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Home My WebLink AboutCO 102 A )) Image Project Order File Cover Page 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 by direct inspection of the file. C () I O~ ~ Order File Identifier Organizing (done) o Two-sided 11IIIII111111111111 o Rescan Needed 1111111111111111111 RESCAN DIGITAL DATA OVERSIZED (Scannable) o Maps: o Other Items Scannable by a Large Scanner o Color Items: o Greyscale Items: o Diskettes, No. D Other, No/Type: o Poor Quality Originals: OVERSIZED (Non-Scannable) o Other: o Logs of various kinds: NOTES: o Other:: BY: C ~~ria) Date: ~ ~I ob /5/ (y:J 111111111111 mJ ... Project Proofing BY: C.. Marj.a J Date: ~ ;J.' of" /5/ Scanning Preparation BY: C to- ~aria) x 30 = + Date: ~ d-I Db = TOTAL PAGES J5lf (Count does not include cover sheet) VY1 P /s/ Production Scanning 1111111111111111111 Stage 1 Page Count from Scanned File: 15 S (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: V YES NO BY: C Maria) Date:.3 I ;;.11 0" Isl VVI.p Stage 1 BY: If NO in stage 1, page(s) discrepancies were found: YES NO Maria Date: /5/ I11I11111111111111 Scanning is complete at this point unless rescanning is required. ReScanned 1111111111111111111 BY: Maria Date: /s/ Comments about this file: Quality Checked 11II111111111111111 10/6/2005 Orders File Cover Page.doc ) ) Index Conservation Order l02A 1. July 19, 1971 2. July 20, 1971 3. July 22, 1971 4. July 23, 1971 5. July 28, 1971 6. July 30, 19971 7. August 10, 1971 8. August 12, 1971 9. August 20, 1971 10. August 26, 1971 11. September 14, 1971 12. September 15, 1971 13. October, 1971 Mobil Oil Corp letter requesting a hearing on the AOGCC's decision to restricting the flaring or venting of casing head gas Letter from Petrolane to Mobil re: interest in the casing head production Letter from Mobil Oil Corp to AOGCC request for a rehearing Letter from Joint Interest to Petrolane re: casing head production AOGCC decisi<;>n granting Mobil Oil Corp request for a rehearing Notice of Hearing Letter from Joint Interest to Rock Island Oil Company Letter from Mitsui to Joint Interest in their interest to purchase gas from Joint Interest Reply to Mitsui 8/12/71 letter from Joint Interest Transcript of hearing Letter from Mobil to AOGCC re: Rehearing Letter from Holland to AOGCC and affidavit Newspaper article from Anchorage Daily News Conservation Order 102A -- ~. STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchoraget Alaska 99504 Re: REQUEST OF THE MOBIL OIL CORPORATION ) for a rehearing on Conservation Order ) No. 102 restricting the flaring or venting) of casinghead gas from the Granite Point ) Field, Middle Kenai Oil Poolt to the ) amount required for safety. ) Conservation Order No. 102-A Rehearing on Conservation Order No. 102 Granite Point Field Middle Kenai Oil Pool October 27, 1971 IT APPEARING THAT: 1. Mobil Oil Corporation, by letters dated July 19, 1971 and July 22, 1971, applied for rehearing on Conservation Order No. 102 and requested such rehearing, if granted, be held August 26t 1971. 2. A public hearing was held August 26, 1971 in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time the applicant and affected parties were heard. 3. The hearing record was held open through September 27, 1971 and additional information was received. FINDINGS: 1. Applicant contends Committee Finding No. 1 of Conservation Order No. 102 is irrelevantt because its casinghead gas cannot be marketed outside of Alaska economically. Upon rehearing the Committee affirms its Finding No. 1 as correct and relevant, inasmuch as applicant presented no evidence in the record of Conservation File No. 102 of its efforts to utilize its excess casinghead gas outside of Alaskat alone or in concert with other gas producers. 2. Applicant contends Committee Finding No. 2 of Conservation Order No. 102 is irrelevant, because its casinghead gas cannot fulfill local needs for gas. Upon rehearing, the Committee affirms its Finding No. 2 as correct and relevant for the following reasons: a. Contrary to applicant's contentions, representatives of the Native Village of Tyonek, Inc., Chugach Electric Association, Inc., and the City of Anchorage Minicipal Light and Power Company have all testified as to their need for additional natural gas. b. Alaska Public Service Corporation alleged its need for additional natural gas has been fulfilled by the commitment of additional natural gas from the Kenai Gas Field. As of the close of the record in this rehearing, September 27, 1971, the operator of the Kenai Gas Field had failed to file this alleged contract for additional natural gas with the United States Geological Survey, on grounds the contract had not been executed. 1[ + t.. IIÞ\ 2,.- "--- ',,-I Conservation Order No. l02-A Page 2 October 27, 1971 c. The fact applicant transports its gas to the west side of the Cook Inlet, where it alleges gas markets are less readily available, is applicant's choice, and does not excuse resulting waste. 3. Applicant contends Committee Finding No. 3 of Conservation Order No. 102 is irrelevant, because its casinghead gas cannot be marketed outside of Alaska economically. Upon rehearing the Committee affirms its Finding No. 3 as correct and relevant, inasmuch as applicant presented no evidence in the record of Conservation File No. 102 of its efforts to utilize its excess casinghead gas outside of Alaska, alone or in concert with other gas producers. 4. Applicant contends Committee Finding No. 4 of Conservation Order No. 102 is irrelevant, because the representative of Pacific Lighting testified the Jones Act does not preclude Pacific Lighting's envisioned gas liquefaction project. Upon rehearing the Committee affirms its Finding No. 4 as correct and relevant, inasmuch as the finding was that the Jones Act impeded, not precluded, utilization of Alaska gas elsewhere in the United States, and because the representative of Pacific Lighting testified his company hopes to obtain some form of relief from the penalties imposed by the Jones Act. 5. Applicant contends Committee Finding No. 5 of Conservation Order No. 102 is irrelevant or incomplete, because all fuel requirements on the oil-producing platforms of the Granite Point Field are now met with casinghead gas and a portion is being sold. Upon rehearing the Committee affirms its Finding No.5 as correct and relevant, because applicant admitted, on examination, that it sometimes uses diesel instead of casinghead gas as fuel on its platform. The Committee agrees its Finding No. 5 was incomplete in that it failed to mention applicant's sales of a small quantity of casinghead gas to others. 6. Applicant contends Committee Finding No. 6 of Conservation Order No. 102 is irrelevant because the casinghead gas and entrained liquids could not be beneficially utilized, and because applicant cannot provide alternative fuels in the event the supply of casinghead gas is interrupted. Upon rehearing the Committee affirms its Finding No. 6 as correct and relevant, for the reasons given in Finding No. 2 of this order, and because the Committee did not state applicant controlled the alternative fuels mentioned in the finding. 7. Applicant is correct. 8. Applicant is correct. 9. App Ii can t is correct. concedes Committee Finding No. 7 of Conservation Order No. 102 concedes Committee Finding No. 8 of Conservation Order No. 102 concedes Committee Finding No. 9 of Conservation Order No. 102 10. Applicant contends Committee Finding No. 10 of Conservation Order No. 102 is correct but incomplete because conservation of gas will result in waste of oil. Upon rehearing the Committee affirms its Finding No. 10, and finds that the alleged incompleteness of this finding is satisfied in Committee Finding No. 11 of Conservation Order No. 102. .~ , I '~. Conservation Order No. 102-A Page 3 October 27, 1971 11. Applicant contends Committee Finding No. 11 of Conservation Order No. 102 is fallacious and erroneous in that restriction in the rate of production or injection under a fluid injection project (which is in operation in the Granite Point Field) will reduce ultimate recovery of oil and thereby cause waste. Upon rehearing the Committee affirms its Finding No. 11 as correct for the following reasons: a. Applicant admitted that petroleum experts cited as references in the record of Conservation File No. 102 do not agree that restriction in the rate of production or injection will necessarily impair ultimate recovery of oi 1. b. Applicant admitted that experts utilizing the same set of technical data may reach entirely different conclusions about how varying production or injection rates will affect ultimate recovery of oil. c. Applicant contended investigation must be made on an individual field basis to determine if there will be a loss in ultimate recovery of oil from varying production or injection rates, and the Committee agrees. d. Applicant relied heavily on extrapolation of decline curves to show damage and reduced ultimate recovery of oil due to reduced production rates. The Committee does not agree with applicant's interpretation of some data and offered a different interpretation thereof. e. Applicant agreed that keeping water out of a producing well bore will tend to increase ultimate recovery of oil, and that reduced injection rates will minimize intrusion of injected water into producing well bores. f. Applicant alleged that by restricting production, oil not produced during the expected 25-year life of the platform and facilities would be wasted. Applicant was unable to testify as to the safety factors used in platform and facility design to support the expected 25-year life. The Committee presented evidence that platform life can be lengthened by strengthening, thereby preventing the alleged waste. CONCLUSION: Conclusion Nos. 1, 2 and 3 of Conservation Order No. 102 are correct. NOW, THEREFORE, IT IS ORDERED THAT CONSERVATION ORDER NO. 102 SHALL REMAIN IN FULL FORCE AND EFFECT. DONE at Anchorage, Alaska and dated October 27, 1971. \.~ Conservation Order No. 102-A Page 4 October 27, 1971 , j "~ ß~ OIt ~ (,.;,? ~~ ~"1-r ,. ~ ,¡jff~ ~ "f -'"- \.\. t!?;, ;,~ ..<.6'. t, ..n ~ 11-""",-- ~"-·iA-""-~·-:1i::'~~:"'" L ...~.... ,,- , . -": Æ1~'J~~'~; J,;'8:::':-;;;¡) ;k ~H· ~r;':,·· . ,:,~. »W!~' s· ,. .~, '" .:~ "t;1 ~ .. ·,£.;-'-J~i·;:·¥' «;: ~:. .~~\~::. o ~ 11~~v~;tt~, , ~\\T~1 O ~-=-- ."'.. ~\ f ?~, , [. 0:.":.1 ~ ~JJ1J / ~ .(·~;r/~ . t;t,// ( ~/ t ~<). "",' \ ¡> 0']0(.· - V:(j!/" '..-0."'-- . Thomas R. Marshall, Jr., Executive Secretary Alaska Oil and Gas Conservation Committee Concurrence: /~/t5~ Homer L. Burrell; Chairman Alaska Oil and Gas Conservation Committee raJ::' A:/~~~- O. K. Gilbreth, Jr., Me~~ Alaska Oil and Gas Conservation Committee #13 f-lÑc~l r tJE w-:S '0' -_ 'VA' -.\ S-'I1 ~&rtÂ. ltJ"' . "t. ... 'J- ,CLL- l",ew gas _~llle. . 11VJtr- _lfarat¡r,on seeks permit Maralthon Oil Co. oha,s aIp- ~~::~I1~n;~~~~~ ~:Jf~~:: .. ····:;~·_~t'T::c·;.l~~'·~··:~f. ". tra11lsImission ,line from Trading' . . . ~ ~:;\ . . "'~~~ p . _......."-':,o..:..,,~.:. .~: /. , ",,'>:< . . 'Tf~-'-··-'· "'<, ,. Bay to Granite Point, a dis- \ -"""">::'~~"~ ' . ,,':.~;::.~:>. ,,17': "':'. ._-1.t~,_... ..><' . "_ ~ ' to "" . ~¡:....-r ..' .,,- t'allcc or some 25 milc's. ,: < '. '. .,:; i '¡ ,G~Y;'~:}''''' ......~ ..~\ '..... . A spokesman for Marathon -_...::..:~·5:~·~.. .~::-~\l;.:..'-..:,_:<~: ,.iM~..>{11~~·~·./~<: -~..:~~.: ,;.,:," ..,,,:,:.:... I;'^<'''~' in Anchol'agc confirmcd 'rum- ,:.:: ..,\~ . :·;~,:::",i{x"".·~ .:-".,' :1" .' .'. o~'s thru~ t,he l:ro~osed line is . \~r'=l):ð..:·~\)\ .:><~"~~'j «.··i~~:.;::::.;::~r~,~·?~ ::.:. :.:.;':'..':..':' i . ::'.' ':. ':'.' p<lrt of <llargm sys1tem to move Þ ~~~~':':"""'21"~""'''' .: "J..'I". .',':.:','.:":.",". .. : .: '. .... .¡.' '. , \..-..; ~. .. " .' , I .... . ~. ~ ' '. gas [¡'om the west ,side of Cook :.\. \..':".-t:~ ~ ... . ::Cr.~" .:':..::.,. .." .r:..··· l·· Inlet to tl1e Norbh K.ett1a,i area ...:... "~'1 %/::')":/:'. ·0h/.. . r . ~¡~~:;~;f~1D~j ~~~~·:¡·.··:j~);~~[~~i~;~~~~(~Æ"i~t~~'¡~~1. Corp. to develop large gas .èr' ,: d.::·. ...<.~.,><:-O.:"~':-~!"i:., :'.' . . .\. I. :/ . , . . .\. . . . . . .. .. . . Bay to North Ken1a,i, aoooifd- .. .... .. .... . . jng 'bo the Marathon ofrmdaL ASSUMING ia pernlÏit is is firmly frozen - probaibly Apµl.üoation for a COl~pS 'Of granted promptly for the Wlelsit about ,the. fil18t '()If the YeJar. Enginecrs permit to 'lay a ~Iulb- Slide line, -whioh wi,ltl pélJ[laHell The ]ii,nie. wjlU carry casling- manine pipe aCl~OSS Cook In- an exi!iting oill pipel,inc, the hoad gas gathered ;rom 01'[- 110t is expected to be made ¡in cQlnstnlOlion work isexpectlCid slhorc production ph\tforms all'll the near future. ~o bClgin 'as sOlon as the gmund piped to shore Sit.a1tionls. llhe gas ,ils çurrontl1Y bcing flared. but ,Uhe Alaska Oil & Gas Oonservation OOInmiUlœ hals set J u/hy 1, 1972 as a deadline for flaring ()If \Su.rplus gas that is produced· with oûl. Acoording ,to. 'a dJelSicriplion of the Tr.ading Bruy, Granit,e Point project p'Ulblished hy ,the Corps of Engineers in a call for comments 'On the pi-an, the line will be laid allong...<;¡Ìide the Cook Inlet PipeUne Co. rul JJi;nc ..... <'........::. ... . :" .....,:;,;... . .. . . at' a distance of somle 50 feet THE LINE is to be buried wit~hsomc ¡throe feet 'of ground COVCIl·, CXCCi[Jit for sovoral large slream ,crossings wherc uhc linie wiill hc pla:cød five feet bCllow the bottom or the slreams. Pipe to be lIised ~s 16-i.l1!oh outside dia.l11C1tcr, 5 LX line pipe with ,a walll It¡hicknelsls of more than one-third inch and a maximum prescribed pl'ies- surc of 1910 pounds per squaœ inch. Bofore burial t!he pipe wiill be 'c'Oa:ted with a huty:l rubber primer, 'a protective tape and an OUller vinyl wrapping, t:o preservle: Í't from oorrosion, tlhe report said. THE SIZE and press1ure rat- ing of the pipeline indicatcls the line wilil h,avean optimum capacity larger than t\he known volume of casinghead and dry gas now available on the weslt side of the Inlet. . By 'comparison, the Aalaska Pipe1in'e Co. 12-3.4-,itllich, 95- mile line serving the Andhor- age 'area ihas a capacity 'Of 120 miUion cu. ft. a day. To make 'l~hclinle economic, it would appear addiltional gals fields wiU haviC to be found and dcvol'Ü'ped on l!!he west side of bhe basin. Both Union and Texaoo I nc. ,arc bd ieved to be planning 'additional explora- tocy wOlI"k in òthart aa:ea. U filion iiS said to be plan¡nin,g a mul¡ti...well progI1am ~n the Wœt Forelands .area -and Texa- co ,is rumored to be ptlanninlg a fif:th well in its Nicoil'ai Oreek Unit. grus field, loo<\¡ted nea.r the Granite Poin¡t ·tem1JÌnus oj the p~anned pipeline. #12 ~3,j:,\~'1 .:r + -e "",'\NtL7i: ALAS!(A OIL and GAS CON~VA T IC~:,9,qL~' MiTTE.E tltee..p -f.4 J. (Q... ttt:·i."<;'~~~ cL ~ 4, - EXHIG!T <; C.O. FfLE :#; JO 2-i'J. ¡f Y~tekV'/;"'l '--.(-' ;' ,-~ \ .."'" ,'ì· ! J. ,\:.,... I·· :~/(,." . .....".. ~) ~ \i ,~ ::_~ t (j \' I:,:' r ~; ).:.. "\ . - f,r ò.f(,. ~ (' (0 f1 "ACCEPTED " Date 1/;7 ¡, I ~, HRH/jw Enclosures :.~ Sincerely yours, -=--2' ./1 2 ,/ /...1 / ;/ . / ..-" /' ./ / /.' /''''',- . .//.,.. ç./ .'/:7Y. /~~-~ég~¿ ,// .// ¿ , - -------.:;.;, H :).~J\t~~\I¿ Ho 11and '~I-··~~\ß'~~~-. ~..'::..~'~ ~~~;:~À~ Inasmuch as these proceedings have been held open at the request of the' èommittee, we hope and trust that the Committee will receive these enclosures as additional exhibits in the nature of rebuttal evidence. As I am sure you can readily perceive, this kind of evidence could not be developed on the spot; but, rather, was the result of analysis of the State's exhibit following the hearing. We will appreciate your confirmation that the enclosures have been received in evidence in these proceedings. 2. Affidavit öf H. H. Hamilton dated September I¿, 1971, to which is attached an exhibit which is a reproduction and modification of the Committee's similar exhibit herein. 1. September 14, 1971, letter from Hoyle Hamilton to you. I !I~j/J I c. GEOL ~ ---p::: ENGf . n~iNr , I ¡--~~~---~¡. '·-SENG-·T-' . ,-T'-GEOL '·n<: -. r-..--..·· . .--; 2 GEOL I L; -r-~~?Clq: I DRÃfTT I SEë '. CONFER: ' .F'lE~ \. Q ID 2.. '~A ;.~. 4 eo.'v., ~ ') . Enclosed herewith are: Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil & Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 9950~ RE: ~ehearlng on Conservation Order No. 102 Dear Mr. Marshall: September 15, 1971 ANCHORAGE,ALASKA 99501 TELEPHONE 272-4471 AREA CODE 907 506 WEST SIXTH AVENUE P. O. BOX 208S ATTORNEYS AND COUNSELLORS AT LAW H. RUSSEL HOLLAND AND RISHE.R M .THORNTON, m ) ) /" o (hrf CYy If! eW\. I 'f ". ~ ... i.~ ALAS}(Ä OrLand G~'\S , _ :: CONS~R\/A T)QM CtCn'i1MITTEEl ~;rt. c C ~ r""''.! "t-a.... -Itt ~H Coli o.iL ¡ I ~¡ "J'-.-.' EXH!~T·. L V ,... ._-'(--, - --- .. Wt -···..;...d -r-~ iJ -. . . f! C.O. FILJ;: . '"' J.~ a...:-Jl1 L 1.-0 ~ c;.. ~ ct ""', ..., ~ ..:Il ACCEPTED II. ~,/ Dote. 'Y/I ~ ~ _ (~ , f& '1..e. 1 0 ~ 2..... .~~.' .'-; . -' 'I --" H. H. Hamilton ~ ~ - - o-:~g ~ Oz zen... .... iii en " ..J.->c:(o:t ..Jz~~"!' 00::1:(/)C\I J:01-c:(" J:x-lC\l iiif-üi~~ (/) _1-111 0 (/)~~~iE ::Jo::::=a::w 0:: l1I o.J oJ:rDJ:t:!. J:()g~ it c:( f ..,¡.~!I,,~ u-.\{· l~F'14'~./J _" 1971. ~ DATED this I&L~ day of on able expression of Mobil's estimate as shown in Exhibit No.3, whereas the dashed line is not. by the circled points; and in my opinion this solid line is a rea,s-I cumulative production as interpreted by Mobil f~om its Exhibit No. 3 herein. A solid line has been drawn through the trend indicated exhibit; and the circled points represent monthly oil rates versus 4. I have replotted the subject data on the attached opinion, the dashed line upon the Committee exhibit does not cor- rectly show Mobil's estimated Oil rate from this well as shown on Mobil's Exhibit No.3. which the subject well would have made without water damage as depicted by a dashed line upon Mobil's Exhibit No.3. Inmy estimate of the Oil and Gas Conservation Committee of the oil rate 3. The dashed line on said graph purports to depict the No. 31-14. production versus cumulative oil production for Mobil-Union WelL 2. Attached hereto is a photographic reproduction of the 011 and Gas Conservation Committee exhibit depicting monthly 011 Alaska, as Associate Reservoir Engineer for the Alaska Division. upon oath: 1. I am employed by the Mobil Oil Corporation at Anchorage, H. H. HAMILTON, being first duly sworn, deposes and says A F F I DAVIT In the Matter of the Application ) of MOBIL OIL CORPORATION for ) Rehearing on Order No. 102 ) ) BEFORE THE ALASKA OIL AND GAS CONSERVATION COMMITTEE r7~~!h~\;r~ ()P i\r·i£) Çj-4~i 'fór~ntp'i"C¡f. -~ °tf;-c< C~r :tfte.M. 1 Fq ,e. 2.. o +-2- - - 0-:11I 0 Z::>IO Zoz<»- « III <» I'- .JI->ot't .JZ«~"!' OO:::J:IJ)N :tOl-otl'- :tX..JN iiil-iJi~~ U) _I-W 0 U):E~~¡ :Jo:::~a:: [¡ o::w O.J _J:IO:r.~ J:U)g~ æ ot F- \f n_) /~) ¿'"/ I! \---,;-6\1-;/:: .A- j ~ -. (/</'// j <. /"7 J 1'-- r'l/ -,-./ ~/ ~.......-- ., / ( /L- L- Nota~ Public in ~<for Alaska My C6mmiss!on expires :_µ~/S:/.3 -) t-J () F () ¡ L /.f".~ c) ;A~F4CHQRr~Ç;~ Gl,-i ¡ 1/ . /" ',;/ J;. l} SUBSCRIBED AND SWORN TO before me this -A-.-f ,J¡ -'" 1971 I & -rÆ day of #11 ) ) Mobil Oil Corporation POST OFFICE POUCH 7-003 ANCHORAGE, ALASKA 99501 September 14, 1971 Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil & Gas Con se rvation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 RE-HEARING CONSERVATION ORDER NO. 102 Dear Mr. Marshall: At the hearing which was held on August 26, 1971, the State submitted an exhibit which was a graph of the monthly oil production versus the cumulative oil production for the Mobil-Union well No. 31-14. A dashed line is shown on this graph which, according to Mr. Gilbreth's testimony, was derived from the estimate of the oil rate this well would have made without water damage as depicted by the dashed line on Mobil's Exhibit No.3. We feel that the dashed line on the State exhibit does not correctly show Mobil's estimated oil rate for this well as shown on Mobil's Exhibit No.3. Attached is a copy of the State's exhibit in questio.n. The circled points represent monthly oil rates versus cumulative production as interpreted by Mobil from our Exhibit No.3. A solid line has been drawn through the trend indicated by these circled points. We feel that this solid line through these circled points is a reasonable expression of our estimate shown in Exhibit No.3, whereas the dashed line is not. We would like this letter and the attached graph to be made a part of this hearing. Yours very truly" ~:Ift£&f~' --, , l1e~ 13 . o fit rf! ~()i' '1 ACCEPTED H. H. Hamilton 11 /1/ Associate Reserv:>ir Engineer Dote 11 Alaska Division ALASKA OIL and GAS CONSERVATION COMMIT"ÇEE 0. n ~ r~ (! --;¡ -f-C.... i-ìi ~ YI!' C CI v" '* EXHI81T C.O. F.I L E . * / 0 1......-t 'Y~ h.f..Cl.. V I ,.., ~ - - .. '.- ¡' .... ~ _.--.J.....,_.~-:==:==- HHH/kg Attachments :~) ~ \' i ~:~': c) ,~.. .:~':: C": I :~';:,,':\ ~ì ~\~'\':CH{"'j¡; :\C:'r~ (I) C) It') ,... "t '" . z 0 o u U ¡¡¡ II: _ _ 101 ., > . 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L~ ~ J f¡ ~ II (¡, ..("0'1--\ l-t ~~. to ~ ·10 9 8 7 6 5 4 3 " v ~ '<::J I, ~, ......1.' ',.; III . ,. :u~~ .~ . ~~'J '~Y/7~ , oJ #10 ) PROCEEDINGS C.ð.J02.A MR. BURRELL: Good morning, ladies and gentlemen. This is a hearing of the Alaska Oil and Gas Conservation Committee, Conservation File No. 102.--4\ The request of the Mobil Oil Corporation for !ehearin~ on Conservation Order No. 102, which restricted the flaring or venting of casinghead gas from the Granite Point Field, Middle Kenai Oil Pool, to the amount required for safety, by legal· notice published July 30, 1971 in the Anchorage Daily News. The request for rehearing was granted. I am Homer Burrell, Chairman of the Committee, to my left is O. K. Grilbreth, Jr., Chief Petroleum Engineer and member of the Committee; to my right is Tom Marshall, Chief Petroleum Geologist and member of the Committee; to his right is Bob Hartig from the Attorney General's office; and Mr. John Reeder, a new member of the Attorney General's staff. The other members of the Division of Oil and Gas are sitting in the audience this time. Is the petitioner ready to put on evidence? MR. HOLLAND: Yes, Mr. Chairman, we are. I do have some brief opening remarks if I may. ~1R. BURRELL: I would make an additional comment, if everybody would identify themselves for the record whenever possible it would make it easier when we get this typed up. MR. HOLLAND: I had a note to myself to do just exactly that but promptly forgot it. I am Russel Holland, appearing a~ Council for the Mobil Oil Corporation this morning. MR. BURRELL: Hold it, Mr. Holland, I think there may be a problem, I don't know. MR. MARSHALL: Would you say something, Mr. Holland? MR. HOLLAND: MR. MARSHALL: MR. BURRELL: MR. HOLLAND: HR. GILBRETH: MR. BURRELL: Testing 1, 2, 3, 4. Fine, let's leave a. little slack. ~lY don't you slide the thing half way your way. A law degree does help engineering doesn't it? (laughter) We need all the help we can get. Escuse the interruption, Hr. Holland. MR. HOLLAND: I am Russell Holland, appearing for the Hobil Oil Corporation this morning, to my left is my partner Richard Thornton; to his left is Mr. Vance B. Porter, Mobil Oil Corporation Joint Interest in Gas Development Administrator; and to his left is Mr. Hoyle Hamilton, who is Associate Production and Reservoir Engineer for the Mobil Oil Corporation. We will be calling both Mr. Porter and Mr. Hamilton as witnesses to present additional testimony. I do have and would like to recognize from the aûdience at this time, Mr. J. L. White, who is the Production Manager for the Alaska E & P Division of the Mobil Oil Corporation. MR. BURRELL: Mr. Holland, will Mr. White be testifying? MR. HOLLAND: Not unless there is some question that comes up that the Chairman would like to ask. As you have already indicated, Mr. Chairman, this hearing is an outgrowth of an Oil and Gas Committee Public Hearing conducted on May 26, 1971, involving the producers of the Upper Cook Inlet. The May 26, 1971 hearing was called for the purpose of reviewing a previous Oil and Gas Conservation Committee Order which had permitted the flaring or venting of casinghead gas. The notice of the May 26 hearing raised three questions: l) Can excess casinghead gas be marketed, injected into any reservoir or pool or otherwise beneficially utilized prior to January 1, 1972? 2) Secondly, it posed the question, will flaring or venting of casing- head gas after July l, 1972 in the excess of the amount required for safety -2- constitute waste as "waste"is defined in Alaska Statute 31.05.170(11). 3) Thirdly, it posed the question will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for safety flares? After taking much testimony, substantial portions of which came from witnesses subpoened by this Committee, the Committee issued i~Order No. 102, dated June 30, 1971, which made certain findings, conclusions, and ordered that casinghead gas in excess of the maximum amount which could bene- ficially be utilized may be flared until 7:00 A.M. Alaska Daylight Standard Time, July 1, 1972. That effective that date flaring or venting of casing- head gas from the Granite Point Field is prohibited except for the amount necessary for adequate safety flares and emergencies. Thirdly, there was another ordering provision that further dealt with emergencies. As you have indicated, the Mobil Oil Corporation, by letter dated July 19, 1971 applied to this body for rehearing. Without repeating in full, because you have it before you, the entirety of this application to the Committee, the main thrust of our request is that: Firstly, your findings two and six of Order #102 as regards need and beneficial use of casinghead gas are not supported by the evidence produced at the May hearing. These findings, two and six of Order #102, if applied and if applicable to Cook Inlet at all have relevancy only to casinghead gas readily deliverable on the East side of Cook Inlet. I question that it supports even that -- that the evidence supports even that. Secondly, Committee Order No. 102 will, and we will produce additional evidence on this point, actually cause "waste" at Mobil's Granite Point Platform of the sort anticipated by the Committee when it posed question number three, in -3- connection with the May 26 hearing. By notice published May 30, 1971, the Oil and Gas Conservation Committee granted Mobil's request. This rehearing is the result of that notice. As the Committee recognized it has the power as a result of this rehearing to enter a new order or decision after rehearing, as may be required by the circumstances. We are here, this morning, to request that a new order be entered, and we will submit evidence which in conjunction , with all of the record which is before you at this time, will resubmit fully justified the continuance of the previous types of orders which have permitted the flaring of excess gas from the Granite Point Field of Mobil Oil Corporation. While all of you are, of course, familiar with the statutory background that we are dealing with here, it might be beneficial to just hit the high points of those provisions so that they will be a part of this record. Alaska Statute', 31.05.200 provides that, among other things, "waste of oil and gas in the State is prohibited." This is the basic concept that we started from. "Waste" according to Alaska Statute 3l.30.010 sub-paragraph 11, "means in addition to its ordinary meaning physical waste and includes," according to sub-paragraph H of that definition, "the release, burning or escape into the open air of gas from a well producing oil or gas except to the extent authorized by the Department." Those last words are really the important ones - except to the extent authorized by the Department. This Committee is, of course, constituted pursuant to Oil and Gas Conservation Regulations promulgated by the Division of Oil and Gas, out of the Department of Natural Resources. Inasmuch as the subject before us today concerns produc- tion from an oil pool, it would appear to me that there are probably no Conservation Regulations which are directly applicable to the issues before us, other than a Section 29.5l of the Oil and Gas Conservation Regulations, which deals with gas/oil ratios. I will have more to say about that in some portions -4- of my closing remarks. As a final preliminary to the presentation of some additional evidence, I want to make sure that we have clear in all of our minds exactly what the evidence is in the record of this hearing. I say this because there was some confusion in my mind from reviewing the statements in transcript as compared to the inventory of exhibits which was prepared. I judge from the inventory of exhibits which Ras been prepared from the May 26, 1971 hearing, that the entire record of File No. 105, which was the Middle Ground Shoal's hearing, both testimony and exhibits is considered part of the record in this hearing and, if I might, I would inquire whether or not that is correct? MR. BURRELL: That is my understanding - that was the intent of the Chair. MR. HOLLAND: May I also inquire whether or not the testimony of Mr. Bergquest, who is the Senior Energy Resource Engineer for Pacific Lighting, in connection with Order No. 104 was considered