6 and (indiscernible) and developing natural gas resources in 5 I have worked in Alaska, specifically in wholly exploring (ph) 4 have worked all across North America and the last three years 3 Masters degree in geology. I have -- in my 15 year career, I 2 Bachelors and a Masters degree from Oklahoma State University. I have both a 1 for oil and gas resources in North America. t 15 ~l f ( 16 ( 1 two, three, four, five page letter with attachment, and the 2 date on the letter is December 1 and it's addressed to Mr. 3 Cran- -- or Mr. Bob Crandall, with the Oil and Gas 4 Conservation Commission. Please proceed. 5 MR. LYNCH: Okay. I am going to speak 6 specifically from information on page 2 of that document in 7 the section entitled Reservoir Description. The stratigraphic 8 section that produces gas at Happy Valley is comprised of the 9 Beluga and Tyonek reservoirs. We have found gas occurring 10 anywhere from 3,000 to 10,000 feet, true vertical depth below 11 ground surface. And that's a significantly wide but not 12 continuous column of natural gas. Those formations are 13 comprised of varying lithologies, inner-bedded coals, shales, ( 14 silt stones, and reservoir sandstones of varying quality and 15 quantity. 16 Due to the depositional system in which these sands 17 were laid down, which has been characterized and generally 18 accepted in the literature as a fresh water fluvial system, 19 that is comprised of channels and braided streams, or 20 meandering stream deposits, which tend to be linear features 21 that are very laterally discontinuous. That has a direct 22 impact on the drainage area of any given well that is put into 23 these reservoirs. We -- with this application we had 24 submitted maps that showed the areal extent of the Happy 25 Valley field, but any given well blower within that field is ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 endeavor to answer them but if not, I would limit my comments If you gentlemen have any specific questions, I would very limited areal extent across this structure. finding reservoirs of varying and sometimes poor quality, and lot of reservoirs vertically, because we are constantly our need for tight well spacing and the ability to co-mingle a So those are basically the two things that drive both rock quality is variable across the entire field. 17 might not be capable of flowing due to poor rock quality. The 16 adjacent well due to reservoir discontinuity or if present, 15 that produces in one well might either not be present in an 14 production problems. So it's not uncommon that a reservoir 13 that serves to reduce permeability and cause a lot of 12 and unstable grains and rock fragments within them. All of 11 generally accepted and known to have a wide variety of clays 10 reservoir quality. The Tyonek and Beluga reservoirs are part, to the number of wells that we have been required to drill in this field in order to adequately drain it. The other thing that has lead to the number of wells we had to drill and our contemplating additional wells is 5 thousands of acres, or anything larger. That has lead, in 4 it's generally on the order of hundreds of acres, not 3 tests that will describe what the drainage area might be, but 2 Ralph will talk to some of the information we have from well 1 not capable of draining the entire limits of that structure. 17 ~' I{ ( 25 24 23 22 21 20 19 18 ( 9 8 7 6 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 (' CHAIR NORMAN: Okay. 25 24 Ralph Affinito. MR. LYNCH: In that case, I'll turn it over to 23 COMMISSIONER SEAMOUNT: Okay, thank you. 22 MR. LYNCH: Yes. 21 20 not go to the top of the structure? 19 possibility of a stratigraphic trap where the reservoir does COMMISSIONER SEAMOUNT: So, do you see the 18 17 that's forming that reservoir. 16 must be comprised of the edges or limits of the given channel 15 some reservoir boundaries in each trap must be stratigraphic, 14 said, no given reservoir covers the entire thing. Therefore, ( 13 structure. Although it is a simple anticlinal structure, as I 12 part of most of the reservoirs that are present on the 11 stratigraphic trapping must by its very nature form at least MR. LYNCH: Commissioner Seamount, 10 9 possibility on this structure? 8 stratigraphic trapping or do you feel that that's a 7 question. Mr. Lynch, do you -- have you seen any evidence of COMMISSIONER SEAMOUNT: I just have one 6 5 back to some questions, but, do you have anything right now? 4 finished with these proceedings because we may need to come 3 all the witnesses we would ask that you remain until we're CHAIR NORMAN: Thank you, Mr. Lynch. As to 2 1 to that. ( 18 ¡,' '\ METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( in Cook Inlet was with? 25 CHAIR NORMAN: And then the prior five years 24 MR. AFFINITO: One year. 23 22 Unocal? CHAIR NORMAN: And how long have you been with 21 20 engineer in the state of Wyoming. 19 working the Cook Inlet, excuse me. I am a licensed petroleum 18 Six years of my experience have been in the Cook Inlet, 17 being with Marathon Oil, and last year with Unocal Alaska. 16 for three companies, five being with Amerada Hess, seven years 15 State University, spring of 1992. I worked the next 13 years 14 petroleum and natural gas engineering from the Pennsylvania ( MR. AFFINITO: By all means. I have a BS in 13 12 STATEMENT BY RALPH AFFINITO 11 give us your background information and experience. CHAIR NORMAN: Then could you please similarly 10 MR. AFFINITO: Yes. 9 8 a technical expert? CHAIR NORMAN: And would you be testifying as 7 MR. AFFINITO: Yes, I do. 6 (Oath administered) 5 MR. AFFINITO: Yes, sir. 4 3 Affinito, would you raise your right hand please? CHAIR NORMAN: Can you wait. And Mr. 2 MR. AFFINITO: My name lS..... 1 ( 19 ,( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 Finally, with what manifests itself is the need to the 24 are a factor in these well bores. 23 to small volumes that may come in -- they do accumulate and 22 is a result of post-frac stimulations, et cetera, in addition 21 itself earlier in the life of these well bores and that liquid 20 of this is still low flow rates. Liquid loading presents 19 require fracture stimulations of some sort. Resultant of all 18 resource are wellbores on a tight spacing. These zones do 17 where we come to in terms of developing and producing the 16 permeabilities are less than .5 milladarces. Consequently, 15 milladarce. Most all of the reservoirs that we have measured 14 single time we've measured a permeability greater than 1 ( 13 back up one second. The 1 point is the only, the highest and 12 the anomaly. Most of the reservoirs we have measured -- I'll 11 range of .025 milladarces to 1.8 milladarces. The 1.8 being 10 predominately in that we have measured permeabilities on the 9 quality reservoirs and I probably cannot overstate the word 8 points but what we have encountered are predominately low 7 Happy Valley structure and I'll primarily hit the higher 6 moments I'll talk a little bit about the reservoirs in the MR. AFFINITO: Thank you. For the next few 5 CHAIR NORMAN: Please proceed. 4 MR. AFFINITO: Correct. 3 CHAIR NORMAN: Marathon. 2 MR. AFFINITO: Marathon. 1 ( 20 it METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 2, being the steep decline. This is not the anomaly for the 24 points. Number I, we are below the unloading rate, and number 23 wellbore and I would like to draw your attention to two 22 plot of the performance, post-frac of the Happy Valley 8 21 please turn to page 2 of that handout is merely a production If you would 20 perforations have been fracture stimulated. 19 distance of 3300 feet. The top three sets of those 18 there are 19 individual sets of perforations over a vertical 17 the box on the right, the open perforations. What you see 16 a half tubing. What I would like to draw your attention to is 15 in the Happy Valley field. A mono-bore completion, three and 14 represents -- generally represents all wellbores that we have ( 13 are looking at is a general wellbore schematic and it MR. AFFINITO: Thank you. Page 1 of what you 12 CHAIR NORMAN: Please. 11 10 that? MR. AFFINITO: May I proceed with speaking to 9 (Pause) 8 COMMISSIONER SEAMOUNT: Thank you. 7 6 think exemplifies some of what we are dealing with. 5 wellbore schematic for the Happy Valley 8 wellbore which I 4 What I have, if I may approach and present to you is a 3 unloading rates, commercializing the resource. 2 zones in any given wellbore to achieve economic flow rates, 1 additive property of combining multiple reservoirs, multiple f 21 f ( (' 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING ( log at this time to be able to tell you the incremental 25 I have no concrete results via production 24 results of that. 23 that I mentioned, and we are in the process of evaluating the 22 frac stimulations, one, of course in this Number 8 we 1 1 bore 21 Mr. Turner indicated earlier, we have implemented a two-prop 20 multiple intervals, commercializing a greater resource. As 19 technology to effectively and economically fracture stimulate 18 point would be utilizing -- potentially utilizing escape 17 reservoirs to the entire Beluga, Tyonek sequence. The second 16 from a new pad, where wellbores will penetrate multiple 15 supported by our pool application, is developmental drilling 14 that's correct, yes, true. So, henceforward, our plan, as ( 13 currently we have three wells that are very much like this, MR. AFFINITO: Of the producing wells, 12 11 wells? 10 representative generally of the behavior of most of those 9 -- there are 11 wells and you are presenting this as being CHAIR NORMAN: You're presenting this as being 8 MR. AFFINITO: By all means. 7 6 point again. CHAIR NORMAN: If I could interrupt on that 5 4 our pool. . . . . 3 rates, et cetera. So henceforward our plan, as supported by 2 are exactly like this in a similar situation, below unloading 1 wells at Happy Valley. Three of the producing wells currently ( 22 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( were to estimate an average permeability, what would it be? 25 COMMISSIONER SEAMOUNT: And what -- if you 24 MR. AFFINITO: No. 23 22 fracture permeability in these reservoirs? COMMISSIONER SEAMOUNT: Okay. Do you see any 21 20 as the Happy Valley Beluga Tyonek. MR. AFFINITO: We have written it I believe it 19 COMMISSIONER SEAMOUNT: An unnamed pool. 18 MR. TABLER: Just a field, yeah, unnamed. 17 16 well, that's not even a pool, is it, that's just unnamed. 15 similar to the way the North Middleground Shoal Pool is COMMISSIONER SEAMOUNT: And that would be 14 ( MR. AFFINITO: That's correct. 13 12 pool, is that correct? 11 be, you would co-mingle Beluga and Tyonek formations into one 10 of the pool and am I correct in understanding that it would 9 describe the pool, in other words, what's your proposed name COMMISSIONER SEAMOUNT: Could you name and 8 MR. AFFINITO: Yes. 7 COMMISSIONER SEAMOUNT: Mr. Affinito. 6 CHAIR NORMAN: Commissioner Seamount? 5 4 to make unless you have questions. 3 That concludes any comments or statements that I had 2 you can see, multiple zones are open in the wellbore. 1 improvement from an individual zone because at this point, as (' 23 ( METRO COURT REPORTING 745 West Fourlh Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 our -- that this proposed plan that we've submitted will 24 providing any information that you may need. We believe that 23 make and summation and then we can proceed with any -- 22 have some additional questions, I have a few other comments to MR. TABLER: I have a few, just -- unless you 21 STATEMENT BY MR. TABLER (CONTINUED) 20 CHAIR NORMAN: Mr. Tabler? 19 18 Thank you, Mr. Affinito. 17 questions to make sure that we have everything that we need. 16 that we would take a recess after you're done with your COMMISSIONER SEAMOUNT: So I would recommend 15 CHAIR NORMAN: Correct. 14 ( 13 on the record in order to write and approve pool rules. 12 I'm wrong but I think we need a minimum amount of information COMMISSIONER SEAMOUNT: Okay. Correct me if 11 10 we would have, so the number may go down. 9 have not measured and that's a commercialization target that that. The lower end of the spectrum I'm sure exists. The higher end is probably less likely to be encountered. I'Tn sure there are permeabilities below the point 025 but we just 8 7 6 5 out that we are still in the process of probably defining MR. AFFINITO: But I would also like to point 4 COMMISSIONER SEAMOUNT: 1.25. 3 2 average. MR. AFFINITO: 1.25 () if I had to provide an 1 (0 24 ( { METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( I think Commissioner Seamount's suggestion is an excellent 25 CHAIR NORMAN: Okay, thank you Mr. Tabler and 24 23 favorably on our proposed application, thank you. 22 owners. So with that we would ask that the Commission rule 21 of all parties, the working interest and royalty interest 20 that's -- in addition that will protect the correlative rights 19 recovery and provide a commercially viable project for us and 18 that these pool rules will enable the optimal resource 17 request that it does be approved as submitted and we believe 16 I think that our proposed application, we would 15 to produce longer and recover more reserves. 14 of wells and reducing operating expenses, which will allow us ( 13 development, thereby reducing the abandon (ph) and flow rates 12 and we will be lowering the economic threshold of field 11 technology, which is new to -- relatively new to the industry, 10 operations by using the -- as Ralph had mentioned, the EXCAPE 9 that we will be improving the efficiency and the stimulation 8 through the approach that we've submitted. You know, we think production from multiple typed intervals and we'll be commercializing this low quality (clears throat) excuse me, reservoir, that otherwise might likely not be recovered 7 6 5 4 will be improving the uploading of liquids by combining 3 points in these low permeability reservoirs. Additionally, we 2 number of different ways by increasing the number of take 1 maximize resource recovery and we think it'll do it in a ( 25 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( the participating area from the. . . . . 25 prepare our own description, we can utilize the boundary of 24 think what we need to do then when we identify this and 23 CHAIR NORMAN: And would -- okay. Then I 22 21 yes it is, Commissioner. MR. TABLER: Yeah, this is Kevin Tabler, and 20 is answering the question. The - - some of these we believe are apparent but just for clarity. Is the requested pool rule area identical to the participating area? 19 18 17 16 that you remember to state your name for the record, as to who 15 someone else should respond. When you respond we would ask 14 questions to you and then you can act as traffic director if ( 13 questions from the applicant. Mr. Tabler, I'll address 12 recess to review the record and try to collect any final 11 approximately 10:15 a.m. The Commission has taken a brief CHAIR NORMAN: We're back on the record at 10 9 (On record) 8 (Off record) 7 in 10 minutes. 6 been here before, but ask the receptionist and we'll reconvene 5 have need to use any of the rest rooms, I think you've all 4 take terribly long. There is coffee right outside and if you 3 have any final questions and then I don't anticipate that will 2 questions, we'll take a 10 minute recess, come back, we'll 1 one. What we will do instead of at risk of asking duplicate ( 26 ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( conditional basis and what we will have to do is study each of 25 confidential treatment to that, but we're doing that on a 24 for purposes of this hearing, we will go forward and accord 23 4, et cetera, we'll quote the whole thing, and as I indicated 22 listing geologic information, Attachment 1, Figures 1 through 21 page of your letter there is the summary of confidentiality, 20 reference to the confidentiality of information, on the last 19 . ... .at that time. With CHAIR NORMAN: 18 MR. TABLER: That would be fine, thank you. 17 16 the information to us. . .. . 15 expand the pool rule area, then you could come in and present 14 suggest is that if you reach the point where you want to ( CHAIR NORMAN: Okay. What I think I'd like to 13 MR. TABLER: Probably not. 12 11 have enough information before us to make that distinction? do you believe we CHAIR NORMAN: Do we have 10 MR. TABLER: Unit-wise, yes. 9 CHAIR NORMAN: The entire unit..... 8 7 appropriate to apply to the unit boundary? 6 rules will be applied today, but would they not be -- be more 5 existing participating area, and that's where the actual pool 4 -- the drilling, I guess currently right now there is the 3 to the unit boun- -- to the unit, but it will only be impacted 2 that the principal of the pool rules, we'd asked to be applied MR. TABLER: Yeah, I might clarify one thing 1 (' 27 r ~, "'I' { f 28 ( 1 those and then find a specific statute or regulatory basis for 2 giving that confidential treatment. Should we conclude that 3 we can't find authority to hold one or more of these items 4 confidential, we will notify you and give you an opportunity 5 to also look at it and tell us that we've missed something. 6 So, what I'm really saying is that although we have 7 conditionally agreed to extend confidentiality, we are 8 reserving the right to take a further look at it, and we may 9 conclude that some of it does need to be public in our 10 opinion, in which case we'll let you know and give you a 11 reasonable period of time to react to it before it's made 12 public. 13 MR. TABLER: And this is Kevin Tabler, ( 14 understood. 15 CHAIR NORMAN: On one of the -- let's see 16 which page it is, it's the third from the last page of your 17 letter, it's the one that has the heading, Reservoir 18 Management, in bold -- in the bold font at the top, and then 19 toward the bottom there is -- the second to the last paragraph 20 begins: Consistent with the complex nature, et cetera, do you 21 have that in front of you? 22 MR. TABLER: Yes. 23 CHAIR NORMAN: Okay. I'm looking at the next 24 sentence: Unocal is requesting no restrictions on wellbore 25 spacing as tight spacing is expected necessary to maximize METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 ordinarily we wouldn't waive the set-back requirement. We'd 24 need to be clear on when we right the pool rules, and 23 and would require some adjustment, but it's something that we 22 state of Alaska or Cook Inlet Region would be watching that 21 this is a unit overseen by the state, quite presumably the 20 could potentially be draining an adjacent tract. Now, since 19 differently, were you to drill right at the unit boundary, you I'm -- and -- I guess to state it 18 of correlative rights. 17 that is -- that's what we would be concerned about, protection 16 that boundary, there is a set-back on the external boundaries 15 within the pool rule boundary, but ordinarily as you get up to 14 generally that you would like to have very flexible spacing ( CHAIR NORMAN: Yeah, well, I understand 13 12 the question. MR. TABLER: Maybe -- maybe I don't understand 11 10 it within the pool rule area. I think we have to do COMMISSIONER SEAMOUNT: 9 MR. TABLER: Yes, yeah. 8 CHAIR NORMAN: Within the PA boundary. 