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Home My WebLink AboutSIO 007INDEX STORAGE INJECTION ORDER 7 Kenai Gas Field Sterling Gas Pool 6 Well KU 31-07X 1. August 26, 2005 Marathon Oil Company (Marathon)'s SIO application (Attachments 1 and 3 (2 copies) and disc with attachments 7 and 19 held confidential in secure storage) 2. September 7, 2005 Notice of Public Hearing, Affidavit of Publication, email distribution, and mailings 3. September 12, 2005 Internal Memo to File 4. -------------------- P/Z Graph 5. October 11, 2005 Transcript, sign -in sheet, Sterling Pool 6 Overview Exhibit 6. October 24, 2005 Laughlin's request for transcript 7. February 12, 2006 Keener's letter to DNR 8. March 2, 2006 AOGCC's letter to Marathon re: agreement with land owners 9. March 2, 2006 Marathon's First Storage Development Plan — Revised (Exhibits B, D, and G held confidential in secure storage) 10. March 7, 2006 DNR's memo re: Proposed ACMP Determination 11. March 7, 2006 Internal email 12. March 16, 2006 Marathon's Supplemental Information (Exhibit B held confidential in secure storage) 13. March 21, 2006 AOGCC's letter to Keener 14. March 30, 2006 Internal email 15. April 3, 2006 Marathon's letter to AOGCC re: Legal Description of the Project Area 16. April 4, 2006 DNR's Notice of Issuance of Gas Storage Lease Best Interest Finding and Final Consistency Determination 17. May 8, 2006 Marathon's First Storage Development Plan 18. April 27, 2007 Marathon's Second Storage Development Plan 19. ---------------------- Sterling Pool 6 Annual Performance Evaluation INDEX STORAGE INJECTION ORDER 7 e e STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501 Re: THE APPLICATION OF ) MARATHON OIL COMPANY ) ("Marathon") for an order authorizing ) the underground storage of natural ) gas in the Sterling Gas Pool 6, Well ) KU 31-07X, of the Kenai Gas Field. ) ) Storage Injection Order No.7 Kenai Gas Field Sterling Gas Pool 6 Well KU 31-07X April 19, 2006 IT APPEARING THAT: 1. By application dated August 26, 2005 Marathon Oil Company ("Marathon") as operator of the Kenai Gas Field, requested a storage injection order from the Alaska Oil and Gas Conservation Commission ("Commission") authorizing the injection for underground storage of natural gas in Well KU 31-07X in the Sterling Gas Pool 6 of the Kenai Gas Field. 2. Notice of opportunity for public hearing was published in the Anchorage Daily News on September 8, 2005 in accordance with 20 AAC 25.540. 3. The Commission held a public hearing October 11,2005 at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. No testimony other than from Marathon was offered; no protest or written comments were received in response to the public notice. The Commission requested that Marathon provide additional information in writing following the hearing. 4. In correspondence dated March 16, 2006 and received by the Commission on March 20, 2006, Marathon supplied the additional information that had been requested by the Commission at the October 11,2005 hearing. FINDINGS: 1. Operator: Marathon is the operator of the Kenai Gas Field. There are no other operators within one-quarter mile of the boundaries of the proposed storage reservoir. 2. Iniection Strata: The Sterling Gas Pool 6 is defined within Conservation Order 510 as the accumulation of gas common to and correlative with the 5,250 to 5,520 feet measured depth interval in Well KU 21-6. The Sterling Gas Pool 6 occurs Storage Injection Order 7 e Apri119,2006 e Page 2 between 4,366 and 4,569 feet true vertical depth subsea ("TVDss") in proposed gas storage injector Well KU 31-07X. 3. Proposed Iniection Well: The surface location of KU 31-07X is 320 feet FSL, 1,325 feet FWL, Sec 6, T4N- R11 W, Seward Meridian. At the top of the Sterling Gas Pool 6, the well location is 734 feet FNL, 3,160 feet FWL, Sec. 7, T4N, Rll W. 4. Operators/Surface Owners Notification: Marathon has provided an affidavit showing that the Operators and Surface Owners within one-quarter mile radius of the proposed storage injection well have been notified. Surface owners include the Alaska Department of Natural Resources and Salamatof Native Association, Inc. In addition, notice was mailed to owners of Sterling Gas Pool 6. 5. Description of Operation: Marathon proposes to inject natural gas from the Kenai Gas Field and from the Cannery Loop Unit into the Sterling Gas Pool 6 of the Kenai Gas Field. Well KU 31-07X will alternate between injection and production, providing gas to meet peak rate requirements during seasonal high demand periods. The maximum reservoir pressure at which Sterling Pool 6 gas storage will operate is 300 psi. A typical injection cycle will consist of 6 billion standard cubic feet ("BSCF") of gas injected in the summer and then produced back in the winter, with the reservoir pressure fluctuating 35 psi through the cycle. 6. Pool Information: The Kenai Gas Field is a large asymmetric anticline overlain by a series of nonmarine sandstone reservoirs in the Tyonek, Beluga and Sterling Formations. The Sterling Gas Pool 6 unconformably overlies the Upper Tyonek-Beluga Gas Pool and is conformably overlain by the Sterling 5.2 Gas Pool. Each of these gas pools has a unique gas-water contact and reservoir pressure. The Sterling Gas Pool 6 is composed of two thick fluvial sandstones, named the C-1 and C-2, composed of friable to unconsolidated sand to clayey sand, with minor interbedded siltstone and coal. The two sands are in pressure communication and have porosities that range from 4 to 16%, permeabilities that range from 400 to 1,000 millidarcies and original gas saturations of around 68%. Within Well KU 31-07X the C-1 interval occurs between 4,366 and 4,500 feet TVDss and the C-2 interval is between 4,530 and 4,569 feet TVDss. Production began in the Sterling Gas Pool 6 in July 1960. Peak gas production was achieved in 1982 at 82 million standard cubic feet per day ("MMSCFD"). The average gas production rate in 2005 was 15 MMSCFD from 11 producers. As of January 1,2006 total production from Sterling Gas Pool 6 was about 523 BSCF. Material balance and model studies show an original gas in place of 563 BSCF. Storage Injection Order 7 e April 19, 2006 e Page 3 Original reservoir pressure reported during pool rules testimony (Conservation Order 82) was 2,138 psi at a datum of 4,565 feet TVDss. Current reservoir pressure is less than 200 psi. Reservoir pressures are higher than 200 psi within strata lying both above and below the Sterling Gas Pool 6. Proposed storage Well KU 31-07X was originally completed as a gas producer in the Sterling Gas Pool 6 in both the C-1 and C-2 sands. Well 31-07X has produced 3.2 BSCF gas and approximately 2,500 barrels water since it was brought on production in March 2001. Peak gas production rate of 10 MMSCFD was achieved in November 2005. 7. Well Logs: The logs of existing wells in the area are on file with the Commission. 8. Mechanical Integrity and Well Design ofIniection Wells: Well KU 31-07X was constructed in accordance with the requirements of 20 AAC 25.030. A cement bond log and cement calculations were used to determine isolation of the Sterling Gas Pool 6 in Well KU 31-07X. The Commission witnessed a passing mechanical integrity test on April 29, 2005. The Commission considered imposing rules regulating sustained casing pressures for Kenai Field development wells in 2004. A review of well records, pressures in existing wells, and other relevant information led the Commission to exclude all Kenai Field pools from sustained casing pressure requirements. Low reservoir pressures and over-designed well construction capable of withstanding the full range of reasonably anticipated well pressures were the basis for the Commission's decision. Supplemental information provided by Marathon included a summary of an Emergency Action Plan maintained for all operations at the Kenai Gas Field. Included are contingency planning for operational incidents, personnel training, and drills. Marathon notes that there are no additional operating hazards represented by the proposed gas storage operations. The proposed gas storage project will require no additional pads, roads, pipelines or production/compression equipment. 9. Type of Fluid / Source: Dry natural gas from the Kenai Gas Field and from the Cannery Loop Unit is planned for storage injection. 10. Fluid Compatibility with Formation: Marathon provided gas analysis representative of native gas originating from the Sterling Formation and will inject only gas that is compatible with Sterling Gas Pool 6. Storage Injection Order 7 e Apri119,2006 e Page 4 11. Iniection Rates and Pressures, Fracture Information: Injection rates will vary dependent upon gas supply/demand and the Sterling Gas Pool 6 reservoir pressure. Marathon requested the Commission preserve flexibility of storage and withdrawal operations by establishing a maximum reservoir pressure of 300 psi in lieu of maximum injection and withdrawal rates. A maximum allowable reservoir pressure of 300 psi is nearly 2,500 psi below the fracture pressure for the Sterling Gas Pool 6, as determined by leak off tests and modeling. 12. Underground Sources of Drinking Water: All aquifers below 1,300 TVD feet have been exempted by the EP A under 40 CFR 147.1 02(b )(1 )(iii). 13. Mechanical Condition of Adiacent Wells: Marathon supplied a report on the mechanical condition of each well that penetrates the Sterling Gas Pool 6 dated March 16, 2006. The Commission received the report on March 20, 2006. Marathon found no evidence of pressure communication between Sterling Gas Pool 6 and other strata, but cement bond logs do not exist for all Sterling Gas Pool 6 penetrations. Marathon has been unable to provide well records (cement bond log, cement top verification), for some wells, that are typically used to determine isolation of the injection zone in all wells penetrating the confining layer. More than 40 years of production performance for Sterling Gas Pool 6 wells, at considerably higher pressures than proposed for storage, indicates the reservoir is confined and there is no movement of fluid behind casing. 14. Monitoring: Marathon's Gas Storage Project Monitoring Program includes a supervisory controlled automatic data acquisition system to record flow rates and pressures on all active wells in the field. Data is monitored continuously at Marathon's Kenai Field office. Operations personnel visit all production pads daily to perform visual inspections and maintenance of wells and production equipment. 15. Public Comment: A letter objecting to the project was sent to the Alaska Department of Natural Resources dated February 12,2006 by Tim, Marilyn, Clint and Lindsay Keener. In addition to questions about the lease agreement, concerns were raised about ongoing disposal injection in the Kenai Gas Field. Geologic and engineering records, modeling, and well test performance data for the four existing waste injection wells operated by Marathon in the Kenai Gas Field indicate all fluids are confined to the intended injection formations. The Commission responded to the Keener's injection concerns by letter dated March 21,2006. Storage Injection Order 7 April 19, 2006 e e Page 5 CONCLUSIONS: 1. The Kenai Unit, Sterling Gas Pool 6, gas storage project meets the requirements of 20 AAC 25.252. 2. There are no concerns with compatibility between injected gas and the native gas in Sterling Gas Pool 6. 3. Construction records, casing and cementing records, a cement bond log and a witnessed mechanical integrity test on April 29, 2005 demonstrate the mechanical integrity of well KU 31-07X and demonstrate that fluids will not move behind casing beyond the gas storage zone. 4. The proposed injection operations will be conducted in permeable strata, which can reasonably be expected to accept injected fluids at pressures less than the fracture pressure of the confining strata. 5. The proposed injection of natural gas into the KU 31-07X well for the purpose of storage will not propagate fractures through the confining zones. 6. Surveillance of operating parameters for the storage and offset wells will provide continued assurance that stored gas will remain confined to the Sterling Gas Pool. 7. Limiting the reservoir pressure to 300 psi for natural gas storage in Sterling Gas Pool 6 eliminates the need for additional pressure monitoring beyond commitments made by Marathon. 8. The proposed injection of natural gas into the Sterling Gas Pool 6 for the purpose of storage will not cause waste, jeopardize correlative rights, endanger freshwater, or impair ultimate recovery. NOW, THEREFORE, IT IS ORDERED that the following rules, in addition to statewide requirements under 20 AAC 25, apply to the underground storage of hydrocarbons by injection operations in the Sterling Gas Pool 6 within well KU 31-07X. The area described as follows is affected by this order: Seward Meridian T4N, R11 W, Section Sections Section Section 4: W 1/2 SW 1/4, SW 1/4 NW 1/4 5,6, 7, and 8: All 9: W 1/2 NW 1/4, NW 1/4 SW 1/4 17: NE 1/4 NE 1/4,W 1/2 NE 1/4, NW 1/4, N ~ SW 1/4, SW 1/4 SW 1/4 18: All T4N, R12W 1: E 1/2, E 1/2 W 1/2 Section Section Storage Injection Order 7 April 19, 2006 e Section Section Section Section Section Section Section Section e Page 6 12: E 1/2, E 1/2 W 1/2 13: NE 1/4, E 1/2 NW 1/4, N 1/2, SE ~, T5N, R11W 28: W 1/2 SW 1/4 29: All 30: E 1/2 NE 1/4, SW 1/4 NE 1/4, SE 1/4, SE 1/4 SW 1/4 31: E 1/2, SW 1/4, E 1/2 NW 1/4 32: All 33: W 1/2 NW 1/4, SE 1/4 NW 1/4, and SW 1/4 RULE 1: STORAGE INJECTION The Commission approves the injection for storage of natural gas in well KU 31-07X within the Sterling Gas Pool 6 interval from 4,366 to 4,569 feet TVDss. RULE 2: DEMONSTRATION OF MECHANICAL INTEGRITY The mechanical integrity of Well KU 31-07X must be demonstrated before injection begins, and before returning the well to service following a workover affecting mechanical integrity. A Commission-witnessed mechanical integrity test must be performed after injection is commenced for the first time in the well, to be scheduled when injection conditions (temperature, pressure, rate, etc.) have stabilized. Subsequent tests must be performed at least once every four years thereafter. The Commission shall be notified at least 24 hours in advance of a test. Unless an alternate means is approved by the Commission, mechanical integrity must be demonstrated by a tubing/casing annulus pressure test using a surface pressure of 1,500 psi or 0.25 psi/ft multiplied by the vertical depth of the packer, whichever is greater. Stabilizing pressure that does not change more than 10 percent during a 30-minute period is required for a valid test. Results of all mechanical integrity tests must be provided to the Commission. RULE 3: WELL INTEGRITY FAILURE AND CONFINEMENT The operator shall maintain a continuous data acquisition system to record flow rates and pressures on all active wells in the field. Field personnel must perform daily visual inspections and maintenance of all active wells and production equipment. Whenever any pressure communication, leakage or lack of injection zone isolation is indicated by injection rates, operating pressure observations, tests, surveys, logs, or other evidence, the operator shall notify the Commission by the next business day and submit a plan of corrective action on a Form 10-403 for Commission approval. The operator shall immediately shut in the well if continued operation would be unsafe or would threaten contamination of freshwater, or if so directed by the Commission. RULE 4: MAXIMUM RESERVOIR PRESSURE The reservoir pressure for this project shall be limited to 300 psi. RULE 5: PERFORMANCE REPORTING The Operator shall report disposition of production and injection as required by 20 AAC 25.228,20 AAC 25.230, and 20 AAC 25.235. Storage Injection Order 7 April 19, 2006 e e Page 7 An annual report evaluating the performance of the storage injection operation must be provided to the Commission no later than March 15. The report shall include material balance calculations of the gas production and injection volumes and a summary of well performance data to provide assurance of continued reservoir confinement of the gas storage volumes. Additional data collection and analysis will be based on a review of the operating performance and could include temperature surveys, pressure surveys, and production logs. RULE 6: OTHER CONDITIONS a. It is a condition of this authorization that the operator complies with all applicable Commission regulations. b. The Commission may suspend, revoke, or modify this authorization if injected fluids fail to be confined within the designated injection strata. c. As provided in 20 AAC 25.2520), if storage operations are not begun within 24 months after the date of this Order, the injection approval shall expire unless an application for extension has been approved by the Commission. RULE 7: ADMINISTRATIVE ACTIONS Unless notice and public hearing are otherwise required, the Commission may administratively waive or amend any rule stated above as long as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in fluid movement outside of the authorized injection zone. Daniel T. Seamount, Jr., Commissioner Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it Month file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 PM on the 23rd day following the date of the order, or next working day if a holiday or weekend, to be timely filed. The Commission shall grant or refuse the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. An affected person has 30 days ftom the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court. Where a request for rehearing is denied by non-action of the Commission, the 30-day period for appeal to Superior Court runs from the date on which the request is deemed denied (Le., 10th day after the application for rehearing was filed). SIO 7 Kenai Gas Field e e Subject: SIO 7 Kenai Gas Field From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Thu, 20 Apr 2006 10:35:38 -0800 To: undo nts:; BCC: Rö < rt _ mintz@la <c.hanse .0 >, T rrie Hu <StewmaSD@BP.com>, stan <trmjr1@aol.com>, shaneg < nelson <knelson@petroleum <mark.dalton@hdrinc.com>, Sh Worcester" <mark. p. cester@conoco <wdv@ tate.ak.u tjr <tjr@dnr.state.ak. <mjnels com>, Charles O'Donnell <c 'do <Skille .com , "D J. Jones" <JonesD6@BP.co <RossbeRS@BP.com>, Loi inletkeeper.org>, Dan B Pospisil , "Francis S. Sommer" <SommerF BP.com>, Mikel Schultz <Mikel.Sch m>, '.'N· Waver" <GloverNW@BP.com>, "Dary . Kleppin" <KleppiDE@BP.com>, "Jane I PlattJD@BP.com>, "Rosanne M. J bsen" <JacobsRM@BP.com>, ddo .com>, mckay <mckay@gc t>, Barbara F Fullmer <barbara.f.fullmer@conocophi s. Barker <barker@usgs.gov>, doug_schultze <doug_schultze@xtoenergy.com>, H .alford@ nmobil.com>, Mark Kovac <yesno l@gci.net>, gspfoff <gspfoff@auror er.com>, Greg dy <gregg.nady@shell.com>, Fred St e < d.steece@state.sd.us>, rcrotty <rcrotty ch2m.co nes <jejones@aurorapower.com>, k& , j erick <jroderick@ et>, ey yancy@seal-tite.net>, "James M. o hillips.com>, Brit Lively <map @ak.net>,jah o <buonoje@bp.com>, Mark ley <m hanley@anadarko.com>, an@gov. e.ak.us>, Julie Houle _houle .state.ak.us>, John W Katz >, an J Hill zan_hill@dec.state.ak ablerk lerk@unocal.com>, Brady <brady@aog rg>, Brian veloc <beh@dnr.state.ak.us>, p <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr. >, "John S. Haworth" <john.s.haworth@exxonmobil.com>, marty <marty@rk· trial.com>, ghammons <ghammons@aol.com>, rmclean <rmclean@pobox.alaska.net>, mkm720 aol.com>, Brian Gillespie <ifbmg alaska.edu>, David L Boelens <dboele r.com>, Todd Durkee <TDURKE G.com>, Gary Schultz <gary_sc. s>, Wayne cier <RANCI tro-canada.ca>, Brandon Gagnon <bgagnon@brenalaw.co Winslo· winslow@forestoil.com>, Sharmaine Copeland <cop v@ >, Kr s <kristin_ irks .state.ak.us>, Kaynell Zeman <kjz @ noil.com>, Tower <John. er@eia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, cott ck <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe ,jack newell <jack.newell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, conocophillips.com, Tim Lawlor <Tim_Lawlor@ 1m. >, Lynnda ynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry.C - ethlefs on phi'. , crocke aoga.org, Tamera Sheffield <sheffield@aoga.org>, Jon <Jon.Goltz@conoc Illips.co r Bel age Iman@conocophillips.com>, Min is <mlewis@brenalaw.com>, ga.org>, Patty Alfaro <palf: yahoo.com> f <sme Kratz ToddKratz@chevron.com>, Gary Roge <garyJogers nue.stat os <Arthur_Copoulos@dnr.state.ak.us>, Ken <ken@secorp-inc.co teve L <salambert ocal.com>, Joe Nicks <news@radiokenai.com>, Jerry McCutcheon <susltnahydrono yahoo. com>, Paul Todd <paulto@acsalaska.net>, Bill Walker lof2 4/20/2006 10:36 AM S10 7 Kenai Gas Field e e <bill- @ak.net>, Iris Matthews <Iri tthews@legis.state.ak.us>, Paul Decker <paul er@dnr.st .us>, Rob ch <rob.g.dragnich@exxonmobi1.com>, Aleutians East Borough <admin@al rg>, Marquerite kre _kremer@dnr.state.ak.us>, Robert Brelsford <Robert.B ediagroup.com>, <alicia_konsor@dnr.state.ak.us>, Mike Mason <mike@kbbi.org>, d Robinson <g @marathonoi1.com>, Cammy Taylor < il ot@law.state.ak.us>, thia er <bren_mciver@admin.state.ak.us>, lady bie Colombie@admin.state.ak.us> . Content-Type: application/pdf slO7.pdf . Content-Encoding: base64 20f2 4/20/2006 10:36 AM Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 e George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise, ID 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 North Slope Borough PO Box 69 Barrow, AK 99723 e Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 19 Hileorp Alaska, LLC U February 11, 2019 Mr. Hollis French, Chair Alaska Oil and Gas Conservation Commission 333 W. 7th Avenue, Suite 100 Anchorage, AK 99501 Re: Kenai Gas Field SIO #7 2018 Sterling Pool 6 Annual Performance Evaluation Dear Commissioner French: Post Office Box 244027 Anchorage, AK 99524-4027 3800 Centerpoint Drive Suite 100 Anchorage, AK 99503 vhughes@hilcorp.com Phone: 907/777-8445 Fax: 907/777-8310 MAR 0 1 2010 IYo C CO Attached for your review is the 2018 Annual Performance Evaluation for the Sterling Pool 6 Gas Storage Reservoir according to SIO #7. This report covers the primary production and injection period through the 2018 gas storage operations. Sterling Pool 6 continues to exhibit tank like behavior with neither influx of other fluids nor loss of storage gas based on the evidence shown in the exhibits below. Injection wells continue to act as expected based on an injectivity index. Real time downhole pressure monitoring is possible with shut in tubing pressures of KU 34-31 corrected to reservoir pressure. For the annual period ending 12/31/2018 the total volume injected into Sterling Pool 6 was 4,359 MMSCF and total production was 4,719 MMSCF. The native gas was determined to be fully depleted as of November 2017. All Pool 6 gas production throughout 2018 was considered 100% storage gas. The maximum reservoir pressure recorded in Pool 6 based on the KU 34-31 monitoring well SITP (shut in tubing pressure) was 253 psi or a reservoir pressure of 279 psi. This pressure is expected to be distributed consistently throughout the productive area of Pool 6 and is below the maximum reservoir pressure of 400 psi as established by rule #6 of SIO 7A. Rega}dg, 17 I Anthon McConkey Y Reservoir Engineer Exhibit #1 — List of wells and service Exhibit #2 — KU 34-31 Monitoring Well SITP during 2018 Exhibit #3 — Monthly Production and Injection Volumes for 2018 Exhibit #4 — P/z plot for Injection Period 2018 Exhibit 1— List of Wells and Service Pool 6 Well List 1. KU 13-06 2. KU 14X-06 3. KBU 23X-06 (prod and inj) 4. KU 31-07X (prod and inj) 5. KDU 05 6. KU 14-32 7. KU 22-06X 8. KU 34-31 (monitoring well) 9. KU 33-07 10. KU 43-06RD 11. KU 34-32 12. KU 21-06RD (inj only) 34-31 Tubing Pressures ml Legend Pe..., $ Tubing Pssure vstate --0— CaIwlNed Sendfece Pressure vs. Dote - - - - — -_- ----� —�--�--- Cekuleted Bottom -Hob Presauras 300 290 280 270 260 i— 260 — 240 — 230 220 — - 210 — Measured sreMad Pressures 200 — --- -- -- 160 --- — -- -- 170 160 ------ — — ._.......... _.. _— — --- --------- ._._.__. ____ _ — 140 130 120 110 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 100 BS 2018 35,000,000 --*--Pool6 Gas Balance (Mscf) --0-- 1, 30,000,000 25,000,000 u � 20,000,000 a l7 p 15,000,000 0 o. 10,000,000 5,000,000 2018 Pool 6 Gas Storage Volumes 2,000,000 1,500,000 1,000,000 500,000 u c 0 0 0 0 a` (500,000) Z (1,000,000) (1,500,000) (2,000,000) Nov -17 Dec -17 Feb -18 Apr -18 May -18 Jul -18 Sep -18 Oct -18 Dec -18 Feb -19 350 300 250 o 150 Q. 100 50 0 -2,000,000 .1,000,000 Pool 6 Gas Storage -- 2018 y =-1E-05z + 268.75 R' = 0.9601 0 1,000,000 2,000,000 3,000,000 Pool 6 Net Production (Mscf) 4,000,000 Hilcorp Alaska, LLC 11 March 13, 2018 RECEIVE® MAR 14 2018 AOGCC Mr. Hollis French, Chair Alaska Oil and Gas Conservation Commission 333 W. 7h Avenue, Suite 100 Anchorage, AK 99501 Re: Kenai Gas Field SIO #7 2017 Sterling Pool 6 Annual Performance Evaluation Dear Commissioner French: Post Office Box 244027 Anchorage, AK 99524-4027 3800 Centerpoint Drive Suite 100 Anchorage, AK 99503 vhughes@hllcorp.com Phone: 907/777-8445 Fax: 907/777-8310 Attached for your review is the 2017 Annual Performance Evaluation for the Sterling Pool 6 Gas Storage Reservoir according to SIO #7. This report covers the primary production and injection period through the 2017 gas storage operations. Sterling Pool 6 continues to exhibit tank like behavior with neither influx of other fluids nor loss of storage gas based on the evidence shown in the exhibits below. Injection wells continue to act as expected based on an injectivity index. Real time downhole pressure monitoring is possible with shut in tubing pressures of KU 34-31 corrected to reservoir pressure. For the annual period ending 12/31/2017 the total volume injected into Sterling Pool 6 was 9,214 MMSCF and total production was 4,913 MMSCF. The total native gas withdrawn from Pool 6 was 1,296 MMSCF with a native gas balance of 0 MMSCF. The native gas was determined to be fully depleted as of November 2017. All Pool 6 gas production after this date is considered 100% storage gas. The maximum reservoir pressure recorded in Pool 6 based on the KU 34-31 monitoring well SITP (shut in tubing pressure) was 260 psi or a reservoir pressure of 287 psi. This pressure is expected to be distributed consistently throughout the productive area of Pool 6 and is below the maximum reservoir pressure of 300 psi as established by rule #4 of SIO 7. Regar , ony McConkey Reservoir Engineer Exhibit #1 — List of wells and service Exhibit 42 — KU 34-31 Monitoring Well SITP during 2017 Exhibit #3 — Monthly Production and Injection Volumes for 2017 Exhibit #4 — P/z plot for Injection Period 2017 Exhibit 1— List of Wells and Service Pool 6 Well List 1. KU 13-06 2. KU 14X-06 3. KBU 23X-06 (prod and inj) 4. KU 31-07X (prod and inj) 5. KDU 05 6. KU 14-32 7. KU 22-06X 8. KU 34-31 (monitoring well) 9. KU 33-07 10. KU 43-06RD 11. KU 34-32 12. KU 21-06RD (inj only) Page 2 of 5 Exhibit #2 - KU 34-31 Monitoring Well SITP During 2017 KBU 34-31 -- 300 Bottomhole Sandface Pressure (Calculated-psia) Shut -In Tubing Pressure (Measured-psia) January February '.. March April May - June July August September October '.. November '.. December 2017 280 260 240 220 200 180 160 140 120 n m 100 2 w m ¢ 80 d a 60 m v m N 40 c N V N 20 � Page 3 of 5 IAA Harmonv Ver 3.7.0.358 �7' O:\Alaska\Fields\Ninilchik\Res Enq\Production\Ninilchik Production Merged.harmonv 06 -March -2018 Exhibit #3 - Monthly Production and Injection Volumes for 2017 t Pool 6 Gas Balance(Mscf) 35,000,000 Net Production (Mscf) 25,000,000 u cN C V, 20,000,000 O CL 15,000,000 � 2017 Pool 6 Gas Storage Volumes 2,000,000 1,500,000 1,000,000 500,000 u cN C C O 0 ti v 0 a (500,000) 2 (1,000,000) (1,500,000) (2,000,000) Nov -16 Jan -17 Mar -17 Apr -17 Jun -17 Aug -17 Sep -17 Nov -17 Dec -17 Page 4 of 5 Exhibit #4 - P/Z Plot for Injection -Production Period 2017 350 300 250 100 50 Pool 6 Gas Storage -- 2017 V =1E.05z ♦ 227.84 W=0.9872 -4,000,000 -2,000,000 0 2,000,000 4,000,000 6,000,000 6,000,000 Pool 6 Net Production (Mscf) Page 5 of 5 ~18 . . ~ SARAH PALIN, GOVERNOR DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS 550 WEST 7TH A VENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3560 PHONE: (907) 269-8800 FAX: (907) 269-8938 CERTIFIED MAIL RETURN RECEIPT REQUESTED April 27, 2007 John A. Barnes Marathon Oil Company P.O. Box 196168 Anchorage, Alaska 99519-6168 RE: ADL 390821 Second Storage Development Plan Approval Dear Mr. Barnes: The Division received the proposed Second Storage Development Plan (2nd SDP) for ADL 390821 on March 2, 2007, submitted by gas storage lessee and operator, Marathon Oil Company (Marathon). The 2nd SDP includes items requested by the Division in the previous plan approval letter, and on April 26, 2006, Marathon provided reservoir performance data and an update to the well utilization table (Exhibit E to the SDP). Marathon requested that the Division hold the data and SDP Exhibits confidential under AS 38.05.035(a)(9). The Sterling Pool 6 storage reservoir continues to demonstrate tank-like behavior as expected. During the 2006 injection season (May to October), Marathon injected 1.529 billion cubic feet (bct) of gas into the reservoir and withdrew 0.708 bcf. Marathon produced 3.793 hef :6:om the reservoir during the winter withdrawal season (November 2006 to March 2007). As of March 31, 2007, there remained 22.143 bcf of recoverable "native" gas in storage reservoir. During the 1st SDP period, Marathon completed an inactive Beluga well as a Pool 6 producer. Marathon plans to add a second i~ector well (KBU 23X-06) and inject between 3 and 6 bcf of natural gas during the 2nd SDP period. I approve the 2nd SDP for ADL 390821 for the period May 1, 2007 through April 30, 2008. Marathon shall request Division approval before making any changes to the Pool 6 facilities, including changes to the gas cycling rate, well utilization, compression capacity, pipelines or flow schematics. This decision does not relieve Marathon of its obligation to maintain a valid lease plan of operations for ADL 390821. Under Paragraph 13(b) of the lease, the SDP must be revised, updated, and submitted to the Division for approval 60 days before the anniversary date of the previously approved plan. "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " . . John A. Barnes April 27, 2007 Page 2 The proposed Third (3cd) SDP, and revisions to all SDP Exhibits, are due in this office on or before Friday, February 29,2008. The Division will review the proposed 3cd SDP for compliance with the storage lease, and may request additional engineering, geological, or operational information at any time. The proposed 3cd SDP must include a monthly summary of injected and withdrawn volumes, royalty payments, and remaining recoverable reserves, status of operations and monitoring, and a status report on P/z performance analysis. The proposed plan must also include proposed revisions, if any, to the long term plan for the storage lease and area. The Division requests that Marathon provide the Division with copies of all of Marathon's written correspondence, including e-mails, with the AOGCC concerning the Pool 6 reservoir, including any proposed changes to Stor:fe Injection Order 7, and well work approval requests for wells identified on Exhibit E of the 2n SDP. If you have any questions regarding this decision, please contact Brian Havelock at 907-269-8807. A person affected by this decision may appeal it, in accordance with 11 AAC 02. Any appeal must be received within 20 calendar days after the date of "issuance" of this decision, as defined in 11 AAC 02.040 (c) and (d), and may be mailed or delivered to Thomas E. Irwin, Commissioner, Department of Natural Resources, 550 W. 7th Avenue, Suite 1400, Anchorage, Alaska 99501; faxed to 1-907-269-8918; or sent by electronic mail to dnr_appeals@dnr.state.ak.us. This decision takes effect immediately. Ifno appeal is filed by the appeal deadline, this decision becomes a final administrative order and decision of the department on the 31st day after issuance. An eligible person must first appeal this decision in accordance with 11 AAC 02 before appealing this decision to Superior Court. A copy of 11 AAC 02 may be obtained from any regional information office of the Department of Natural Resources. Sincerely, cc: Lisa Kirsch, Jeff Landry, DOL John K. Norman, AOGCC Greg Noble, BLM [Fwd: Kenai Sterling Pool 6 gas storage 2007 lease plan approval] . . . · Subject: [Fwd: Kenai Sterling Pool 6 gas storage 2007 lease plan approval] From: John Norman <john_norman@admin.state.ak.us> Date: Sun, 29 Apr 200716:48:40 -0800 To: Jody J Colombie <jody_colombie@admin.state.ak.us> print to file and give copy to members of team working on this storage application. -------- Original Message -------- Subject:Kenai Sterling Pool 6 gas storage 2007 lease plan approval Date:Fri, 27 Apr 2007 16:06:26 -0800 From:Brian Havelock <b!iªIl...hªyeLºçl<.@d!l!._~(l!~.:-ª1s.l,ls> To:Martens, Dave <domartens@marathonoil.com> ----.--......---=.......-..----..................--. CC:L yndon Ibele ~!bel~Ølplªrat.hQgºi!.cºæ::::, Qr_~1L0!gþl~_@<lJ~~Ql1p.. gov, i~Œ.lª-l!..cLry(a!1.ª"\Y.:.sta!9.:_ªk~_l!.s, "Terry L. Peterson" ::!~I.ry.J2et9Xson@ºgt:~!ª-t9_=_ak.!!.s2::, "Jack D. Hartz" Sªçl<..hª!:~@linr. .s1ª-t£~ª-k.l!§?:, Lisa Kirsch ::E.sª.kir.§_cÞ@Jª~..:~!§1~·ak~lls>, jºþI..l..Ilºr.!!!ªl!@ªli!gill:§!ate.ª-~~ll.s,ª!L§al!æªrsh@ªºæiIl:.s!_ª!~~ªk.!!§, 'Nan Thompson' ::gªIlthQæp§ºIl@ºl}r~.§tate:_ª1&~us>, "Julie A. Houle" Sl.ll!'Ë~þºule(â1QQf.:.s!ª!~.:<l.1s:.us>, "Ken P. Helmold" <ken helmold@dnr.state.ak.us>, 'Kristin Dirks' <kristin dirks(á~dnr.state.ak.us>, ____.__..._.............._._______z...___._...___....._..._ ___._._ _..___._..__..~_____._.__.___.._ "Matt W. Rader" ::::.æ.ª!Lr.ªº~!@ºIl!.:~tª~~;~1s:!!§?:, !ºæ_}l1aunder(a!adl!!i!1.:§ta~:-ª1s:!!~, kÇl,lll!l.iIlKl1ªæ@çi!LçQ!.1!:, Jim Stouffer Si.i}:!1s!º-l!ffçX@º!1!:.§~te.a1s:_!!_s.?:, "'Jonne D. Slemons'" :':1ºQIl9_s1~æº..!!§_@gIl!::.S.!<lJ£.:.ª_l<.:.l.ls>, "Antony G. Scott" <ag1:..º!1Y~'£Qt!@4Il!·:s.1ª!~.