part of this record. MR. BURRELL: Yes it was. Mr. Bergquest was subpoened the day of the No. l02 hearing, and we discussed, at that time, in the record, him deferring his testimony till the end of the four-day session and on condition that it be incorporated in the record of all of the previous hearings. MR. HOLLAND: Thank you, I had missed that portion of the record somehow or other. Finally, it is my understanding from page 5l of Mr. Porter's testimony at the May 26 hearing that his testimony from the March Committee hearing in Juneau is also a part of the record on this and the May 26 hearing. MR. BURRELL: That is correct. He requested that without objection it was so ordered. MR. HOLLAND: Now, to supplement the record on this rehearing, we would ask that the Committee consider the following: I would first like to have the Committee take, if it will, official notice of the classification of the -5- Granite Point Field as an oil field as distinguished from a gas field in that production in question is from oil wells. MR. BURRELL: That is my understanding, yes sir. MR. HOLLAND: Thank you. Secondly, I would like to have the Committee take official notice of its prior orders with regard to the flaring of casing- head gas from the Granite Point Field. These are primarily Order No. 61, which was extended a number of times, but I gather that there were perhaps previous orders and certainly there were subsequent extensions. MR. BURRELL: The Committee takes notice of them and is willing to incorporate them into the record, if you so request. MR. HOLLAND: I do so request, Mr. Chairman. MR. BURRELL: Without objection we'll incorporate the record of Conservation File No. 61 into the record of this hearing and all extensions issued pursuant to Conservation File No. 61. Is there anything else you want----- MR. HOLLAND: One final thing, Mr. Chairman. I would like the Committee to take note of the fact that it has, according to my understanding, authorized a water flood project for the Mobil Oil Corporation from its Granite Point Platform. MR. BURRELL: That is correct. MR. HOLLAND: Now, without further ado, we do have the further testimony of Mr. Porter and Mr. Hamilton. Mr. Porter will offer testimony dealing with the Committee findings in connection with Order No. 102, and principally dealing with the prospects for beneficial use of casinghead gas. His testimony will indicate that while there has been an increase in the beneficial use of gas, casinghead gas, from the Granite Point Field even since the May hearing before this Committee, there is still no reason whatsoever to believe there will ever, in the foreseeable future, be an independent market, that is a non- producer market, for Mobil's casinghead gas from the Granite Point Platform -6- Field. Secondly, Mr. Hamilton will present testimony directed primarily to Finding No. 11 of Order No. 102 indicating that this Order, if applied to the Granite Point Field wells owned and operated by the Mobil Oil Corporation, such will cause, not prevent, the waste of resources. His testimony will indicate that the savings of casinghead gas through a reduction of production from Mobil's Granite Point Wells will result in an overall loss of oil which would otherwise be produced from the subject wells. If there are no questions at this point, I would call and ask that Mr. Porter be sworn. MR. BURRELL: Does anybody have any questions before Mr. Porter testifies? There being no questions, Mr. Porter, Mr. Marshall will swear you, sir. MR. MARSHALL: Will you please raise your right hand, Mr. Porter. In the matter now at hearing, do you swear to tell the truth, the whole truth and nothing but the truth, so help you God? MR. PORTER: Yes, sir, I do. MR. HOLLAND: Mr. Chairman, Mr. Porter has previously been qualified before this Committee as an expert witness. MR. BURRELL: I was going to make the same statement, thank you, Mr. Holland. MR. HOLLAND: Thank you, sir. Mr. Porter, before you begin your actual prepared testimony, I wonder if you would give us just a very brief statement of your qualifications in terms of your familiarity with the gas production and marketing of Mobil from its Granite Point Platform. MR. PORTER: Yes, sir. For the past year or more I have been employed in the Mobil E & P Division in Alaska as Joint Interest and Gas Development Administrator, and Granite Point is the only production that Mobil has in -7- Alaska at the current time. I have been involved in attempts to sell or otherwise dispose of the gas from Granite Point Field. MR. HOLLAND: Are you the person with the Mobil Oil Corporation who is responsible for the marketing of gas? MR. PORTER: Yes, sir, I am. MR. HOLLAND: Would you at this point go ahead with your testimony? MR. PORTER: Alright. My opening paragraph is a slight repeat of what has gone on but I would like to say my name is Vance B. Porter. I am employed by Mobil Oil Corporation as Joint Interest and Gas Development Administrator in Mobil's Alaska Exploration and Producing Division in Anchorage. Mobil is the operator of State Lease No. ADL l876l which is jointly owned with the Union Oil Company of California and overlies the southern portion of the Granite Point Field. The Oil and Gas Conservation Committee, on June 30, 1971, issued Conservation Order No. l02 which ordered, effective July 1, 1972, that no casinghead gas from the Granite Point Field may be vented or flared except for the amount necessary for safety. Similar orders were issued for each and every oil field in the Cook Inlet. The orders for each field were exact duplicates except for the order numbers, field name, number of platforms, hearing date and gas production statistics for the year 1970. The same Order was issued for the Atlantic Richfield Spark Platform, where there is a gas deficiency, as was issued for other platforms and fields in which it is necessary to flare gas. The Committee did not appear to consider that each field and each platform is operating under different circumstances. Conservation Order Number l02, as printed, contains three directives resulting from three conclusions which, in turn, were based upon eleven findings. The eleven findings were made by the Committee after hearing -8- testimony and evidence during public hearings conducted in late May of this year. We, at Mobil, upon reading Conservation Order No. 102, searched for relevancy in the eleven findings that were stated as justification for the three conclusions that resulted in the three directives. We would not, from our recollection of the testimony, find such relevancy and justification insofar as Order Number 102 applies to the Mobil-Union Granite Point lease. In light of this, our desire to properly fulfill our duties as operator for Mobil and Union, our obligations to the State of Alaska under State Lease #ADL 18761 and our sincere desire to fully comply with the laws of the State of Alaska and the regulations of this Committee and the Department of Natural Resources, prompted us to request a rehearing on Order No. 102 as it concerns the Mobil-Union Granite Point Platform. I thank the Committee for granting our request. I shall testify as to each of the eleven findings. In so doing, I will refer to testimony on record in the hearing held on May 26, 1971, and, with the permission of the Committee, I shall present new evidence where it is meaningful. There have been events transpire since the May 26 hearing. Some of the findings are interrelated and I have therefore grouped them in my testimony. I will deal with the findings of Order No. 102 in this sequence: l. Numbers 2 and 6 2. Numbers I, 3 and 4 3. Number 5 4. I'll group Numbers 7 and 8 5. Number II 6. Number 10 7. Number 9 -9- I have selected this order of reference to show that: There is no further beneficial use for the Mobil-Union Granite Point casinghead gas in Alaska. There is no further beneficial use for this gas outside of Alaska. The gas is now being utilized to the fullest extent possible. Waste of casinghead gas at ADL 1118761 has not and is not and will not occur under current operations. In fact, waste will be caused by Conservation Order No. 102. Gas will be conserved but crude oil will be wasted. The irrelevancy of each finding, except Numbers 11 and 9, and the fact that Number 11 is fallacious and erroneous, substantiates that Finding Number 9 is also irrelevant. My testimony concerning Number 11 will be brief. Mr. Hamilton will testify to that finding when I have£inished. I will now speak to Findings Numbers 2 and 6. These Findings are interrelated. Number 2 states, "There are increasing needs for natural gas in the village of Tyonek and Greater Anchorage area and Kenai Peninsula Boroughs, on both an interruptible and uninterruptable basis. Specific needs are those of the Native Village of Tyonek, Inc., Chugach Electric Association, Inc., The City of Anchorage Municipal Light and Power Department, and Alaska Public Service Corporation." Number 6 states, "The casinghead gas and the entrained liquids now being flared could be beneficially utilized. There are uses for interruptible casinghead gas, and alternative fuels exist in the event the supply of gas is interrupted." I would like to discuss these two findings as they relate to the Mobil- Union lease in the Granite Point Field in light of the evidence presented -10- at the May 26, 1971, hearing. My testimony will also bring the Committee up-to-date on events that have transpired since that hearing. These findings, I assume, are based on testimony presented by the seven subpoenaed witnesses appearing. None of these witnesses, either in their testimony or in thei.r actions during or since the hearing, has indicated that the "increasing needs" mentioned in Finding Number 2 or the "Beneficial" uses mentioned in Finding Number 6 have any practical or material bearing to the Mobil-Union Granite Point lease. Let's start with Mr. Elkins' testimony. I am sure that Mr. Elkins is sincere in his various studies to utilize some of the casinghead gas now being flared. He testified that his company, Rock Island, was engaged in setting up a small propane extraction plant at West Forelands. For this he would use gas from the West Forelands extraction plant and therefore have no use for our Granite Point gas in this project. This is the first of the "needs" or "beneficial" uses mentioned at the hearing that cannot be filled by our Granite Point gas. Mr. Elkins stated that his company definitely plans to put in a bid to try to supply gas to the City of &1chorage. Rock Island has not approached Mobil-Union in any attempt to line up the Mobil-Union Granite Point casinghead gas for possible use in this project. We have formally offered to sell it to them. I must, therefore, conclude that this is the second of the "needs" or "beneficial" uses that cannot be filled by Granite Point gas. You will recall that, at the May 26 hearing, I referred to a contact by Rock Island regarding possible purchase of our gas. On May 27, I received a letter from Rock Island offering to take 2350 MCF per day of low-pressure gas at our shoresite, pay us 2 cents per MCF, compress, strip and deliver gas to Atlantic Richfield for use on their Spark Platform and to the Native Village of -ll- Tyonek and to the Mobil-Union shoresite. Mobil was to store and dispose of the liquids extracted. They offered to sell the gas to Atlantic Richfield for 40 cents per MCF. Mobil has and is now selling gas to Atlantic Richfield at a price considerably below that. Rock Island's letter stated that the price to the Tyonek Village would be negotiated. Rock Island was asking a price of 25 cents per MCF for gas to be used by Mobil at the shoresite. The whole package was contingent upon being able to use Atlantic Richfield's line for delivery to Tyonek. This letter was entered into the record of the hearing. I am not making light of Rock Island's efforts to make a profit and am convinced that they were sincere in their proposal. Mobil declined that proposal. This offer opened no new markets or possibilities of markets. Rock Island would only be the middle man. Nothing presented by Mr. Elkins, either in the hearing room or outside the hearing, room, showed or created any additional "need" or a "beneficial" use that could be filled by Granite Point casinghead gas. Mr. Sharp was the next witness appearing to indicate a "need". The City of Anchorage has asked for bids to supply gas to their Municipal Light and Power Department plant. The need is for 19 MMCF per day in 1973, rising to 109 MMCF per day in 19.93 on a peak load basis. Our Granite Point lease cannot, of course, supply any such need. Mobil is not a public utility and consequently we are prohibited by law from engaging in such activity. Therefore, the Committee must certainly realize that the only practical action that Mobil can take in an effort to aid in supplying gas to the City of Anchorage is to offer to sell our gas to any party that may be interested in buying it at our shoresite for further transportation and sale. This we have done. I will make reference to this later in my testimony. Mr. Sharp's -12- , testimony did not show or express a "need" that cannot be filled with currently available sources. I do not believe that anyone can take our Granite Point gas at our shoresite and transport it to Anchorage at a price competitive with the current supply. In fact, all that Mr. Sharp's testimony indicated is that the City of Anchorage is desirous of obtaining gas at a price lower than that being paid currently. It did not show that the City is or will be short on gas supply. Consequently, the City of Anchorage has no relevancy in Finding Number 2 as it pertains to our Granite Point lease. Mr. Dale Teel, General Manager of Alaska Pipeline Company and President of Alaska Public Service Corporation, appeared at the hearing. With your forebearance, I would like to quote from the transcript of Mr. Teel's testimony. MR. BURRELL: Do you purchase any casinghead gas at all? MR. TEEL: No, we do not. MR. BURRELL: You purchase all your dry gas from the Kenai Gas Field? MR. TEEL: Yes, we do. Kenai Field supplies all our gas. MR. BURRELL: Natural gas, you have enough? MR. TEEL: Yes, we do. MR. BURRELL: Do you have enough to meet your projected demand? MR. TEEL: Yes, we do. MR. BURRELL: All from the Kenai Field? MR. TEEL: Yes, sir. That ends the quote from Mr. Teel's testimony, and Mr. Teels's companies are the current suppliers to the City of Anchorage and based on his testimony, we can now add the Alaska Public Service Corporation to the list of those that, by the evidence presented, should not appear in Finding Number 2 as it relates to the Mobil-Union Granite Point lease. -l3- Mr. Bill Schoepoester of Chugach Electric appeared. He stated that there was a "need" for gas to fuel Chugach's Bernice Lake power plant on the east side of the Cook Inlet north of Ken ai . Of course, our gas from Granite Point goes to the west side of the Inlet. It is obvious that this "need" can most economically and best be served by gas going to the east side of the Inlet. Mr. Schoephoester stated that "Chugach Electric is willing to investigate further the possibility of using any gas available in the vicinity of its Bernice Lake Plant. We would welcome the opportunity to discuss the use of any source which meets the tests of purity, deliverability and economy." I testified at the May 26 hearing that it may be physically possible to move our Granite Point gas to the east side of the Inlet by connecting to Amoco's platform. This will cost $4,000,000 or 40 cents per MCF, not including further transport and handling from Amoco's platform to Bernice Lake. This estimated unit cost to Amoco's platform has gone Uß for reasons I shall explain later, to S5 cents. I don't think that Mr. Schoephoester would welcome the opportunity to discuss this matter with me when I would have to open such discussion by saying that I could supply part of his needs for a short period of time at a price of 55 cents per MCF delivered on Amoco's platform. Mr. Teel's letter to Mr. Burrell dated June 3, 1971, and made a part of the record of the hearing on Conservation Order No. 102 stated that he has offered Chugach gas at as low as 20 cents per MCF. Therefore, the name of Chugach Electric Association should not appear in Finding Number 2 as it relates to the Mobil-Union Granite Point casinghead gas. The only name left now is the Native Village of Tyonek. Mr. Bartlett, the General Nanager of the Native Village of Tyonek, appeared in regard to a lineed" for gas to fuel the generator at the Village. I testified that -14- we had held conversations with representatives of the Native Village of Tyonek and the Bureau of Indian Affairs to explain to them that we did have casinghead gas available and could provide it to them if we made certain investments and altered some of our equipment. Mr. Bartlett did not indicate an interes t in offet'ing to purchase the gas. This took place between the Harch hearing in Juneau and t.he May 26 hearing in Anchorage. At the May 26 hearing, Mr. Bartlett made some statements that I would like to quote. He stated: "The Village would be interested in perhaps purchasing casinghead gas, if it were available...... He also stated: "I suppose, in summary, I should say that the Village is interested in exploring the possibility of getting this casinghead gas." Later he stated: "There are several other alternatives that we are looking at and it wouldn't be fair to say that our whole power program hinges on casinghead gas, but I think it is probably in proximity to geographical.....in proximity to the plant and it's something that we want to continue to explore." My duties for Mobil include trying to sell gas. On June 2, 1971, I wrote Mr. Bartlett offering to sell casinghead gas to the Native Village of Tyonek. I delivered the letter to Mr. Bartlett personally and mailed a copy to Mr. E. F. Griffin of Union Oil, Mr. R. Petrovich of the Bureau of Indian Affairs and Mr. R. A. Smith of the USGS. My letter to Mr. Bartlett was entered into the record of the May 26 hearing but with your permission, I will read the letter now. (LETTER OF JUNE 2, 1971 ATTACHED) Mr. Bartlett told me that he thought that he could give me an answer -15- by the requested time, i.e. June 14, 1971. He also requested an analysis of the gas and that was mailed to him on June 3, 1971. The June 14 data passed with no reply from Mr. Bartlett and no indication that he required more time. I, of course, on several occasions, attempted to talk to him by telephone but I was told that he was out of his office upon each occasion. I requested upon each occasion that he return my call at his convenience. I received no return call. On July 6, 1971, I wrote and forwarded to Mr. Bartlett by registered mail, a letter which I will read into the record. (LETTER OF JULY 6, 1971 ATTACHED) I received a letter from Mr. Bartlett dated July 8, 1971, which I will also read into the record. (LETTER OF JULY 8, 1971 ATTACHED) Almost three months have gone by since my offer. I would judge that the name of the Native Village of Tyonek should not appear in Finding Number 2 as it relates to the Mobil-Union Granite Point casinghead gas. I will make one more reference to this "need" in my later testimony. Mr. Hendershot presented testimony concerning a past "need" and a past "beneficial"use for casinghead gas. This "need" was on the east side of the Inlet and the Mobil-Union Granite Point lease was not involved in any wa¥ and reference to my prior testimony will indicate that transportation costs to the east side would have precluded his use of the west side Granite Point gas. We were never contacted by Mr. Hendershot and, therefore, the part of his testimony concerning his efforts to obtain about one }illCF per day for propane extraction is irrevelant to Conservation Order No. l02 as it concerns the Mobil-Union Granite Point casinghead gas. -16- You will recall that Hr. Hendershot said, "But as an Alaskan utility rate payer and one who is closely associated with the rate problems of our various power companies, I say it is extremely unfortunate that a solution to the quandary of flared gas had not been found." There is no quandary concerning our Granite Point gas. If utility rates were based upon the unit cost of using west side casinghead gas, a lot of consumers would be extremely upset. A quandary would indeed exist if consumers would pay higher prices to use casinghead gas when lower-priced gas field gas is available in large quantity. Mr. Hendershot seems to think that because I have told prospective purchasers that the casinghead gas service is interrupt able , I have prevented them from using Granite Point west side gas. I am sorry if the Committee thinks that to be true. I would be less than truthful if I told them that such service were not interrupt able , for reasons fully discussed at previous hearings. Mr. Bergquest of Pacific Lighting Service Company testified as to his efforts to obtain gas reserves for liquification and transportation to the West Coast. The record plainly shows that he is principally interested in gas on the east side of the Inlet because pårt facilities on the west side are unattractive. Again, I state, that to move our Granite Point gas to the east side, even with no profit, would preclude its use for any purpose in deference to the low priced gas that is available. I will refer later to a telephone contact with Mr. Bergquest. Mr. Gilbreth, by letter dated June 4, 1971, provided to Mr. P. J. Trimble of Mobil and Mr. Oscar E. Swan of Amoco, a list of persons who have had contact with the Division of Oil and Gas concerning a need for gas. There were nineteen names. If that letter is a part of the record of the May 26 hearing, I will not read it into the record of this one, but if it is not a part of that hearing, I would like to read it in, and I don't know if it is or not. -l7- ) MR. BURRELL: Mr. Gilbreth thinks it is, I am not sure. MR. GILBRETH: It was requested as part of the case and was submitted prior to the close of the record on the case and is part of it. MR. BURRELL: Alright. We'll stipulate that it is part of the record in any event. MR. PORTER: Now, I must assume that the Committee used this knowledge, these inquiries, as support for the first sentence of Finding No. 2 and for Finding No.6. I wrote on July 9, 1971 to each contact provided by Mr. Gilbreth, with the exception of Mr. Sharp of the City of Anchorage; Mr. Sharp was excepted because, as I earlier stated, I cannot supply the needs of the City of Anchorage either physically or economically. I added to the list Marathon Oil Company because of their possible use for the gas at their West Forelands extraction plant and I also added El Paso Natural Gas Company of E1 Paso, Texas, because they are the leading supplier of gas to the u.s. West Coast. I will read my letter into the record. (LETTER OF JULY 9, 1971 ATTACHED) I have received written replies to my offer from three of the addressees which I will read into the record. The first is from Mr. Reginald W. Elkins of Rock Island Oil Company and reads: (LETTER OF JULY 16, 1971 ATTACHED) The second reply was from Mr. Stan Smith of Petrolane in Houston, Texas, and reads: (LETTER OF JULY 20, 1971 ATTACHED) Petrolane's letter was received on July 23, and I replied the same day forwarding the requested analysis. My letter reads: -18- (LETTER OF JULY 23, 1971 ATTACHED) The third reply was from Mitsui Toatsu Checmicals, Inc., of Tokyo, Japan. The letter is dated August 12, 1971 and rêads: (LETTER OF AUGUST 12, 1971 ATTACHED) I hope that someday Mobil will have sufficient natural gas to accommodate Mr. Saiga's needs. Two million metric tons of gas per year is equivalent to 250 million cubic feet per day. Allowing for 20 percent plælt shrinkage, I would need 300 million cubic feet per day to meet the demand. I cannot guarantee a stable supply of gas even on my own platform. I replied to ~1r. Saiga on August 21, 1971, explaining the volume of gas available and attached the requested analyses of the gas. A copy of Mr. Saiga's letter was forwarded to Phillips Petroleum Company and to Pacific Lighting and Service Company in hopes that this need for gas might fit into their plans Neither of these possible suppliers have found a way to use the casinghead gas from the Mobil-Union lease at Granite Point. Mr. Saiga's letter shows only that there is a market for liquified natural gas in Japan. This is quite commonly known. Unfortunately, the casinghead gas at Granite Point cannot compete in this market. Mr. John Bergquist of Pacific Lighting and Service in Los Angeles, California, telephoned me on August 4, 1971. He confirmed receipt of our offer. He reconfirmed his statement at the hearing that his principle interest was in east side gas, but of course, he was considering gas from all sources but much more study would have to be done. He informed me that it would be two to four years before he would be in a position to accept or reject our offer. Forcing a restriction of oil production rate with the attendant loss in ultimate oil recovery and revenue to conserve -19- west side Granite Point casinghead gas for a liquification plant on the east side which mayor may not be built and which mayor may not be able to use casinghead gas and which will not be able to so state whether or not it wanted this gas for as long as four years would seem to be waste in its worst form. A copy of our gas analysis was forwarded to Mr. Bergquest. On August 10, 1971, Mr. Elkins telephoned referencing our offer to sell our casinghead gas. Our Option No. 2 in the offer stated that the price for less than the total quantity available would have to be negotiated. Mr. Elkins asked at what price we would sell l40 to 280 MCF per day of gas at 250 psi at our shoresite. It was explained to me by Mr. Elkins that the Native Village of Tyonek was considering running their standby generator on a mixture of oil and casinghead gas. I replied to Mr. Elkins the same day as follows: (LETTER OF AUGUST lO, 1971 ATTACHED) Also as a result of our offer, Marathon has requested and has been provided a gas analysis. I have made telephone contact with Mr. John Horn of Phillips Petroleum Company who, as you know, is operator of the gas liquification plant near Kenai. Mr. Horn informed me that his studies to date have shown that the cost of transporting west side casinghead gas to the LNG plant is prohibitive. 