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Home My WebLink AboutCO 478 A e e Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. eO L1!1 S A Order File Identifier Organizing (done) D Two-sided 1111111111111\ \1111 D Rescan Needed 11111111I1111111111 R~CAN VI Color Items: D Greyscale Items: DIGITAL DATA OVERSIZED (Scannable) D Maps: D Other Items Scannable by a Large Scanner D Diskettes, No. D Other, No/Type: D Poor Quality Originals: OVERSIZED (Non-Scannable) D Other: o Logs of various kinds: NOTES: Oat. 7/1c?/o ~ Da'·7/' f6 / 00 I f D Other:: BY: ~ /5/ 'VlLt? 1111111111111111111 ~ 3~ BY: ~ /5/ Project Proofing Scanning Preparation BY: Date: 111/111111111111111 ~ = TOTAL PAGES (Count does not include cover sheet) /5/ = + Production Scanning Stage 1 Page Count from Scanned File: ~ (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: L YES BY: ~ Date:7/18/Ofo Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO /5/ MP NO BY: Maria Date: /5/ 1111/111111111 "'II Scanning is complete at this point unless rescanning is required. ReScanned ""1111111111" III BY: Maria Date: /5/ Comments about this file: Quality Checked 1111111111111111111 1 0/6/2005 Orders File Cover Page.doc • • INDEX CONSERVATION ORDER NO. 478A Nicolai Creek 1B, 2 and 9 1. September 25, 2003 Ltr from DNR to AOGCC re: Nicolai Creek Unit, Letter supporting production petition and setting out interim royalty payment methodology 2. August 6, 2004 Aurora Gas' Application for expansion 3. October 1, 2004 Aurora Gas' 31St Plan of Development 4. March 1, 2005 US Dept of Interior Final Approval for Nicolai 5. March 10, 2005 DNR's Final Approval for Nicolai 6. May 22, 2006 Aurora Gas' request for Sundry Approval and Approval 7. June 26, 2006 Completion Diagram Nicolai Creek 1 B 8. August 17, 2006 Aurora Gas' Application to DNR to stratigraphically expand Nicolai Creek 9. August 18, 2006 Note to File from Team 10. September 1, 2006 Letter to Aurora Gas re: delay of approval of Administrative Approval request 11. September 13, 2006 Moquawkie Unit Application on 8/15/01 12. September 26, 2006 Consent for regular production from US Dept of Interior 13. September 26, 2006 Consent for regular production from DNR 14. October 5, 2006 Consent for regular production from the Trust Land Office 15. October 5, 2006 Aurora Gas' request for Administrative Approval (CO 478A-001) 16. -------------------- Various E-mails Conservation Order 478A . . STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICATION OF Aurora Gas, LLC for an order allowing regular production from Nicolai Creek Unit Wells No. IB, No.2, and No.9 in an undefined gas pool. ) Conservation Order No. 478A ) ) Nicolai Creek Unit No. IB, No.2 ) and No.9 ) ) October 16, 2003 IT APPEARING THAT: 1) The Commission published a notice of public hearing in the Anchorage Daily News on July 17, 2002 and in the Peninsula Clarion on July 19, 2002, of an application by Aurora Gas, LLC ("Aurora") for a spacing exception to complete and produce three wells, Nicolai Creek Unit ("NCU") No. IB, No.2 and No.8. 2) Aurora sent notice of the application by certified mail to all offset owners, landowners, and operators of all properties within 3000 feet of the proposed productive intervals in NCU No. IB, No. 2 and No.8, as required by 20 AAC 25.055(d). 3) No objection to the application was received by the Commission. 4) In Conservation Order No. 478 ("CO 478"), issued September 5, 2002, the Commission granted Aurora's application but provided that the NCU No. IB, No.2 and No.8 wells could not be placed on regular production until the Commission took additional action to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations. 5) NCU No. 8 was not drilled because Aurora encountered a shallow obstruction while driving conductor pipe. The conductor was pulled, the rig moved 7 feet to the east, and the NCU No.9 well was permitted and drilled as a replacement well. In this order, references to "NCU No.9" include NCU No.8 as applicable 6) Aurora, by letter dated September 25, 2003, and received by the Commission that same day, has now requested that the Commission allow Aurora to place the Nicolai Creek Unit No. IB, No.2, and No.9 wells on regular production as soon as facilities are complete. Conservation Order No. 4í. October 16, 2003 . Page 2 of 4 FINDINGS: 1) Newly acquired 3D seismic data and information obtained through drilling the NCU No.9 well have allowed Aurora to better define the limits of the NCU gas reservoirs. Based on this improved understanding, Aurora is proposing changes to the existing Nicolai Creek Unit and Participating Area ("P A") boundaries. These changes will include Federal acreage on the north side of the property line that currently separates Federal and State acreage and exclude some State acreage in ADL 17585. 