~-ªk. ~?: Dave I do not have John Barnes' email, so please forward this if you wish. Otherwise, the paper copy will be sent Monday via certified mail. Brian E. Havelock Natural Resource Specialist N Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue Anchorage, Alaska 99501 http://www.dnr.state.ak.us/oi I. John K. Norman <John Norman@admin.state.us> Chairman Alaska Oil & Gas Conservation Commission Content-Type: application/pdf 390821 2ndSDP APPROV AL.pdf Content-Encoding: base64 10ft 5/1/20075:31 PM #17 , e e FRANK H. MURKOWSKl GOVERNOR DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS 550 WEST 7TH AVENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3560 PHONE: (907) 269-8800 FAX: (907) 269-8938 ~ /)ëll Viìe€"~ CERTWITID MAiL R:BTtmN RECEIPT ItEQlmßTJID May 8, 2006 John A. Barnes Marathon Oil Company P.O. Box 196168 Anchorage, Alaska 99519-6168 RE: ADL 390821 First Storage Development Plan Approval Dear Mr. Bames: On December 16, 2005, Marathon Oil Company (Marathon), operator of the Kenai Gas Field, appIÍed to the Division of Oil & Gas (Division) under 11 AAC 83.520 for a lease to store gas in the nearly-depleted Sterling Pool 6 reservoir. Following Division review of the application and a 30- day public comment period, I approved the storage lease (ADL 390821) in a best interest finding and decision that became effective today--May 8,2006. ADL 390821 grants Marathon the right to store gas in that portion of the Sterling Pool 6 reservoir owned by the State of Alaska, and requires an annual storage development plan approval from the Division. The Division received the proposed First Storage Development Plan (1st SDP) for ADL 390821 on March 6, 2006. Marathon also submitted supporting Exhibits and requested that the Division hold the Exhibits confidential under AS 38.05.035(a)(9). The 1st SDP describes Marathon's plan to inject, store, and withdrawal or cycle, about six billion cubic feet of natural gas per year through existing facilities and weIIs to meet base load demand for gas on the Cook Inlet pipeline grid. It includes reservoir performance monitoring obligations, injection and withdrawal reporting, pressure and volume reporting, and long term plans for the storage pool, consistent with the lease. Under AS 38.05.180(u), I approve, effective today, the 1st SDP for ADL 390821 for the period May 1,2006 through April 30, 2007. Marathon shall request Division approval before making any changes to the Pool 6 facilities, including changes to the gas cycling rate and instaIlation of additional wells, compression facilities or pipelines. This decision does not relieve Marathon of its obligation to maintain a valid lease plan of operations for ADL 390821. Under Paragraph 13(b) of "Develop, Coltserve, altd Enhallce Natural Resources fOI' Presellt alld Future Alaskalls. " I e e ADL 390821 151 SDP Approval May 8, 2006 Page 2 the lease, the SDP must be revised, updated, and submitted to the Division for approval 60 days before the anniversary date of the previously approved plan. The proposed Second (2nd) SDP, and any revised, updated, or new Exhibits, are due in this office on or before March 2, 2007. The Division will review the proposed 2nd SDP, and any Exhibits, for compliance with the lease terms! and may request additional engineering, geological, or operational information at any time. The proposed 2nd SDP must include a monthly summary of injected and withdrawn volumes, royalty payments, and remaining recoverable reserves, status of operations and monitoring, and a status report on P/z performance analysis. The proposed plan must also include proposed revisions, if any, to the long term plan for the storage lease and area. Marathon shaH comply with Storage Injection Order No. 7 (SIO 7), issued by the Alaska Oil & Gas Conservation Commission (AOGCC) on April 19, 2006. Marathon shall provide the Division with copies of all of Marathon's written correspondence, including e-mails, with the AOGCC concerning the Pool 6 reservoir, including any proposed changes to SIO 7, and well work approval requests for wells identified in Exhibit E of the SDP. If you have any questions regarding this decision, please contact Brian Havelock at 907-269-8807. A person affected by this decision may appeal it, in accordance with 11 AAC 02. Any appeal must be received within 20 calendar days after the date of "issuance" of this decision, as defined in 11 AAC 02.040 (c) and (d), and may be mailed or delivered to Michael Menge, Commissioner, Department of Natural Resources, 550 W. 7th Avenue, Suite 1400, ,Anchorage, Alaska 99501; faxed to 1-907-269-8918; or sent by electronic mail to dnr_appeals@dnr.state.ak.us. This decision takes effect immediately. If no appeal is filed by the appeal deadline, this decision becomes a final administrative order and decision of the department on the 31st day after issuance. An eligible person must first appeal this decision in accordance with 11 AAC 02 before appealing tIûs decision to Superior Court. A copy of 11 AAC 02 may be obtained from any regional information office of the Department of Natural Resources. smcere:y'/Í/ ( , cJ~~ William Van Dyke Acting Director cc: Lisa Kirsch Jeff Landry, Cammy Taylor, DOL John K. Norman, Chair, AOGCC Greg Noble, ELM [Fwd: :enai Pool 6 (ADL 390821) 1st SDP A_Val] e Subject: [Fwd: Kenai Pool 6 (ADL 390821) 1st SDP Approval] From: John Norman <john_norman@admin.state.ak.us> Date: Tue, 09 May 2006 10:48:25 -0800 To: JôdyJCo!(j)mbie <j odYíçoldn;1'~ie@adIllin.state.ak. us> print attached letter for storage injection file -------- Original Message -------- Subject:Kenai Pool 6 (ADL 390821) 1st SDP Approval Date:Mon, 08 May 2006 10:30:01 -0800 From:Brian Havelock <brian havelock(cì}dnr.state.ak.us> Reply-To: brian havelock(cì}dnr.state.ak.us To:'Lisa Kirsch' <[isa kirsch(cì}law.state.ak.us>, 'Jeff Landry' <jeff landry0}law.state.ak.us>, matt rader(cì}dnr.state.ak.us, jonne slemons(cì}dnr.state.ak.us, 'Terry Peterson' <terry peterson(cì}dnr.state.ak.us>, "Dianna L. Lewis" <dianna 1 ewis(cì}dnr. state.ak.us>, "Katharine S. Means" <kathy means(cì}dnr.state.ak.us>, "'Julie A. Houle'" <julie houle(cì}dnr.state.ak.us>, "'Ken P. Helmold'" <ken helmold(cì}dnr.state.ak.us>, jack hartz(cì}dnr.state.ak.us, kristin dirks(cì}dnr.state.ak.us, jim stouffer(cì}dnr.state.ak.us CC:Greg Noble(cì}ak.blm.gov, John Norman <john norman(cì}admin.state.ak.us>, 'Jane Williamson' <¡ane williamson(cì}admin.state.ak.us>, Lyndon Ibele <1cibele(cì}marathonoil.com>, 'keith wiles' <kwiles(cì}hotmail.com> FYI Brian Havelock Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 99501 http://www.dog.dnr.state.ak.us John K. Norman <John Norman(cì}admin.state.us> Chairman Alaska Oil & Gas Conservation Commission Content-Type: KenaiPool6_lstSDP _APPROV AL.pdf Content-Encoding: base64 1 of 1 5/9/2006 11 :23 AM Re: [Fwd; Training Logistics] ", e e Subject: Re: [Fwd: Training Logistics] From: John Norman <john_norman@admin.state.ak.us> Date: Wed, 03 May 2006 16:53:20 -0800 To: Stephen Davies <steve_davies@admin.state.ak.us> CC: Jody J Colombie <jody_colombie@admin.state.ak.us> Thank you Steve. I'll cc Jody with this and ask her to remind us that in about two weeks we should meet to plan the special briefing for the press. Jody make a list of who we will invite--Kristin nelson, tim bradner, wesley Loy, plus any others you can think of--is Gareth Rosen local? Also tV...Channel 2 and channel 11, etc Stephen Davies wrote: John, Absolutely. I apologize for not getting to writing a press release for the training in advance due to other, overriding priorities. The training may conflict a bit with the briefing on Monday for Don Young's assistant, but we will work around the briefing. Thanks, Steve D. . John Norman wrote: Steve, later this month or next can we arrange a special briefing for the press with hands on opportunity to learn to access the system and the wealth of information it offers to them? John Stephen Davies wrote: John, Dan, Cathy and All: Just a reminder that RBDMS Training will be held in our offices beginning this coming Sunday morning and continuing through Tuesday afternoon. We will be using the library, hearing room and conference room during most of that time. The agenda is attached. Projected attendance is 33 from out of state. I will be here Saturday afternoon setting up tables, chairs, etc. This is a great opportunity to increase your RBDMS savvy. Although there is little of interest for most of you on Sunday, beginning and intermediate-level training will be offered on Monday and Tuesday in the Library on a space-available basis. We should be able to accommodate 12 people (plus Maria and Christine at their desks) for this training. Please feel free to attend for the parts that interest you and to slip out when your interest wanes. As a bonus, this coming Friday, representatives from ALL will be in our office in advance of the training sessions. ALL is the consultant company that put together Alaska's RBDMS system. They will be here to install upgrades to our existing system, upgrades to our web applications, and to discuss future work needed. We will be sitting down with each of you who use RBDMS on a daily basis to discuss needs, wants, and complaints. Please let me know if you have any questions. Thanks, Steve D. lof2 5/9/2006 11 :26 AM Re: [Fwd. Training Logistics] ..t e e -------- Original Message -------- Subject:Training Logistics Date:Wed, 03 May 2006 10:29:16 -0700 From:Paul Jehn <pauljehn@adelphia.net> To:adkins@caer.uky.edu, bren mciver@admin.state.ak.us, rhonda.jacobs@netl.doe.qov, Bill Adkins <bill.adkins@ky.qov>, "Bob G. Griffith" <B.Griffith@occemail.com>. Dan Jarvis <danjarvis@utah.qov>, Dave Lowther <dlowther@coordinatesolutions.com>, David English <daenqlish@state.pa.us>, Deborah Gillespie <Deborah@VirtuaIES.com>, Don Drazan <djdrazan@qw.dec.state.ny.us>, Don Staley <DONSTALEY@utah.qov>, Elaine Johnson <elaine johnson@admin.state.ak.us>, Eric StClair <EStClair@oqb.state.al.us>, Gregg Miller <qreqq.miller@dnr.state.oh.us>, "Hladek, John" <John.Hladek@dnr.state.oh.us>, "Jim Lindholm (jlindholm@nd.qov)" <jlindholm@state.nd.us>, Jimmy Hall <jhall@oqb.state.al.us>, Kyle Joersz <kjoersz@state.nd.us>, Marc Fine <marc.fine@state.co.us>, "Mark Bohrer (mbohrer@nd.qov)" <mbohrer@state.nd.us>, Mark Layne/ALL-LLC <mlayne@all-lIc.com>, Mary Pohl <mpohl@noqcc.ne.qov>, Michael Loftin <mloftin@oqb.state.ms.us>, Michelle Smith <M.5mith@occemail.com>. 'Mickie McSheehy' <mmcsheehy@ddqinc.com>, Roy Arthur/ALL <rarthur@all-llc.com>, Scott Gambill <sqambill@reclamation.dnr.state.in.us>, Stan Belieu <sbelieu@noqcc.ne.qov>, Steve Davies <steve davies@admin.state.ak.us>, Thom Kerr <thom. kerr@state.co.us>, Tom Gillespie <Tom@VirtuaIES.com>, Y C Miller <ycmiller@hamilton.net> Meet in the Sheraton Hotel Lobby at 8:00 am Sunday Morning My cell phone is 509 680-2652 Paul Jehn The Ground Water Protection Council WWW.qwpc.orq Please join us for the GWPC Annual Forum at the Wyndham Miami Beach Hotel September 30th - October 5th, 2006 See you there! John K. Norman <John Norman@admin.state.us> Chairman Alaska Oil & Gas Conservation Commission 2of2 5/9/2006 11 :26 AM #16 ~V&V~ Ii &~~~ DIVISION OF OIL AND GAS NK H. MURKOWSKI. GOVERNOR DEPARTMENT OF NATURAL RESOURCES 550 WEST 7TH A VENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3650 PHONE: (907) 269-8800 FAX: (907) 269-8938 April 4, 2006 NOTICE OF ISSUANCE OF GAS STORAGE LEASE BEST INTEREST FINDING AND FINAL CONSISTENCY DETERMINATION The Department of Natural Resources (DNR), Division of Oil & Gas (division) gives notice under AS 38.05.945(a)(3)(C), that it plans to issue a Gas Storage Lease (ADL 390821) to Marathon Oil Company (Marathon) within the Kenai River Unit, located approximately seven miles west of Soldotna, Alaska. The lease is entirely within the Kenai Peninsula Borough and contains 2,637.96 acres of state-owned mineral estate, more or less. Annual Fee Marathon must pay the state's proportionate share of a minimum fee of $300,000 per year or 5-cents per thousand cubic feet injected monthly, whichever is higher. Lease Term The lease has a primary term often (10) years. Lease Form The lease will be executed on Gas Storage Lease Form # DOG200603. Best Interest Findin2 On April 7,2006 the Director, Division of Oil and Gas (director), issued a final finding and decision under AS 38.05.035(e), with the concurrence ofthe Commissioner, Department of Natural Resources. This finding sets forth the facts, policies, and laws upon which the determination was made. The Best Interest Finding and Final Consistency Determination are available on the division's Web site: www.dog.dnr.state.akus/oil. Copies of the finding are also available for public review at the Division's offices, the Kenai Peninsula Borough offices, as well as the Loussac Public Library in Anchorage. Individuals may obtain copies of the finding and consistency determination ITom the division: 550 West 7th Avenue, Suite 800; Anchorage, Alaska 99501. To order, call Anna Motschenbacher at (907) 269-8814, or e-mail atAnna_Motschenbacher@dnr.state.ak.us. Miti2ation Measures AS 38.05.03 5( e) and the departmental delegation of authority provide the director the authority to impose conditions or limitations, in addition to those imposed by law, to ensure that the disposal best serves the interests of the state. To meet this requirement, the director has adopted Mitigation Measures and Lessee Advisories that impose standards of conduct that must be met and inform the lessee of possible future limitations. These measures and advisories are deemed necessary to protect "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " biological, cultural and ar.10gica1 resources as well as to rnitig~.ocial impacts. will be enforced throughout the lease term. These measures Reconsideration and Appeal This finding is a final administrative decision of the department. A person affected by this decision who provided timely written comment or public hearing testimony on this decision may request reconsideration, in accordance with 11 AAC 02. Any reconsideration request must be received by 5:00 p.m. (local time), April 27, 2006 and may be mailed or delivered to Michael Menge, Commissioner, Department of Natural Resources, 550 W. 7th Avenue, Suite 1400, Anchorage, Alaska 99501; faxed to 1-907-269-8918, or sent by electronic mail to dnLappea1s@dnr.state.ak.us . If reconsideration is not requested by that date or if the commissioner does not order reconsideration on his own motion, this decision goes into effect as a final order and decision on May 8,2006. Failure of the commissioner to act on a request for reconsideration within 30 days after issuance ofthis decision is a denial of reconsideration and is a fma1 administrative order and decision for purposes of an appeal to Superior Court. The decision may then be appealed to Superior Court within a further 30 days in accordance with the rules of the court, and to the extent permitted by applicable law. An eligible person must first request reconsideration of this decision in accordance with 11 AAC 02 before appealing this decision to Superior Court. A copy of 11 AAC 02 maybe obtained from any regional information office of the Department of Natural Resources. The State of Alaska, DNR, Division of Oil & Gas complies with Title IT of the Americans with Disabilities Act 1990. This Publication will be made available in alternative communication formats upon request. Please contact Anna Motschenbacher at (907) 269-8814 to make any necessary arrangements. C--<~ r>- William VanDyke "') Acting Director STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DMSION OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 Published April 7, 2006 #15 · Alaska A. Team Marathon Oil Company P.O. Box 196168 Anchorage, AK 99519-6168 Telephone 907/561-5311 Fax 907/565-3076 April 3, 2006 Hand Deliver State of Alaska Alaska Oil and Gas Conservation Commission Attn: Jane Williamson and James Regg 333 West 7th Ave, Suite 100 Anchorage, AK 99501 RECEIVE APR 0 3 RE: Kenai Gas Field Pool 6 Gas Storage Project Application for Injection Legal Description of the Project Area .Alaska Oil & Dear Ms. Williamson and Mr. Regg: Per your request, Marathon is submitting a legal description of the lands within the proposed Pool 6 gas storage project. A map showing the proposed lands and the boundary for the Pool 6 gas storage project was generated and submitted to the AOGCC, the ADNR, and the BLM in various filings. The map was submitted as Exhibit 23 in Marathon's application for injection to the AOGCC on August 26, 2005, and is attached to this letter for easy reference. The same lands and project boundary are represented in attachment SDP-A to Marathon's Storage Development Plan as submitted to the ADNR on March 2, 2006, with copies to AOGCC (Jane Williamson) and the BLM (Greg Noble). The Pool 6 storage project boundary was generated by first mapping the contour of the current gas-water contact (-4770 ft) in Pool 6. All area inside the contact is the gas- bearing portion of Pool 6, within which the pore space is available for storage of gas. In the area outside the contour, the Pool 6 pore space is filled with water and is therefore unavailable for the storage of gas. The Pool 6 gas storage project area was then determined in the manner consistent with and accepted by the ADNR and BLM when establishing participating area boundaries: any 40 acre lease block with more than 50 percent of its area within the contour (above the gas-water contact) was included in the storage project area; any 40 acre lease block with less than 50 percent of its area inside the contour of the gas water contact was not included. Kenai Gas Field Pool 610as Storage Project April 3, 2006 Application for Injection Page 2 Legal Description of the Project area Attached please find a legal description of the lease blocks inside the proposed storage boundary (the project area) as shown on Exhibit 23 to Marathon's application for injection, per your request. If you have any additional questions, please do not hesitate to contact me. Production Coordinator Cc: Brian Havelock, ADNR . . MARATHON OIL COMPANY KENAI GAS FIELD POOL 6 GAS STORAGE FACILITY LEGAL DESCRIPTION OF PROJECT AREA (as shown in Exhibit 23 to Marathon's Application for Injection to the AOGCC, 8/26/05 and Attachment SDP-A to the First Storage Development Plan submitted to ADNR, 3/2/06) Seward Meridian T4N, R11 W, Sections 4: WI2SW/4 & SW/4NW/4 Sections 5, 6, 7 & 8: All Section 9: WI2NW/4 & NW/4SW/4 Section17 : NE/4NE/4 & WI2NE/4 & NW/4 & N/2SW/4 & SW/4SW/4 Section 18: All T4N, R12W, Section Section Section 1: E/2 & E/2W/2 12: E/2 & E/2W/2 13: NE/4 & E/2NW/4 & N/2SE/4 T5N, R11W, Section 28: W/2SW/4 Sections 29: All Section 30: EI2NE/4 & SW/4NE/4 & SE/4 & SE/4SW/4 Section 31: E/2 & SW/4 & EI2NW/4 Section 32: All Section 33: W/2NW/4 & SE/4NW/4 & SW/4 Proposed Pool 6 Storage Map I r #14 Re: [Fwd: Re: Kenai Injection Order Application March 2 letter to Ma... - " . . . Sabject: Re: [Fwd: Re: Kenai Injection Order Application March 2 letter to Marathon] From: John Norman <john_norman@admin.state.ak.us> Date: Thu, 30 Mar 2006 11:01:30 -0900 Rob, may we have your legal opinion on this issue please? Let me know if you need additional facts or background information. Thanks, John Robert Crandall wrote: John; Jane asked me to respond. The issue here seems to be if the Commission can write an order for a storage reservoir in which affected landowners are not participating. Our current regulation for gas storage includes the following language; An application for underground disposal or storage must include (1) a plat showing the location of all proposed disposal and storage wells, abandoned or other unused wells, production wells, dry holes, and any other wells within one-quarter mile of each proposed disposal or storage well; (2) a list of all operators and surface owners within a one-quarter mile radius of each proposed disposal or storage well; (3) an affidavit showing that the operators and surface owners within a one-quarter mile radius have been provided a copy of the application for disposal or storage; I have recently rewritten these regulations so that the notice area would extend to a 1/4 mile beyond to reservoir boundary, not simply a 1/4 mile around the storage well. Jim and Winton are reviewing these regulations. The regulation above is clearly requiring that affected owners be notified prior to the commission holding a hearing and issuing an order. The application Marathon filed conforms to our existing regulations, only owners within 1/4 of the proposed storage well were notified. No objections were filed and no interested parties requested a hearing or attended the hearing. At the hearing we requested additional information from Marathon which is yet to be submitted. In mid-February landowners claiming to be have property in the Kenai Field -Tim and Marilyn Keener contacted DNR and expressed concern about the storage operation, concerns about drinking water and also the amount of money Marathon was offering for the use of the Keener land. Jim is drafting a response to the Keeners. The Keeners have not raised the issue of correlative rights with us yet and they may not. Brian's letter makes clear there are a number of landowners who could do so however. Brian also discusses unititzation of the storage operation. This is interesting because if storing gas is the same as producing it we could rely on our statute to force unitize any hold outs, although the allocation of cost and production in the statute may not be applicable to this situation. In summary I think we should ask Rob for an opinion on the appropriate manner to deal with correlative rights in gas storage situations and then respond to Brian. 100 3/30/2006 11 :39 AM Re: [Fwd: Re: Kenai Injection Order Application March 2 letter to Ma... . " j . Jane Williamson wrote: 20f3 . Would you respond to this? -------- Original Message -------- Subject: Re: Kenai Injection Order Application March 2 letter to Marathon Date: Mon, 20 Mar 2006 10:55:11 -0900 From: John Norman <john norman@admin.state.ak.us> Organization: State of Alaska To: Jane Williamson <jane williamson@admin.state.ak.us> References: <OIVROOJ3GTOQ4E@ancmail1.state.ak.ys> <440DDE47.2050905@admin.state.ak.us> Jane-what is status of this matter? Thx, John Jane Williamson wrote: Brian and Lyndon, I have to speak with the Commissioners on this, but I understand the problem. We'll get back to you as soon as possible addressing your concern. In the meantime Lyndon, please continue compiling the remainder of the information we requested. Thank you for bringing this to our attention. Jane Brian Havelock wrote: Jane This follows our conversation regarding gas storage leasing and unitization at Kenai Pool 6 and the letter of March 2, 2006 from John K. Norman, AOGCC, to Marathon Oil Company. Specifically, there is concern regarding the last statement in the letter, "The Commission's order will be contingent upon Marathon Oil Company executing a gas storage agreement with all affected landowners." While this would be ideal, it is probably impossible. Marathon is trying to sign a lease with every landowner and has made contact with them (regardless of the distance from the injection well KU-3107X), but at least five landowners have refused their offer to lease. Certainly, every owner of the storage interval is entitled to compensation for Marathon's use of their lands (interval) and to their proportionate share of the lease fee, and Marathon on its own volition has agreed to place proportionate fees in escrow for any lands that it does not obtain an agreement for lease with. Marathon will apply to unitize the Pool 6 storage reservoir sometime next year, and we will require proof that Marathon made reasonable efforts to obtain joinder of any proper party that has refused to join that unit agreement, but we cannot make anyone sign a lease or unit agreement. Many oil and gas units in Alaska do not have 100% of the lands within the unit under lease or 100% of the landowners committed to the unit. We do not think it is necessary to have all the gas storage lands in Pool 6 under lease prior to issuing the injection order for the State to be protected, because the lease protects the State and Marathon would already have effective control of operations. The proposed lease protects the State in many ways, and additionally BLM has agreed to the native gas royalty payment method prescribed in it. Once they get the State lease, Marathon will have about 80% of the Pool 6 gas storage reservoir under lease or outright ownership. CIRI owns 10% and they are in lease negotiations right now. DNR plans to issue the gas storage lease sometime next month and Marathon 3/30/2006 11 :39 AM Re: [Fwd: Re: Kenai Injection Order Application March 2 letter to Ma... . ~. 4IIÞ J 300 4IIÞ would like to begin injecting almost immediately. Part of my job is to make sure the injection order and lease are consistent with one another. I am more than happy to come by to discuss the injection order, lease or gas storage process with you, staff or Commissioners and answer any questions. Brian **Brian Havelock** Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 99501 http://www.dog.dnr.state.ak.us John K. Norman <John Norman~admin.state.us> Chairman Alaska Oil & Gas Conservation Commission 3/30/2006 11 :39 AM #13 . . r;::I FRANK H. MURKOWSKI, GOVERNOR '¡:L, 1;~ ì :¡ :! j ·w AJ1ASIiA OILAlWD GAS CONSERVATION COMMISSION 333 W. 7'" AVENUE. SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 March 21, 2006 Tim and Marilyn Keener P.O. Box 2833 Kenai, AK 99611 Re: Marathon Oil Company's Proposed Kenai Gas Storage Lease Application Dear Mr. and Mrs. Keener: The Department of Natural Resources ("DNR") has forwarded to the Alaska Oil and Gas Conservation Commission ("Commission") your letter of February 12, 2006, concerning the application of Marathon Oil Company (" Marathon ") to DNR for an underground natural gas storage lease in the Kenai Gas Field. Although the Commission is not in- volved in such leasing, the Commission does regulate underground injection, as DNR noted in its response to your letter. Before Marathon can begin injecting gas under- ground it needs to obtain from the Commission a gas Storage Injection Order ("SIO"), as specified in 20 AAC 25.252. Under 20 AAC 25.252, an operator must demonstrate to the Commission that any pro- posed gas storage will not allow movement of gas into sources of fresh water. Gas stor- age wells must be cased and cemented so that the underground storage zone is isolated from other strata. As part of its evaluation, the Commission assesses well logs and other subsurface data, well designs, gas composition, volume, and compatibility, proposed in- jection pressure, likelihood of storage zone and confining layer fracturing, the presence of nearby water wells, water analyses, and other data to ensure that gas storage is safe and protective of the environment. Should the SIO be granted, the Commission will regularly inspect all injection wells and require that Marathon periodically confirm every injection well's mechanical integrity. Prior to Commission approval, any application for an SIO is publicly noticed and an op- portunity is given for a public hearing. Marathon submitted its request for SIO to the Commission on August 26, 2005. Public notice was posted in the Anchorage Daily News on September 8, 2005. The public notice was also posted on the Commission's website and sent by electronic mail to several State, Federal and local agencies (including the Ke- nai Peninsula Borough) on September 7,2005. A hearing was held on October 11,2005. At the hearing the Commission requested that Marathon provide additional information in support of its request. When all of the requested information is received, the Commis- sion will evaluate it and determine whether to approve the SIO for the Kenai Gas Field. Keener Page 2 of2 . . March 21, 2006 .'t ~ . The Commission has previously authorized the underground injection of exploration and production wastes in four Kenai Gas Field wells beginning in 1986. The injected wastes are primarily produced water, used drilling mud and cuttings, and other fluids that have been used in exploration and development wells for specific operational and integrity purposes. As described above, the Commission conducts extensive technical reviews prior to and during the injection to ensure all fluids injected are confined to the approved receiving zone, and that freshwater sources are fully protected. Publicly available infor- mation maintained by the Commission, including geologic and engineering records, modeling, and well test performance data for the existing four waste injection wells indi- cate all fluids are confined to the intended injection formations between 2,700 feet and 5,100 feet below the surface. Additional information, including the Commission's regulations and orders, is available on the Commission's web site at www.aogcc.alaska.gov. We hope this information is helpful to you. If you have further questions you may contact us directly at 907 279- 1433 for additional information. cc: William Van Dyke, DNR K. Patrick-Riley, ADEC Sen. Thomas Wagoner Representative Mike Chenault Representative Kurt Olsen Lt. Governor Loren Leman G. Noble, BLM L.C. Ibele, Marathon #12 · Alaska a Team Marathon Oil Company P.O. Box 196168 Anchorage, AK 99519-6168 Telephone 907/561-5311 Fax 907/565-3076 March 16, 2006 RECE\VED MAR 2 0 2005 0·\ & Gas Cons. commission. ~Iaska I Anchorage State of Alaska Alaska Oil and Gas Conservation Commission Attn: Mr. John Norman 333 West ih Ave, Suite 100 Anchorage, AK 99501 RE: Kenai Gas Field Gas Storage Application Supplemental Information request Dear Mr. Norman: At the October 11,2005 public hearing for the above application and in follow-up letter received by Marathon on March 2, 2006, the Commission requested supplemental information from Marathon regarding the proposed project. Information requested by the commission includes the following: 1) A records review of Pool 6 containment and the mechanical integrity of all KGF wells which penetrate Pool 6, including Attachment A. 2) The monitoring plan to be used to assess performance and confinement of Pool 6 storage operations, including Attachment SDP-B. 3) A revision to the injection permit application, requesting a reduction in the maximum operating pressure for the storage reservoir, consistent with specific request of the Commission. 4) A summary of Marathon's Emergency Action Plan which includes contingency planning for operational incidents. Listed below are answers to the commissioners requests. 1) Records Review for Kenai Gas Field Pool 6 Containment and Mechanical Intel!ritv Marathon has performed a thorough records review to supplement ph data and reservoir simulation modeling results that were previously presented to the AOGCC as evidence of containment/confinement of the Pool 6 and its suitability for gas storage operations. Kenai Gas Field Gas s.ge Application Supplemental Information request . March 16, 2006 Page 2 This effort to provide further evidence that Pool 6 is contained and isolated from all other zones included a thorough review of the individual well files for all Pool 6 penetrations, extractions from Marathon's digital records database (DIMS), and a comparison of pressures observed and recorded during drilling, completion and workover operations to Pool 6 reservoir pressure. The results of this records review have been compiled in a summary spreadsheet. This expansive approach was necessary because of the large number and relatively old age of well penetrations in the Pool 6. Although records which are oftentimes used as evidence of containment (ie, cement bond logs) are absent or inadequate in many cases, there was no evidence found of any communication between the Pool 6 and other intervals. The results of the record review, when integrated with all other production performance data, pressure data, and engineering models show conclusively that Pool 6 is isolated and provides containment for gas storage operations. Attachment A includes a description of the records review and a summary spreadsheet of the results, by well, for all Pool 6 penetrations. Please contact Mr. Kent Kuch, (713) 296- 3387 should you have questions regarding the information presented in Attachment A. 2) Monitorinl! Plan for Kenai Gas Field Pool 6 Storal!e Operations The gas storage lease requires Marathon to measure and keep a record of all gas injected into and withdrawn from the gas storage formation, and surface casing and reservoir pressures. Continuous monitoring will be performed to ensure the confinement and containment of the stored gas. Public safety, protection of the environment (surface and subsurface), and conservation of the resource are the primary purposes of the monitoring program. Additionally, monitoring data will be used to evaluate project performance and optimize the storage operations. A summary of all well monitoring data and results ofPIz performance analysis will be reported annually to the AOGCC, with copy provided to the Division of Oil and Gas. Attachment SDP-B is a copy of the monitoring plan for this project, which was previously submitted to AOGCC as an attachment to the Storage Development Plan filed with the ADNR on March 2, 2006. 3) Revised Pool 6 Reservoir Pressure Limitation for Storal!e Operations In its August 28, 2005 Application for Storage Injection Order, Marathon requested permission to utilize the Pool 6 for gas injection/storage as follows: "The proposed gas storage operation is expected to increase the current reservoir pressure from 192 psia to no more than 500 psia." At the October 11, 2005 hearing, the Commissioners made inquiry and Marathon presented testimony that the actual reservoir pressure given the anticipated injection volumes of 6 to 8 BCF per year would be far less than 500 psia. In its closing requests, the commission asked if a volume limitation of 7 BCF would be acceptable to Marathon. Marathon responded that a pressure limitation is more desirable than a volume limitation, given the uncertainties of when the project would begin, and how much gas might need to Kenai Gas Field Gas s.ge Application Supplemental Information request . March 16, 2006 Page 3 be injected to reach the desired optimum deliverability for which the project is planned. By letter dated March 2, .2006, the Commission specifically requested that Marathon revise the maximum operating pressure for the storage reservoir. Consistent with that request, Marathon has reviewed its reservoir information and plans, and hereby amends its application to request a maximum operating pressure of 300 psi for the storage reservoir, and further requests that to preserve maximum flexibility of operations and storage utility, that the Commission not impose limitation on annual injection/withdrawal volumes so long as the maximum reservoir pressure limit is not exceeded. 