11r. Horn and I must have the same type of slide-rule. As tot he first sentence of Finding Numb e r 6, to quote, "Casinghead gas and the entrained liquids now being flared could be beneficially utilized," the gas is and has been beneficially utilized and that is for natural reservoir energy. The foregoing has explained that there are no beneficial uses available through further sales. All of the gas that may be used for a secondary beneficial use is being -20- used for platform and shoresite fuel and sold to those others who have a need and are willing to purchase such gas. No further "beneficial" uses exist for gas from our Granite Point lease and certainly none were presented at the May 26 hearing. Both at Juneau and in Anchorage on May 26, I testified as to our arrangement with Atlantic Richfield to provide them with gas on their Spark Platform. The volume mentioned in total for both Mobil and Union was 800 MCF per day once we made the necessary modifications on our platform to deliver at 250 psi. Atlantic Richfield has been taking about 200 to 300 MCF per day of low-pressure gas for use on their shoresite. The uncertainty resulting from the May 26 hearing and the issuance of Conservation Order No. 102 has forced us to postpone modification of our main compressor. I was informed by Atlantic Richfield on August 18, 1971, that their requirements have changed and that they will need at least 1.6 MMCF per day at 250 psi and we are now attempting to provide this to them by using our standby compressor to move the gas to our shoresite at about 160 psi and thence to the Spark Platform. On the platform, they are further compress- ing the gas to meet their pressure requirements. We are trying to arrive at a better means of supplying their need. This increased need of Atlantic Richfield is the reason that the unit cost of transporting our excess gas has gone up as I previously mentioned. There is less gas available and the cost of compressors, pipelines, treating equipment has remained the same. The recipients of my July 9 letter offering to sell gas have been informed of the increased committment to Atlantic Richfield. The second sentence of Finding Number 6 states that "there are uses -2l- for interruptible casinghead gas, a.nd alternative fuels exist in the event the supply of gas is interrupted." The Mobil-Union Granite Point platform has no such back-up source of fuel available and this was stated at the May 26 hearing. Therefore, this second part of Finding No.6 cannot possibly apply to our Granite Point platform. I know my testimony on Findings Numbers 2 and 6 has been lengthy, but I want the record of this hearing to show that Finding Number 2 and Finding Number 6 in Conservation Order Number 102 have no meaning as concerns Mobil-Union's Granite Point lease and are, indeed, contrary to the testimony presented at the May 26 þearing and events transpiring since. Currently, there is no need for or beneficial utilization of the casing- head gas from Mobil-Union Granite Point lease which has not been fulfilled. Now to the second part of my testimony on Finding Numbers land 3. Findings Numbers land 3 state respectively: "1. There is a growing shortage of natural gas in the contiguous 48 states and Hawaii, and natural gas is being sold at increasingly higher prices in both intrastate and interstate markets." And, 3. Alaska gas is being exported to Japan, and there are potential markets for Alaskan gas in the contiguous 48 states and Hawaii." The only practical way of moving gas from the Cook Inlet to the areas of shortage or potential markets mentioned in these two findings is by tanker ship transporting liquified methane. At the current time, there is only one exporter of liquified methane -22- in the State of Alaska. I told you in my testimony on Findings Numbers 2 and 6 that this exporter has found no economic way that he can utilize Granite Point gas produced from the Mobil-Union Granite Point platform. Mr. Bergquest, in his testimony in May of this year, stated that gas going to the west side of the Cook Inlet is of not much value to him at this time. He has reconfirmed this by telephone. My information indicates that the minimum economic size liquification plant in Alaska would require a reserve of greater than one trillion cubic feet of methane and a deliverability of about 150 million cubic feet of methane per day. The Mobil-Union lease at Granite Point cannot meet these requirements. Further, this minimum liquification plant could affort to pay no more than 2 cents to 6 cents per MCF to the producer at the plant gate for resale on the West Coast of the United States. The excess casinghead gas from the Mobil-Union Granite Point platform cannot be transporte.d to the shoresite for this price. A larger plant with a 300 million cubic feet per day capacity could pay only 4 to 6 cents more. Findings Numbers 1 and 3 in Conservation Order No. l02 are irrelevant as concerns the ~10bil-Union Granite Point lease. Our casinghead gas cannot be used outside of Alaska economically. The Committee's Finding Number 4 states: "The Jones Act has impeded utilization of Alaskan gas elsewhere in the United States. II When that portion of Alaskan gas which is produced as casinghead gas with the crude oil at the Mobil-Union Granite Point lease is considered this statement simply does not apply. Had there been no Jones Act, the past disposition of this gas after its primary beneficial use would have -23- been the same. The finding of the Committee is stated in the past tense. But, 1f the Jones Act were repealed today, there will still be no additional use for this gas. Testimony at the May 26 hearing and all of the hearings held that week was to the effec.t that the past or future use of this and other such gas elsewhere in the United States, or in Alaska for that matter, is not impeded by the Jones Act. Mr. Bergquest testified that the Jones Act is not a precluding factor for his envisioned project. It has apparently not slm.¡ed his efforts. Uses of the casinghead gas produced from that part of Alaska identified as ADL 18761 outside of the west side of the Cook Inlet has been and will continue to be precluded, not impeded but precluded, by: (1) Its remote location (2) Its pressure (3) Its quality (4) Its quantity These four items are the physical facts that have and will continue to preclude the use of this Granite Point gas outside of Alaska and I don't think that the Committee can blame the United States Congress for them. Now as to my third portion concerning Finding Number 5. Finding Number 5 states: "Substantially all fuel requi1;'ements on the oil-producing platforms of the Granite Point Field are now met by casinghead gas. II Evidence presented at the Hay 26 hearing and previous hearings showed -24- that all of the fuel requirements on the oil-producing platform and the shoresite appurtenant to the Mobil-Union lease are now and have been in the past met by the re-utilization of casinghead gas. Further, the owners of the lease and platform are selling a portion of the gas excess to their needs. This is the only sale of casinghead gas in the State of Alaska. Therefore, Finding Number 5 of the Conservation Order No. l02 is incomplete. The fourth portion of my testimony will concern Findings Numbers 7 and 8. Finding Number 8 stated that "During 1970, 8,415,694,000 cubic feet, or 86 percent, of the gas produced from the Granite Point Field was flared." This is undoubtedly a true statement. From the Mobil-Union Granite Point lease for the same period, 4,ll4,921,000 cubic feet, or 92 percent, of the gas produced was flared. This was with the full knowledge and approval of the Committee. As a matter of fact, through June of 1971, a total of 15.l billion cubic feet have been flared from our lease. This is 94 percent of the total l6.0 billion cubic feet that have been produced. This did not constitute waste because no beneficial use has been available. I would like to submit Mobil's Exhibit Number 1 into the record. MR. HOLLAND: Mr. Chairman, we have the exhibit on the board and if you please, I'll hand out some smaller copies. MR. BURRELL: Thank you. Mr. Holland are these smaller copies you handed out exact reproductions of the one on the board? ~m. HOLLAND: They are illustrative of the primary exhibit, although I presume that at some point here shortly we will move the admission of the larger exhibit as part of the record. MR. BURRELL: Thank you, sir. -25- MR. PORTER: This exhibit is a graph showing our current estimate of total future casinghead gas production and . the planned disposition of the gas through the year 1987. At that time, we will have no excess gas to sell but will be able to run our platform and shoresite through 1991. From mid- 1971 through 1991, a total of 34.3 billion cubic feet will be produced; 22.5 billion cubic feet or 66 percent will be used as fuel by Mobil and Atlantic Richfield. This exhibit is similar to that submitted in previous hearings but has been updated to reflect the anticipated additional sale to Atlantic Richfield. Considering the conditions existing in the past and those that will exist in the future, ~hese are commendable statistics. The Committee, by the use of their exhibit No.2, which was presented by Mr. Miller, attempted to place a "Dollar Value" on the gas at Granite Point of 78 cents per MCF. Mr. Hiller explained quite carefully that he compared the "Dollar Value" of the gas to oil on a B. T. U. basis at the consumer. He stated that he was comparing competitive commodities. To arrive at the 78 cents per MCF "Dollar Value", Mr. Miller used a crude oil price of $3.255. Crude oil is not a competitive commodity compared to natural gas. He stated that he was comparing it to heating oil but he used crude prices. Heating oil, delivered to a consumer in the Anchorage area, sells for an average of $9.66 per barrel. Using Mr. Miller's method of gas evaluation, the so-called "Dollar Value" of gas at Granite Point would be $2.33 per MCF. The Committee must surely recognize that such number juggling is ridiculous and extremely misleading. On the west side of the Inlet, gas well gas has been sold for 15 cents per HCF, casinghead gas has been sold for 6.2 cents per MCF to 11.8 cents per liCF depending upon its conditions, pressure and location. Casinghead gas has been offered for -26- sale at l-l/2 cents per MCF. All of these pric.es were for delivery on the west side or on the platform. Please don't let such number games as shown on your exhibit influence your grasp of the facts concerning the casing- head gas on the west side. Testimony was presented at the May 26 hearing by the president of the largest purchaser and seller of gas in Alaska. This was, of course, Mr. Teel. In response to questi,ons by Mr. Trimble of Mobil concerning casinghead gas from the west side of the Inlet, Mr. Tee1 said, "I don't think the gas is worth anything." The Committee's Finding Number 8 is factual but is irrelevant and immaterial as concerns the Mobil-Union lease at Granite Point. Finding Number 7 expressing the Committee's past concern with the flaring of gas from the Hobil-Union platform is factual, I'm sure. The fact that you have held numerous public hearings to determine the disposition of this gas is a well-known fact. You have, as a result of those hearings, held that the flaring of this gas did not constitute waste because there was no "beneficial" use for the gas other than its prime beneficial use of supplying reservoir energy and its secondary beneficial use of fueling platforms and related activities. As of the present time, about 45 percent of the casinghead gas to be ultimately produced has been produced. The situation has not basically changed from 1967 except for the better for the Mobil-Union Granite Point lease. We are using all the gas that we can to improve oil recovery. We are selling gas. We plan to utilize about 66 percent or more of our remaining gas. And now, with no evidence that conditions have changed, you have issued Conservation Order No. lOZ. This is why the words arbitrary and capricious were used in our application for rehearing. Your Finding Number 7, although factual, has no relevancy as concerns Mobil-Union Granite Point casinghead gas. -27- Finding Number 11 in Conservation Order Number l02 states: "Expert opinions differ as to the effect on ultimate recovery of a restriction in the rate of production or injection under a fluid injection project, but it is not proven that any such restriction will reduce ultimate recovery from the referenced pool and thereby cause waste. A fluid injection project is in operation in the Granite Point Field." A review of the transcript of all the hearings held in May of this year shows that each and every expert witness appearing informed the Committee that waste will occur if rates are reduced. This was for several reasons including, but not limited to these: 1. Water blockage of unflooded strata by backflow from strata that have had water breakthrough. 2. The detrimental effect of gravity segregation under a lower rate of injection. 3. Failure to get water into less permeable portions of the sand. 4. Abandonment of wells and platforms because of physical failure. Mr. Hamilton will introduc.e more testimony and evidence on this later. I merely state now that, even without Mr. Hamilton's testimony today, Finding Number II is erroneous as concerns our Granite Point lease and was not supported by the evidence presented in May of this year. The sixth part of my testimony concerns finding Number 10. The Committee's Finding Number 10 states: "Restricting the flaring or venting of casinghead gas produced from each of the three platforms in the referenced field to to a volume necessary for an adequate safety flare will conserve gas. II -28- Such a restriction is imposed by Conservation Order Number 102 as it applies to the Mobil-Union Granite Point lease will result in less gas being flared presently, but Finding Number lO is imcomplete. ~1r. Hamilton's testimony on Finding Number II will show that the sought- after conservation of gas will occasion the waste of valuable crude oil. The seventh portion of my testimony deals with Finding Number 9. In our application for rehearing, it was stated that there was sub- stantial testimony on the minimum amount of gas necessary for a safety flare. Upon reviewing the transcript, I find that our statement was wrong on this point because there was not substantial evidence. However, the matter is not material because Order Number 102 should not apply to our Granite Point lease. I have saved comment on this Finding Number 9 until now in the hope that the Committee will, after considering what has been and will be said today, agree with me that this finding, in the case of the Mobil-Union Granite Point lease, is also irrelevant. My testimony has shown that Conservation Order Number 102 insofar as it pertains to the Mobil-Union Granite Point lease, is irrelevant in light of the physical and economic facts and the irrelevancy is substan- tiated by the testimony and evidence presented in late May 1971. My testimony has, without equivocation, shown that there are no additional economical uses for the casinghead gas produced with the oil on ADL Number l876l. Each and every expert witness appearing in the May 1971 hearings stated that loss of oil would occur if Order Number l02 is not rescinded. ~1r. Hamilton will now present additional testimony concerning the waste that will occur as a result of your order. I am aware of what Mr. Hamilton -29- plans to say and am in complete agreement with it. This concludes my direct testimony. Thank you for the opportunity to appear here and for your attention. MR. BURRELL: Thank.; you, Mr. Porter. }ffi. HOLLAND: I would move the admission of Exhibit No.1, at this time. MR. BURRELL: Without objection it will be admitted as Mobil's Exhibit No.1. MR. HOLLAND: Are we ready for Mr. Hamil ton now? MR. BURRELL: Mr. Holland, could you give me any idea of about how long Mr. Hamilton's testimony will be? MR. HOLLAND: I am sure Mr. Hamilton will be able to. MR. HAMILTON: It will probably take, I would guess, about 12 minutes. ~ffi. BURRELL: I think it would be better to proceed with Mr. Hamilton's testimony rather than get into cross-examination at this time. Then we could take a break after that. Is that satisfactory with you? MR. HOLLAND: Yes. Mr. Hamilton, if you would stand for your oath please. l1R. MARSHALL: Please raise your right hand. In the matter now at hearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? MR. HAMILTON: Yes, I do. MR. HOLLAND: Mr. Chairman, Mr. Hamilton has also been previously qualified before this Committee, I understand. MR. BURRELL: That is correct. -30- MR. HAMILTON: My name is Hoyle Hamilton, and I am employed by Mobil Oil Corporation. Finding Number 11 in Conservation Order Number 102 states: "Expert opinions differ as to the effect on ultimate recovery of a restriction in the rate of production or injection under a fluid injection project, but it is not proven that any such restriction will reduce ultimate recovery from the referenced pool and thereby cause waste. A fluid injection project is in operation in the Granite Point Field." A review of the transcript of all the hearings held in May of this year shows that each and every expert witness appearing informed the Committee that waste will occur if rates are reduced. This was for several reasons as noted in Mr. Porter's testimony: 1. Water blockage of unflooded strata by backflow from strata that have had water breakthrough. 2. The detrimental effect of gravity segregation under a lower rate of injection. 3. Failure to get water into less permeable portions of the sand. 4. Abandonment of wells and platforms because of physical failure before all of the economically recoverable oil has been produced. In the May 26 hearing, Mr. Porter stated that Mobil had experienced a loss in the production capacity of a well when water apparently broke through. I would like to expand on that statement and I will give additional evidence to show that the Middle Kenai oil sands at Granite Point are very water sensitive. I will show that this sensitivity is not just -31- I, }' theory but is actual and will cause a drastic reduction in oil rate if these sands are exposed to water. In 1968, while running gas lift valves in two of our wells, water from the tubing casing annulus was inadvertently allowed to come in contact with the well perforations. I would like to submit Exhibits 2 and 3 which show the effect that the water had on the oil producing rate of these wells. Exhibit 2 is a production graph for Well 1131-13. T he solid line represents the actual oil rate. The dashed line is an estimate of the oil rate without water damage. This estimate is based on the average decline from our other producing wells during this same period. As this graph shows, we would expect this well to be currently producing approxi- mately 300 barrels per day of oil without damage. The current rate, however, is only approximately 70 barrels per day. The difference between the solid and dashed line represents a cumulative loss to date in oil production of 337,000 barrels. Exhibit 3 is a similar production graph for Well #31-l4. Our current oil producing rate is approximately 150 barrels per day while the estimated oil rate without damage is 400 barrels per day. In July 1969, as depicted on the graph, a surfactant treatment did relieve part of this water damage. However, it was far short of restoring the well to its undamaged potential rate. The difference between the dashed and solid line represents a cumulative loss to date of 422,000 barrels of oil for this well. I would like to now submit Exhibit 4. This is a production graph for Well #33-13. This well was producing approximately 650 barrels per day of oil in April of this year. Water broke into the well in May. The oil -32- production dropped to approximately 20 barrels per day with a 95 percent water cut. Fill was encountered above the fie" sand, the lowermost sand in the well. With continued maximum production for several weeks, the oil rate increased to approximately 290 barrels per day with a 35 percent cut. ~1ile attempting to survey the well to locate the water entry, the production logging tools were lost in the hole. The well was down while the production logging equipment was recovered. During this operation, the casing opposite the liCit sand was found to be collapsed and this portion of the well was plugged and abandoned. When producing operations were resumed, the well would not produce any fluids. The experiences just related show that: l. Water on the sand face of the Middle Kenai sand will severely damage the producing ability of the well. 2. The damage may be lessened if the well is allowed to produce at maximum rate. 3. Mechanical deterioration of the wells has and is occuring. The cumulative loss of crude production from the three damaged wells through June of this year was 789,000 barrels. We are currently planning remedial work to try and relieve some of this water damage. If the damage cannot be corrected, a large portion of the 789,000 barrels of oil will be lost. We are also considering the trial of a submersible pump to see if this would allow us to increase our maximum well rates and enable us to maintain as low a fluid level in the wells as practical during the water- flood. You can see our concern with this water damage problem. We only have ten producing wells on our lease at Granite Point. Three of these -33- ) wells have been severely damaged by water already. If we are forced to curtail our producing rate under waterflooding as per Conservation Order Number 102, so that we cannot keep these wells pumped off to minimize water damage, I believe there will be a drastic loss in reserves. Conservation Order Number 102 will be a direct contributory cause to any such loss that occurs. In July 1967 while we were considering what steps we should take to maximize oil recovery, our research laboratory in Dallas, Texas, ran waterflood tests on core plugs taken from Middle Kenai Sand cores obtained in drilling Granite point Well Number 1 and Well Number 3l-l3. Ten plugs were selected to cover the permeability range and to represent the litho- logic change from the pebbly to the more uniform-grained material. The data obtained from the cores show that the amount of oil to be obtained by water injection into the Middle Kenai sand is dependent upon the volume of water that is put through the sand. The average oil recovery at breakthrough was 34.09 percent of the pore volume of the rock. This average is weighted by porosity. The oil recovery increased to 35.25 percent of the pore volume at 0.5 pore volumes of water throughput and to 36.03 percent at 1.0 pore volumes throughput. Actually, the recovery was still increasing after 10 pore volumes of water throughput in some of the cores. Our platform has a design life of 20-25 years. At the longest then, by this design life, a safe operating life of 25 years will be assumed to illustrate how waste will occur if producing rates are restricted. If we are allowed to contine operating according to our project design, we will have injected l3l million barrels of water, through the year 1991, into a pattern which has a pore volume of l87 million barrels. This is a -34- total of 0.7 pore volumes of water throughput. During this 25-year life, the restriction of rate that would result from Conservation Order No. 102 would allow for the injection of only 88.5 million barrels of water or 0.47 pore volumes. In excess of one million barrels of oil would be lost. This factor, the inability to get water away at planned rate, will cause a waste, based on the present price of a barrel of crude, of over three million dollars worth of natural resources. This evidence is not based upon data from Pennsylvania, Oklahoma or Texas. It is based upon data taken on sandstone from the Middle Kenai zone at the Granite Point field. The foregoing, in my opinion, is additional proof that waste will occur if an artificial rate restriction is imposed on our lease. Mobil had numerous discussions with the Division of Oil and Gas during the planning and design phase of our waterflood. It was pointed out at that time that due to the tight Middle Kenai sands special high pressure injection equipment would be needed to inject water at a sufficient rate to maximize oil recovery during the life of our facilities. We have not changed this goal. We have ordered and installed this special injection equipment to do just this. Mobil will continue to evaluate remedial techniques to restore the loss in well productivity due to damage. We will also consider replacement wells for those lost due to mechanical failure. However, this work is very expensive and it can only be justified if the remaining well reserves are sufficient to warrant the expenditure. In summary, I have expressed our deep concern with the impaired well productivities we have experienced due to water damage. As -35- yet we have not found a successful method of restoring this productivity after the damage has occurred. For this waterflood to be successful, we mus t : 1. Either prevent or minimize this damage by producing wells at maximum rate; 2. Maintain water injection at a rate that will maximize oil 'recovery; 3. Recover the oil as fast as practical before the the well and platform deterioration terminates our operation. If we are allowed to continue to operate this waterflood as it was designed, I feel we can do this and maximize the oil recovery. If we are forced to operate with a restriction in producing rate, we cannot do either. Finding Number 11, except for the second sentence, is erroneous insofar as it pertains to Mobil-Union Lease Number ADL 1876l. That concludes my testimony. Thank you. MR. BURRELL: Thank you, Mr. Hamilton. MR. HOLLAND: Mr. Chairman, I would like the admission of Exhibits 2 through 4 -- MR. BURRELL: Without objection, they will be admitted and marked Mobil's Exhibits 2, 3 and 4, respectively. MR. HOLLAND: I have to present at this time -- at the insistence -- copies of Mr. Porter's testimony. I think we have copies of Mr. Hamilton's testimony. MR. BURRELL: We would request copies of both, if you have them. It is a great aid in typing up the transcript. MR. HOLLAND: In so doing I would request that you pursue whichever course you prefer here, and that the exhibits which are attached to Mr. Porter's testimony be marked as part of the record. They have been read into the record, -36- and it might be advisable to have them marked as exhibits. MR. BURRELL: Well, that presents a bit of a problem. Shall we assign exhibi t numbers to them now? We're all the way through 4 so far. Shall we start with the first one and call it Exhibit 5, and just keep on going? MR. HOLLAND: Mr. Chairman, I'm happy with them being read into the record, if that won't cause any problem for you. MR. BURRELL: That would cause no problem for me. MR. HOLLAND: I would just present these then -- MR. BURRELL: Thank you very much. MR. HOLLAND: I also have smaller copies of the large exhibits. MR. BURRELL: Thank you very much, Mr. Holland. Do you have any further testimony? MR. HOLLAND: This completes the testimony. MR. BURRELL: I would like to suggest that we go off the record for just a few minutes here so we can discuss procedure at this point. BREAK MR. BURRELL: Mr. Porter, since you started, I think we'll start with you first. Before you got into your findings, Mr. Porter, you made some initial remarks, your comment I believe was that we wrote substantially the same order for all of the four fields. MR. PORTER: Yes, sir. The orders I got copies of seemed to be substantially the same for each field. MR. BURRELL: Right. You pointed out, as I recall, that there was a problem with respect to the Spark platform inasmuch as you didn't think the order was applicable to the Spark platform because that platform was gas deficient. Was that a correct statement? MR. PORTER: Yes, sir, I made that statement. -37- MR. BURRELL: I would like to point out to you, sir, that we don't write orders by platforms, or by leases. ADL 18761 or any lease. We write them by pools, as we are required to do by the Oil and Gas Conservation Regulations. I refer you to 11 Alaska Administrative Code, Section 2004. So we don't care whether there is one platform or 20, or one lease or 20, we write it by pool. MR. PORTER: Well, yes, sir, I understand, and this is our purpose here -- to say that there is a difference. MR. BURRELL: Well, I think your example was ill-advised as Spark, then, that is part of a pool in which the order did apply, there is considerable flaring of gas from the pool in which the Spark platform is located. So that's why the order had to be written to apply to the whole pool. The fact that there happened to be a gas deficient platform is irrelevant. MR. PORTER: I understand, Mr. Burrell. I just pointed out there is a difference, even among platforms. MR. BURRELL: Right. Thank you. Your next point was with respect to Mobil's desire to fulfil their obligations under Lease No. ADL l876l. I believe one of those obligations is to produce and market the product of oil or gas that may be discovered. Yes, sir. We're not sure that that obligation has been fully met. But there is also an obligation in that lease to prevent waste, Mr. Burrell, and this is what I was referring to. MR. BURRELL: Thank you. Does anybody else here on the Committee have any questions with respect to the initial remarks before we get into the findings that Mr. Porter testified to? MR. MARSHALL: I might just point out in the same line that Mr. Burrell made that the order that was written is to be effective July 1, 1972, and by -38- MR. PORTER: MR. BURRELL: MR. PORTER: this nature it requires a certain amount of crystal balling as to what situation may exist. We cannot write off the fact that. or the possibility that there may be additional gas discoveries or additional casinghead gas reserves developed in a particular field by the time the order becomes effective. MR. BURRELL: I think we're ready to move to findings 2 and 6, I think which were first commented on. MR. PORTER: By the way, back to the obligations under the lease, if I may state the portion of the lease I'm referring to. MR. BURRELL: I'm sorry, I didn't understand your question, Mr. Porter. MR. PORTER: On our discussion here on our obligations under the lease -- MR. BURRELL: Yes, sir. MR. PORTER: I was referring specifically to item no. 20, I believe is the one. MR. BURRELL: MR. PORTER: prevent waste -- MR. BURRELL: That is correct. And I'm referring to, I believe, it's the addendum clause, one of the very early clauses which gives you the obligation to market the product. MR. PORTER: And we are marketing it wherever we can, sir. Paragraph 20 of the lease? Paragraph 20 of the lease, I think, says that we shall Mr. Marshall, you made a statement there to me, was that a question to me about the possibility of future discoveries? MR. MARSHALL: No. Tom Marshall speaking. I was merely pointing out to you that there are certain difficulties in writing an order which become effective approximately in a year hence. We must think of certain possibilities and I think to take apart a piece of writing which must be generalized in -39- -40- certain respects is not quite being fair to the fact that the effect of the order is one year down the road. This would apply, also. possibly to Mr. Bergquist's statement that he would have little use for west side gas -- I would be willing to gamble that his statement is hinged on the fact that a pipeline does not exist from the west side to the east side in, for most of those fields. Therefore, his statement would be relevant only because of the lack of transportation facilities. MR. PORTER: Well, this is true. And in my testimony I stated that we can't move all our gas to shore at prices which would be envisioned to be paid for future products, and there was no testimony at the hearing concerning where these future gas