7 6 but within the PA boundary, yes. MR. TABLER: It would be not the unit boundary 5 4 area or participating area, or just within the area? 3 set-back requirements from the external boundary of the pool 2 Commission to also waive what would ordinarily be the normal 1 resource recovery. Is your intention there to ask the ( 29 ( ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( CHAIR NORMAN: Okay, Commissioner Seamount? 25 MR. TABLER: That is correct. 24 23 tract in or allocate some..... 22 agreement would require the PA to be enlarged, to bring that 21 adjacent tract, then the requirements of the overlying unit 20 if you ever reached a point where you were draining in an CHAIR NORMAN: Okay. And your point is that 19 18 area, not the unit area. 17 our intend would be to have unlimited spacing within the pool 16 rights within the unit but not within the pool, and that -- so 15 definitely agree that you would have to to protect correlative . . . . .not -- not -- yeah, we MR. TABLER: 14 ( CHAIR NORMAN: Yes. 13 12 contained within the unit. Understand about the unit..... 11 with external boundary of the pool because the pool will be I don't think we'll have an issue 10 unitization of the field. 9 the correlative rights would be protected through the 8 unit boundary, so it's all contained within the unit. So, all 7 half mile away from the exterior boundary of the unit, the 6 though that he pool and the PA are a quarter of a mile to a I think in this case MR. TABLER: Correct. 5 4 careful. 3 adjacent correlative rights, that's where we would want to be 2 boundaries, where there is the possibility of encroaching on 1 allow flexibility within it but as you get toward external ¡ "( 30 l t ( 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING ( COMMISSIONER SEAMOUNT: And if it's the same 25 MR. TABLER: Very good. 24 23 pool rule area. . . . . .that this is the COMMISSIONER SEAMOUNT: 22 MR. TABLER: Okay. 21 COMMISSIONER SEAMOUNT: Okay. Well, a PA is not - - is often not the same as a pool, so it might be good just to clarify it so there's no confusion at all..... 20 19 18 17 bounds. 16 because it does have the participating area in metes and 15 not, I will provide you a copy of that -- the DNR description, 14 your files through our PA application filing with the DNR. If l \ 13 through the Chair, I believe that you may already have that in MR. TABLER: Yeah, Commissioner Seamount, 12 11 description of the PA, that's what I understood. CHAIR NORMAN: That would be the legal 10 9 Commissioners..... MR. TABLER: You may have the 8 7 wouldn't have any confusion. . . . . .and then we COMMISSIONER SEAMOUNT: 6 MR. TABLER: Yeah, I mean we. . . . . 5 4 being included in the pool area, is that possible..... 3 ranges, partitions within the sections, that you recommend 2 would be helpful if we could get a list of section, townships, COMMISSIONER SEAMOUNT: Yes, Mr. Tabler, it 1 (' 31 ( ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 25 understand that. The liquids you get are from the frac fluid? I didn't COMMISSIONER SEAMOUNT: Okay. 24 come in are a result of more than - - more than not resulting of the load recovery of the fracs, et cetera. Flow capacity of the rock to carry water is very, very low at best. 23 22 21 20 reservoir pressures, first point. Second point, liquids that 19 flowing bottom hole pressures are typically well below the MR. AFFINITO: No, we do not. The wellbores 18 17 you have any concerns about crossflow? 16 to be co-mingling such a large interval with many sands, do If you're going COMMISSIONER SEAMOUNT: Okay. 15 function of the fracs, et cetera. 14 ( 13 and it will be a function of what is deemed commercial as a 12 acre drainage area with the anticipation of going below that, 11 undefined. However, we are currently modeling that with a 100 it's 10 performance of the wells, a concrete answer is not 9 Essentially at this point, being early in the life of the MR. AFFINITO: Ralph Affinito speaking. 8 7 address that. MR. TABLER: We'll ask Ralph Affinito to 6 5 would that be possible or is that impossible? 4 understand that these are lenticular discontinuous sands, I -- 3 estimates of what a typical drainage area would be? I 2 about spacing, has there been any -- do you have any confident I guess in getting to the question 1 as the PA, that's fine. ( 32 ( ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( CHAIR NORMAN: I'd like to remind all 25 MR. LYNCH: This is Mark. . . . . 24 23 Lynch. I'll defer that question to Mark MR. TABLER: 22 21 the top and bottom in the same well? Is it possible to get a type log which shows 20 another well. 19 it -- you've defined the top in one well and the bottom in 18 identification of the pool in a vertical sense, you've defined COMMISSIONER SEAMOUNT: Okay. As far as 17 16 operator I guess. 15 changes as a -- as strictly a matter of being a prudent 14 continually be monitoring well performance and noticing ( 13 and we will, as a function of reservoir management, 12 we have temperature logs indicating in-flow in all reservoirs 11 run production logs to quantify that. At this point in time MR. AFFINITO: Currently, we are planning to 10 9 any crossflow, would you be able to detect it? 8 from individual reservoirs or, I mean, I guess if there were 7 monitor flow, are you using special tools to identify flows COMMISSIONER SEAMOUNT: How are you going to 6 5 liquid, yes. MR. AFFINITO: Appreciable -- noticeable 4 COMMISSIONER SEAMOUNT: Okay. 3 2 seems to be the case. MR. AFFINITO: At this point in time, that 1 ( 33 ~" I~I ~\ t 34 (' 1 witnesses you remain under oath and I'll just ask generally a 2 question of each of you. You each understand and acknowledge 3 you're still continuing to testify under oath? 4 6 MR. TABLER: Yes. MR. AFFINITO: Yes, sir. CHAIR NORMAN: All right, the record will 5 7 reflect affirmative responses from all four witnesses. 8 MR. LYNCH: This Mark Lynch replying. Yes, 9 sir, Commissioner, it is possible to demonstrate the 10 stratigraphic horizon that we would -- that we have identified 11 for the top and base of the pool in a single well because we 12 have described it as a surface and it's stratigraphic 13 equivalents across the field so I can certainly do that and ( 14 provide you with a single well log that would demonstrate 15 where those boundaries are. 16 COMMISSIONER SEAMOUNT: Could you do it in a 17 well that is not covered by confidentiality that is more than 18 two years old? 19 MR. LYNCH: Yes, I can probably demonstrate 20 those surfaces in the Superior Deep Creek Number 1 or the 21 Happy Valley -- Superior Happy Valley, 3122 well, which was 22 drilled I believe in the 60's. 23 COMMISSIONER SEAMOUNT: Okay, excellent. 24 Thank you, I have no further questions, Mr. Chairman. 25 CHAIR NORMAN: If you'll bear with me for just ( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 Division of Oil and Gas file -- unit file, I would think..... 24 the participating area which should be available from the 23 could provide us with the legal description of the boundary of 22 information you had requested, just to save time, is if they CHAIR NORMAN: Yes, as I recall, the 21 20 information requested? 19 record open for a period of time so that they can provide the COMMISSIONER SEAMOUNT: Could we leave the 18 CHAIR NORMAN: Yes, Commissioner. 17 COMMISSIONER SEAMOUNT: Mr. Chairman? 16 15 possible. And this hearing..... 14 proceed to issue our ruling on this matter as expeditiously as ( 13 presentation and for answering our questions and we will 12 Tabler, and through you, the entire group, for a very good 11 offer testimony and so I would like to commend you, Mr. 10 record that no other persons have asked to be recognized to 9 for the Happy Valley Pool? Okay. The Chair notes for the 8 testimony on this particular matter, establishing pool rules 7 Are there any other persons present that wish to offer 6 excused from the chair. 5 would appreciate it, in case we need to recall you, but you're 4 there are any other persons who wish to offer testimony and I 3 would ask that you remain briefly. I'm going to ask now if 2 has no further questions of these particular witnesses. I 1 a moment, I want to (pause - reviewing documents). The Chair ( 35 ( 1( METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( what I would think then we can do is send a letter saying we 25 24 identified the documents they wish to be held confidential so CHAIR NORMAN: Well, very well. Unocal's 23 22 why we should hold it confidential. 21 have them hold them confidential and maybe the specifics as to 20 length of periods, the length of time that you would like to 19 confidentiality and the various documents and establish the 18 what would be useful would be for us to review the request for MR. CRANDALL: Oh, I just -- it may be that 17 16 has a comment. COMMISSIONER SEAMOUNT: I believe Mr. Crandall 15 .... .for you to provide that. CHAIR NORMAN: 14 ( MR. TABLER: Okay. 13 12 open until close of business tomorrow..... CHAIR NORMAN: Then we'll leave the record 11 MR. TABLER: You'll have it today. 10 9 would you want to get that information to us? CHAIR NORMAN: And may I ask, how much time 8 7 correlative. 6 description of the top and bottom of the pool within one well, COMMISSIONER SEAMOUNT: Is a type log and a 5 4 other open item..... 3 time if we could do that. Were there other -- oh yes, and the . . . . .but that would save us CHAIR NORMAN: 2 MR. TABLER: Yeah. 1 ( 36 ( (' METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 CHAIR NORMAN: All right. MR. TABLER: That's correct. the attachments were. I have understood that this letter was not confidential but CHAIR NORMAN: The five pages to the letter. 1..... COMMISSIONER SEAMOUNT: It would be page pages, it would be the first three pages? MR. TABLER: The -- just the front -- which confidential? minus the figures and attachments, is this intended to be kept COMMISSIONER SEAMOUNT: The cover letter, CHAIR NORMAN: The cover letter? that was handed out today. .... .this write up COMMISSIONER SEAMOUNT: CHAIR NORMAN: Is that the..... the figures..... Unocal intend to keep the write up confidential or is it just COMMISSIONER SEAMOUNT: Could I clarify, does Any further, Commissioner Seamount? reasonable time to respond before something is made public. identify that and then in the same letter, we'll give Unocal a that we do not believe deserves confidential protection, we'll confidential for this period of time or if we see something agree that these meet the criteria and they will be held 37 1( i( 1 2 3 4 5 6 7 8 9 10 11 12 13 ( 14 15 16 17 18 19 20 21 22 23 24 25 (, METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ( 25 24 23 22 21 20 19 18 17 16 15 14 ( 13 12 * * * END OF PROCEEDINGS * * * 11 10 9 (Off record) 8 we will stand adjourned at 10:30 a.m. CHAIR NORMAN: Okay. Then without objection, 7 COMMISSIONER SEAMOUNT: Nothing further. 6 5 Commissioner Seamount, anything further? 4 are, subject to further review by the Commission. 3 letter that are not confidential, and then the attachments CHAIR NORMAN: So there are five pages to the 2 COMMISSIONER SEAMOUNT: Okay. 1 ( 38 i ( ( ~' ( 1 2 SUPERIOR COURT 3 STATE OF ALASKA 4 ( 39 C E R T I FIe ATE ) )ss. ) 5 I, Jerri Young, Notary Public in and for the State of Alaska, do hereby certify: 7 8 9 10 11 12 13 ( 14 15 16 17 18 19 20 21 22 23 24 25 ( 6 THAT the annexed and foregoing pages numbered 2 through 38 contain a full, true and correct transcript of the Public Hearing before the Alaska Oil and Gas Conservation Commission, taken by Jan Scott and transcribed by Jerri Young: THAT the Transcript has been prepared at the request of the Alaska Oil and Gas Conservation Commission, 333 West Seventh Avenue, Anchorage, Alaska, 2005. DATED at Anchorage, Alaska this 31st day of January, ,\\\\\\111111/111 ~\' oR' Yo(¡/~ ~ 'S~þ..."...ð..". ~ ~ ~.. ". iI"\ ~ S ..- ...~. ~ ~ l ~OT4~ \ ~ ==:~ J-~-- -: -*- : = = : Þ : == -:::; ... \ USL\C l ;:: ;:::; .. _- s ~~.".." ."". "'$ ~ ~l·····""······ ~~~ ~ eOfA\'3-'~ ~II//"n\\\\\'\ SIGNED AND CERTIFIED TO BY: ($ . '~"'.~' Jerri Young Not~y in and My Commission METRO COURT REPORTING 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 #4 '(d "18 y~~ Y'"ES /'Ur) No z~ 3 '",. 7~5 I ~b ~-1 (;P"I'I /9.5../ /zYo Z~q.. ~ ~(Sl G(~ - )9Co M /h4. I<. L- y,tV C /I- (/1Vd c4l- '\2C\\~h Ät-f~N$:Ö (lNDCQ \ t, /:,£ é://çr},../-// #ð(;rt'~ %.. l fÀ."'-. ~'\j e..-\o-cL- f?D ~ '\Xi j I ( UNékAL- ED ''íùevJ ~ ;;llo 3--"1 '='0 0 ? 0 Bd}C \ q,l.o d- '{ 7 I ~'J c.k u'Vk& l A^<.. '10, $'ö ( TESTIFY (Yes or No) (PLEASE PRINT) k",,:3---J I;~ T4-ß Lt-.,\Q.. U~o...Q ADDRESS/PHONE NUMBER NAME - AFFILIATION HAPPY VALLEY POOL RULES January 13,2005 9:00 AM STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION ) ") #3 STATE OF ALASKA ') NOTICE TO PUBLISHER ADVERTISING ORDER NO. ADVERTISING ORDER SEE, BOTTOM FOR INVOICE ADDRESS INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE AO-02514027 F AOGCC R 333 W 7th Ave, Ste 100 o Anchorage, AK 99501 M AGENCY CONTACT DATE OF A.O. Jody Colombie PHONE December 7,2004 PCN (907) 793 -1 ??.1 DATES ADVERTISEMENT REQUIRED: ¿ Anchorage Daily News PO Box 149001 Anchorage, AK 99514 December 10, 2004 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Type of Advertisement X Legal D Display Advertisement to be published was e-mailed D Classified DOther (Specify) SEE ATTACHED SEND INVOICE IN TRIPLICATE AOGCC, 333 W. 7th Ave., Suite 100 TO Anchorage, AK 99501 NUMBER AMOUNT DATE TOTAL OF PAGE 1 OF ALL PAGES$ 2 PAGES COMMENTS REF TYPE 1 VEN 2 ARD 3 4 FIN AMOUNT 02910 SY CC PGM LC ACCT FY NMR DIST LlQ 05 02140100 73451 2 : £\ (r ð./ REQUISITIONEDt AJ~ ' DIVISION APPROVAL: J ) ~ Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Happy Valley Field Pool Rules Union Oil Company of California (UNOCAL) by letter dated December 1,2004, has requested that the Alaska Oil and Gas Conservation Commission establish pool rules in conformance with 20 AAC 25.520 for gas productive intervals in the Tyonek and Beluga Formation in the northern portion of the Deep Creek Unit. The accumulation is called the Happy Valley Field, located in T2S R13W SM, approximately 6 miles southeast ofNinilchik on the Kenai Peninsula. The Commission has tentatively scheduled a public hearing on this application for January 13, 2005 at 9:00 am at the offices of the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a written request with the Commission no later than 4:30 pm on December 27, 2004. If a request for a hearing is not timely filed, the Commission may consider the issuance of an order without a hearing. To learn if the Commission will hold the public hearing, please call 793-1221. In addition, a person may submit written comments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 4:30 pm on January 10, 2005 except that if the Commission decides to hold a public hearing, written protest or comments must be received no later than the conclusion of the January 13, 2005 hearing. If you are a person with a disa . lty w:Jo may need special accommodations in 1221. Jo Published Date: December 10, 2004 ADN AO# 02514027 Clarion AO# 02514028 ;~; ) Anchorage Daily News Affidavit of Publication J 1001 Northway Drive, Anchorage, AK 99508 PRICE OTHER OTHER OTHER OTHER OTHER GRAND AD# DATE PO ACCOUNT PER DAY CHARGES CHARGES #2 CHARGES #3 CHARGES #4 CHARGES #5 TOTAL 365563 12/10/2004 02514027 STOF0330 $160.60 $160.60 $0.00 $0.00 $0.00 $0.00 $0.00 $160.60 Notice of Public Hearing STATE OF ALASKA THIRD JUDICIAL DISTRICT STATE OF ALASKA Alaska Oil and Gas Conservation Commission, Signed ~¡J/lçlfjoJ Re: Happy Valley FI.eld Pool Rules Union Oil Company of California (UNOCAL) by I ~~~~I~~~~d O?le~~~g~s 1é;~~:~~at~6;t~~~?s~rg~ e.stablish pool rules in conformance with 20 AAC 25.520 for gas productive Intervals in the Tyonek and Beluga Formation in the northern portion of the Deep Creek .Unlt. The accumulation is called the Happy Valley Field, located.in T2S.R13W SM, ~:r,~~x~~~i~e~~I~.milessoutheast of Nlnilchik ,on the The Commission ha's tentatively scheduled a. pub· lie hearing on this application for Januarly 13, 2005 at 9:00 am at the offices of the Alaska Oil and Gas Conservation Commission at' 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a written request with the Commis- sion no later than 4:30 pm on December 27, 2004. If a request for a hearing is not timely filed, the Commission may consider the issuance of an or· der without a hearing~ To learn if the Commission will hold the pUblic hearing, please call 793-1221. In addition, a person' may submit written com· ments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Writ- ten comments must be received no later than 4: 30 pm on January,10, 2005 except that if the Commis- sion decides to hold a pUblic hearing, written pro· test or comments must be received no later than the conclusion of the January 13,2005 hearing. If yOU area person with a disability who may need special accommodations in order to com- ment or to attend the public hearing, please con- I tact Jody Colombie at 793-1221. John K. Norman Chairman Teresita Peralta, being first duly sworn on oath deposes and says that she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on the above dates and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. Subscribed and sworn to me before this date: /Jï.f2-œ'1?'1b-úL ) L) !l[) 0 Y Notary Public in and for the State of Alaska. Third Division. Anchorage, Alaska MY COMMISSION EXPIRES: D{! )/:J-.)dCC7 _Ii / k'. ·.1 . ij.. r /f. / \\lUC({((f(ft: . / { I' \.\\\:0~~~~.~. 1'/.-;,. ; ll'Mb...7LuJ( Il/ ¡.:;1uJ6 t~~·· oT-;;. ',~~~ ~ :".., ... .. f:( J..... ;,4. -=. ........ ""'. ~ , ~j:::'" . J¿.,I. : ,.. . ::: , -' - ~ . '" at h" . .... -.;¿:. . ø ' ..... - ~. ..:\, ...~.. r .~~ ~ .,~ ,....... -," . :~- a..;', :-\' -;. .;~. , .~ A~r: . . ¡(\-' ~ """'~<"'t¿,u;~' . . :r~'" ,,\ ;,,>.{. ""lfp",\~: I.. ,)"\ .II j i) ) } J ] ) ) \ ADN AO# 02514027 Publish: December 10, 2004 RE: Public Notice ) ) .~..~~j.·~ct:.·...~E.:.·..P~b.liø....l\r 2tice ~roIn:.·.l~g~ads..<legala<1s@~cln.¢orh> Date: Tue, 07Deø 200414:18:25...0900 '............................................. .....................'..... ..........,.................. ..................... ............'...................................... . .. . .................. .....'..'...... '..'....................... ... ..... ........'. J:q:JpdyGol()mþiç.~ 9ª¥:-.S()tqmºi~@~cltri~~t~ta~~.~.µs<:.