4) Marathon's Emere:encv Action Plan and Emere:encv Response Ore:anization Marathon has prepared and maintains an Emergency Action Plan (EAP) for all of its work locations in Alaska, including the Kenai Gas Field. The EAP has been prepared to meet the applicable requirements of 29 CFR Part 1910.38, 49 CFR Part 192.615, and House Bill 567 adopted by the 1990 Alaska Legislature. Marathon's EAP includes procedures for responding to spills, blowouts, fires, earthquakes, and numerous other scenarios. These hazards exist regardless of storage operations, and likewise the level of hazard is not elevated by the storage project as proposed in the application for injection. The proposed gas storage operations require only the use of existing pads, roads, pipelines, production equipment and compressors. Further, the modified, requested Pool 6 storage project reservoir pressure limitation under the AOGCC injection permit (300 psi), included in this letter as Item No.3, is extremely low, and the operating parameters of the project are well within the design limits of all of the equipment to be used. Therefore, there are no additional identified operating hazards as result of the proposed gas storage operations, and any potentially-required response scenarios are covered in Marathon's existing EAP. It is the policy of Marathon Oil Company to take practical steps to promote personal safety, conserve material resources, safeguard property and protect the environment and the general public. In pursuit of this policy, Marathon is committed to: · Compliance with government regulations and legislation. · Development and application of safe work practices. · Development and implementation of emergency response procedures and contingency planning. · Provision of adequate training and supervision to enable all employees to effectively carry out their roles and responsibilities. Training drills are held on a regular basis. These drills are designed to practice coordination and transition with joint participation of governmental agencies, contractor response organizations, and Marathon for the various emergency conditions identified in ourEAP. Kenai Gas Field Gas s.ge Application Supplemental Information request . March 16, 2006 Page 4 Marathon's Alaska personnel will respond to emergencies using the Incident Command System (ICS). Additional support is provided by Marathon's Corporate Emergency Response Team (CERT) which is on call and prepared to respond to major emergencies anywhere in the world that Marathon operates. I trust that this information will complete the record necessary for the Commission to make its decision in support of issuing the requested injection permit. Please call me at (907) 565-3042 if you have any additional questions. Marathon requests that the AOGCC and the agencies copied on this letter maintain the confidentiality for any or all of this information which is not required to become part of the public record. smc:~/ L~C.Ibe;" Production Coordinator Enclosures cc: Greg Noble, Bureau of Land Management Brian Havelock, Alaska Department of Natural Resources . . Kenai Gas Field Gas Storage Project Records Review for Proof of Containment of Gas in Pool 6 Discussion of Methodology Marathon has performed a thorough records review to supplement p/z data and reservoir simulation modeling results that were previously presented to the AOGCC as evidence of containment/confinement of the Pool 6 and its suitability for gas storage operations. This effort to provide further evidence that Pool 6 is contained and isolated from all other zones included a thorough review of individual well files for all Pool 6 penetrations, extractions from Marathon's digital records database (DIMS), and a comparison of pressures observed and recorded during drilling, completion and workover operations to Pool 6 reservoir pressure. The results of this records review have been compiled in a summary spreadsheet. This expansive approach was necessary because of the large number and relatively old age of well penetrations in the Pool 6. Although records which are oftentimes used as evidence of containment (ie, cement bond logs) are absent or inadequate in many cases, there was no evidence found of any communication between the Pool 6 and other intervals. The results of the record review, when integrated with all other production performance data, pressure data, and engineering models shows conclusively that Pool 6 is isolated and provides containment for gas storage operations. A spreadsheet summarizing the Pool 6 well penetrations and the results of the records reviewed is included as part of this attachment. Review of Well Files The well files for every well in the Kenai Gas Field that penetrates the Pool 6 were investigated to determine if Pool 6 was isolated. The well history was broken into several stages (drilling, completion, production and auxiliary data) and information pertinent to isolation of Pool 6 was recorded in a summary spreadsheet. In the original drilling of the well it was noted in the summary if casing was set across Pool 6, whether a sufficient volume of cement was pumped to cover the interval, if there was verification of the top of cement, if a bond log was run and if the bond interpretation indicated adequate isolation of Pool 6. In the completion phase of the well, mechanical isolation from other producing zones by the use of tubing and packers, sliding sleeves, patches, plugs or squeezes of perforated intervals was noted in the summary. In the subsequent years of production history, any information that showed differential behavior from Pool 6 was noted. Examples include records of shut-in pressures that were higher than Pool 6, and any record of workover fluid columns that would exceed Pool 6 reservOIr pressure. Attachment A Marathon Oil Company AOGCC Application for Injection Supplemental Data Request 3/16/06 . . Auxiliary data like production logs, temperature logs, gradient surveys, etc were inspected to verify no gas was entering or exiting Pool 6. Other data that was researched and recorded includes records of all mechanical integrity tests (MIT's) demonstrating casing and tubing integrity. Reservoir Pressure Different Than Pool 6 The single most convincing evidence of Pool 6 containment is that the pressure of every other zone is different than Pool 6. Periods where all the wells in a given pool were shut- in typically show that shut-in pressures stabilize in less than two days and all wells have pressures within a few psia of the pool average. This consistency across the field within a given pool adds credibility to differences between the Sterling pools throughout history, when the pools were being depleted at much the same rate at the same time due to market demands. In recent years, with more sophisticated electronic gauges and continuous monitoring of Pool pressure data, even the smallest pressure differences between the pools are easily seen. The pressure in the deeper zones (Beluga, Upper Tyonek, and Deep Tyonek) are substantially more than Pool 6, so much so that if communication did exist, there would be evidence on the P/Z versus cumulative gas plot for both reservoirs. Shallower producing zones (ie, Pools 3, 4, and 5.2) exhibit pressures that are significantly enough different that they are easily distinguishable and obviously isolated from each other and from the Pool 6. The trend of the Pool 6 P/Z plot is very linear, indicating tank-like behavior and therefore complete zone isolation. Drilling Database Electronic Search A search was made of the electronic drilling database (DIMS) to extract all records that held key words related to opening, closing, testing or working on a well. This extraction allowed for rapid searches of key words such as "plug", "pressure", "test", "cement", "leak", etc. to locate wells that needed further investigation. Those well records were then reviewed for applicability to Pool 6 containment. The digital drilling database however only contains data for wells drilled or worked on since 2000. For this reason, the manual search through the hard copy files was necessary for thoroughness. The electronic record search was undertaken to ensure the thoroughness of the review for the more recent historical records. No Documentation of Communication with Pool 6 There were no documents found in any of the well records indicating that Pool 6 was in communication in any wellbore other than where it had been perforated as a Pool 6 producer at some point in the history of that well. In wells where Pool 6 was subsequently plugged, documentation of the plugging procedure and any other validation was noted. Attachment A Marathon Oil Company AOGCC Application for Injection Supplemental Data Request 3/16/06 . . In some cases the raw data by itself is inadequate to prove isolation, for example a bond log that shows poor bond across Pool 6 or a well where a bond log was not run. However, neither does the absence of such data lead to the conclusion that communication is occurring, unless supported by other evidence. All of the available data from the well records has been evaluated and none of it points to a conclusion that supports communication. To the contrary, the records review shows a preponderance of information indicating that Pool 6 is contained and isolated. A spreadsheet summarizing the Pool 6 well penetrations and the results of the records reviewed follows immediately as a continuation of this Attachment A. Attachment A Marathon Oil Company AOGCC Application for Injection Supplemental Data Request 3/16/06 Marathon Oil Company Confidential Kenai Gas Field Gas Storage Project Date: 3/9/2006 Record Review for Containment of Gas in Sterling Pool 6 CASING SET ACROSS POOL 6 CEMENT BOND LOG TOP OF CEMENT MECHANICAL ISOLATION INSIDE THE CASING PRESSURE ISOLATION DOCUMENTED Covered by WELL API Number Current Pool 6 Ever Casing? Bond Log Bond Tubing Sliding Casing Tubing Squeezed Pressure Character of P/Z vs Pressure Work over fluids exceed Mechanical Documented Zone(s) Open Perforated? Exists? Adequate? Verified Calculated Other &/or Sleeve Plug Plug Perfs / Other different than Cum. Gas stable in Pool 6 Integrity Test communication COMMENT Packer Patch Pool 6 long SI (M.I.T.) with Pool 6? plot pressure KENAI UNIT 11-06 50133100880000 Pool 4 No NDE WA WA WA WA WA WA WA WA WA WA N/A WA N/A WA N/A No Not drilled as deep as Pool 6 KENAI UNIT 11-08 50133203570000 Pool 4 Yes Yes Yes Yes Yes Yes Yes Yes No Yes Pool 5.1 Pool 4 Pool 4 Yes I No N/A Former roducer. Tubing plug in LS, Pool 6 Shut-in. KENAI UNIT 11-17 50133203490000 Pool 5.1,6 Yes Yes Yes Yes Yes Yes Sgz'd Yes Yes No No Yes Pool 5.1,6 WA WA Yes Yes Injection in Pool 6 Disposal into Pool 5.1 & 6 KENAI UNIT 13-06 50133203560000 Pool 6 Yes Yes Yes Yes Yes Yes Yes Yes No No Pool 5.1 Pool 6 Pool 6 Yes WA WA Pool 6 producer. Pool 6 LS & annular flow. KENAI UNIT 13-08 50133100140000 Abandoned No No WA N/A P&A Yes P&A WA WA WA WA WA N/A N/A N/A WA WA No P&A'd.This well is in Cannery Loop. KENAI UNIT 14-04 50133100870000 Abandoned No Yes Unknown WA Yes Yes Sgz'd WA N/A Yes WA WA P&A'd N/A WA N/A Yes Former disposal Was Pool 4, then wtr dis osal.P&A. KENAI UNIT 14-06 50133100890000 Plugged Yes Yes Yes Yes Yes Yes Sqz'd Yes Yes Yes Yes N/A Plugged WA WA WA WA Former producer. Plugged for redrill. KENAI UNIT 14-06RD 50133100890100 Pool 3 Yes Yes 1 Unknown WA Yes Yes Cmt'd Yes Yes Yes Yes Pool 3 Plu ed WA WA WA Yes Former producer. Everything below Pool 3 plugged. KENAI UNIT 14-32 50133203510000 Poo16 Yes Yes Yes Yes Yes Yes Yes No Yes No Pool 5.1 Pool 6 Pool 6 Yes WA WA Pool 6 producer. Former dual 5.6 & 6, now only 6. KENAI UNIT 14X-06 (KDU 8) 50133203420000 Pool 6 Yes Yes Yes No Yes Yes Temp Yes No Yes No Pool 3 T onek Pool 6 Pool 6 Yes WA WA Pool 6 producer. Former dual, now only Pool 6. KENAI UNIT 14X-06RD 50133203420100 Not redrilled No WA N/A N/A WA WA WA N/A WA WA WA WA N/A WA I WA WA No Well never redrilled. KENAI UNIT 21-05 50133201850000 Pool 3,5.1 No Yes Yes Yes Yes Yes Sqz'd Yes Yes Yes No Yes Pool 3,5.1 Pool 3 Yes No WA No Never perf'd below Pool 5.1 KENAI UNIT 21-06 50133100900000 Plugged Yes Yes Yes Yes Yes Yes Sqz'd No No Yes No Redrilled WA WA N/A WA WA Former producer. Wellbore was plugged for redrill. KENAI UNIT 21-06RD 50133100900100 Pool 6 Yes Yes Unknown WA No Yes P-test Tb No No No No Pool 6 Fiool 6 Yes N/A WA Pool 6 producer. Only zone open in redrill is Pool 6. KENAI UNIT 21-07 50133100920000 Pool 3 No Yes Yes Yes Yes Yes No No Yes No Above 6 Pool 3,5.1,5.2 Pool 3 Yes No WA No Only drilled 30 ft into Pool 6, cmtd. KENAI UNIT 21X-32 50133202040000 Pool 4 No Yes No WA No Yes Yes Yes Yes Yes No Pool 4,5.1 Pool 4 Yes No WA No Pool 4 SS & annular flow. KENAI UNIT 24-05 50133203580000 Plu ed No Yes Yes Yes Yes Yes WA WA N/A WA WA Pool 4,5.1 Pool 4 Yes No WA No Never perforated below Pool 5.1. KENAI UNIT 24-05RD 50133203580100 Pool 4 No NDE WA WA WA WA WA WA WA WA N/A Pool 4 Pool 4 Yes No WA No Redrill does not penetrate Pool 6. KENAI UNIT 24-07 50133203520000 Plugged No Yes WA WA WA WA WA WA WA WA WA Redrilled Plugged WA N/A WA Yes No Former dual producer, disposal. KENAI UNIT 24-7RD 50133203520100 Pool 3 No NDE WA WA I WA WA WA WA WA WA N/A NDE Pool 3 Pool 3 Yes No Yes No Redrill does not penetrate Pool 6. KENAI UNIT 31-07X 50133204950000 Pool 6 Yes Yes Yes Yes Yes Yes No No No No No Pool 6 Pool 6 Yes WA WA Pool 6 Producer Planned gas injector/producer. KENAI UNIT 33-01 50133100950000 Pool 4 No Yes Yes Yes Unknown Yes Yes Yes Yes No Yes Pool 4 Pool 4 Yes No WA No Pool 6 below casing plug. KENAI UNIT 33-30 50133100960000 Pool 3,4 No Yes Unknown WA Unknown Yes Yes Yes Above 6 No Yes Pool 3,4 Pool 4 Yes No Yes No Pool 6 below casing plug. KENAI UNIT 33-32 50133100980000 Pool 4,5.1,6 Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Pool 4,5.1,E Pool 4 Yes No WA SI Pool 6 producer Pool 6 is LS, inactive. KENAI UNIT 34-31 50133100970000 Pool 6 Yes Yes Unknown WA No Yes Yes No Yes No Yes Pool 6 Pool 6 Yes WA WA Pool 6 Producer Pool 6 producer only. KENAI UNIT 34-32 50133203480000 Pool 5.1,6 Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Pool 5.1,6 Pool 6 Yes No WA Pool 6 Producer Pool 6 LS & annular flow. KENAI UNIT 41-02 50133100130000 Dry hole No P&A WA WA Yes Yes P&A WA WA WA WA WA WA WA WA WA WA No Dry hole, plugged 9/28/66. KENAI UNIT 41-18 50133202280000 Pool 4 No Yes Yes Marginal Yes Yes Sqz'd Yes Yes Above 6 Yes Below 6 Pool 4 Pool 4 Yes No WA No Block squeezed Sterling zone. KENAI UNIT 41-19 50133100940000 Abandoned No P&A WA WA Yes Yes P&A WA WA WA WA WA WA WA WA WA WA No KENAI UNIT 42-30 50133203410000 Pool 4 No P&A Yes Yes Yes Yes P&A P&A P&A P&A P&A P&A Pool 4 Pool 4 Yes No WA No Dry hole, plugged. (KDU 7) Hole below Pool 5.1 plugged. KENAI UNIT 43-06 50133100910000 Plugged Yes Yes Unknown Sqz'd Yes Yes Sqz'd Yes Yes Yes No Sgz'd redrilled 1 Pool 5.1,6 Pool 6 Yes No WA No This was plugged to redrill. KENAI UNIT 43-06A 50133201230000 Pool 4 No Partially Yes Yes Yes Yes No No Yes No Pool 3 Pool 4 Pool 4 Yes No N/A No TD is in Pool 6, plugged. KENAI UNIT 43-06RD 50133100910100 Pool 6 Yes Yes Unknown Unknown Unknown Yes Tested Liner No No No No Pool 6 Pool 6 Yes WA N/A Pool 6 Producer After redrill, 4.5" liner run. KENAI UNIT 43-07 50133100930000 Pool 3,5.1 Yes Yes Unknown Unknown Yes Yes Sqz'd Yes Yes lAbove 6 Yes Pool 6 Pool 3,5.1 Pool 3 Yes YesPN/A Pool 6 Plugged Now Pool 3 producer. KENAI UNIT 43-12 50133201990000 Pool 3 Yes Yes Yes NDE Yes Yes Yes Yes Above 6 No Pool 5.1 Pool 3,4 Pool 3,4 Yes No No Pool 6 isolated b plug. KENAI UNIT 44-18 50133100940100 P&A'd No Yes Yes Yes Yes Yes P&A WA WA N/A N/A WA WA WA WA WA No P&A'd well 12/1/86 KENAI UNIT 44-30 50133201390000 Pool 4,6 Yes Yes Yes Yes Yes Yes Yes Yes No No No Fill Pool 4,6 Pool 4,6 Yes WA SI Pool 6 producer Both tubin strip s are shut-in. KENAI UNIT WD-1 50133203450000 Shallow No Yes Yes Yes Yes Yes Yes Yes No No No Fill Pool 4,6 Pool 4,6 Yes N/ANDE NDE.Water disposal above Pool 6. KENAI BELUGA UNIT 11-7 50133205560000 Belu a/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Belu a WA Yes No Pool 6 behind 2 strings. KENAI BELUGA UNIT 11-8X 50133205360000 Beluga/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 11-8Y 50133205520000 Beluga/UT No Yes No WA Yes Yes Temp Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 13-08 50133203040000 Beluga No Yes Yes Yes Yes Yes Sqz'd Yes Yes WA No Yes Yes Beluga WA Yes WA No Pool 6 squeezed for isolation. KENAI BELUGA UNIT 22-06 50133205500000 Beluga/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 23-7 50133205320000 Beluga/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 23X-06 50133203710000 Pool 6 Yes Yes Yes Yes Yes Yes Sqz'd Yes No Yes No Pool 5.1 patch Pool 6 Pool 6 Yes WA WA Pool 6 Producer Pool 6 annular flow. KENAI BELUGA UNIT 24-06 561 33204990000 Belu a No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 31-07 56133203470000 Plugged No Yes Unknown WA No Yes WA WA Yes WA WA Liner run WA WA WA WA WA No KENAI BELUGA UNIT 31-07RD 50133203470100 Beluga No Yes Yes Yes Yes Yes _Sqz'd Yes No No No No Yes Beluga WA Yes Former dual Beluga, redrilled. KENAI BELUGA UNIT 33-06 50133204870000 Beluga/UT No Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Belu N/A No Kickoff was below Pool 6. KENAI BELUGA UNIT 33-06X 50133205290000 Belu a No Yes No WA No Yes Yes No No No No Monobore Yes a Belu a WA WA Yes Yes WA WA No Pool 6 behind intermediate casin . KENAI BELUGA UNIT 33-07 50133203800000 Pool6 Yes Yes Yes Yes Yes YesYes rlUin Yes Yes Yes Belu a Pool 6 Pool6 Yes WA WA No Pool 6 Producer Pool 6 behind 2 strings. Pool 6 SS & annular flow. KENAI BELUGA UNIT 41-07 50133203270000 Belu a No Yes Yes Yes Yes Yes Yes No Yes No Beluga Yes Belu a WA Yes Yes No Moved top packer up, passed MIT. KENAI BELUGA UNIT 41-07X 50133205100000 Belu a No Yes Yes Yes Yes YesNo No Yes No Beluga Monobore Yes Beluga WA Yes Yes No Pool 6 isolated by monobore. KENAI BELUGA UNIT 41-6 50133205550000 Beluga/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool KENAI BELUGA UNIT 42-07 50133204880000 Beluga No Yes Yes No No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA 6 behind 2 strings. KENAI BELUGA UNIT 42-6 50133205460000 Beluga/UT No Yes No WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 43-07X 50133205220000 Beluga No Yes Unknown WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI BELUGA UNIT 44-06 50133204980000 Beluga No Yes Unknown WA No Yes P-test Yes No No No No Monobore Yes Beluga WA Yes WA No Pool 6 behind 2 strings. KENAI DEEP UNIT 1 50133200350000 Deep T onek No Yes Yes Yes Yes Yes Yes Yes No No No Yes T onek Yes Yes WA No No Pool 6 behind 2 strings. KENAI DEEP UNIT 2(21-8) 50133201210000 T onek Yes Yes Yes Yes Yes Yes S Zd Yes Yes Yes No Pool 6 lu Good bond above & below Pool 6. I D YesI Tyul lun Yes Yes WA Former producer I Was dual, Pool 6 s z'd. Attachment A cont KGF Pool 6 Containment Records Review.xls 1 of 2 M¡o¡,ratl1Qn Oil Company Confidential Kenai GasiField Gas ~tQrage Project RecQrd. Review for Contªinment of Gas·in Sterling PoolS Date: 3/9/2006 CASING SeT ACROSS POOL 6 Te:¡ '!.It Ä"'I"'~I Covered by Character of Work over Current Pool 6 Ever Casing? Bond Log Bond Tubing Sliding Casing Tubing Squeezed Pressure P/Z vs Pressure fluids exceed Mechanical ¡Documented WELL API Number Zone(s) Open Perforated? Exists? Adequate? Verified Calculated Other &lor Sleeve Plug Plug Perfs 1 Other different than Cum. Gas stable in Pool 6 Integrity Test communication COMMENT Packer Patch Pool 6 long SI (MH.) with Pool 6? plot pressure KENAI DEEP UNIT 4 50133201760000 Beluga No Yes Unknown N/A No Yes Yes No Yes No Tyonek plug Yes Beluga N/A Yes N/A No Pool 6 be_hind 2 strings. -- -.-- ---¡ïJO ~^~~- ~~^^ KENAI DEEP UNIT 5 50133203190000 Pool 3,6 Yes Yes Yes Yes Yes Yes Sqz'd Yes Yes Yes Beluga plug Pool 6 Pool 6 Yes N/A N/A Pool 6 Producer Pool 6 LS & annular flow. iKENAI DEEP UNIT 6 50133203200000 Pool 3,4 No Yes Yes Yes Yes Yes Sqz'd Yes Yes Yes No Beluga Pool 3,4 Pool 3,4 Yes No N/A No Pool 6 isolated by plug. KENAI TYONEK UNIT 13C05 50133203700000 Beluga/UT Sqz'd Yes Yes Unknown No Yes Sqz'd Yes Yes Yes No Yes Beluga/UT Tyonek __Yes _ Yes N/A - Block sqz'd Pool 6 block squeezed, under pkr. KENAI TYONEK UNIT 24-06H 50133204900000 Tyonek No Yes Unknown N/A No Yes Yes Yes No No No Yes T\lonek Yes Yes N/A ~- No Pool 6 behind 2 strings. -- KENAITYONEK UNIT 32-07 50133204910000 Tyonek No YèS Yes Unknown No Yes P-test Yes No Yes No Tyonek Yes Tyonek Yes Yes N/A No Pool 6 behind 2 strings. KENAI TYONEK UNIT 32-07H 50133205110000 Tyonek No Yes Unknown N/A No Yes P-test Yes No No No No Yes - Tvonek Yes Yes N/A No Pool 6 behind 1 string. ... KENAI TYONEK UNIT 43-06X 50133203280000 Plugged No Yes Yes Yes Yes Yes N/A N/A Yes N/A N/A Yes Tyonek Yes Yes N/A No Pool 6 behind 2 strings. KENAI TYONEK UNIT 43-6XRD 50133203280100 Plugged No Yes Yes Yes Yes Yes N/A N/A Yes N/A N/A Yes Tyonek Yes Yes N/A No Kickoff for redrill below Pool 6. .-- --^-- KENAI TYONEK UNIT 43-6XRD2 50133203280200 Tyonek No Yes Yes Yes Yes Yes N/A N/A Yes N/A N/A Yes Tyonek Yes Yes N/A No Kickoff for redrill below Pool 6. LEGEND Zones ¡Abbreviation N/A= Not Applicable P-test = Pressure test Sterling I~:~~~ 4, 5.1, 5.2,6 P&A= Plugged & Abandoned Temp = Temperature Log Beluga/Upper Tyonek Sqz'd= Squeezed Pèrfs LS Long string Deep Tvonek Deeo Tv NDE- Not Deep Enouah SS .... Short strinCl Attachment A cant KGF Pool 6 Containment Records Review.xls 20f2 #11 [Fwd: Proposed Consistency Determination - Gas Storage - ADL 390821] . . Subject: [Fwd: Proposed Consistency Determination - Gas Storage - ADL 390821] From: John Norman <john_norman@admin.state.ak.us> Date: Man, 20 Mar 2006 10:53:31 -0900 "Eo:J ody J CC:9ª,~~r <då1U5~~ollnt@ Print copy with attachment and file in MOC Kenai Gas field storage application file. -------- Original Message -------- Subject:Proposed Consistency Determination - Gas Storage - ADL 390821 Date:Tue, 07 Mar 2006 16:48:01 -0900 From:Jonne Slemons <ionne slemons(a}dnr.state.ak.us> Reply- To:jonne slemons(a}dnr. state. ak. us Organization:DNR Division of Oil & Gas To:'Gary Williams' <gwilliams(a}borough.kenai.ak.us>, 'Chick Underwood' <caunderwood(a}marathonoil.com>, 'Ben Greene' <ben greene(a}dnr.state.ak.us>, Stewart Seaberg <stewart seaberg(a}dnr.state.ak.us>, 'Mark Fink' , 'Kellie Westphal' <kellie westphal(å}dnr.state.ak.us>, 'Linda Books' <linda books(a}dnr.state.ak.us>, 'Cynthia Espinoza' <cynthia espinoza(a}dec.state.ak.us>, 'Lydia Miner' <lydia miner(a}dec.state.ak.us>, 'Judith Bittner' <iudy bittner(a}dnr.state.ak.us>, 'Bob Crandall' <bob crandall(a}admin.state.ak.us>, Lynn Kent <lynn kent(a}dec.state.ak.us>, john norman(a}admin.state.ak.us, Kristin Ryan <kristin ryan(a}dec.state.ak.us> The Proposed Consistency Determination for the subject Gas Storage lease is attached for your information and review. Please note that elevation of the proposed determination must be received by the Director, Division of Oil and Gas or the Commissioner, Alaska Department of Natural Resources, by 5:00 p.m. March 10,2006. Jonne Slemons Manager, Oil & Gas Permitting Division of Oil & Gas Alaska Department of Natural Resources th 550 W. 7 Ave., Ste. 800 Anchorage, AK 99501 Ph: 907-269-8806 Fx: 907-269-3484 John K. Norman <John Norman(a}admin.state.us> Chairman Alaska Oil & Gas Conservation Commission Content-Type: application/msword Proposed Consistency Determination-060307.doc Content-Encoding: base64 ] of 1 3/20/2006 11 :58 AM #10 . . MEMORANDUM Department of Natural Resources STATE OF ALASKA Division of Oil & Gas DATE: March 7, 2006 TO: Distribution list FROM: Patrick S. Galvin Petroleum Land Manager SUBJECT: Proposed ACMP Consistency Determination for Proposed Gas Storage Lease Application (ADL 390821), Kenai Gas Field, Sterling Pool 6 The Alaska Department of Natural Resources (ADNR), Division of Oil and Gas (DO&G) is reviewing the proposed gas storage lease application for consistency with the Alaska Coastal Management Program (ACMP). Marathon Oil Company (Marathon) proposes to store natural gas in the Sterling Formation Pool 6 C 1 and C2 gas sands utilizing gas wells and facilities located approximately seven miles west of Soldotna, Alaska. No construction or modifications to the existing facilities are required. All of the lands within the proposed storage area are subject to existing oil and gas leases in the Kenai River Unit, owned and operated by Marathon. State storage lands are located in all or portions of the following lands: T. 5 N., R. 11 W., Seward Meridian, Sections 28 - 31, and T. 4 N., R. 12 W., Seward Meridian, Sections 1, 12 and 13. The proposed lease area lies within Alaska's coastal zone, and has been reviewed for consistency with the Kenai Peninsula Borough Coastal Management Plan (KPBCMP). DO&G is issuing this proposed consistency determination under 11 AAC 110.255. On January 10, 2006 DO&G initiated an ACMP review for the proposed gas storage lease. Agencies, the local government, the coastal district, the oil and gas industry, and the public were invited to comment on the proposed lease's consistency with the ACMP, and on any issues relative to the state's best interests regarding the proposal. Three entities provided comments. The State Historic Preservation Officer commented that because no ground-disturbing activities are proposed, the Office of History and Archaeology has no concerns with the proposed project, but reminds the applicant that all future activities must be reviewed as the project progresses in order for Marathon to remain in compliance with the Alaska Historic Preservation Act. The Kenai Peninsula Borough's Planning Department, Land Management Division commented with no opposition to the proposed gas storage project provided the borough's interests are protected, and asked a question about ownership of subsurface pore spaces, where the state owns the subsurface resources. Tim, Marilyn, Clint and Lindsay Keener commented in opposition to the project, relative to the State's best interests; their comments are . . March 3, 2006 Page 2 of8 lengthy and make several requests, and will be fully considered in development of the best interest finding. They do not address the project's consistency with the ACMP. A best interest finding for a proposed lease is valid for the length of the lease. However, proposed activities on the lease will be subject to ACMP consistency. Both the best interest finding and the final consistency determination for the proposed lease are planned for release on March 20, 2006. Following review of the comments received and the proposed lease, DO&G will attach the following mitigation measures and lessee advisories as terms of the storage lease. Abbreviations used in the following sections include: Alaska Department of Environmental Conservation (ADEC), Alaska Department ofFish and Game (ADF&G), Alaska Department of Natural Resources (ADNR), Director (Director, ADNR/Division of Oil and Gas), ADNR/Division of Forestry (DOF), ADNR/Division of Mining, Land and Water (DMLW), ADNR/Division of Parks and Outdoor Recreation (DPOR), Kenai Peninsula Borough (KPB), ADNR/Office of Habitat Management and Permitting (OHMP), ADNR/State Historic Preservation Officer (SHPO), U.S. Army Corps of Engineers (USCOE), and U.S. Fish and Wildlife Service (USFWS). MITIGATION MEASURES AND LESSEE ADVISORIES Facilities and Operations 1. The Lessee must submit a plan of operations to the state for approval as required by 11 AAC 83.158. Where surface activities are proposed on non state-owned land, the Lessee must submit a copy of the plan of operations to the private surface owner. Plans of operation must describe the Lessee's efforts to minimize impacts on residential areas and privately-owned surface lands. 2. The Lessee must disclose any requests for exceptions to these mitigation measures and advisories in their plans of operation and applicable permit applications. 3. A plan of operations must describe the Lessee's efforts to minimize impacts on residential, commercial, and recreational areas, Native allotments and subsistence use areas. At the time of application, the Lessee must submit a copy of the proposed plan of operations to all surface owners whose property will be entered. 4. Facilities must be designed and operated to minimize sight and sound impacts in areas of high residential, commercial, recreational, and subsistence use and important wildlife habitat. Methods may include providing natural buffers and screening to conceal facilities, sound insulation of facilities, or by using alternative means approved by the Director, in consultation with OHMP. 5. The siting of facilities other than docks, roads, utility or pipeline corridors, will be prohibited within 500 feet of all fish bearing waterbodies. A facility may be sited within this buffer if the Lessee demonstrates to the satisfaction of the Director, in consultation with OHMP and the KPB, that a site location outside this buffer is not feasible and prudent or that a location inside the buffer is environmentally preferred. Road, utility and pipeline crossings must be aligned perpendicular or near perpendicular to watercourses. . . March 3, 2006 Page 3 of8 6. Impacts to important wetlands must be minimized to the satisfaction of the Director, in consultation with OHMP and ADEC. The Director will consider whether facilities are sited in the least sensitive areas. Further, all activities within wetlands require permission from the U.S. Army Corps of Engineers (see Lessee Advisories). 7. a. Pipelines that must cross marine waters will be constructed beneath the marine waters using directional drilling techniques, unless the Director, in consultation with OHMP and the KPB, approves an alternative method based on technical, environmental, and economic justification. b. Wherever possible, onshore pipelines must utilize existing transportation corridors and be buried where soil and geophysical conditions permit. In areas where pipelines must be placed above ground, pipelines must be sited, designed and constructed to allow free movement of wildlife. c. Pipelines must be located upslope of roadways and pads and must be designed to facilitate the containment and cleanup of any associated hydrocarbons and petroleum products. Pipelines, flowlines, and gathering lines must be designed and constructed to assure integrity against environmental conditions and geophysical hazards. 8. Dismantlement, Removal and Rehabilitation (DR&R): Upon abandonment of material sites, well sites, roads or other facilities, such facilities must be removed and the site rehabilitated to the satisfaction of the Director, unless the Director, in consultation with DML W, OHMP, DEC, KPB, and any non-state surface owner, determines that such removal and rehabilitation is not in the state's interest. 9. With the exception of facilities specifically permitted, facilities must be consolidated, and the use of gravel must be minimized. Use of abandoned gravel structures may be permitted on an individual basis. 10. Gravel mining within an active floodplain will be prohibited. Upland sites will be restricted to the minimum necessary to effect lease operations efficiently. Fish and Wildlife Habitat 11. Compaction or removal of snow cover overlying fish bearing waterbodies is prohibited except for approved crossings. If ice thickness is not sufficient to facilitate a crossing, ice or snow bridges may be required. 12. Surface entry will be prohibited within one-quarter mile of trumpeter swan nesting sites from April 1 through August 31. The siting of permanent facilities, including roads, material sites, storage areas, powerlines, and above-ground pipelines will be prohibited within one-quarter mile of known nesting sites. Trumpeter swan nesting sites will be identified by ADF&G at the request ofthe Lessee. 13. Before commencement of any activities requiring human presence, the Lessee shall consult with ADF &G to identify the locations of known bear den sites that are occupied in the season of proposed activity. Activities requiring human presence may not be conducted within 1f2-mile of known occupied brown bear dens, unless alternative mitigation measures are approved by ADF&G. A Lessee who encounters an occupied bear den not previously identified by ADF &G must report it to the Division of Wildlife Conservation, ADF&G, within 24 hours (Soldotna, 907-262-9368). . . March 3, 2006 Page 4 of 8 Access 14. Public access to, or use of, the leased area may not be restricted except within the immediate vicinity of well sites and related structures. Areas of restricted access must be identified in the plan of operations. Lease facilities and operations shall not be located so as to block access to or along navigable and public waters as defined at AS 38.05.965(13) and (17). Waste and Wastewater Disposal 15. Waste from operations must be reduced, reused, or recycled to the maximum extent practicable. Garbage and domestic combustibles must be incinerated whenever possible or disposed of at an approved site in accordance with 18 AAC 60. 16. Discharge of drilling mud and cuttings into lakes, streams, rivers, or important wetlands is prohibited. On pad temporary cuttings storage will be allowed as necessary to facilitate annular injection, regulated by AOGCC, or backhaul operations in accordance with ADEC solid waste regulations at 18 AAC 60. 17. Wastewater disposal: a. Unless authorized by NPDES and/or state permit, disposal of wastewater into freshwater bodies, intertidal areas, or estuarine waters is prohibited. b. Disposal of produced waters to freshwater bodies, intertidal areas, and estuarine waters is prohibited. c. Disposal of produced waters in upland areas, including wetlands, will be by subsurface disposal techniques approved by AOGCC. d. Surface discharge of reserve pit fluids will be prohibited unless authorized in a permit issued by ADEC and approved by DMLW. Fuel and Hazardous Substances 18. Secondary containment shall be provided for the storage of fuel or hazardous substances. 19. During equipment storage or maintenance, the site shall be protected from leaking or dripping fuel and hazardous substances by the placement of drip pans or other surface liners designed to catch and hold fluids under the equipment, or by creating an area for storage or maintenance using an impermeable liner or other suitable containment mechanism. 20. During fuel or hazardous substance transfer, secondary containment or a surface liner must be placed under all container or vehicle fuel tank inlet and outlet points, hose connections, and hose ends. Appropriate spill response equipment, sufficient to respond to a spill of up to five gallons, must be on hand during any transfer or handling of fuel or hazardous substances. Trained personnel shall attend transfer operations at all times. 21. Vehicle refueling shall not occur within the annual floodplain, except as addressed and approved in the plan of operations. . . March 3, 2006 Page 5 of8 22. All independent fuel and hazardous substance containers shall be marked with the contents and the Lessee's or contractor's name using paint or a permanent label. 23. A fresh water aquifer monitoring well, and quarterly water quality monitoring, is required down gradient of a permanent fuel storage facility, unless alternative acceptable technology is approved by ADEC. Prehistoric, Historic, and Archeological Sites 24. a. Prior to the construction or placement of any structure, road, or facility, the Lessee must conduct an inventory of prehistoric, historic, and archeological sites within the area affected by an activity. The inventory must include consideration of literature provided by the KPB and local residents; documentation of oral history regarding prehistoric and historic uses of such sites; evidence of consultation with the Alaska Heritage Resources Survey and the National Register of Historic Places; and site surveys. The inventory must also include a detailed analysis of the effects that might result from the activity. b. The inventory must be submitted to the Director for distribution to DPOR for review and comment. In the event that a prehistoric, historic, or archeological site or area may be adversely affected by a leasehold activity, the Director, after consultation with DPOR and the KPB, will direct the Lessee as to what course of action will be necessary to avoid or minimize the adverse effect. c. In the event any site, structure, or object of prehistoric, historic, or archaeological significance is discovered during leasehold operations, the Lessee must immediately report such findings to the Director. The Lessee must make every reasonable effort to preserve and protect such site, structure, or object from damage until the Director, after consultation with the SHPO, has given directions as to its preservation. Local Hire and Training 25. To the extent they are available and qualified, the Lessee is encouraged to employ local and Alaska residents and contractors for work performed on the leased area. The Lessee shall submit, as part of the plan of operations, a proposal detailing the means by which the Lessee will comply with the measure. The proposal must include a description of the operator's plans for partnering with local communities to recruit and hire local and Alaska residents and contractors. The Lessee is encouraged, in formulating this proposal, to coordinate with employment services offered by the state of Alaska and local communities and to recruit employees from local communities. 