2) Aurora is the only owner within 3000 feet ofNCU No. IB, No.2 and No.9. 3) The proposed expanded PA will encompass NCU No. IB, No.2 and No.9. All properties within 1500 feet of each of these wells will be included, in whole or in part, in the expanded P A. . 4) It is expected to take no more than 100 days to obtain the necessary approvals of the proposed changes to the NCU and PA from the Department of Natural Resources ("DNR") and the Bureau of Land Management ("BLM"). 5) In the interim, Aurora proposes to report production from NCU No. IB and No.2 to DNR at a 5% royalty rate, and production from NCU No.9 to BLM using a 12.5% royalty rate. IfDNR and BLM approve Aurora's proposed revisions to the NCU and P A and associated tract participation percentages, Aurora will submit revised royalty and operator reports to DNR and BLM retroactive to the first day of production according to terms of the Nicolai Creek Unit Agreement. 6) DNR and BLM have consented to Aurora's interim royalty payment methodology. 7) Allocation of gas resources to individual leases will require evaluation of technical data such as seismic, petrophysical, gas properties, reservoir pressure and temperature to arrive at equitable division of royalties. CONCLUSIONS: 1) An expanded NCU PA encompassing the NCU No. IB, No.2 and No.9 wells and including, in whole or in part, all properties within 1500 feet of these wells will satisfy the objective of offseting any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations, and regular gas production from these wells within such an expanded P A will not result in waste or jeopardize the correlative rights of adjoining or nearby owners 2) Payment of royalties according to Aurora's interim plan for a period of not more than 100 days, subject to retroactive adjustment when the proposed P A expansion is approved, will adequately protected holders of affected property interests. Conservation Order No. 47_ October 16, 2003 . Page 3 of 4 3) If a P A expansion that meets the description set out in Conclusion 1 is not effected within 100 days after regular production commences from the NCU No. IB, No.2, or No.9 well, the Commission may need to revisit the conditions under which further regular production from those wells is approved. 4) Additional notice and public hearing prior to approving regular gas production from the Nicolai Creek Unit are not necessary under the circumstances and conditions of this order. 5) Regular reservoir pressure measurements will be required to perform volumetric and material balance calculations. NOW, THEREFORE, IT IS ORDERED: 1) Aurora's request to begin regular production from NCU No. IB, No.2 and No.9 is approved, subject to the condition that if an expanded P A meeting the description set out in Conclusion 1 is not effected within 100 days after regular production commences from the NCU No. IB, No.2, or No.9 well, the Commission will determine whether other or additional conditions will be imposed on further regular production from those wells in order to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations Such other or additional conditions may be made effective as of the date of first production from NCU No. IB, No.2 or No.9. 2) Aurora shall keep the Commission timely informed in writing of the status of its proposed changes in the NCU and P A. 3) Prior to regular production, Aurora shall take a pressure measurement on each well to determine initial reservoir pressure. 4) Aurora shall perform a minimum of one bottom-hole pressure measurement per well annually to monitor reservoir pressure. The surveys required in Rule 3 rule may be used to fulfill the minimum requirements. A common datum for measurements in production intervals, if in communication, shall be established by the operator at a relevant depth in feet subsea. Pressure surveys may be stabilized static pressure measurements at or near the production zone or extrapolated from surface (single phase fluid conditions), pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole formation tests. Pressure data must be representative of reservoir conditions for use in material balance and volumetric calculations. 