· Hi Jody: Following is the confirmation information qn your legal notice. Please let me know if you have any questions or need additional information. Account Number: STOF 0330 Legal Ad Number: 365563 Publication Date(s): December 10, 2004 Your Reference or PO#: 02514027 Cost of Legal Notice: $160.60 Additional Charges Web Link: E-Mail Link: Bolding: Total Cost to Place Legal Notice: $160.60 Your Legal Notice Win Appear On The Web: www.adn.com: :xxxx Your Legal Notice Win Not Appear On The Web: www.adn.com: Thank You and Happy Holidays, Kim Kirby Anchorage Daily News Legal Classified Representative E-Mail: legalads@adn.com Phone: (907) 257-4296 Fax: (907) 279-8170 ---------- From: Jody Colombie Sent: Tuesday, December 7,2004 12:33 PM To: legalads Subject: Public Notice «File: Ad Order form.doc»«File: Happy Valley poolrules.doc» Thank you 1 of 1 12/7/20043:04 PM 02-902 (Rev. 3/94) Publish, riginal Copies: Department Fiscal, Departm )Receiving AO.FRM STATE OF ALASKA ADVERTISING ORDER seE BOTTOM FOR INVOICE ADDRESS NOTICE TO PUBLISHER ADVERTISING ORDER NO. INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AO-02514027 AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATIACHED COpy OF ADVERTISEMENT MUST BE SUBMITIED WITH INVOICE F AGENCY CONTACT DATE OF A.O. AOGCC R 333 West ih Avenue, Suite 100 o Anchorage, AK 99501 M 907-793-1221 lody Colombie December 7, )004 PHONE PCN (907) 793 -1 ),).1 DATES ADVERTISEMENT REQUIRED: T o Anchorage Daily News PO Box 149001 Anchorage, AK 99514 December 10, 2004 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: United states of America AFFIDAVIT OF PUBLICATION REMINDER State of ss INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. division. Before me, the undersigned, a notary public this day personally appeared who, being first duly sworn, according to law, says that he/she is the of Published at in said division and state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2004, and thereafter for _ consecutive days, the last publication appearing on the _ day of , 2004, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This _ day of 2004, Notary public for state of My commission expires 02-901 (Rev. 3/94) AO.FRM STATE OF ALASKA ) NOTICE TO PUBLISHER ) ADVERTISING ORDER NO. ADVERTISING ORDER .'., S_~.~,~~r~ FOR,I~~~I~'~~~~, ':;::':" AOGCC R 333 W 7th Ave, Ste 100 o Anchorage, AK. 99501 M INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE AO-02514028 AGENCY CONTACT DATE OF A.O. Jodv Colombie PHONE December 7, 2004 PCN (907) 793 -1 ?,?, 1 DATES ADVERTISEMENT REQUIRED: T Peninsula Clarion o December 10,2004 Kenai, AK THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Type of Advertisement X Legal D Display Advertisement to be published was e-mailed D Classified DOther (Specify) SEE ATTACHED . SENDJNVÖICE.'N TRIPLICAtE; AOGCC, 333 W. 7th Ave., Suite 100 .:;~;:j,~t¥S:!Li.;~,:· ,..' TQia;i.·~~~~l'W! ::~'~i;!/i.:,~' Anchorage, AK 99501 REF TYPE NUMBER AMOUNT DATE 1 VEN TOTAL OF PAGE 1 OF ALL PAGES$ 2 PAGES COMMENTS 2 ARD 02910 3 4 FIN AMOUNT SY CC PGM LC ACCT FY NMR DIST LlQ 05 02140100 73451 2 3 r &ISITIONEDBY: G 11 tPvIll ! ~{'t1 ~ DIVISION APPROVAL: J ) ') . Notice of Public Bearing STATE OF ALASKA Alaska on and Gas Conservation Commission Re: Happy Valley Field Pool Rules Union Oil Company of California (UNOCAL) by letter dated December 1, 2004, has requested that the Alaska Oil and Gas Conservation Commission establish pool rules in conformance with 20 AAC 25.520 for gas productive intervals in the Tyonek and Beluga Formation in the northern portion of the Deep Creek Unit. The accumulation is called the Happy Valley Field, located in T2S R13W SM, approximately 6 miles southeast ofNinilchik on the Kenai Peninsula. . The Commission has tentatively scheduled a public hearing on this application for January 13, 2005 at 9:00 am at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a written request with the Commission no later than 4:30 pm on December 27, 2004. If a request for a hearing is not timely filed, the Commission may consider the issuance of an order without a hearing. To learn if the Commission will hold the public hearing, please call 793-1221. In addition, a person may submit written comments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 4:30 pm on January 10, 2005 except that if the Commission decides to hold a public hearing, written protest or comments must be received no later than the conclusion of the January 13, 2005 hearing. Published Date: December 10, 2004 ADN AO# 02514027 Clarion AO# 02514028 . ·\ ) I' PUBLISHER'S AFFIDAVIT Denise Reece being first duly .---~~~--~--~--~~-----. I _,Ii'- ," NotlceofPu,þllcHearl,ng I I·",' ._ _._ ._ - STA,.E OF AL4sKA .' .. I ': Alaska OU and Gas Conservation Commission : IRe.:iHapþy. Valley· Field I : Pool Rules : : UnionOil Company of California (UI'IOCAL)byl Iletter dated. December 1, 2904, has requesteq,; Ithat the Alaska Oil and Gas Conservation I ICommissionestablish pool rules in cOhformancel' Iwith.20 AAC 25.520 for gas productive intervals inl Ithe Tyonek and Beluga Formation,in the northern I :portion of the Deep Creek Unit. The accumulation; .is called the Happy Valley Field, located .in T2S. .R13W SM;approximately 6 miles ,~putheast ofl . Ninilch,ik on .the Kenai Peninsula.. I I, The"Gol11niission has tentatively scheduled al 1 public hearing on this· application - fbrJanuary 13,1 12005 at 9:00. am aìJhe offices of the Alaska Oil. .and Gas' Conservation ComlTJi~~ion at333 West I 17th Avenue, Suite 100, Anchorage, _ Alaska 99501.1 IA person may request that the, tentativelysched-I i IUled hearing be held by filing a 'written requestl Iwith the Commissi.onno latèr than 4:30 pm on; IDecember 27,2004.-. . _ ; . I I If a request fora hearing is not timely filed, thel ICommission may consider the issuance of ani .order, without ,a haaring,.. To. .Iearn if thel :coml11issiòn ~ill hold the public hearing, Please: Icall 79.3-1221. . . _ _. I I In addition; a person may submit writtencom-. Iments regarding this application to the Alaska Oil. ,land'Gas ''Conservation ComrAission at 333 West. ;7thAvenue, Suite 10Q, Anchorage, Alaska 99501.: .Written comments must be received no later thanl 14:30 pm on January 10,2005. except that if thel ICommission decides to hold a public hearing,. Iwritten protest or comments-must be received no. ~Iater.than the conclusion of the January 13, ~005; Ihearlng. I I If you are a person with a disability who maYl Ineed special accommodations in order to com-I Iment or to attend the public hearing, please con-I :tact Jody Colombie at 793-1221., : IJohn K. Norman I IChairman ; IPUBLISH:12110,2004 4336/20741 ._--------------------~ UNITED STATES OF AMERICA, ... STATE OF ALASKA ., 5S: sworn, on oath deposes and says: That I am and was at all times here in this affidavit mentions, Supervisor of Legals of the Peninsula Clarion, a news- paper of general circulation and published at Kenai, Alaska, that the Happy Valley Field Pool Rules AO-02514028 a printed copy of which is hereto annexed was published in said paper one each and day for one successive and every consecutive day in the issues on the following dates: Decembe~ 10, 2004 x IJ ;/J.J~rl¿ ~ß'~('.l oJ SUBSCRIBED AND SWORN to me before 2004 tþ: Q jOfp~JD~Q NOTARY PUBLIC in favor for the State of Alaska. My Commission expires 26-Aug-08 02-902 (Rev. 3/94) ) Publisher/Óriginal ') Copies: Department Fiscal, Departmtalt, Receiving STATE OF ALASKA ADVERTISING ORDER .~1~~9B,~ ',,~~~::;'~,.'" F AOGCC R 333 West 7th Avenue, Suite 100 o J\nchorage,AJ( 99501 M 907-793-1221 NOTICE TO PUBLISHER ADVERTISING ORDER NO. AO.FRM INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AO 02 514028 AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATIACHED COpy OF · ADVERTISEMENT MUST BE SUBMITIED WITH INVOICE T Peninsula Clarion o Kenai, AJ( AGENCY CONTACT Jo1Y Colomhie PHOI'JE (907) 793 -I ?,?I DATES ADVERTISEMENT REQUIRED: December 10, 2004 DATE OF A.O. Decemher 7, ?004 PCN THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: AFFIDAVIT OF PUBLICATION REMINDER United states of America State of ss division. Before me, the undersigned, a notary public this day personally appeared . who, being first duly sworn, according to law, says that he/she is the of Published at in said division state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2004, and thereafter for _ consecutive days, the last publication appearing on the _ day of . 2004, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This _ day of 2004, Notary public for state of ,commiSSion expires 02-901 (Rev. 3/94) and INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING· ORDER NUMBER. A CERTIFIED COpy OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. AO.FRM Citgo Petroleum Corporation PO Box 3758 Tulsa, OK 74136 Kelly Valadez Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Mark Wedman Halliburton 6900Arctic Blvd. Anchorage. AK 99502 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 ) Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 Robert Gravely 7681 South Kit Carson Drive Littleton, CO 80122 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 North Slope Borough PO Box 69 Barrow, AK 99723 ') David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise,lD 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 David Cusato 200 West 34th PMB 411 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 Public Notice ) ') safe¡morris thank you very much! Ad Order form_ Clarion.doc!! Content-Type: applicationlms\vord ,J"":,:,,:',,, , !,[ Content-Encoding: base64 ..."..............."..........,.... ".....",...,..,:........",.."....",."............" .................................... ............. ,.....".,............. ".........,,,.....,,,,,,...,,...... ........................."......... .,'.. on......'...'... "... ::::::::~..J. ¡Happy _ Valley ---poolrules.doci i Content - T)' pe: app I ¡cation ms\Vord ."""""""""""""""" """ ,,""""""""""" """""""""'" "","""""""" "",:,""""',.:,"",.,""",:""i,I,,::~,~~.~.~:?~.~~,~,~.~,~,~~~,:..,?ase64 'l .....................,........., .... .... ....... .........,..... :::::::::.'::.':::::.. ,'::::::::::::::::;::::. ::::;:::::::::~..J. 1 of 1 12/7/20044:43 PM Public Notice ) ') 10f2 12/7/20044:43 PM 12/7/20044:43 PM 20f2 ) ) Public Notice Public Notice '} .' ~·~~j..e~t·:·...·..·P~þ.liè...·~ot~ce ~..~nl:...Jody·Colombie·<jöðY_colört1bie@adrl1in.state.ak.us> Dat~:rrlle;07.Dec 2004 .12:33:40...0900 !ÌJ~:..~~g~l\4s~Þ~Þ:rªg~P~î1yt$ï~~~:$ì~gØ)ªª~@~4p:.çºt)j#· ......, ' Thank you ') Order Content-Type: application/msword Content-Encoding: base64 I::::::::·:"::'::"""" ........................................... . ........................."...............""',.........".........."......"....,,...,,........."...... .........."....",,,. ".... '" ........................."...... ........."............................ ..........".........".......................... "'0""'" ! II Content-Type: application/msword II .:.~_~~~~ ::.:~I:::::.:.lrules.dOc:1 ~~.~.~~nt=~~~~~~~:_~a~~~~. ..,""'" jj 1 of 1 12/7/20044:43 PM #2 ') Unocal Alaska \ Union Oil Company of Calik .¡~ 909 West 9th Avenue, PO. Box 196247 Anchorage, Alaska 99519-6247 Telephone (907) 276-7600 Fax (907) 263-7698 UNOCALe 2004 Kevin A. Tabler, Manager Land/Government Affairs December 1,2004 Mr. Bob Crandall Alaska Oil and Gas Conservation COl1unission 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501 DEEP CREEK UNIT Pool Rules Application Dear Mr. Crandall: Union Oil COlnpany of California (Unocal), Operator of the Deep Creek Unit, herein sublnits the following infonnation in support and establishlnent of initial Field and Pool Rules for the Deep Creek Unit. As sufficient field delineation has occurred to establismnent the initial Happy Valley Beluga/Tyonek Participating Area (HVP A), approved Septelnber 01, 2004, by the Division of Oil and Gas, DeparÜnent of Natural Resources, it is tilnely to apply for Field and Pool Rules to govern the continued develoPlnent of hydrocarbon extraction within the Deep Creek Unit. Figure # 1 attached hereto shows the approved HVP A. BACKGROUND The Happy Valley field is located in the northern part of the Deep Creek Unit (DCU) approximately 6 Iniles east of the town of Ninilchik on the Kenai Peninsula. The HVP A is located within the DCU. Unocal drilled the Happy Valley #1 discovery well in Sec. 22-T2S-R13W to a total Ineasured depth of 10,871 feet in June 2003. The well tested gas frOlTI two different Lower Tyonek reservoirs. ) ) The Happy Valley field discovery was confinned by the Happy Valley #2 well drilled in July, 2003. This well flowed gas frOln two other Lower Tyonek reservoirs not seen in Happy Valley # 1. Unocal has drilled nine (9) additional delineation wells and acquired approxiInately 65 line miles of new 2D seismic data over the area in an attelnpt to delineate the structure and reservoir distribution within the field. Figure #2 attached hereto lists the wells within the Happy Valley field. Unocal has constructed a 15 Inile natural gas transmission pipeline to, and gas production facilities at, the Deep Creek Unit, Happy Valley 'A' Pad. Gas sales cOlnlnenced Novelnber 5, 2004. RESERVOIR DESCRIPTION The Happy Valley field currently produces dry gas froln both Beluga and Tyonek reservoirs. Gas cOlnposition is 98+% Inethane. The reservoirs are all relatively low penneability. The entire reservoir systeln is a freshwater channel and braided streaIn environlnent with severe discontinuity between sands over the areal extent of the structure. This lenticular and discontinuous nature Inakes for a very cOlnplex structure. A confidential discussion of the Beluga and Tyonek Reservoirs is attached hereto as Attachlnent 1. Beluga The Beluga Reservoirs vary in depth frOln approxiInately 3,070' TVD to 5,800' TVD. The reservoir pressure varies froln a 0.44 to a 0.46 psi/ft gradient. Obtaining Ineasurable gas flow frOln the Beluga has required Inultiple intervals to be open siInultaneously. Nodal analysis has been used to estiInate reservoir quality in the 0.05-0.5 Ind range for the Beluga. Intervals do exist that have a lower penneability but intervals have not been encountered where a higher permeability has been calculated. It is generally accepted that the Beluga reservoirs have a high clay content. Based on the reservoir quality of this rock, liquid flow is inefficient at best. Water production has not been observed and it is expected that a wet interval will produce as an unconsolidated sand providing fill into the tubing Inore cOlnlnonly than water. Tyonek The Tyonek Reservoirs vary in depth from approximately 5,800' TVD to 10,108' TVD. The reservoir pressure has an approxiInate 0.44 psi/ft gradient. The lowest relative permeability to gas measured with gas flow has been 0.025 md while the highest relative permeability to gas measured has been 1.8 md. The majority of the Tyonek reservoirs encountered are less than 1.0 md. It is generally accepted that the Tyonek reservoirs have a high clay content including mobile clays. Consequently, intervals deemed wet have been done so based on a fluid ) ) level rise over an extended period of time. Based on the reservoir quality of this rock liquid flow is inefficient at best. RESERVOIR MANAGEMENT Due to the lueasured low rates frolu individual reservoirs, it will be cOluluercially necessary for Unocal to COluluingle production frolu the Lower and Upper Tyonek and Beluga reservoirs whenever possible. Consistent with the approved single HVP A, Unocal proposes a single Beluga/Tyonek Pool encompassing all of the currently identified Beluga and Tyonek reservoirs within the field, and also any future new reservoirs of the SaIue age that lnight be found within the lnapped liIuits of the Happy Valley field frolu the Beluga coalluarker observed at 4,688' MD (3,015' TVD / -2,277' TVDSS) in the Happy Valley #8 well (Figure #3 attached hereto) to the Tyonek coal luarker seen at 10,690' MD (10,118' TVD / -9,380' TVDSS) in the Happy Valley #3 well (Figure #4 attached hereto), and their respective stratigraphic equivalents across the field, at whichever depth they luay be encountered. To ensure optiIual resource recovery, Unocal proposes to liIuit initial COluluingled producing intervals to within 4000' vertical feet. This luethodology has application in the tight reservoirs encountered in each wellbore. This tight resource would not otherwise support infill drilling independent of other zones in a given well bore, and thus requires contribution frolu a large gross interval. As depletion occurs over the life of the field and it is deelued operationally prudent, Unocalluay request expansion of the 4,000' vertical foot liInit regarding comluingled perforations as a lneans to increase resource recovery. Additionally, both the Beluga and Tyonek reservoirs are in the ongoing evaluation stages of developlnent. Pay identification and petrophysical liInits on resource viability are continually evolving. As a means to advance this understanding, proppant fracture stimulations will be elnployed in the near future in an attelupt to cOlulnercialize the low quality reservoirs encountered. It is anticipated that EXCAPETM technology will be elnployed to effectively recovery gas frOlu the slnall footage of net pay spread across the large gross interval. Consistent with the complex nature of these low penueability reservoirs, Unocal is requesting no restrictions on well bore spacing as tight spacing is expected necessary to InaxiInize resource recovery. SUlnluarizing the lnamler in which the proposed plan willlnaxiInize resource recovery: · Increasing the number of take points in these low permeability reserVOIrs. · l1nproving the unloading of liquid by combining production froln multiple tight intervals. · Commercializing a low quality resource otherwise likely to not be recovered. ') ) · I1nproving efficiency of stiInulation operations, such as when uSIng EXCAPETM cOlnpletion technique. · Lowering the econOlnic threshold of field developlnent, reducing the abandonment flow rates of wells, reducing operating expense, thereby producing longer and recovering more reserves,. Unocal requests that the annual bottOln hole pressure lneasurelnent requirelnent be satisfied by a single key well pressure survey conducted at least once per year. Bottoln hole pressure lnay be cOlnputed froln surface measurelnents taken with an accurate pressure gauge provided that it can be accurately extrapolated to bottoln hole conditions. The pressure will be referenced to the 6,700' TVD. The Original reservoir pressure at this datuln is 2,948 psia. WELLBORE CONSTRUCTION Unocal proposes that wells drilled in the Happy Valley Beluga/Tyonek Pool will have a miniInuln surface casing point of +/- 1000 ft TVD and a InaxiInuln depth of 3000' TVD (See Attachlnent 2). Unocal requests diverterless drilling provided no shallow gas hazards are identified. Additionally, EXCAPE technology lnay be elnployed to optiInize resource recovery. With the EXCAPETM technology no production packer is utilized. Further, it is requested that production packer requirelnents of 20 AAC 25 .200( d) be modified to accept annular celnent as a packer for EXCAPE well bores without requirelnent of a lnechanical integrity test. Additionally, Unocal requests the Alaska Oil and Gas Conservation COlnlnission (AOGCC) not establish any requirelnent for installation of sub-surface safety valves (SSSVs) in wellbores in the Happy Valley field. Unocal proposes to install a surface safety valve (SSV) on each well that is capable of unassisted flow to surface. Unocal also proposes to conduct annual pressure testing of the SSV to InaxiInUln anticipated shut-in pressure. ADMINISTRATIVE APPROVAL Unocal requests that the Happy Valley Beluga/Tyonek Pool Rules allow for Adlninistrative Approval for changes or exceptions filed pursuant to AOGCC regulations. CONCLUSION Unocal requests the proposed Happy Valley BelugalTyonek Pool Rules be approved as submitted. Unocal believes the proposed Pool Rules will enable optimal resource recovery, provide for commercial viability and cOlnpliment the approved HVP A thereby assuring the protection of correlative rights within the HVP A. The approved HVP A ') ) protects the econolnic interests of the working interest owners and royalty owners of a COlnlnon reservoir and the approved production allocation schedule ensures an equitable allocation of revenue to the lessors COlnlnensurate with the value of their leases. LIST OF INCLUDED FIGURES, ATTACHMENTS AND PLATES FIGURE 1: Shows the approved Happy Valley Beluga/Tyonek P A FIGURE 2: List of well bores in the Happy Valley Beluga/Tyonek PA FIGURE 3: Well log showing Beluga coallnarker in Happy Valley #8 FIGURE 4: Well log showing Tyonek coallnarker in Happy Valley #3 ATTACHMENT 1: Confidential Reservoir Infonnation (Beluga/Tyonek) ATTACHMENT 2: Well Types PLATES 1 THRU 17: Contours and Cross-Sections CONFIDENTIALITY Unocal requests to the extent possible, the geologic and engineering data, Attachlnent 1, Figures 1 thru 4 and Plates 1 thru 17 presented in this application be disclosed only to those persons who are required to review the application for approval. Infonnation presented and discussion of results obtained to date Inay provide critical competitive infonnation to others regarding the cOlnlnerciality of this field and other geologic structures in the area. If you require additional infonnation regarding this application, please contact Mr. Ralph Affinito, reservoir engineer at 263-7947, or the undersigned at 907-263-7600. . ~CerelY. ' '-~f'1 "" '~~' n - j ?', t.v....).