26. A plan of operations application must include a description of a training program for all personnel, including contractors and subcontractors. The program must be designed to inform each person working on the project of environmental, social, and cultural concerns that relate to the individual's job. The program must use methods to ensure that personnel understand and use techniques necessary to preserve geological, archeological, and biological resources. In addition, the program must be designed to help personnel increase their sensitivity and understanding of community values, customs, and lifestyles in areas where they will be operating. . . March 3, 2006 Page 6 of8 Lessee Advisories Lessee Advisories are intended to alert the Lessee to possible additional restrictions that may be imposed at the permitting stage of a proposed project or activity, especially where entities other than DO&G have permitting authority. DNRlOHMP and DNR/DMLW 1. Under the provisions of Title 41 of the Alaska Statutes, the measures listed below may be imposed by OHMP to protect designated anadromous fish bearing streams and to ensure the free and efficient passage of fish in all fish-bearing water bodies. Specific information on the location of anadromous waterbodies and prior written approval for activities affecting fishbearing waterbodies may be obtained from OHMP. a. Alteration of river banks may be prohibited. b. Operation of equipment within riparian habitats may be prohibited. c. The operation of equipment, excluding boats, in open water areas of rivers and streams will be prohibited. d. Bridges or non-bottom founded structures will be required for crossing fish spawning and important rearing habitats. In areas where culverts are used, they must be designed, installed, and maintained to provide for the efficient passage of fish. 2. Removal of water from fish bearing waterbodies shall be subject to prior written approval by OHMP and DMLW. 3. F or activity in proximity to areas frequented by bears, the Lessee is encouraged to prepare and implement bear interaction plans to minimize conflicts between bears and humans. These plans could include measures to: (a) minimize attraction of bears to drill sites; (b) organize layout of facilities and work areas to minimize human/bear interactions; (c) warn personnel of bears near or on work sites and the proper procedures to take; (d) if authorized, deter bears from the work site; (e) provide contingencies in the event bears do not leave the site; (f) discuss proper storage and disposal of materials that may be toxic to bears; and (g) provide a systematic record of bears on site and in the immediate area. DNRlOPMP 4. Pursuant to Alaska Statutes, the Lessee is required to comply with all requirements ofthe Alaska Coastal Management Program, including the District Coastal Management Plan. ADEC 5. The Lessee is advised that air quality permits may be required prior to construction and operation, pursuant to state regulations administered by ADEC and the Clean Air Act administered by EP A. . . March 3, 2006 Page 7 of8 USCOE 6. Any activity involving wetland-related dredge or fill activities requires a permit from the USCOE. USFWS 8. Bald eagles are protected under the Bald Eagle Protection Act (16 U.S.c. 668-668c) and the Migratory Bird Treaty Act of 1918 (16 U.S.C. 703-712) and are under authority of the USFWS. The Lessee is responsible to ensure its actions do not take bald eagles. The Eagle Protection Act defines "take" to include disturbing birds. Any nests located within Y2-mile of the project site must be mapped, and destruction of nest trees or locations is prohibited. If any nests are located within Y2-mile of a project site, the Lessee shall meet with the USFWS to review any site-specific concerns regarding the subject nest. The USFWS generally recommends no clearing of vegetation within 330 feet of any nest. No activity should occur within 660 feet of any nests between March 1 and June 1. Between June 1 and August 31, no activity should occur within 660 feet of active eagle nests until after juvenile birds have fledged, unless specifically authorized by the USFWS. While the USFWS can recommend ways to avoid the take of eagles, final accountability lies with the party responsible for the action. 9. The Lessee is advised of the need to comply with the Migratory Bird Treaty Act (MBTA) (16 U.S.C. 703) which is administered by the USFWS. Under the MBTA, it is illegal to "take" migratory birds, their eggs, feathers or nests. "Take" is defined (50 CFR 10.12) to include "pursuing, hunting, shooting, wounding, killing, trapping, capturing, or collecting." The MBTA does not distinguish between "intentional" and "unintentional" take. Migratory birds include songbirds, waterfowl, shorebirds, and raptors. In Alaska, all native birds except grouse and ptarmigan (which are protected by the State of Alaska) are protected under the MBTA. To ensure compliance with the MBTA, it is recommended that the Lessee survey the project area prior to construction, vegetation clearing, excavation, discharging fill or other activities that create disturbance, and confirm there are no active migratory bird nests. It is recommended the Lessee contact the USFWS for assistance and guidance on survey needs, and other compliance issues under the MBTA. While the Service can recommend methods to avoid unintentional take, responsibility for compliance with the MBT A rests with the Lessee. CONCLUSION Based upon the review of all currently available information, DO&G considers the Proposed Gas Storage Lease (ADL 390821) consistent with the ACMP. ELEVATION Pursuant to 11 AAC 110.600, a state resource agency, the project applicant, or an affected coastal district that does not concur with this proposed consistency determination may request an elevation of the proposed determination to the department's director or commissioner. The deadline for requesting elevation is 5:00 p.m. Alaska time, March 17,2006. An elevation may be initiated by submitting a written statement describing the concerns, and the revised proposed alternative(s) that would meet those March 3, 2006 Page 8 of 8 concerns. For other requirements regarding the written statement see 11 AAC 110.600. Elevations must be filed with the Division of Oil and Gas, 550 W. 7th Avenue, Suite 800, Anchorage, Alaska 99501; by fax to 1-907-269-3484, or by e-mail to jdsgdnr.state. ak.us. Distribution List: Gary Williams, KPB Judy Bittner, ADNR/SHPO Chick Underwood, Marathon Oil Co. Ben Greene, ADNR/OPMP Stewart Seaberg, ADNR/OHMP Mark Fink, ADF&G Kellie Westphal, ADNR/DMLW Linda Books, ADNR/DMLW Cynthia Espinoza, ADEC Lydia Miner, ADEC Lynn Kent, ADEC Bob Crandall, AOGCC Jack Norman, AOGCC Jane Williamson, AOGCC #9 · John A..nes, P.E. Alask:Bt Team Leader Alaska Asset Team Northern Business Unit Marathon Oil Company P.O. Box 196168 Anchorage, AK 99519-6168 R E C EIVED Telephone 907/565·3040 . Facsimile 907/565·3076 March 2, 2006 MAR 0 6 2006 Alaska Oil & Gas Cons. Comnission Anchorage William Van Dyke, Acting Director Division of Oil and Gas Department of Natural Resources 550 W. 7th Ave., Suite 800 Anchorage, AK 99501-3560 Re: First Storage Development Plan for the Kenai Gas Field Pool 6 Gas Storage Lease--REVISED Dear Bill: Marathon Oil Company (Marathon) respectfully submits the above referenced document for your approval. Per AS 38.05.035{a)(9) Marathon requests confidentiality for the entire submittal. If you have any questions, please do not hesitate to contact Lyndon IbeJe at (907)565-3042 or LClbele@MarathonOil.com. Sincerely, MARATHON OIL COMPANY n A. Barnes Alaska Asset Team Manager Enclosures Via Certified Mail cc: Greg Noble, BLM Jane Williamson, AOGCC L.C. Ibele, Marathon File . (. M.') Marathon MARATHON Oil Company . Alaska Asset Team Northern Business Unit P.O. Box 196168 Anchorage, AK 99519-6168 Telephone 907·561·6311 Fax 907-565-3076 March 2, 2006 William Van Dyke, Acting Director Division of Oil and Gas Department of Natural Resources 550 W. 7th Ave., Suite 800 Anchorage, AK 99501·3560 Re: First Storage Development Plan for the Kenai Gas Field Pool 6 Gas Storage Lease--REVISED Dear Bill: Pursuant to Section 12 of the Kenai Gas Field Pool 6 Gas Storage Lease, the following proposed Storage Development Plan (SDP) is submitted. OVERVIEW Marathon Oil Company (Marathon) plans to conduct gas storage operations utilizing a portion of the Kenai Unit, Sterling Pool 6. The Pool 6 was defined by the Alaska Oil and Gas Conservation Commission, Conservation Order No. 82, dated December 3, 1969. In that order, the Kenai Sterling Pool 6 is defined as "the accumulation of gas common to and which correlates with the accumulation found in the interval 4,880' to 5,213' in the KU 21-6 WelL" (See Exhibit A, 8.5"x11" map of proposed storage lease area, including Kenai Unit and Sterling PA boundary and contour map of C1 sand with GWC identified.) The Sterling Unit Pool 6 has two gas sands, labeled by Marathon as the C-1 and C-2 sand. These sands are present throughout the field, easily identified on well logs, are in pressure communication with one another, and are produced as a common management unit. Pool 6 gas production is isolated downhole and is not commingled with any other gas stream until surface flow measurement has occurred, for reservoir management and royalty allocation purposes. The Pool 6 Storage Lease area was determined in the manner consistent with and accepted by the ADNR and BLM when establishing participating area boundaries. Thus, all owners of the subsurface estate whose pore space will be used for the storage of gas have been included in the proposed storage lease area as represented on Exhibit A. While some recoverable native gas will remain in the reservoir to the storage project, full payment of royalties will be made on the estimated volume of native gas according to the storage lease, underlying oil and gas leases, and Kenai Unit Agreement. I. PERIOD This plan shall be in effect from April 1 ,2006 through March 31,2007. . First Storage Development Plan Kenai Gas Field Pool 6 Gas Storage Lease . March 2, 2006 Page 2 of 5 II. FACILITY DESCRIPTION The estimated size in surface acres of the Pool 6 Gas Storage Lease is 7531.55 acres (see attached Exhibit A). Storage is limited to the Sterling C-1 and C-2 sands. The C-1 injection interval is between 4366' and 4500' TVD (134' thickness) in injection well KU 31-07X. The C-2 injection interval is between 4530' and 4569' TVD (39' thickness) in injection well KU 31-07X. The current GWC and resulting storage area is not expected to change as result of the gas injection volumes and reservoir pressure response anticipated through operations described in this Plan. A monitoring program will be implemented to determine if any change in the GWC is occurring (Exhibit B, monitoring plan), along with pressure response in the reservoir resulting from storage operations. The estimated maximum reservoir capacity utilization (Pool 6 cushion gas plus working gas) as defined in the gas storage lease is 50 BCF. The anticipated reservoir pressure at this maximum capacity utilization is expected to be approximately 288 psia, as compared to the January 1, 2006.reservoir pressure of approximately 177 psia. The average annual working capacity of the facility is expected to be 6 BCF. The actual annual working gas capacity will be a function of Marathon's market demand and availability of injection gas. The Kenai Gas Field has been developed utilizing a limited number of gravel pads to minimize surface impacts. Each pad contains a number of wells, along with common production facilities. Storage operations will make use of existing pads, wells, and production facilities (Exhibit C). As of January 2006, there are 69 wells in the Kenai Gas Field which penetrate the Sterling Pool 6. Of these, twelve are active Pool 6 wells, including 11 producing wells and one water disposal well. Exhibit D is a listing of all of the wells within the Kenai Gas Field with sufficient depth to penetrate the Pool 6, and the current utility of each. As indicated in the exhibit, there are a number of wells in the Kenai Gas Field that are completed in more than qne pool. However, all production by pool is isolated downhole and no commingling occurs until surface flow measurement has occurred, for reservoir management and royalty allocation purposes. Upon initiation of gas storage activities, nine Pool 6 wells will be utilized as gas producers, one as a dual-purpose producer/injector, one as a designated observation well, and one as a water disposal well. Exhibit E is a list of all wells currently completed in the Pool 6 storage formation, their current and proposed status, and the maximum daily production capacity for the active producers. The dual-purpose gas injection well, KU 31-07x, is located on Pad 14-6. The maximum daily injection capacity of this well and related facilities is approximately 55 mmcfd as limited by available surface injection pressure of 750 psi. The available surface injection pressure is limited by the existing in-field gathering system pressure and compression horsepower. Additional injection wells may be permitted in the future, dependent upon demonstrated needs. The maximum anticipated withdrawal capacity of the facility totals approximately 60 mmcfd, when at a reservoir bottom hole pressure of 220 psig. Withdrawal rates are a function of . First Storage Development Plan Kenai Gas Field Pool 6 Gas Storage Lease . March 2, 2006 Page 3 of 5 reservoir pressure, compression horsepower and the number of producing wells. Reservoir pressure is a function of the total volume of gas in the ground (pad gas plus stored gas). As previously stated, the storage operation will make use of existing wells, production facilities, and gathering lines within the Kenai Gas Field. Initiation of storage operations required only the construction of piping on Pad 14-6 from the high-pressure discharge line (downstream side of the Centaur compressors and gas contactors) to the existing flow line for Well KBU 31-07x. Additionally, a bi-directional ultrasonic meter was installed to ensure the highest measurement accuracy of injected and produced volumes from Well KU 31-07x. This work was completed in the summer of 2005. Gas injection and withdrawal will make use of the existing flow line between the KU 31-07x wellhead and production/injection facilities. The production system at Kenai Gas Field (KGF) consists of two production trains, a high pressure train, and a low pressure train. Wells producing into the high pressure train do not require compression. High pressure wells flow directly into the KGF field-wide dehydration system, located at Pad 14-6, at system pressure 750 PSIG. Wells producing into the low pressure train are routed via a field-wide low pressure gathering system thru two stages of compression prior to dehydration. The first stage of low pressure train compression (three Saturn compressors at Pad 14-6 and two Ingersoll Rand compressors at Pad 34-31) runs at a suction pressure of 50 PSIG and discharges at 250 PSIG. The second stage of low pressure train compression (2 Centaur compressors at Pad 14-6) operates at a suction pressure of 250 PSIG and discharges at 750 PSIG prior to dehydration. Gas for injection into gas storage can be supplied at 750 PSIG at Pad 14-6 at a point downsteam of where the high pressure system mixes with the final stage of compressed gas from the low pressure system, or at 250 psig from a point between the compression stages in the low pressure system (see Exhibit F: Gas Storage Development Schematic, and Exhibit G, table of KGF compression specifications). Gas produced from the Pool 6 storage reservoir will be gathered through the low pressure train and run through the previously described first stage (50 psig suction pressure) and second stage (250 psig suction pressure) compression for discharge at 750 psig, destined for sales from the field. III. PROPOSED OPERATIONS For the first SDP period, Marathon anticipates storing and withdrawing volumes of its equity gas production from sources within the Kenai Gas Field (Tyonek PA, Beluga PA and Sterling PA Pools 3 and 4) and the Cannery Loop Unit. All royalties must be paid prior to injection as specified in the lease. A portion of Cannery Loop Unit gas production is routed into the Kenai Gas Field low pressure gas gathering system and compressed at the Kenai Gas Field in common with Kenai production. Therefore the injection source for storage will consist of both Kenai and Cannery Loop production. Gas injection will occur in periods of surplus supply and low market demand, principally in the period between April and September. Withdrawal will occur in periods of high demand. Injection operations will likely first begin in March, 2006, or sooner if periods of excess supply occur. Marathon anticipates injecting approximately 6 BCF of gas in the first SDP period. Actual volumes injected and stored will be a function of gas supply and market demands. The Kenai Gas Field Pool 6 Storage Facility is intended to provide Marathon Oil Company with a means to mitigate its seasonal variations in its gas contract demands. Marathon supplies gas . First Storage Development Plan Kenai Gas Field Pool 6 Gas Storage Lease . March 2, 2006 Page 4 of 5 to all Cook Inlet market segments: utilities, industrials, and private parties. By helping to maintain Marathon's ability to meet its seasonal demand variations, this facility will benefit all gas market segments and consumers in Cook Inlet. Marathon has no contracts obligating it to develop or provide storage services, and has no plans to offer commercial storage services due to the large volume of Marathon-owned pad gas which must first and foremost be available to meet Marathon's contract commitments. The State and lessee agree that as of August 31, 2005, the estimated ultimate recovery of native gas from the gas storage formation shall be 552 billion cubic feet (BCF) and that there are deemed to be 32.51 BCF of recoverable native gas in the gas storage formation under the leased area based on a straight line p/z interpretation of the entire Pool 6 well production history data set and an abandonment pressure of 75 psia. Initially, this native gas will be utilized as cushion gas to maintain reservoir pressure and support the storage project. Upon initiation of storage operations, the allocation of native gas withdrawn from the storage area shall be as indicated in Exhibit C of the gas storage lease. IV. OPERATIONS PERFORMANCE AND MONITORING Marathon will measure and keep a record of all gas injected into and withdrawn from the Gas Storage Formation, and surface casing and reservoir pressures in accord with the requirements of the gas storage lease. Continuous monitoring will be performed to ensure the confinement and containment of the stored gas. Public safety, protection of the environment (surface and subsurface), and conservation of the resource are the primary purposes of the monitoring program. Additionally, monitoring data will be used to evaluate project performance and optimize the storage operations (reference Exhibit B, monitoring program). A summary of all well monitoring data and results of P/z performance analysis will be reported annually to the AOGCC, with copy provided to the Division of Oil and Gas. Additionally, Marathon will annually review the injected and withdrawn volumes, royalty payments, and remaining recoverable reserves, per terms of Marathon's gas storage lease with the State of Alaska. V. LONG TERM PLANS As specified in the lease, Marathon may inject only gas owned by Marathon, and no storage of gas owned by third parties is planned. The remaining recoverable native gas estimate of 32.51 BCF is based on the abandonment pressure of 75 pSia that is limited by existing facilities as specified in this SDP. No additional facilities (injection/withdrawal wells, pipes, compression, formations, etc.) are currently anticipated to be required during the 1 O-year primary term of the storage lease (life of the project). Any modification or change to this long range plan will be reported in subsequent SDP's. . First Storage Development Plan Kenai Gas Field Pool 6 Gas Storage Lease . March 2, 2006 Page 5 of 5 Marathon Oil Company, as Unit Operator, reserves the right to modify the SDP if necessitated; however, such modifications will be subject to approval by the Alaska Department of Natural Resources. Your approval of the First Storage Development Plan is respectfully requested. Sincerely, æMARATHON OIL COMPANY 1fß~~ - A. Barnes Alaska Asset Team Manager Enclosures Via Certified Mail L:\KGF Gas Storage\1st Storage Dev Plan\KGFP6_SDP _Revised 3-2-06.doc cc: Greg Noble, BLM Jane Williamson, AOGCC L.C. Ibele, Marathon File Approved: Alaska Department of Natural ResotJrces By: Title: Date: Exhibit A Exhibit 8 Exhibit C Exhibit 0 Exhibit E Exhibit F Exhibit G . . First Storage Development Plan Kenai Gas Field Pool 6 Gas Storage Lease List of Exhibits Map of proposed storage area Monitoring plan Map of pads, roads, wells and facility locations Kenai Gas Field Pool 6 well penetrations Kenai Gas Field Pool 6 well utilization Gas storage schematic Kenai Gas Field compression summary Pool Gas Storage Area 8 : PA) SDP 21 PIPING .. EXISTING EClU!IiIENT .. TIE-IN POINT TO 10 KNPl 10 APt !.iSM 5œ #8 . . FRANK H. MURKOWSKI, GOVERNOR A I,"'-SIiA OIL AND GAS CONSERVATION COMMISSION 333 W. 7'" AVENUE, SUITE 100 ANCHORAGE. ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 March 2, 2006 Certified Mail No. 7004 1160 0001 3621 1809 Linden Ibell Reservoir Engineer Marathon Oil Company PO Box 196168 Anchorage, Alaska 99519 Re: Kenai Gas Field Storage Injection Order Dear Mr. Ibell; This letter is a compilation of matters yet to be resolved related to the Commissions' issuance of a Storage Injection Order for your proposed Kenai Field Underground Gas Storage Facility. The hearing conducted on October 11, 2005 successfully completed the public hearing requirement of the process; no additional hearings into your application are envisioned at this time. At the October 11 hearing the Commission requested additional information consisting of the following items; "" 1) An assessment of the mechanical integrity of all penetrations of the proposed storage interval (Sterling Pool 6). Remediation plan and schedule for any penetration lacking mechanical integrity. 2) A hazard analysis and emergency response plan for the proposed operations. 3) Reservoir performance and mechanical integrity monitoring plan for the storage reservoir. 4) A revised maximum operating pressure for the storage reservoir. .;i \l Issuance of the order will be within 30 days of the Commissions' determination that Marathon has satisfactorily submitted the information requested at the October 11, 2005 hearing. Linden Ibell March 2,2006 Page 2 of 2 . . The Commissions' order will be contingent upon Marathon Oil Company executing a gas storage agreement with altai ected landowners. / // e1ý; .� D. C3 Provided) (Vomestic Mail Only; a m Postage � 0.39 UNIT III: 0535 r-q Certified Fee p 2.40 Postmark 0 Return Reciept Fee 1.85 Here C3 (Endorsement Required) O Restricted Delivery Fee •clerk:: KGS3HH _p (Endorsement Required) r-q 4.64 03/02'/06 Total Postage & Fees Sent To �� ' (f!)%- ---------- f Street, Apt. No.;jG J¢?C�i� or 1-0 Box No. /V,A// State, ZIP+4 ■ Complete items 1, 2, and 3. Also complete it--m 4 if Restricted Delivery is desired. ■ Print your name and address on the reverse so that we can return the card to you. ■ Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: / A. Si ture rAgent X /Addressee B. R eived by ('P ed Name C.•Pate of Dflivery D %I delivery addkds different from item 1? ❑ Yes j f YES, enter delivery address below: ❑ No 3. Service Type 'Certified Mail A press Mail ❑ Registeredturn Receipt for Merchandise ❑ Insured Mail ❑ C.O.D. 4. Restricted Delivery? (Extra Fee) ❑ Yes 2. Article Number (Transfer from service label) 7004 1160 0001 3621 1809 PS Form 3811, August 2001 Domestic Return Receipt 102595-02-M-0835 #7 -, ~ ., . FROM : FAX NO. ~~ . ~t:.b. 13 2006 81: 59PM P2 Tim and Marilyn Keener PO ~ 2833 Kenai, AK 99611 PH; 907 283-9513. F8X~ 907283..6555 ]0DIlC S1cmODl, p~tting Mana~ AJaska Dept. of Natural Reøou.rces Division of Oil and Gas , 550 West ¡fh Ave., Suite 800 Anohomge, AK 99501 PH: 9fT! 269-8800, FIX 907 269-3484 February 12, 2006 cc: Senator Thomas Wagoner, Representative Mike Chenault R.eprcøcntative Kurt 01son, Lt. Gov. Loren Leman RE; Notige; Kenai au Storage Lease Application Received, Call ror Comments " Aluka. Coastal Mø:n.ø.ee:ment Program Consistency Review Dear Mr. Slemons: I am a landowner whose pt'Operty i5 within the area Marathon Oil COI,UpaD.Y wishes to store natural ¡as in. My family hu been heavily impao1cd. by the puseuce ofManathon Oil in the area they m-e now ,PJ'OPOsin¡ to store au \1D.d.cmeath.. As a young boy arowing up on a homestead on the property on and near what we are beinS a*ed by your Department to comment 011¡ I have seen many ohanges. I believe these chlnles have oc:cuned mainly because of the 1enaDts, Unocat ønd MaratboD, who have iqjected a Dumb« of chemica1ø and. drillin¡ fluids into the ground. The property I refer to has :renW.ned W1developed other than. the presence of Marathon and the constant iDjeQÛODl end activities they pcrfonn daily to it. When Msri.1yn Keener molt recently asked Msra:tbon in May of 200S when they would be ending these C6.t11:ÏnuaJ injootions, she WÞ informed that they have øo plW of evtlt ending such praoticcB. I would Dot feel comfortable with more activity and. m.01'f! injections going on right behind my home. I do not feel that the state'. bel!lt interests aæ at hoart by Mar8.thon nor the landowner's best interests. I realize that Marathon's inw'estl ate to their shareholders and profit margi:a~ but I feel that it Is our state's duty to protæt the citizens and the resourcM first. We will likely never know what happened to the hundreds of rabbits, ducks, geesœ, . SWIDS, and spruce hens that nested on these lands that are now taken over. but not owned, by Marathon. Each day I S~ truck after truck driving onto the property wbich your abow-mentioned notice is referring to. Marityn Keener went behind our home in May G JÐVd Þ8VE69GLO t : XVd ÐoaVOS:WOBd Wd GE: to Jill 900G-LO-BVW t . FROM : FAX NO. . - Feb. 13 2006 01: 59PM P3 2005 where the pump 1Neks Well; dd.îwriDa their loads and was asked by Marathon not to take pictu.rM. On FebruatY 19, 2003, Marilyn Keener went to thß Maratbon warehouse behind our home to explain her concerns about water pollution and other serious problems to Donald Erwin, production supervisor at the Kenai gas field. She asked him to drink some tap water to help 811evJate her fea¡s but he would not. Mr. Erwin stated that he would. ¡I~ to a superlor about a third party water test for OW' family but this was never don!;. I rœc.ived a leüer dated January 6. 2006. from Muathon Oil statir¡g~ ··We are basically offerin¡ $40 per net interval ~, pm' year, for an initial term of 10 years and as long thereafter II the interval is being used for gas storage". I find it extremely insulting that any company would assume a rate they propose would be acceptable for an unspecified amount of time and remain the exact same rate for decades to come, I would like to have " few qu~ons addressed by your depertment: Whete is the gu that Marathon wams to store under our property cown¡ from? How would it be transported to our property? What is an interval aore? What price would the state charge for leasing its property and would the lease rate increase at least 3% per year? Would· royalties be cbatged when the gas that has been stored :is used'? 1£ so. would this rQyaJty amount be încrcascd yearly? Have water testa in this area been taken by third parties to monitor the aquifers and to make certain that the oil company in question has been a good steward of the state's resources thus far? Are monitoring records kept by third parties available for me to look over? May I have copies Qfthc gcologiçal findings so J might have these reviewed by third party experts? ' In closirag, I protest the request by MlJld;hon Oil Company to le¡ue property from the state and private lauc:1owncrs for the storage of natural gu, Sincerely, ~~. Tfn1. Kecn~or 1IJ~ .~. MãÆ~ er' JM.:v Clint Keener Lindsay Keener ~~ E ]DVd Þ8ÞE69GLO t : XV3 DoaVOS:WOH3 Wd ~E: to ]Dl 900~-LO-HVW . . FRANK No MURKOWSKl GOflERNOR DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS 550 WEST 7TH A VENUE, SUITE BOD ANCHORAGE. ALASKA 99501-3560 PHONE:(907) 269-8800 FAX: (907) 269-8938 March 7, 2006 ~ ~r;J Tim and Marilyn Keener PO Box 2833 Kenai, AK 99611 Subject: Proposed Gas Storage Leal!le Application (ADL 390821), Kenai Gas Field, Sterling Pool 6 Deer Tim and Marilyn Keener: Thank you for your letter of February 12, 2006 responding to the Call for Comments on the Alaska Coastal Management Program consistency review, and the State's best interests regarding the subject proposed gas storage project by Marathon Oil Cornpany. Your letter raises several issues, wbich I will address individually. Where reference to the terms of the lease are mentioned, see the enclosure to this letter, or the posted documents at: httn://www.doll.dnr.state.ak.us/oil/products/publications/ltasstorue/gasstorage.htm . a) Concern regarding current lease opera.tions, specifically underground waste injection, and potential water pollution resulting from injection activities. The underground injection of waste products is regulated by the Alaska Oil and GeuJ Conservation Commission (AOGGC), and requites a permit. In approving such activities? thli! AOGCG must determine that injections occur at a depth below the level from which drinking water would be drawn. I have forwarded a copy of your letter tQ the AOGCC? so that they may respond directly to you regarding Marathons currently permitted activities under existing leases. Regarding the proposed gas storage lease ADGCC must also issue an Injection Order for the injection ofnaturol gas into the subsurface storage formation. Marathon Oil does not propose to inject anything other than natural gas into that formation. b) Concern regarding the monetary offer you bave received from Mara.thon Oil Company for the current and future use of your subsurface property for purposes of gas storage. The Division of Oil and Gas? and the State of Alaska generally have no authority over the offer made by a private company for use of your property, and we cannot consider the details of this type ,,{business transaction in our decisions regarding the application for a lease. "Develop, Conserve, and Enhance Natural Re~ourC6S for Present and Future A.lfI8kans." Þ 3DVd Þ8H6nLO I: XVd DoaVOS:WOBd Wd ~E: 10 3Dl 900~-LO-BVW . . Letter tQ Keeners . 060307 3/7/2006 Page 2 on c) You asked se"Veral questions: 1. Where is the gas that Marathon wants to store under our property coming from? Current plans include Qnly natural gas from the Kenai Gas Field, Cannery Loop Unit. In the future, it is possible that gas from Qther locations may be included; though thi8 is not anticipated at this time. f ,# 3. ~ 2. How would it be transported to our property? The gas will be transported via existing pipeline tQ the injection well, KU 81-07X, which is already in existence and was re-completed specifically to support 0. gas storage operation. No changes to existing facilities, and no new facilities, are required. The well is located on Pad 14"6 in the Southwest quarter of Section 6, T.4N, R.I1W, Seward Meridian approximately one mile from your surface prQperly location. What is an interval acre? An acre of the Sterling Pool 6 storage area regardless of the thickness of the storage interval or formation. The Pool 6 {ormation is defined in Term 2 of the proposed gas storage lease and the storage area is depicted in the plat shown on Exhibit A and as described in Exhibit B of the proposed lease. 4. What price would the state charge for leasing its property and would the lease rate increase at least 3% per year? The fee is described in Term 8 of the proposed storage lease. The fee is escalated based on the producer price index. 5. Would royalties be charged when the gas that has been stored is used? If so, would this royalty amount be increased yearly? No, As described in Term 71 royalties must be paid on all gas before it is injected. Royalty on the "native gas" withdrawn from the gas storage {ormation under the leased area will be paid as specified in the terms of the applicable existing oil and gas leases and unit agreements. 6. Have water tests in this area been taken by third parties to monitor the aquifers and to make certain that the oil company in question has been a good steward of the state's resources thus far? Are monitoring records kept by third parties available for me to look over? We have inquired of three programs in the Department of Environmental Conser7)ation, with the following results: Within the Division otWater, the (Water Quality) Protection and Restoration SectiQn reports no known water quality problems in nearby waterbodies. An isolated incident of transient turbidity was reported in Coal Greek in 2003, which was resolved within a few days. The Industrial Wastewater Section reports no known issues, and no required permits for purposes of the proposed lectBe activities. Within the Division of Environmental Health, the Drinking Water Section reports they are unaware of any drinking water problems at your property. I believe you spoke with David Litchfield on this issue, in late February. S ]DVd v8H69GLO I: XVd DoaVOS:WOBd Wd EE: 10 ]Dl 900G-LO-BVW . . Letter to Keener!! ~ 060307 3/7/2006 Page 3 of3 A8 discussed above, the ADGGG has authority over the underground injection practices which you suspect may have or may in future affect your drinking water, and likewise has authority over related monitoring requirements. I have therefore forwarded you.r letter to the AOGCC 80 that they may respond directly to your concerns in this regard. 7. May I have copies of the geological findings so I might have these reviewed by third party experts? Some geologic and engineering information supporting the ga8 storage application are held confidential under AS 88.05.035(a) (9). Other information availa.ble to the public is on file a.t the ADaCe. Your opposition to the proposed project is noted. However, the Division of Oil and Gas, after thoroughly evaluating the proposed project, related activities and expected surface impacts, is issuing a Proposed Consistency Determination that finds the project to be consistent with the Alaska Coastal Management Program. A copy of the Proposed Consistency Determination wil1 be sent to you separately. ~\ Sincerely, William VanDyke Acting Director ?;VLdo'5-Ufe,' ~-;,.R-I. L~ Cc: J. Williamson, AOGCC B. Crandall, AOGCC J. Nonnan, AOGCC K. Ryan, ADEC D. Litchfield, ADEC L. Kent, ADEC K Patrick-Riley, ADEC S. Stambaugh, ADEC P. Galvin B. Havelock P. Bates 9 ]DVd t8tS6nLO I: XVd DoaVOS:WOHd Wd SS: 10 ]Dl 900~-LO-HVW . . !II:~ ~ri, ' _¡ ~~~: .__ _ /C~ ¡¡¡.'Ö>-.,.·i.....;-;iX;··' «-:¡~;'í CEIVED AR 0 7 2006 it & Gas Con$. Co '. Anchorage mmlSSIQfi State of Alaska Department of Natural Resource Division of Oil & Gas 550 West 7'h Avenue~ Suite 800 ~chorage,AJC 99501-3560 (907) 269-8800 ~~ @@m@ ~ TO: Jane Williamson PHONE: ~-¡q ~ 1'/33 COMPANY: AOGCC FAX NO.: 276-7342 FROM: Jonne Slemons PHONE: 269-8806 FAX NO.: 269-3484 DATE: 3/7/06 TIME: Approx. 12:50 pm I CC: Number of pages Including cover sheet: 8 D Urgent o For Review o Plea.. Comment o As You Requested Om Message: ... Jane, The attached letter from Tim and Marilyn Keener speaks of underaround InJeçtion aç11vltles which concern them re: water quality In the area~ including their drinking water. I am also copying you on our draft response to the Keeners, which will go out this afternoon. As you çan see, we inquired of ADEC re: water quality Issues, and found none. (Please let me know If you have any comments regarding our response, prior to 3;00 pm this afternoon.) AOGCC may wish to respond separately re: the underground Injection ~~- your call, certalnlv. Thanks ~~ / / \../ S:\DOGShare\Slemon8J\Gas Srora,ge\Marathon-KenaÎ\F¡¡x Conr to AOGCC - Keener.doc 03/07/06 I HDVd Þ8ÞE6nLO I: XVd DoaVOS:WOBd Wd IE: IO HDl 900~-LO-BVW #6 Re: Hearing . . Subject: Re: Hearing From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Man, 24 Oct 2005 15:48:12 -0800 11'nGA~\Ai ':¡'ill' <ga j,:>:¡:::~¡~¡:;¡\::;:<~;~~*{,,~:;J"i:H'!;)<'. ",;.;' Gary, There you go! Jody Laughlin, G~ A. wrote: Jody, I am requesting a copy of the Oct 2005 AOGCC hearing transcripts involving Marathon Oil Company's request for Gas Storage at the Kenai Gas Field. Thanks Gary Content-Type: application/msword Kenai Gas Storage.DOC Content-Encoding: base64 1 of 1 10/24/2005 3 :48 PM #5 · · · 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . . 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: John K. Norman, Chairman Daniel T. Seamount Cathy Foerster 3 4 In the Matter of the Application ) of MARATHON OIL COMPANY to allow ) 5 Underground Injection of Natural Gas ) for Storage Purposes in Sterling ) 6 Pool 6, Kenai Gas Field ) ) 7 8 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska 9 October 11, 2005 9:00 o'clock a.m. VOLUME I PUBLIC HEARING BEFORE: John K. Norman, Chair Daniel T. Seamount, Commissioner Cathy Foerster, Commissioner R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 · · · 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . . 1 TABLE OF CONTENTS ....... . . . . · .06 2 Opening Remarks by Chair Norman . 3 Testimony of Lyndon Ibele · · · · · . . · · . Testimony by Kent Kuch. . · · · · · · · . . Testimony by Jennifer Enos. · · · · . . · · Testimony by Brock Riddle · 4 5 6 7 Testimony by Dan Taimuty. . · . . · . . · . . . 8 9 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 03 . 09/21 . . . · .12 . . . · .46 . . . .54 . . . · · · . . 1 PRO C E E DIN G S 2 Tape 1 3 0015 4 (On record - 9:00 a.m.) 5 CHAIR NORMAN: Good morning. I'll call this hearing to 6 order. This is a hearing before the Alaska Oil and Gas 7 Conservation commission. The hearing is being held on the 8 morning of Tuesday, October 11th at the hour of 9:00 o'clock 9 a.m. The location is the Commission's offices at 333 West 10 Seventh Avenue, Suite 100, Anchorage, Alaska. 