reserves might be found. This is the point -- I mean if the order was written with your statement in mind, I don't see the testimony to that effect, the evidence. MR. BURRELL: Mr. Gilb re th ? MR. GILBRETH: Mr. Porter, I think you made the statement early in your testimony that all the orders are identical. MR. PORTER: Essentially, yes, sir. MR. GILBRETH: I wonder if there weren't a few key words different in some of those orders as they pertained to each separate field, they were definitely considered separately by the Committee and the information -- the order was written based on the consideration -- and I think you will find that there is some difference in spite of the fact that you made the statement they are identical. MR. PORTER: I said they were essentially the same. MR. GILBRETH: I thought you made the MR. PORTER: I said exact duplicates, you're correct, sir. MR. GILBRETH: You did make the statement that they were identical, did you not? MR. PORTER: Yes, sir. Except for certain things. MR. GILBRETH: I believe if you will look at the orders that there may be a little bit of difference even in spite of those exceptions that you mentioned. I would like to ask you if the conditions on your platfoDm as pertaining to the flaring of gas at Granite Point and gas available for market and it could be sent to the shore, etc. are different from the conditions which would exist on Pan American's platform in the Granite Point Field? MR. PORTER: Would you mind stating the question again, sir? MR. GILBRETH: Well, the Committee wrote an order covering the Granite Point Field. The conditions on your platfoDm, I believe according to the testimony of both yourself and Pan American, would be different from those on the Pan American platform with regards to volumes flared, where the gas is going, what might be sold, interruptibility problems, and other things. There is a difference on this platform? MR. PORTER: Yes, sir. That's why we're here today. You issued the same order for different circumstances. MR. GILBRETH: I would like to ask you, sir, could the Committee in your opinion issue an order permitting you to do one thing and Pan American to do something else and still protect your correlative rights? In the same field. MR. PORTER: Well, sir, the order will cause waste and as for correlative rights, we are injecting water into the lease and currently if there is any correlative rights that should be protected, it should be ours. MR. GILBRETH: The Committee is required by statute to try to write orders that will protect correlative rights, among other things, and my question is -- do you think it would be possible for the Committee to protect your -41- , MR. GILBRETH: There should be some consideration then to correlative rights. Is that right? MR. HAMILTON: There should be and we have given that consideration, as I say, in putting those two lease line wells. MR. GILBRETH: I simply was asking the question to try to show and get -42- no. correlative rights by issuing one order to you regarding flaring and a different order to Pan American regarding flaring? MR. PORTER: Yes, sir. MR. GILBRETH: You think it could be that you could produce one way and they could produce another way? MR. PORTER: No, sir. It's the fact that the gas comes with the oil and what is done with the gas after it's produced with the oil has no bearing on the oil recovery. I mean -- on correlative rights. MR. GILBRETH: But, any order that the Committee might issue regarding the production of 011 would affect both your and Pan American correlative rights, would it not? MR. PORTER: I don't think so, sir, unless -- MR. HAMILTON: May I make a statement here? Hoyle Hamilton with Mobil Oil. We drilled two line injectors on our lease line for the p.rpose of protecting correlative rights, and as long as these two wells are onstream and we are both conducting waterfloods, I would say that there could be different øp,tations going on on either side MR. GILBRETH: You think then, Mr. Hamilton, that anything that Pan American could do in the way of producing their properties would not harm your property. MR. HAMILTON: I could not make a flat blanket statement to that effect, into the record the fact that the Committee cannot issue orders helping one operator and hurting another operator. We have to look at the correlative rights problem across the board and field and try to consider each of them, and there was some question~ I believe, some statement made in the earlier testimony, that we are going to hurt you and there was implication that we might not hurt someone else. MR. BURRELL: May I interrupt. Mr. Gilbreth~ just a second here, on this very same point which is the one I tried to touch on before. If we should comply with your request and vacate Conservation Order No. 102 insofar as it applies to Mobil's Granite Point Field and leave it in effect Mobil's Granite Point Platform -- and leave it in effect insofar as Amoco Production Company's platforms in the same field and the same pool are concerned, do you think that Amoco would not~ shall we say, petition us for some type of a hearing immediately? MR. PORTER: I think they would, probably. And if you want to rescind this order for the entire field you will prevent more waste. MR. BURRELL: Go ahead, Mr. Gilb re th . MR.. GILBRETH: Mr. Po'rter, there was in your testimony you went through several proposals that had been made regarding volumes and prices~ etc. Could you briefly tell us what the difference in the prices and volumes on shore were, as covered in the proposals which you read into the record today? I believe in some cases there were figures of 11 1/2 cents; some cases 6.2 cents; some cases 15 cents, and some other factors perhaps that I didn't write down, but could you tell us what the difference in those figures, or how it was derived? MR. PORTER: Yes, sir, Mr. Gilbreth, I'd be glad to. The l5 cent price -43- ) y of it to allow you to treat it, strip it and dehydrate it. So, and it's location is important, also. because it takes investment in pipe and compressors, etc. to move it where you want it. So, the 6.2 cents that Atlantic Richfield is currently paying us for the low pressure casinghead gas at the shore site was arrived at in this manner, and we backed off what would have to be done to the gas to make it usable to us. MR. GILBRETH: Could you tell us, sir, what that is, what you have to do to it to make it usable? MR. PORTER: Well, they have to take it, strip it, dehydrate it and compress it. So, therefore, they pay us less for it. MR. GILBRETH: Are they paying you 6.2 cents for wet casinghead gas -44- to compress gas through one stage of compression. So, if you get gas at lower pressures you have to subtract something from the fact that it is not at a pressure that you want. You have to subtract something from the price mentioned was for dry gas well gas on an uninterruptible basis at 1,000 pounds of pressure. MR. GILBRETH: You say dry gas well gas? MR. PORTER: Gas well gas. Yes, sir. MR. GILBRETH: And where was this to come from? MR. PORTER: We sold some to the Native Village of Tyonek from our Moquawkie No. 1 Well, there was some gas sold from the Albert Kaloa Well by the Chakachatna Group, at that price. I believe it was actually 15.2. MR. GILBRETH: Yes. MR. PORTER: Alright. So we get down to what's casinghead gas worth? Well, usable gas at 1,000 pounds is worth 15 cents. This 1s the precedent that has been established. It costs approximately 3 cents or more per MCF ) MR. PORTER: Alright, sir, it was testified in the previous hearing, as stated here, our cost estimate to move all of our gas, excess gas, from our platform to Amoco's platform where hopefully it might be transported to the east side. This costs four million dollars. Alright, we had ten billion cubic feet, approximately, of excess gas. This is 40 cents per MCF. Now Atlantic Richfield has expressed a desire and we are hopefully today we started delivering them more gas than we thought we were going to give them when -- May 26. So this brings the total amount of excess gas, it reduces -45- MR. GILBRETH: Somewhere I recall in your testimony, wasn't there a figure of some 55 cents or 45 or something like that. MR. PORTER: Yes, sir. MR. GILBRETH: What was this for? of which we are currently negotiating with Atlantic Richfield and this would be for gas at 250 pounds. This is why the price is over 6.2. In other words, it's providing for interruptibility and for something less than the pressure that they require. And naturally you realize in our offer to sell this gas to interested parties, if any, said that -- we naturally would have to recover our investment on a unit volume. I mean, if they took the total stream, the price I think was 15 cents and we mentioned that we would negotiate for less than that, but would have to get a different price. come and get it. Now, they would have to lay their own line. As it is, to move it to shore now, we're using our own line, so that difference is transpor- tation cost, essentially. Alright, then, there was the 11.8 cents mentioned delivered on shore at some pressure? MR. PORTER: Yes, sir. At about 45 pounds. I offered to sell it on the platform for a cent and a half to anybody who might be interested enough to at the time the Conservation Order No. 61 was written which was probably 1968 or early '69. MR. PORTER: I said that the situation has not changed except for the better. In other words, I still have nothing I can do with this gas excess -46- Order No. 61, if my memory serves me right. I believe there was considerable testimony at the time of the hearing and the Committee issued the order permitting the continued production and flaring of gas. I take it from your testimony that you see very little difference occurring right now from what occurred MR. GILBRETH: Just a little bit out of sequence here, I think you have mentioned that the flaring that has taken place has been with Committee approval, I believe the earlier orders have been made a part of this hearing -- Conservation the cost of transporting it past that point. MR. GILBRETH: I notice the volume that Arco is joing to take now has doubled in the past two or three months. Is there any likelihood that they could be that far off on their needs in the future? That they might double again? MR. PORTER: Well, if they need more gas we want to make every attempt to supply it. We want to sell gas to anybody that needs it who can pay for it. MR. GILBRETH: I see. Thank you. sir. MR. PORTER: And I want to point out again that that is just getting it to Amoco's platform and doesn't allow us any profit or doesn't consider it. but that four million dollars didn't change. So if you divide four million dollars by the amount of gas we now envision as being excess to our needs, the price is 55 cents. to our needs and those of the people who take the extra gas. MR. GILBRETH: Has the amount of gas that's available for supply, the estimates that were presented to the Committee in those hearings -- have those changed significantly? MR. PORTER: No, sir. The top line on Exhibit 1 is essentially -- I mean it is the same as was presented in Juneau on May 26, and -- MR. GILBRETH: I'm sorry, sir, I'm speaking of the earlier hearings when the operators presented their estimates of gas that would be available for market or outside usage. Have those estimates changed significantly? Has your company's estimates changed significantly? MR. PORTER: Yes, sir. There has been a change and let me refer to my testimony at Juneau. Yes, sir, I testified in Juneau that the amount shown on our Exhibit 1 today and our exhibits at Juneau, and also May 26, is about 17% greater that that that was forecast on August 15, 1969 here. MR. GILBRETH: Then the situation has changed a little bit -- we know a little bit more about the field now, we have some more production history, there is more development in the State of Alaska, and there is a shortage down south, and the conditions are not exactly the same as they were when Conservation Order No. 61 was issued. I think the evidence in the cases will show that conditions have changed and I see no compelling reason that the Committee would or might enter the same decision now, based on current - day information that they did in 1968 when Conservation Order No. 61 was issued. I don't think it is incumbent upon the Commission to, or the Committee to, necessarily find that flaring today is not waste or that it is waste, based on the 1968 decision. I wanted to make that point. MR. PORTER: This is why we used the word, "capricious". -47- excess of the volume authorized by the Committee is waste? MR. HOLLAND: Well, that's essentially a legal question, so if I answer it, I think that is a fair statement, of law. MR. GILBRETH: Alright, sir. Then if the Committee should decide on some certain volume that could be produced and flared anything in excess of that would be waste, and if they should decide that anything over the safety flare was waste, then that would be waste, would it not? MR. HOLLAND: Well, that presumes that there is a factual and evidentiary basis for what you're doing. MR. GILBRETH: Right. Mr. Porter, you touched briefly on the gas require- ments for the City of Anchorage, or the fact that they are soliciting bids for a gas supply. Have any outside parties or any third parties, other than your company and the City of Anchorage, contacted you regarding purchase of casing- head gas that they might consider in a contract bid to the City of Anchorage? MR. PORTER: No, sir, not to my knowledge and I informed the Committee today -- I read letters to bring you up to date on everything. MR. GILBRETH: But no one has contacted you regarding gas usage for that purpose, as I understand it. MR. PORTER: Not to my knowledge -- I mean, I read you the correspondence and nobody there said I want this gas to give to the City of Anchorage. Now, the only person that I know of personally who is interested in that is -48- Committee decides is -- that any amount that is flared in excess of that permitted is waste, does it not? MR. PORTER: I'm sorry, I -- MR. GILBRETH: Does not the statute provide that any gas flared in MR. GILBRETH: Right. The statute provides that any amount that the the law in general? Dumping it down the creek is no longer permitted in Texas? -49- there, but at least some of it used to be dumped down the creeks. MR. BURRELL: Well, apparently they've said dumping it down the creek is to be stopped -- it's now prohibited, is that correct, sir, as you understand Rock Island Oil Company. They want to buy it from me, according to the latest letters I have from them, 140 MCF per day, and I'm sure they don't contemplate supplying the City of Anchorage with that. MR. GILBRETH: No, I hardly think that is enough. MR. BURRELL: The substance of your remarks, Mr. Porter, was with respect to these potential markets and your reading of this correspondence, your offers, was that it was uneconomic, this gas -- this casinghead gas -- was uneconomic. I'd like to ask you a question, sir. Have you worked in Southwest Texas or New Mexico at any time in your 011 industry career, sir? MR. PORTER: Yes, sir. MR. BURRELL: They have a p rob lem the re we don't have too much of he re , fortunately. There is a great deal of salt water produced with the oil, I believe, sir. Is that correct? In many of the fields. MR. PORTER: Oh, yes, sir. In some fields, certainly, sir. MR. BURRELL: t~at is done with that salt water that is produced with the oil, s1 r? MR. PORTER: Well, there are several things done for it, depending upon the particular field. Some of it goes to evaporation pits, some is reinjected into the producing reservoir or into salt water bearing sands aquifers that will accommodate the volume, some of it, I don't think this 1s occurring anymore -- it has been 5 or 5 1/2 years since I worked down not very expensive, the cost of drilling another well? You know, it costs a lot of money to drill another well and there's no oil coming out of it, but it is done as a means of disposing of that water, is that right? MR. PORTER: Yes, sir, and in some instances it is done as a means of providing increased recovery of oil and thereby preventing waste. MR. BURRELL: Right. But in many cases it is not injected into the water-driving mechanism in the oil reservoir. In some cases it is simply salt water disposal, is that correct? MR. PORTER: Yes, in some instances. MR. BURRELL: And the reason for that is to comply with law, that is, you can't dump the salt water on the ground. MR. PORTER: That is correct. MR. BURRELL: Well, doing something with this casinghead gas that is being flared is likewise going to cost money, but if we determine that it is waste, is that not also to comply with the law, the extra expenditure -50- MR. PORTER: Oh, I don't know, but I'm sure that these pollution laws, I can get our environmental engineer that is concerned with that here, but I don't know if he would be knowledgeable on Texas, but in the federal thing you can dump into certain waters. MR. BURRELL: Well, in any event, there is not too much of it going on in Texas nowadays. By your own remarks about three sentences back you said, I believe, they don't dump it down the creek. MR. PORTER: I wouldn't suppose they would. MR. BURRELL: Okay. So it's either probably evaporated or reinjected somewhere. If it's reinjected, this takes compression equipment, does it an injection well, or several injection wells? not -- pumps -- and sometimes MR. PORTER: Yes, sir. MR. BURRELL: Are these -51- doesn't get any more oil out of the ground. It's just another expenditure which doesn't give you any benefit. that is, it MR. BURRELL: How about a dike around the well site. Is that not waste? MR. PORTER: This is true. salt water disposal well led to waste. MR. BURRELL: Well, you've just said that this expenditure for this MR. PORTER: No, sir. to less oil. Is that what you're saying? any expenditure that doesn't lead to more oil is waste because it leads MR. BURRELL: It would appear to me that what you're saying is that of production, that oil will not be recovered. is considered waste underground, then yes, sir. If you abandon at high rates MR. PORTER: If the loss of ultimate recovery of oil or underground waste does cause waste, by your definition of waste. that salt water be sometimes injected into salt water disposal wells. That MR. BURRELL: So there is waste in Texas resulting from this requirement production in the oil wells costs money. Therefore you will abandon the field at a higher rate of MR. PORTER: It causes waste, because to operate these salt water disposal that also waste? money that is used to dispose of the salt water in the injection wells. Is MR. BURRELL: May I interrupt you one second there, sir? How about the inject it is a waste. MR. PORTER: Well, in the first place, the money that it would take to analogous to disposing of the salt water? that would be req ui red of you to dispose of the casinghead gas? Is that not )v y -52- MR. BURRELL: Well, how does it save oil if it doesn't spill? MR. PORTER: If it doesn't spill, it won't save it. MR. BURRELL: Okay. I'll abandon that -- I think we have covered that. Sir, I have here in front of me the Pacific Light Incorporation's Annual Report for 1970 -- I turn to page 7: "We are well along in negotiations for additional long range supplies of gas in the magnitude of from 500 million to one billion cubic feet per day. To find new gas in such large quantities we have been looking to possible projects in Canada, Alaska and South America." Turning to page 8 and still quoting: "U. S. and Canadian experts have estimated there are more potential gas supplies in Western Canada and in Alaska, including the North Slope, than have been discovered to date in the entire lower 48 states. We are actively pursuing these potential supplies in several ways. First, we are studying the availability of undedicated gas supplies in the southern Alaska area in the vicinity of Cook Inlet, as well as from the northwestern coast of South America. Some of these studies have entered the initial negotiating stages. There is good reason to believe that one of these major supply arrangements can be announced in the first quarter of 1971 and actual deliveries can be expected by the mid-'70's." MR. HOLLAND: May we have the date of that report in the record, Mr. Burrell? MR. BURRELL: That's the Pacific Light Incorporation Annual Report for 1970 which I received in the mail yesterday. MR. HOLLAND: For 1970? MR. BURRELL: Yes, sir. oil. MR. PORTER: No, sir. That's for a purpose, too. It will help save J -53- MR. PORTER: Humm -- kind of late mailing it out. MR. BURRELL: Can you tell me if Pacific Light Incorporation has contacted you or any member of your company, to the best of your knowledge, with respect to Cook Inlet casinghead gas supplies? MR. PORTER: I contacted them. You're talking about Pacific Lighting & Service Company, the company that Mr. Bergquist -- MR. BURRELL: Yes, sir. I'm talking about -- the annual report is from the parent company; Pacific Lighting & Service Company is one of the subsidiaries. I'll expand my remarks to include all their subsidiaries. MR. PORTER: Well, naturally my first knowledge that they were considering this came during the hearings in late May, hearing Mr. Bergquist's testimony. He had not contacted me at all. My next contact with him was writing him a letter, I think, on July 9 offering to sell him gas, and then I reported our telephone conversation where he called and said he was still not particularly interested in west side gas, but it needed a lot more study and perhaps couldn't even give me an answer within four to five years. And since he apparently intends to put his plant on the east side and in the transcript of last hearing, I think you said it was your understanding it would be on the east side, too, and the fact that he, Phillips and myself know that it is uneconomic to move that gas even to our shore site, let alone to the east side, and I fail to see where their annual report is relevant to our lease. MR. BURRELL: Mr. Porter, I am reliably informed that negotiations are actively in progress for the laying of a pipeline across the Cook Inlet from the west side to the east side to deliver all the casinghead gas that can be gathered at the west side, and deliver it to the east side for a liquefaction plant. My prob 1em is I can't get anybody in this room to come here who knows anything about it. -54- MR. HOLLAND: Well, Mr. Burrell, if you know of someone who has this information, I understand you have the power of subpoena. MR. BURRELL: That is correct, sir, but the people who have this informa- tion are not within my jurisdiction. They are outside of the State of Alaska. MR. HOLLAND: Well, then, I take it what you're telling us is not evidence before this Committee. MR. BURRELl~: No, sir. I am making a statement that this is my problem. I cannot get people in this room to testify to what I am reliably informed to be true. I suspect that this is why I got sent to so many meetings when I was with an oil company. They knew I couldn't give anything away. MR. GILBRETH: I'd like to ask one direct question, if I may. MR. BURRELL: Yes. MR. GILBRETH: Mr. Porter, do you know if anybody in your organization has been contacted in any other office regarding the sale of casinghead gas in Cook Inlet? MR. PORTER: No, sir, and any contact made regarding the sale of gas in the State of Alaska would have to come through me. MR. BURRELL: Mr. Porter, do you know anything about this tale I just told, that these negotiations are actively underway for the laying of a pipeline -- a gas pipeline -- from the west side of the Inlet to the east side? And to build a liquefaction plant on the east side. Do you know anything about this? MR. PORTER: ~~ell, the liquefication plant I learned about at the last hearing, the Pacific Light and Service Company. I was aware that Phillips was interested in a possible expansion of their plant. This came to my knowledge when I was contacted by Mr. John Horne of Phillips in Bartlesville, h a v e I a I 1 T hat's well adds to the cost of producing the oil. -55- MR. PORTER: Yes, sir. MR. BURRELL: Why couldn't your gas go there, too? MR. PORTER: There is only one line, to my knowledge. MR. BURRELL: Well, obviously there would have to be an additional line. MR. PORTER: Well, this would add to the cost. MR. BURRELL: That's correct: Just like the salt water injection Oklahoma, to sell them gas, but as it turned out he was under the impression that we were operators of the Beluga Field. We are not. We have only casing- head gas. We have no non-associated gas. Naturally, we made contacts with other operators in an attempt to find if they had projects in mind which might help Mobil. In other words, could we get a piece of the action: I was informed that there were some studies underway and when you say "negotia- tions to lay a pipeline", are you talking about their talking to contractors? MR. BURRELL: I don't know whether we're talking to contractors yet. I believe we are, but I don' tknow that. I know the negotiations are between the people who would pay for it. MR. PORTER: I was aware that there were some studies going on. I am not aware of what went into the studies. I do know this -- it has been indicated to me by these people that there is nothing there that would be economically advantageous to Mobil, and I believe that, too, because I have stated that we can't. get our gas to shore at prices competitive with markets, all of our gas. So a pipeline across the Inlet is sort of irrelevant to our Granite Point Platform. MR. BURRELL: Your oil goes down to West Foreland, does it not, from Granite Point? -56- costs included. 