~ )/._JiA.. - --.J'..A..).., "- '~(evin A. Tabler Enclosures FIGURE 1 Attachment #2 Well Type "A": Well Type "B": Well Type "C": Base case well design for Happy V alley "B" pad. The surface casing will be set @ +/ - 1,000', which will provide a sufficient anchor for the BOPE as noted on the Happy Valley "A" pad leak off data @ +/- 1,000'. In addition, the nominal 1,000' surface casing is below the base of all strata reasonably expected to serve as a source of drinking water for human consumption. The intermediate casing will be ideally set above any known commercial gas to allow for the production pay zones to be behind a single string of liner. This will allow for a bottom to top completion philosophy of maintaining a pressure balanced flowing system. .~ The ideal slim well design for Happy Valley "B" pad. The surface casing would be set above any known commercial gas and capable of being cemented to surface. The production tubing / liner would be of mono bore style with an inline packer in the surface by liner annulus to meet current AOGCC regulations. The desired well type "B" will require competent formations below the nominal 1000' and above the top of pay at the nominal 3,000' to allow for primary cementing to surface. This packer-less completion would be utilized as a mono bore completion. The application would be required for the EXCAPE technologies where multiple, continuous, control lines from surface are required. A variance from the AOGCC for a cement annular packer would be required. '- Attachment #2 Well Type "A" Well Type "B" Well Type "C" ....,..oIIIIIIIII..... ..... ........... ..... ............9-518!~......·.,....··..···· ..... ....,...... ..... .......,................................. ........... ........... ........... ·............·........·..·........·1-;OOO!..VÐ...··..........·............ - - - 1:. - - - _\.._:¡~ - - - - - - - - _¿- - - - ~ -]2'- - - - - ~-j i_ - - ---~ -9-&8~ - -3,ÐÐÐ~VÐ- - - -- - - -- - - - - - - ~ - - ~ -3-':f2!'- - - - - - - - - ~ - - ~ -3-112'~ - - - - - - -.....- - - ~ -3--H-2!-'- - - - - -6,8ÐÐ~VÐ-- - - - - - -- - -... ..... ~ -L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _9 6ÐÐ~VÐ- - - - - -- -----~--~-------------- -- , UNOCAL8 API: 50-231-20023 AOGCC: 204-114 1324' FSL, 1203' FEL Sec22, T2S, R13W, S.M. RT-THF: 23.9' Tbg lift threads - 3W' IBT Tree cxn - 2Y2" Bowen cxn Production Tubinq: 3W', 9.2 ppf, L-80, IBT-Mod to 4055' - Annulus loaded with fresh water plus Baracor 100 corrosion inhibitor Completion - Chemical injection sidepocket mandrel at 2501' (Macco SFO-1C-I) with 1/4", 0.049" wall SS chemical injection line - Locator sub @4027' - Baker 80-40 seal assembly 17' of 4.00" OD seals - Muleshoe at 4055' NOTE: Slickline had problem hanging up at 4056" when running square-shoulder tool (8/15/04). Pluas: Halliburton Fasdrill bridge plug at 7881' (8/15/04) - Removed Directional Data: max hole angle = 65.9 deg at 2877' KOP = 175' max doglegs = 6.0 deg/100' at 4313' 5.7 deg/100' at 1304' 8.0 deg/100' at 236' HV-8 Actual schematic 8-27-2004.xls ) ~ z ~ z ~ ..4 ... PBTD = 8900'? TD = 8900' Well Name: Happy Valley #8 Field: Deep Creek Unit State: Alaska Conductor: 16", 82.77 ppf, K-55 to 111 ' ~ Surface Casing: 9%",40 ppf, L-80, BTC to 1194' Cmnt with 67 bbl of 12.8 ppg lead and 31 bbl of 15.8 ppg tail "G" Intermediate Casino: 7", 26 ppf, L-80, BTC-Mod to 4169' Cmnt with 71 bbl of 12.8 ppg LiteCrete lead and 15 bbl of 15.8 ppg "G" tail. Open Perfs: B-40: 5235' - 5244' (6 spf, 8/17/04) B-40: 5254' - 5262' (6 spf, 8/17/04) B-40: 5295' - 5304' (6 spf, 8/17/04) B-45: 5694' - 5718' (6 spf, 8/26/04) B-45: 5729' - 5749' (6 spf, 8/26/04) B-50: 6073' - 6083' (6 spf, 8/17/04) B-50: 6100' - 6110' (6 spf, 8/17/04) B-50: 6116' - 6124' (6 spf, 8/17/04) B-50: 6128' - 6134' (6 spf, 8/17/04) B-65: 6504' - 6518' (6 spf, 8/26/04) B-80: 6738' - 6748' (6 spf, 8/26/04) B-80: 6759' - 6765' (6 spf, 8/26/04) B-80: 6772' - 6782' (6 spf, 8/15/04) B-80: 6791' - 6801' (6 spf, 8/26/04) T-1: 7910' -7930' (6 spf, 8/11/04) T-1: 7949' - 7959' (6 spf, 8/11/04) T-6: 8247' - 8277' (6 spf, 8/11/04) T-7: 8393' - 8404' (6 spf, 8/11/04) T-10: 8541' - 8581' (6 spf, 8/9/04) Production Liner: 3Y2", 9.2 ppf, L-80, IBT-Mod liner from 4021' - 8897' Baker ZXP packer, Flexlock liner hanger & 80-40 seal bore at 4021' Cemented with 145 bbl of 12.0 ppg Litecrete \ ~\) \) ~ Updated by: RJA - 01-10-2005 is' Q. C) I.L o :E - (1) - IU 0::: w IU C) 12/30/04 01/06/05 HV...g .~ ~ ~W'l ~ _ Flow --- Pressure I 01/13/05 . ~ tJ Q. - e :;¡ tJ tJ (1) ¡., Q. œ "Q I- 1/1312005 HAPPY VALLEY CONTOURS 214000 216000 , I 218000 220000 I l ' J , ! (, 'J)" I I ' 222000 224000 226000 228000 230000 232000 I I , , BLG20 HKW -247] in HV2:: ]966 AC - BLG20 Lowest C]osed Contour -2400:::: 1084 AC BLG20 LPG -2339 in HV8 :::: 443 AC Creek Unit Section Lines -$- P]ugged and abandoned ¢- Gas Temporarny abandoned 214000 216000 , I ' , 218000 I 220000 222000 I 224000 226000 228000 , , , I 230000 I 232000 HAPPY VALLEY FIELD o I 2000 I 4000ft I DEPTH STRUCTURE MAP Reservoir 1 :24000 BELUGA BLG-20 Sw/àce name BLG20 fm COpy of MTL 7 depth 2rid 2 Scale Comour file PLATE 1 1 :24000 100 Dale Intel7Jreter 09117/2004 JAS 1 MTL PETREl 1iUJ.!d 'UW ¡ svr 1700ZII., T/60 ,/(!liJ.ld.lilJUI Jl11(1 001 00017Z: 1 :)111 .1ff01U0:J aZV:J8 Z Pl.ID \lid;}P 1.,'1J,W JO AdO:) WJ 1f~'1a aU/vu (J:)t)JJllS H>~'1a V~fl'13:a oootz: I I OOOZ .1!Or.t1JS'â{f dVW 3:}IflJ,:)mUS HJ,d3:G I n00017 O'1:t£I.tI X:t£'1'1VA XddVH OOOZ£Z , OooO£Z 0008¡;¡; 0009Z¡; OOOtZZ I ooOW:; ooon:z OOOO£Z 0008ZZ 0009ZZ OOOtZ¡; OOOZZZ I o OOOOZZ , 00081Z 00091Z , p;:mopm~qe ÁIµl3JodwøJ, SUD p;,mopræqu puu P;:¡;'3;'30ld sd!qsUh\o¡~ søun UOH;)ØS Hua :>¡ØØl;) .L VQ'ÁlodPndøp- L '1.LW ;)V Z69 :::: 8AH U! 8ZÇZ:- Ddì 1 W'1H ;)V IL6:::: 09S;Z-lTIO¡UO;) pøsol;J ¡SØh\Oì I£D'1H , I ' , , f ' , , J j I , , , j OOOOZZ 0008 [¡; l 31Vld 00017IZ I ¡ "¡" I , ! 00091 ¡; 00017 1 Z . , ¡ ! , \ ' ... I 218000 220000 . I " I",.. I " I 222000 t ¡ , , , ! , 224000 I 226000 228000 230000 232000 214000 216000 BLG40 HKW -2871 in HV2:::: 1846 AC BLG40 LKG -2801 in HV8 :::: 980 AC MTL 7 _depthjpoly.DA T Creek Unit Section Lines Plugged and abandoned Gas TemporariJy abandoned 214000 216000 218000 I 220000 , , ¡ , 222000 224000 I ' , 226000 I 228000 230000 I 232000 HAPPY VALLEY FIELD o I 2000 -I 4000ft I DEPTH STRUCTURE MAP Reservoir 1 :24000 BELUGA BLG-40 Sw.7ace name BLG40 fm Copy of MTL 7 depth grid 2 Scale COl1lOlIr fllc PLATE 3 1:24000 Dale 09117/2004 100 fmerpreler JAS/MTL PETRIEI.: 214000 216000 ¡ \, \ J ' , , \ I 218000 ' 220000 , , ¡ , , I ' I J 222000 \. ' , 1 ) 224000 BLG45 HKW -3202 in HV3 :::: 876 AC BLG45 LPG -3187 in HV8 :::: 778 AC MTIA_depth_fauICpoly,DA T Creek Unit Section Lines Plugged and abandoned Gas Temporarily abandoned 214000 , , I 216000 218000 220000 222000 224000 o I 2000 I 4000ft I 1:24000 PLATE 4 226000 228000 I 230000 232000 , I ' , 226000 I ' 228000 230000 232000 HAPPY VALLEY FIELD DEPTH STRUCTURE MAP Reservoir BELUGA BLG·45 Surface name BLG45 fm COPy of MTL4 depth hrz.DÞ Scale Conlour inc 1:24000 100 Oate Interpreter 09/1712004 JAS 1 MTL PETREl.: 214000 216000 , I I , , , , I 2 I 8000 220000 J , J , J ! " ! BLG50 MPG -3645 in HV3:::: 1256 AC - BLG50 LPG -3570 in HV2 :::: 1068 AC BLG50 LKG -3520 in HV8::: 565 AC MTIA_depthjau1cpoly.DA T Creek Unit Section Lines Plugged and abandoned Gas Temporarily abandoned Minor gas 214000 I 220000 2[6000 2[8000 PLATE 5 I , ! 224000 I 226000 228000 230000 232000 , , ¡ , , 222000 I 228000 224000 226000 230000 232000 HAPPY VALLEY FIELD o I 2000 I 1 :24000 4000ft I DEPTH STRUCTURE MAP Re.>œrvoir BELUGA BLG-50 5'w:[ace l1afne BLG50 fro COpy of MTL4 depth hrz.DJ Scale Contour inc 1:24000 Date 09117/2004 100 Interpreter JAS / MTL PETRU 214000 216000 I 'I j , , ( ! I 218000 I , , ( , I , , , , ¡ 220000 I I ) I 222000 , , \ ' 224000 226000 228000 I 230000 232000 BLG80 MPG -4283 in HV 4 :::: 1933 Upthm BLG80 LPG -4095 in HV8 = 770 AC MTL4_depth_faulcpoly.DA T Creek Unit Section Lines Plugged and abandoned Gas Temporarily abandoned J j ( , 214000 , . I 216000 , , ¡ , 218000 I 220000 222000 224000 , . I 226000 I 228000 230000 232000 HAPPY VALLEY FIELD o I 2000 I J :24000 4000ft I DEPTH STRUCTURE MAP Reservoir BELUGA BLG-80 c,'wface name BLG80 fm COpy of MTL4 depth hrz.DÞ Scale Contour ine PLATE 6 1 :24000 100 Dale Interpreter 09/1712004 JAS IMTL PETREl 214000 216000 218000 220000 , ¡ , , , , I " I \ 222000 224000 226000 228000 230000 I 232000 I , , Tl HKW -5220 in HV6 :::: 1374 AC T1 LPG -5194 in HV2:::: 11 108 AC LKG -5124 in HV8:::: 517 AC Creek Unit Section Lines townships Plugged and abandoned Gas Temporarily abandoned 214000 216000 218000 , 220000 222000 224000 226000 228000 230000 232000 HAPPY VALLEY FIELD o I 2000 I 1 :24000 4000ft I DEPTH STRUCTURE MAP Reservoir TYONEK T1 S'Uljace name T1 fro Cony of TonTY ·z·6Au~.DA T 5'cale Contour ine PLATE 7 1:24000 100 Date Interpreter 09/17/2004 JAS/MTL PETREa: 214000 216000 j À l \ ¡ , , ¡ \ 218000 ¡ , , , , ¡ J 220000 I 222000 J ' , , , I ' 224000 226000 228000 230000 232000 -1'] 0 GWC -5700 = 725 AC -$- Plugged and abandoned V Gas Section Lines -e- 1'emporæily abandoned townships Ò Minor gas , j , , 214000 216000 218000 , , I 220000 I ' , 222000 224000 I ' , 226000 228000 230000 I 232000 HAPPY VALLEY FIELD o I 2000 I 1:24000 4000ft I DEPTH STRUCTURE MAP Reservoir 1'YONEK TlO SU/:Iace name TlO fm Copy of 1'op1'Y ·z·6Au2.DA l' Scale COil/our inc PLATE 8 1:24000 100 Date Interpreter 09117/2004 JAS 1 M1'L PETRE!: , , I \ ' \ ' I 218000 , , I , , 220000 I 222000 ¡ , , , , \ ( 224000 I 226000 228000 230000 232000 214000 216000 T25 LKG-6558 IN HV 4 ::: 1562 AC Creek Unit Section Lines - townships -$- Plugged and abandoned P Gas Temporarny abandoned .0. Minor gas 214000 , , J ' , 216000 218000 , 220000 222000 224000 226000 , , ' 228000 I 232000 HAPPY VALLEY FIELD o I 2000 I 1:24000 4000ft I DEPTH STRUCTURE MAP Reservoir TYONEK T25 Surface name T25 fmCopv of TopTY .z·6Aug.DA T Scale Contour inc PLATE 9 1 :24000 100 Imerpreler JAS I MTL PETREl.: Dale 09117/2004 214000 216000 \ ' \ },} J 218000 I , F , , I , , 220000 I 222000 I , ( , , ! , 224000 226000 228000 I 230000 232000 · T40 HKW? -7013 HV4:::: 731 AC T40 LPG -6933 HVl :::: 495 AC HV _topTIOjlts_1 ! aug04.txt Creek Unit N N o --,," o ~ 0 ~o Section Lines --- townships .. Plugged and abandoned -¢- Gas Temporarily abandoned tv tv o tv o -0 o tv - tv o -0 o -0 o N ::;; 00 o :8 N '" 0\ o o o ::::: '" -"" o o o tv '" tv o o o tv -::;; -0 o o o tv 00 00 o o o N 00 -0\ o -0 o N 00 -"" o ~o o tv 00 tv o o o ~N 00 -0 o '0 o 214000 2]6000 , I ' , 218000 I 220000 222000 I 224000 226000 228000 , , , , I ' 230000 I 232000 HAPPY VALLEY FIELD o I 2000 I 1:24000 4000ft I DEPTH STRUCTURE MAP Reservoir TYONEK T40 Suelace flame T40 fw COpy of T70 -llaug04.DA T Scale Contour Ínc PLATE 10 1 :24000 100 [)ate Imerpre1er 0911712004 JAS I MTL PETREl.: 214000 216000 218000 220000 I 222000 224000 226000 228000 230000 232000 ¡ ( , , l ¡ , I , , T70 + I Net Sd -7975:= 582 AC T70 LKG -7936 in HVI :::: 482 AC HV _topT70_flts_l laug04.txt Creek Unit N to o -.þ. o ~o o Section Lines ~tovvnships ... Plugged and abandoned p. Gas Temporarily abandoned to . N o N o ~ 0 o ö N N o o o ~o ~o N '0 ()O o 8 to '0 '" o 8 N ~~ .. o 8 ~ '0 -to o ·0 o to .~ o o o o N ()O ()O o ~ 0 o § '0- 00 '" to 00 '" o -0 o N ()O .. o '0 o ~ 00 '0 o ~o o N ()O -0 o ~ 0 o , ! ' , 214000 216000 , I 218000 220000 222000 224000 226000 I ' 228000 230000 232000 HAPPY VALLEY o I 2000 I - I :24000 4000ft I DEPTH STRUCTURE MAP Reservoir TYONEK 1'70 Swjace name 1'70 ·l1au~04.DAT Scale Contour inc PLATE 11 1:24000 100 Dale Interpreter 09/17/2004 JAS 1 MTL PETREl ,,, N o .þ. o o o N N o '" o o o '" '" o o o o o '" '>D -00 o -0 o '" '>D 0\ o o o '" '>D -.þ. o o o ,,, '>D N o o o ,,, '>D o o o o '" 00 00 o o o N 00 0\ o o o '" 00 .þ. o o o '" 00 '" o o o '" 00 -0 o - 0 o 232000 230000 228000 HAPPY VALLEY FIELD DEPTH STRUCTURE MAP Re,yervoir TYONEK T80 ,)'ruface flame T80 fm COpy of HVtopT70z-11aug04.DA 'call' COf1(()ur inc 100 222000 224000 226000 0 2000 4000ft I .. 24000 21 8000 220000 I , -8036 in HV4 = 665 AC ........ - T80 AIL P99 -8254 in HV6 = 1336 AC ........ - T80 LKG+ I Net Sd -800 I = 554 AC -TSO LKG -7939 in HV2 = 375 AC - HV _topTIO_llts_11 aug04.txt Creek Unit Section Lines - townships -$- Plugged and abandoned .p Gas -e- Temporarily abandoned ÒM T80 HKW 216000 o o o .". o N N o 0- o N- 0\ N o 0- o 0- 00 <,I o o o 0- 0\ N o o o 00 00 <'I o 0- o '>D- 00 N o 0- o .".- 00 N o 0- o N- 00 N o o o N o <'I N o o o o o N N o o o 00 0\ N o o o '>D 0\ N o o o .". 0\ <,I PETREL MTL Illfel'lJrt'fl' .JAS/ 1:24000 f)all' 09/17/2004 12 PLATE , I ' , 222000 224000 226000 0 2000 4000ft I .. 24000 1'-' '" o .þ. o o o 1'-' 1'-' o - 1'-' o - 0 o ,'-' ,'-' o o o o o '" "" DO o o o ,'-' "" a- o o o 1'-' "" -.þ. o - 0 o ,'-' "" - ,'-' o o o ,'-' "" -0 o -0 o 1'-' DO DO o o o ,'-' DO -a- o - 0 o 1'-' DO .þ. o o o 1'-' DO - ,'-' o - 0 o 1'-' DO o o o o 232000 232000 230000 , I 230000 228000 228000 226000 224000 222000 216000 218000 220000 I n. Tl20 LKG+l Net Sd = 568 AC ~-"" T120 LKG -8749 in HVl = 505 AC - HV _topT70_flts_1 1 aug04.txt Creek Unit Section Lines - townships -$- Plugged and abandoned .q. Gas -e- Temporarily abandoned .0 Minor 220000 218000 214000 /, I , o 0- o """ o '" '" o 0- o N- o '" - N o 0- 0' 00- a- N o 0- o "" a- N o o o N- a- '" o 0- o 0- a- N o o o 00 00 N o 0- o ""- 00 N o 0- o N- 00 N o o o 0- 00 '" o o o o o N N o o o """ a- N o o o """ 00 N HAPPY VALLEY FIELD DEPTH STRUCTURE MAP Reservoir TYONEK T120 Xlii/an' 1/ame T120 fm COpy of HVtopT70z-11aug04.D Scale COllwur inc 100 PETREL Interpreter JAS / MTL 1 :24000 Dale 09/17/2004 13 PLATE 232000 HAPPY V ALLEY FIELD DEPTH STRUCTURE MAP Reservoir TYONEK Tl55 5;uliac{' nanw Tl55 fm COpy of HV Tl40 COAL z dr: Scale COJJ!ourinc 1:24000 100 /)Gle Jl1lerprelf'" 09/17/2004 JAS / MTL PETREL N ,'-' o .... o o o N - ,'-' o - 1'-' o - 0 o 1'-' 1'-' o o o o o 1'-' 'D 00 o o o N 'D ~ o o o ,'-' 'D .... o o o ,'-' 'D - ,'-' o o o ,'-' 'D -0 o - 0 o 1'-' 00 00 o o o 1'-' 00 ~ o o o ,'-' 00 .... o o o ,'-' 00 - ,'-' o - 0 o N 00 o o o o 232000 230000 230000 228000 228000 226000 I 222000 224000 226000 0 2000 4000ft I .. 24000 224000 222000 I 216000 218000 220000 , I , , ..... T]55 HKW -9532 in HV4 = 5]3 AC --- TI55 LPG -9408 in HV312-22:::: 234 AC --.. TI55 LKG -9370 in HV3 23 AC - TI 40_tlU Sept04.DA T Creek Unit Section Lines - townships -$- Plugged and abandoned V Gas -e- Temporari]y abandoned OM 220000 218000 6000 2 14 o 0- o .". o <'I N o 0- o N- o N N -[ 214000 PLATE 214000 o o o o o <'I N o o o 00 ~ <', o o o 'D ~ <', o 0- o .".- ~ N o o o N ~ <', o o o 00- 00 N o 0- o 'D- 00 N o o o .". 00 <', o 0- o N- 00 N o o o 0- 00 <', o o o o ~ N HAPPY VALLEY CROSS-SECTIONS ( (( Findings and Decision of the Director of the Division of Oil and Gas APPROVING THE FORMATION OF THE HAPPY VALLEY PARTICIPATING AREA WITHIN THE DEEP CREEK UNIT Under a Delegation of Authority frOlTI the Commissioner of the State Of Alaska Department of Natural Resources November 4,2004 TABLE OF CONTENTS I. APPLICATION FOR THE FORMATION OF THE HAPPY VALLEY PARTICIPATING AREA ........1 II. ANALYSIS OF THE APPLICATION FOR THE FORMATION OF THE HAPPY VALLEY P A...........2 1. PRIOR EXPLORATION AND DEVELOPMENT ACTIVITIES AND THE GEOLOGICAL AND ENGINEERING CHARACTERISTICS OF THE RESERVOIR ...... ............. ................... .............................. ..................... ..................2 2. THE ApPLICANT'S PLAN OF DEVELOPMENT FOR THE DEEP CREEK UNIT ............................................................ 6 3. THE ECONOMIC COSTS AND BENEFITS TO THE STATE ..... ........ .............. ...... ........... ...... ........................... ...........6 4. THE ENVIRONMENTAL COSTS AND BENEFITS........ ............................................................................................. 7 5. OTHER RELEVANT FACTORS.............................................................................................................................. 8 III. FIND IN GS...... ................... .... ............... ................... ................... ................................ .......................................... 8 1. PROMOTE THE CONSERVATION OF ALL NATURAL RESOURCES ........ ........ ...................... ......................... ............ 8 2. PROMOTE THE PREVENTION OF ECONOMIC AND PHYSICAL WASTE.................................................................... 9 3. PROVIDE FOR THE PROTECTION OF ALL PARTIES OF INTEREST, INCLUDING THE STATE...................................... 9 IV. D ECISI 0 N .... ................................ ................. ....................................................................................................1 0 Attachment 1. Exhibit A, Unit Tract Description and Ownership Schedule Attachment 2. Exhibit B, Map of the Deep Creek Unit Boundary Attachment 3. Exhibit C, Happy Valley P A Production Allocation Schedule Attachment 4. Exhibit D, Map of the Happy Valley P A Attachment 5. Exhibit E, Happy Valley PA Expense Allocation Schedule Attachment 6. Exhibit F, Deep Creek Unit Expense Allocation Schedule Attachment 7. Exhibit G, Deep Creek Unit First Plan of Development ( ( I. Application for the Formation of the Happy Valley Participating Area The Deep Creek Unit is located on the Kenai Peninsula, approximately five miles inland from the nearest communities of Ninilchik and Happy Valley. The State of Alaska, Department of Natural Resources, Division of Oil and Gas (the State, the DNR, or the Division, as appropriate) and Cook Inlet Region Inc. (CIRI) approved the formation of the Deep Creek Unit and the initial plan of exploration effective Decel11ber 31, 2001. The unit area encompasses 22,656.90 acres. Approximately 40.370/0 of the unit area, lies within three State leases and 59.450/0 of the unit area, lies within five CIRI leases. The remaining .18% of the Deep Creek Unit (39.99 acres) is unleased federal acreage managed by the Bureau of Land Management (BLM). The State and CIRI jointly administer the Deep Creek Unit Agreement (the Agreement). On September 1, 2004, Union Oil Company of California (Unocal), the Deep Creek Unit Operator, applied to form the Happy Valley Participating Area (Happy Valley P A) within the unit area. Unocal submitted the Deep Creek Unit Happy Valley PA Application (the Application) in accordance with 11 AAC 83.351 and Article 9 of the Deep Creek Unit Agreement (the Agreement). The Application included the following exhibits to the Unit Agreement: Exhibit A, a schedule describing the Deep Creek Unit; Exhibit B, a map of the Deep Creek Unit; Exhibit C, a schedule allocating unitized substances within the Happy Valley P A; Exhibit D, a map of the Happy Valley PA; Exhibit E, Happy Valley Allocation of Participating Area Expense; Exhibit F, Allocation of Unit Expense; and Exhibit G, First Unit Plan of Development and Operations (First POD). On September 23, 2004, the Division received a revised First POD that addressed exploration within the unit area and outside of the proposed Happy Valley PA. Unocal originally proposed that the Happy Valley P A include portions of four leases encompassing a total of 1,410 acres. Unocal corrected the legal descriptions and submitted revised Exhibits A and F on September 10, 2004, and revised Exhibits C and E on September 16, 2004. Unocal reduced the area proposed for inclusion in the Happy Valley P A and Sublllitted revised Exhibits C, D, and E on October 12, 2004. On November 2, 2004, the Division received final version of Exhibits C and E with corrected legal descriptions, tract acreages, and allocation percentages. The final versions of Exhibits A, B, C, D, E, F, and G are Attachments 1 though 7 to this Findings and Decision, respectively. Unocal also provided geological, geophysical, and well data to support the Application. The proposed Happy Valley P A contains a portion of one State lease, ADL 384380, and portions of three CIRI leases in the north half of the Deep Creek Unit. DNR issued oil and gas lease ADL 384380 following Cook Inlet Sale 78 held on October 31, 1994, on State lease forn1 DOG 9208. With an effective date of January 1, 1995, the seven-year primary term of ADL 384380 expired on Decel11ber 31, 2001. A portion of ADL 384380 was committed to the Deep Creek Unit as Tract 2, effective December 31, 2001. The lease was severed, the non-unitized portion of the lease expired, and the unitized portion is extended indefinitely by the Agreel11ent. Unocal proposed including portions of the following three CIRI leases in the Happy Valley P A: C- 061588 (Tract 3); C-061589 (Tract 4); and C-061590 (Tract 5). The primary terms of the all three of these leases expired on December 17, 2003, but the lease terms were extended Deep Creek Unit, Happy Valley P A Findings and Decision Page 1 ~: ( indefinitely by commitment to the Deep Creek Unit, effective December 31, 2001. Unocal is the only working interest owner in the Deep Creek Unit and the Happy Valley PA. ConocoPhillips Alaska, Inc has 1.5% overriding royalty interest in Happy Valley P A and CIRI Production Company has a 3.50/0 overriding royalty interest in the State lease. The proposed Happy Valley PA encompasses approximately 1,239.99 acres, including 145.84 acres within the State lease and 1,094.15 acres within the three CIRI leases. Production from the Happy Valley P A will be allocated to the individual leases based on their surface acreage within the participating area as a percentage of the total acreage in the Happy Valley P A. Therefore, 11.76% of the production from the Happy Valley P A will be allocated to the State lease and 88.24% to the CIRI leases. The State retains a 12.5% royalty on production from the State lease while the three CIRI leases specify an 18% royalty rate. The Division's evaluation of the Application is set out in this Findings and Decision. II. Analysis of the Application for the Formation of the Happy Valley P A The COl1llnissioner of DNR (the Commissioner) reviews unit-related applications, including unit expansions and the formation of participating areas, under AS 38.05.180(p) and 11 AAC 83.301-11 AAC 83.395. The State statute and DNR regulations set out the standards and criteria for formation of a participating area. The Commissioner or his designee I may approve the formation of a participating area if he determines it is necessary or advisable in the public interest2. This Finding and Decision evaluates the Application based on the six factors set out in 11 AAC 83.303 (b). 1. Prior Exploration and Development Activities and the Geological and Engineering Characteristics of the Reservoir A participating area may include "only land reasonably known to be underlain by hydrocarbons and known or reasonably estimated through use of geological, geophysical, or engineering data to be capable of producing or contributing to the production of hydrocarbons in paying quantities.,,3 The Division received the following technical data in support of the Application: a history of oil and gas exploration in the area; a description of the stratigraphy, structure, trapping lnechanisms 1 By memorandum dated September 30, 1999, the Commissioner approved a revision of Department Order 003 that delegated this authority to the Director of the Division of Oil and Gas. 2 The proposed unit action must be necessary or advisable in the publ ic interest: "To conserve the natural resources of all or part of an oil or gas pool, field, or like area, the lessees and their representatives may unite with each other, or jointly or separately with others, in collectively adopting or operating under a cooperative or unit plan of development or operation of the pool, field, or like area, or part of it, when determined and certified by the commissioner to be necessary or advisable in the public interest." AS 38.05.I80(p). 311 AAC 83.351 (a). paying Quantities is defined in II AAC 83.395(4) and in the Agreement. The exact wording of the two definitions differ slightly, but they are essentially the same. In Article 1.14 of the Agreement: "Paying Quantities" means: Quantities sufficient to yield a return in excess of operating, costs, even if drilling and equipment costs may never be repaid and the undertaking considered as a whole may ultimately result in a loss; quantities are insufficient to yield a return in excess of operating costs unless those quantities, not considering the costs of transportation and marketing, will produce sufficient revenue to induce a prudent operator to produce those quantities. Deep Creek Unit, Happy Valley P A Findings and Decision Page 2 ( ~ and hydrocarbon generation; a stratigraphic column for Cook Inlet; seven depth structure maps of Tyonek and Beluga horizons; a seismic coverage map of the north half of the Deep Creek Unit; four interpreted seismic lines; and four structural well cross sections. The Division will hold these data confidential under AS 38.05.035(a)(9)(C) and 11 AAC 96.220. The Deep Creek anticline is the main feature in the Deep Creek Unit area, and a structural saddle separates it from the Happy Valley anticline. The Happy Valley reservoir consists of Teliiary (Kenai Group) Tyonek and Beluga formation sandstones and interbedded coals. The reservoir is defined by a four-way dip closure along a northeast-southwest trending anticline, with possible fault containment on the east. In 1958, Standard Oil of California (SOCAL) drilled the first well drilled to test the Deep Creek anticlinal trend, the SOCAL Deep Creek 1 well (SDC 1). SOCAL's primary exploration objective was oil in the Hemlock Formation, with gas in the Tyonek Formation as a secondary target. Subsequent to logging the initial borehole, problems forced the operator to re-drill the hole before testing the Hemlock Formation (SDC l-RD). SOCAL completed two drill stem tests (DSTs), one in the Tyonek Formation and one in the Hemlock Formation that showed n1inor indications of gas. SOCAL plugged and abandoned the SDC l-RD as a dry hole. In 1963, Superior Oil Company drilled the Happy Valley Unit #31-22 well (HVU 31-22) approxitnately one mile south of SDC l-RD and within the proposed Happy Valley P A. Superior did not perform any reservoir tests on HVU 31-22 before plugging and abandoning it as a dry hole. The State and CIRI approved Unocal's application to form the Deep Creek Unit effective December 31, 2001. The initial Plan of Exploration contained a commitment to drill one exploratory well in the first year, and if successful, Unocal was prepared to drill a second well in the unit area. The State and federal agencies approved the necessary permits to spud the first well prior to formation of the Deep Creek Unit, and Unocal drilled the NNA #1 well as a straight hole on CIRI acreage north of the SDC I-RD. Unocal completed NNA #1 on January 27,2002, and tested several intervals which were wet or tight. Subsequent to drilling the NNA #1 well, Unocal constructed a gravel pad nearly two miles south of the first well location and drilled the Happy Valley # 1 well (HV -1) to a bottOln-hole location about a mile west of the pad. HV -1 producèd gas from two Lower Tyonek intervals at test rates of 4.1 Inillion cubic feet per day (MMCFPD) at 1,122 pounds per square inch gage fluid tubing pressure (psig FTP). Encouraged by the success of the HV-l well, Unocal continued to drill delineation wells in 2003 and 2004. Unocal drilled six lnore wells in the Deep Creek Unit and converted NNA #1 to a disposal well prior to submitting the Application. Unocal tested the HV -1 and HV -2 wells in the Tyonek formation and the HV -8 well in both the Tyonek and Beluga formations. No test rate was established for HV-3, HV-4, HV-6, or HV-7. Unocal drilled the HV-5 well to the target objective, but it was unproductive. The well information is summarized in Table 1 below. Deep Creek Unit, Happy Valley P A Findings and Decision Page 3 ( ~: Table 1. Wells Drilled by Unocal in the Deep Creek Unit Well MD TVD Rate Pressure Formation Location API Number NNA #1 10,590' 10,590' Tyonek I1-T2S-RI3W SM 501332050700 HV-l 1,872' 9,700' 4.1 1 , 122 Tyonek 21-T2S-RI3W SM 502312001300 HV-2 10,225 ' 9,812' 2.6 695 Tyonek 22-T2S-RI3W SM 502312001400 HV-3 11,345' 10,772' 22-T2S-RI3W SM 502312001600 HV-4 10,625' 10,515 ' 22-T2S-RI3W SM 502312001700 HV-5 n/a n/a 14-T2S-R13W SM 502312001800 HV-6 11,798' 10,400' 28-T2S-RI3W SM 502312001900 HV-7 9,118' 7,140' 15-T2S-RI3W SM 502312002200 HV-8 8,900 6,734 ' .6 902 Tyonek 21-T2S-RI3W SM 502312002300 1.2 865 Beluga MD: Measured Depth TVD: Total Vertical Depth Rate: Million Cubic Feet Per Day (MMCFPD) Pressure: Fluid Tubing Pressure per Square Inch Gage (psig FTP) Unocal also committed to acquire new proprietary 2D and/or 3D seismic data within the proposed unit area to enable mapping of the adjacent structures during the second year of the Initial POE. Failure to acquire the seismic data as specified would have resulted in contraction of the unit area to exclude the two southern State leases (Tracts 6 and 7). Unocal fulfilled the commitment by acquiring 105 line miles of2D seismic over the Deep Creek Unit area. The Happy Valley PA is stratigraphically limited to the Beluga and Tyonek Formation Sands from -1,547 feet True Vertical Depth Sub Sea (TVDSS) (2,176 feet Measured Depth) in the Happy Valley Unit No. 31-22 well to -9,368 feet TVDSS (10,678 feet Measured Depth) in the HV -3 well. Unocal mapped the depth of the lowest known gas for each producible interval based on seismic and well control and overlaid them on an aliquot part map grid to detennine the Happy Valley P A boundary, which is based on 40-acre aliquot parts as defined by 11 AAC 88.185(11).4 The unit boundary, the Happy Valley PA boundary, and well locations are depicted on Figure 1 below. The well and geophysical data provided in support of the Application, and otherwise available to DNR, indicate that the land proposed for inclusion in the Happy Valley PAis capable of producing or contributing to production of Unitized Substances in Paying Quantities from the Happy Valley Reservoir. The Applicants' prior exploration activities and the geological and engineering characteristics of the Happy Valley PA support approval of the Application under 1] AAC 83 .303(b )(2) and (3). Figure 1, Map of the Deep Creek Unit and the Happy Valley P A 4 I AAC 88.185(1 1) "legal subdivision" means an aliquot part of a section of land according to the public land rectangular survey system, not smaller than one-quarter of one-quarter of one section ofland, containing approximately 40 acres; where a section ofland contains section lots, "legal subdivision" also means those section lots; "legal subdivision" also means a protracted legal subdivision according to any protracted public land rectangular survey prepared by the division or Bureau of Land Management of the Department of the Interior, and made available to prospective applicants for leases; Deep Creek Unit, Happy Valley P A Findings and Decision Page 4 Deep Creek Unit, Page 5 Happy Valley PA Findings and Decision ) ) 2. The Applicant's Plan of Development for the Deep Creek Unit Unocal proposed a one-year term for the First POD, September 1, 2004 to August 31, 2005, which supersedes the last quarter of the current Deep Creek Unit Plan of Exploration. The First POD includes plans to develop the reserves underlying the Happy Valley PA and plans to explore the unit area outside of the participating area. Unocal will cOlnplete construction of gas handling facilities on the Happy Valley pad and gathering lines that will connect it to the Kenai Peninsula pipeline network. Sustained production from the Happy Valley PAis scheduled for Novelnber 2004. Unocal plans to commingle production from multiple zones in the Tyonek and Beluga sandstones, process the hydrocarbon stream in the gas processing facility located on the Happy Valley pad, and ship pipeline quality gas through the pipeline that connects the Deep Creek Unit to the Kenai-Kachemak Pipeline. Unocal's First POD also includes plans to drill two or more additional development wells in the Deep Creek Unit from the Happy Valley pad. Unocal has approved permits and is currently drilling HV -9 and HV -10. Unocal may establish another pad to develop the reserves in the western portion of the Happy Valley P A. Primary gas treatment facilities may be located on the second developlnent pad and a gathering line installed to ship the gas to the Happy Valley pad where it will be processed for sale. Exploration activities outside of the Happy Valley P A include both exploration drilling and seislnic evaluation. Unocal installed the Star pad in the southern end of the Deep Creek Unit in 2004, and drilled the Star # 1 well, which bottom-holed outside of the unit area. A flow test of the Star #1 well produced gas from the Tyonek formation at a rate of 0.5 MMCFPD at 413 psig FTP. Unocal plans to recomplete and test uphole zones in the Star #1 well during the tenn of the First POD. Further delineation of this southern accumulation may justify forming another participating area and expanding the unit area. During the tenn of the First POD, Unocal will process and evaluate the seismic data acquired over the Deep Creek Unit area, which should in1prove Unocal's understanding of the underlying hydrocarbon accumulations. The Application, along with the First POD, contains sufficient plans and comlllitments to explore and develop the Deep Creek Unit to support forming the Happy Valley PA. It protects the interests of the public, CIRI, and the State by committing the Applicants to drill delineation and production wells in the Happy Valley Reservoir, and to explore additional prospects outside of the participating area. Therefore, Unocal's plans for development of the Happy Valley Reservoir and exploration of the unit area support approval of the Application under the section .303(b)(4) criteria. 3. The Economic Costs and Benefits to the State Approval of the proposed Happy Valley PA and the First POD will result in both short-term and long-term economic benefits to the State. Happy Valley PA production will generate construction jobs in the short-term and some long-term employment in the Kenai Peninsula Borough. The long-term goal is to maximize the physical and economic recovery of hydrocarbons from the Happy Valley PA. Development and production from the Happy Valley Deep Creek Unit, Happy Valley PA Findings and Decision Page 6 ) ) P A will provide royalty and tax revenues to the State over the life of the field. The lessees may reinvest revenues in new exploration and development in the State. Additionally, the Happy Valley P A will deliver new natural gas supplies and help stabilize the local and regional economy. Royalty, tax, and employment benefits derived from production and economic developn1ent will far exceed any additional adlninistrative burdens associated with pennitting Happy Valley P A facilities, administering the unit leases or collecting royalties on production. In sUInmary, the econOInic benefits outweigh the costs. The working interest owners made Ineaningful cOImnitments to explore and develop the unit area and the State will receive taxes, royalties, and increased economic activity. Moreover, the discovery of additional gas reserves in Cook Inlet Inay help to maintain stable, low cost energy supplies for the surrounding area. Therefore, DNR's evaluation of the section .303(b)(5) economic criteria supports approval of the Application. 