11 Present are Commissioners Seamount, Foerster and Norman. 12 And a quorum is present. 13 Any persons who may have special needs that would allow 14 them to participate in these proceedings should see the 15 Commission's Special Assistant. I'll ask the Special Assistant 16 if she would hold up her hand now and you may see her if you do 17 have any special needs that may require an accommodation in 18 order to allow you to participate. 20 transcript available later on. The reporter is R & R Court 19 This proceeding will be transcribed and there will be a 22 24 21 Reporting. 23 I will remind everyone testifying to please speak into the microphone and in the course of the proceedings all of us need to keep an eye on the record and remember that we are creating a written record that may be reviewed some years from now for 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 3 · · · . . 1 various reasons. Therefore, it's important to speak clearly. 2 And the Court Reporter also has a challenging job in capturing 3 terms and particularly names. And so if you do have a business 4 card later on and you can leave it with her it helps her 5 considerably with the spelling of the names. 6 If you are referring to exhibits or slides or maps, please 7 do your best to tie them to your oral testimony because the 8 written transcript which reads right here or this that I'm 9 pointing to won't have meaning unless it's later tied to an 10 attached exhibit. 11 When you are referring to matters we will require that 12 they be placed in the record. If for any reason you feel that 13 information is entitled to confidentiality the Commission will 14 hear your request, but the Commission does have a bias toward a 15 maximum of public information. It's a public process. And the 16 burden will be on any party asserting confidentiality to 17 convince the Commission that the information you're providing 18 should remain confidential. 19 The notice of hearing was published in the Anchorage Daily 20 News on September 8th, 2005. 21 This proceeding originates based upon an application filed 22 by Marathon oil Company on August 28th applying for an Area 23 Injection Order authorizing underground storage of natural gas 24 in the Sterling Pool 6 of the Kenai Gas Field. The application 25 is filed in accordance with 20 AAC 25.252. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 4 · · · . . 1 The Sterling Pool 6 is located within certain sections in 2 Township 4 North, Range 11 West, and additional sections within Township 5 North, Range 11 West, Seward Meridian, all is more specifically described in the official notice. 3 4 5 Any persons desiring to get a copy of the notice, again, 6 may see the Commission's Special Assistant and she will provide 7 you with a copy of the notice. 8 The Commission will receive testimony from the applicant. 9 We will administer an Oath. If any persons object to taking 10 the Oath we will respect that, but we also tell you that 11 greater weight is given to testimony given under Oath than 12 testimony not given under Oath. 13 Also if any of you are testifying from the perspective of 14 an expert then we would appreciate it if you would state your 15 educational background and your work experience that is 17 The Commission ordinarily does not allow cross examination 16 relevant to the testimony that you will be giving. 18 in a proceeding like this, and I do not anticipate that today 19 we will depart from that. If, however, there are any persons 20 present who have a question that you would like to have 21 answered, you may provide it to the Commissioners at one of the 22 breaks or give it to the Commission's Special Assistant and we 23 will do our best to obtain answers to all relevant questions. 24 We want this hearing to go smoothly. And so we will begin 25 by asking the first witness to please raise your hand? Do you R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 5 · · · 10 11 12 13 14 15 16 . . 1 swear -- excuse me, just a moment. 2 COMMISSIONER FOERSTER: It's really difficult for the 3 people in the back of the room to hear you. We can hear you 4 great 'cause you're facing us, but you have to get about three 5 inches from the mic on your right for the people in the back of 6 the room to hear you, so it's just in courtesy to them. 7 CHAIR NORMAN: Yes. If you can speak into both mics. One 8 is doing the transcript and the other is the amplification and 9 so they're both necessary. MR. IBELE: Okay. (Oath administered) MR. IBELE: Yes, sir. CHAIR NORMAN: Please state your name? TESTIMONY BY LYNDON IBELE MR. IBELE: I'm Lyndon Ibele with Marathon oil Company. 17 witness? CHAIR NORMAN: And will you be testifying as an expert 18 19 20 MR. IBELE: No, sir. CHAIR NORMAN: Very well. You may proceed. 21 of set the stage for the testimony we're going to present here MR. IBELE: Okay. What I'd like to do today is just kind 22 today. My role in Marathon's application has been to try to 23 help coordinate the permitting for this project. Most of the 24 work was done by our technical team in Houston, Texas. 25 We have three Marathon employees participating on the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 6 · · · 20 21 . . 1 phone by teleconference. It's Dan Taimuty, engineering 2 manager, Kent Kuch, the senior reservoir engineer, and Jennifer 3 Enos, a senior geologist. And they will weigh in, in just a 4 minute here, but also represented by Marathon in the room here 5 are Gary Laughlin, an engineering technician, and Brock Riddle, 6 land man. 7 CHAIR NORMAN: Let me ask just for a moment then so we 8 don't have to backtrack, if we have parties participating by phone let me ask each of the parties that are on the line simply to state your name just to be sure that you're hearing us and we can hear you. 9 10 11 12 MR. TAIMUTY: Yes, we can hear you. And my name is Dan 13 Taimuty and I'm the engineering manager for Alaska. 14 CHAIR NORMAN: And next, please? 15 MR. KUCH: My name is Kent Kuch, I'm the reservoir 16 engineer. 17 CHAIR NORMAN: And next please? 18 MS. ENOS: My name is Jennifer Enos and I'm a geologist. 19 CHAIR NORMAN: Your first name again, please? MS. ENOS: Jennifer. 22 proceed. CHAIR NORMAN: Jennifer, okay. Thank you. Please 23 24 presentation today just to give an overview of the gas storage MR. IBELE: Okay. Kent Kuch has prepared a short 25 permit application that was submitted to AOGCC. What we'd like R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 7 · · · 16 20 . . 1 to do is just to have Kent walk you through that presentation 2 which is appearing on the projector here. And following which 3 we can entertain any questions that the Commissioners might 4 have about our project, so we'd just like to start with this 5 short presentation. 6 CHAIR NORMAN: Very well. 7 MR. IBELE: Kent. 8 CHAIR NORMAN: And let me ask on the slides that we will 9 be viewing, those are -- what I want to do is tie them to the 10 record. will they be made part of the record or are they what 11 we have had previously filed with us? 12 MR. IBELE: These are new slides, but we did bring paper 13 copies or we can provide them electronically so they can be 14 part of the record. 15 CHAIR NORMAN: Very good. MR. IBELE: And they are identified by page number, 17 exhibit number. 18 CHAIR NORMAN: Mr. Kuch, were you able to hear that? 19 MR. KUCH: Yes, I was. CHAIR NORMAN: Okay. Could you spell your last name for 21 us, please. And am I pronouncing that correctly, Kuch? 22 23 MR. KUCH: Yes, it's Kuch. And it's spelled K-u-c-h. 24 testimony today as an expert witness? CHAIR NORMAN: All right. And will you be offering 25 MR. KUCH: Yes. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 8 . . . 14 . . 1 CHAIR NORMAN: And then will you raise your right hand, 2 please? 3 MR. KUCH: Okay. (Oath administered) 4 5 MR. KUCH: Yes, I do. 6 CHAIR NORMAN: And will you be testifying as an expert 7 witness? 8 MR. KUCH: Yes. 9 CHAIR NORMAN: will you, please, state your educational 10 background and then your work experience? 11 TESTIMONY BY KENT KUCH 12 MR. KUCH: Yes, I have a B.S. in Petroleum Engineering from 13 the University of Texas Tech in 1979, the year I graduated. I 15 production engineering for several different companies most have about 24 years of experience doing reservoir and 17 16 recently Marathon for about the last year. CHAIR NORMAN: And where did you work, what geographic 18 locations for Marathon? 19 MR. KUCH: For Marathon I have only worked the Alaska 20 asset area. Prior to that I have about 13 years experience in 21 California, the remainder of the 13 or so years or 12 years is 22 from mid continent, Kansas, Oklahoma, Texas Panhandle, and I 23 used to testify at OCC hearings so I think my credit- -- my 24 credentials were always accepted at that -- at that 25 standpoint. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 9 · · · 10 11 . . 1 CHAIR NORMAN: And as a reservoir engineer have you had 2 experience working on any projects involving strictly gas 3 storage? 4 MR. KUCH: Yes. And they were relatively small and most 5 of those were in California using relatively small sands, 6 typically in the 1 to 2 bcf range. And at that time it was by 7 ARCO of the Bakersfield Office, but the majority of the 8 experience would be on production of oil, gas and under 9 different reservoir mechanisms. CHAIR NORMAN: One to 2 bcf range per what? MR. KUCH: That would be per reservoir. They were very 12 small fan (ph) lenses that were in a very shallow zone that was 13 14 15 above a very, very large oil field that was being water flooded. 16 the other Commissioners have any questions of you, Mr. Kuch. CHAIR NORMAN: Okay. I'm going to now ask if either of 17 Commissioner Seamount? 18 19 20 COMMISSIONER SEAMOUNT: I have none. COMMISSIONER FOERSTER: I have none. 21 we will accept your credentials as an expert witness and ask CHAIR NORMAN: Very well. Then if there is no objection 22 you to proceed. 23 MR. KUCH: Okay. One of the attachments is labeled as 24 number 7 is a power point presentation on reservoir simulation 25 of the Sterling Pool 6 sand that was done originally by John R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 10 . . . 17 . . 1 Ozcan who is a reservoir simulation, kind of, specialist inside 2 of Marathon. 3 I'll kind of give briefly an overview of that -- the 4 history that they utilized reservoir simulation on all of the 5 sterling sands and specifically in Pool 6. The original models 6 were built to be, kind of, tank like models to confirm the 7 behavior we were seeing on the P over Z versus cumulative gas 8 plot. 9 John's work was basically to update the model which was 10 done in July of 2004. He improved the model by getting 11 individual well history matches of gas and water production on 12 all of the wells in Pool 6. And then we have a good 13 confirmation of gas in place, type well to the historic numbers 14 that were -- had been done in the past, and then we have 15 projections and history match up through July of 2004. And 16 then we make predictions up through 2015. 18 page 3 is a grid showing the (simultaneous speech)..... Let's see, I'll go through that power point. The third 19 20 that's..... MR. IBELE: Kent, you'll have to give us a minute, 21 CHAIR NORMAN: Excuse me, just a moment, Mr. Kuch. Mr. 22 Kuch, just one moment, please. We're going to try to 23 coordinate your testimony with the power point here. 24 25 Is that the one you want to go through? MR. IBELE: Kent, that's not the presentation we had up. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 11 · · · 12 13 . . 1 MR. KUCH: I'm sorry. Well, we originally were going to 2 lead in with Jennifer giving an overview for, kind of, the 3 geologic input. Would you like to do that first? It would 4 make more sense probably. 5 MR. IBELE: I think it would. I'm sorry. I thought you 6 were doing this okay. 7 MR. KUCH: So is that okay? Can we have Jennifer do that? 8 MR. IBELE: Yes. I think that'd make more sense. 9 MR. KUCH: Okay. Then we'll probably have to swear in 10 Jennifer. 11 CHAIR NORMAN: All right. Ms. -- is it Enos? MS. ENOS: It's Enos. CHAIR NORMAN: Enis spelled E-n-i-s (sic)? 14 MS. ENOS: E-n-o-s. 15 CHAIR NORMAN: E-n-o-s. All right. Ms. Enos, would you 16 raise your right hand, please? 17 18 19 20 MS. ENOS: Okay. (Oath administered) MS. ENOS: I do. 21 remain under Oath and when we return to you, you will continue CHAIR NORMAN: And, Mr. Kuch, you understand that you will 22 to testify under Oath? 23 24 25 MR. KUCH: Yes, I do. TESTIMONY BY JENNIFER ENOS CHAIR NORMAN: And, Ms. Enos, will you be testifying as an R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 12 · · · . . 1 expert witness? 2 MS. ENOS: Yes. 3 CHAIR NORMAN: Then would you, please, give your 4 educational background and work experience? 5 MS. ENOS: Yes. I have a Master's degree in Geology from 6 the university of Texas at Austin. And I have been working in 7 oil and gas for nine years. The past year has been at 8 Marathon. 10 done? 9 CHAIR NORMAN: And the location of the work that you have 11 MS. ENOS: For Marathon I have only worked the Alaska 12 asset. Previous to that I worked for Phillips and I worked 13 14 15 Gulf of Mexico Shelf. I worked East Texas and North Louisiana and Prudhoe Bay Satellite. CHAIR NORMAN: And for Marathon the general location of 16 the area of your work? 18 19 20 21 MS. ENOS: Only the Cook Inlet asset. 17 CHAIR NORMAN: Okay. Commissioner Seamount? COMMISSIONER SEAMOUNT: I have no questions. CHAIR NORMAN: Commissioner Foerster? 22 University of Texas should be the number one ranked football COMMISSIONER FOERSTER: Ms. Enos, do you think that the 23 team in the country? 24 25 MS. ENOS: Of course. COMMISSIONER FOERSTER: Okay. I have no questions. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 13 · · · 19 20 . . 1 CHAIR NORMAN: Okay, thank you. Ms. Enos, you may 2 proceed. 3 MS. ENOS: Is that part of my expert? 4 COMMISSIONER FOERSTER: It weighs very heavily with me. CHAIR NORMAN: Time will tell. 5 6 MS. ENOS: You have a power point that you're looking at, 7 is that correct? 8 CHAIR NORMAN: We do. To describe it for you in the upper 9 right-hand corner it's says Kenai Gas Field, under that 10 Sterling Pool 6 Overview, the date October 11th, and then the 11 Marathon oil Company logo. 12 MS. ENOS: Okay. That is what I have as well. And that's 13 what I'll be doing is just giving a brief overview, location of 14 the field, stratigraphy structure and some comments about Pool 15 6 itself. Okay. 16 If you turn to the next page, page 2 of 9, the map of the 17 Inlet. To locate everyone the Kenai Gas Field is just located 18 south, southwest of the town of Kenai on the peninsula. CHAIR NORMAN: Yes, we're looking at it. 21 paper copy of this as we go through if you want to make notes MR. IBELE: Excuse me, Commissioners, would you like a 22 on it? 23 24 would you like a paper copy to follow? CHAIR NORMAN: I believe -- unless Commissioner Seamount, 25 COMMISSIONER SEAMOUNT: No, it's okay. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 14 · · · 14 . . 1 COMMISSIONER FOERSTER: I might want one. I might need 2 one, so I do want one. Thanks. 3 MS. ENOS: You all let me know when you're ready for me to 4 go ahead. 5 CHAIR NORMAN: Yes, we're ready. You may proceed. 6 MS. ENOS: Okay. On page 3, if you move to that page, 7 there are three producing formations within the Kenai Gas 8 Field, the Sterling formation, the Beluga and the Tyonek 9 formation. 10 The Sterling formation is what we are talking about today 11 and it was discovered in the field in 1959. These are miocene 12 formations and the Kenai structures are north to south trending 13 anticline with little to no faulting. Next page is a (indiscernible) diagram of the definitional 16 system leading into the alluvial system. These are 15 system that we see in the Cook Inlet especially an alluvial fan 17 (indiscernible) to meandering streams which result in interbed 18 sands, shales, silts and coal. 19 The next slide, page 5, is a diagrammatic cross section 20 across the Kenai Gas Field. You can see that the Sterling 21 formation is the (indiscernible) formation that we have. 22 Structurally it's at about 4,500 feet subsea. These sands are 23 more continuous than the other reservoirs that we see in the 25 24 area. The next slide is a structure map on page 6. And I j R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 15 · · · 10 11 13 . . 1 believe that this is one of the exhibits as well, but I'm not 2 sure which exhibit number. But this is a structure map of the 3 field with the well locations as well. There are 60 4 penetrations through Pool 6 -- I'm sorry, there are 60 5 penetrations -- well penetrations in the field, 59 of those are 6 through (ph) Pool 6. 7 CHAIR NORMAN: And in the lower left-hand corner of our 8 slide it says supplemental document A, page 6 of 9, and that is 9 what you're referring to? MS. ENOS: That's correct. CHAIR NORMAN: Thank you. 12 MS. ENOS: So this map should show that there are 60 wells in the field and all but one of those wells which is well 11 -- 14 KU 11-6 has penetrated Pool 6. There is a north-south 15 trending anticline as I mentioned. The Pool 6 limit is drawn 16 17 18 in red and it is a thin oil/water con- -- or gas/water context, excuse me, at 4,770 feet which is established by a water production in the northern most well which is well number 19 KU 44-30. 20 The next slide, page 7 is an overview of the Sterling 21 Formation. This is a clean, quartz-rich lith-arenite. There 22 are thick, continuous sands with interbedded coals. As I said 23 before these sands are more continuous than the other 24 formations in the field. The high-quality reservoir in excess 25 of 25 percent porosity and 100 to 1,000 plus millidarcies of R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 16 . . . . . 1 permeability. (Indiscernible) is about 200 feet thick roughly 2 and, again, the porosities and the permeabilities are 3 applicable. 4 There are a lot of sands within the Sterling formation and 5 they are broken into five different pools, Pool 16 (ph) the 6 lowest (indiscernible) and this is established by AOGCC rules 7 beginning of the development of the field. 8 The next page is a type log of the Sterling formation. 9 This is from well KBU 41-7. You can see the Pool 6 is a 10 combination of two sands actually, the Sterling C-1 and the 11 Sterling C-2. Generally the Sterling C-1 in the field is about 12 150 feet and the C-2 is the -- anywhere from 50 to 100 feet 13 thick and they're generally separated by a shale barrier. 14 Pool 6 is isolated from Pool 5.2 by a consistent shale 15 barrier of at least 10 feet ranging up to 30 or 40 feet or 16 greater and it is separated on the bottom from the Beluga 17 formation with another shale break (ph) that's consistent 18 through the field. 19 You can also recognize the separation of Pool 6 from the 20 overlying and underlying formation by the reservoir pressure 21 differences. (Indiscernible) to the right of this log. Pool 6 22 has a reservoir pressure of about 190 psi. Right now with 23 1,400 psi in Pool 5.2 above and 500 to in excess of 2000 psi in 24 the Beluga. 25 The final slide is page 9, again, Pool 6 is a combination R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 17 . . . 10 11 . . 1 of the C-l and C-2 sands. We have an assumed gas/water contact 2 at 4,770 based on the KU 44-30 watering out. All Pool 6 3 completions in the field show pressure communication. There 4 are 18 completions in Pool 6. And we currently have reservoir 5 pressure of about 190 psi. 6 To begin reviewing the modeling (ph) at this point? 7 CHAIR NORMAN: Let me ask, Commissioner Seamount, 8 questions? 9 COMMISSIONER SEAMOUNT: I have none, thank you, Ms. Enos. CHAIR NORMAN: Commissioner Foerster? 12 perforated in both the C-l and the C-2 or do you have good COMMISSIONER FOERSTER: All of your Pool 6 completions 13 communication between those two? 14 MS. ENOS: We do have communication between those two, but 15 we -- but not every well is completed in both of the sands. 16 COMMISSIONER FOERSTER: But the two sands are in reservoir 17 communication with one other? 18 19 20 MS. ENOS: Yes, they are. COMMISSIONER FOERSTER: Okay, thank you. 21 consistent in both sands. MS. ENOS: The pressure measurements that we have are 22 23 COMMISSIONER FOERSTER: Thank you. 24 back up to the preceding -- I think the slide, the type log. CHAIR NORMAN: Ms. Enos, this is John Norman. Could we 25 MS. ENOS: Certainly. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 18 . . . . . 1 CHAIR NORMAN: Could you elaborate on the confining 2 barrier? The shales above Pool 6? 3 MS. ENOS: The confining barriers, both of them? 4 CHAIR NORMAN: Yes. 5 MS. ENOS: Yes, okay. The shale above Pool 6 -- between 6 5.2 and Pool 6 is a consistent shale barrier that we see and 7 it's at a minimum of 10 feet and it sometimes is in excess of 8 40 feet. 9 CHAIR NORMAN: And can you -- well, let me start out. The 10 current pressure is 190 psi, did I understand correctly? 11 12 13 14 15 MS. ENOS: That's correct. CHAIR NORMAN: And what was the original pressure, to the extent you know, in Pool 6? MS. ENOS: I don't know, but I know that Mr. Kuch does. 16 is complete. CHAIR NORMAN: Okay. Then we'll wait until his testimony 17 18 19 20 MS. ENOS: Okay. CHAIR NORMAN: Does that complete your presentation? MS. ENOS: It does. 21 that you continue to remain available and it may be that we CHAIR NORMAN: All right. I would ask, if you can do so, 23 22 would want to recall you if a question comes up. MS. ENOS: Okay. 24 25 also to remember that you will remain under Oath. CHAIR NORMAN: And when you are recalled I would ask you R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 19 . . . . . 1 MS. ENOS: Yes. 2 CHAIR NORMAN: Okay. They you're..... 3 MR. IBELE: Are you ready for Mr. Kuch? 4 CHAIR NORMAN: Yes. 5 MR. IBELE: Okay. Kent, could you give us just a minute 6 to call up your presentation. I do need to ask a question. 7 This was the only exhibit among the thirty-some that went with 8 the application that was marked as confidential and I assume 10 you are not concerned about confidentiality? 9 that the parts of this you're preparing to talk about are parts 11 12 13 14 MR. KUCH: Yes. MR. IBELE: Okay. CHAIR NORMAN: You may proceed, Mr. Kuch. We're -- well, 15 it's on the screen and then we'd be ready to go. let's see, we're cuing up now the -- we'll let you know when 16 17 MR. KUCH: Okay. 18 up, just so you could be thinking about it, when you finish CHAIR NORMAN: Mr. Kuch, while we're getting this lined 19 your presentation I'll ask you to give a general description of 20 the material that's been provided to us for which Marathon oil 21 Company asserts confidentiality. Not the information itself, 22 but just enough of a description so that those in the audience 23 have some idea of what it is that confidentiality is being 24 asserted for? 25 MR. KUCH: Okay. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 20 . . . . . 1 CHAIR NORMAN: But that can occur at the end of your 2 presentation. And I'm assuming that everything right now that 3 we will be seeing here on the screen before us -- now, it is 4 marked confidential, so I caution you once it's shown here it 5 will lose its confidentiality. 6 MR. KUCH: Yes, I understand that. 7 CHAIR NORMAN: All right. Then we're looking at a slide 8 entitled Kenai Gas Field Sterling Pool 6 Sands, Reservoir 9 Simulation, August 2004 John Ozcan. 10 MR. KUCH: Yes, okay, that's the beginning slide and the 11 slide numbers are in the lower left hand corner just for future 12 reference. 13 If we go to the next slide this is going to be a recent -- 14 it's a summary of the updates of the model done in 7 (sic) of 15 2004 talking about the individual well history matches that 16 were generated for both gas and water production. 17 And then we ran a base case prediction out to 2015 and 18 that base case was basically just a blowdown (ph) of the field 20 ultimately be able to get out of the wel- -- out of the 19 to try and determine what type of rate forecast we would 21 reservoir. 22 If we can go to slide 3, this shows the grids (ph) that 23 the simulator is based on. Blue represents -- this is a map of 24 gas saturation at the beginning of time for Pool 6. The 25 colored bar at the bottom shows the gas saturations of roughly R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 21 . . . . . 1 68 percent, or the red and anything below that would typically 2 be -- end up (ph) water aquifer. 3 If we go to the next slide this just, kind of, shows the 4 structural relief of that grid and that most of the water is 5 all down structure. 6 MR. IBELE: Kent, I wanted to point out the orientation on 7 this map, please? 8 MR. KUCH: Oh, I'm sorry, yes. The actual orientation, 9 the field -- you have to rotate it up (ph). It's laying on its 10 side for distance (ph), so north is to the right and south is 11 to the left. That's the way the grid is aligned so it's 12 actually, kind of, looking sideways at the field. 13 14 15 16 Okay. If we can go to the next slide number 5. It's a (indiscernible) that basically, kind of, drives (ph) to the key points of the amount of gas in place that we're showing for the C-l and C-2 together is about 563 bcf. And at the time of the 17 simulation in roughly August 1st of 2004 we were showing 18 roughly 33.5 bcf remaining of recoverable reserves and that's 19 at an abandonment pressure 50 psi which is our current limit 20 with the existing facilities that we have. 21 Okay, we can go to the next slide. This is a production 22 plot showing the history and then on the far right hand side it 23 shows the forecast. It, kind of, goes through a curve down 24 there for what we would expect to recover in the -- during a 25 blowdown cycle. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 22 . . . 12 14 15 16 . . 1 The green dots are the actual field pressure measurement. 2 The black is what the simulator pressure would predict. The red curve is the actual gas production through the time the simulation was done and the water rate is shown in blue. 3 4 5 CHAIR NORMAN: The black is illustrated in dots, is that 6 correct, superimposed on the green line? 7 MR. KUCH: Yes, and so the -- the key takeaway on that is 8 that the black dots are the -- what the reservoir says that the 9 average reservoir pressure is and if we have a good history 10 match the green dots will be lying on top of the black dotted 11 line. CHAIR NORMAN: So it looks like it's virtually a perfect 13 match, is that correct? MR. KUCH: That's correct. CHAIR NORMAN: Okay. 17 production. So we will have a series of slides that will MR. KUCH: And so this is looking at the entire Pool 6 18 follow this in great detail and we mayor may not necessarily 19 need to go through all of those, but I can explain those when 20 we get to 'em, but I think the key driver here is that we've 21 matched on an individual well basis to the best of our ability 22 and then that drives the total production slot, the number that 23 we have a great deal of confidence in. 24 On top of that it fits very well with all of the basic P 25 over Z versus (indiscernible) of gas type of predictions that R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 23 . . . . . 1 would be done so it's very tank like in its behavior which was 2 one of the biggest reasons we targeted Pool 6 for gas storage. 3 If we go to the next slide it, kind of, a similar one as 4 far as production versus date (ph). The only difference is 5 this one will show, kind of, a cumulative effect. It shows the 6 green gas is accumulative, but the -- and let's go to slide 7 number 8. 8 This shows the pressure from the model and the actual 9 field observed pressures. This is a pressure versus time plot. 10 And then the very next one which is probably more critical 11 to interpretation is the Paver Z versus cumulative gas plot. 12 And here the red line is based on the simulator prediction and 13 the little blue cross marks are the actual observed pressure. 14 And so as a general rule Pool 6 is very tank like. This is a 15 reasonably straight line. 16 We don't get major, you know, flattening of the curve 17 showing a very, very strong aquifer. The model is built with a 18 very weak and small aquifer as a plot drive and in the 19 simulation runs the aquifer really doesn't encroach very much 20 from the outer boundary. 21 Let's see, I think okay, from this point forward there 22 will be two graphs that will be every well, with one of the 23 graphs being pressure versus date (ph) and it will show the 24 simulation predictions as well as the actual pressures gathered 25 on that well. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 24 . . . . . 1 And then the second plot will be the production -- the 2 rate production performance that will show the gas in red and 3 water in blue. And, I think -- and it will show the 4 predictions for wells that are still on production and would be 5 forecast out to 2015. 6 So pretty much -- okay, if -- if we want we can step 7 through them. They're all basically about the same. I guess 8 what I would say is we have a good fit of the pressure data 9 which adds a lot of confidence that the model is telling us the 10 -- the tank size (ph) is valid and it's all open and in 11 communication. 12 CHAIR NORMAN: Mr. Kuch, why don't you run through a 13 couple of them with us and I think that will give us a picture? 14 MR. KUCH: Okay, I'd be happy to. Let's see, the first 15 one is 11-17, that's the well number. The gas rate is in red. 16 The water is in blue. And you'll have to pay attention to the 17 water production in reference to the -- oh, I'm sorry, it on 18 page 11. The water is referenced to the line alternate (ph) 19 access on the right. 20 So this is a very, very sensitive scale because typically 21 these wells only make, you know, a few barrels of water a day. 22 It's on the realm of the ability of measuring, you know, pretty 23 accurately in a mon- -- within a monthly volume that's very 24 small. So you can see -- I just need (ph) to make sure you 25 understand the magnitude of the scale changes there. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 25 . . . 20 . . 1 Let's see -- okay. So if we go to page 12 this would show the -- oh, this would be I'm sorry, this would be for a different well. This would be well 13-6 and it would show the 2 3 4 pressure versus time match with red being the simulation 5 prediction and the blue cross hatches being the actual observed 6 pressures in the pad (ph). 7 So the next slide on 13 would be a very similar rate 8 forecast for well 13-6. The same nomenclature with red 9 representing gas on the left axis and blue representing water 10 production on the right. 11 So after that, I guess, that most of them are, kind of, 12 about the same. I guess if you're interested we can flip 13 through them. I guess what I'd suggest is if we -- if we have 14 -- you know, Gary or Lyndon, flip through the slides and you 15 can get a feel for the number of wells and the quality of the 16 match. I think it will, kind of, help drive the point home as 17 to how good the simulation is predicting so far. 18 CHAIR NORMAN: Yes, I think that that's satisfactory. 19 That gives us a good picture. MR. IBELE: I just want to point out for the Houston 21 participants that the production plots are very difficult to 22 read on the scale we see here, but the pressure matches are 23 quiet easy to see and to understand on this power point so I 24 think that will be of the most benefit. 25 MR. KUCH: Yes, okay, that's a good point. And then, I R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 26 . . . . . 1 guess, at the very end of the -- very close to the end of the 2 slide presentation -- it may be easier to back up. If we go -- 3 there's a subsection called pressure distribution and it will 4 show maps of the grid at the beginning of time and what it was 5 at the time the simulation was done. 6 And it would give a -- give you a feel for the phase of 7 completion (ph) and the consistency of the pressures across the 8 field and that might be worth, I guess, viewing and, for 9 example that pressure is on slide 50 is the header so the first 10 map is on slide 51. 11 MR. IBELE: Okay. We're scrolling through the exhibits 12 right now. He's on about page 45. 13 MR. KUCH: Okay. I'll just wait until we get to 51 where 14 we can see the..... 15 MR. IBELE: Okay, we're there. Okay, Kent, we're there. 16 MR. KUCH: Oh, I'm sorry, okay. This is a map of 17 within the layer that is the equivalent of the C-l sand and the 18 model has two layers in it, one representing the C-l and the 19 second representing the C-2 sand. 20 This is an initial condition and it will show that the 21 you know, the reservoir pressure is in the neighborhood of 22 2,100 pounds initially. And it spreads the wells are shown 23 in white near mostly the center, in the this kind of teal 24 colored area in the center of the simulating grid. The higher 25 pressures on the outside are in the aquifer. R & R C 0 U R T R E P 0 R T E R 5 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 27 . . . . . 1 So if we go to the next slide which would be 52, this is 2 the pressure as of August 2004. And you can see that although 3 the magnitude of the pressure is in the neighborhood of, you 4 know, 200 pounds so almost all those wells in the field will 5 see something very close to that. And the pressure only 6 increases as you get close to the aquifer, so that's very 7 consistent with what we see in the shut-in pressures. 8 Typically every May we do surface pressures and some 9 bottomhole pressure measurements on the Sterling pools during 10 the plan turnaround when a lot of production has to be shut-in. 11 And we typically see very small pressure differences between 12 any of the wells in that given pool. It's typically in the 13 order of two to three pounds. 14 The next slide, 53, is the initial pressure map of the C-2 15 and it also shows around 2,100 pounds pressure range. And then 16 on the next slide, 54, it's what the C-2 looks like in August 17 of 2004 and our pressures are very close to -- at about 220 18 pounds. 19 The next section starting at slide 55 are some gas 20 saturation maps and one of these was, kind of, shown early on. 21 Roughly 68 percent or higher gas saturation initially. 22 And if you look at the C-2 map that's slide 57 that's as 23 of August 2004, we still have very, very high gas saturations. 24 It's just a matter of the pressure being low, so it's showing 25 that the aquifer really hasn't encroached very far. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 28 . . . 1 On this particular slide you can see that well 44-30 is 2 out on the very far northern edge of the field. That's one of 3 the ones that watered out in the C-2. And that's basically how 4 we have matched the volumetric within the model to what we see 5 as far as where we'd expect the gas/water contact to be. 6 We should go to the next and last, kind of, -- well, let's 7 see, yeah, the last section here is on gas/water contacts. And 8 what this represents -- it's a little confusing to look at 9 because it's a cross section view through the model, but it 10 shows the structural roll so that's why it makes it look like 11 the gridlock fills (ph) are different widths. It's because 12 they're -- it's where their relative position is on the 13 structure and the curving of that anticline. . 14 15 16 So what it shows basically is the real high water saturation, they're all on the bottom. And this was -- this is the this slide which is the 59, is at initial condition. 17 And if you look at the next slide it would show where the water 19 change in that. 18 contact is in August of 2004, so there's very, very slight 20 Typically we've only seen, like, two grid block 21 encroachment of the aquifer which is still very far away from 22 most of the producing wells. 23 MR. IBELE: Kent, once again on this exhibit we cannot 24 read at the bottom what that scale is on the water saturations. 25 Can you, please, describe that? . R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 29 . . . . . 