27 1/2¢ gas at Amoco's platform, with no profit and no further transportation it is available in large quantities. Instead of 55¢ gas, wouldn't it be barge for nothing. We still don't have gas competitive with prices of which MR. PORTER: Now, let me point out, though, that we could get that lay MR. MARSHALL: Thank you. MR. PORTER: Alright, sir. would be a reasonable assumption. would be prorated over the mileage of the other gas pipelines laid. That Inlet could be arrived at, then this two million dollar transportation cost MR. MARSHALL: If the overall plan for the transportation of gas in Cook MR. PORTER: Yes, Mr. Marshall. transportation. MR. MARSHALL: At 50% of the figure, then, would be the pipe laid estimate. MR. PORTER: Yes, sir. Approximately two million dollars of that home port? short line between the two platforms and then returning the barge to its a one shot deal of bringing a pipeline barge to Alaska laying your rather particular job, or correct me if my assumption is wrong, but this is for which would be required to bring a pipe-laying barge to Alaska for this Point. Could you give us approximate breakdown of the amount of that figure the Amoco Production Company's platform in Granite and the Pan American four million dollars to lay a gas pipeline between your Granite Point Platform MR. MARSHALL: Mr. Porter, you mentioned that it was your estimate of ''I. on that. Mr. Marshall? MR. PORTER: Well, the -- I mean, Areo, of course, has diesel, or Atlantic -57- interruptibility of the gas supply. MR. PORTER: What fuel are you speaking of, sir? MR. BURRELL: How about diesel? LUNCH MR. BURRELL: We'll reconvene the hearing now. Mr. Porter? MR. PORTER: Yes~ sir. MR. BURRELL: I believe you said to the second sentence of Finding No. 6 was inaccurate inasmuch as no alternate fuels exist on the Mobil Granite Point platform. Is that about what you said, sir? MR. PORTER: Nothing to back up a gas supply off the platform. MR. BURRELL: Well, sir, I just wanted for the record to state that that's not what the second sentence of No.6 says. It makes no reference to the Mobil platform. It says that alternate fuels are available. In other words -- MR. PORTER: This order covers Granite Point Field and the only portion of Granite Point Field we have is our lease which is operated on by a platform. MR. BURRELL: That is correct~ sir, but the point is this -- if somebody would be using the casinghead gas from the Mobil Granite Point platform and that supply should be interrupted, Mobil or somebody else, perhaps the user, could use alternate fuels. There is alternate fuel available to back up the MR. BURRELL: I think maybe we ought to break for lunch. It's twelve minutes of 12:00. Would 1:15 be a reasonable time to come back for everybody? So, we'll take recess until 1:15. We'll lock this room up, by the way. Last one out -- one of us -- will lock it up so that if you want to leave your stuff here, it would be safe. Richfield, they're running on it now -- this is why they want the gas, but this would not prevent their machinery going down, their wells going down, and possibly causing waste while they're switching over on an emergency basis. Now, the -- well, I won't get into the Tyonek situation because I don't think they will take gas, anyway, but even if they did, they can't run their turbine on diesel 011. All they can run is their small standby generator. MR. BURRELL: On diesel fuel. MR. PORTER: Yes, sir. MR. BURRELL: Right. Do you have backup supply for any of your equip- ment on the platform? Do you have diesel in the platform in case your gas should be shut off, to keep the quarters warm, should we say, during the winter? MR. PORTER: I am informed that we do, yes, sir. MR. BURRELL: Well, that's what I thought. I think if you can use diesel to back up -- to solve an 1nterruptibility problem, perhaps some other user could, and that was the point in the second sentence of number 6, 1s that diesel or some other alternate fuel supply was available somewhere. MR. PORTER: We're talking here of our gas, excess to our needs, of around six million cubic feet per day. There is not backup diesel fuel available for six million cubic feet of gas per day. And this is what we would be required to back up in the event we had a sale for it. MR. BURRELL: Well, now, just a minute. There is not that much diesel fuel available: Available where? In Alaska? MR. PORTER: No, at any point that might be economically served by our platform. MR. BURRELL: Well, suppose you were serving the City of Anchorage. -58- y j is not in the business of distributing fuel oil or diesel oil. MR. BURRELL: Well, that's interesting. MR. HOLLAND: In the State of Alaska. MR. BURRELL: Thank you for the clarification. I think the business license probably would permit it, though, wouldn't it? -59- MR. PORTER: I disagree with you, sir. MR. BURRELL: Okay, that's fine. MR. HOLLAND: Might I add, Mr. Burrell, that Mobil Oil Corporation Suppose that your gas, your casinghead gas, was going to the City of Anchorage. Is there any reason why, theoretically now -- I'm not talking about whether or not you want to do it, but is there any reason why you couldn't have a diesel supply at the City of Anchorage Power Generation Plant and switch to diesel when the gas was shut off? MR. PORTER: I don't know what equipment they have there. They want gas to run their turbines. I cannot supply it. I can offer to sell it to someone that wants to supply it, and I can't back it up. MR. BURRELL: Well, you could if you wanted to. You could buy the diesel and sell it to the City of Anchorage just as well as I could or somebody else could, is my point. MR. PORTER: Mr. Burrell, I think this line of questioning is entirely out of line because you can't expect somebody that sells gas from a casing- head source to provide backup fuel to anybody that wants to buy it. MR. BURRELL: Well, I think you can if you wanted to dispose of the casinghead gas well enough. I think you damn sure can -- I think you could lay the line, I think you could do all kinds of things if you wanted to dispose of that casinghead gas. MR. PORTER: This may be, sir, and when that time comes, we will try to supply them with casinghead gas. MR. GILBRETH: Alright, you said that our Finding No. 2 was completely in error, lOO% according to your testimony, and that's the reputation of your testimony. MR. PORTER: I think, according to my testimony, this is true and it was true on June 30, it was true May 26 and it is true today. I can't sell the Tyoneks any gas. MR. GILBRETH: Well, that's getting more and more obvious all the time. I believe you stated that you had a minimum volume that the Tyoneks would have to take in one of the letters. -60- MR. HOLLAND: That's a rather tricky question. The Department of Revenue and I go around and around regularly, and I suspect as a matter of fact they would require separate licenses for producing and marketing. MR. BURRELL: Well, we've got several producers t several companies, that produce oil in Alaska who somehow found a means to market it t so I don't think the problem is insurmountable. MR. HOLLAND: Oh, I'm sure it is not, but all I'm saying is that I think they might have to have two licenses. MR. BURRELL: Well, that may be, that may be. Mr. Gilbreth? MR. GILBRETH: Mr. Porter, your testimony was to the effect that we can now rule out the Tyoneks for use of casinghead gas. In listening to the events that you recited in your testimony, I don't understand how you can rule out the Tyoneks. I understood that they said that they were still looking at this and there still might be a possibility that they would use it. MR. PORTER: Yes, sir. MR. GILBRETH: Why was that? t~at was that based on? MR. PORTER: Because to supply their needs we have to put in a certain amount of equipment; compressors, dehydrators, etc. It is only good business and perfectly acceptable business practice to require a take or pay when we make an investment for their use. This is mainly to assure my management " . that we will recover a portion~ at least, of our money. If you don't have that sort of thing they can hook onto you today and say I don't want it tomorrow, with no financial credit. MR. GILBRETH: In your offers to sell the Tyoneks gas, did you offer to sell them casinghead gas delivered on shore, uncleaned? MR. PORTER: Yes, sir. It's in the letter to Mr. Bartlett. I said I would make it available to them at the same price we're selling it to Atlantic Richfield. MR. GILBRETH: Alright, sir. I noticed from your testimony that there has been remarkab Ie progress shown by your company in trying to sell the gas since the May hearing. Can you tell us if your company was as active in trying to sell the gas as much prior to the May hearing as you have been from the May hearing up until now? Well, there has been an extreme amount of progress since that time and essentially none prior to that time, that's why I -- MR. PORTER: What progress? I don't see that progress has been made. Atlantic Richfield has come upon an additional need for that platform. This is the only progress that has been made. MR. GILBRETH: I said progress in attempts to sell it, sir. I didn't say in selling it, I said in attempts to sell it. MR. PORTER: Well, Mr. Gilbreth, this was done -- I didn't expect even -61- p was 11,329 MCF daily, per day. The daily average production in the Beluga Field during the same year is less than that -- 9,284 MCF. Beluga has found a home -- I think Granite Point could, too. Mobil's Granite Point alone. MR. PORTER: Do you know the price the gas is selling for in the Beluga MR. BURRELL: Yes, sir. MR. PORTER: I cannot compete with the Beluga Field, and there are no additional uses that I know of. MR. BURRELL: The point is, the gas is being flared. Let me follow a -62- MR. GILBRETH: We understand each other fully, I think. MR. PORTER: And I think the evidence bears it out. MR. BURRELL: Excuse me, I'll follow up on Mr. Gilbreth's point there. During 1970 the daily average, the gas flared by Mobil at Granite Point, three answers to the letter I sent out offering to sell the gas. It's a bona fide offer and I'll deal with anybody who wants to accept. It just merely states that the evidence presented to the hearing, whether it was lOa people who came through your office wanting to buy gas, that it was really insincere. In other words, when it gets right down to buying Granite Point casinghead gas, it is uneconomical. They realize it. MR. GILBRETH: Well, now, this gets down to a matter of opinion, Mr. Porter, but I submit that there is still a possibility of selling gas to the Tyoneks -- I submit that there is still a possibility that Granite Point gas could be used in supplying the demands of the City of Anchorage. I submit that the Japanese are interested if enough gas could be available. Obviously, there is not enough available, according to the man that you wrote to. MR. PORTER: Well, I submit to you, based upon evidence of the May 26 hearing in Juneau and this here today that I disagree with your little bit further. Do you know the total that is flared on the west side of Cook Inlet? It's about one-half of the daily average in the North Cook Inlet Field. MR. PORTER: Yes, sir, I am aware of that. MR. BURRELL: Don't you think this City of Anchorage contract would be interesting if all the west side producers got together and got the gas over the re? MR. PORTER: It would be~ but in my opinion it could not be at a price competitive with current sources of supply for the City of Anchorage, and there is adequate gas to supply the City of Anchorage at prices that I can't get below. MR. BURRELL: Well, of course you know they are bidding for more gas right now. MR. PORTER: Yes, sir. I spoke of that in my testimony. Mr. Teel, their current supplier, says he has got all the gas he needs. MR. BURRELL: Well, I am talking about the new City of Anchorage Municipal Light and Power Department call for bids which Mr. Teel can bid on and you can bid on and I can bid on -- It could be a group, the west side could all get together as a group. They didn't seem to have much trouble getting together on the Cook Inlet Pipeline which I doubt if Mobil's Granite Point reserves are sufficient to support. Everybody got together and built that oil pipeline; jim-dandy, right on down the Drift River. MR. PORTER: This was an economical project -- a viable project. MR. BURRELL: Right. Now, if the production is cut back severely for a safety flare next July 1, it would seem to me that there might be some -63- y MR. PORTER: Mr. Hamilton testified to that, sir. MR. BURRELL: Thank you. That's all I have. Mr. Gilbreth? -64- economics in building this pipeline, as a group. MR. PORTER: Sir, anything that we do at Granite Point has to compete within our company -- has to compete among our other projects for capital funds. MR. BURRELL: I understand that. MR. PORTER: If Order No. 102 is not rescinded, we have to curtail our production to meet Order No. 102. The loss in daily volume of oil to Mobil is small compared to Mobil's needs. If -- I cannot sit here and guarantee you that my management would let me have capital to enter into a project that would be an economic loss, so I don't know if I could get together with them or not. MR. BURRELL: Presumably you have a small interest in this venture based on volume, assuming it was percentage-wise based upon what you could offer. You would have less, so -- MR. PORTER: But, sir, I have to take it to wherever the pipeline terminus would be and I don't know where that would be or if it would ever be. I have to do that on my own and I can't get it to shore for pipeline prices. MR. BURRELL: Well, we keep coming back to that economic MR. PORTER: Well, I think we stated here today, and I said, well, I know one thing, it wouldn't be economic. If "10211 is not rescinded and I can't get money to join in any of these uneconomic projects, a physical waste of oil will occur. This will be as the direct result of your order and not economics. MR. BURRELL: Sir, could you tell me how a physical waste of oil could occur there? -65- MR. PORTER: Yes, sir. MR. GILBRETH: Have you read the articles that Mr. Giles incorporated into the record and read the information that those representatives have given? MR. PORTER: Yes, sir, you're referring to the Interstate Oil Compact Commission Report? MR. GILBRETH: Yes, and there were several others that Mr. Giles also entered. MR. PORTER: Well, I've read the Conservation -- most of the Interstate Conservation Report. MR. GILBRETH: Alright, I'm going to read you some passages from the Interstate Oil Compact Report, and then I'd like for you to tell me how you can make such a statement as you just made. MR. PORTER: Well, let's clarify my statement. I said among the experts appearing at the hearing. MR. GILBRETH: Mr. Porter, you stated that expert testimony has indicated that waste would occur at Granite Point if there were a restriction on production and that there was nothing to the contrary, did you not? MR. PORTER: Among the experts appearing at the hearing, yes, sir. MR. GILBRETH: You heard the testimony of Mr. Giles at the hearing, did you not? MR. PORTER: Yes, sir. MR. GILBRETH: You heard Mr. Giles refer and incorporate into the record the reports of many oil and gas experts in the oil industry, did you not? -66- MR. GILBRETH: Alright, then let us understand each other and have the record show that there are still many petroleum experts who disagree on whether or not curtailment of rates would affect ultimate oil recovery. Is that not righ t? MR. PORTER: They disagreed, sir, in 1959 and 1960. MR. HAMILTON: I'd like to -- MR. PORTER: Mr. Hamilton said he'd like to speak to that. MR. GILBRETH: Alright, Mr. Hamilton, please. MR. HAMILTON: If you're through with your questions. Is that the entirety of your questions? MR. GILBRETH: No, I have some more to the same question. MR. HAMILTON: I'm aware that there's many papers been written by experts -- recognized experts -- in the field of reservoir engineering on the pros and cons of the effect on ultimate recovery, that a restriction in either inj ection rate or restriction in production would have -- but I think a word of caution should be put in here that anyone taking those conclusions, or statistics from those authors, and applying them at random to a field, you can pick and be very misleading. Take an analogy, for example, is one of the most powerful tools to a reservoir engineer. If you have a history behind you of a successful waterflood, for instance, and you have another field you want to consider for waterflooding, it has very similar properties to this successful waterflood, you can say with a great deal of confidence, you can probably have a successful waterflood in the new field, but if you take evidence from either papers or from other fields and apply them to a specific field without having full knowledge of the problems and conditions in that field, I think you can get yourself into trouble. -67- slow rate of advance of the water drive or waterflood." Skipping two paragraphs, or heterogenous applies, recovery of oil actually may be increased by a the reservoir. When the reservoir is complex, when the term lenticular physical properties of the fluid concerned and of the rocks and minerals constituting GCl 1.0 X'" </--'? action of a water drive is determined by many factors having to do with the "Naturally the recovery of oil from a particular reservoir subject to the effects of injection and in the summary they state, and I quote on page 4, ago when there came to be a difference of opinion among oil people on the MR. GILBRETH: No, sir. It was not. This study was made several years made in the Granite Point Field? MR. THORNTON: Is the study that you're about to expound on, was that Granite Point Field by Mr. Giles at our last hearing. MR. GILBRETH: This report has been made a part of the record of the MR. THORNTON: Was that report relative to the Granite Point Field? MR. GILBRETH: Yesþ sir. MR. THORNTON: Could I ask one question? Chairman. Recovery and Pressure Maintenance Committee, George H. Fancher, Subcommittee MR. GILBRETH: This report was prepared by a Subcommittee of the Secondary MR. BURRELL: Objection noted. at this point. I have no opportunity to cross-examine these people. MR. HOLLAND: For the record, Mr. Burrell, I must interpose an objection Waterfloods and Other Secondary Recovery Projects." "A Study of the Effect of Curtailment of Production on Oil Recovery from would like to read at this time from the Interstate Oil Compact Commission, MR. GILBRETH: I would certainly agree with you, Mr. Hamilton. I ) their final and concluding paragraph says, "These laws can be used by the petroleum engineer to predict reservoir performance with considerable confidence. In many oil fields such a degree of uncertainty exists as to the magnitude of variation and distribution of certain of the properties of reservoir rock that the engineer can never be certain as to the quantitative accuracy of the recovery predictions until a complete performance of a reservoir is obtained. Using known and tested basic principles, however, he can predict with assurance the overall and qualitative behavior of the petroliferous reservoir subject to fluid displacement by either a natural water drive, or injection of water into wells. His confidence and precision, and I assume this is a typographical error -- it says "if growing" and it probably should be "is growingH, with additional research and experience. The lack of certainty as to the quantitative accuracy of prediction and the adverse affect of curtailment on economics are the principal explanations for the lack of unanimity of agreement in regards to the effect of curtailment of recovery from waterflood reflected in the papers which have been presented before this committee." I merely wanted to read that to show that a blue ribbon committee of industry representatives find that they are unable to agree on the effects of curtailing injection rate on recovery mechanism. This was entered as part of the record in the case that we are now discussing. MR. HAMILTON: I'd like to -- Hoyle Hamilton with Mobil -- I'd like to say that I think part of the reason they couldn't agree was that they were trying to generalize and include all fields in this package, and I think a lot of those people would agree that you can't do this -- you have to look at a field, an individual field, before you can state one way or another whether -68- as Granite Point? MR. HAMILTON: It is certainly possible. You can take any field and take the same data and you may get differences of opinion. That's always true with any set of data. MR. GILBRETH: As a matter of fact, Mr. Hamilton, I think I would disagree with some of your extrapolations. I would like to refer to your Exhibit No.3 and perhaps 2. I'm not sure of the one before that, the one where you had extrapolation of the production of the decline curve. Could you tell us what the -- how you arrived at the dotted portion of the curve which you call, this is on Exhibit No.2, Well 31-13. MR. HAMILTON: Right. MR. GILBRETH: It says estimate of oil rate without water damage. Could you tell us, please, how you arrived at that extrapolation? MR. HAMILTON: Certainly. At the time that the water damage was incurred, you see the arrow there, that was the time that the well was put on gas lift and this well, then, and the well in the previous exhibit, Exhibit No.3, did not respond to that gas lift, as all of our other wells did that did not have this water damage. This is another instance here of the decline just preceding -69- That's right. Do you believe that this is possible in other fields such MR. HAMIL TON: MR. GILBRETH: you will lose ultimate recovery. MR. GILBRETH: Right. And, further, Mr. Hamilton, did not authorities or experts disagree on the same data from a field? MR. HAMILTON: That's right. MR. GILBRETH: In other words, experts taking the same set of data -- one expert could believe that damage did occur while another would believe that it did not. the period -- or the point -- MR. BURRELL: Excuse me, Mr. Hamilton, let the record show we switched from Exhibit 2 to Exhibit 3. MR. HAMILTON: Okay t we're talking about Exhibit 3 now. The decline period just preceding the water damage point there on that rack, the well had started to die and head under its natural flow and is reaching the point where it would not flow very long under natural conditions, and all of our other wells when we run gas lift valves in there responded back up to a rate similar to this well. This is a case of the same condition occurring here. You can see the steep decline preceding the point where we started our gas lift. MR. BURRELL: Excuse me again, we're now looking at Exhibit 4. MR. HAMILTON: Excuse me -- Exhibit 4. We try to catch these wells before they reach this point, but we are drilling at the time on the platform and according to the location of our drilling rigs. only certain wells were available to enter -- to run these gas lift valves. MR. GILBRETH: Mr. Hamilton, referring back to Exhibits 2 and 3 and looking at your extrapolation, at the time you had the arrow on the curve showing the intrusion of water damage, if you extrapolated the prior history, would not the trend fall far below the dotted line you have? MR. HAMILTON: If you assume -- MR. GILBRETH: As a matter of fact, for four or five months prior to that time didn't you have a lower actual production rate? MR. HAMILTON: Yes, that is what I was saying. The well was heading and dying during this period of time. MR. GILBRETH: Could that not have been because you did not have adequate -70- y a decrease in productivity, you think that you can rule those out to the exclusion -- or to the inclusion -- of water damage? MR. HAMILTON: I believe I can, yes. It is to my benefit -- I mean, as far as I'm concerned, yes, I believe I can. These wells had no adverse location as far as structural position and as far as the thickness of the sand. They were performing -- they came in performing very similar to the other wells. -7l- I feel I do, yes. Out of all the other factors that could occur to cause MR. HAMIL TON: MR. GILBRETH: lift equipment in the hole to lift all the fluid out that the reservoir was capable of giving out? MR. HAMILTON: That's right. We did not have any lifting equipment in the hole. MR. GILBRETH: Is it possible that this might have had some bearing on the loss and productivity as you have shown here? MR. HAMILTON: I don't think it had any loss or any bearing whatsoever. All of our other wells responded back up to a decline as shown by that dash line, other than these two that were damaged by water. MR. GILBRETH: Did you put in exactly the same kind of gas lift equipment in this well that you put in the other wells? MR. HAMILTON: We have been using two types of gas lift valves and we haven't seen any difference in the performance from either one, and I don't recall which ones went in these particular wells. MR. GILBRETH: Isn't it true that there are many, many, many factors that influence the production in an oil well and that your best guess right now is that this was water damage, but you don't really know that this was water damage, do you? They started heading and dying just like our other wells. We put our other wells on gas lift, they responded to the gas lift, and they had a de cline as shown by that dash line -- it was approximately 26%, and these were the only two where we accidentally dumped salt water on the formation at the time we run the gas lift valves, and their performance indicates to me that that is water damage. MR. GILBRETH: Isn't it true that in your well in Granite Point, since it is undersaturated, that it 1s characteristic to have a very rapid decline until you reach the saturation pressure and then production rates level out? MR. HAMILTON: That's true. MR. GILBRETH: Did you not experience a similar characteristic-type curve, not in the magnitude of rates but the type curve in your other wells that didn't experience water damage? MR. HAMILTON: Yes. MR.. GILBRETH: As the solid curve on the -- MR. HAMILTON: If we got the gas lift valves installed in time they did not exhibit that terminal decline that you see there on the end of 68. MR. GILBRETH: It was merely a matter of degrees, wasn't it, where that came in -- how high or how low it came in? MR. HAMILTON: Usually when they started heading we got the gas lift valves in there and if you did not you'd get this sharp decline as you see there, and if you did get them in there they would not show that, and in one case -- the 4th exhibit, we did not get them in time, but it did respond back up to that decline that you would expect. MR. GILBRETH: Could you show us where you would draw the decline curve -72- on Exhibit No.4, similar to the one that you drew on Exhibit 31 MR. lLAMILTON: It would be back in 1968 sometime in there, I would -- just looking at the graph, I could look back through the data and find out how the well was performing at that time. MR. GILBRETH: Well, would you have the decline curve above the actual production curve during the early part of 19691 MR. lUillILTON: Yes. MR. GILBRETH: But the curve, the actual solid line that you have until approximately mid-'69 represented the capacity of the well to produce at the surface, did it not? MR. HAMILTON: The capacity for the well to flow to the surface, yes. MR. GILBRETH: Without the aid -- MR. HAMILTON: Without the aid of gas lift, that is correct. MR. GILBRETH: I would like to go back just a minute to the I.O.C.C. report, Mr. Hamilton. One of the things that author after author cautioned then is interpretation of data from logarithmic curves, either rate time or log-log curves. Do you agree with that warning of the authors? MR. HAMILTON: Not necessarily. I've seen cases where your rate time on a logarithmic basis was a good extrapolation. MR. GILBRETH: Well, I have, too, but you can't use that as just a law and say that everyone that you put on here is right, can you? MR. HAMILTON: You can if you have the occasion where the wells all around the wells that you are looking at exhibit the same decline, by inference I think you can say that these two wells would have experienced the same decline. MR. GILBRETH: Are either of these two wells that you have a decline on -73- anywhere near your MUC I-I and MUC 1-2 Wells? MR. HAMILTON: The 31-13 is probably the -- it is the closest well to the MUC 1-1 Well, and the 31-1.4 is over near the MUC 1-2 Well. MR. GILBRETH: Is it possible that production from the MUC 1-1 and the MUC 1-2 could have interferred with the reservoir performance of this well? MR. HAMILTON: No, since the MUC 1-1 and MUC 1-2 Wells were not drilled until later. MR. GILBRETH: They were not drilled until later? I see. Mr. Hamilton, in testifying as to possible damage in the wells in exhibits that you have placed on the boardt I take it that you believe that most of the damage has resulted from water remaining on the formation face in the well, is that right? MR. HAMILTON: Water becoming in contact with the formation face and the longer it stands there, I think we get more damage. MR. GILBRETH: Would this not imply that it would be most efficient for an operator to keep the water pumped out of the well bore at all times? MR. HAMILTON: That is a very good implication. I think that's a prudent practice, and in the conditions we have here I think we need to strive for that. MR. GILBRETH: Well, let me ask you if the equipment that you have installed will keep the water removed from the well bore of your Granite Point Wells at all times. MR. HAMILTON: It will keep it removed to a certain extent; but we're making studies, as I mentioned in my testimony, a possible trial of a submersible pump to do even better than we're doing now. MR. GILBRETH: I see. It would be possible in your pressure maintenance project to control to a certain extent the entry of water into the well by -74- controlling the injection, would it not? MR. HAMILTON: Not necessarily. We have a certain amount of control on our injectivity as far as where the water goes, etc., but that doesn't necessarily say that it is going to control it coming into our producing wells MR. GILBRETH: Well, but if you have injected water coming into your producing well it is simply a metter of going to the extreme if you shut it completely off in the injection well it's going to eventually quit in the producing well or die down, isn't it? MR. l~ILTON: Ultimately, it would, yes. MR. GILBRETH: And then to that extent you do have control of the entry of water into the producing well, do you not? MR. HAMILTON: To that certain extent, yes. MR. GILBRETH: In the case that we're on here now, we hear that there will be damage to the reservoir by controlling production. I think the order has been issued to be effective next July. This gives from the present time about ten months. Wouldn't it be possible for the operator to control injection during this period to such an extent that water production in the future could be handled by existing equipment even under curtailed conditions? MR. HAMILTON: There is another point in question here. When you start cutting back on your injection, I think I brought this out in my testimony, too, this in itself is going to cost you ultimate recovery in this field. MR. GILBRETH: In terms of raising the economic level. MR. HAMILTON: No, in terms of not getting the oil out before you reach the life of our facilities. MR. GILBRETH: I believe you testified your life was 25 years. Could you tell us, for the record, what the actual safety factor was that you -75- incorporated into your design, then? Is that included in the 25 years? MR. HAMILTON: I personally don't know what safety factors were incorporated, but I'd like to point out there are other things besides just the platform sitting there that will contribute to the economic life of this project. We have so far discovered casing problems in five of our wells. We operate 16 wells there. In Well 42-23 X we found we could not get down into the zone, the casing was partially collapsed or there was some problem with it. On Well 24-13, we had a casing parting up above the zone in that well. In our MUC-I-l Well we had a hole develop in the casing that had to be squeezed. We had another well, 12-24, as I recall, we had to run an extra string of casing for the problem that we had there. And there is one other well that I can't recall the number on now -- oh, 33-13 -- we actually had collapsed casing opposite the C sand in that well. And it's not just the platform that is deteriorating, it's our wells, too, and these have to be considered in this study. MR. GILBRETH: Hoyle, did you ever answer my question about being able to control the water into the