4. The Environmental Costs and Benefits Approval of the Happy Valley PAin itself has no environmental Ì1npact. Fonnation of the Happy Valley PA is an administrative action and does not authorize any on-the-ground activity. State and federal agencies will analyze the potential effects on the envirol11nent when they review applications for permits to conduct exploration and development in the unit area. Unitization allows the unit operator to explore and develop the resources under a single unit plan rather than on a lease-by-Iease basis. The unit operator will consolidate facilities and space gas wells as close together as possible to minimize environmental impacts of development. Future exploration and development will also utilize existing logging roads. Additionally, Unocal expects to develop this proposed participating area in concert with unitized exploration and developlnent of other known and potential natural gas resources on the Kenai Peninsula via a COInmon carrier pipeline, which will allow for further consolidation of facilities and pipelines. Article 8.2 of the Agreement requires that a Unit Plan of Operations must be consistent with the leases, n1itigation measures, and lessee advisories developed by DNR for the State's most recent Cook Inlet Areawide lease sale. Cook Inlet 2004 Areawide Mitigation Measures were developed specifically for this region and include habitat and wildlife protection such as stream and waterbody setbacks and seasonal use restrictions to protect sensitive birds and animals. Unitization does not waive or reduce the effectiveness of the mitigating measures that condition the lessee's right to conduct operations on these leases. Exploration and development within the Deep Creek Unit is subject to these provisions, if proposed operations involve State surface or subsurface. When the unit operator submits a Unit Plan of Operations for approval, the Division will apply the current mitigation measures uniformly across the unit, ensuring environmental protections that might not otherwise occur on private lands. However, for operations solely on CIRI lands, the Division does not have the authority to approve a plan of operations or impose the State's mitigation measures. The Deep Creek Unit is within the Alaska Coastal Zone, and therefore it is subject to the Alaska Coastal Management Program (ACMP), whether the activity is on State or CIRI land. The appropriate federal, State, and local agencies must determine if the Unit Operator's exploration Deep Creek Unit, Happy Valley P A Findings and Decision Page 7 ') or development plan is consistent with ACMP, and the lessees Inay not commence drilling or developlnent operations until all agencies have granted the required permits. Unocal will develop the Happy Valley PA from a gravel pad and an existing road on private surface lands. The Unit Operator designed the Happy Valley pad to minimize impacts to the surrounding natural environment, specifically wetlands and riparian habitat, and no wetlands fill or fish stream permits were necessary. Unocal acquired the necessary air emission and drilling waste disposal permits. The benefits of consolidated exploration and development, application of the State's Areawide Initigation measures, and the use of existing roads, balance the potential costs to the surround ing environment. Forming the Happy Valley P A minimizes the enviromnental impacts and costs of exploration and development of the unit area supports approval of the Application under the section .303(b)(1) criteria. 5. Other Relevant Factors The Agreement requires joint approval of the Application by the DNR and CrRr because the Happy Valley Reservoir lies within both State and CrRr leases. The Happy Valley P A will be the first participating area jointly managed by the DNR and crR!. Unocal constructed the Happy Valley pad on CrRr acreage and directionally drilled to the adjacent State lease. The Division and CrRr agreed to Unocal' s proposal to allocate production from the Happy Valley P A based on surface acreage. With joint management of the Happy Valley P A, the State and CrRI will review Unocal's plans to delineate and develop the reservoir. The Deep Creek Unit Plans of Development must be consistent with State regulations and include plans to explore the area outside of the Happy Valley P A. Although the majority of production from the Happy Valley P A will be allocated to the crRI leases, the Division will have an equal say in the approval of those plans. Reaching agreement on an acceptable development plan and an equitable allocation of production required the cooperation of all parties. Joint management of the Deep Creek Unit and the Happy Valley PA provides for development of State and private lands under a unified plan that reduces environmental impacts, conserves resources, and protects the interests of all parties. Joint management of the Happy Valley PA supports approval of the Application under 11 AAC 83.303(b)(6). III. Findings 1. Promote the Conservation of all Natural Resources The Happy Valley P A will promote the conservation of both surface and subsurface resources through unitized (rather than lease-by-Iease) development. Approval of the Application will reduce both the number of facilities required to explore for and develop reserves and the aerial extent or the footprint required to accommodate those facilities. The formation of oil and gas units, as well as the formation of participating areas within units, Deep Creek Unit, Happy Valley PA Findings and Decision Page 8 ) ) generally conserves hydrocarbons. Formation of the Happy Valley P A will provide for efficient, integrated development of the Tyonek and Beluga reservoirs within the Deep Creek Unit. A comprehensive operating agreement and plan of development governing the area will help avoid duplicative development efforts on and beneath the surface. There will be environmental impacts associated with reservoir development. However, all unit developlnent must proceed according to an approved plan of development. Additionally, before undertaking any specific operations on State land, the Division must approve a Unit Plan of Operations. DNR may condition its approval of a Unit Plan of Operations and other pennits on performance of the mitigation measures developed for the most recent Cook Inlet Areawide lease sale in addition to those in the leases. Compliance with mitigation Ineasures will minimize, reduce or avoid adverse environmental impacts. Creating the Happy Valley PA will help maximize oil and gas recovery, while Ininitnizing negative impacts on other natural resources. This reduction in environmental itnpacts and conservation of hydrocarbon resources is in the public interest. 2. Promote the Prevention of Economic and Physical Waste Fonning a participating area prevents economic and physical waste by eliminating redundant expenditures for a given level of production, and by avoiding loss of ultimate recovery with the adoption of a unified reservoir management plan. Marginally economic reserves, which otherwise would not be produced on a lease-by-lease basis, can be produced from the Happy Valley PA in cOlnbination with more productive leases. Facility consolidation lowers capital costs and promotes optimal reservoir Inanagement. Pressure maintenance and secondary recovery procedures are easier to design and achieve through joint, unitized efforts than would otherwise be possible. In cOlnbination, these factors allow the unit operator to develop and produce less profitable areas of a reservoir in the interest of all parties, including the State. Reducing costs and environmental impacts through unitized operations will expedite development of reserves and will promote greater ultimate recovery of oil and gas from the unit area. This may increase and extend the State's income stream from production taxes and royalties. Formation of the Happy Valley PA will facilitate the equitable division of costs and allocation of the hydrocarbon shares, and provide for a diligent development plan that helps to maximize hydrocarbon recovery from the reservoir. Further, the formation of a participating area, which enables commingled production, facility sharing opportunities, and adoption of a unified reservoir management strategy, may allow for the development of economically marginal hydrocarbon accumulations. 3. Provide for the Protection of all Parties of Interest, Including the State Because hydrocarbon recovery will more likely be maximized under a unified plan, the Happy Valley P A protects the economic interests of the State, CIRI, and the overriding royalty interest owners. Formation of the Happy Valley PA advances the efficient evaluation and development of the hydrocarbon resources while minimizing impacts to the area's cultural, biological, and Deep Creek Unit, Happy Valley PA Findings and Decision Page 9 ) ) environmental resources. F ormation of the Happy Valley P A protects the economic interests of the working interest owners and royalty owners of a common reservoir. The approved production allocation schedule ensures an equitable allocation of revenue to the lessors commensurate with the value of their leases. The Happy Valley P A will not diminish access to public and navigable waters beyond those lil11itations Ï111posed by law or already contained in the oil and gas leases covered by the Agreen1ent. The Agreement provides for future expansions and contractions of the participating area, as warranted by data obtained by exploration or otherwise. The Happy Valley P A and the Agreement thereby protect the public interest, the rights of the parties, and the correlative rights of adjacent landowners. IV. Decision The Division reviewed the statutes, oil and gas unitization regulations, the Deep Creek Unit Agreement, and l11aterials supplied by Unocal in support of the Application. I find that f0f111ation of the Happy Valley P A within the Deep Creek Unit will promote the conservation of all natural resources, pr01110te the prevention of economic and physical waste, and provide for the protection of all parties in interest including the State, as discussed above. The Application adequately and equitably protects the public interest, is in the State's best interest, and it meets the requirel11ents of AS 38.05.180(p) and 11 AAC 83.303. Therefore, I approve the Application under 11 AAC 83.351(b). Unocal requested that approval of the Happy Valley P A be effective September 1, 2004, which is consistent with the proposed term of the First POD. "The Proper Authority will establish the effective date of the initial Participating Area. That effective date shall be no later than the date of the first Sustained Unit Production."s Subject to concurrent approval by CIRI, the effective date of the Happy Valley PA will be September 1,2004, and Unocal may commence production. The Happy Valley PA is limited to the 1,239.99 acres described in Exhibit C and depicted in Exhibit D. The Happy Valley PA encompasses approximately 5.5% of the Deep Creek Unit, including a portion of one State lease, and portions of three CIRI leases. The Happy Valley P A encompasses all unitized substances in the Beluga and Tyonek Formation Sands from -1,547 feet TVDSS to -9,368 feet TVDSS within the boundary of the approved participating area. DNR accepts Exhibits A, B, C, D, E, F, and G to be true and correct as submitted; those exhibits are attached hereto as Attachments 1 through 7, respectively. I approve the allocations of production and costs for the tracts within the Happy Valley P A shown on Exhibits C and E dated November 1, 2004. DNR assigned Accounting Code "DCHV" to the Happy Valley PA for royalty accounting purposes, which Unocal shall reference on monthly operator and royalty reports. I approve the First POD set forth in Exhibit G for the period from September 1, 2004 through S Article 9.S of the Agreement Deep Creek Unit, Happy Valley PA Findings and Decision Page 10 ~ ) ) August 31, 2005. In accordance with Article 8.1.1 of the Agreement and State regulation 11 AAC 83.343, the unit operator must submit a Second Plan of Development (Second POD) to the Comlnissioner and the President at least 90 days before the First POD expires, by June 2, 2005. Before sublnitting its proposed Second POD, Unocal shall schedule a meeting with the Division and CIRI to present its current interpretation of the reservoirs underlying the Deep Creek Unit. A person affected by this decision may appeal it, in accordance with 11 AAC 02. Any appeal must be received within 20 calendar days after the date of "issuance" of this decision, as defined in 11 AAC 02.040 (c) and (d), and may be mailed or delivered to Thomas E. Irwin, COlnmissioner, Department of Natural Resources, 550 W. 7th Avenue, Suite 1400, Anchorage, Alaska 99501; faxed to 1-907-269-8918; or sent by electronic mail to dnr appeals(~dnr.state.ak.us. This decision takes effect imlnediately. Ifno appeal is filed by the appeal deadline, this decision becomes a final administrative order and decision of the department on the 31 st day after issuance. An eligible person must first appeal this decision in accordance with 11 AAC 02 before appealing this decision to Superior Court. A copy of 11 AAC 02 Inay be obtained from any regional information office of the Department of Natural Resources. Orif!inal sif!ned bv Mark D. Mvers, Director Mark D Myers Division of Oil and Gas November 4, 2004 Date cc: Thomas E. Irwin, DNR Commissioner Kirk McGee, CIR! John Norman, Chairman AOGCC Jeff Landry, Assistant Attorney General Attachments: Attachment 1. Attachment 2. Attachment 3. Attachment 4. Attachment 5. Attachment 6. Attachment 7. Exhibit A, Unit Tract Description and Ownership Schedule Exhibit B, Map of the Deep Creek Unit Boundary Exhibit C, Happy Valley P A Production Allocation Schedule Exhibit D, Map of the Happy Valley PA Exhibit E, Happy Valley P A Expense Allocation Schedule Exhibit F, Deep Creek Unit Expense Allocation Schedule Exhibit G, Deep Creek Unit First Plan of Development Deep Creek Unit, Happy Valley PA Findings and Decision Page 11 , ,'-u' ..._-...-.. """'.'~--"""- 1y.,,"'.W/II'\I'·'''' WMW'~: '~i-IN'MWIIIII!;; '-,-k{M~lljI' .'" C1 .... . "',""""""""'"""'''''._''''' f U HOC L:t~> ,) <:ool<¡(nlct: [)f~el' (::rt~~k {]nit Exbi.bitB . ........... r..'" ,.... ......................-.................... . {··__V.;Im_'l>t''' L .. 8 ..............."..........".........,'"««1,««.<'''''''"''1 "\ ~<.*"'....,...«.".,.....-.............' ,- c:;,{ F~evìs,e~j SeFtf~rnbf:~r 1 ~ 2l)Ol~ Sc,a{e. 'i "j,:1G,{)C() p;¡~~:..-. ~ ..~ I Ihll;:!"·,- !('{:C:U' . I ~:¡:·.<)Ü~'..I i::'!jf;, W(H');iug Intern! (h, IICI' ';'-:;' OUJün ()Ü C{4H;t~:!ny ~~r c:!tirJ~n!;t t rnh~~~ ~)if \_;i::;r:p~',n) ,,;f C~~~~f'H~ ~ 5fH~ I ';<';'." t~--H~n()n:;:~{,~ ~ iJÜ U-Ü{>i}::~'~ t hÜ-f~:t~ -(HfC'(~nnhH~'~'- .- n.ÜfKtÜ:~-;~ t) uÞ~'tn~ui{{~t:j f'A% OWMrs (:-{~-nü·Ct}Pt::m-ìt~-~~ Ah~f;k~t_ !{t(. C\~::r.~'D-çt::'-f;hª¡Hp-~"- AJ~1~~k.J.._ In>: lhÛðu ().U ('{~H~p-:I;;:~- :i~'J CaHh:-rni ~ t ;nh~n -f)iJ {\1rnp~¡nr .,;>:j' (~;11~10f;~í~ Working InH:röt Ownership ~5Ú'>~ 1,:¡O~ç. J.5Ð~-:f., omu .f't'J'n;rH J~(~RjÜ{}~~ GIRl i'fm;!K,HÞ;¡ (\anþ?uy C\¡¡}!K,-,Ph¡¡¡¡r; AbÛ;:\, be, (HUH (hnwr RiJY<'ftty PCH£ßt ~: {~}. üc~}~}aüt~~; P\.':ft:t'!Ü.;tgt; 5-.~ -Hge3\~}?-~ C:·tK*~ hd~~{ HXlti~)*l> l~~ç ~ Ü~J.l\.r:--:~;- l.j-~;9 .q<} 'l'oH$t PA Ai:"rt'age L;J$! ~Þ"4M< ~ ìiV2iJi}l ~ r~:~Ff~f '\hIik:y- Par(-ir~.H(nIA.rè-~~ ". Fx_h~h-h (~ {:JRJ <~{ (::"{J6~59~:; ~-iî.;-t: ~ _¡Ü293t~:) f~~¥:t ti 6~;~,.t. j.5 ;~!;;:-:f~:$. ,--- .. .2:!¡.~)::~2:$.tKn,:;:, (-~;:¥;:~t ff;k:~ R~"1~h}n,. fn~: ~~)Ü-{~}}~ 3-.2Z5ZQrt}~ C\kJtJH1~i R-tgkJi1,.1~~<:~ H)n.~}~j:~(. t.:HU ('.;.~}{~!$h) l)()ç~ ~~ ~¡Ü?9)9~~ H:c::::_tt:;-H Wi0)~ ~j<~- 4~}}J~J j L-1.(i hnJn~~f< S~tJ{qn }'5~ ~5E1/{S\:V~l4 {J!U tC/){;¡ 518 U:tJoC ff 1 ~f?~t~)~~J- -Al)Lf 3ß438Ü UOC /i ¡ {(HF)Ül !\lji!t'nd fnkn'$! M~!1<f¡¡'! U\Ht~t LNtSt: # .I;;;·_c_.....~.~_~ Effi:~cti,le 9nf20Ü4 Oeer> (:reci<Unlt Exhibif' (~ H1ìì.ìI>YV ílUey I}articipatil1g AU;11 Tf'act ~"erei:nh1gc 1453A Tnu:t ACntnge ~;~w......_,-,..,;- 1.k'J- ,.~ P...5 Tract Ltê;31 ne$~dptìnn Tnœ1 HVPA Decision Attachment 3 ~2f'fe(;Hve 'Se~Jte·;~be1' ;. 20CJ~¡ SC<Jie: 1: lOfLOOC ......__...w-<",".....,...". ;~~::,;.~:/:;';L ,_""",;.",~",~.'«-'.-.oIo,<,<.:~<V\.,¡"««««" ~'i " . 'j . . ~ .... LY ..... "". rr UNOCAL',~~' I I , \ ~_.,,___1...._..._~l.-.__.. \ I '~ ~.- -". '...... ' .,.......... 0..>~:::::,:~ .. _'. . ....., "'" ."....~ ").....~ :¡¡, .,. .('\'.áil~··l~~i' ... E.f..p ....·1 ef,l\'\".. .1111. 1Jt'~ I .". . I) ~~)'¡'îlh,:nt .. '" ... '1'·J.~ll)IJy'l alle}~ 'P~lrt¡cillating i\rf;~.·~~ PA Decision Attachment 4 n(~_\\W,'-\"___""f ... ,.. ¿ '* ·'V'~"VNf__r.1'" X ... ) HVPA Decision , Attachment 5 ';rÚle{ ]'f'àêtt.cgaJ Df~St.'dpH{jn ::n-.-Å-:X-;i:-:-;-;-;;:-.-':s:<''5.'f..AXW»;.~ jKt T('~I\.·ú,jJrr;!) Sl:~\\~f'd ~..fl,.-~:.Ji:~IL ...:...j.j;..k;~ S-¡;d¡'.)U J5: smJ¡S\VJt,; TnHòf Acr(,Hg{~ 4{J JPJ l}ec!J (;reek Unit 'Exbi bit li: Hì\I)f)yValley ¡\Jlocntioll ofl'¡u1idpaCing ¡\rea Jf;;q){:use Effective 911l2{}(J4 U(K;# !Ü29394 29_--n::~25{¥J%~ CK~~k in~:ct É.~~gh:~n,,_ k~~-. ivûJI~)'}' IÆrL~c if Tr..ld f'(~rt{~ntzge i\Ht!t'r;¡1 Interest Rr.yaHy P~rn~nt OUJU Ownê¡' l\nl1~rnr ÜWU('¥ j -:t5{Jj}{)~'$ {JJU l'ro(!~Mkm ~:~>mp¡u¡y Ü<:Iw,x'ul'hHH¡H AIMk~, 1M;. ~{GfJfì{j2 ! i ~~Ui ÞH~:~}n~ ORm l'êr~ènt 3T5tt}~ 1.50% Wor/dug Iuteresf Ownership lhJÌún Oil Cmnpaoj ()f (>1 i!(J!ï'¡" t 8~ût)j}Q<;':&. t:Þ!UX:'Jf>J!Wif'S AhÚ:.I<, In,;, Hni(m. ()i1 {\~uJf'aay {~f Ctiii I:',foia {}J )<:1¡",' n W"SL c~~~}(~:'::t~r~h~~H~~$ l\t1$kzt 15ú~.- '}i,"\,\,ll.! ,\!··n·~~~~: a\:,1..:t;¡ &5 $-t~J~~}3Ü~-~ {~~¥tJ '5 -il~:~~ :){{l©ü: ~~~~f:-~.IJ Am" It }Z43ttl 1 W.fXr:¡'~ (:Iil~ i' r>n6-~$S-~) IJ()(; # 55-.98~}30(~<~ {:~*)k fJtle~ R-tltk:~t~_~"lf1Ç-. i(U'l(t{r),~ (JH_~ #l (~...{i(~15{~ Tot¡d Tract l"'rúònt¡tg~ 'V~rkif1g rr,(('r~5t QWfi\'l't Ltlf! Upj(M' 11 niZO<H Tôl:d 1'i\. AUJ;,'age l>.¡J91~r} ! 00 ~Q:ftj}{K~)8=t- t $~jl(ì{)f}'H~ th~~(~ntniiU~d t~5Ú,}~ 1.5tl~i~ VA% 1}J}jHJÜ1-~· t i)(}. (}{)(~V::-~ tkÚ,)1i í)ii C(~mz;~':.u~ (.( (:-JJíf()Hlj~~ tJnion ()iì ("~.Hnp~l_t~:-· ni Caht0rn1~ Workíll:~ lfltl.·n·,~t Owner % WD,C{)% J IJ{) D{)~<> !O{), O(\~', $ U{), f)O'~-~ I',\{~" ¡ ()f ¡ ;\w.: ¡ '-'{ ~ 1;~! IfjÖ_(::}% i {ì(;.n~Y:-~ Wol'I,ìng I l1ter",,;! 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J£U3/' !t}JO~.H12 C!Ið # ~ }f't"'.. ð. 2_,} ~~ÆL~} 1 1 ~J29J:1l (:~~~~~$~ ¡nh:~t- R~f:-k~~t h}~~~ .:~;smm."1S~_"'_-"f iVHl1~!'id Own~r n~£l)(:reel{ lJnU Exbibit F l\lloeatinn of IJl1itl:~~xt)ense ~":~~'~.';(-Ú¡W;';-k~'~-'-'.;...w.;.~ l~f}L- Ii ~._:::~__.'%:_.-_ !f 2,.t33:_Ú7 1 {JÜ :(i~}~-~ i'\lhwra~ Interöt f>üt'J !:S-K'¡ l.,"~$ï' ft ('flU # tJ{:~:{::_# l.56g:.._~/t~ . ..... 'rmd iM:.reilgc 5Y~_~ 5${}· iire.«;~ -- lá\Yf1ihk~ 2 SfUHft J-h!OJrß: iJ \Vtst_ $~;';:~:t:n$ . - },;fë~hHqt!> ::\h~$k~:~ u_) L-ütt:: __1- ;~td 4- {~1:~nlit:dy 1 J \th::~~:t_ S:~:: \'\::'~Hd. -t\) --, T~-)A:r~~;b~þ 2 ~k~nb~ Jt~Ü\~j~: 13 \*h;~_( Stw~~rd }4ft~cik~}~ l\i_~%~~~~ Ül 'frnctTrád Lçg~t! DL';''ìcâpthm HYPA Decision Attachment 6 ~ 1Þ.:'. OíY:'J, ~ ':'lf~,~)-4>~~~ ; ~)G.~.f!j·,\. ijn í.!lY;;. Worldllg IlItvn'sl Owner <~.~, :: ':! : ''; ~~ :'f: .~ ()iL ~,J~Úf~1t J)1! 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UnH Ah'~ä~'" -:~l-..à~t~-_~.HJ Unit EXiwnS¢ - tinl<m('m Üm~p:my (>f C3IHhrnìa H)í)% /- r!~~l! {::f:ttf~: ~ kut l::~J~-~-f.~-~_ F L;:~::~i ~.Jr,;é~}íf~·:· '~:~g i tl ~}:{14 ORRl (hvHer ORRf \Vorldng Intí:J'í;st Ownership l'et'(elH 1 :;,n~-:~< Lhriçn Ck~ C~>a1r~;J:}Y- ~)t (:'-~iiÙwn~-;1 ':Et:, f)t\/~13ic)r\1 f:.=:J~~.:.:. i\N() (j/\t~~ «~,-,"',....~_.-,.,..'. .._........