1 MR. KUCH: Yes. Can you read the title? Is this the one 2 that says August of 2004, gas/water contact? MR. IBELE: We're on slide 60. MR. KUCH: Yes, sorry, 60. The scale is on the far left 3 4 5 in the light blue. It's .3199 and on the far right side it's 6 1.0 basically so there would be 100 percent water saturation 7 and a residual gas saturation of .3199 on the far left. So 8 that's basically what's that showing is all along the crest 9 (ph) where the wells are which is on the left side of the -- or 10 -- kind of, top side of that diagram, we're at residual water 11 saturation. (Indiscernible) water saturation. 12 So to clarify that, that's why at roughly if the water 13 saturation is at .32 than the gas saturation maps (ph) are all 14 showing .68 and that would add to a total of 100 percent. 15 Let's see, okay, and the last -- the next to the last 16 slide is the same aquifer cross section on the C-2 zone and 17 then the very, very last slide is that same thing at August of 18 2004. 19 So that's, kind of, basically the conclusion of all the 20 slides that -- in keeping (ph), I guess, I would like to point 21 out as far as, like, the confidential information really the 22 thing we're probably most sensitive to is the gas in place 23 because with the (ph) production data being public it pretty 24 much will allow anyone to estimate the remaining reserves and 25 -- but, you know, it's a very old field and such. You know, R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 30 . . . . . 1 it's probably not a big problem since most of the -- all of the 2 production data had been published. 3 CHAIR NORMAN: Mr. Kuch, could you give a little more 4 detail on the information that you're asking the commission to 5 consider that has not been presented publicly at this hearing? 6 And give it in a way, if you would, so that some other person 7 would have enough of an understanding that if they felt like 8 confidentiality was inappropriate they could let the commission 9 know that. 10 You need not disclose, of course, the details of the 11 confidentiality, but give generic descriptions in a little more 12 detail than you just gave of what has been provided that you 13 are claiming confidentiality for? 14 MR. KUCH: You know -- so really I don't have anything 15 else really to describe that I would want to consider as 16 confidential. 17 The key issue is that. you know, we've got a volumetric 18 estimates of the gas in place on Pool 6. And -- but with that 19 from all of our performance data it shows it to be very tank 20 like and it's, you know, very well suited for gas storage, but 21 as far as confidentiality I don't have anything else that we 22 really want to exclude. 23 CHAIR NORMAN: Okay. Thank you very much. Will this set 24 of slides be available to be attached to the transcript to..... 25 MR. KUCH: Yes, it will. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 31 . . . . . 1 CHAIR NORMAN: .....go with the testimony? And could I 2 ask at the close of these proceedings a representation from 3 Marathon to come up and initial -- line through and initial the 4 word confidential on each of these, since by being presented 5 here they will no longer be confidential and we don't want any 6 confusion in the record. 7 MR. IBELE: Yes, sir, we can take care of that. 8 CHAIR NORMAN: Thank you. 9 MR. IBELE: Okay. Are there any questions for the -- the 10 Commissioners have regarding this project? 11 14 CHAIR NORMAN: Commissioner Seamount? 12 COMMISSIONER SEAMOUNT: I have none at this time. 13 CHAIR NORMAN: Commissioner Foerster? COMMISSIONER FOERSTER: I do. Mr. Kuch, in your reservoir 15 modeling did you model your proposed storage project? 16 MR. KUCH: Yes, what I should say is we did a test case on 17 the model using a -- you know, a range of the amount of gas 18 that we would normally want to store just to make sure that 19 operationally we had that capability and that it was stable and 20 it seemed to work fine. 21 23 24 So where we will be I guess, you know, we're looking at 22 volumes in the neighborhood of, you know, five to seven bcfs of storage capability at least for the short term to meet Marathon's goals for winter demand. 25 COMMISSIONER FOERSTER: And what pressure increases do you R & R C 0 U R T R E P 0 R T E R 5 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 32 . . . . . 1 expect with that volume, five to seven bcf? 2 MR. KUCH: It's a good rule of thumb on this reservoir at 3 this level is that for every bcf that we inject we would 4 increase reservoir pressure by two pounds -- no, six pounds and 5 that's reasonably consistent. 6 COMMISSIONER FOERSTER: So in your reservoir modeling what 7 radius of pressure impact do you see? Do you see the pressure 8 being impacted out to the ends of the model during your storage 9 time or do you see a grad- -- a pressure gradient and if you 10 see a pressure gradient, how far out to you see pressure 11 impacts? 12 MR. KUCH: It's -- let's see, we'll see a pressure 13 gradient over most of the grid cells. Although they -- yeah, 14 we originally tried modeling this with keeping the injection 15 gas separate from the native gas so -- for an increased 16 visibility of understanding where that's going. 17 As the number of cycles increased the -- you know, as you 18 go from year to year whether that increases the reservoir 19 pressure over time is going to be a function of what we store 20 compared to what we take out. 21 So unless we're starting to get an accumulative addition 22 of the storage volume than the pressure will basically be 23 operating over the geographic area. It will be going up and 24 then back down to basically its initial state. 25 COMMISSIONER FOERSTER: Okay. When it goes up how far out R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 33 . . . . . 1 away from the injection well do you expect to see an increased 2 pressure? 3 MR. KUCH: It's pretty much out to the boundaries of where 4 the aquifer is. So it's the -- because it's so tank like and 5 -- I'll give you an example. When we do the shut-in pressure 6 than they -- most of the wells will literally be within two psi 7 of each other, so it doesn't take very long for the pressure to 8 equalize across the structure. It's a very permeable 9 formation. And on build-ups for example it only takes a small 10 number of hours for a well to build up to its static (ph) 11 condition. 12 COMMISSIONER FOERSTER: So what you put into injection 13 well in the middle of the reservoir will have a pressure impact 14 all the way out to the ends of the reservoir is what you're 15 saying? 16 MR. KUCH: Yes, it ultimately will, yes. 17 COMMISSIONER FOERSTER: Okay. I have some other questions 18 and if you're not the right person to answer them just let me 19 know and I'll defer until that person, but I do have several 20 questions I think might be right for you so I'm going to keep 21 asking until you -- and if you say don't ask me that one, then 22 I'll go to the next one, is that all right, Mr. Kuch? 23 MR. KUCH: Yes. 24 COMMISSIONER FOERSTER: Okay. So what has Marathon done 25 to assure itself that there's mechanical integrity in all the R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 34 . . . . . 1 penetrations within the radius of impact? 2 I know that the regulations that are in place require a 3 quarter mile radius, but if there is a pressure impact out to 4 the ends of the reservoir then I would think that you would 5 need to ignore the one-quarter mile and recognize its 6 inapplicability. So what has Marathon done to ensure itself 7 that there's mechanical integrity in all penetrations? 8 MR. KUCH: Well, for -- certainly for all of the new wells 9 that are drilled -- well, let's say, for example, for the 10 Beluga or Upper Tyonek wells that are drilled, we're sitting a 11 string of pipe across the Sterling in the upper Beluga and 12 isolating that so that typically would be very well cemented 13 because it's very close to the bottom of the strand (ph). 14 And then on those Beluga wells we'll drill out and then 15 we'll typically complete those with an escape (ph) completion 16 so it's a three and a half tubing that's monobore assembly so 17 it's cemented the rest of the way. So of the log I've looked 18 at on all of those newer wells we typically get very, very, 19 good isolation on that. 20 On the older wells a lot of, kind of, the normal 21 completion procedure was to have a large casing, typically nine 22 and five-eights and then due a dual string completion with the 23 dual going to a deeper zone and a shallow zone. 24 So -- and may of those when they were originally installed 25 had sliding sleeves to enable the operator to, you know, open R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 35 . . . . . 1 or close any specific zone. Now, this was definitely 2 predominate in all of the wells that were drilled to be 3 producing from the Sterling zone. 4 So what -- I guess as far as integrity is concerned we see 5 we have almost all of the wells tied to the monitoring sys- 6 where we monitor pressure at the surface continuously so if 7 we see anything that's different there we'd be able to 8 recognize it. 10 of the wells at -- when the entire field is shut-in, in May 9 We have the state (ph) test pressures where we look at all 11 then if we had a major, let's say, either influx or, you know, 12 out-take of gas then it would be very difficult to match Pool 6 on the reservoir simulator because we would be seeing major 13 14 departures for gas that's being either put in or taken out of 15 the system that's not accounted for in the wells as they are 16 producing. 17 COMMISSIONER FOERSTER: Now, you said most are tied to the 18 surface pressure monitoring system? 19 MR. KUCH: Yeah, the ones that would not be, they'll still 20 have a mechanical gauge on it, but those would be wells that 21 were typically shut-in or have been shut-in for many years 22 where they're not producing right now, but may still have a 23 tubing conduit where the gauge (ph) pressure at the surface 24 would still give us an indication of what reservoir pressure 25 is. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 36 . . . . . 1 COMMISSIONER FOERSTER: Now, Mr. Kuch, I ..... 2 MR. KUCH: I'm sorry, go ahead. 3 COMMISSIONER FOERSTER: .....I understand that you're 4 expecting about six pounds increase per bcf and you're only 5 expecting five to seven bcf, so we're talking 30 to 50 pounds 6 of reservoir pressure increase. 7 So some of the questions that I ask you may seem frivolous 8 for this small pressure increase, but keep in mind that gas 10 Inlet is a populated area and we might be setting some 9 storage is, kind of, new to Alaska and to the Inlet and the 11 precedence here by what we're doing. 12 So bear with my apparently frivolous questions and keep 13 them in a frame work of gas storage in general, not just gas storage of five bcf in the Kenai Sterling Pool, okay? 14 15 MR. KUCH: Okay. 16 Okay. COMMISSIONER FOERSTER: 17 MR. KUCH: Well -- so one other comment I was going to make was that one of the advantages of using the Sterling Pool 6 is that we do have a large number of penetrations that are 18 19 20 connected to that zone. Even though the number of active 22 where we can monitor pressure so our intent was to have 21 producers is about 12 we have a significant number of wells 23 dedicated pressure observation wells so those will be 24 continually monitored. 25 So will your storage operations COMMISSIONER FOERSTER: R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 37 . . . . . 1 be manned 24/7? 2 MR. KUCH: Yes. 3 COMMISSIONER FOERSTER: And the pressures that you're 4 monitoring, I assume you're monitoring them both for safety 5 assurance and for verification of your modeling results and the 6 reservoir behavior? 7 MR. KUCH: Yes, that's correct. And they're tied into a 8 SCADA system that basically samples every few seconds and is 9 monitored live in the field office. 10 Has Marathon done hazard analysis COMMISSIONER FOERSTER: 11 on this project? 12 MR. KUCH: I'm not sure I can answer that question. 13 2700 14 (Tape Change) 15 Tape 2 17 16 0015 18 someone else who can. COMMISSIONER FOERSTER: Okay. Well, I'll save it for 19 My one last question, again, this is more for the public 20 record and the thought process of gas storage in general. You 21 said you've worked on some gas storage projects in California. 22 How do California gas storage requirements compare to what 23 you're seeing in Alaska and are you -- which has a greater set 24 of standards and to which are you trying to comply? 25 MR. KUCH: We will comply to the greatest set of R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 38 . . . . . 1 standards. And that -- I have to, kind of, reference that the 2 reservoirs I've worked in, in California were -- let's see, 3 time-wise that would be in the early '80s, so although 4 regulatory compliance in California at the time was probably 5 the most difficult state I had worked in, it was less -- 6 there's a -- yeah, those were relatively small and they didn't 7 last a very long period of time. 8 I think we only had injection of two cycles and then they 9 blew (ph) their gas down 'cause it was in such high demand and 10 they no longer had the ability to store because they were 11 selling everything that they could. 12 COMMISSIONER FOERSTER: Only two more questions. Do you 13 have an operational safety plan? 14 MR. KUCH: I'm not the expert on that category 'cause 15 I'm..... 16 COMMISSIONER FOERSTER: Okay. 17 .....a reservoir engineer. MR. KUCH: 18 COMMISSIONER FOERSTER: Okay. So that goes with the 19 hazards analysis question. And so my last question probably 20 goes to that, too. I'll ask it anyway and you can defer it if 21 you want to. 22 Do you have an emergency plan, an emergency response plan? 23 MR. KUCH: Yes, I'm sure we will have one, yes. That's, 24 kind of, a standard operating procedure for us, but yes, I -- I 25 have not probably seen that document myself. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 39 . . . . . 1 COMMISSIONER SEAMOUNT: So I should defer that question to 2 someone later. That's all I have. 3 CHAIR NORMAN: Commissioner Seamount, questions? 4 COMMISSIONER SEAMOUNT: I just have one more question. I 5 thought Commissioner Foerster was pretty complete in her 6 questions, but the question I have is, do you anticipate or do 7 you see ever bringing that pressure way up to near reservoir 8 pressures in your storage project? 9 MR. KUCH: No, I can't see that. We typically would not 10 have the capability to do that. You know, the most common 11 sense thing we would be able to do is use the existing 12 compression that we have and that typically, you know, like 500 13 to less than -- you know, way less than 1,000 pounds. So, no, 14 we don't even have the capability so I can't see us doing that. 15 The reservoir volume is so large and it -- you know, it's 16 roughly at, you know, 97 percent completion so it can hold a 17 very, very large volume of gas without going to high pressure. 18 COMMISSIONER SEAMOUNT: I guess I was thinking about what 20 discovery was made in Cook Inlet and all of a sudden we had all 19 if they brought a spur down from the North Slope or if a huge 22 23 25 21 these extra LNG plants..... MR. KUCH: The most (ph) ..... COMMISSIONER SEAMOUNT: .....and fertilizer plants 24 and..... MR. KUCH: I guess although this is probably not my, you R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 40 . . . . . 1 know, area of expertise, but I would say that it's market 2 driven. And the key is generally you will only store the 3 amount of gas volume that's necessary to meet the next winter 4 cycle. It's not that you, you know, want to have something 5 that's going to store, you know, 500 bcfs ahead of time. It's 6 just an economic issue, time, value, (ph) money. 7 COMMISSIONER SEAMOUNT: Understood. Okay, that's all I 8 have, thank you. 9 CHAIR NORMAN: This is John Norman, Mr. Kuch. I have two 10 questions. One of them is a question that I was asked recently 11 at a Public Meeting in Kenai. A lot of people are following 12 the gas supply issues there very closely and I'd be curious how 13 you would answer the question. 14 The question posed to me was, if you inject for storage a 15 given volume of gas and then at some point recover that gas, 16 what percent of recovery do you have? 17 MR. KUCH: I'm sorry, I think the phone cut out. I'm not 18 sure I heard the entire question. Can you repeat that? 19 CHAIR NORMAN: Yes, I can. If you inject a billion bcf 20 into the ground, how much of that billion bcf would you expect 23 21 to recover? In other words, how much loss, if any, do you 22 experience in gas storage in a reservoir like this? MR. KUCH: Well, I don't know if I can answer that, time 24 will tell, but what I would expect is that -- well, if we stay 25 within the pressure range that we're targeting, kind of, our R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 41 . . . . . 1 project (indiscernible) which is low compared to all of the 2 surrounding formations, there's really not many places it's 3 going to leak off to 'cause everything else will be at a higher 4 pressure. So although I'm expecting it to be a relatively 5 negligible amount of loss, I'm not sure I can quantify that. 6 So our intent is to monitor it very aggressively. And as 7 early as possible if we see any type of an error (ph) or issue 8 where it looks like we're losing gas we'll immediately stop. 9 It's -- I mean, it would just make sense, there's a lot of 10 economic value on the gas that you're injecting and we 11 certainly don't want to be injecting it if we think we're going 12 to lose it. 13 CHAIR NORMAN: So would it be correct to say your answer 14 is you would expect to recover nearly 100 percent of the gas 15 that you originally put in the ground? 16 MR. KUCH: Well, on what I know today, yes, that's -- 17 that's my best guess. 18 CHAIR NORMAN: Okay, thank you. The next question I have 19 and you may not be the best one, but several slides -- I just 21 ownership within the proposed storage area. And I can 20 wanted to clarify or confirm my understanding of the land 22 appreciate you may not be the best one, so I'll indicate that 23 question and then if you want to pass it off to someone else 25 24 you can do so. MR. KUCH: I'll be more than happy to pass that off. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 42 . . . 10 11 . . 1 That's not ..... 2 CHAIR NORMAN: Okay. Heads --..... 3 .....as I explained, I'm not an expert on that MR. KUCH: 4 category. 5 .....heads are nodding so you have CHAIR NORMAN: 6 successfully passed off. 7 Thank you very much then for that testimony and we would 8 appreciate it if you could remain available and also remember 9 that you're under Oath in case we need to recall you. MR. KUCH: Yes, sir, I will. CHAIR NORMAN: Okay. We're ready for your next witness, 12 Mr. Ibele. 13 14 MR. IBELE: Okay. If you'd like I can address 15 operational safety plans. Okay. commissioner Foerster's questions about the hazard analysis and 16 17 CHAIR NORMAN: Please. 18 really that we've identified with this project is due to the MR. IBELE: So far as hazard analysis, the only hazard 19 increase -- small increase in reservoir pressure that would 20 accompany this gas injection. 21 And because we're using existing wells, existing flow 22 lines, existing compression, all of which were installed and 23 designed when the reservoir pressure was significantly higher 24 than what it is today, we feel that there's very minimal in the 25 way of hazards that are presented from the storage of this gas. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 43 . . . . . 1 As a matter-of-fact, you know, the reservoir pressures 2 we're talking about achieving through the storage of five to 3 seven bcf of gas only gets us back to where we were about a 4 year ago at this point in time. So, you know, the pressure 5 increases are minimal. The equipment is more than designed for 6 the pressures that the reservoir will experience as a result of 7 the storage operations. 8 As far as operational safety plans, all of Marathon's 9 facilities operate under a emergency response team. We have a 10 corporate emergency response team with local supports. And 11 additionally all of our pipelines have very specific standard 12 operating and maintenance procedures that we follow, too, so we 13 are well covered with operational safety plans. There's none 14 that is specific to the gas storage operations. 15 As Mr. Kuch testified the Kenai Gas Field is a 24 hour, 16 manned operation center that is the location from which we 17 monitor all of our gas production and pipeline operations in 18 Cook Inlet and it is the most monitored of all of our 19 facilities, so we feel very comfortable with that right now. 20 CHAIR NORMAN: On that subject, Commissioner Seamount, any 21 questions? 22 COMMISSIONER SEAMOUNT: I have none. 23 CHAIR NORMAN: Commissioner Foerster? 24 COMMISSIONER FOERSTER: Is there any public access to any 25 of the facilities? R & R C 0 U R T R E P 0 R T E R 5 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 44 . . . . . 1 MR. IBELE: The Kenai Gas Field is all a controlled access 2 type facility. 3 CHAIR NORMAN: On all of the relevant wells here within 4 the proposed storage area, how are they configured, subsurface 5 safety valves, casing and so forth? Are they all 6 conventionally configured? 7 MR. IBELE: I'm going to pass that question back to Kent. CHAIR NORMAN: Mr. Kuch, could you hear the question? 8 9 MR. KUCH: Yes, I did. Surface safety valves is the 10 predominate mechanism. 11 12 CHAIR NORMAN: No subsurface safety valves? MR. KUCH: That's correct. I mean, typic- -- where I've 14 13 ever worked that's typically only in the offshore wells. And since all of these are onshore it typically can be -- you know, 15 if there was a problem it would be seen and recognized rapidly 16 especially with the monitoring and the 100 percent manpower 17 dedication to it so usually it's a relative small rate (ph). 18 19 this phase of our questioning then. So we're ready to proceed CHAIR NORMAN: Yes, thank you. I believe that completes 20 to your next witness. 21 22 Riddle to answer questions on land and title. MR. IBELE: Okay, I guess, the next witness will be Brock 23 (Side conversation on microphones and seating) 24 25 CHAIR NORMAN: Nice to see you again, Mr. Riddle. MR. RIDDLE: Nice to see you, sir. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 45 . . . . . 1 CHAIR NORMAN: If you'll raise your right hand I'll swear 2 you? 3 (Oath administered) 4 MR. RIDDLE: Yes. 5 CHAIR NORMAN: Please proceed. And state your name first? 6 MR. RIDDLE: My name is Brock Riddle. I'm the land 7 manager for the Alaska asset team. 8 CHAIR NORMAN: Okay. Could you basically state your 9 educational background qualifications. 11 10 TESTIMONY BY BROCK RIDDLE 12 Oklahoma with a BBA in Petroleum Land Management in 1981. I MR. RIDDLE: Yes, sir. I graduated from the University of 14 13 worked the gas belt for 15 years for Texas oil and Gas Corporation which eventually merged with Marathon oil Company 15 in 1990 and I've been the land manager of this asset group for 16 since 1996. 17 18 CHAIR NORMAN: Please proceed. MR. RIDDLE: Okay. I have submitted an affidavit 19 regarding notice requirements for this application and I'll 20 just submit myself to answer any questions regarding that or 21 any questions you may have regarding land issues surrounding 22 this permit. 23 24 25 CHAIR NORMAN: Commissioner Seamount, questions? COMMISSIONER SEAMOUNT: I have no questions. CHAIR NORMAN: Commissioner Foerster? R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 46 . . . . . 1 COMMISSIONER FOERSTER: None (ph). 2 CHAIR NORMAN: The notification lists a number of parties, 3 many of which have out of state addresses and I assume those 4 are all owners of overriding royalty interests, is that 5 correct? 6 MR. RIDDLE: The notification affidavit..... 7 CHAIR NORMAN: Are they surface owners? 8 MR. RIDDLE: We did, we notified the surface owners within 9 a one-quarter mile radius of the surface location of the 10 injection well. That was the Department of Natural Resources, 11 State of Alaska and Salamatof Native Association. The 12 remainder parties are those parties who have the right to share 13 14 in production of the remaining reserves in Pool 6. 15 or whatever that would generally show the outline of the CHAIR NORMAN: Do you have a map, any map, structure map 16 proposed storage area that you could put on the screen? 17 18 but it shows the outline. MR. RIDDLE: I've got a map, it's not a structure, sir, 19 CHAIR NORMAN: Sure, that's even better. Yeah, that would 20 be better. As Commissioner Foerster observed the gas storage 21 is somewhat new to us and we're occasionally plowing new ground 22 and from what I've been given to understand here the because 23 of the characteristics of this which seem to make it an ideal 24 reservoir, we may see gas far beyond a quarter mile under the 25 injection well, is that correct, is that your understanding? R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 47 . . . . . 1 MR. RIDDLE: Below the surface, yes. 2 CHAIR NORMAN: Below the surface, subsurface. So I 3 suppose looking within the confines of the proposed storage 4 area, what is identified as a red line, red line indicates 5 proposed storage area on both of the maps that I'm looking at, 6 what generally speaking is the land -- is the subsurface 7 ownership there? 8 MR. RIDDLE: I may have to get a little bit more long 9 winded than you anticipated, but the -- what I'll call the 10 interval ownership, the space itself, the dirt, the rock, the 11 container, whatever we want to call it nomenclature-wise, what 13 solicitor at BLM. 12 began this process was a decision that we got out of the 14 And the solicitor's opinion said that when these lands 15 were patented by BLM in the instances where they reserved the 16 minerals the only reservation that they made, their intent, was 17 to reserve the molecules within the interval and the interval 18 pass to the patentee. It will be owned today by that patentee, 19 successors or assigns. And so that created the green tracks on 20 your map of people that own interval only, no molecules, just 21 the interval. 22 23 this is..... CHAIR NORMAN: Now, when you say intervals you're talking 24 25 MR. RIDDLE: Pool 6..... CHAIR NORMAN: .....not severed horizon is it or is it R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 48 . . . 13 . . 1 or..... 2 MR. RIDDLE: It is severed, but the..... 3 CHAIR NORMAN: There are different horizons..... 4 MR. RIDDLE: .....solicitor's opinion where when they 5 reserve those minerals that severed it, but they only reserve 6 the molecules within that interval and the interval went with 7 the patent. 8 CHAIR NORMAN: Well, what's -- what interval are we 9 talking about? 10 MR. RIDDLE: We're talking about the Pool 6 interval. 11 CHAIR NORMAN: The Pool 6 interval? 12 MR. RIDDLE: Yes, sir. CHAIR NORMAN: Okay. 14 MR. RIDDLE: It's a defined interval both horizontally and 15 vertically. 16 17 CHAIR NORMAN: All right, I understand. 18 map. Okay, that's one class of ownership within this storage MR. RIDDLE: Okay. That created these green areas on your 19 area. 20 If you will look at these little, yellow areas those are 21 instances where when the BL- -- when the Federal Government 22 patented out these tracks they conveyed both minerals and 23 interval so those tracks -- or those people own both, okay, and 24 that's the yellow. 25 And, of course, the purple is self-explanatory, that's the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 49 . . . . . 1 state of Alaska where they own. And the part in the middle 2 which I'm not sure how to describe that, but it's -- the legend 3 says Marathon Oil Company, that's an interest that we acquired 4 from Cook Inlet Region, Inc. in two phases. Back approximately 5 1999 we acquired their interval ownership for injection 6 purposes. Nevertheless we owned the interval from that point. 7 I think along about 2000 we came back in and we bought 8 their molecules, if you will. They're oil and gas interests. 9 And so that's how Marathon acquired that interest. 10 And in the peripheral acreage in blue is the acreage as it 11 ends CIRI did retain the rights to the interval ownership, 12 although they don't own any more molecules in the area, they do 13 own that interval and those spaces. 14 CHAIR NORMAN: Yes, okay. Thank you very much for that 15 complete explanation. Now, the ownership of the molecules once 16 they're produced that ends and then all we have is the space 17 there of the receiving reservoir, correct? 18 MR. RIDDLE: Yes, sir. That's correct. 19 CHAIR NORMAN: Okay. So on the map here among the blue 20 the CIRI lands, the yellow which I'm not sure, I guess we could 21 correlate it are the green federal acreage. Is there any owner 22 of that subsurface space that would be surprised that someone 23 is putting gas into their subsurface space? 24 MR. RIDDLE: I think they're going to be very surprised 25 that they even own it, but we're -- let me say this, R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 50 . . . . . 1 Commissioner, we are fully aware that the issuance of this 2 permit does not grant us any rights to store gas on any of this 3 property in here. We are going to have to go negotiate a 4 separate gas storage lease with each individual that I've 5 described in my testimony. 6 CHAIR NORMAN: Okay, that is sufficient then. That's the 7 answer that I was looking for. And to cap that off, if our 8 order, whatever form it comes out, is so conditioned that you 9 understand it's still your obligation to deal with the owners? 10 MR. RIDDLE: Absolutely. 11 CHAIR NORMAN: Okay. Commissioner Seamount? 12 COMMISSIONER SEAMOUNT: No, questions. 13 CHAIR NORMAN: Commissioner Foerster? 14 COMMISSIONER FOERSTER: No. 15 CHAIR NORMAN: Thank you, Mr. Riddle. 16 MR. IBELE: commissioners, I'd like to just wrap up a 17 little bit and tell you what our current status is on the lease 18 issue because obviously that's of interest to you here, but I 19 want to mention that Marathon is actually engaged with the 20 Alaska Department of Natural Resources in negotiating lease 21 terms with the State for the rental of the State's subsurface 22 interest in this proposed area. 23 Brian Havelock with the Department of Natural Resources is 24 here today is involved in that and that's his interest in being 25 here. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 51 . . . . . 1 The state of Alaska acreage represents only 24 percent of 2 the ownership in this proposed lease area so -- and Marathon 3 itself owns about 55 percent of the subsurface area so between 4 the two parties, Marathon and the state of Alaska, those are 5 the primary participants in this rental area, the interval as 6 Brock describes it for the storage. 7 Additionally we're actively engaged with DNR, the 8 Department of Revenue and BLM regarding the necessary royalty 9 and tax terms for both the stored and the Native gas and those 10 discussions are ongoing at this time. We have some meetings 11 scheduled to talk to all those agencies together to agree to 12 certain aspects of the project. 14 We anticipate filing our lease application with the DNR 13 prior to the end of this year. And as Brock indicated first 15 gas injection will not occur until the state's lease is 16 approved and all permits and -- yeah, all permits are received 18 ready to start storing, physically injecting volumes of gas in 17 and approved. We're targeting March or April of 2006 to be 19 the storage project. 20 21 testimony? CHAIR NORMAN: Very good. Now, do you have any further 22 23 24 25 MR. IBELE: Do not. CHAIR NORMAN: Commissioner Seamount, any questions? COMMISSIONER SEAMOUNT: I have no further questions. CHAIR NORMAN: Commissioner Foerster? R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 52 . . . . . 1 COMMISSIONER FOERSTER: No. 2 CHAIR NORMAN: Okay. We're been at it about an hour and 3 20 minutes. Let's take a 10 minute break and then in the 4 course of that the Commissioners will also retire. We'll 5 compare notes and see if there are any final questions. We'll 6 then return and I would ask all of the witnesses that have 7 testified to, please, remain available. We'll try to collect 8 our questions and if there are -- I don't know there will be 9 any, but if there are any remaining questions we'll try to ask 10 them in as efficient a way as possible and I would anticipate 11 we could wrap up here pretty quickly. 14 15 12 We'll take now a recess of 10 minutes. 13 (Off record - 10:25 a.m.) (On record - 10:38 a.m.) CHAIR NORMAN: We're back on the record after a recess of 16 approximately 10 minutes. We have conferred and commissioner 17 Foerster will sum up a few remaining questions the Commission 18 has. Commissioner Foerster. 19 COMMISSIONER FOERSTER: If we limit your allowable 20 injection volume to a total of seven bcf per cycle as part of 22 21 this order, will that be acceptable? 23 24 MR. TAIMUTY: May I take a shot at answering that? CHAIR NORMAN: And your name, please, sir? MR. TAIMUTY: This is Dan Taimuty at Houston with 25 Marathon. I'm the development manager. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 53 . . . . . 1 CHAIR NORMAN: You may. We've not previously placed you 2 under Oath, have we? 3 MR. TAIMUTY: No, sir. 4 CHAIR NORMAN: Then I'll do that first before you answer. 5 MR. TAIMUTY: Okay. 6 CHAIR NORMAN: Would you raise your right hand? 7 (Oath administered) 8 MR. TAIMUTY: Yes, sir. 9 CHAIR NORMAN: And can you state and spell your name for 10 the record, please? 11 MR. TAIMUTY: My name is Daniel Dean Taimuty. My last 12 name is spelled Tango, Alpha, India, Mike, Uniform, Tango, 13 14 15 Yankee. CHAIR NORMAN: And your position, please? 16 assets for Marathon Oil Company. MR. TAIMUTY: I am the development manager for the Alaska 17 18 19 CHAIR NORMAN: Yes, please proceed. TESTIMONY BY DAN TAIMUTY 20 is really a simple yes or no question, but we certainly MR. TAIMUTY: To answer the question, I don't know if this 21 understand and appreciate the desire to monitor how much is 22 injected, you know, so that the pressure situation doesn't go 23 beyond some reasonable bounds. 24 My only concern would be that seven may limit us to try 25 and, you know, there -- there may be some cycles where we may R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 54 . . . . . 1 want to inject more that seven bcf. Having said that I don't 2 envision where we ever would inject 25 or 30 bcf, but one summer we may want to inject 10 or 11, for example, so I think a cap would be a reasonable thing, but we would like a chance 3 4 5 to, kind of, review this in more detail and maybe make a 6 recommendation to you if that's possible? 7 COMMISSIONER FOERSTER: Okay. That would be possible 8 because we're going to ask you for a little bit more 9 information to consider in our deliberations so if you could 10 give us what we asked for and the other -- the request I 13 12 be great. 11 haven't made yet, and this information at the same time that'll 14 MR. TAIMUTY: That'd be great. COMMISSIONER FOERSTER: Okay. The other piece of data 15 that we would like to get from you would be the details of your 16 monitoring plan, which wells you plan to monitor and how you 17 plan to monitor them both for reservoir performance and for 18 mechanical integrity? And I'm assuming for mechanical 19 integrity you'll be monitoring all wells that penetrate the 20 reservoir. 21 Which leads me to my next question, are you okay with me 22 proceeding? 23 24 MR. TAIMUTY: Yes. 25 part of our order we require you to monitor and report COMMISSIONER FOERSTER: Okay. My next question is, if as R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 55 . . . 21 22 . . 1 mechanical integrity in all wells that penetrate the reservoir, can you physically do that? MR. TAIMUTY: We would have to think about that. That's a difficult request. I guess I'd like an opportunity to talk to 2 3 4 5 our operations people about that first to give you a good 6 answer. 7 COMMISSIONER FOERSTER: Okay. Well, then we can expect the answer to that one along with the two then. MR. TAIMUTY: Okay. 8 9 10 COMMISSIONER FOERSTER: Okay. My last question -- and I 11 apologize that I, sort of, asked it before, but maybe I'll hone 12 in a little bit more this time. 13 Have you looked at all 59 penetrations and satisfied 14 yourselves that they have mechanical integrity? 