well bore by controlling injection? MR. HAMILTON: We could control the injection -- sure, we can cut it back, if that's what you mean, but you're still faced with the same problem -- you're not going to get the oil out of the ground fast enough. MR. GILBRETH: Well, with the lift equipment that you have, if you were to reduce or restrict injection rates, presumably you would be able to lift everything out of the well bore and keep the well lifted, also, that you wouldn't have at least the damage from the water, would you? MR. HAMILTON: We think we can solve the problem and keep the wells pumped off with the conditions we have now and still keep our injection rate up.o -76- -77- MR. GILBRETH: You apparently haven't been able to -- I think the testimony was that three of your ten wells have been damaged now already through conven- tional operations -- do you think there is any likelihood that this will happen when you shut down and put in submersible equipment? MR. HAMILTON: If we put it in now for a trial and get it in before we are making substantial water production, it would not, no. MR. GILBRETH: Are these the only wells that are making water production? MR. HAMILTON: These are the only wells that have been damaged by water. We, as of now, have no wells making any substantial amount of water. MR. GILBRETH: I see. I'd like to review a statement by Mr. Claude R. Hocott, head of the Production Research Division, Humble Oil and Refining Company, in his paper in this I.O.C.C. Book, page 17, which says: "This analysis also shows clearly that control of oil production rate available to the flood operator through control of water injection rate, and that such increase in production rate are not indicative of increase in ultimate oil recovery." You, then,. I would assume would agree that the operator has control of the injection rates, does he not? MR. HAMILTON: Yes. MR. GILBRETH: You design your waterflood or your pressure maintenance project to inject certain volumes of water. You have predicted the amount of oil production that you would get from those. Would it not be possible from an engineering point of view to govern the water injection rate to get approximately an oil production rate that might be desired. MR. HAMILTON: You get a lower production rate over the same period of time and -- but you'll lose in ultimate recovery, and I wouldn't consider that desirable. -78- cost. MR. GILBRETH: Right. Isn't it true that the higher pressure you go the higher your economic limit becomes? MR. HAMILTON: No, it isn't. Our cost of handling that water, the incremental difference isn't that great. MR. GILBRETH: But the higher you go you do have some incremental additional water. Can you get away smaller volumes of water at lower pressure? Definitely. You can turn it off and you won't get any MR. GILBRETH: MR. HAMIL TON: MR. GILBRETH: You're saying in effect, then, that you've got to have a high injection rate to get the maximum recovery. MR. HAMILTON: I'm saying that we need probably a higher injection rate than we're getting right now to maximize recovery. We're trying to get our injection rate up right now higher than it is. We're not satisfied with the volume of water we're putting away now compared with what we could do with higher rates.. MR. GILBRETH: Are you trying to tell me that you believe that the maximum recovery will be obtained in this deal by maximum injection rates? MR. HAMILTON: The maximum it yes, that we can put away. We were having trouble putting away water. This field is sort of unique -- as far as I know, we probably have the world's record here in the pressures that we have to use to put the water away. Our system operates out there quite often at 6500 pound surface pressure. We've gone up as high as 7200 pounds, and I don't know of any other waterflood in the world where you have that much trouble getting water away in the ground. -79- MR. HAMILTON: A slight amount, yes. MR. GILBRETH: Don't you the higher you go -- you have more repair expense than you do at lower pressure? More fuel? MR. HAMILTON: No -- the advantage you gain by getting that oil out sooner by a slightly higher rate -- I'm not talking about much difference in rate because we can't get much more water in that reservoir than we are getting right now -- and it more than offsets the -- any incremental cost of operations. MR. GILBRETH: Let me ask you one question and then I'll defer to some of the other fellows. Based on the amount of fluids that you are now injecting into the Granite Point, do you anticipate production rates that would exceed present levels after July 1, 1972? MR. HAMILTON: If we're fortunate, yes. MR. GILBRETH: Is that your best guess, that you will be fortunate? MR. HAMILTON: We hope so, yes. MR. GILBRETH: Alright. That's all I have for now. MR. BURRELL: Mr. Marshall, do you have a question? MR. MARSHALL: I have several questions for Mr. Hamilton. Mr. Hamilton, would you review very briefly the nature of your surfactant treatment of your Well 31-14 shown on Exhibit 3? MR. HAMILTON: That treatment was surfactant -- mixed with diesel -- that we tried to kind of wash the well with or to squeeze a little bit away, to see if we couldn't improve the water damage around the well bore. MR. MARSHALL: Inasmuch as fluid·-- surfactant fluid -- was forced into the formation, do you think that some of the increase in production may be in the purging of perforations, or the relocation of particular matter near the well face? MR. HAMILTON: It could be a relocation of fines or removing the water. They are kind of coupled together, usually when you have water problems there are at least our indications are here, that you probably move some of the fines around with that water. MR. MARSHALL: So that any increase in production from the surfactant treatment would have to be distributed to several different factors which improved the productivity. MR. HAMILTON: I think -- my feeling, the two main factors would be removing part of the water block and the fines that cause the damage. MR. MARSHALL: Ordinarily, how much improvement do you expect from a surfa,ctant treatment? In other words, if the surfactant treatment removed all the water damage, then you would expect to see the production curve approach your estimate of oil rate without water damage. How would you explain this lack of coincidence? MR. I~ILTON: If it removed all of the damage, we would expect that curve to go way up above that dash line. MR. MARSHALL: Well, if the surfactant treatment working at 100% efficiency would remove the effect of the water damage, then would it not approach your dash line and stay there? MR. HA}1ILTON: It would go up above that dash line because when these wells are drilled they all had damage in them, and if you could 100% remove the damage you would have a theoretical rate, or an actual rate in that case, even exceeding that dash line. MR. MARSHALL: In other words, your dash line does not include water damage from drilling. MR. HAMILTON: No. Because all the other wells have had this water damage and this dash line was taken from the performance of the surrounding wells. -80- MR. HAMILTON: Yes. MR. MARSHALL: Would not this increase pressure, restrict production which could partly account for that depression of production in the latter part of 1968? MR. HAMILTON: When you get the well pumped back down again, you should relieve this and start circulating out your fluids if your well is going to respond. MR. MARSHALL: Do you know that the well was -- the salt water was removed in a very discreet period of time, or was this a general condition where you mainly had salt water in the well bore for a month or so? MR. HAMILTON: We know we had it there for the period of time that it took to complete our -- run our gas lift equipment, and after that we put it back on and tried to produce it at the maximum rate, and it never did come back and we had the well pumped down to the last gas lift valve which didn't really --there wasn't much back pressure left on the well. MR. MARSHALL: Do you think there could be any influence from gypsum deposition or other methods or other factors which could have plugged the -81- MR. MARSHALL: In the latter part of 1968 your graph indicates that there was water damage incurred and you say this was from accidental dumping of brine on the formation face. Would not the presence of salt water or additional salt water in the well bore create additional hydrostatic counterhead which could depress the oil production? MR. HAMILTON: I'm not sure I understand your question. MR. MARSHALL: The weight of the fluid column in the well bore, if it contained salt water, would have more hydrostatic pressure than one of crude oil? perforations during that period? As a result of the water and not because of the -- as a result of something precipitating from the water rather than some effect of the water on the formation. MR. HAMILTON: I'm not sure if I get what you're trying to say -- 1f there might be something in the formation like gypsum that would contribute to this? Damage -- MR. MARSHALL: Right. In the water, in this foreign water which was actually dumped on the well face, do you feel that there could have been any precipitation of gypsum, for instance, which could have clogged up the perforations which could have contributed to the lessening of production after the well was on production which was also after the time which you removed this water? MR. HAMILTON: In answer to your question, I don't know, but I don't feel that gypsum is one of the minerals that would be active in our water damage problem, based on an analysis I have seen of core data, but I could consult with our geologist to see what the gypsum content of our core material was, but I don't think it's very much. MR. MARSHALL: Had you had any problem with your perforations closing for any chemical reason, corrosion or precipitation? MR. HAMILTON: I can't answer that. We don't know. You see, the well is declining and some of this could possibly be due to perforations that were being clogged, but we have no way of knowing. ~m. MARSHALL: One other question. Do -- how do you usually rate the efficiency of a surfactant treatment in treating water damage? MR. HAMILTON: The only thing I can answer is you try it and if it works, then it's pretty good, it's pretty efficient. If it doesn't, you don't try -82- MR. MARSHALL: The surfactant treatment, by virtue of the fact that it actually is injected into the formation over and above the formation pressure, in a sense is a -- could possibly be a type of a hydrofrac treatment of the formation. Do you feel your injectivity -- injection curve show any breakdown of the formation? MR. HAMILTON: They have -- we have done this with water injection, but the pressures that we used to put that small amount of surfactant diesel away were not anywhere high enough to fracture the formations. MR. MARSHALL: Thank you. MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: Mr. Hamilton, isn't it true that in a pressure maintenance project -- a waterflood project -- the only real measure that it would have of one type of operation against another would be if you could do the same reservoir twice two different ways. You can't stop in the middle and evaluate one way and say that something else will happen another way. Is that right? MR. HAMILTON: To be positive about it, that's true, but you can certainly -83- to restore our productivity. This has been tried in other fields in the Inlet and with a fair degree of success, and it's expensive, but if we are as successful with it as they have been, apparently, it might pay for itself. it again. These things -- treating for damage -- my experience has been that it's a kind of a hit or miss proposition. In some areas certain things will work, and in other areas they won't, and we are now contemplating trying another technique to try to remove damage. In fact, if it got started it should be -- the program should be initiated today and this would be a high volume acid injection into our Well 31-13 which was Exhibit No.2, to try versus cumulative oil production in the horizontal direction, with a dotted line which is the dotted line the points have been taken off of your Exhibit No. 3 - placed on there. Would you say on that particular type of plot that the ink line might represent a better extrapolation of the dotted line? MR. HAMILTON: Not necessarily. MR. GILBRETH: Of prior history up to the time of damage? -84- MR. lIAMILTON: Yes, they were. MR. GILBRETH: I'd like to hand you a copy of a hurriedly-drawn curve by the staff here which 1s a plot of production rate in the vertical direction take the data you have on that particular reservoir and the problems you have to work with and make a pretty good estimate at what might happen. MR. GILBRETH: I notice on the board that you have prepared with Exhibit 3, for example, is a production rate versus time curve and I assume from the looks of it here that it's coordinate paper, is that right? Do you normally in your engineering work, work with production rates versus time on logarithmic paper, semi-log papery MR. HAMILTON: We work both ways. MR. GILBRETH: Do you work with production rates versus cumulative produc- tion on semi-log paper? MR. HAMILTON: I tell you -- there is all kinds of ways of plotting these things, and usually we plot them until we find something that we think shows a trend or something we can extrapolate. And that's the method we will end up using. MR. GILBRETH: Alright, sir. Mr. Hamilton, were the exhibits 2, 3 and 4 prepared by you or under your supervision? MR. HAMILTON: I think you can be misled with this type of plot by extrapo- lating it very far. MR. GILBRETH: Couldn't we be misled much further by the type of plot you have on the board? MR. HAMILTON: No, because that plot is taken off of history from our surrounding wells~ and I'm just putting it on there to explain what I think the performance would have been for these wells if they had not been damaged. MR. GILBRETH: Alright, I'm going over to the exhibit and would like to ask you a question or two. As I understand your testimony, Mr. Hamilton, during the -- approximately the last quarter of 1968 is when the damage occurred? MR. HAMILTON: That is correct. MR. GILBRETH: That's your best guess on when it occurred. MR. HAMILTON: Uh huh. MR. GILBRETH: During the third quarter of 1968, the oil production rate was almost 500 barrels a day below the extrapolation you have. How do you account for that, if that was before the time of damage? MR. HAMILTON: That's when the well was dying. It wouldn't produce all the time. It would head and die -- head and die, and once you put it on gas lift it produced continuously and all of our other wells that we have had this experience with, they went back to a former decline which would be similar to that dash line. MR. GILBRETH: Alright, isn't it true that the decline that you're taking from your other wells is merely the shape of the dotted curve here, and you do not really know where to place it in a vertical direction, based on your other wells here. MR. HAMILTON: I have a certain idea of where to place it, where that well starts dying and heading, and I can just place it up and down slightly -85- MR. HAMILTON: The production that we have plotted up there is what we feel the well produced for that month, and during certain days, yes, it had higher 'rates, and certain days it had possibly low rates. MR. GILBRETH: And during some months you have high and low rates for the total month, as exhibited during the late part of 1967. MR. HAMILTON: Right. MR. GILBRETH: And isn.' t it common practice to take an average of the points in extrapolating your curves? MR. HAMILTON: Right. You take -- it's common practice, but it is also common practice to use a trend of surrounding wells which I have done there, and this trend I feel is pretty well established. MR. GILBRETH: Mr. Hamilton, I gave a copy of a curve there which we will place on the record. Have you had occasion to draw curves of similar types as that on your other wells to know whether or not there is a straight -86- but you have to tie it somewhere in there where that well starts dying and heading because after that point that decline that is shown on there, it does not represent what your decline will be under gas lift. MR. GILBRETH: It is common in the production history of an oil well that you will have high and low production rates on alternate months or periods, is it not? MR. HAMILTON: In some cases you will and some cases you can have just very nice consistent production, it depends on the well. MR. GILBRETH: Well, commonly, though, you do have variations -- high and low variations -- and isn't it common practice to take an average of those variations in establishing your trends? You don't always take the peaks, do you? -87- there and has indicated that at least there is an honest difference of opinion I think that Mr. Gilbreth has read from the Interstate Oil Compact Commission MR. BURRELL: This reduction in recovery rates from these two causes -- MR. HAMILTON: That is correct. is Committee Exhibit A. I have one question, Mr. Hamilton. If I understood ~/'him correctly, the reduction in injection rates and in production rates would ~~ ~ lead to a reduction in ultimate recovery which you would call waste. Is that ¡r essentially correct, sir? MR. BURRELL: We'll introduce that into the record~ that plat on Well 31-14 MR. GILBRETH: I understand that. That's all. die the end of '68 there and we wouldn't be producing anything. If we didn't put those gas lift valves, then it would run down and probably gas lift valves in there in order for the well to establish at the point. characteristic type of decline. But in most of our wells we had to put the after that time this dashed line that I have shown you on there has been the on all our wells drilled initially, until they reached bubble point, and covered this~ but maybe I haven't. That steep initial decline was exhibited MR. HAMILTON: One thing I'd like to point out that -- I'd thought I had MR. GILBRETH: That's all the same well, I'm sorry -- 31-14. MR. BURRELL: Which well is that, Mr. Gilbreth? MR. GILBRETH: Alright. MR. HAMILTON: No, I've seen this extrapolation before. now on the curve that I gave you? MR. GILBRETH: Is that an unusual type extrapolation that's before you drawn them on all the wells or not. MR. HAMILTON: I have drawn curves like this, yes. I don't know if I've line extrapolation on semi-log paper? on it between professionals as to whether or not that is true, that is, the reduction in injection and production will result in a reduction in ultimate recovery. I'm speaking of reservoir mechanics now. MR. HAMILTON: You're speaking in generalizations about other fields? MR. BURRELL: That is correct. And even for one field, anyone of those fields, you can frequently find differing opinions. MR. HAMILTON: Right. MR. BURRELL: Okay. Then, assuming that it is controversial and just assume for the moment that it is not true that it won't result in a reduction in ultimate recovery, what is this waste, then? If the other opinion, the one that is contrary to yours, is accurate? What would be the reduction in ultimate recovery and, therefore, waste which you referred to, sir? MR. HAMILTON: Well, if the other opinion says that during the same period of time that our facilities will be here, he can get the same amount of oil out of the ground that I think we can under our current operations, then I say there would be no waste. What I'm saying, if we change our mode of operation, we can't get this amount of oil out of the ground during this period of time. MR. BURRELL: Well, now, what's the time interval got to do with it? That's what I want to know. Are you speaking about the MR. HAMILTON: It has everything to do with it. MR. BURRELL: Premature abandonment, is that what you're alluding to, that when the production rate gets way down -- MR. HAMILTON: I'm talking about not premature -- mature abandonment or whatever you want to call it. The facilities are good for so many years. MR. BURRELL: The Oil and Gas Journal of July l2, 1971 on page 70 has -88- got an article by a Un.ion Oil Company official whose name is C. A. Tannahill. It's a summary of a paper delivered by him at the Offshore Technical Conference in 1969. The title of the article is Strengthening Extends Platform Line. MR. THORNTON: Mr. Burrell, may I make the same objection to that that we made prior -- we have had no opportunity to cross-examine the gentleman who wrote it. MR. BURRELL: Exactly. I might ask if, at this time, you would like to get it in with Pacific Lighting? You don't have the author of that here either. You'll accept that? MR. THORNTON: Yes, sir. MR. BURRELl..: Thank you. MR. HOLLAND: Mr. Burrell, I think the relevancy of that was questioned. MR. BURRELL: I'd like to read a couple of paragraphs from this article from which I just referred. "Some production platforms in the Gulf of Mexico are 20-25 years old and are suffering from old age, corrosion damage, hurricane wear and tear, and overloading through the installation of enlarged and additional equipment. But strengthening by one of several methods can prolong the life of these structures, hopefully, until the fields they service are depleted. II I won't read the technical details on it. Suffice it to say that an-:- allegedly qualified engineer thinks he can do it. MR. HAMILTON: Well, I'm not a mechanical engineer and I won't take excep- tion to that paper, but I think our environment out here is somewhat different than probably that platform is set in and possibly you can extend the life by making expensive repairs, but there is other facilities involved, too, besides the platform and I was trying to point that out, that every well we have there has a chance of failing and we have good evidence that the life of these wells -89- ..~ } may not be the same as the life of the platform, maybe much shorter, so I think it, behooves us to get this oil out in a reasonable and as fast as we can. MR. BURRELL: That's all I have on this point. Does anybody else have anything on this point before we move on to something else? MR. HOLLAND: Mr. Burrell, I'm wondering about this exhibit. Was there some indication of who prepared it and what it was prepared from? MR. BURRELL: I think Mr. Gilbreth did state it, but I will ask him to restate it for the record. MR. GILBRETH: It was prepared by the Committee staff under my direction. MR. HOLLAND: Based on -- MR. GILBRETH: Based on production data reported by Mobil Oil Corporation to the Oil and Gas Division each month and based on the information contained on Mobil's Exhibit No.3, a compilation of those two. MR. HOLLAND: Might we be provided copies of MR. BURRELL: Yes, it will be in the record, but you can have it before that if you want a reproduction. MR. GILBRETH: I have one further question on this point. I believe that the statement was made perhaps by Mr. Porter that all of the expert testimony heard on the reduction of rates would result in a reduction of ultimate recovery. I wonder, Mr. Porter, did you hear the testimony from all of the expert witnesses in cases 102, l03, 104 and 105 which were the four days of no flaring that were held here in May of this year? MR. PORTER: Yes, sir. I wasn't there every minute of each one, but I did attend and, of course, I don't have transcripts of all of them, as you know. MR GILBRETH: I have been hurriedly searching through the transcripts for the testimony of one of the witnesses, I am not sure whether it was in -90- the Trading Bay or in the McArthur River Pool, who did state that he did not agree with this, that he did not know whether there was any damage, and I'd like the record to show that -- that he's speaking of a reservoir in the same vicinity, and I just wondered if you happened to hear that testimony. MR. PORTER: I don't -- if I did, I don't recall the testimony and I want the Committee to be aware that our application for rehearing was made without the benefit of transcripts, and our case was prepared without all of the transcripts. MR. GILBRETH: Well, I merely make this to refute some of the contentions that the Committee is in such an erroneous state here. MR. PORTER: Well, I don't recall that statement being made, but if you will provide the transcripts for me sometime or let me have one available -- MR. GILBRETH: I'll be glad to. That's all I have. MR. BURRELL: If we're through with this, I think we've been dealing actually with number II in your presentation, and we've covered 2 and 6 first which are the first two you covered, Mr. Porter, and I think we can hit 1 and 3 next. The next two you addressed yourself to were numbers I and 3 of the Committee's findings in Conservation Order No. I02. MR. PORTER: Yes, sir. MR. BURRELL: And as I recall your statement with respect to number -- well, with both of them, both 1 and 3 MR. PORTER: Yes, they both have to do with -- MR. BURRELL: Ri gh t . MR. PORTER: Exporting. MR. BURRELL: Yes, sir. MR. PORTER: The first two were gas within Alaska. -91- -92- of the Jones Act was not impeding the marketing of Alaskan gas and that we Mr. Porter. I have something on that. I believe you said that the effect Alright, we'll move on to No.4, I guess. Your comments on finding No.4, (NO RESPONSE) land 3? is well in hand." Does anybody have any further questions with respect to natural gas, LNG. The technology necessary for this transportation method Fahrenheit, reducing 600 cubic feet of gas to one cubic feet of liquefied Natural gas liquefies at minus 258 degrees of the gas as an extremely cold liquid. market will be accomplished through liquefaction and ocean tanker transportation or South American supplies (we're talking about gas) to the Southern California I read a paragraph and a sentence following: "Transporting Southern Alaska I will read from this annual report of Pacific Light, Inc. on page 8 again. I don't have anything further on that, except MR. BURRELL: That's to his plant for his use. natural gas has told me he has been unable to figure out a way to get my gas MR. PORTER: In Alaska -- for export elsewhere would be less than what it would cost me to deliver my gas to the shore site. This is of no advantage to Mobil, and I also pointed out that the only current exporter of liquefied MR. PORTER: I didn't say it was not economic to do so -- I said the price for which a plant would have to pay for gas at its plant intake MR. BURRELL: In Alaska -- to do so. Is that -- Alaska was by means of liquefaction in a tanker, and that it was not economic were to the effect that the only practical way of exporting natural gas from MR. BURRELL: As I recall your statement with respect to I and 3, they } the Committee should not blame the U. S. Congress for the Jones Act, or for impeding this. MR. PORTER: Mr. Burrell, what I said was the Jones Act has not impeded the use of Granite Point gas going to the west side. MR. BURRELL: I see. MR. PORTER: That portion of the Alaskan gas. MR. BURRELL: Alright. The Jones Act would hardly interfere with that. That's only what -- about six miles? From the Granite Point platform to shore? MR. PORTER: I meant the utilization of this gas outside of Alaska. The Jones Act has not interfered with that. MR. BURRELL: I see. And you also said that's what Mr. Bergquist said, didn't you? MR. PORTER: No~ sir. I just said that Mr. Bergquist testified that the Jones Act was not a precluding thing to his considerations for liquefication. MR. BURRELL: Thank you. I found it in the testimony there. Mr. Gilbreth did. I would like to refer you to Mr. Bergquist's testimony which occurs on page 80, Conservation File No. 104. I shall now quote from that: "Mr. Burrell: Yes~ the article in the Oil Daily which I read into the record the first day of these hearings was a statement by your company negotiating for Alaska gas for liquefaction and shipment to California. Would you say that the Jones Act is somewhat of a financial problem in respect to this transaction?" Mr. Bergquist: "I would certainly agree with that statement. It is not a precluding factor, we don't think. We hope to be able to obtain some form of relief from the penalties imposed by the Jones Act." I would suggest Mr. Bergquist's testi- mony is directly contrary to the way you put it. He says it is a problem. MR. PORTER: I used exactly his words. He said it is not precluding. -93- -94- MR. BURRELL: That is correct. MR. PORTER: That is why I used his words. MR. BURRELL: It is not a precluding factor. Alright, the next sentence is the one I am focusing on. It is apparently not slowed his efforts. MR. PORTER: He's still looking for gas. MR. BURRELL: That is correct. But he is also looking for an exemption from the Jones Act. MR. PORTER: Well, this may be, sir. MR. BURRELL: Right. MR. PORTER: But it hasn't impeded his effort. MR. BURRELL: Well, I don't know. The gas isn't moving yet, so something's impeding him, and I would suggest that might be one of the contributing factors. MR. PORTER: Sir, I don't know if he has got any gas under contract. MR. BURRELL: I don't either, but he's sure trying to get it. That's all I have on No.4. Do you have something, Mr. Gilbreth? MR. GILBRETH: Well, isn't it true, Mr. Porter, that -- and a well known fact that the Jones Act results in a higher transportation charge in carrying products from Alaska to other states in the United States and to Hawaii? MR. PORTER: Yes, sir. MR. GILBRETH: Is it not true that Alaskan gas is going to have to compete with other forms of energy to find a market outside of this state? MR. PORTER: Yes, sir. MR. GILBRETH: Is it not true that any additional cost imposed by the Jones Act will be an impediment to the marketing of Alaskan gas anywhere outside of the state? ~m. PORTER: Not that portion of the Alaskan gas that comes ashore at our west -- at our shore site from our platform. MR. GILBRETH: Well, if the gas comes ashore at the shore site at your platform and somebody wanted to take it to the southern part of the country, to the south 48, wouldn't that be an impediment to the sale of your gas? If it costs 10 extra cents to transport it down there because of the Jones Act? Wouldn't that make it lO¢ per MCF less desirable? MR. PORTER: Well, the main cost here is not the Jones Act. It is the physical -- it's what it takes to get it from our platform to shore and then to wherever such plant might be built. Now, surely, nobody is going to build a plant at our shore site for that little amount of gas. It is going to have to go elsewhere. MR. GILBRETH: I fully understand that, and it would take a fairly large volume to justify a liquefaction plant, but I have been told by an official of Phillips Oil Company -- Phillips Petroleum Company -- that there is a difference, competitive disadvantage of Alaskan gas of approximately 5¢ per MCF on the West Coast. Now, if the Jones Act cost an additional 7¢ to get the gas to the West Coast, maybe we could compete, maybe there might be a market for your gas now instead of next week or next month. MR. PORTER: Pardon me, Mr. Gilbreth, but you said that the gentleman from Phillips said the Jones Act was 5¢ per MCF? MR. GILBRETH: No. I was told that Alaskan gas lacked approximately 5¢ per MCF being competitive on the West Coast, and that the Jones Act was the primary factor holding up competition, keeping us from competing. Now, if the Jones Act is costing us money, it is a deterrant to some extent, and marketing any Cook Inlet gas, is it not? MR. PORTER: It's a very minor thing when we talk about that part of Alaska which we have a lease to produce the Granite Point Field. I stated -95- .