-"^.....-......,...._.."'"^..~--- W nrldllg Inlcl'CSI OwmT'Y" IU:f,¡r;;, P1 n b.">.:,, '.'{ .; ) ) H P cislon c!hmeint 7 I Aßm ".~",-:...!-J,,"'~ Ii'.:,:!, ;~ rt:~ I¡-~'\ n·::t.~ fh\ /} r;·',:;:' 1'::".. 1·;.... ~ ¡ ,r--' II '" r» ~ d· \ ~! 1 P)'~¡ / 4 \ \ J ( 'fo_..~ \,'I....~. ......,.' I·¡ '...... r. !. '¡,,~' .~._.. .-..' ~;""...,. "" . ,. r ,: ;\.... ..--. \ 1... .' , . I .~..... I Coo'k C Anr;h tH'a>ge ì ß\Ja5ka DEEP CREEK, UNIT §lª~,ê. Qt~l'~~~, First Unit Plan of Developn:Hulf and Opetation Revised ·9*23..04 Gentlemen: In accordance 'llitilArticle 8 of the Deep Creek. Unit l\greernení and 1 83.343,. Union ()i! Company of California {Unocal), as Operator resp¡;;ctfully submits follcrwìng Revised Planaf Developrnentand Operations. This Plan contaíns reviSiOns to the F~rsï Unit Plan of Developn1ent submittø'd to you on August 31 2004. per the request of Department of Natural Resourc€:$ (DNH) personnel I, PJ;BIQQ Thìs Plan shall cover the period fraln September í . 200/~ to þq¡gust 3"j . 2005. It } ) Planaf [)evelapm f~ev¡sed Septerr)ber·23·~ 2004 Pt~ge .2 I ¡ ·º8JU::~,kt~L~.Ç?/'ß\~:,M,~"º1¿~I:~:,,<,E~J3º,,Ç?J~l.\ r,,1 Plan Exploration .Review 1. RemecHaj \lvork "... "The NNA in1erval$ no commercial #f.1 a disposal ,~\J11 T, 2. During the Expic,r£ltion th·,e Creek a, HV..1.... Drilled in to in the Tyonek fbrmEJtìon, '1,122 b, HV..2- the Tyonek psig FTP c. HV..3 - DriUed 11'12004 t()'1" <:Ü t~ l11í?, HV ..4,,,,,, Drmed 1n2004 to ra,te e$tabHshed at this E~, HV..(;- Un$UQCeSsfLiUy in No t3stabllshed at tl1 is tinl€!!. f, HV..6 ,,.. Drilled in 2.004 to·11.: rate estabUshed at time. g. HV..7 DtWed 2004 f), 18 estab!Î$hedat th istìmEl. h. HV..S- Drilled in2004 90D tv1Dl TyoneK fonnaUonat 0,6 Mr.¡1GFGPD at 902 in the Beh.:ga fOfmationat'Î.¿,tv1MCFGJ'D at 865 L Star#1- Drilled in 2004 to 130' rv1D 8,6401 the Tyonek fonlìatioli at 0.5 MMCFGPD at 4 '13 in B. First Plan PotønUal VVork II'Z' 1. Drìl! two (2) development welis in the Deep Creek Unit. a. Tv.¡o (2) or rnore cfEwe!opn1erit vveHs in the Happy V&J!lE~'y¡ Develüprnent area depending on results. ) P~an of r.:;¡:-:...,'(d..~ p ""-,("1. f-; ~'/i'~.s] Septernber23, 2004 P,age ~~ b, AdditIonal cieve'!aplmEHit De;ve~oprnelt~a rea recof11ph9tion vv()rkand The StarVVeU\1V3S Unit to· aloct:diafl the Unit. ¡'f testina is drmed . . ¥a nev·.l e,xpanded, if n (~wiy cl eYin{:;d est.ab¡~$hed " VVorKovar .Qf;· Uìe(~x¡s.ting wells" tt Star#1·~ ReootTfpl,ete tìl'1d b. r~'o$s¡bje recOrnptèt¡or¡ (j~lnd¡date$ exi~til1~JHapþy \lailey Devalopn1e~)tafea a~ As requit1:Jd under approxirnate!y '105 rnHes of half of the· data cCJllected·\¡vas over ·the be the first data worked by our the southern . <:3 rea the evaluated over th(~ pts:n·periö,d. þ,U required Sund ties and PerrnitswHI ~¿P~I36Ilt~l~~P.R,QDqG.lt~ Q" :P,8.º.QJ3l~~J~t~1 P~ln of Exploration ~~e\tjew 't No Produc;tÎon Qcc1.Hred durin~J the Exploration Plan as. tIle and pîpeHnas vv-ere not in opetatfon, 2. Dutìng the Exploration Plan·- ¿-1£1 ll.quifer Exemption and DispoS¿il h1jection Application weré $ubn,ìUed to the AOGC(; for theNNl\# 1 weUbore \.vithin the Deep Creek Unit Pending approval of these applications, the ~~NA #1 will be utilized as a vlater dìsposa! ]' cuttìngs disposal well, 8. Potential VVork "1. Þ.n applicaUon for a Beluga ;' TyonekPartìcipatif1f;area is b8;no subnliUed for the Happy Val~ey Portion of the Deep Creek !...In¡t 2. Production is estimated to commence during November 2004. ."" Pirs.t Plan of Ðeveldprn S'fZ*pt€trrdJer:2 3, 2,004 Page -4 ) r~evised \bJel! Procluction SUI11111ary 1. No prQd uctiön ()(~cLlrn~d during SURFA"CE f\ND FACILITVOPERA,TIONS ""~'«"'««««~~~·:~~:I::¡<~¡~:::~:~~«~.~«~.:c:.,<'«<<<<.<<o(m "'Jò"-..:""'''';'''''''''''''' , "OJ...Jò....1«~,,""J·,,· '''·~w.::~~~~i»:':-:''''-:':-;'~'''·'''Ui'''''''' ~~..."" ,-' -rr-rw r"'w.':u' I ril.l Plan of ExplöraHon 1« [juring thEJ E,xpion:ltibn F:4!ana gaB CQnn€:~cting the I"'fappy Pèld instaJlatîOl1 is üngöingand $(~hedu led NOVêl1"ltJer, 2" InstaUaliún ofa ga,g, HarJPY Valley p<3d., Gas connecting the Dee,p sch~dulad for Novernber, t)€Hlen.ÜOr$, prior start Pötentia~l.^lQrk. 1" A nevv pad niay be (;$tabIi$h€~d ~n !DeepCrs~k b€tapproxìmately 41000fet~tvve$t <)J eX!$thlg pad, AU requkE;dpermits be secured prieJ'f t() r1e1vV pad. 2, P{¡mary gas treaUng rnay occur on ne\N pt~d fin~n¡ ptbcessingfof $a~e$OCCtlrring on the rnain Happy VanJ.3'ypad, 3. ¡..~ 'Ataterçfì$posel facn¡ty -may be estab!isl1ecl adj<-lcent th{~~ NNl\#'i weJlbore. 4, InstaUation of gas cornpression facHitiø$ may OGcur tit the nrain Happy VaHey Pact The Unit Operator respectfully requests approval of the 7orego1r19 Frrst Pìarl of Development and Operations for the Deep Creel< Unit Unocal. reserves the right to propose modificatìons to this Plan s·lould conditions so warrant hO\lvever, no r1ìodìncationswiU be rnade \N¡thoul first obtaining perrntssion from the appropriate governnìental agencies. ........ .......,,~~~~~;~.,.. ",." UNION OIL COM'PANYOF CAL1FORNIA 0perator ) It; co: ß\laska Oil and C<Jnservation Cornmis,@¡ion dìrect·any qu~st¡on$ regarding plan to or Þ.!iarkLynch, Geologist at Firs.t of Devt~l(jprnè~1t Revi$€'d Saptelnber·:2312Q04 PageD ') Union Ojj ëöñ'ipanyof Ca" la>·· . 909 West 9th Avenue, P.O. Jx_196247 Anchorage, Alaska 99519-62/ ) Telephone (907) 276-7600 ' Fax (907) 263-7698 tiJ UNOCALe Kevin A. Tabler, Manager Land/Govemment Affairs August 31,2004 Mr. Tom Irwin, C9mmissioner Director, Division of Oil and Gas Alaska Department of Natural Resources 550 W. 7th Avenue, Suite 800 Anchorage, AK 99501-3560 Mr. Carl Marrs, President Cook Inlet Region Inc. 2525 C Street, Suite 500 Anchorage, Alaska 99509-3330 RE: Deep Creek Unit Happy Valley PA Application Cook Inlet Area State of Alaska Gentlemen: Union Oil Company of California (Unocal)J.as operator of the Deep Creek Unit (DCU), hereby applies for the designation and establishment of the Happy Valley (HV) Participating Area (PA) effective September 1, 2004, pursuant to 11 AAC 83.351 (Participating Area) and Article 9 of the Deep Creek Unit Agreement (Participating Area). Enclosed with this application is a Geologic & Engineering Report supporting the formation of the PAw Additionally, enclosed pursuant to Article 9 of the OCU Agreement, and included as part of this application, are Exhibits C, 0, E, F and G to be incorporated as part of the OCU Agreement. Deep Creek Unit P A. DNRlCIRI ) August 31,2004 Page: 2 ) The proposed PA includes one (1) State of Alaska (DNR) tract and three (3) Cook Inlet Region Inc. (CIRI) Tracts, for a total of four (4) tracts comprising 1410 acres of land reasonably known to be underlain by Unitized Substances and known or reasonably estimated through use of geological, geophysical, engineering data and actual well performance, to be capable of producing or contributing to production of Unitized Substances in Paying Quantities. Both Unitized Substances and Paying Quantities are defined by statute. Unocal, over the last three (3) years, has conducted an aggressive exploration drilling program far in excess of that required by the initial Plan of Exploration. As a result of our drilling and delineation efforts, the DCU is ~oised to begin customer deliveries and sales of natural gas in the fourth (4t ) quarter 2004, upon the completion of a Kenai Kachemak Pipeline (KKPL) company pipeline extension to the Happy Valley pad complex. The enclosed structure maps, well data, geological and geophysical information submitted with this application, varies slightly from the maps and information discussed and reviewed at the August 19, 2004, pre-application meeting. New well data and structural interpretation, particularly in the Beluga interval, has necessitated the revisions provided in this application as the "lowest known gas" I.. is larger in areal extent and involves both DNR and CIRI tracts. Given the complexity and low rate of production from each individual reservoir and the lenticular and discontinuous nature of the sands, the only economically viable approach to development of these reservoirs will be to commingle production and combine the Lower an~ Upper Tyonek and Beluga Reservoirs into one participating area. The combination of these re.servoirs facilitates the seasonal deliverability of gas in the winter and storage of gas in the summer, signific?lntly increasing the economic viability of the DCU. Establishing the HV PA as proposed, will provide for the earliest production of gas reserves underlying the DNR tract and CIRI tracts while, at the same time, protecting the correlative rights of the DNR and CIRI, as royalty owners, and ConocoPhillips Alaska, Inc. and CIRI Production Company, as overriding royalty interest owners. The proposed HV PA is in the best interest of the State of Alaska and CIRI, and is consistent with the authority and criteria for DNR and CIRI approval. As operator of the unit, Unocal respectfully requests DNR and CIRI approval of this application to form the proposed HV P A. In support of this application, we request that all geologic, engineering and well data be kept confidential. Deep Creek Unit PI-. ) DNR/CIRI ') August 31,2004 Page: 3 } ", ) As time is of the essence, we respectfully request your expedited review of this application. Should you have any questions, please do not hesitate to contact the undersigned at (907) 263-7600. Sincerely, Union Oil Company of California AJ~À '- evin A. Tabler Its Attorney-in-Fact Enclosures cc: AOGCC Tract Tract Legal Description 02 Township 2 South, Range 13 West, Seward Meridian, Alaska Special Surveys; that portion of U.S. Survey 9469, Lots 3 & 4 within Section 22, W1I2 and the W1I2NE1I4, containing 145.84 acres. 03 Township 2 South, Range 13 West, Seward Meridian, Alaska Section 15: SE1I4SW1I4 04 Township 2 South, Range 13 West, Seward Meridian, Alaska ' Section 21: E1I2NE1I4, SW1I4NE1I4, E1I2SW1I4, SE1I4. 05 Township 2 South, Range 13 West, Seward Meridian, Alaska Section 22: W1I2 and NW1I4NE1I4 excluding Lots 3 and 4 of U.S. Survey 9469, 254.15 acres; Section 27: NW1I4NW1I4, 40 acres; Section 28: NE1I4, NE1I4NW1I4, S1/2NW1/4, Nl/2SW1I4, NW1I4SE1I4, 400 acres; containing 694.15 acres. Happy Valley Parcipation Area - Exhibit C Last Update: 11/1/2004 Deep Creek Unit Exhibit C Happy Valley Participating Area Effective 9/1/2004 Working Working Tract Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Acreage Lease # Percentage Owner Interest Percent Owner Percent Ownership Owner 0/0 145.84 UOC # 1030902 11.761400% State of Alaska, 100.00% 12.5000% COO Production Company 3.50% Union Oil Company of California 100.00% ADL # 384380 Department ofNaturaI ConocoPhiUips Alaska, Inc. 1.50% Resources l 40.00 UOC # 1029393 3.225800% Cook Inlet Region, Inc. 100.00% 18.000å% ConocoPhillips Alaska, Inc. 1.50% COO # C-061588 360.00 UOC # 1029394 29.032500% Cook Inlet Region, Inc. 100.00% 18.0000% Conoc~ì?hiUips Alaska, Inc. 1.50% COO # C-061589 Union Oil Company of California 100.00% Union Oil Company of q;alifornia 100.00% 694.15 UOC # 1029395 55.980300% Cook Inlet Region, Inc. 100.00% COO # C-061590 18.0000% ConocoPhillips Alaska, Inc. 1.50% Union Oil Company of California 100.00% '\ Total PA Acreage 1,239.99 Total Tract Percentage 100.000000% PA% 0.0000% 100.0000% Working Interest Owners Uncommitted Union Oil Company of California Page 1 of 1 Deep Creek Unit Exhibit A Working Working Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Tract Tract Legal Description Acreage Lease # Owner Interest Percent Owner Percent Ownership Owner 0/0 01 Township 2 South, Range 13 West, Seward 2,569.96 UOC# 1029392 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% Meridian, Alaska CIRI # C-061587 Inc. California Sec. 1: All, 647.08 acres; Sec. 2: AU, 642.88 acres; Sec. 11: All, 640 acres; ) Sec. 12: All, 640 acres. 02 Township 2 South, Range 13 West, Seward 2,133.67 UOC# 1030902 State of Alaska, Department 100.00% 12.50% CIRI Production 3.500000% Union Oil Company of 100.00% Meridian, Alaska ADL# 384380 of Natural Resources Company California Section 16: Surveyed, W1/2 NE1/4 NW1/4, ConocoPhillips Alaska, 1.500000% NW1/4 NW1I4, 60 acres; Inc. Section 31: Surveyed. AU, 623.72 acres; Section 32: Surveyed, AU, 640 acres; Section 33: Surveyed, All, 640 acres; Special Surveys: U.S. Survey 9469, Lots 3 and 4 (formerly known as Lot 2), 159.96 acres Alaska State Land Surveys: A.S.LS. 80-72, Tracts A and B, 9.99 acres; 03 Township 2 South, Range 13 West, Seward 2,780.01 UÛC# 1029393 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% ~ Meridian, Alaska CIRI# C-061588 Inc. California ,¡ Section 10: AU, Excluding Lot 1 of U.S. Survey 9469,600.01 acres; Section 13: WY2, 320 acres; Section 14: All, 640 acres; Section IS: All, 640 acres; Section 16: NE~, EY2NE~NW~, SY:zNW~, S~, 580 acres; Deep Creek Unit Exhibit A Last Update: 9/1/2004 Page 1 of3 Working Working Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Tract Tract Legal Description Acreage Lease # Owner Interest Percent Owner Percent Ownership Owner 0/0 04 Township 2 South, Range 13 West, Seward 2,534.43 UOC# 1029394 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% Meridian, Alaska CIRI # C-061589 Inc. California Section 20: All, Excluding Tracts A and B of ASLS 80-72, 632.99 acres; Section 21: All, 640 acres; Section 29: All, 640 acres; Section 30: All, 621.44 acres, 05 Township 2 South, Range 13 West, Seward 3,040.04 UOC# 1029395 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% Meridian, Alaska CIRI # C-061590 Inc. California ) Section 22: All, Excluding Lots 3 and 4 (formerly known as Lot 2) ofUSS 9469, 480.04 acres; Section 23: All, 640 acres; Section 27: All, 640 acres; Section 28: All, 640 acres; Section 34: All, 640 acres; 06 Township 3 South, Range 14 West, Seward 5,762.68 UOC# 1030906 State of Alaska, Department 100.00% ., 12.50% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% Meridian, Alaska ADL# 389226 of Natural Resources Inc. California Section 1: Surveyed, All, 641.94 acres; Section 2: Surveyed, All, 640.70 acres; Section 3: Surveyed, All, 640.04 acres; Section 10: Surveyed, All, 640.0 acres; Section 11: Surveyed, All, 640.0 acres; Section 12: Surveyed, All, 640.0 acres; Section 13: Surveyed, All, 640.0 acres; Section 14: Surveyed, All, excluding U.S. \ Survey 4717,637.26 acres; " Section 15: Surveyed, All, excluding U.S. Survey 4717,637.74 acres; Special Surveys: U.S. Survey 4717,5.00 acres; 07 Township 3 South, Range 13 West, Seward 1,250.12 UOC# 1030905 State of Alaska, Department 100.00% 12.50% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% Meridian, Alaska ADL# 389225 of Natural Resources Inc. California Section 6: Surveyed, All, 625.22 acres; Section 7: Surveyed, All, 624.90 acres; Deep Creek Unit Exhibit A Page 2 of3 Last Update: 9/1/2004 Tract Tract Legal Description 08 Township 3 South, Range 13 West, Seward Meridian, Alaska Section 5: Lots 1 to 4 inclusive, S1/2 N1/2, SE1/4, SWII4; Section 8: All; Section 18: All; Township 3 South, Range 14 West, Seward Meridian Section 24: All; )09 Township 2 South, Range 13 West, Seward Meridian, Alaska Special Survey: U.S. Survey 9469, Lot 1, 39.99 acres ) Deep Creek Unit Exhibit A Last Update: 9/1/2004 Working Working Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Acreage Lease # Owner Interest Percent Owner Percent Ownership Owner 0/0 2,546.00 UOC# 1029396 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.500000% Union Oil Company of 100.00% CIRI# C-061591 Inc. California 39.99 unleased BLM Total Unit Working Interest Net Acres Unit % Acreage Owner 22,656.90 Uncommited 39.99 0.18% Union Oil Company 22,616.91 99.82% of California Page 3 of3 Cook Inlet Deep Creek Unit Exhibit B 28 27 ¿b 25 30 ?q 28 2ï 26 2~,! -_.--------_.~~- -_._--~_. S001 4Vv 800 3\íV SOOi SQ", 2-N ~32 34 V"'; -3f= r;.¡ 32 33 ,j4 3~¡ ~3E ,-:;-1 ¡ 4 3 2 1 6 5 4 .J 2 i 1 G c06is87 - ---t--- --- ___m_ S 10 1 Î 12 27 îO 1 i ! 12 7 - ~-- f91 3 . C06158f 16 15 14 13 18 15 ¡ 14 13 \ 8 -8OOf -4W ___~______n . ! h84.td 80028012W 21 22 23 24 19 '~ ! 23 24 19 C06~590 28 27 26 25 28 .¡. 275 26 25 30 i __u_ i ____ ______._ ._ ..~ ~_____~.~ I 31 i I 33 34 35 36 A'DL314380232 33 34 35' 36 31 , 4 3 2 1 6 4 'J. i? . r -----¡-'--ADL38 3225~-.--~~ - _.._m-~__..J___-..'.__' i : 9 10 I 611. 12 7 9 ; 10 11 12"7 ----¡~?-~~~-~¡ ----- I - umt-· _u__u_~______u_ , l . ¡ j 8 . 16 15 14! 13 .·18 17; 16 15: 14 î:3 1 P S Oö'-'ni4\N . C061591 i SOOr¡$'013W i -' o r'=>v . ......... I 1.°,'" moo ___Om !$003SQ2ý\1 21 22 23 24 -----1 19 20 I 21 ¡ 19 ¡ I I Unit Boundary I I Unit Tracts __ ___ u I I State Leases 23 27 26 25 30 29 28 L___________________J CIRI Leases 3f: 33 34 35 .5t} 31 32 T< 34 :35 36 31 Revised September 1, 2004 -UNOCALf) Scale: 1:100,000 vj ~ ..r ..r ~ ~ ft ~ I: tf -; u tf tI) ~ tI) - U ~ .- o u ..... «S U U ........ U µJ «S_ C ._ :> <0.00 e ~ ~ ~ ~ ~ ;Z;vj O~ ..§ .......... ·00 - '<T' -.:t' C c.. ~ c:-B ~ ~ ~ f/) ~ .......;::¡.ft ft 8 ..... ...... 0 -- ~ -" .....c .............. ~ :"=t ~ b U«S 'E~u- ~«S '<T ~«S ft~ ~«S ~cg...:::':::c..;.ft rI.I OJ),.\oi: O~-B OJ) ,.\oi:;::; 5,.\oi: -.t- æ~ Z ~~µJ;::; ~ ~ ~~~ ~~§:ª ~ft~ ~ ~~ ~~ ~ft~ i:g~~;~ ~ - -B ft oS~ .s -B ft ~ -B ft ;2;", oS ft «S-.:t'_.......r-¡O ~ g~ ~.3S 8 g~ ~ g~ s~ g~ ~;;~~~~~ft _ , f/) ._ 0\ ~ ft f/) .c f/) f/) ._ c.Q '<T f/) .- ~ Q O\ft ft ~ <Ii - N~ ~\O ft~ Nu .. N~ ..;::; N~ ..~\O"..~-~ ...... ø.~ ::s~N_ ø.~ or¡ ø.~ -µ:¡ c.~ N OJ)-.:t't--oo_¡.¡:¡ U Cj ._ ,.:¡ f/) 0\ M µ:¡ .- ,.:¡ - .- ,o::¡ N Z .- ,o::¡ M c: 0\ N N ~ f/) «S co: .c "0 ta c: ;2; .c "0 c: -5! "'ò c: '<T -5! "'ò c::a >. c c: '<T V"I r:: ~ æ '(3 ~.g ~ ~ æ .g ~ æ S ;::; ~ æ .g.E ~ .g .g N ;::; ~ o~ &::s3~ o~ 3 o~ 3~ o~ 3~333:::C~~ ~~ ~~~~ ~~ ~ ~~ ~~ ~~ ~U~f/)~~Z\o ...... U co: .., ('I ~ -.r V"I ~ 0 0 0 0 ......~ ~-., u ..... :.ë :E >< ~ I «S ~ c .2 -.r ~ 0 ø.0 .- N u ........ a ~ ø,.- »- .£ £ ëð «S ;>"8, ~=> 0. ..... «s ¡a ::z::~ Deep Creek Unit Exhibit D Happy Valley Participating Area ~.T~ì ¡ 33 348001 4\¡V ~<F. 31 32 33S001$Oi3VV 'J: SO()1~~ 2\N ---'..... :34 '~(-' .:., 3 / G::; ~ ~) 2 1 ' - c061587 :\ .____.._~ i ~ -... .-- _.~---~---- I o P. I 'J 1 n , , ' ~ 2- '-' 9 I "- I ' ~ /' I ! -, 10 11' '12 7 "--.-.- --,- "': rm 3 I ; 16 15 ilL,' ~; C06158E ! . . 13 18 16 I 15 ¡ 14 ¡ .¡ 3 18 I . , --'-S002 4W- ¡ 80028012\Â/ 21 22 23 24 19 23 24 19 r --.------ 28 27 26 25 30 ¡ I 26 25 30 ! --_. '-.--. ¡ I ..,-- - i I -?" 3 31 ¡ , v'.) 4 35 36 ADL3&438023; 33 34 35 36 31 I . I 4 7 I 2 u ¡ 1 6 5 .1 '3 ~, I ' , Lit, ¡ i --- ! --.--- AÐL--3&t225-1· i-··, - -f-- ; ! 1 ¡ i i 9 10 611 '2 '7 j I ; I f 8 9 10 Æ 1 1" -- IADL389226 . I L I . I I .--- '1-------------· I ------. ...----,--- .--.---- 16 15 ¡ 14 ! 13 . 17 í6 15 14 u, S003S014W ...' , 10 18 ._____ S003q;013W ; 0Q03-"'012'N __ ------t-----.---.-- - --ion Û\, J 1_ 21 ?? 0":( -~ Lv 2n v I I Unit Boundary t 19 ,_ I I Unit Tracts V / / / / /1 Happy Valley Participating Area --. 28 / i ::O'h ~r I I State Leases .. U ¿J 30 29 ' I i CIRI Leases 33 34 36 Ü j 32 33 3(; , --.,,':.' --. UNOCAL~ Effective September 1. 