15 MR. TAIMUTY: Yeah, we have to looked -- I know we've 16 looked at most of them. I can't swear in testimony that we've 17 reviewed all 59 in detail, most of them we certainly have. 18 COMMISSIONER FOERSTER: Okay. So maybe the answer to this 19 question can come in with the rest? 20 MR. TAIMUTY: Yes. COMMISSIONER FOERSTER: Okay. That's all I have. MR. IBELE: Commissioners, I'd like to add a little bit to 23 Dan's response on the injection limitation. Dan, speak up if 25 Our main goal through this storage project is to offset 24 you disagree with me here. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 56 . . . . . 1 withdrawals'with injection on an annual cycle. To the extent 2 that we're currently -- well, somewhere around 23 or 24 bcf of 3 remaining recoverable reserves in this reservoir, recall that 4 the information you saw up there was dated prior -- you know, 5 that's a 2004 model so we've had a fairly significant 6 withdrawal from this reservoir in the last couple of years. 7 I think that our -- what we're trying to get to is a 8 reservoir volume of around 30 bcf. That, kind of, has the 10 achieve. That gives us the daily rates that we're capable of 9 optimum deliverability characteristics that we're trying to 11 handling with our existing compression and our facilities 13 12 there. 14 So to the extent that, you know, today we're at 23 bcf, 15 winter cycle not starting injection until, say, April or March give or take, we're going to be depleting further through this 16 next year, limiting us to seven bcf injection would not get us 17 to where we want to be ultimately. 18 We requested a pressure limitation in our application for 19 injection and I think we're much more comfortable with a 20 pressure limitation rather than a volume limitation so far as 21 -- you know, if you're going to cap what we're -- what our 22 storage operations are. 23 The application ask for a cap of -- or I should allowed us 24 to inject to a reservoir pressure of no more than 500 psi. 25 Keeping in mind, again, that the original reservoir pressure R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 57 . . . 10 11 . . 1 here was over 2000 psi, so that's, you know, only -- a 500 psi 2 limit is only 25 percent of what was originally there in place 3 and well below, again, what all the wells, the facilities, the 4 flow lines, the compressors are designed for. So we'd be much 5 more comfortable with a pressure limitation rather than a 6 volume limitation. 7 Dan, do you agree with that? 8 MR. TAIMUTY: Yeah, you're making a very good point, I 9 totally agree. MR. IBELE: Okay. COMMISSIONER FOERSTER: So let me for clarification for 12 the record, are you saying for a 500 pound reservoir pressure 13 14 15 or a Delta P of 500 pounds? MR. IBELE: A maximum of 500 pound reservoir pressure. 16 Delta P of approximately 300 pounds somewhere (simultaneous COMMISSIONER FOERSTER: Available (ph) pressure. So a 17 speech) ..... 18 19 of what volumes available for storage would ever allow us to MR. IBELE: And to be honest that's probably far in excess 20 achieved. 21 22 expecting about seven to 10 bcf and then asking for a pressure COMMISSIONER FOERSTER: And so asking for seven bcf or 23 that gives you 50 bcf, we would need you to tighten that up a 24 little bit. You know, we're not married to seven bcf,..... 25 MR. IBELE: Okay. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 58 . . . 10 . . 1 COMMISSIONER FOERSTER: .....nor do we immediately have a 2 problem with 500 pounds, but there's a lot of difference 3 between seven bcf and a 50 -- 500 pound or a 300 pound Delta P 4 in the reservoir. 5 MR. IBELE: So you're asking us to come back with a 6 lower..... 7 COMMISSIONER FOERSTER: Either a pressure or an injection 8 volume that..... 9 MR. IBELE: That is more consistent..... COMMISSIONER FOERSTER: .....is more consistent with what 12 11 you..... MR. IBELE: .....with our plans or anticipation..... 13 14 15 16 17 COMMISSIONER FOERSTER: .....plan to do. MR. IBELE: Okay. COMMISSIONER FOERSTER: Thank you. COMMISSIONER SEAMOUNT: No questions. 18 of the Marathon oil Company witnesses have anything more to CHAIR NORMAN: And do you have anything more than -- any 19 add? 20 MR. IBELE: I guess, yeah, I would like to add one other 21 comment on the question about monitoring the wells and how we 22 assure that we have integrity in all our other wells. 23 And, again, I think the strongest evidence of the 24 integrity of the reservoir is the tank like behavior that Kent 25 Kuch testified to that indicates that there's been no influx or R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 59 . . . . . 1 leakage from this reservoir despite the fact there's 2 significantly higher pressures on either side of this. 3 So, you know, we feel very comfortable that we're not 4 getting any communication between the Pool 6 and any other 5 pools out in the field there so -- although as Dan indicated 6 that -- wasn't able to answer the question of whether or not 7 we've looked specifically at the mechanical integrity of every 8 well that penetrates Pool 6, the field wide performance that we 10 contained and there are no mechanical integrity issues in these 9 have I think very satisfactory demonstrates that it is 11 wells, so -- sorry? 16 17 12 CHAIR NORMAN: Anything further? 13 MR. IBELE: No, sir. 14 CHAIR NORMAN: Okay. Then..... 15 COMMISSIONER FOERSTER: I have another question. CHAIR NORMAN: Commissioner Foerster. 18 as much to help you understand my thinking and getting it on COMMISSIONER FOERSTER: I have one more question and it's 19 the record as anything. Are you familiar with the gas storage 20 project in Hutchinson, Kansas? 21 22 MR. IBELE: No, I am not. 23 actually out -- seven miles outside of Hutchinson, Kansas there COMMISSIONER FOERSTER: Well, in Hutchinson, Kansas -~ or 24 was a gas storage project and the operator followed all the 25 rules that the State of Kansas gave the operator and then one R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 60 . . . 12 13 14 . . 1 day in the middle of downtown Hutchinson, Kansas there was a 2 surface explosion that destroyed two buildings -- two 3 businesses in downtown Kansas and then the following day a 4 trailer park exploded and two people were killed, so that's the 5 biggest motivation for some of my questions. 6 CHAIR NORMAN: Thank you, Commissioner Foerster. Do you 7 have anything further? 8 MR. IBELE: No, sir. 9 CHAIR NORMAN: Okay. Then I'll ask -- the Chair is asking 10 now are there any other persons present in the room who would 11 like to be heard from on this specific application? Okay. The Chair sees -- for the record, the Chair sees no one asking to be recognized and if there is no opposition we will stand adjourned at 10:50 a.m. 15 (Recessed - 10:50 a.m.) 17 16 1070 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 61 . . . . . 1 C E R T I F I CAT E 2 UNITED STATES OF AMERICA ) )ss. 3 STATE OF ALASKA ) 4 I, Rebecca Nelms, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and Reporter for R & R 5 Court Reporters, Inc., do hereby certify: 6 THAT the annexed and foregoing Public Hearing In the Matter of the Application of MARATHON OIL COMPANY to allow 7 Underground Injection of Natural Gas for Storage Purposes in Sterling Pool 6, Kenai Gas Field was taken by Suzan Olson on 8 the 11th day of October, 2005, commencing at the hour of 9:00 a.m., at the Alaska oil and Gas Conservation commission, 9 Anchorage, Alaska; 10 THAT this Hearing Transcript, as heretofore annexed, is a true and correct transcription of the proceedings taken and 11 transcribed by Suzan Olson; 13 12 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 24th day of October, 2005. 14 15 16 17 18 19 20 21 22 23 24 25 Q'-.tt~ (' ("~''-.f~ Notary Public in and for Alaska My Commission Expires: 10/10/06 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 . . STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Kenai Gas Storage Injection Order October 11,20059:00 AM NAME - AFFILIATION ADDRESS/PHONE NUMBER TESTIFY (Yes or No) (pLEASE PRINT) L 'I t1J(f,.. I ß.h4~-, f11 ~ /ðJJrb ,.....) 0'; C (' Ç" sµ ',Y'j)- y;.( , Gif~ kf!jhl~ Jð µ ~ A . LP¡,\ fD.-J£' { J3R.OtK /2 í 0 ß Lt.,;. cr~ '" w; [it!)""",? ¿,/ r:Þ"q~/6/t -l E.r:r= SKt:..-rA~~ Iì1 ~rvttWh 0 d to S tiJ -30 ~ fø Z461U:t\Q\./ bAY P.lß,-gc¿cr f\¡\ 0 c... -5 ~ ~'3 0 <-I Y /2;;; J;~.~;t No y-es ,(,l(;' /t4:) \)~CA'- / ZCí:a~"'l b'è.-è.. No ¡¡I . 1 . Ing . . I , II i I st 11II 11II I I t K · . r t r I Sterling Formation, Kenai Gas Field · Clean, quartz-rich lith-arenite · Thick, continuous sands with interbedded coal · High-quality reservoir - 25+°/0 porosity - 100 -1000+ md perm · 10s to 100s of feet thick in 1000 ft section · 11 sands = 5 Pools, as established by AOGCC Supplemental Document A, Page 7 of 9 .. t IiII I IiIII I I 1 6 1 "", . Sterling Pool 6, Kenai Gas Field · C 1 and C2 sands · GWC @ -4770' - Based on KU 44-30 watering out · All Pool 6 completions show pressure communication · Low P (190 psi) zone between much higher P formations Supplemental Document A, Page 9 of 9 r:J- ~ WORK PERFORMED · Updated production data to 7/2004 . · Reviewed Individual well historical pressure data, genera observed pressure files for history matching · Conducted history match on well by well basis · Run base case prediction to 12/2015. -. -£mJFIÐ[tffIAL~ 2 Property of Marathon Oil Company. For Authorized Use Only. of Oil Use Only~ KENAI GAS FIELD POOL 6 RESERVES SUMMARY CASE-1: BASE OGIP 8/1/04 12/1/15 BCF BCF SAND REMAINING GIP REMAIN. RESV* 8/1/04 8/1/04 BCF BCF UR RESERVES 12/1/15 BCF ---------- ---------- ------------- ---------- --------- eC-1 457 9.9 39.3 29.4 447.1 C-2 106 5.3 9.4 4.1 100.7 ---------- --------- ------------- ----------- ---------- TOTAL 563 15.2 48.7 33.5 547.8 ·SHP 50 psia CASE-2: PERF C-2 OGIP REMAINING GIP REMAIN. RESV* UR RESERVES EUR 8/1/04 12/1/15 8/1/04 8/1/04 12/1/15 12/1/15 SAND BCF BCF BCF BCF BCF % e---- ---------- ---------- ------------- ---------- --------- --------- C-1 457 10.1 39.3 29.2 446.9 97.78 C-2 106 2.2 9.4 7.2 103.8 97.92 ---------- --------- ------------- ----------- ----------- --------- TOTAL 563 12.3 48.7 36.4 550.7 97.82 5 ~ --eONFIDCtJTIAl Property of Marathon Oil Company. For Authorized Use Only. EUR 12/1/15 % --------- 97.83 95.00 --------- 97.30 at 11: 11 am by user dff from machine of Marathon Oil For Use Printed on « Ü) (L 0::: (L LL (L LL 000 2000 3000 ....... o /1 FP FPR FGPR VS. VS. VB. DATE (PRESSURE) DATE (LAST _2) DATE (LAST _2) aBS FWPR VS. DATE (LASL2) FWPRH VS. DATE - 1/1/74 1/1/86 DATE o 80000 70000 60000 50000 10000 0 /1/74 /1/86 DATE Printed on 7/9/04 at 11:19 om by user dff from machine P244012 Marathon Oif For Authorized Use š (f) iL o 000 2000 IIIi!IIIi! 3000 o FP vs. FGPR FPR DATE (PRESSURE) vs. DATE (LAST _2) vs. DATE 08S FWPR vs. vs. FGPT vs. DATE (LASL2) DATE (LASL2) DATE (LAST _2) OE+O 3E+8 4E+8 5E+8 6E+8 E+8 300 2000 <C (j) CL 01000 CL CL LL FPPG vs. DATE ( LAST _2 ) o Printed on 7/9/04 at 10:35 am by user dff from machine P244012 of Marathon Company. Authorized 300 «2000 (f) CL N CL~ 1 000 N Ü 0.:::: o FPRGZ VS. FGPTH ( LAST _2 ) OE+O 1E+8 2E+8 3E+8 FGPTH,FGPTZ MSCF 4E+8 5E+8 6E+8 Printed on 7/9/04 at 10:35 om by user dff from machine P244012 Marathon Oil For Authorized Use Only. 2000 <C if) ~ f'. J-1000 ~ f'. ~ I ~ m :s; 0 WBP:11-17 vs. DATE ( LASL2 ) ++ Printed on 7/9/04 at 10:36 am by user dff from machine P244012 of Marathon For Use Well Production Rate (11-17 ) WGPR:11-17 ( LAST_2 10000 9000 8000 >- ;§ 7000 ~ b 6000 (f) 2 5000 ~ 4000 i := 3000 I g:: 2000 ü ~ 1000 (5 0 WGPRH:11-17 vs. DATE ( LASL2 ) 10 9 8 7 6 5 4 3 2 1 o 1/1/74 Printed on 7/9/04 at 10:44 am by user dff from machine P244012 For ~ o '--.... m f- (f) f"-. I ~ I 0:::: (L 5: 5: L.- () +' o 5: 2000 <C (f) (ì ({) ~1000 (ì ({) I n , , (ì ~ 0 WBP:13-6 vs. DATE ( LAST _2 ) + Printed on 7/9/04 at 10:36 am by user dff from machine P244012 CONFIOCN1'lAL of Oil Well Prod uction Rate ( 1 3 6 ) WGPR: (LAST ~2 ) 16000 14000 >-12000 « o ~10000 () Uì 2 8000 r 6000 I"') ~ I 4000 cr: CL ~ 2000 o (/) o (;) WGPRH:13~6 vs. DATE ( LAST~2 ) 1/1/62 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:45 am by user dff from machine P244012 Oil For Only. 10 9 8 7 6 5 4 3 2 1 o >- « o ~ ill ?- m <D I I"') I Q:: CL :5 :5 L (j) +-' o :5 2000 š (f) CL N n J1000 n CL N n I >t CL ~ 0 ++ WBP:14-32 vs. DATE ( LASL2 1/1/74 Printed on 7/9/04 at 10:37 am by user dff from machine P244012 of Authorized Well Production Rote (14-32 ) WGPR: 14-32 ( LAST _2 ) 30000 >- « ~20000 U-. o If) 2' N f'0 J10000 I (L (L C) 5: (fJ 8 0 WGPRH: 14-32 vs, DATE ( LAST _2 ) 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:46 am by user dff from machine P244012 Cor~FIDENTIAt? of Marathon Oil Company. For Only. 50 40 >- « 0 ......... 30 CD 1- (f) N 20 f'0 I "<l- I (L 10 (L 5: 5: '- Q) +-' 0 0 5: 2000 <C (J) 0-- w J1000 0-- W I 7 0-- ~ 0 LAST _2 ) ++ Printed on 7/9/04 at 10:37 am by user dff from machine P244012 of Marathon Oil For Authorized Only. Well Produ on Rote (14-6 ) WGPR:14-6 ( LASL2 ) WGPRH: 14-6 vs. DATE ( LAST _2 ) 9000 8000 ~ 7000 "-.. b 6000 (fJ 2 5000 ¡ 4000 ~ ~ 3000 I [ 2000 ü $ 1000 (f) 25 0 Printed on 7/9/04 at 10:47 am by user dff from machine P244012 Marathon Oil 1/1/10 10 9 8 7 6 5 4 3 2 1 o ~ o "-.. ill I- (f) <D I ~ I cr: Q $ S L" Q) -+-' o S 2000 <:: (f) D- ~1000 CD I ~ . . D- m S WBP: 14-6RD vs. DATE ( LAST _2 ) o 1/1/62 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:38 am by user dff from machine P244012 For 1/1/10 Well roduction Rate (14-6RO ) WGPR:14-6RD ( LAST_2 7000 6000 >- « o b 5000 (f) 2' <:1-000 o œ CD 3000 I '* I 2000 œ Q.. ~ 1 000 o (f) o G WGPRH: 14-6RD vs. DATE ( LAST _2 ) 1/1/74 Printed on 7/9/04 at 10:47 am by user dff from machine P244012 of Marathon For Authorized Use 10 9 8 >- 7 « 0 .......... 6 co ~ (f) 5 0 œ 4 CD I '* 3 ~ " I œ 2 Q.. os os 1 L" () +-' 0 0 os 2000 « (J) 0- (01000 I x ...q- . . 0- m S WBP: 1 vs. DATE ( o Printed on 7/9/04 at 10:38 am by user dff from machine P244012 of Marathon Oil Company. For . Well Production Rate (14X-6 ) WGPR:14X-6 ( LAST_2 ) 1.00 0.75 >- « o ~ 0.50 u <.n :2 . 0.25 (J1 o Ü 0.00 1/1/62 1/1/74 1/1/86 DATE Printed on 7/9/04 at 10:48 am by user dff from machine P244012 21 ~DEÞJTIAI., Property of Marathon Oil Company. For Authorized Use Only. 1.00 0.75 >- <C 0 '-..... ill f-- VJ 0.50 ill I x v ~ .. I 0.25 0::: 0... :s: 3: L (lJ -+-' 0.00 0 :s: WBP:2 I -6 vs. DATE LAST _ 2 2000 UJ 0.... (0 :-1000 0.1 0.... ^ (0 I ~ 0.1 . . 0.... m 0 S 1/1/86 /1/98 DATE Printed on 7/9/04 at 0:39 am by user dff from machine P244012 ~ of Marathon Oil For Authorized Use /1/10 Well Production Rate (21-6 ) WGPR:21-6 ( LAST _2 ) WGPRH:21-6 vs. DATE ( LAST _2 ) 8000 7000 >- « ~6000 LL ~5000 :;;;: t04000 ~3000 æ2000 C) 5:1000 ffJ (5 0 1/1/86 DATE Printed on 7/9/04 at 10:49 am by user dff from machine P244012 of Oil Use 10 9 8 7 6 5 4 3 2 1 o >- « o ~ m f- (f) to I ~ 0J I lY CL S S L (j) +' o S 2000 3 if) (L 1000 N (L 0 a::: ill I N (L m 0 5: WBP:21-6RD vs, DATE ( LAST _2 ) + Printed on 7/9/04 at 10:39 am by user dff from machine P244012 of Marathon Oil COITJpany. For Authorized Use Only. Well Production Rote (21 6RD ) WGPR:21 -6RD ( LAST _2 ) 5000 4000 >- « o ~ ~3000 ¿ ~2000 I ~ N ~1000 (') s 8 0 WGPRH:21-6RD vs. DATE ( LAST _2 ) 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:49 om by user dff from machine P244012 -CONnDEtmÄE of Marathon Oil For Authorized Use 10 9 8 >- 7 « 0 ~ 6 m f- U1 5 0 0::: 4 ill I 3 N I 0::: 2 (L s s 1 L' ID +-' 0 0 s 2000 « (j) CL r.D I Þi1000 N CL r.D I x n N CL ~ 0 WBP:23X-6 vs. DATE ( LAST _2 ) ++ 1/1/62 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:39 om by user dff from machine P244012 of Marathon Oil Well Production Rote (23X-6 ) WGPR:23X-6 ( LAST _2 ) 7000 6000 >- 5000 « 0 ........... LL Ü 4000 (f) ¿: <D 3000 ¡ x n 2000 N I 0::: CL 1000 G "5:: (f) 0 0 G WGPRH:23X-6 vs. DATE ( LAST _2 ) 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:50 am by user dff from machine P244012 of Marathon Oil For Authorized Use Only. 1 6 14 12 >- « 0 10 ........... m f- (f) 8 <D I 6 x n N I 4 0::: CL "5:: 2 "5:: L (!) +-' 0 0 "5:: 2000 « (f) lì X f"-..- l1000 n lì x f"-..- I n lì ~ 0 WBP:31-7X vs. DATE ( LASL2 ) .. DATE Printed on 7/9/04 at 10:40 om by user dff from machine P244012 Use 1/1/10 Well Production Rote (31-7X ) WGPR:.31 - 7X ( LAST _2 ) WGPRH:.31-7X vs. DATE ( LAST _2 ) 10000 >- « 0 8000 """ u.... u UJ ¿ 6000 x I"-- I 4000 ~ n :r: cr (L 2000 CJ s (f) 0 0 CJ 1/1/62 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:51 am by user dff from machine P244012 For 10 9 8 7 >- « 0 """ 6 m ~ UJ 5 x 4 I"-- I ~ 3 n :r: cr 2 (L s s 1 L- OJ +-' 0 0 s 2000 <C (í) 0... N f'I} ~1000 f'I} 0... N f'I} I n f'I} 0... ~ 0 .. WBP:33-32 vs. DATE ( LAST _2 ) 1/1/74 DATE 1/1/86 Printed on 7/9/04 at 10:40 am by user dff from machine P244012 of Marathon Only. Well Production Rate (33-32 ) WGPR:33-32 ( LAST _2 ) WGPRH:33-32 vs. DATE ( LAST _2 ) 10 9 8 7 6 5 4 3 2 1 o 7000 >-6000 « o b5000 U1 24000 N 73000 n n Ï2000 a::: (L ~1000 (f) ~ 0 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:52 am by user dff from machine P244012 of For Authorized Use Only_ >- « o "-..... m I- U1 N n I n n I a::: (L :s: :s: L- (!) ...~ o :s: 2000 (f) Q... ¡---.... 11000 ¡---.... I n n Q... ~ 0 .. 1/1/74 Printed on 7/9/04 at 10:41 am by user dff from machine P244012 Oil For Use Only. Well Production Rate (33-7 ) WGPR:33- 7 ( LAST _2 ) WGP.RH:33-7 vs. DATE ( LAST _2 ) 5000 >- <{ ~4000 LL () if) 2:3000 f'. ~2000 I 0::: 251000 5; ffJ o Ü o 1/1/86 DATE Printed on 7/9/04 at 10:53 am by user dff from machine P244012 Property of Marathon Oil Company. For Authorized Only. 10 9 8 7 6 5 4 3 2 1 o >- <{ o ~ co f-'- if) f'. I n n I 0::: 0- S S L (j) +-' o S .. 2000 3 (f) 0- f") J1000 f") 0- f") o WBP:34-31 vs. DATE ( LASL2 ) 1/1/62 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:41 am by user dff from machine P244012 For Use Well Production Rate (34-31 ) WGPR:34-31 ( ) 9000 8000 7000 >- <{ ~6000 u... ~5000 ~4000 I") J3000 I") ~2000 0- ~_1 000 (f) ~ 0 WGPRH:34-31 vs. DATE ( LAST _2 ) 1/1/74 1/1/10 Printed on 7/9/04 at 10:53 am by user dff from machine P244012 of Oil For 10 9 8 7 6 5 4 3 2 1 o >- <{ o ........... m I- (f) 2000 « (f) Q N 1<) J- 1000 1<) Q N n I >t n Q ~ 0 WBP:34-32 vs, DATE ( LAST _2 ) ++ 1/1/62 1/1/74 1/1/86 DATE Printed on 7/9/04 at 10:41 am by user dff from machine P244012 of Use Well Production Rate (34-32 ) WGPR:34-32 ( LAST _2 ) WGPRH:.34-32 vs. DATE ( LAST _2 ) 10000 >- « 0 8000 ~ l.L 0 (f) :? 6000 N 1'0 I 4000 "<f 1'0 I æ; [L 2000 C) 5: if) 0 0 C) 1/1/62 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:54 om by user dff from machine P244012 of Only. 10 9 8 7 6 5 4 3 2 1 o ~ o ~ OJ þ- (f) N 1'0 I "<f 1'0 I æ; [L 5: 5: L (!) +-' o 5: 2000 (J) D- iD ~1000 'T D- iD I f'l) 'T D- ~ 0 WBP:43-6 vs. DATE ( LAST _2 ) .. Printed on 7/9/04 at 10:42 am by user dff from machine P244012 Marathon Use Only. Well Production Rate (43-6 ) WGPR:43-6 LAST _2 ) 8000 7000 ~ E:.6000 LL ~5000 ¿ (Q4000 ~3000 æ2000 (') 5_1 000 UJ 25 0 Printed on 7/9/04 at 10:55 am by user dff from machine P244012 Marathon For ) 10 9 8 7 6 5 4 3 2 1 o >- « o ~ CD ;- Uì :r: ex:: CL 5 5 L- (!) ..µ o 5 2000 « (f) tL o 0::: ~1000 n .q- tL o 0::: tD I n .q- tL ~ 0 ++ Printed on 7/9/04 at 10:42 am by user dff from machine P244012 of Marathon For Well Production Rate ( 43 6RD ) WGPR:43~6RD ( LAST _2 ) ~3000 o "'- w... o (f) ~2000 o rt: ill I n <;- :5:1000 rt: D- o s: (fJ (5 0 WGPRH:43-6RD vs. DATE ( LAST _2 ) Printed on 7/9/04 at 10:55 am by user dff from machine P244012 For 10 9 8 7 6 5 4 3 2 1 o ~ o "'- m I- (j) o rt: ill I n <;- I cr: D- s: s: L () ...., o s: 1000 0 1/1 /74 /86 DATE Printed on 8/9/04 at 2:49 pm by of Marathon Oi For Authorized Use WBP:43-7 vs. DATE P43-7 vs. DATE LASL2 aBS /10 Well Production Rate (43-7 ) WGPR:43-7 ( LAST _2 ) WGPRH:43-7 vs. DATE ( LAST _2 ) 1.00 7000 >-6000 <C o ~OOO u (j) 24000 Ä3000 "<t ~2000 Q ~1000 (fJ (5 0 1/1/74 1/1/86 DATE Printed on 7/9/04 at 10:57 om by user dff from machine P244012 For Use 0.75 0.50 0.25 0.00 >- <C o , m f- (/) f'. I n ..g- I æ Q 5: 5: .: () +-' o 5: 2000 1000 o I") I "<I- "<I- CL ~ 0 WBP:44-30 vs. DATE ( LAST _2 ) ++ 1/1/62 1/1/74 1/1/86 DATE 1/1/98 1/1/10 Printed on 7/9/04 at 10:43 om by user dff from machine P244012 of Marathon Oil Well Production Rate (44-30 ) WGPR:44-30 ( LAST _2 ) WGPRH:44-30 vs. DATE ( LAST _2 ) 8000 7000 ~ ~6000 LL ~5000 04000 n J3000 '<t ~2000 Q ~J 000 (f) 8 0 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:57 am by user dff from machine P244012 of For Authorized Only. 10 9 8 7 6 5 4 3 2 1 o ~ o "'-... m f- (j') o n I '<t '<t I 0:::: Q 5: 5: L- (j) ..µ o 5: 2000 ::?; (f) (L ('oJ I 61000 ~ (L ('oJ I (L ~ 0 WBP:KDU-2 vs. DATE ( LAST _2 ) ++ Printed on 7/9/04 at 10:34 am by user dff from machine P244012 of Marathon Oil Well Production Rote (KDU-2 ) WGPR:KDU-2 ( LAST _2 ) 7000 >-6000 « o t;sooo UJ 24000 N ~3000 o :::s:::: i2000 a::: D- ~1000 if) 25 0 WGPRH:KDU-2 vs. DATE ( LAST _2 ) 10 9 8 7 6 5 4 3 2 1 o Printed on 7/9/04 at 10:58 am by user dff from machine P24401 2 of Marathon Oil For Authorized Use N I ::::J o ;c,( I 0:::: D- 5: 5: c..' Q) .µ o 5: 2000 <C (f) Q lD I 61000 :x: Q lD I :J o :x: Q ~ 0 vs. DATE ( LAST _2 ) Printed on 7/9/04 at 10:36 am by user dff from machine P244012 For Well Production Rate ( KDU 5 ) WGPR:KDU~5 ( LAST_2 1 6 14000 >- <:( ~12000 LL ~10000 L() 8000 I 25 6000 '::L ~ 4000 D- C) 5:, 2000 U) ß 0 WGPRH:KDU-5 vs. DATE ( LAST_2 1/1/62 1/1/74 1/1/86 DATE 1/1/98 Printed on 7/9/04 at 10:58 om by user dff from machine P244012 of Only. >- « o , m I- (f) L() I :::J o '::L I 0::: D- 5: 5: L () +-' o 5: 50 fbÞoNFIDENTlðL, Property of Marathon Oil Company. For Authorized Use Only. . PRESSURE DISTRIBUTION . -CONFIDE!\! ¡lAC' of Marathon Use of cmmDENTIAt Oil For Use 55 , COf).IFIDEI>JTIA!:: Property of Marathon Oil Company. For Authorized Use Only. . GAS SATURATION . of Marathon Oil For Use 58 M CONFIODHIÆ: Property of Marathon Oil Company. For Authorized Use Only. . GAS WATER CONTACTS . · JO asn paZiJOlnn'lt lO;:! ~BC SEe. 16 15 r- 22 SEC. 24 SEe. 21 ~ lEns ¡- SEe. 11 ~ ~C lK23~ SECl< 21 MARATHON KENAI UNIT COMPANY ALASKA BOR.OUGH, AI{ OCTOBER. 3, 2005 MARATHON FEE SEC. 35 SEC. 3 1 SEC. 10 ~ J #4 Sterling Pool 6 P/Z Graph 3000 2500 2000 P/Z, PSIA 1500 1000 500 o o 100,000,000 200,000,000 300,000,000 400,000,000 CUM GAS PRODUCTION, MCF 500,000,000 . . 600,000,000 18 #3 . . MEMORANDUM STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION TO: File DATE: September 12, 2005 SUBJECT: Memo to File FROM: Jody J. Colombie Special Staff Assistant On September 12,2005 at 8:55 am I received a phone call from Debra Sims with Robertson, Montaque and Eastaugh requesting copies of the attachments to the injection request filed by Marathon Oil Company on August 29,2005. I informed her that there was many attachments ie: logs and maps and to please e-mail me their request. I then made a courtesy call to Lyndon Ibele, Production Coordinator for Marathon and informed him of this possible request and that I had noticed that none of Marathon's attachments were marked confidential. He said that he thought that they were marked confidential. I asked him if he would be coming by to review the file and he said that he was busy with arguments today before RCA and he didn't know if he would have enough time. #2 STATE OF ALASKA . NOTICE TO PUBLlSHEe ¡ ADVERTISING ORDER NO. r ADVERTISING INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AO-02614011 AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COpy OF ORDER ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE R·INV'OICEJÄDDRESS F AOGCC AGENCY CONTACT DATE OF A.O. R 333 W 7th Ave, Ste 100 Jodv Colombie Sentember 7 2005 0 Anchorage, AK 99501 PHONE peN M - (907) 7Q1 -1 ')7.1 DATES ADVERTISEMENT REQUIRED: T Anchorage Daily News September 8, 2005 0 PO Box 149001 Anchorage, AK 99514 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Advertisement to be published was e-mailed Type of Advertisement X Legal 0 Display o Classified DOther (Specify) SEE ATTACHED BY~IEEIN1'RIPM$Þí1'ÊI AOGCC, 333 W. 7th Ave., Suite 100 PAGE 1 OF TOTAL OF þ TO· .... AnchoTaQe. AK 99';01 2 PAGES ALL PAGES$ REF TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN 2 ARD 02910 3 4 1=11\1 ð.MnIII\lT ~v f".f". Pr.:M If". ð.f".f".T I=V NMR DIST LlQ 1 05 02140100 73451 2 3 ^ 4 /' ........ I / REQUISITIONED B( )~ ~ 1 ~ ~A^ / IDIVISION APPROVAL: -- "'" l Ij . '~ . Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Kenai Gas Field Sterling Pool 6 Application to allow underground injection of natural gas for storage purposes in Sterling Pool 6. Marathon Oil Company by letter dated August 26, 2005, has applied for a area injection order authorizing the underground storage of natural gas in the Sterling Pool 6 of the Kenai Gas Field, in accordance with 20 AAC 25.252. The Sterling Pool 6 is located in portions of Sections 4,5,6,7,8,9,17,18 of Township 4 North, Range 11 West, , Sections 1,12,13 ofT4N, R12W S.M., and Sections 20,28,29,30,31,32,33 ofT5N, R11 W, Seward Meridian. The Commission has tentatively scheduled a public hearing on this application for October 11, 2005 at 9:00 am at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a written request with the Commission no later than 4:30 pm on September 26,2005 If a request for a hearing is not timely filed, the Commission will consider the issuance of an order without a hearing. To learn if the Commission will hold the public hearing, please call 793-1221 after September 30,2005. In addition, a person may submit written comments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 4:30 pm on October 10, 2005 except that if the Commission decides to hold a public hearing, written protests or comments must be received no later than the conclusion of the October 11, 2005 hearing. who may need special accommodations in earing, please contact the Commission's before October 5, 2005. Published Date: 9/8/05 AO# 02614011 . Anchorage Daily News Affidavit of Publication . 1001 Northway Drive, Anchorage, AK 99508 PRICE OTHER OTHER OTHER OTHER OTHER GRAND AD# DATE PO ACCOUNT PER DAY CHARGES CHARGES #2 CHARGES #3 CHARGES #4 CHARGES #5 TOTAL 596251 09/08/2005 02614011 STOF0330 $176.32 $176.32 $0.00 $0.00 $0.00 $0.00 $0.00 $176.32 That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on the above dates and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. Notice of Public Hearing STATE OF ALASKA Alasko Oil and ~as Conservation Commission Re: Kenai Gas Field Sterling Pool 6 Application to .allaw undergroUnd iniectIan of natural gas far storage purposes in Sterling Pool 6. Marathon Oil Company bv letter dated August 26. 2005. has applied for a area Iniectian order au- thorizing the underground storage of natural gas in the Sterling Pool 6 of the Kenai Gas Field. in ac- cordance with 20 AAC 25.252. The Sterling Pool 6 Is located in portions of Sections 4,5,6.7.8,9,17.18 of Township 4 North. Range 11 West" Sectlc,"s 1,12,13 of T4N. R12W S.M.. and Sections 20,28,29,30.31.32.33 of T5N, RllW, Seward Meridian. The Commission has tentativelv sctleduled a pub- lic hearing on this application for October 11, 2005 at 9:00 am at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage. Alaska 99501. A person may request that the tentatively scheduled hearing be held bY filing a written request with the Commis- sion no later than 4:30 pm on September 26, 2005 If a request for a hearing is not timely filed, the Commission will consider the issuance of an order without a hearing. Ta learn if the Commission will hold the public hearing. please call 793-1221 after September 30, 2005. STATE OF ALASKA THIRD JUDICIAL DISTRICT Teresita Peralta, being first duly sworn on oath deposes and says that she is an advertising representative of the Anchorage Daily News, a daily newspaper. Subscribed and sworn to me before this date: o '" --L J (Ä7'¡ ~\.Q1U / úY!hI]Jt7Ul-"L ! lDOJ- I n addition, a person may submit written com- ments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue. Suite 100, Anchorage, Alaska 99501. Writ- ten comments must be received no later than 4:30 pm on October 10. 2005 except that if the Commis- sion decides to hold a public hearing. written pro· tests or comments must be received no later than at the conclusion of the October 11. 2005 hearing. If you are a person with a disability who may need special accommodations in order to com- ment or to attend the public hearing. please con- tact the Commission's Special Assistant Jody Co- lombie at 793-1221 before October 5, 2005. John K. Norman Chairman Signed *~~ AO# 02614011 Published Date: 9/8105 Notary Public in and for the State of Alaska. Third Division. Anchorage, Alaska Zy OMMISS..IONEXPIRES' O{0~@r{J(rr ._ /) . ~~L.Y -4. 1'''..-: f . " ~....~~.., ;.:.:.. .':/,f('?;. I) û; r ,.- ~..' OTA~~~.L-:::' I --- . ": ::.:~. ÞuBL\C : :: -:l!: . cJI .~..... :::'<;:>.'.:A _e. .~. ~ -' ~"'A.. '!I'.':"\ -::;: '.. : ~. OF þ.~ . . oQ.'~ ..... . . . . . . ....:A- ~'\ ....,/.1. ¡ê,~"~'" .Ij))j'JJJJ) 1\ \' Re: Public Notice . . Subject: Re: Public Notice From: "Ads, Legal" <legalads@adn.com> Date: Wed, 07 Sep 2005 16:42:40 -0800 To: Jody Colombie <jody_colombie@admin.state.ak.us> Hello Jody: BE SURE TO CHECK OUT THE LEGAL NOTICES ON-LINE. WE RECENTLY CREATED NEW LEGAL SECTIONS ON-LINE ESPECIALLY FOR THE STATE OF ALASKA. WE ARE OFFERING A 90 DAY FREE TRIAL ON ALL LEGAL ADVERTISING AS OF MAY 9TH TO PROMOTE OUR NEW ON-LINE, USER FRIENDLY CATEGORY'S. PLEASE TAKE THIS TIME TO TRACK YOUR CUSTOMERS AND SEE IF ON-LINE ADVERTISING IS RIGHT FOR YOU. Following is the confirmation information on your legal notice. Please review and let me know if you have any questions or need additional information. Account Number: STOF 0330 Legal Ad Number: 596251 Publication Date(s): September 8, 2005 Your Reference or PO#: 02614011 Cost of Legal Notice: $176.32 Additional Charges: Web Link: E-Mail Link: Bolding: Total Cost To Place Legal Notice: $176.32 Your Legal Notice Will Appear On The Web: www.adn.com: XXXX Your Legal Notice Will Not Appear On The Web www.adn.com: Thank You, Kim Kirby Anchorage Daily News Legal Classified Representative E-Mail: legalads@adn'~9m Phone: (907) 257-4296 Fax: (907) 279-8170 On 9/7/05 1:52 PM, "Jody Colombie" <jody colombie@admin.state.ak.us> wrote: Please publish tomorrow. Jody 1 of 1 9/12/2005 9:40 AM 02-902 (Rev. 3/94) pu.r/original Copies: Department Fiscal, Dep.nt, Receiving AO.FRM STATE OF ALASKA ADVERTISING ORDER NOTICE TO PUBLISHER ADVERTISING ORDER NO. INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO.. CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE AO-02614011 I.. . F . ''''\Inlt'c ... . ., R o M AOGCC 333 West ih Avenue. Suite 100 A n('.h()nHJ~ A K QQ'iO 1 907-793-1221 AGENCY CONTACT T "rlv ~. .. PHONE I (Q07) 7Q1 _ 1')') 1 DATES ADVERTISEMENT REQUIRED: DATE OF A.O. ~ 7 2005 peN T o Anchorage Daily News PO Box 149001 Anchorage, AK 99514 September 8, 2005 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: United states of America AFFIDAVIT OF PUBLICATION REMINDER State of ss INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. division. Before me, the undersigned, a notary public this day personally appeared who, being first duly sworn, according to law, says that he/she is the of Published at in said division and state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2005, and thereafter for _ consecutive days, the last publication appearing on the _ day of . 2005, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This _ day of 2005, Notary public for state of My commission expires 02-901 (Rev. 3/94) AO.FRM Notice . . Subject: Notice From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Wed, 07 Sep 2005 13:50:10 -0800 To: ugdisplpsed-recipients:; BCC: Cynthia B Mciver <bren_l11Cìver Content- Type: application/msword KenaiSterlingPool6GasStorage.doc Content-Encoding: base64 1 of 1 9/7/2005 1 :54 PM Public Notice . . Subject: Public Notice From: Jody Colombie <jody _ colombie@admin.state.ak.us> Date: Wed, 07 13:52:00 -0800 Please publish tomorrow. Jody 1 of 1 Content-Type: application/msword Order form.doc Content-Encoding: base64 Content-Type: application/msword KenaiSterlingPool6GasStorage.doc Content-Encoding: base64 9/7/2005 1 :54 PM Public Notice Kenai Gas Field Sterling p. . Subject: Public Notice Kenai Gas Field Sterling Pool 6 From: Jody Colombie <jody _ colombie@admin.state.ak.us> Date: Wed, 07 Sep 2005 13:54:12 -0800 To: undisclosed-recipie BCC: R z< <c.hanse te <StewmaSD@BP.com, tt ecolaw <ecolaw@trustees.org jbriddle <jbriddle@marathono <jdarlington@forestoil.com>, <cboddy@usibelli.com>, Mar ton <mark.dalton <shannon.donnelly@conocophillips.com>, "Mark P. <mark.p.worcester@conocop s.com>, Bob <bob tjr <tjr@dnr.state.ak.us>, bbr' @alaska.net>, Charles O'Donnell <charles. eco.com>, "R "Deborah J. Jones" <JonesD6@B en R. Ro <lois@inletkeeper.org>, Bross <kuac rg>, "Francis S. Sommer" <Sommer BP.com>, 1 e ultz < . Schultz Glover" <GloverNW@BP.com>, 'Daryl J. Kleppin" piDE@BP.com>, <PlattJD@BP.com>, "Rosanne M. Jacobsen" <Jacobs BP.com>, ddonkel e mckay <mckay@gci.net>, Barbara F Fullmer <barbara. mer@conocophillips.com>, <bocastwf@bp.com>, Charles Bar <barker@usgs.go oug_schultze <doug_schultze@xtoenergy.com>, Alford <han1c exxo i1.com>, M <yesno1@gci.net>, gspfoff <gsp£ aurorapower.com>, Nad egg.nady Steece <fred.steece@state.sd.us>, otty <rcrotty@ch2m. jej ejones dapa <dapa@alaska.net>,jroder <jroderick@gci.net>, < y@seal-tit Ruud" <james.m.ruud@conocop lips.com>, Brit Lively aska@ak.n, jah <jah@dnr.state.ak.us>, Kurt E Olson <kurt_olson@legis.sta us>, buo <buonoj Mark Hanley <mark_hanley@anadarko.com>, loren_leman <loren_leman@gov.state. Houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, Suzan J Hil <suzan _ hill@dec.state.ak.us>, tablerk <tablerk@unoca1.com>, Brady <brady@ao Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@bo h.kenai.ak.us>, Jim Wh <jimwhite@satx.rr.com>, "John . Haworth" <john.s. orth@exxonm i1.com>, <marty@rkindustria1.com>, gh ons <ghammons@ao1.com>, rmclean clean mkm7200 <mkm7200@ao1.c , Brian Gillespie , Davi <dboelens@aurorapower.com>, Todd Durkee <TDU @ om>, Gary S <gary_schultz@dnr.state.ak.us>, Wayne Rancier < IER@petro-canada.ca>, iller <Bill_ Miller@xtoalaska.com>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoi1.com>, Garry Catron <catrongr@bp.com>, Sharmaine Copeland <copelasv@bp.com>, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoi1.com>, John Tower <John. To ia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, Vaughn Swartz <vau artz@rbccm.com>, ScottCranswick <scott.cranswick@ s.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe <lambes@unoca1.c , jack newell <jack.newell@acsalaska.net>, James Scherr <james_scherr@yahoo.com>, david roby <David.Roby@mms.gov>, Tim Lawlor lof2 9/7 /2005 1 :54 PM Public Notice Kenai Gas Field Sterling p. . IS Content-Type: ap f Content-Encoding: 20f2 9/7/2005 1 :54 PM Citgo Petroleum Corporation PO Box 3758 Tulsa, OK 74136 Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 . Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 Robert Gravely 7681 South Kit Carson Drive Littleton, CO 80122 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 . David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise, 10 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 David Cusato 200 West 34th PMB 411 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 North Slope Borough PO Box 69 . #1 . . . A.d Asset Team Marathon Oil Company P.O. Box 196168 Anchorage, AK 99519-6168 Telephone 907/561-5311 Fax 907/565-3076 August 26, 2005 State of Alaska Alaska Oil and Gas Conservation Commission 333 West 7th Ave, suite 100 Anchorage, AK 99501 Attn: Mr. Bob Crandall Re: Kenai Gas Field Gas Storage Application Dear Mr. Crandall: Enclosed please find Marathon Oil Corporation's request for Gas Storage within the Kenai Gas Field into Sterling Pool 6. The application document is intended to cover all engineering and geologic aspects for review of a gas storage project utilizing a partly depleted gas reservoir. Per statute, we have completed mechanical integrity tests of all well within the J¡4 mile radius ofthe injection well cut point. All wells tested passed the test with the exception of well KBU 41-07. Remedial plans for KBU 41-07 have been activated and a rig workover to perform repairs is scheduled for September. Please note that it was not possible to test KU 41-07X (a monobore) because it has no annular space. We request this application proceed while we address the mechanical integrity issue in well KBU 41-07. Please call me if you have questions, 565-3042 or email me at lcibele@marathon.com. "' 1/ Lyndon Production Coordinator LCI:bjv Enclosures Hand delivered c: Steve Martinez, Bureau of Land Management Brian Havelock, Alaska Department of Natural Resources . , Section A. B. C. D. E. F. G. H. I. J. K. L. M. N. O. P. Q. R. . . Application for Inj ection Order for Gas Storage Kenai Gas Field Storage Facility Ree:ulatorv Citation 20 AAC 25.252(c)(1) 20 AAC 25.252(c)(2) 20 AAC 25.252(c)(3) 20 AAC 25.252(c)(4) 20 AAC 25.252(c)(4) 20 AAC 25.252(c)(5) 20 AAC 25.252(c)(6) 20 AAC 25.252(c)(7) 20 AAC 25.252(c)(8) 20 AAC 25.252(c)(9) 20 AAC 25.252(c)(10) 20 AAC 25.252(c)(ll) 20 AAC 25.252(c)(l) Table of Contents Subiect Plat Operators/Surface Owners Affidavit Description of Operation Storage Zones Geologic Information Production History Reservoir Modeling Well Logs Mechanical Integrity Injection Fluid Inj ection Pressure Fracture Information Formation Fluid Aquifer Exemption Wells Within :y.¡ Mile of Injection Well Gas Measurement Reporting Pae:e 3 4 4 4 4 5 5 5 6 6 7 8 8 8 9 9 10 10 1 , Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 . . Kenai Gas Field Application for Injection Order for Gas Storage Kenai Gas Field Storage Facility List of Attachments Description Cook Inlet Map Sterling Pool 6 Completions Map Cut Point Map - Wells within ~ Mile Radius ofKU 31-07X List of Parties with Rights to Share Production List of Surface Owners within ~ Mile on Injection Well Affidavit Injection Well KU 31-07X Production Historical Graph August 2004 Sterling Model MS PowerPoint presentation (on CD) Cement Bond Log Well KU 31-07X Cement Bond Log Well KBU 31-07 Cement Bond Log Well KBU 31-07RD Cement Bond Log Well KU 32-07H Cement Bond Log Well KU 32-07 Cement Bond Log Well KU 43-07 Cement Bond Log Well KBU 41-07X Cement Bond Log Well KBU 41-07 Well 31-07X Well Bore Diagram Sterling Pool 6 Gas Analysis Sterling Pool 6 Water Analysis Instromet Model Q.Sonic-C literature (on CD) Well KU 31-07X Completed 10-403 Well KU 31-07X Completed 10-404 Sterling Formation Structural Cross Section Map N-S orientation Sterling C-l Structure Map with GWC and P A boundary Sterling Pool 6 P/Z Graph Sterling Pool 6 Production Historical Graph May 2004 Shut In Surface Pressures May 2005 Shut In Bottom Hole Pressures Well KU 31-07X Injection Plot Sterling Pool 6 Well Bore Utility Table Well 31-07X MIT Results Well KBU 41-07 Type Log 2 r . . Kenai Gas Field Kenai Gas Field Storage Facility Application for Storage Injection Order August 28, 2005 Introduction Marathon Oil Corporation (Marathon) requests permission to utilize the Kenai Gas Field, Sterling Pool 6 located within the Kenai Sterling Participating Area for natural gas storage. The injection intervals are known as the Sterling C-1 and C-2 sands, both of which are partly-depleted gas sands. The proposed injection well, KU 31-07X was designed and completed specifically to support a gas storage operation. The project will be used to help meet seasonal contract demands and to help mitigate well problems incurred by choking-back production or shutting in wells during low market-demand periods. The proposed gas storage operation is expected to increase the current reservoir pressure from 192 psia to no more than 500 psia. The gas storage reservoir will be continuously monitored to ensure proper containment. Injection operations will not commence until all necessary approvals have been obtained. Brief History Marathon Oil Company is currently the Operator and sole Working Interest Owner (WIO) of the Kenai Gas Field. Historically, Marathon has been a WIO in the Kenai Gas Field since its discovery in 1959. Marathon acquired the interests of Union Oil Company of California in 1994 and assumed operatorship of the field. In 2000, Marathon acquired the interests of a minority owner and became the sole working interest owner. Over the years, Marathon has pioneered new technologies in the Kenai Gas Field in order to increase reserve recovery and extend its economic viability. Cost effective gas storage operations might further extend field life and may increase ultimate reserve recovery. Section A - Plat Regulation 20 MC 25.252(C)(1) - a plat showing the location of all proposed disposal and storage wells, abandoned or other unused wells, production wells, dry holes, and any other wells within one-quarter mile of each proposed disposal or storage well; A Cook Inlet map (Attachment #1) shows the Kenai Gas Field in relation to other fields and points of interest. A Sterling Pool 6 Completion map is included (Attachment #2) showing KU 31-07X and other wells completed into Pool 6. A map showing all wells penetrating within 'l4 mile at the top of the injection location and zone is included (Attachment #3). 3 . . . . Section B - Operators/Surface Owners Regulation 20 AAC 25.252(C)(2) - a list of all operators and surface owners within a one-quarter mile radius of each proposed disposal or storage well; A complete listing of surface owners is attached. (Attachment #4 a& b). All surface owners have been notified. Marathon is the sole operator within the Kenai Gas Field. There are no other operators within If.¡ mile of the proposed storage project. Section C - Affidavit Regulation 20 AAC 25.252(C)(3) - an affidavit showing that the operators and surface owners within a one-quarter mile radius have been provided a copy of the application for disposal or storage; Affidavit in reference to Section A and B are attached. (Attachment #5) Section D - Description of Operation Marathon proposes to inject natural gas produced within the Kenai Gas Field and from the Cannery Loop Unit into the Kenai Sterling PA, Sterling Pool 6 (C-1 and C-2 sands). Well KU 31-07X will be used to both inject and produce gas. All other active completions into the Sterling Pool 6 will be utilized as take points or for reservoir monitoring purposes. A well utility chart is included as Attachment 29. Gas will be injected during low market demand periods and produced during periods of increased market demand. Future gas storage operations will include gas produced from other sources. Section E - Storaee Zones Regulation 20 AAC 25.252(C)(4) - the name, description, depth, and thickness of the formation into which fluids are to be disposed or stored and appropriate geological data on the disposal or storage zone and confining zones, including lithologic descriptions and geologic names; The Sterling Pool 6, C-1 and C-2 sands, will be used for gas storage. The C-1 injection interval is between 4366' and 4500' TVD (134' TVD thickness) in injection well KU 31- 07X. The C-2 injection interval is between 4530' and 4569' TVD (39' TVD thickness) in injection well KU 31-07X. The C-1 and C-2 sands are in communication with each other and have been managed as a single reservoir-Sterling Pool 6- as defined by the AOGCC. 4 ~ . . . Section F - Geolol!:ic Information The Sterling Formation is the youngest geologically and most prolific of the three gas producing formations in the Kenai Gas Field. The Sterling Formation consists of eleven separate sands and is grouped into five separate pools as defined by the AOGCC. The Sterling Pool 6 is comprised of the C 1 and C2 sands which are managed as a single reservOIr. The Sterling Sand sequence is Miocene-Pliocene in age and was deposited by large, meandering stream systems. Individual sands are typically 30 to 60 feet thick, fine upward slightly, and are separated by coal, silt, and shale barriers. The thickest reservoir bodies in the Sterling are amalgamated sand sequences deposited in the central portions of the meander belts and can be in excess of 200 feet thick. The quartz-rich litharenites contain little matrix and are only slightly cemented with calcite, smectite, and kaolinite. The sand is fine to coarse-grained, angular to subrounded, and moderately well sorted. These represent the highest quality reservoirs in the field with porosities of 20 - 35% and permeability ranging from 10s to commonly 1000s ofmillidarcies (md). The subsurface structure of the Kenai Gas Field has a North-South trending anticline. Section G - Production Historv Well KU 31-07X was completed into the Sterling Pool 6 in both the C-1 and C-2 sands in January 2001 with first production occurring April 2001. The well was originally completed as an annular producer with 3 W' tubing and a sliding sleeve to allow access to the annulus. In 2004, the 3 W' tubing was pulled and replaced with a cemented 7" liner. Well KU 31-07X produced 5.2 BSCF and 2.4 MBW of fluid as of December 2004. A monthly production graph of KU 31-07X is attached to this permit (Attachment #6). Also included is a Pool 6 production graph (Attachment #25). Section H - Reservoir Modelinl!: The Pool 6 reservoir performance has been modeled for many years, and was recently updated. Attached is an August 2004 model report (Attachment #7). The model has been an accurate predictor of the reservoir's past and present behavior. The model is essentially a tank model with a weak aquifer driven by pressure. The model contains the historical gas and water production and observed BHP data either calculated from surface tubing pressures or directly from BHP pressure gauges. Each well within the model has an excellent history match. The Pool 6 model will continue to be used as a tool to monitor performance during gas storage injection and withdrawal cycles. 5 ~, . . Section I - Well Loe:s Regulation 20 MC 25.252(C)(5) - logs of the disposal or storage wells, if not already on file, or other similar information; All logs from wells in the Kenai Gas Field have been previously submitted to Alaska Oil and Gas Conservation Commission. Log sections for well KU 31-07X and the wells intersecting Pool 6 within a 'l4 mile radius of the injection well are attached to this application (Attachments # 8 -15). Section J - Mechanical Intee:ritv Regulation 20 MC 25.252(C)(6) - a description of the proposed method for demonstrating the mechanical integrity of the casing and tubing under 20 AAC 25.412 and for demonstrating that fluids will not move behind casing beyond the approved disposal or storage zone, and a description of (A) the casing of the disposal or storage wells, if the wells are existing; or (8) the proposed casing program, if the disposal or storage wells are new; A pressure test of the casing-tubing annulus will be the primary means of demonstrating mechanical integrity. The proposed injection well, KU 31-07X, passed an MIT (Mechanical Integrity Test) on April 29, 2005. The test was witnessed by an AOGCC representative. (Attachment 30) Additionally, all wells identified within the 'l4 mile radius of the KU 31-07X cut point into Sterling Pool 6 were tested for mechanical integrity except for KBU 41-07X. It was not possible to test well KU 41-07X (a Beluga monobore) since it has no annular space. Well KU 41-07X is an inactive well however and has not produced since May 2003. All other wells tested passed the MIT test per AAC 25.412, except KBU 41-07 which is being addressed at this time. A rig workover of KBU 41-07 is planned to restore mechanical integrity. The proposed injection/withdrawal well, KU 31-07X (API 50-133-20495-00), was completed with a cemented 7" liner with a ZXP packer above the cemented liner section at a measured depth (MD) of 5,330'. The casing information below is provided to summarize the data depicted in the attached well bore diagram. (Attachment #16) KU 31 07X C . I fi f - aSIDe: norma Ion Casine: Size From (MD) To (MD) Comments 20" Surface 114' 13 3/8" Surface 1,508' 7" Surface 5,737' Cemented from 5,330' to TD Further evidence of mechanical integrity and confinement The Pool 6 P/Z plot, referenced in Section D shows 40 years of history as evidence that the reservoir is confined and there is no movement of fluids behind casing beyond the proposed storage interval. 6 . f,' ~. . . The Sterling Pool 6 is part of the greater Sterling Participating Area (P A). The Sterling PA is comprised of the Sterling Pools 3,4,5.1,5.2 and 6 in sequence with Pool 3 being the shallowest. Pools 3 and 4 are nearing depletion and some completions are experiencing water loading problems. Pool 5.1 is shut in and considered depleted. Pool 5.2 has been watered out for several years and contains high pressure water. The latest observed pressure in Pool 5.2 was nearly 1400 psia. The Sterling, Beluga and Tyonek formations are configured in a layer cake fashion. The Sterling Pool 6 is beneath Sterling Pool 5.2 and above the Beluga formation. Recent bottom hole pressures range from 500+ psi to 2000+ psi in the Beluga formation. Clearly, any communication between the Sterling Pool 6 and the adjacent pools would appear as influx into Pool 6 due to the significantly higher pressure above and below the target sands. For more than 40 years Pool 6 has followed a classic P/Z curve indicating no communication or water influx. Future P/Z performance will be closely monitored as an indicator of continued reservoir confinement. The Pool 6 reservoir performance is expected to track the established P/Z line during injection and withdrawal cycles with possible slight deviation due to compaction and aquifer encroachment. Industry literature indicates that this behavior has been observed in other gas storage projects using depleted gas reservOIrs. Section K - Iniection Fluid Regulation 20 AAC 25.252(C)(7) - a statement as to the type of oil field wastes to be disposed or hydrocarbons stored, their composition, their source, the estimated maximum amounts to be disposed or stored daily, and the compatibility of fluids to be disposed or stored with the disposal or storage zone; Marathon intends to inject a stream of gas which is typically over 98% methane into Sterling Pool 6. Initially, the injected gas source will be from wells within the Kenai and Cannery Loop Units. The attached gas analysis (Attachment #17) is from well KU 43-06A. KU 43-06A is completed into Pool 4 and its gas analysis is representative of all native gas originating from the Sterling P A. Marathon will only inject gas from sources which are of similar composition and deemed compatible with Pool 6. The anticipated average injection rate is expected to be approximately 32 MMSCFPD. The maximum anticipated injection rate is approximately 68 MMSCFPD. 7 . ' . . Section L - Iniection Pressure Regulation 20 AAC 25.252(C)(8) - the estimated average and maximum-injection pressure; The injection pressure is expected to be 500 psi at the surface and 474 psi at bottom hole for the expected daily average injection rate of approximately 32mmcfd. Daily injection rates will be dependent upon gas volumes available for injection. Marathon intends to conduct gas injection operations in KU 31-07X at a maximum surface tubing pressure of 900 psi which correlates to an estimated injection rate of 68 MMSCFPD and a bottom hole pressure of 810 psi. The bottom hole injection pressure of 810 psi at the maximum anticipated injection rate of 68 MMSCFPD is nearly 2,000 psi below the estimated fracture gradient of 2,785 psig referenced in the Section M. Section M - Fracture Information Regulation 20 AAC 25.252(C)(9) - evidence to support a commission finding that the proposed disposal or storage operation will not initiate or propagate fractures through the confining zones that might enable the oil field wastes or stored hydrocarbons to enter freshwater strata; Leak offtests in well penetrations KBU 42-7 and KBU 42-6 show the fracture gradient to be 0.69 psi/ft at 5,350 feet true vertical depth (TVD) and 0.7 psi/ft at 5,367 feet TVD, respectively. Using a frac gradient of .695 psi/ft at 5,360 feet TVD and correcting back to a TVD of 4,420 using a conservative 1.0 psi/ft overburden gradient results in a frac gradient of 0.63 psi/ft. at the depth of the injection interval (approximately 4,420 feet TVD). Marathon intends to maintain wellhead injection pressures below a gradient of .63 psi/ft at a target injection depth of 4420 feet TVD, or 2,785 psig bottom hole injection pressure. This corresponds to a maximum wellhead surface pressure, for 0.56 specific gravity gas, of 2,500 psig during gas injection operations. KU 31-07X was modeled with injection rates up to 68 MMSCFPD. The model indicates bottom hole injection pressure of 810 psi at the maximum anticipated injection rate of 68 MMSCFPD, which is nearly 2,000 psi below the estimated fracture gradient of 2,785 pSlg. Section N - Formation Fluid Regulation 20 AAC 25.252(C)(10) - a standard laboratory water analysis, or the results of another method acceptable to the commission, to determine the quality of the water within the formation into which disposal or storage is proposed; A produced water sample collected from a produced water tank at Pad 14-32 in the Kenai Gas Field is attached (Attachment #18). This sample is representative of produced water collected throughout the Kenai Gas Field. 8 .' .. . . . f Only trace amounts of water are expected to be introduced into the Sterling Pool 6 as a result of gas injection/storage operations. No adverse impact is expected from the trace water. Section 0 - AQuifer Exemption Regulation 20 MC 25.252(C)(11) - a reference to any applicable freshwater exemption issued in accordance with 20 MC 25.440; All aquifers in the Kenai Gas Field below 1300' TVD have been exempted by the EPA under 40 CFR 147.102 EPA (b)(1)(c). (1) The portions of aquifers in the Kenai Penins,ula, greater than the indicated depths below the ground surface and described by a 1/1 mile area beyond and lying directly below the following oil and gas producingfields: (i) Swanson River Field-1700 feet. (ii) Beaver Creek Field-1650 feet. (iii) Kenai Gas Field-1300 feet. Section P - Wells Within 114 Mile of Iniection Well Regulation 20 AAC 25.252(C)(1) - a report on the mechanical condition of each well that has penetrated the disposal or storage zone within a one quarter mile radius of a disposal or storage well. The wells listed in the table below cut the top of the Sterling Pool 6 within y,¡ mile of the proposed injection well KU 31-07X's penetration into the pool. All wells within the y,¡ mile radius were tested for mechanical integrity with the exception of KBU 41-07X which is a monobore completed into the Beluga formation. None of the wells within the y,¡ mile radius have active completions into Pool 6 with the exception of KU 31-07X, the proposed injection well. Well D~...h Depth KU31·07X Drill API # l\<Ia.y2005 Complêtlôit CBL.Ovêr MD(ft) TVD(fI) HorÎ%olltal }>erJnÎt# BlIP IlIto ;SœrllilgPool Oft's.et (ft). SterllilgPooló? 6? KBU31.07 4757.82 4433 103666 181·153 50·133-20347-00 N y KBU31·07RD 4757:82 4433 1036.66 195.055 50-133'20147c(}1 N y KU31-07X 5330 J5 4433 0 20Ô-l48 50c133;20495.00 X y r KDU04 4948.99 4433 1003:62 169-012 50-133-20176-00 N N KDU4RD 4939.92 4433 1020.15 KTU 32-07 4720.02 4433 763.36 200·023 1M33.20491.00 N N KBU 41·07X '1493. 27 4433 888.21 202·025 50-133'20510·00 N 1>1. KTU 32-07H 4433.7 4433 1336.65 202·043 50-133'20491'00 N 1>1 KBU 41-07 '1431.19 4433 1225.73 179·029 5M33,20327'OO N y Additionally, a map showing the wells within the y,¡ mile radius is show as Attachment # 3 as previously referenced. 9 . . .. . ' Section 0 - Gas Measurement All gas volumes injected into Pool 6 will be measured with an Instromet Q.Sonic Ultrasonic TM gas meter. The Q.Sonic is capable of bidirectional flow and will be used during both injection and withdrawal cycles. The meter will be given a dual name designation, one for injection the other for withdrawal. Manufacturer literature on the Q.Sonic is attached to the permit request and can be viewed online at following web site http://www.instromet.comlProducts. (Attachment # 19). Section R - Reuortin2: Marathon will modify the Kenai Gas Field Plan of Development to reflect the proposed gas storage operations upon approval of this permit. Marathon will submit a Material Balance report specifically addressing the Sterling Pool 6 gas storage. Marathon will submit the required monthly reports tracking injection and withdrawal volumes. Marathon has attached the required forms 10-403 and 10-404 converting KU 31-07X to well with dual purposes (injection/withdrawal) (Attachments #20-21). Marathon will perform an MIT on KU 31-07X every four years as required by 20 AAC 25 .252( d). cc: All interest owners with the right to share in production from existing Pool 6 Gas Surface owners within If4 mile radius of injection well 31-07X 10 . . Marathon Oil Company Alaska Asset Team Northern Business Unit P.O. Box 196168 Anchorage, AK 99519-6188 Telephone 907-565-3044 Fax 907-565-3076 October 7, 2005 RECEIVED OCT 11 2005 Mr. Robert Crandall Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, #100 Anchorage, AK 99501-3539 Alaska Oil & Gas Cons. Commission AnchOfage Re: Notification of Surface and Mineral Owners Kenai Gas Field Gas Storage Application Kenai Peninsula Borough, Alaska Dear Mr. Crandall: Enclosed is a copy of the Certified Mail Receipts that Marathon Oil Company has received to date. We will forward copies of the remaining cards as they become available. Enclosures cc: J. Brock Riddle Green Alpha Name/Company Address Zip Card Received AMERICAN PO BOX 22035 / HEART AMERICAN HEART ASSOCIATION SAINT PETERSBURG, FL 33742 ASSOCIATIO v N 5742 CHURCHILL RD SE BARNES VERONICA A BARNES TENINO, WA 98589 ~ 352 PICKENS ST / BEIDLER RUTH M BEIDLER WENATCHEE, WA 98801-2546 1771 GAl NARD STREET / BIGHAM MICHELLE BIGHAM CRESCENT CITY, CA 95531 2220 HOLBEN RD / BURR VICKIE L BURR CRESCENT CITY, CA 95531-8811 DEPTARTME STATE OF ALASKA 550 WEST 7TH AVE STE NT OF 1410 / NATURAL DEPTARTMENTOF NATURAL RESOURCES ANCHORAGE, AK 99501-3554 RESOURCES FINANCIAL SERVICES SECTION 550 W. 7m Ave, Ste. 650 DNR Alaska State DNR Anchorage, AK 99501-3576 // KIRKPATRICK WALKOWSKI 10900 NE FOURTH ST., / ERVIN WATKINS TRUST STE 920 98004 FOR DORIS L ERVIN BELLEVUE, WA C-O WELLSPRING GROUP 6002 BELLA VISTA RD GIEST KELLI GIEST VERNON, BC V1 H 1 B4 R E JACOBS, PO BOX 190126 / JACOBS. C K JACOBS, ANCHORAGE, AK 99519-0126 R L JACOBS e . ~ not ~d- Y-t:tuJ1Mi Green Alpha Name/Company Address Zip Card Received PO BOX 628 JOHNSTON JAMES JOHNSTON DOWNIEVILLE, CA 95936-0628 / 32605 KALlFORNSKY KISTLER JOHN W KISTLER BEACH RD 99610-9208 V BARBARA J KISTLER KASILOF, AK 539 SOUTH MAIN ST MARATHON MARATHON OIL CO FINDLAY,OH 45840-3229 ì< MCCANNA MCCANNA LIVING TRUST DATED 6/8/99 PO BOX 68 LIVING C/O FIRST INDEPENDENT BANK BATTLE GROUND, WA 98604-0068 / TRUST ACCOUNT 02069951 1325 APTOS DR MILLER MARJORIE L MILLER TURLOCK, CA 95382-8524 MINERALS MINERALS MGMT SERVICE BOX 5810 TA MGMT LAKEWOOD ACCTG CENTER DENVER, CO 80217-5810 / SERVICE 5140 KACHEMAK DR MOORE ROSELEEN L MOORE HOMER, AK 99603-0000 / 40 ZIRCON DRIVE 17 / OGRADY VANESSA J 0 GRADY RENO, NV 89511-9632 POLK PO BOX 240 / COUNTY POLK COUNTY BANK BOLIVAR, MO 65613-0240 BANK ACCT CHARLES STEELMAN NO 513474 Salamatof P.O. Box 2682 / Native Salamatof Native Association Inc. Kenai, AK 99611-2682 Association Inc. e e Green Alpha Name/Company Address Zip Card Received 931 JUANITA DR V SANCHEZ WENDY SANCHEZ EL SOBRANTE, CA 94803-0000 352 PICKENS ST SCHMIDT RON L SCHMIDT WENATCHEE, WA 98801-2546 C/O RUTH M BEIDLER UNIVAR PO BOX 34325 UNIVAR CORP SEATTLE, WA / CORP A TTN CORPORATE CASH MANAGER 98124-1325 M B KIRKPATRICK TR 10900 NE FOURTH ST. ~ WATKINS WILLIAM W WATKINS TRUSTEE STE 920 98004 C-O WELLSPRING GROUP BELLEVUE, WA . e · ompJete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. - 1. Article Addressed to: , "II .1,11 1'111'1'11'1" 1'11'''' AMERICAN HEART ASSOCIATION PO BOX 22035 SAINT PETERSBURG, FL 33742 2. Article Number (transfer from service label) PS Form 3811, February 2004 r 3. Selvic:e Ty o CertifIed Mall 0 Expre$S Mail o Registered D Retum Receipt for MerchandJse o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) ¡ l t: I f 1 02595-02·M-154O I o Yes 7004 2510 0004 3297 1627 Domestic Retum Receipt SENDER: COMPLETE THIS SECTION · Complete items1,2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: 11.1111111.111111..111.1.1111 III VERONICA A BARNES 5742 CHURCHILL RD SE TENINO. WA 98589 2. Article Number (Transfer from service labeQ PS Form 3811, February 2004 C. Date of Delivery , ¿'-t:8 Dyes DNo 3. Service Type f o Certffied Mall 0 Expre$S Mall ¡ D Registered 0 Return Receipt for Merchandise ~ o Insured Mail 0 C.O.D. ¡ 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1580 ~ Domestic Retum Receipt 102595-02-M.15401 ""- SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. . Print your name and address on the reverse so that we can return the card to you. . Attach this card to the back of the mal/piece, or on the front if space permits. 1. Article Addressed to: 1111111111,1,111111,111 ,'I..' ,',','11',,',11 RUTH M BEIDLER 352 PICKENS ST WENATCHEE, WA 98801-2546 2. Article Number (Transfer from selVlce labeQ PS Form 3811, February 2004 3. Service Type o CertifIed Mail 0 Express Mail o Registered 0 Retum Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2890 0001 b071 bOb7 Domestic Retum Receipt 102595-02-M-1540; · plete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on theteverse so that we can return the card to you. · Attach this card to the back of the or on the front if space permits. - 1. Article Addressed to: 11111111111111111111111111111111 MICHELLE BIGHAM 1771 GAl NARD STREET CRESCENT CITY, CA 95531 2. Article Number (Transfer from service label) PS Form 3811, February 2004 SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: 11111111111111111111111111111111111111111111111, VICKIE L BURR 2220 HOLBEN RD CRESCENT CITY, CA 95531-8811 2. Article Number (Transfer from s91Vlce label) PS Form 3811, February 2004 D. Is delivery address different from item 1? If YES, enter delivery address below: 3. Service Type ! o Certified Mail 0 Express Mail ! o Registered 0 Return Receipt for Merchandise ! o Insured Mail 0 C.O.D. t 4. Restricted Delivery? (Extra Fee) 0 Yes Domestic Return Receipt I I ! ! 1 02595-02-M-1540 I I f 7004 2510 0004 3297 1641 COMPLETE THIS SECTION ON DELIVERY D. Is delivery eddress different from item 1? If YES, enter delivery address below: 3. Service Type I o Certified Mail 0 Express Mall ¡ o Registered 0 Retum Receipt for Merchandise ¡ o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) DYes ¡ ---ì ¡ ¡ 1 02595-02-M-1540 ¡ 7004 2510 0004 3297 1603 Domestic Return Receipt · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: 111111111111111,11,1/111111111111,11111111111111111111II;¡ STATE OF ALASKA DEPTARTMENT OF NATURAL RESOURC£-S FINANCIAL SERVICES SECTION 550 WEST 7TH AVE STE 1410 ANCHORAGE, AK 99501-3554 2. Article Number (Transfer from service label) PS Form 3811 , February 2004 D. Is delivery address different from item 1? If YES, enter delivery address below: 3. Service Type o Certified Mail 0 Express Mail o Registered 0 Retum Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1535 Domestic Return Receipt 102595-02-M-1540 · Co ete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1~ Article Addressed to: 11111 11111 11111 11111 11111 11111 11111 11111 III If JAMES JOHNSTON PO BOX 628 DOWNIEVILLE, CA 95936-0628 2. Article Number (Tnmsfer from setVlce label) PS Form 3811, February 2004 r ""- 1 3. ~rvlce Type tJ Çertifiec Mall b RetumReceipt for Merchandise D Insurtkl Mall D O.O.D: 4. Restricted Delivery7(~ Fee) Dyes 7004 2890 0001 6071 6104 Domestic Retum Receipt 1025SJ5.02-M-1540 SENDER: COMPLETE THIS SECTION · Complete items 1, 2. and 3. Also complete item 4 if Restricted Delivery Is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece. or on the front if space permits. 1. Article Addressed to: 11111111111111111111" 1111I111111111111111111 JOHN W KISTLER BARBARA J KISTLER 32605 KALlFORNSKY BEACH RD KASILOF, AK 99610-9208 2. Article Number (Tnmsfer from service label) PS Form 3811, February 2004 -~-,---_._-- COMPLETE THIS SECTION ON DELIVERY A. Signature X t5cuJ,-tvw-<- -t: JA.tP4.~ ~::ssee B. Received by (Pri Name) C. ~~ of ~very D. Is delivery add/1 different from item 1? DYes . If YES, ent de ve éldress belOW:jZCÑo 6(, ¡I' h4 At.\... k¡ <:..+I..e.' 3. Service Type ( D Certified Mail 0 Express Mall Î D Registered D Return Receipt for Merchandise I D Insured Mail D C.O.D. 4. Restricted Delivery? (Extra Fee) D Yes 7004 2510 0004 3297 1610 I ! 1 02595-02-M-1540 I __-1 Domestic Return Receipt SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece. or on the front if space permits. 1. Article Addressed to: II11111111111111I1111111111I111I11111111111111 I.I';.T¡] MCCANNA LIVING TRUST DATED 6/8/9fJ C/O FIRST INDEPENDENT BANK ACCOUNT 02069951 PO BOX 68 BATTLE GROUND, WA 98604-0068 2. Article Number (Tiansfer from service label) PS Form 3811, February 2004 D. Is delivery address dffferent from it m 1? 0 Yes .Yæ.ps_~' ~D~ 3. Service Type D Certified Mail D Express Mall D Registered D Retum Receipt for Merchandise ! o Insured Mall D C.O.D. 4. Restricted Delivery? (Extra Fee) D Yes -1 7004 2510 0004 3297 1634 Domestic Retum Receipt ¡ 102595-02-M-1540 i · Comp e items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can retum the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Miele Addressed to: 11,111111111111111,1,11,11,111,1111,11,11, Alaska State DNR 550 W. 7th Ave, Ste. 650 Anchorage, AK 99501-3576 2. Article Number (Transfer ftom service label) PS Form 3811, February 2004 D. Is delivery address different from item 17 If YES, enter delivery address below: 3. Service Type o Certified Mail o Registered o Insured Mail o Express Mail o Retum Receipt for Merèhandise OC.O.D; 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1665 Domestic Return Receipt I 102595-o2-M~1Mo \ .-1 I SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: H.I"I"IIII'I,III'I,I.IIIIII"I KIRKPATRICK WALKOWSKI WATKINS TRUST FOR DORIS L ERVIN CoO WELLSPRING GROUP 10900NE FOURTH ST., STE 920 BËLLEVUE, WA 98004 2. Article Number (Transfer ftom service label) PS Form 3811, February 2004 3. Service Type o Certified Mail 0 Express Mail o Registered 0 Return Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1573 Domestic Return Receipt 102595-02-M-1540 · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: ., ~ 11,1"1,11111,11,,,111,1,,111,1,1,11,11,1,111,1.11, ~'IS>I R E JACOBS, C K JACOBS, R L JACOBS PO BOX 190126 ANCHORAGE, AK 99519-0126 2. Article Number (Transfer ftom service label) PS Form 3811, February 2004 o Agent o Addressee C. Date of Dellve¡y DYes DNa . Service Type o CertifIed Mail 0 Express Mail o Registered 0 Retum Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2890 0001 6071 6050 Domestic Return Receipt 102595-02-M-1540 · Comp e items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space pennits. 1. Micle Addressed to: 1111111111111'11111111111'1111.1,,111111111.. MINERALS MGMT SERVICE LAKEWOOD ACCTG CENTER BOX 5810 TA DENVER, CO 80217-5810 2. Article Number (Transfer from se1Vice label) PS Fonn 3811, February 2004 D. Is delivery addl9SS different If~MUM AGENT FOR MIN 3. Service Type [J Certified Mail D Registered D Insured Mail D C.O.D. 4. Restricted Delivery? (Extra Fee) DVes 7004 2890 0001 6071 6043 ¡ 1 02595-02-M-1540 i } Domestic Return Receipt -.-- SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: 1111111111111111111111111111111111111 ROSELEEN L MOORE 5140 KACHEMAK DR HOMER, AK 99603-0000 2. ArtIcle Number (Transfer from setvice labeQ PS Fonn 3811 , February 2004 . Is delivery dress different from item 1 . If VES, enter delivery address below: 3. Service Type D Certified Mail 0 expresS Mail D Registered D Retum Receipt for Merchandise D Insured Mail D C.O.D. 4. Restricted Delivery? (Extra Fee) D Ves 7004 2510 0004 3297 1528 I i 1 02595-02-M-1540 ¡ I Domestic Return Receipt SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: 11111111111111111111111111111111111111 VANESSA J 0 GRADY 40 ZIRCON DRIVE 17 RENO, NV 89511-9632 2. Article Number (Transfer from service labeQ PS Form 3811, February 2004 . . . . . 3. Service Type o Certified Mail D Express Mail o Registered D Retum Receipt for Merchandise D Insured Mail D C.O.D. 4. Restricted ~IiVßI'Y?(Extra Fee) DXes 7004 2890 0001 6071 6098 Domestic Return Receipt 102595-02-M-1540 .¡~i'I'1S; · mplete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. - 1. Article Addressed to: 1111111111111111111111111111111111.1111111111111111111\ POLK COUNTY BANK ACCT CHARLES STEELMAN NO 513474 PO BOX 240 BOLIVAR, MO 65613-0240 2. Article Number (rransfer ftom service label) PS Form 3811, February 2004 cr - ""LETE THIS SECTION ON DELIVERY . 3. Service Type o Certified Mail 0 Express Mail o Registered 0 Return Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1542 ! 1 1 02595-02-M-1540 ! Domestic Return Receipt · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: 111111111111" 111111111111111111111111.11111 Salamatof Native Association Inc. P.O. Box 2682 Kenai, AK 99611-2682 2. Article Number (rransfer ftom service label) PS Form 3811 , February 2004 o Agent o Addressee C. Date of DelivE!!'}' ¡>-~~ D. Is deliv ress different from item 17 0 Yes If YES, enter delivery address below: 0 No 3. Service Type o Certified Mail 0 Express Mall ! o Registered 0 Retum Receipt for Merchandise I o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) Dyes 7004 2510 0004 3297 ¡ I 1658 ( ( 1025~!HJ2'M'1540 , ---_.__._~-----_.._._. -- Domestic Return Receipt SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4if Restricted Delivery is desired. · Print your name and address on the reverSe so that we can return the card to you. · Attach this card to the back of the mallpiece, or on the front if space permits. 1. Article Addressed to: 1111111111.11111 " 111111111111111111111111 " II RON L SCHMIDT C/O RUTH M BEIDLER 352 PICKENS ST WENATCHEE, WA 98801-2546 2. Article Number (rransfer ftom servIce label) PS Form 3811, February 2004 COMPLETE THIS SECTION ON DELIVERY 'æ D. Is delivery address different from item 17 If YES, enter delivery address below: 3. Service Type - o Certified Mall 0 Express Mail { o Registered 0 Retum Receipt for Merchandise t o Insured Mail 0 C.O.D. ! 4. Restricted Delivery? (Extra Fee) D Yes t 7004 2510 0004 3297 1559 ! ! 1 02595-02-M·1540 I I Domestic Retum Receipt · plete items 1, 2, and 3. Also complete - item 4 if Restricted Delivery is desired_ · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. - 1. Article Addressed to: 1111111111111111111111111,111111111111111111 WENDY SANCHEZ 931 JUANITA DR EL SOBRANTE, CA 94803-0000 2. Article Number (rransfer from service label) PS Form 3811, February 2004 D. Is delivery address different from Item 1? If YES, enter delivery address below: 3. Service Type í o Certified Mail 0 Express Mail I o Registered 0 Retum Receipt for Merchandise Î o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2890 0001 6071 6081 í , Domestic Return Receipt 102595-G2-M-1540i ¡ f SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mailpiece, or on the front if space permits. 1. Article Addressed to: 11,11111111111111111111111111111111111111111111111 UNIVAR CORP ATTN CORPORATE CASH MANAGER PO BOX 34325 SEATTLE, WA 98124-1325 2. Article Number (rransfer from service label) PS Form 3811, February 2004 3. Service Type { o Certified Mail 0 Express Mail i o Registered 0 Return Receipt for Merchandise . o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2510 0004 3297 1511 -- - Domestic Return Receipt ! 1 02595-02-M-1540 I , SENDER: COMPLETE THIS SECTION , · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: 1111111111.111111111111111111111 M B KIRKPATRICK TR WILLIAM W WATKINS TRUSTEE C-O WELLSPRING GROUP 10900 NE FOURTH ST., STE 920 BELLEVUE, WA 98004 2. Article Number (rransfer from service label) PS Form 3811 , February 2004 COMPLETE THIS SECTION ON DELIVERY 3. Service Type o Certified Mail 0 Express Mail o Registered 0 Retum Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) 0 Yes 7004 2890 0001 6071 6074 Domestic Return Receipt 102595-02-M-1540