5) Aurora shall submit data and results from pressure surveys in an annual reservoir surveillance report on or before April 1 of each year. The report must include future development plans, reservoir depletion plans, and surveillance information for the prior calendar year, including: a. reservoir pressure map at datum, summary and analysis of reservoir pressure surveys within the pool; Conservation Order No. 47_ October 16, 2003 . Page 4 of 4 b. results and, where appropriate, analysis of production surveys, tracer surveys, and any other special monitoring; and c. review of pool production allocation factors and issues over the prior year. All data necessary for analysis of each survey need not be submitted with the report but must be available to the Commission upon request. 6) Unless notice and public hearing is otherwise ordered, the Commission may administratively waive the requirements of or administratively 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 an increased risk of fluid movement into freshwater. nONE at Anchorage, Alaska and dated October 16,2003. / I ! I , tw·, --- / aniel T( S)amoun.i¡!Jr., Commissioner ? Alaska 00' and Gaš'Conservation Commission 61ch~r~' Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it may file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 PM on the 23rd day following the date of the order, or next working day if a holiday or weekend, to be timely filed. The Commission shall grant or refuse the application in whole or in part within ] 0 days. The Commission can refuse an application by not acting on it within the lO-day period. An affected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court. Where a request for rehearing is denied by nonaction of the Commission, the 30-day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., I O'h day after the application for rehearing was filed). Various Conservation Orders . . Subject: Various Conservation Orders Date: Thu, 16 Oct 2003 15:57:04 -0800 From: Jody Colombie <jody_colombie@admin.state.ak.us> Organization: Alaska Oil and Gas Conservation Commission BCC: Robert E Mintz <robert_mintz@law.state.ak.us>, Christine Hansen <c.hansen@iogcc.state.okus>, John Tanigawa <JohnT@EvergreenGas.com>, Terrie Hubble <hubbletl@bp.com>, Sondra Stewman <StewmaSD@BP.com>, Scott & Cammy Taylor <staylor@alaska.net>, stanekj <stanekj@unoca1.com>, ecolaw <ecolaw@trustees.org>, roseragsdale <roseragsdale@gci.net>, trmjrl <trmjrl@aol.com>, jbriddle <jbriddle@marathonoil.com>, rockhill <rockhill@aoga.org>, shaneg <shaneg@evergreengas.com>, rosew <rosew@evergreengas.com>, jdarlington <jdarlington@forestoil.com>, nelson <nelson@gci.net>, cboddy <cboddy@usibelli.com>, "markdalton" <markdalton@hdrinc.com>, "shannon.donnelly" <shannon.donnelly@conocophillips.com>, "markp. worcester" <mark p. worcester@conocophillips.com>, "jerry.c.dethlefs" <jerry.c.dethlefs@conocophillips.com>, bob <bob@inletkeeper.org>, wdv <wdv@dnr.state.ak.us>, tjr <tjr@dnr.state.ak.us>, bbritch <bbritch@alaska.net>, mjnelson <mjnelson@purvingertz.com>, burgin _ d <burgin _ d@niediak.com>, "charles.o 'donnell" <charles.o 'donnell@veco.com>, "Skillern, Randy L" <SkilleRL@BP.com>, "Dickey, Jeanne H" <DickeyJH@BP.com>, "Jones, Deborah J" <JonesD6@BP.com>, "Hyatt, Paul G" <hyattpg@BP.com>, "Rossberg, R Steven" <RossbeRS@BP.com>, "Shaw, Anne L (BP Alaska)" <ShawAL@BP.com>, "Kirchner, Joseph F" <KirchnJF@BP.com>, "Pospisil, Gordon" <PospisG@BP.com>, "Sommer, Francis S" <SommerFS@BP.com>, "Schultz, Mikel" <Mikel.Schultz@BP.com>, "Jenkins, David P" <JenkinDP@BP.com>, "Glover, Nick W" <GloverNW@BP.com>, "Kleppin, Daryl J" <KleppiDE@BP.com>, "Platt, Janet D" <PlattJD@BP.com>, "Jacobsen, Rosanne M" <JacobsRM@BP.com>, ddonkel <ddonkel@cfl.rr.com>, collins_mount <collins _ mount@revenue.state.ak.us>, mckay <mckay@gci.net>, "barbara. f. fullmer" <barbara.f. fullmer@conocophillips.com>, eyancy <eyancy@seal-tite.net>, bocastwf <bocastwf@bp.com>, cowo <cowo@chevrontexaco.com>, ajiii88 <ajiii88@hotmai1.com>, doug_schultze <doug_ schultze@xtoenergy.com>, "hank.alford" <hank.alford@exxonmobil.com>, yesno 1 <yesno 1 @gci.net>, gspfoff <gspfoff@aurorapower.com>, "gregg.nady" <gregg.nady@shel1.com>, "fred.steece" <fred.steece@state.sd.us>, rcrotty <rcrotty@ch2m.com>, jejones <jejones@aurorapower.com>, dapa <dapa@alaska.net>, jroderick <jroderick@gci.net>, eyancey <eyancey@seal-tite.net>, "james.m.ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>, jah <jah@dnr.state.akus>, Kurt E Olson <kurt_olson@legis.state.ak.us>, buonoje <buonoje@bp.com>, "Emeka.C.Ezeaku" <Emeka. C.Ezeaku@spdc.shell.com>, mark_ hanley <mark _ hanley@anadarko.com>, loren _leman <loren _leman@gov.state.ak.us>, Harry R Bader <harry _ bader@dnr.state.ak.us>, julie_houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, lof2 10/16/20033:58 PM Various Conservation Orders . . Suzan J Hill <suzan_hill@dec.state.ak.us>, tablerk <tablerk@unocal.com>, brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@borough.kenai.ak.us>, jimwhite <jimwhite@satx.rr.com>, Stephanie_Ross <Stephanie _ Ross@thomson.com>, "john.s.haworth" <john.s.haworth@exxonmobi1.com>, marty <marty@usalaska.biz> All were signed today. Jody Colombie Name: C0478A.doc ~C0478A.doc Type: WINWORD Pile (application/msword) Encoding: base64 Name: C0500.doc ~C0500.doc Type: WINWORD Pile (application/msword) Encoding: base64 Name: C0501.doc ~C0501.doc Type: WINWORD Pile (application/msword) Encoding: base64 Name: C0502.doc ~C0502.doc Type: WINWORD Pile (application/msword) Encoding: base64 Name: C0503.doc ~C0503.doc Type: WINWORD Pile (application/msword) Encoding: base64 y Colombie <" 20f2 10/16/20033:58 PM Orders . Subject: Orders Date: Thu, 16 Oct 2003 15:58:01 -0800 From: Jody Colombie <jody_colombie@admin.state.ak.us> Organization: Alaska Oil and Gas Conservation Commission To: Cynthia B Mciver <bren _ mciver@admin.state.ak.us> Please add to web site. Jody . Name: C0502.doc ~C0502.doc Type: WINWORD File (applicationlmsword) Encoding: base64 Name: C0503.doc ~C0503.doc Type: WINWORD File (applicationlmsword) Encoding: base64 Name: C0478A.doc ~C0478A.doc Type: WINWORD File (applicationlmsword) Encoding: base64 Name: C0501.doc ~C0501.doc Type: WINWORD File (applicationlmsword) Encoding: base64 Name: C0500.doc ~C0500.doc Type: WINWORD File (applicationlmsword) Encoding: base64 1 of 1 10/16/20033:58 PM SD Dept of Env & Natural Resources Oil and Gas Program 2050 West Main, Ste 1 Rapid City, SD 57702 David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 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 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 David Cusato 600 West 76th Ave., #508 Anchorage, AK 99518 Kenai Peninsula Borough Economic Development Distr 14896 Kenai Spur Hwy #103A Kenai, AK 99611-7000 Penny Vadla 399 Riverview Ave Soldotna, AK 99669-7714 . Citgo Petroleum Corporation PO Box 3758 Tulsa, OK 74136 W. Allen Huckabay ConocoPhillips Petroleum Company Offshore West Africa Exploration 323 Knipp Forest Street Houston, TX 77079-1175 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 Schlumberger Drilling and Measurements 3940 Arctic Blvd., Ste 300 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Jack Hakkila PO Box 190083 Anchorage, AK 99519 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 . Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 Kelly Valadez Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Trustees for Alaska 1026 West 4th Ave., Ste 201 Anchorage, AK 99501-1980 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 Kevin Tabler Unocal PO Box 196247 Anchorage, AK 99519-6247 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 131 Fairbanks, AK 99707 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 . . North Slope Borough PO Box 69 Barrow, AK 99723 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 . . ADMINISTRATIVE APPROVAL CO 478A.Ol G. Scott Pfoff President Aurora Gas, LLC Aurora Power Resources, Inc. 2500 Citywest Blvd, Suite 2500 Houston, TX 77042 Re: Aurora Gas, LLC's request for Administrative Amendment of Conservation Order 478A Allowing Regular Production from the Nicolai Creek Unit Wells No. 1B, No.2 and No.9. Dear Mr. Pfoff: By letter received on October 5, 2006, Aurora Gas, LLC ("Aurora"), as operator of the Nicolai Creek Unit ("NCU"), requested authorization from the Alaska Oil and Gas Conservation Commission ("Commission") to allow regular gas production from the NCU No. 1B ("NCU 1B"), NCU No.2 ("NCU 2"), and NCU No.9 ("NCU 9") wells by administrative amendment and without public notice or hearing. Decision The Commission hereby APPROVES Aurora's request to commence regular gas