~ four things that precluded the use of that gas and one of them is certainly not the Jones Act. MR. GILBRETH: Well, let's put it this way. If all of your costs put together lacked 5¢ of competing with gas on the West Coast and the Jones Act cost 7¢, it would be an impediment, wouldn't it? MR. PORTER: Would you restate that, please, sir? MR. GILBRETH: If all of your costs put together placed your gas in a position where it only lacked 5¢ of being competitive on the West Coast and the Jones Act cost 7¢, then the Jones Act would be a barrier to you selling your gas, wouldn't it? ~1R. PORTER: Well, I'll accept that statement; however, it's contrary to the facts. I mean we can't get our gas anywhere in 5¢ less, for 5¢ more. MR. GILBRETH: Well, if gas were worth $1.00 per MCF on the West Coast, and it cost you 95¢ to get it there, you could sell it, could you not? MR. PORTER: Alright, I'll accept that, but once more we're to this thing of number juggling without consideration of the facts. I'll accept your statement as true with the ifs and the qualifications. MR. GILBRETH: I'm through, then. MR. BURRELL: Do you have anything, Mr. Marshall? MR. MARSHALL: No. MR. BURRELL: Number 5, I believe, you stated the finding was incomplete. MR. PORTER: Yes, sir. }ffi. BURRELL: I think, if I understand your comments correctly, you're ob j ecting to the word, or use of the word "subs tan tia1" . You're saying all field requirements are being met and there's a surplus of fuel. Is that the problem? MR. PORTER: This is one point, yes. -96- MR.. PORTER: Yes, sir. MR. BURRELL: Thank you. I think we covered 6 earlier. Number 7 and 8 would be next, unless somebody else had something on No.5. We feel we must cover these in the same precision that you did. MR. HOLLAND: We gathered that, Mr. Chairman. MR. BURRELL: Actually, I don't think I'm quite correct in saying 7 and 8. I think it was at this point in your testimony, sir, probably just before you started 7 and 8, that you made some critical comments of the Committee's -- certain of the Committee's exhibits. Perhaps we should address -- that were introduced into the May hearing. Perhaps we should address ourselves to that point right now, if we're going to follow this chronologically. This is the way most of us have our notes. MR.. GILBRETH: Hr. Porter, the only comment that I had on that was the Committee exhibits that were prepared were prepared on the basis of BTU content -97- to. MR. BURRELL: Well, the reason the word "substantial" is in there is because you do, by your own testimony, use diesel sometimes, as a standby fuel on your own platform. I didn't want to say all fuel requirements because then I'd be telling a lie. (LAUGHTER) MR. PORTER: My basis of statement is incomplete in the fact that it didn't say that we were reutilizing some of this gas for industrial sale and it was the only sale of casinghead gas in Alaska. In other words, you seem to indicate that this is all we are doing with it. MR. BURRELL: I wouldn't read it that way. We said that you were essentially meeting all of your fuel requirements with the casinghead gas. MR. PORTER: And doing more. MR. BURRELL: Well, we didn't add that, and that's what you're objecting -98- MR. PORTER: You put a chart on the board and said it was 27 million dollars Granite Point. considerations did not consider that the gas was worth that much money at MR. GILBRETH: Well, I could assure you that the Committee in their the Committee should not consider it in their considerations of Order No. I02. called "dollar value" on this gas by this method is extremely misleading and to point out. But the real purpose is pointing out attempting to put a so- MR. PORTER: And he was using a crude oil price. This is what I wanted MR. GILBRETH: I see. Well-- clear he was comparing it with fuel oil. MR. PORTER: No, sir. My transcript of the testimony made it quite under cross-examination, I believe Mr. Miller admitted that to your attorney. shown on the exhibits were at the battery, not at the market place, and MR. GILBRETH: Right. The pricing, though, the figures that were MR. PORTER: I mean, at the consumer. MR. GILBRETH: That's right -- in the market place. market place. I think this was brought out quite clearly. MR. PORTER: You said it was a competitive product. I mean, in the MR. GILBRETH: No. that is, to the consumer. inferrence at least was made that it is worth that much in the market place, MR. PORTER: It was my impression from the testimony that it was the much. We did not imply, we didn't intend to imply that the gas was worth that a BTU basis if the gas were valuable as the oil it would be worth so much. ~ was merely made that the exhibit was prepared to show that on a -- strictly and the sales price of oil at the battery on a BTU basis, and the statement -99- MR. PORTER: On tons and cubic feet, not on dollars. MR. BURRELL: That is correct. Now, I'll read the next sentence here. "This practice of flaring casinghead gas has been carried on in other juris- dictions and the total resultant waste, if calculated, could be expressed only in astronomical figures." We simply calculated it; they just said it would be astronomical figures, and that's what they were. MR. PORTER: I don't know what method you used calculate it, sir. }ffi. BURRELL: Well, I'm sure it's the same we're talking about. What's the price of coal? I really believe you do know that. You had an article out of the Oil Daily, I believe, Mr. Gilbreth. MR. HOLLAND: Mr. Burrell, if I might, I'm probably becoming too objection- able at this point, but I really thought you were leading up to a cross-exami- nation between ----- Summary of Oil and Gas, Second Edition, page 229, Footnote 70.1: "The waste resulting from the flaring of casinghead gas in Illinois from 1937 through 1942 has been reliably estimated at 416 billion cubic feet. The equivalent in heating value to 16 thousand tons of bituminous coal. II Now, we have equated gas and oil on heating values and here they are equating gas and coal. MR... PORTER: I think it's misleading, sir. MR. BURRELL: Okay. I'd like to read to you, sir, from -- we don't have Mr. Sumners here, but he wrote a book called 1I0il and Gas, Volume I", worth of gas. It's your own figures. If you don't consider your own figures, why show them? MR. BURRELL: Mr. Porter, that's not quite true. You said 27 million dollars worth of gas equated to the oil on a BTU content clearly explaining what we are doing. Now, apparently, you think this is some kind of improper exhibit. MR. BURRELL: There has been an objection. MR. HOLLAND: If that's what it was, fine, but I didn't hear the question. MR. BURRELL: Alright. In light of the fact. Oh, I'll ask the question, I thought it was clear. The question was this: In light of the fact that we were not original in equating things on BTU contents, do you still think it is objectionable to do so? MR. PORTER: No, I mean this is fine to state that one field has a BTU content and another one has a BTU content. MR. BURRELL: Fine. Well, I simply wanted to get the record clear that we weren't trying to put on some kind of a misleading exhibit, that this has been done before and by responsible authorities. Mr. Gilbreth has something else on the same line and he will ask the same question if you want a question to come. MR. HOLLAND: Mr. Burrell, we have no objection whatsoever to BTU comparison. This is fine. What we're objecting to is the mathematical computations which grow out of that which attribute to the gas the values which the market simply does not sustain. MR. BURRELL: And we never said it did, is my point, sir. But the criticism of these exhibits is such that I understood there was an implication to say the least that it was a deliberately misleading exhibit s\IDmitted by the Committee. MR. HOLLAND: I don't think anyone is talking about deliberation, but we are saying that the net, in fact, is to mislead. If someone thinks that the gas that we're talking about is really worth whatever the number ----- MR. BURRELL: Well, I think we also said that we didn't say that. Mr. Gilbreth? MR. GILBRETH: I have a Xerox copy of an article in the Oil Daily dated August 16, 1971, it's ti tIed "Los Angeles Board Reports Hu~e Purchase of Fuel Oil. Ii -100- And one of the paragraphs in that I'd like to read. It says, "accepted by the City Water and Power Commission was an Atlantic Richfield offer of 7 million 800 thousand barrels over a 20 month period at a price of $4.80 per equivalent barrel (6 million 300 thousand BTD' s per barrel) ." It would appear from this and I would like to place this in the record that some trades are being made on the basis of BTU content of oil~ as well as the other products that can be obtained from the oil. MR. HOLLAND: I have no objection. I have already stated that I have no quarrel with comparison of BTU content. MR. BURRELL: Committee Exhibit "B'I. MR. GILBRETH: Mr. Porter, I would like to ask you, is it not an accepted practice for oil operators with crude oil purchasing departments and sales departments to make trades with some sort of BTU limitation or BTU consideration in the product that they are trading? MR. PORTER: I would presume so, sir. My experience has been in gas and gas BTU content is considered MR. GILBRETH: It's considered in gas. MR. PORTER: In the pricing. MR. GILBRETH: That '9 all I have, sir. MR. BURRELL: I think we've moved to finding 7 and 8 there and, again, upon reflection of my notes, I believe you agreed with me on findings 7 and 8, Mr. Porter, is that correct? MR. PORTER: Yes, sir. I just wanted to clarify the record as concerns the portion of the field we're here to discuss today, set out that these volumes of gas and percentages are a matter of public record which is fine -- even if they weren't, I would be pleased to submit them -- and the fact that the future, we hope, will be better, that we ~.;rill be able to -101- -102- MR. PORTER: Yes. Of course, it becomes immaterial if Order No. 102 finding of No.9. objection on that -- on that finding. You withdrew the objection to the MR. BURRELL: Yes, sir. Right. And No.9 I believe you withdrew your ~m. PORTER: Yes, sir. Based on our testimonial finding on No. 11. didn't go quite far enough to satisfy you, is that correct, sir? to, No. ll, and you agreed with No. 10, if I'm correct, Mr. Porter, we MR. BURRELL: I believe we've covered the next one which you testified thing. at the record in the future might see three different figures for the same MR. GILBRETH: I just wanted to point that out because anybody looking comes from an official. the numbers. All I'm saying, if you say it's true, it's true. I mean, it MR. PORTER: Well, fine, sir. I'm not here to -- you know -- argue about presented in the past, but are based on current records in our file. that we may have presented here today will not necessarily agree with those gas usage reports dating back to July of 1968 and, consequently, any figures MR. GILBRETH: '.\fell, let me say that your company did file amended MR. PORTER: I don't know, sir. That comes from our clerk. back into 1968 with the Committee, did they not? week your company filed amended gas production and utilization report dating and the Committee presenting information. I believe that during this past produced, etc. by different operators, both the operators presenting information hearings in Juneau and in Anchorage on volumes of gas that have been flared, question for the record, but figures have been testified to in the prior MR. GILBRETH: Mr. Porter, I'd like to ask one question, just as a technical -/ utilize more of this gas. -103- is rescinded. MR. BURRELL: I think that covers all comments on the findings. Mr. Gilbreth has a few more little questions here, and then perhaps we can take a brief intermission before your summary. MR. GILBRETH: Mr. Hamilton, I'd like to ask, in your pressure maintenance project in the Granite Point Field~ are you now operating above the bubble point pressure? MR. HAMILTON: No, we are not. MR. GILBRETH: You are below bubble point pressure? MR. HAMILTON: Yes. MR. GILBRETH: Is your pressure building up or do you anticipate pressure increasing to the bubble point pressure? MR. HAMILTON: Ultimately, we will probably obtain the bubble point pressure again i£we put enough water in. MR. GILBRETH: Alright, let me ask you, have you injected enough fluid yet to reach what is commonly referred to as fill-up? MR. HAMILTON: No, we have not. MR. GILBRETH: Is this at -- with your present plans, do you anticipate reaching this point in the next year or so? MR. HAMILTON: It may -- unless we can get more water away than we are putting away right now, it may be a couple of years or so, as I say, we are trying to~explore methods of increasing our water injection. If we are successful, it will accelerate the point when we reach fill-up. MR. GILBRETH: Well, then, until you reach bubble point, you will be putting -- or until you reach fill-up, pardon me -- you will be putting more water into the reservoir than you will be producing, is this the plan? HR. HAMILTON: Yes. -I04- MR. GILBRETH: I mean, pardon me, I didn't word it right. You will be putting more water into the reservoir than total fluids that you will withdraw, the total reservoir voldage? MR. HAMILTON: Yes. You have to do this in order to reach your fill-up. MR. GILBRETH: Alright. And during this period of time it's now your plan to go to as high a pressure as possible. Ml{. HAMILTON: No, we're at the highest pressure as possible. We're going to try to increase our rate. MR. GILBRETll: With the highest pressure possible? MR. HAMILTON: Yes. MR. GILBRETH: Alright. I wanted to ask one question that I failed to pick up earlier in your testimony -- you indicated one of the wells you had plugged off an interval in it. Had you ruled out all possibility of production in that well prior to the time it was plugged off, or was it producing some fluid? MR. HAMILTON: It was producing some fluid, but that particular interval the casing had collapsed and we could not get back in that interval. MR. GILBRETH: I see. From the standpoint of damage to the well with the water coming in contact with the formation £ace, are you aware of any other situation in the Cook Inlet where damage of a similar nature has developed, or is this something that you would antiicipate in other similar reservoirs? MR. HAMILTON: I would suspect that this may be a problem in other reservoirs, but I haven't got any specific evidence to point to. MR. GILBRETH: If they did not have that problem in other reservoirs, you wouldn't see anything unusual in this? I mean, the situation can differ from reservoir to reservoir, can't it? ) MR. HAMILTON: That's what I was pointing out earlier. You need to look at your conditions and problems that are existing in that field or particular reservoir in order to voice an expert opinion. MR. GILBRETH: In other words, what might happen here might or might not happen in other reservoirs, depending upon the similarities, and just how closely to being similar they are. MR. BURRELL: Is there anybody in the audience who would like to ask any questions of the witnesses, or make any statement in connection with this rehearing? We are reaching a point where we can summarize here. Mr. Anderson, would you like to come up and identify yourself, for the record? MR. ANDERSON: Mr. Chairman, and members of the Committee, my name is Robert T. Anderson. I'm the Alaska District Land Manager for Union Oil Company of California. We in the district have had an opportunity to review the prepared testimony by Mr. Porter, Mr. Hamilton, and we concur in their written testimony as presented here today. That's all we have to say. MR. BURRELL: Does anybody have any questions of Mr. Anderson before we let him get away? Mr. Anderson, I realize a District Land Manager is not a Vice President, but I'd like to know what you can tell me about your company's negotiations for a pipeline -- a gas pipeline -- across Cook Inlet, around Cook Inlet, for a liquefaction plant, or an expansion of an existing liquefaction plant, at this time. MR. ANDERSON: I have no immediate knowledge of any negotiations that are being conducted by my company with anyone else in this regard. MR. BURRELL: I see. MR. ANDERSON: I can't expand that -- I know there are feasibility studies being initiated for some sort of crossing of the Inlet -- very preliminary, and that's all I know. I am not directly involved with it. -105- MR. HOLLAND: I decided that I have no questions to ask and it has nothing to do with the answers. (LAUGHTER) And I'm not going to ask them. With your permission, I would give a sunnnation, though, which I prepared in advance largely based upon the prepared testimony that has been presented here. I will supplement it somewhat. Hence, if I stumble somewhere along the way, just a little bit, I hope you will understand that I'm inserting something, either that or having trouble reading my own writing, which does happen occasionally. With the presentation of this additional testimony from Mr. Porter and Mr. Hamilton, I believe that you have the facts necessary to review the previous findings, -106- MR. BURRELL: We'll call the hearing back to order at this time. Mr. Holland, if you're ready. MR. HOLLAND: I'm ready. MR. BURRELL: Alright. MR. BURRELL: Does anybody have any questions of Mr. Anderson before we turn him loose a second time? (NO RESPONSE) Thank you, Mr. Anderson. Does anybody in the audience have any questions of anybody, or wish to make a state- ment? Mr. Holland, do you want to make a statement now or do you want to take an intermission first? MR. HOLLAND: Well, why don t t we take our break and I may have just one question. MR. BURRELL: MR. HOLLAND: Alright, let's take a l5 minute break. I want to find out what the answer is. BREAK MR. BURRELL: I realized that when I asked you. MR. ANDERSON: Not being a Vice President. (LAUGHTER) MR. GILBRETH: Are there any Union Vice Presidents in the audience? (LAUGHTER) conclusions and the ordering paragraphs, Order No. 102, as regards to three questions which were posed in the notice which gave rise. to the earlier -- and this hearing. It is our petition and request that you revise the conclusions made in your Order No. 102 and enter an order which will, in effect, extend the previous order permitting the flaring of casinghead gas produced from the Granite Point Field. In saying this I am cognizant of the problem that is brought up by questions that we, you, Mr. Burrell, as regards to whether or not you can enter one order for Mobil's platform and do something else, have another different order in connection with Pan Am's platform in the same field. I suggest to you that it is entirely feasible and upon the evidence, it would be proper -- such an order would be supported by the evidence for you to enter an order such as we request which would, according to the testimony produced here, in our opinion, prevent the wasting of oil at the same time by virtue of the provisions of the oil and gas lease which both Mobil and Amoco have entered into with the state, your body, your Committee, has the fullest of authority, to require that Mobil and/or Pan Am do what is required of them, that is, market the oil and gas produced from the lease. And I submit to you that there does have to be a market, there has to be a place to sell the gas, before you can enforce that provision of the lease. It is my opinion, based upon the testimony that you have here, that there simply is no market for the gas produced from Mobil's Granite Point Platform. To summarize this point, then, it is my statement to you that you can enter an order which will -- being blunt about it -- help Mobil, it will prevent the waste of oil and it will not in any respect preclude you from requiring the marketing of Pan Am oil -- Amoco oil -- and gas, especially gas, that's what we're talking about, which goes to the east side of Cook Inlet -- Mobil's gas presently going to the west side. In closing this hearing, I would like to discuss now -107- briefly with you three questions which have been raised by the Committee's notice, the facts developed in answer to these questions. The first question posed by the original notice was, "Can excess casinghead gas be marketed, injected into any reservoir or pool, or otherwise beneficially utilized by July 1, 1972?" Your conclusions in order, by inference, indicate that you have recognized that casinghead gas injection is not feasible. The testimony bears this out. However, you do find that casinghead gas can be marketed or otherwise beneficially used prior to July 1, 1972. Obviously, much gas produced -- now some 66% of that remaining from the Granite Point portion is being marketed or will be beneficially used as platform fuel. Your finding, however, implies that all of the gas can be marketed or beneficially used by a user now. And this may not be true; we submit it is not true. We submit that only in theory and in the abstract, is this true, for we submit there is no evidence for market which is not being employed or taken up to the fullest. There is no evidence that Mobil can make a greater beneficial use of the casinghead gas than it is at the present time. There is no evidence that anyone else will in the foreseeable future want Mobil's excess casinghead gas. As regards to marketing of casinghead gas, we produced testimony for you as to the great costs of such marketing; costs which priced the gas out of all known or projected markets. The facts remain that even if the cost were not a problem, it is proven by the testimony before you that there is no market now known for Mobil's Granite Point gas. Absolutely no one has come forward to buy the gas at any price due to the other problems that are associated with this gas, as has been mentioned in detail by the testimony. I recognize that some of you think the oil industry, presumably Mobil is included in this, are throwing stumbling blocks in the path of anyone wanting to purchase and market -108- -109- the casinghead gas. I submit that there is no such evidence in the record of this hearing. The Committee subpoenaed the number of witnesses at the first hearing on May 26 and none of these witnesses, from my review of the testimony, produced anything which would support such a conclusion. Considering the responses or perhaps more accurately, the lack of responses to Mr. Porter's letters, to everyone who called at the Committee office, I repeat my state- ment, that there is no foreseeable market for Mobil's Granite Point casinghead gas. Those who are interested in purchasing gas from Alaska are simply not interested in what Mobil has to sell, but it isn't just Mobil that's involved, there is no evidence that Mobil o'r others in conjunction with one another, can produce a market on a competitive basis for the casinghead gas from the Cook Inlet. If what Mobil has advised those who are potentially interested in the casinghead gas in terms of the quality, quantity, etc. of the casing- head gas, constitutes stumbling blocks, so be it. Those inquiring were told the truth and as I believe Mr. Porter indicated, I think we would be subject to far greater criticism from this Committee than we have been if we had led some potential purchaser to believe that the supply of gas was not subject to interruption, that it had some quality which it does not have, or so forth. Gentlemen, the evidence simply does not support your conclusion, that we can market gas being produced from the Granite Point Field by 1972. Rather, it proves we cannot do so. Secondly, your notice posed the question, IIWill the flaring or venting of casinghead gas after June 30, 1972 in excess of the amount required for safety constitute waste as waste is defined in Alaska Statute 31.5.l70(ll)?" The definitional section requires, or makes reference to the following: "Waste means, in addition to its ordinary meaning, physical waste and includes the gas associated with it should be marketed to the fullest, but that the excess should be permitted to be flared in order to prevent ultimate loss of oil from the potential total reserves. This brings me to our question No.3, which was, "Will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is beneficially utilized or is required for a safety flare?" On this point we fear that the Committee went somewhat astray also. Firstly, we read the evidence as to all field hearings -- it is clear that more waste would likely be caused than prevented if this order is promulgated finally. Secondly, and more pertinent, we fear that due to the composite nature of the hearings, evidence on the point of issue as to other fields was attributed to the Granite Point Field which is simply not relevant to the Granite Point Field. As to Granite Point, the evidence is clear and unequivocal that the production possible from that field will be in part lost if the order is implemented which, as the testimony clearly -110- statute. We submit that you have before you compelling evidence in the whole record as to Granite Point, not just Mobil's portion, the entire thrust of which is that oil should be produced from the Granite Point Field and that insofar as is pertinent here, subsection H, the release, burning or escape into the open air of gas from a well producing oil or gas, except to the extent authorized by the Department." This is an amendment and obviously the Legis- lature has tightened up the definition of waste as regards casinghead gas. I don't quarrel with this -- it's the law and we must all live with it. But expressly reserved to you, the Oil and Gas Committee, the province of authorizing the flaring of casinghead gas. Surely had the Legislature meant to limit your authority to safety flares, they would have said so. They would not have phrased the exception in terms as broad as those which are contained in the J indicates, will result in a necessary cutback in production. You have no contrary point, no contrary testimonYt on this point, as to the Granite Point Field. I recognize that there is possibly some contrary testimony as to other fields, not to Granite Point Field. In this same regard, I want to call to your particular attention the Conservation Regulation 2159 which provides, in part, "Where gas produced from an oil pool is returned to the same pool from which it was produced, only the volume of gas not returned to the pool shall be considered in applying the above rule, which is, as you know, deals with oil and gas ratios that are above the desirable level. The Committee may grant gas credit on equivalent volume basis for water or other fluid injected." As you know, the Committee has authorized a waterf100d project for the Granite Point Field. With this regulation -- I'm sorry and the testimony before you, recognized that a waterflood project and the reinjection of gas produced with the oil are not compatible. And for this