2004 VIII Scale: 1 :100,000 ~. -< - '" -- ~ < ~.. = tf ~ ~.r .r . tf ::o:t 2â~ ~ () f.) ::> CIS 3 3 ::o:t f.) - ~ ::o:t .... ~ ~ ~~:b ~ ~ tiJ ~ ~vj o~ 'B .s- ~ § ~ on . ~ ~ en r<') ~ ::) 'Of' Z c r.LI b f.). '-e ~ f.) ::!: f.) CIS "Ot 0 "Ot~ -: - ~ ~::o:t~ ~ ~ 8 ... fI) š,fj O'Of'':;bD š~ ...... tw] ~:::. bD~ ~oä--"l:t·~ :õ ~ iZ ~ ~ ~ "0 :ä ~ ~ ~ ~ ¡a ~ ~ ~ ¡a "0 ::; In ~ ~ ~ ~ ~ "; oS ft .:;~ ã¡g oS ft ~ oS~ ~C! oS~ ã i;~~VJ~ ~ ~ ~ ~ ~.3 ~ 8 g ~ üj 5 .~ S tiJ 5 .~ S ~ ~ ~ pj ~ ~ ~ ~ Ni ~~ft~ ~~ ~ (I)~ ~~ (I)~ ~Q~zz.~~~ < _ Q,~ =' ~ N...... ~ VI N 4,) - N 4,) .. ....¡ \0 .. .. '<t - ~ ~ :a ~ (I) 0\ N ~ .90 ~ - .90 ~ Ñ ~ .90 ~ ~ bD ~ ~ ~ :::. ~ 0 § '<T _ ~ -; :3 ~ § z ~ -; § ~ "Ø Š "Ot ..c: "'0 Š ~ 0'1 C c.~ ~ ~ .~ g ~ ~ ~ 3 ~'13 S ~ ~ '13 ~; ',= :::. ~ ~ tJ.2 f·g·g ~ :::. '""! .90 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r~ r~ ~ 3 g g - ~ ~ ~ S "'4 ...... "'4 "'4 U (I) (I) (I) (I) ~ '" ~ - ~ ~ Ö ~ - ~ ~ S .--.S ~ ~ ~ ~ -, t... æ~ Tract Tract Legal Description 01 Township 2 South, Range 13 West, Seward Meridian, Alaska Sec. 1: All, 647.08 acres; Sec. 2: All, 642.88 acres; Sec. 11: All, 640 acres; ) Sec. 12: All, 640 acres. 02 Township 2 South, Range 13 West, Seward Meridian, Alaska Section 16: Surveyed, WII2 NEl/4 NW1I4, NWl/4 NW1I4, 60 acres; Section 31: Surveyed. All, 623.72 acres; Section 32: Surveyed, All, 640 acres; Section 33: Surveyed, All, 640 acres; Special Surveys: U.S. Survey 94691 Lots 3 and 4 (foonerly known as Lot 2), 159.96 acres Alaska State Land Surveys: AS.LS. 80-72. Tracts A and B. 9.99 acres; 03 Township 2 South. Range 13 West, Seward ) Meridian, Alaska Section 10: All. Excluding Lot 1 of U.S. Survey 9469.600.01 acres; Section 13: WY2, 320 acres; Section 14: All, 640 acres; Section 15: All, 640 acres; Section 16: NE~. EY2NE~NW~, SY~Y4, SY2, 580 acres; Deep Creek Unit Exhibit F Last Update: 9/1fl004 Deep Creek Unit Exhibit F Allocation of Unit Exoense Working Tract Mineral Mineral Royalty ORRI ORRl Interest Acreage Lease # Owner Interest Percent Owner Percent Ownership 2,569.96 UOC# 1029392 Cook Inlet Region. Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.50% Union Oil Company of COO # C-061587 Inc. California 2.133.67 UOC# ADL# 2.780.01 UOC# COO # 1030902 State of Alaska. Department 100.00% 384380 of Natural Resources 12.50% ConocoPhillips Alaska, 1.50% Inc. CIRl Production 3.50% Company 1029393 Cook Inlet Region. Inc. C-061588 100.00% 18.00% ConocoPhillips Alaska, 1.50% Inc. Union Oil Company of California Union Oil Company of California ~~~~Î]) DIVIS\ON OF OIL AND GAS Working Interest Owner 0/0 100.00% 100.00% 100.00% Page 1 of 3 Working Working Tract Mineral Mineral Royalty ORRI ORRI Interest Interest Tract Tract Legal Description Acreage Lease # Owner Interest Percent Owner Percent Ownership Owner 0/0 04 Township 2 South, Range 13 West, Seward 2,534.43 UOC# 1029394 Cook Inlet Region, Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.50% Union Oil Company of 100.00% Meridian, Alaska CIRI # C-061589 Inc. California Section 20: All. Excluding Tracts A and B of ASLS 80-72. 632.99 acres; Section 21: All. 640 acres; Section 29: All. 640 acres; Section 30: All. 621.44 acres. 05 Township 2 South, Range 13 West, Seward 3.040.04 UOC# 1029395 Cook Inlet Region. Inc. 100.00% 18.00% ConocoPhillips Alaska, 1.50% Union Oil Company of 100.00% Meridian, Alaska CIRI # C-061590 Inc. California ) Section 22: All. Excluding Lots 3 and 4 (formerly known as Lot 2) ofUSS 9469. 480.04 acres; Section 23: All. 640 acres; Scction 27: All. 640 acres; Section 28: All. 640 acres; Section 34: All. 640 acres; 06 Township 3 Southl Range 14 West, ~eward 51762.68 UOC# 1030906 State of Alaslm, Department 100.00% 12.50% ConocoPhillips Alaska, 1.50% Union Oil Company of 100.00% Meridian, Alaska ADL# 389226 of Natural Resources Inc. California Section 1: SUlVeyed. All. 641.94 acres; Section 2: SUlVeyed, Alii 640.70 acres; Section 3: SUlVeyed. All. 640.04 acres; Section 10: SUlVeyed. All. 640.0 acres; Section 11: SUlVeyed. All, 640.0 acres; Section 12: SUlVeyed. All, 640.0 acres; Section 13: SUlVeyed, All, 640.0 acres; Section 14: Surveyed, All, excluding U.S. SUlVey 4717,637.26 acres; ) Section 15: Surveyed, All, excluding U.S. Survey 4717,637.74 acres; Special SUlVeys: U.S. Survey 4717, 5.00 acres; 07 Township 3 South, Range 13 West, Seward 1,250.12 UOC# 1030905 State of Alaska, Department 100.00% 12.50% ConocoPhillips Alaska, 1.50% Union Oil Company of 100.00% Meridian, Alaska ADL# 389225 of Natural Resources Inc. California Section 6: Surveyed, All, 625.22 acres; ~~~:u' Section 7: Surveyed, All, 624.90 acres; , S£P 1 0 2004 '...;J Deep Creek Unit Exhibit F DIVISION OF Page 2 of 3 Last Update: 9/1/2004 OlL AND GAS Tract Tract Legal Description 08 Township 3 South, Range 13 West, Seward Meridian, Alaska Section 5: Lots 1 to 4 inclusive, SI/2 NU2, SEl/4, SWl/4; Section 8: All; Section 18: All; Township 3 South, Range 14 West, Seward Meridian Section ~.4: All; ) 09 Township 2 South, Range 13 West, Seward Meridian, Alaska Special Survey: U.S. Survey 9469. Lot 1.39.99 acres Working Working Tract Mineral Mineral Royalty ORRI ORRl Interest Interest Acreage Lease # Owner Interest Percent Owner Percent Ownership Owner % 2.546.00 UOC# 1029396 Cook Inlet Region. Inc. 100.00% 18.00% ConocoPhillips Alaska. 1.50% Union Oil Company of 100.00% CllU# C-061591 Inc. California 39.99 unleased BLM Total Unit Acreage 22,656.90 Unit Expense - Union Oil Company of California 100% ) Deep Creek Unit Exhibit F Last Update: 9/112004 r5)~œ~~;D ; ~ SEP 1 0 2004 .::!) DIVIS10N OF OIL AND GAS Page 3 of 3 · ,1Þ. } ) ') EXHIBIT G DEEP CREEK UNIT State of Alaska Revised First Unit Plan of Development and Operation In accordance with Article 8 of the Deep Creek Unit Agreement and 11AAC 83.343, Union Oil Company of California (Unocal), as Unit Operator, respectfully submits the following Revised Plan of Development and Operations. This Plan contains revisions to the First Unit Plan of Development submitted to you on August 31, 2.004, per the request of Department of Natural Resources (DNR) personnel. I. PERIOD This Plan shall cover the period from September 1, 2004 to August 31, 2005. II. DRILLING/REMEDIAL PROGRAM A. Plan of Exploration Review 1. Remedial Work - The NNA #1 wellbore was tested in additional intervals with no commercial gas tests. Operations to convert the NNA #1 to a disposal well were completed such as performing a MIT. 2. During the Exploration plan, nine (9) wells were drilled in the Deep Creek Unit. . a. HV-1 - Drilled in 2003 to 10,872' MD /9,700' TVD. Completed in the Tyonek formation. Test rate was 4.1 MMCFGPD at 1,122 psig FTP. b. HV-2 - Drilled in 2003 to 10,225' MD /9,812' TVD. Completed in the Tyonek formation. Test rate was 2.6 MMCFGPD at 695 psig FTP. c. HV-3 - Drilled in 2004 to 11,345' MD / 10,772' TVD. No test rate established at this time. d. HV-4 - Drilled in 2004 to 10,625' MD /10,515' TVD. No test rate established at this time. e. HV-5 - Unsuccessfully drilled in 2004 to objective. No test rate established at this time. f. HV-6 - Drilled in 2004 to 11,798' MD / 10,400' TVD. No test rate established at this time. g. HV-7 - Drilled in 2004 to 9,118 MD /7,140' TVD. No test rate established at this time. h. HV-8 - Drilled in 2004 to 8,900 MD /6,734' TVD. Tested in the Tyonek formation at 0.6 MMCFGPD at 902 psig FTP.. Tested in the Beluga formation at 1.2 MMCFGPD 'at 865 psig FTP. Revised First Plan of De'!ypment September 23,2004 Page 2 ) i. Star #1 - Drilled in 2004 to 9,130' MD ! 8,640' TVD. Tested in the Tyonek formation at 0.5 MMCFGPD at 413 psig FTP B. First Plan Potential Work 1. Drill two (2) development wells in the Deep Creek Unit. a. Two (2) or more development wells in the Happy Valley Development area depending on results. b. Additional development wells may be. drilled in the Star Development area depending on the results of the recompletion work and uphole zone testing in the Star #1 well. The Star Well was drilled from a surface location within the Unit boundary to a location outside of the southern portion of the Unit. If testing is successful and additional wells are drilled to delineate a new accumulation, the Unit will be expanded, if necessary, to encompass the areal extent of the newly defined reservoir and a Participating Area will be established. 2. Workover of the existing wells. a. Stat #1 - R.ecomplete and test uphole zones: b. Possible recompletion candidates will be identified from the existing Happy Valley Development area as necessary. 3. As required under the Plan of Exploration, Unocal acquired approximately 105 miles of 2D seismic data over the Unit area. About half of the data collected was over the Happy Valley P A area and will be the first data worked by our staff. The balance of seismic data over the southern area of the Unit has now been processed and will be evaluated over the plan period. All required Sundries and Permits will be obtained for this work III. OPERATING-PRODUCING PROGRAM A. Plan of Exploration Review 1. No Production occurred during the Exploration Plan as the facilities and pipelines were not in operation. 2. During the Exploration Plan - an Aquifer Exemption and Disposal Injection Application were submitted to the AOGCC for the NNA#1 wellbore within the Deep Creek Unit. Pending approval of these applications, the NNA #1 will be utilized as a water disposal! cuttings disposal well. ) Revised First Plan of Dev ')pment September 23, 2004 Page 3 -) B. Potential Work 1. An application for a Beluga I Tyonek Participating area is being submitted for the Happy Valley Portion of the Deep Creek Unit. 2. Production is estimated to commence during November, 2004. C. Well Production Summary 1. No production occurred during the Exploration Plan. IV. SURFACE AND FACILITY OPERATIONS A. Plan of Exploration Review 1. During the Exploration Plan a gas pipeline installation commenced connecting the Happy Valley Pad to the KKPL line. This installation is ongoing and is scheduled to be completed by November, 2004. 2. Installation of a gas processing facility commenced on the main Happy Valley pad. Gas will be sold via the newly installed pipeline connecting the Deep Creek Unit to KKPL. Facility Start up is scheduled for November, with minor fuel gas use in October to run generators prior to start up. B. Potential Work 1. A new pad may be established in the Deep Creek Unit. This pad will be approximately 4,000 feet west of the existing main Happy Valley pad. All required permits will be secured prior to construction of this new pad. 2. Primary gas treating may occur on the new pad with final gas processing for sales occurring on the main Happy Valley pad. 3. A water disposal facility may be established adjacent to the NNA#1 wellbore. 4. Installation of gas compression facilities may occur at the main Happy Valley Pad. The Unit Operator respectfully requests approval of the foregoing First Plan of Development and Operations for the Deep Creek Unit. Revised First Plan of De' ... '~pment September 23, 2004 Page 4 ) Unocal, reserves the right to propose modifications to this Plan should conditions so warrant; however, no modifications will be made without first obtaining permission from the appropriate governmental agencies. Please direct any questions regarding this plan to Ralph Affinito, Reservoir Engineer, at 263-7947 or Mark Lynch, Geologist at 263-7851. Sincerely, UNION OIL COMPANY OF CALIFORNIA Unit Operator ,,' JAolL. evin A. Tabler By cc: Alaska Oil and Gas Conservation Commission ) ) EXHIBIT G DEEP CREEK UNIT State of Alaska First Unit Plan of Development and Òperation In accordance with Article 8 of the Deep Creek Unit Agreement and 11AAC 83.343, Union Oil Company of California (Unocal), as Unit Operator, respectfully submits the following Plan of Development and Operations. I. PERIOD This Plan shall cover the period from September 1,2004 to August 31,2005. II. DRILLING/REMEDIAL PROGRAM A. Plan of E;:xploration Review 1. Remedial Work - The NNA #1 wellbore was tested in additional intervals with no commercial gas tests. Operations to convert the NNA #1 to a disposal well were completed such as performing a MIT. 2. During the Exploration plan, nine (9) wells were drilled in the Deep Creek Unit. a. HV-1 - Drilled in 2003 to 10,872' MD /9,700' TVD. Completed in the Tyonek formation. Test rate was 4.1 MMCFGPD at 1,122 psig FTP. b. HV-2 - Drilled in 2003 to 10,225' MD I 9,812' TVD. Completed in the Tyonek formation. Test rate was 2.6 MMCFGPD at 695 psig FTP. c. HV-3 - Drilled in 2004 to 11,345' MD /10,772' TVD. No test rate established at this time. r II ~l r-' läl I UJ' uevelopn; August 31, 2004 Page 2 ) ) d. HV-4 - Drilled in 2004 to 10,625' MD /10,515' TVD. No test rate established at this time. e. HV..5 - Unsuccessfully drilled in 2004 to objective. No test rate established at this time. f. HV..6 - Drilled in 2004 to 11,798' MD /10,400' TVD. No test rate established at this time. g. HV..7 - Drilled in 2004 to 9,118 MD /7,140'· TVD. No test rate established at this time. h. HV..8 - Drilled in 2004 to 8,900 MD /6,734' TVD. Tested in the Tyonek formation at 0.6 MMCFGPD at 902 psig FTP.. Tested in the Beluga formation at 1.2 MMCFGPD at 865 psig FTP. i. Star #1 - Drilled in 2004 to 9,130' MD I 8,640' TVD. Tested in the Tyonek formation at 0.5 MMCFGPD at 413 psig FTP B. First Plan Potential Work 1. Drill two (2) development wells in the Deep Creek Unit. a. Two (2) or more development wells in the Happy Valley Development area depending on results. ; b. Additional development wells may be drilled in the Star Development area depending on the results of the recompletion work and uphole zone testing in the Star #1 well. 2. Workover of the existing wells. a. Star #1 - Recomplete and test uphole zones. " b. Possible recompletion candidates will be identified from the existing Happy Valley Development area as necessary. All required Sundries and Permits will be obtained for this work III. OPERATING-PRODUCING PROGRAM A. Plan of Exploration Review 1. No Production occurred during the Exploration Plan as the facilities and pipelines were not in operation. 2. During the Exploration Plan - an Aquifer Exemption and Disposal Injection Application were submitted to the AOGCC for the NNA#1 wellbore within the Deep Creek Unit. Pending approval of these applications, the NNA #1 will be utilized as a water disposal I cuttings disposal well. · t-Irst Planot Developm August 31, 2004 Page 3 ) ) B. Potential Work 1. An application for a Beluga I Tyonek Participating area is being submitted for the Happy Valley Portion of the Deep Creek Unit. 2. Production is estimated to commence during November, 2004. C. Well Production Summary 1. No production occurred during the Exploration Plan. IV. SURFACE AND FACILITY OPERATIONS A. Plan of Exploration Review 1. During the Exploration Plan a gas pipeline installation commenced connecting the Happy Valley Pad to the KKPL line. This installation is ongoing and is scheduled to be completed by November, 2004. 2. Installation of a gas processing facility commenced on the main ¡Happy Valley pad. Gas will be sold via Jhe newly installed pipeline connecting the Deep Creek Unit to KKPL. Facility Start up is scheduled for November, with minor fuel gas use in October to run generators prior to start up. B. Potential Work 1. A new pad may be established in the Deep Creek Unit. This pad will be approximately 4,000 feet west of the existing main Happy Valley pad. All required permits will be secured prior to construction of this new pad. 2. Primary gas treating may occur on the new pad with final gas processing for sales occurring on the main Happy Valley pad. 3. A water disposal facility may be established adjacent to the NNA#1 wellbore. 4. Installation of gas compression facilities may occur at the main Happy Valley Pad. The Unit Operator respectfully requests approval of the foregoing First Plan of Development and Operations for the Deep Creek Unit. Unocal, reserves the right to propose modifications to this Plan should conditions so warrant; however, no modifications will be made without first obtaining permission from the appropriate governmental agencies. · to r-nS(~lanOT uevelopm August 31, 2004 Page 4 ) ) Please direct any questions regarding this plan to Ralph Affinito, Reservoir Engineer, at 263-7947 or Mark Lynch, Geologist at 263-7851. Sincerely, UNION OIL COMPANY OF CALIFORNIA Unit Operator By Kevin A. Tabler cc: Alaska Oil and Gas Conservation Commission ;, #1 PETROLEUM NEWS · WEEK OF NOVEMBER 14, 2004 . KEN A I P E· N INS U L A . . '.-. . . ON · ~~1ìIí. 5 Gas flows from L"nocal's Happy Valley By KRISTEN NElSON Petroleum News Editor-in-Chief Gas is fJowing :trom Unocal's Happy Valley discovery . at its Deep Creek unit ~outheast of Ninilchik on Alaska's Kenai Peninsula. Unocal Alaska spokeswoman Roxanne Sinz told Petroleum News that production began Nov. 5 :trom -one well at a rate of 3-4 million standard cubic feet per day. "We will ramp up production ITom additional wells as soon as the operation of our new facility allows," Sinz said. In a necessary administrative action prior to production, the Alaska Division of Oil and Gas approved fonnation of the Happy Valley pal1icipating area at Unocal's Deep Creek unit Nov. 4, defming the area within the unit from which Happy Valley production is coming. The participating area is 1,240 acres, approximately 5.5 percent of the unit, the division said in its decision, and includes a portion of one state of Alaska lease and portions of three Cook Inlet Region Inc. leases. Unocal completed its first well in the Deep Creek unit, the NNA No.1, in January 2002, . tested several intervals which were wet or tight and subsequently converted the NNA No. 1 to a disposal well. Unocal has since drilled eight Happy Valley wells. Two Lower Tyonek intervals in the Happy Valley No. 1 well test- ed at 4.1 million cubic feet per day, and Unocal continued to drill delineation wells in 2003 and 2004. Unocal has also completed the pipeline connecting the Deep Creek unit to the Kenai-Kachemak Pipeline. Area outside PA wdl be explored Under its first plan of development, covering Sept. 1, 2004, through Aug. 31, 2005, Unocal will develop reserves underlying the Happy Valley participating area and, the state said, "plans tò explore the unit area outside of the participat- ing area." Two or more additional development wells are planned in the Deep Creek unit rrom the Happy Valley pad. The state said "Unocal may establish another pad to develop the reserves in the western portion of the Happy Valley PA." Planned exploration activities outside of the Happy Valley participating area "include both exploration drilling and seismic evaluation." The Star No. 1 well, drilled :trom the Star pad in the southern end of the Deep Creek unit in 2004, produced Tyo~ek fonnation gas at a rate o~ 500,000 cubic feet per day and the state said "Unocal plaris to recomplete and test uphole zones" in that well dtuing the first plan of develop- ment. The state also said that as the southern accumulation at the Star pad is further delineated, both expansion of the unit area and fonnation of a southern participating area may be justified. .