reason credit against the allowable production from wells with the higher COR's are allowed for water injection. However, I recognize that you're not in a situation where we have the extreme gasloi1 ratio that is dealt with in this regulation. The point is, however, and I think it is critical here, that this Committee has, I believe, implicitly recognized by this regulation, that there are times and places, and I submit that this is a time and a place in the Granite Point Field, where one prefers the production of oil and saving of oil over the production and saving of gas, and that in doing so it is often desirable and necessary to institute a waterflood project which of necessity means that the gas must be flared if it cannot be marketed. As I say, I won't belabor the point again. We feel there is no evidence that this gas can be marketed. I think the testimony before you, and I realize -111- I may be repeating this, but I think it is probably the most critical point before us. The testimony is clear and undisputed, as I've stated, about the restriction of production which necessitates the restriction of water injection will jeopardize the effectiveness of waterflood project which you have approved. And after giving approval of, and after Mobil incurring the expense for, the waterflood project, you are in a sense at this point by Order No. 102 telling Mobil that the waterflood project should be jeopardized in part, that it's efficiency should be jeopardized even though the conservation regulations and the statutory definition of waste recognized that there are times and situations where oil should be produced in preference to the casinghead gas that will e lost in this process. In closing, let me say that I feel this Committee has an obligation to the industry, to the State, and to the people of Alaska to use its collective schooling and experience to stand between those radicals who would have you restrict the production of oil in the state in preference to the selling of some casinghead gas which by testimony of Mr. Teel and I'm using essentially his words -- they're not mine, casinghead gas which is essentially of no value at all, without realizing that in so doing, they will literally demand of you the waste of oil which might have been produced. I have one final semi-procedural point I want to mention to you. I would like to call your attention to and, Mr. Burrell, if you have a pencil handy you might want to write this down. Case of Marathon vs. Pan American Petroleum, is found in 473 Pacific 2nd, Page 575, it's a Wyoming Supreme Court decision of 1970. This case has pertinence because it deals with a situation where the Wyoming Oil and Gas Commission had -- if you'll excuse the observation -- trouble drawing its findings of the fact to support its conclusions of orders. Your findings in connection with Order 102 are, in -112- -113- not. my opinion~ in many instances somèwhat peripheral to the real issues and as I have argued to you, I think are inaccurate in some of the more pertinent issues as regards the Granite Point Field. I would like to quote just briefly from one portion of this decision which sets the tone for the point which I wish to get across to you: liThe additional findings of fact made by the Commission following its last hearing still are not helpful in the critical areas. for example, we still are furnished with no technical guidance or given any factual reasons for rejecting Pan American's expert testimony based on actual performance of the field. The Commission claims there was a conflict in the evidence, and with respect to the weight of the evidence, it concluded Pan American failed to establish by preponderance of the evidence that uncompensated drainage was occurring. We failed to find from any of the Commission's findings why it was occurring." I hope that I have not been offensive in this regard -- my desire is simply that you make findings that go directly to the issues which were raised by your notice as to the Granite Point Field. I stated at the outset, we asked that you review and withdraw your Order No. 102 in favor of a new order authorizing the continued flaring of casinghead gas not beneficially used or marketed from the Granite Point Field. Thank you very much. MR. BURRELL: Thank you, Mr. Holland. I have an additional question which I would like to ask either Mr. Porter or Mr. Hamilton. Can you tell me. either one of you, whether or not Mobil has ordered or contracted for the design of compression equipment and/or dehydration stripping equipment which would get that gas to the shore in a reasonably usable condition? MR. PORTER: The answer to your question, Mr. Burrell, is no, we have -ll4- ~m. BURRELL: Thank you, sir. The Committee feels that it wants to review the testimony in great detail before writing an order. It may have additional questions, it may require additional testimony, that perhaps should be handled by mail. We'll put it in the record -- we don't know. It depends upon what we come up with after we review this and it will take awhile to get it typed up and we want to review it most thoroughly and completely. In light of that, we would like to hold the record of this hearing open for 31 days, because 30 is a Sunday, through the close of business 4:30 P. M. on September 27. During that time we may wish to reconvene the hearing -- this hearing was just really temporarily adjourned, if you will, it is not concluded, in which case we would not be able to go through all we are required to to give a ten days t notice of hearing. We would, however, contact the parties, obviously, both by mail and by telephone, and give them as much notice as possible. At this time I would like to ask that anybody else here who is interested in being advised on short notice of a continuation of this hearing -- or I should say, if we call it back to order again -- if they would fill out a sheet with the young lady in the back room there showing their name or their company and their address and their telephone number, so that we can contact them in the event it is short notice. She will have a sheet of paper there and then if you're interested in being advised, just get your name on that and we will definitely contact the parties and their counsel, of course. MR. HOLLAND: That's fine with us. MR. BURRELL: Is that acceptable, is my next question. We'll temporarily adjourn this hearing now. ."~_..;,.,, ""'r"".-"'-"-""""'~'"''''''-'-;''-''''''' '''''M''~''', 7Jeo// iJ,lj- A~./ Y?'71 Los Angeles Board Reports Huge purchase of Fue~ o¡~ \ OIL DAILY BUREAU LOS ANGELES - Purchase contracts aggregating $54,268,545 and covering a combined total of 12.2 million barrels of low sulfur, low ash fuel oil for use in the minicipal water and power department's steam electric generating plants in fiscal 1971- . 1972 and 1972-1973 were awarded here at weekend by the Los Angeles board of water and power commissioners. Tf:1e contréÌcts. covering what Floyd . L. Goss, department· of 60 Completions Listed in Ohio OIL DAILY NEWS SERVICES ~EW ARK, Ohio ---..: The July issue of the 'Ohio Oil & Gas Association's SC9ut Report lists 65 wells completed in the state, including 53 producer's and 11 dry : holes, wi th 1 correction. This total compares with 90 in the June scout reports and 144 in the comparable month last year. Completions reported so far tbis year total 610. The association also reported that, during July, the Ohio, , Division of Oil and Gas issued 137 permits for new wells., This brings the total number' of permits issued so far this year to 694. The latest check indicates there are currently 84 wells drilling; 66 of these with cable tool rigs and 18 with rotary rigs. Aberdeen Negoti~tes Sale- of Subsk~kuy NEW YORK Aberdeen _ Petroleum Corp is negotiating for the sale of substantially all of the. assets oi its Wi10]ly owned subsidiary, Englneèrs and Fabricators. Inc. to the Marley Co for a consideration in excess of $3 million. EngineE·r·s and Fabricators, based in .louston. manufacturers heat exch", ,ge equip,!klll. Annouf.cemen, oi the negotiativls was mé:lde jOlntly by Gerald Sprayregen. chairman, and Lawrence Hurwilz, chief executive officer, Aberdeen, and Richard Powell, president, the Marley Co. ;, . .. '.""~' "-~-"""_-""""'7'1"'~"'\.,' .... ," /,.,~~ I . . . .\ ~,' ,. 4. . ::' ~. .' water and power chief electrical engineer and general manager, described as the "largest single ,purchase of fuel oil ever made in the department's history," were awarded Atlantic Richfield Co. Phillips Petroleum Co, Standard Oil Co of California and Carson Oil Co. . Accepted by the city water and power corvmissior.ers was an Átlantk Richfield offer of 7,800.000 barrels over a 2Q-month periQd at ~prke of $4.80 PW eQuivalent barrel :'6,300,000 BTU'~ per barrelL r;.:'his 'contra~..~ provides that dehv(\:ries during the win t e r m 0 n U~' 1; will be approximately tW1,::{. as much as in the summer period, The Phillips contract covers a total of 3,000,000 barrels to be ,delivered at a unìfonn rate over a 20-month period at $4.65 per equivalent barrel while Standard Oil Co of California's contract calls for delivery between now and Dec I, 1971 of '800,000 barrels at $4.50 per equivalent barrel. The contract awarded Carson· Oil covers 550,000 barrels to be delivered before Dee 1, 1971 at a price of $5 per equivalent barrel. REUTER BEIRUT The Lebanese parliament ratified an agreement. with the ":ë:,.:. Aìdbian Pipeline Co (Taý.¡oeì, increasing Lebanon's anm"il transit revenue by about $4.8 million. Prime Minister Sawb Salam told the Chamber of Deputies that Lebanon's receipts' from the company had been increased to Addition of' 126 miles 30.3 million Lebanese pounds from . . 16.6 million pounds, _ second quarter of thIs yec Salam said Lebanon had also interstate system broui reached an agreement with the . total now open.. to traffic' Iraq Petroleum Co. OPC) on miles as of June 30, FHA s Increased revenue, and the accord -Here is the status would be signed during the next interstate system as of Jut few days. He did not give details of the agreement. Deputy :f're-mier and Finance Minister Elias Saba told the chamber that the ágreement with Tapline was (hE' best iii" ,i couid be obtained. The company's pipeline carries crude oil from Saudi Arabia's southern oil-fields . across Syria and Jordan to Sidon oil terminal in . southern Lebanon. (' 0'" ...., . 'f...e. f V t l.f .' ß c 0 (-oJ J.:..A..,.~ ~ ~ "t 'Y 161 ~ Pa'rli~~'é'~t OKs 0 Bigger Leb~nese Ta!<efrom Tapline (~14l "'1,0 ~1n~J)J" . ~.,,;."·~æ~.",- ...'-'....~~.-~~ ~\-jtyL....l\-. ~ --.-·~-:·~·Tenneco Oil-Gompany A TENNECO COMPANY P'. Ç>., Box 2~11, Houston, Texas 77001 , DIvIsion Offices: P. O. Box 29187 Atlanta, Goorgia 30329 (404) 633-9511 P. O. Box 1000, East Orange, New Jersey 07018 (201) 675-7550 - . . .. ACCEPTED. I . O'ote ~/1.(, '1/ ~ Q\L and G~S '..................:......:......·....-....:............----.~----cõ~~~~J{)N £(W^:\\~ß~F I > :' --~ '::=~~I~.~ /0 :A:" ,..n_..._ t ..............................:..........;/c,:,.Cf,LE .., ~!o.",~-h~4'.'·:~..·'"'".',·.·C.'. j~~~' '. ,~~~ 1111 6~/~ (.1-'-, ~I / . Interstate Moving In OIL DAILY BUREAU WASHINGTON - Comf the interstate highway continues to inch forwa more than 75 percen1 completed and open to tré less than 4 percent having scheduled as yet, accordil latest status report is: ,weekend by the Federal ] Administration. ' r.'~' J'¡;' ~ ':'. ,I~ I ' ·''''.t.:l.,.,I.l.li t,. rif ~~' '.:I::¡~'::I;I;.~; ,') f' ":[11:111,,.(. 'I!.U' I::, .~ ." ;' liJ,Xj'i:%~¿ i."',','" ~' ',¡.~.! I· .u.t:. ..,.1....,..,l\l.I,........\...:.lj¡.~' I' ',1 "j',I't '_lj~l,tJlJl' ffJ., . · 11,'~'.. '. .).,:1...\..;I.,.l;.~..¡...\.'.U...'.'{I'.I ~"" ~!l"'\'Ü' , ,.... \ ¡':" 'I,i'.i;'J:¿I,it! , ,-~>~ 'N\f~I~~ ~ __ .~Jr¡. ,~. -......". ~ " ~ .~ ~ r:¡: ;2; ..... 2 ~ v······· .~I)' ~BJ,:'····· jr\1 '¡~: : ..'. I;""..·.Ü'.' i .;: .u ü '.'¡ J\ RIEFlt~ERIE~ " servil pett ",...-J.. ~ ;, I 1V19re Term Céì ~ ~ ~~'i~7 : '" ! ~~1 -, ., ,,'" ~' ,/"" / #9 " ~ \ ) ) ,...~'" ./"... /// ~~ August 20, 1.971 1v11'. Y I> Saiga :l'!.fjsistant Dircctor Ré\.\'1 lv1af:ù l'i aIs I)e pa:t' t:rnC\D. t IvHtsui Toats\! Cheri1.içaJ.s Jo IhC, P. ().. Do::'? 831 }~asttnlig;::t5eld Buildi.ng Toky'o 1 001 Jap~n. \..' Dc().r lví!'~ S~:ì.iga: Yonr l'cply to 1'Xl)" 10a.(~:t' of July 9,. 1971, in \'S"hlch I offered to :;;011 &. ccrtain ,quantity' (,)1 c(~.:dng h,Ot~d g<.\S iG é.ì.pp·recl;:-d:·;;cL, I ha.ve gl;,taçl'lcd tt copy óf t\VO g~).n an:~1.lY~:(j3c> '1'110 c:~n,:llY'8is xi'..:nn.h01"cd A.,·8?.2·.,~ 1 i$ rc¡.n·es(;n(:,s'~tìv0 of the gr.t~;undcr the CO[HHU.OD.G o£ Option l\h:un.ber 1 th~).t vIas 6tatcd lr'1. 1;1.Y le:ttel'G.J.lio analJl¡::;i:~~ nurnbc;I'cd A~·, 199~7 1~~. rnOl'(: rcprcGenL:d:lv0 of the'ga~:; offc:rcdundeJ.' OpHOl'l l~urnbøl' 2~ It :::hould be l<(';(:,Ji.2;od th~;,~t tht3 COJl1po:3iHo,n of the g::\!~ ":-vill vary sHghlly ·with. the r.;casotl¿:tblc .t.\.Inhiünt tenJ.p:'::1'ab.u.'c~ . ~;-.""~ r)leas c he ê.clvl~; cd th::;,t I \\.Y ;).:S of.£C;:d:l1g £0 :1: ;58,1 (; only that po :d:101l of (:h0 total g~L~ p:coduçHon ()VC~:t' and ahO\Y0 l\!~ohil: s r.!.e(~(l and i.ndl1.;~b:'i2.l .sales to A.t1anHc Hich.f!.c:ld Co:tnp:.l.ny" t[hilt t('J,t~Ü v()Iun:u~þ .in. the ·r(~\v ~~nd unprocossed .:.:blf;c, V!a.~' ~~bont 13 billion f~f:andaI'd çubic fc.et<> ".I.'his. I bcUévc, is 3001 000 }¡IT in tota.l {:() bo pJ'oduccc.1 over ~~ h'iclvc- YC?~l' pe:l'iod. Si.nce rny letter to Y'ou of ...l\:Iy 9) there has bC0.n an ~ ",'~H ::11 r"T~~'""""" I! ~7 ,~ 'j'." ,:t'·..-:¡...l tr Þf·"lr....1.·' ·P¡..·1ìf; ·...1·. ..·1 th,:, t'I'~''':)l ~(h.H~-Ot1._~ "O.'..~._Lç 0). ça;. ç~.l1:rn:d, l.(;,..... D ~...."l<;\._.!.lC ...\~,--~~ ..CIC ·<:-"h.c. ..,.\:~ .01-'.' volnníc no'..v a.v~.>.il;:}.t)lc 'vál1 be o1";.1y 1 0 billion cub3.c .f:~:ct or 230, 000 J.~'iT OVC? a Dine-yea),' p(;Tiod" The Cu'l'1"Cnt r~'.tc ox pl'odnctlon is about 6 D1iUion cubic £0c:t P~}· day and soon \viE be declining. },/ly anD\VÜr to It(:J118 2 é<.nd 3 iny-oux l<~ttcr of I\.UgU~3t 12. 1971, rnu~t: the¡'efo:ro be that I cannot ~-;l1pp1.y tho Tila].'l,et that you 11.;:,v'c avail:~blct) lvlobil h~ts no g<::~.f) 11.(f.·d..fí.c~~tion. pl~\t1t in J:.l~;;'.:~.;ka and Ctll'rcntly h~8 no plan[~ fo}> such a p1.2.nt.. I aID. aV/ë:).:ce thi~t T'lhillip;J Pct:!.'oleum Cornp3.ny ~nd I)acific LizhHnrt ~nd SC1,\tice COT.n!)è3.ilY arc inb~l'cstcd in liquiiicd n,,-tllral g¡:1.S pl<Oj 0CtS.. I h0.vC t¿~kcrl the 1iuc:rt)''' of £o1'\7a~'ding a copy of }'OUl' letter to c2.ch of thç~¡e parties, __Thank YO~J. for YOu;,' intel'cst. YOUTS very truly, ..._~- ----.. --.-----,-.- . -'- _.------ _.__._-----~._--_..- - . - .-. ._,. -,~- ,_. ..- - _._-._-- . -...., . ~:~.~~~::~~~'.·:·.l :~:~~}-~:·.d B)? ".;':" ".' 1JO":\TEH. ~.:.! .:.1., ..... J... . - VII B. Portel' Joint. Intercst and Q\[J DcvclopT.n(~nt Jj,dn:1ini~tl'atoT VBP/skn ~(í6) ,.-, >- as ~ v ~ ., ~ .., 6 ! ...., s ~ --. 4 3 2 1 o 14 13 rv03~ =.~ ":C~~~~/-~C^"" GRlN/T[ PO/NT F/QO -', 11 10 9 " - ..-.':':'::"'~::::;.. " ! ---,.---.-.., =:', :' ! ACCEPTED ..I.: /7/ ¡I Dote. ~~~ It I, ASKA OIL cí1d G ,l\S -- _ 'i ¡ I'\L _ a-"",,~ E t ~\ Or cn¡..Iihi!¡j It:. t . 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IIIIII :111 111¡ril' !Ii lill ill; II 1IIIil 1III II 111111 ,llllli I II T II III II II Ii III ~' , 7 ~ 71 /ð ,II /)- /;1 ./¢ /.5 f\ r( ~ ' c!....- C~/)ìJ/¿.·;/¡-'¿ a/ 7?-O{/JL;/;t:J~..... ...{' /C00001://s, r+ (.~ 10 U \\ \~(.. l 10 9 8 .ø- .3/- //1 7 6 5 4 3 5 4 3 2 o ¿ ., :> #8 - ~ ~~ l I, ) ~Î~ "". ~ \,Jooow "'Jo.. ;~ '1 ," ~~ - '7 i ¡ ~ ~ 1·~·,f . . ~IITSUI TOATSU CHE~íICALS, INCQHPORATED P.O. J,DDRESS P.o. BOX 83, KASUMIGASEKI BLDG. TOKrQ. 100, JAPAN 2·5, KASUMICASEKI, 3·CHOI:IE C¡¡¡YODAKU, TOKYÛt JAPAN TELEPHONE; (TOKYO) 581·6111 CABIÆ:MITSUITOA TSU TOKYO nLEX: 0222·3622(MITUITOATU TOK) : t I Mr4 V. B. Porter .Jriint Interest & Gas .: Development. Admini stratol' Alaska Division Mobil Oil Corporation Post Office Poueh 7-003 Anchorage, Alaska 99501 U.S.A. August 12t.h, 1971 Dear Mr. Porter: Thank you for your letter of July 9th, 1971. We are basically interested in purchasing Gas from you, therefore, \lIe shall much appreciÐtc it if you provide us with further infornwtion on the follo\ving points to enable us to make a feasi- .bility study as soon as possible. '1) Composition of gas. 2) Whether you will be able to increase exportable quaritity to at least 2.000,000 M/T per year by gat.hering additional volumes from other sources. .3) Whether you will be able to guarantee st,c!ble supply oJ the said q~lélnti ty for a period of 15 YOélrs. 4) Map o~ Granite Point. Your prompt attention to the matter would be greatly appreciated. Yours faithfully, I / Y· ,)I' , I... /I ~,(ji.-{Z___ Y. Såiga' . Assistant Director Raw Ì\1aterials Dept. - - - ._~...... --- ... _0 __ _ ,. . .'. ~_n.. _. _ _,__ ~,~ ®' #7 " . 'I: ,../ / ! I '. ", ~ ) ) " . ,..,...-...", (£,). /' I I ;/ .., . .,',,;... Þ:¡.ugU.8 t 10, 1971 ./ ~ ,,' / / .' . . / ,l' ..... 'lvli", H. eginald \V.. }~lkins Aiash.:a Division 1'-/Janagel' Rock I~31and Oil Co:rn.pany P. OJ) Box 122e Anchorage) Alaska 99501 I', De~u' 1',11.1'. Elldnn: Hcfcxcnc(; is :.n1ade to your telephone requcnt tlJ.is date inqui:d.ng as to the pl'ic0 é\t \vhich. 1",:1obil y!üuld düUvør ßç~S pJ; OU1' Gré\nite Point ShOl'csHc under Op!:ion #2 of OU:ï:' letter of July 9, 19'7 1. ~ in the C'vcnt that only 140-2DO Iv'ÍCF pCl' dr.!.)'" \';lCl'Ü delivo:red.. If \VC:i('H'e EfLìccessful in. ove1.'~ ~lJ.rnjng th.c recent no ·..f1a.J:"c orde r £01' OU:::- Cook Inlet pIa t:forrn~:'i t '\vlU be po::: siblo to deli"\lcJ"1 cd: on r :~hOT(;S 1.teþ qU<1nH HOB ~ bove stated £0 r ?. p:d.cc of lIe> B¢ pü].' l/;:CI~~ at 2S0 pHi" ThifJ qUi:?.J:'J.tity f;honld be f.tvt.dlahlc OIl a.11 inteX'x'upt.:\"ble basis [;':)1: app:ro:drnately ~·~;t;;{ 01' seven years" If ho"\'Ve·Y"'Cl""J Vie are forced byno-n:'~,l'e ol'c1Br to 1110VC our tota.l gaB strearn to ßhol:e for fu:tthcI' dispC:Dition,. thø çapH~Ü invC:5b11.Cn.t required v:ronld . nC(~Css.ltc:Üe sales at a. h1.gnr;r pl'J.CC than rtbovc stated~ For the purpone of you).' p~:cliInin.~\:t·Y econo:cn.ic cst1:rn.ates, I \vonlc1 $uggesl: that you. use a d(:li.V~TCc1 price at th(; shcJl'csitc of appro:drnately 40¢ per 1v1,CF f(j;J;' 500 psi gaB" If I D:1ay be; of iú.:d:her a~.::sistZlncc~ plcaD0 call on 1:l1C. You:rs very truljr, .ü~7~r~~~\;;~~;~;,{3 y V. Do Porter Joint Interest and Gas Devclopn'lent Adn1inistrato14 l\.lask2. Di vlsion . - _"'..~. ..-,....- - ._-,-- .~c0 - ..____ - - -._-0 _.___._ _ _ .'__ __._.. .__ _ ___. #6 NOTICE OF PUBLIC HEARING qf\ /1 Í' '1["( I ¡j¡~Vbil~ STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Alaska Oil and Gas Conservation Committee Conservation File No. 102)l Re: Request of the Mobil Oil Corporation for a rehearing on Conservation Order No. 102, restricting the flaring or venting of casinghead gas from the Granite Point Field, Middle Kenai Oil Pool, to the amount required for safety. The Oil and Gas Conservation Committee hereby grants the captioned request for a rehearing on Conservation Order No. 102, pursuant to Section 31.05.080, Alaska Statutes. A hearing will be held on this matter on August 26, 1971, the date requested by the applicant, at 9:30 a.m., in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time operators of the referenced pools and affected and interested parties will be heard. t1L I( JIt¡ ~ 1. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 9~504 Publish July 30, 1971 01¿ ,y J e s I ~ ~ 4 i. J C. (j. / 0 2.. A 4 7,'(. ~ LIt #5 :eft¿ wr 7 -t'J¡ ( J¿ (0 j 0 2. A TJ.H: ja Thomas R. Marshall, Jr. lxecut! ve Secretary Slncerely~ 'This 18 to advise yeuthat the Al..k.aotl ad-Cas Ccmae"at:1_ Cowúttee he,reby grata the re~u_t.d nhearicl. .. have s·«heduledit forÃBlust 26. 1911 iathe City COUÞe11Cbautbers of tbe Z. J,. Lousaae Library at 9 :30 a.m. This is 18 response to feuI' let tar of July 19. 19'11. request10a a reheariftl ,ofCœsenatioa Order Mo.. 10.2.. Hr. P ..Jose,h Trimble GeÐ,eral Attoney Alaska E if Divisi_ Mobil 011 Corpøratiœ P.. 0.. Þoucb1-ðO.3 Anehol'ap , Aløk.a 99501 Dear Mr.. Trimble: July Z8. 1971 AlaskaO:!! _<I GasCoDsenatiOft Coaittee #4 -;- ." """ ) ). -, " '~...... . .. " , " I /" I/ll " , . ,,/;/' . I· ..:{' )' July ....) ? [, ~I , 1971 .~ " .. . . . . , ¡",L~~ '" S i:~~ n S nod. th }. i' f.';I ~~ ('( <J (~, 1'" Of t:'¡ ~ .... \"1 ',. ~".'(.'.J ,.' ·I); .~.' t ,.... ·.··l·1-nl t! t)'.'1 _\I", y~ ~ .'. í::;¡ v ...... - . ,,) ~, t..-' ~- l. J -. J __1 ~ , ..., -.. - , ~ '" P'Ùt.~:'olan;.-! G;:\ G S<:':!·ìtlC Cot Inc.... ·l\n"lcl'lc:¿::;nD. Ðldg(' t SnH(~ l.t 1'7 Hen.: ~~ ton, T (;;:-:(.~!.s '770 (: '2 : Dê&:t" lAl\¡ Sn'lU:h,; : ! In j:Cfipoílse to y(nn: It:;tb):?: of:' July 20, 19"1 J j .l h~¿ve ~~ttac:hcd ücopy of n. g;l:{. (:Hl,,11y=:;b~ !'~~p~n·t CO;1(~<:r"tning the Ca~)1.Dg hi::~d g~:¡.s v::hich. L:: ;:¡.v~lil~\blc on th0 G ).,'£\']:1.1 b-~~ J?Ql:n.t ph'â.f';;Jì:··l;·l b:1 thü Co~/\. L~)l~;;t ,:~.f i\J.;':;.~;;1 K,;;;... It shotd-d ~";:,.. "I-'.~r- ).-)',....~..~..,,/\ (·1Î"I~· ('¡"'" ,>....£',..r.' ~. q'l'~-'D~ ('. r)$' t,:-",~ ""'"~ <! 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V":~l'Y sho}:·t1y ;;:fb'~r a br,·'·¡·J,in..(-:-.''!d Off.(.;r tT) t'\>'}"'('Ì':~!":'f:' 1·11i" !,,'.;\.;: 't':;, "··eí'·["'~'('1'··.,,(1 ,." ~,,# ....(,.... .- ..., 1:'" '......,..... . ......';...t: t,.) "" ,..........." t) (:~\ 1'\,.. .,;..... J.~ . ". ,... 0(,1", 't. ..,.~... .1 e- ( 1£ I r(/!:~ 'l b ü or fa ::." th n :;:' (?,~.,.G i :" h:\rt.c c ,>h:~ì. S i'; eith/r ·db.·ç'cHy Ot t.h.;¿·()1.:.~~h. }'It¡^~ ..l";lqnr.::n¢' )'. //!{ j . ! ../¡- I,:: /. ~ . do :t1Ç·t h:;;,;¿:;lb;tv.' to èOfXb}.(:t :rno y Çi\.1,1; G Yf;'J.--;l' truly I , \ , ! I Origind E:ig;:1-sc1 Bi V. D. POl1TEB. " I J'{ , ï : /,/ \ ' 't' \ , v. Bt-. P~):rt{'::t JOblt ID.ti::~r.'05t tl. '~,1:C 1 Gas .,¡ .-:. ....:>/- , ' il'" ";'-, . : ~ i ' / ~ .e~ ;...., ! 1~;Gl '¡ , .;. ^~. J. f":"t ,~"")]....- ~,~, f /,,' ... "'...tr~..(..~... ,.IlÇ_,... íf :' t .;~,¡{./'~ C c: T vI.,..~ r t r; v Ç. t:· ;to . i ~ 'O, . 1'" ¿ - ".,; ,.)'....1,; _.~ '" '\,0' :Pi:.tToE:.nc . \ \I ~ DC'VGloe:rn(~:¡Jt Adnìinlsb,'¿:.to:e ]'j.l;;;'f.jI:.:;;1. D1 vl~¡t()n })\ !\llCho!·ügc. I ,; f'" .: j i , t . - .. /:,'¡' .' 'j,'" ~I :?~' J. .:/// .; : "1 , ',; ~ j"" , "." /./ ,~. :' . / / I l -¡ ./' I " / ! l ... ¡ ':', ~ ~GJ #3 ) Ii) Mobil· Oil Corporation POST OFFICE POUCH 7-003 ANCHORAGE, ALASKA 99501 July 22, 1971 Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Dear Mr. Mar shall: Reference is hereby made to Mobil's application for a rehearing con- cerning Conservation Order No. 102 dated July 19, 1971. If the Committee decides to grant Mobil a rehearing in this manner, it is respectfully requested that such hearing be scheduled for August 26, 1971. Yours very truly, / /J.L 7/8 {/NÑ- v. B. Porter Joint Interest and Gas Development Administrator Alaska Division VBP/ skn .. l/¡ \ DIR. 1\:."; \. ¡C"GEo~j?1à'i"f -rë:EN~._~ -T·.···.'·. EN. G. \ ,ff,;, . . ,. ~. -- -I:r-:-. .., .' .,.. -T-~·ENG._~ '==F~-~~~r -'-"-"'5 t;NG \ , I .\----. :--r-' . GEOl. ( e"-r'2 GEocf. '-"r~f ~~~s...~ -r~~~".-L-, \ D~~.~~~ " <-_t_..~EC , . .CONFE~: filE. (0 .!.b..1--Ã- R.¡ F ¡r"" c r \l ~ ~) '\ .n, ~, (l IlL. II ¡" "5 1 g. rj v'.., l... (. :. ,: " DIVISION OF Oil AND GAS ANCHORAG~ xte.~ (0- #2 _.._...._Iio... ..-~._........,_.. -'. ) ):" ~~.~-~. ( - I ó'J '- J '\ I. .-.... ~.~~ \.. -r ~ , " ì.,~.¿;e // ~.. . """-;;'':',",",:'''''ë~;\::·~:~''~.~.·I:~?~':1~~,,:'~':~'''"':., >'.i .' ;{";:~<~t:=:?:T"::r;;·~;Õ)(L;!.'V~Y""(~) / .. . ·""ii:d.i,:;;i:ë¿D~1;;> (iJ GAS FOR HOME, AGRICULTURE AND INDUSTRY PETROLAN( GAS SERVICE, INC. ~~ Americana Bldg., Suite 1117, Hous1on, Texas 77002 f!1 Phone (713) CA 5- 1064 July 20 I 1971 Mr. V. B. Porter Joint It,ìi'erest and Gos Development Administrqtor Alaska Division . Mobil Oil Corporalion P. O. Pouch 7-003 , Anchorage I Aloska 99501 Dear Mr. Poder: Thank you for your lelter of July 9th addressed to our W\I". S. L. Lindsey. Mr. Lindsey has beell transferred to our European Division and we now have Mr. Ivon Jaques assuming his duties in Anchoroge. For the purposes of discussing gas liquids supply in Alaskal it would probably be better for you to correspond directly with 1'1181 although we certainly have no objections to any discussi~ns you might WClnt to hove with Ivan Jaques on the local level. Before we can cngender much interest in your casing hea,d produclion¡ we wi'lI have to have a typical analysis of this product. It might also be helpful to know thc approximate date you contemplate making a decision on the disposal of this gas. We do have' an interest in exploring,the possibi IHies and wi II look forward to hearing from you. ' , . Very tru Iy yours I PETROtANE INCORPORATED ¿LJ47;>. Stan Smith Manager of Supply and Distribution SS:plf cc: Ivan Jaques cc: Aiden Forsythe -..".. '..-'-'.-...-".-,..-. ~... --..-. _._-_._--------._-._._-..-_----_.._---~-" ._----~_. ----... ~'-" - - ---.------..- -.----.....-.- ..-.. -.-..-.-..... -. '''--''''-..- uo _ _._.... _.. __..._ '_"_ _ .. ._.. ._ - - .-.. .-. -~ .". . r--x (Ii) #1 -1 + eW. S:-' JÀ~ 'b 7t,~ 5. There was no evidence that the casinghead gas and entrained liquids now being flared from the Granite Point Field can be beneficially utilized in any man- ner other than the use to which it is presently being put; i. e., natural reservoir energy 4. That though there was testimony that liquified natural gas could be utilized in the contiguous 48 states and Hawaii, the witness presenting evidence of such need specifically disclaimed any interest in the gas produced from the Granite Point Field to the west side. 3. That contrary to Finding No. L-the only testimony presented at the ,...- hearing pertaining to the increasing needs for natural gas was that there is no need for additional supplies; that needs for the future can be met by current sources of supply. 2. That there is a growing shortage of natural gas in the contiguous 48 states and Hawaii is immaterial to a holding in this case. 1. The order issued in the proceeding is essentially identical to the order entered in each and every other field in the Cook Inlet with the exception of Finding No. 8 relative to the amount of gas flared. Each field has totally different circumstances and should be considered on its own. On June 30, 1971, the Alaska Oil and Gas Conservation Committee issued Conservation Order No. 102 concerning the flaring of gas in the Granite Point Field, Middle Kenai Oil Pool. Mobil Oil Corporation files this its application for rehearing pursuant to Section 31.05.080 Alaska Statutes on the following grounds: i) , :'( if"..- "'" r'[.., ,(~' í/'tÞ ' " :, ,!l,., f' '" r ./ W.l".., , g" ~ D .: l " ., I.' Ir~ , .:' U( ji .,' .' , D 9 lfr" , F J · (0 JD 2.. x.'SIOty OF I,,: /l Ill. .' Ã.N OIL CJ.tOIe ""IVD O f' r "'G~, G-4 so 1/t4 (øry . '.' .. J1 e '1 " ~ s '1.... r (;.') /'$ /'" t!" h ~ 9 1"'1'/,,; ,þ 't" ..r.," '...;' ~"'.l'I' ;f rt!?'cI c., 0" It:' .:z. -- A THE MOTION OF THE ALASKA OIL AND GAS CONSERVATION COMMITTEE to hold a hearing to consider issuance of an order or orders, effective July 1, 1972, restricting the flaring or venting of casinghead gas from the referenced oil pool to the amount required for safety. Conservation Order No. 102 - Granite Point Field, Middle Kenai Oil Pool RE: Dear Mr. Marshall: Mr. Thomas R. Marshall, Jr. Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 July 19, 1971 P. JOSEPH TRIMBLE Genera' Attorney ALASKA E a: P DIVISION POST OFFICE POUCH 7·003 ANCHORAGE, ALASKA 89501 Mobil OII'Corporatlon I{ 11 Mr. Thomas R. MarshalL Jr. Page 2 July 19/ 1971 and platform fuel requirements. There are no alternate s'upplies of uninterruptable gas available to Mobil Oil Corporation in the Granite Point Field. 6. Although we agree with Finding No. 8/ Mobil's operated portion of this gas was flared pursuant to an order of the Conservation Committee; was not "waste" as that term is defined in A.S. 31.05.170 (11) (H) and therefore was bene- ficially utilized. 7. There was substantial testimony as to the minimum amount of gas necessary for a safety flare from the Mobil Oil Corporation Granite Point Field platform. 8. Although restricting the flaring or venting of casinghead gas from the Mobil Oil Corporation Granite Point Field platform to a volume necessary for an ade- quate safety flare will result in less gas presently being flared / the only testimony presented at the hearing was clear and unequivocal that such restriction would reduce the ultimate recovery of total recoverable hydrocarbons in the Granite Point Field. Every witness appearing at the hearings relating to reservoir engineering matters stated that a restriction in the rate of production under fluid injection projects would reduce ultimate recovery and thereby cause waste. 9. There was no evidence presented concerning additional uses of cas- inghead gas and no evidence presented to show that the storing of such gas for future use was economically feasible. The findings of the committee are either irrelevant or contrary to the evidence presented at the hearing; and / therefore / Conservation Order No. 102 is arbitrary and capricious and is not supported by the evidence presented. We / there- fore / request a rehearing be granted and that the order be set aside and held for naught insofar as it applies to Mobil's Granite Point platform. Yours very truly / J. ~p~M-.L p. Çseph Trimble rz 212...--·