production from well NCU-IB, so long as Aurora complies with the conditions set out in this administrative approval and by the letters of consent from the U.S. Department of Interior, Bureau of Land Management ("BLM") and the Alaska Mental Health Trust Land Office ("TLO"). Regular gas production from wells NCU-2 and NCU-9 may also continue. Additional conditions are set out below. Discussion The NCU IB, NCU 2, and NCU 9 gas production wells are governed by Conservation Order 478 ("CO 478") and Conservation Order 478A ("CO 478A"). CO 478 is a spacing exception that approved drilling and testing of these wells within 1,500' of a property line. The surface locations of all three wells lie onshore within Federal lease AA-8426. NCU IB and NCU 2 were drilled to bottom hole locations that lie offshore within State of Alaska lease ADL 17585. NCU 9 is a vertical well with a bottom hole location within Federal lease AA-8426. The BLM and the Alaska State Department of Natural Resources ("DNR") are the affected landowners. The DNR and the TLO are the affected CO 478A.Ol October 27, 2006 Page 2 of 4 . . surface owners. Aurora is the sole owner and operator of the NCU and all affected leases. CO 478A, dated October 16, 2003, approved regular gas production from these wells contingent upon five conditions: 1. effecting an expanded Participating Area ("P A") within 1 00 days of commencement of regular production from the any of these wells, or additional conditions could be imposed by the Commission; 2. providing timely notice to the Commission of proposed changes to NCU or the PA; 3. recording pressure measurements in each well prior to regular production; 4. recording pressure measurements within each well on an annual basis; and 5. submission of an annual reservoir surveillance report to the Commission on or before April 1 of each year. Aurora's operations in response to each condition listed above were: 1. NCU 2 and NCU 9 commenced regular production about December 1, 2003. The Division of Oil and Gas approved the expanded PAIS months later, on March 10, 2005. 2. Aurora's application to expand the NCU PAs was received by the Commission on August 16, 2004. No other correspondence related to this topic is present within the CO 478A file. 3. Gas Well Open Flow Potential Test Reports presenting reservoir pressure information for all three wells were submitted December 31, 2003. 4. No pressure measurements within each well were submitted to the Commission. 5. No reservoir surveillance reports were submitted to the Commission during 2004 or 2005. On June 8, 2006, the Commission received an Application for Sundry Approval requesting authorization to plug back, add perforations, and replace sand screens within NCU IB. Because of Aurora's record of conformance to the requirements of CO 478A, the Commission authorized these operations and testing of the well, but stipulated that NCU IB could not be produced without further action by the Commission. The Commission later determined that four perforated intervals in NCU 1 B lie stratigraphically below the base of the expanded P A approved by DNR. In response to a request to place NCU IB on regular production, the Commission provided a letter to Aurora dated September 1, 2006. This letter noted that all requirements of CO 478A had not been met, and it presented three conditions that must be fulfilled before the Commission would consider amending CO 478a to allow regular gas production from NCU lB. These conditions were: 1. All affected owners and landowners must provide written notice to the Commission stating that they are aware that the perforated intervals in NCU IB lie both inside and outside of the Southern Participating Area ("SPA") and that CO 478A.Ol October 27,2006 Page 3 of 4 . e they consent to regular production from NCU IB; 2. Aurora must submit a reservoir surveillance report to the Commission; and 3. Aurora must comply with all other requirements of CO 478A that are within Aurora's ability to control. In response to the Commission's letter, the following information was submitted to the Commission: a. Between September 26 and October 5, 2005, BLM, DNR, and TLO provided letters to the Commission acknowledging awareness that perforated intervals within NCU 1 B lie outside of existing participating areas and consenting to regular production from that well. The letters from BLM and TLO state that their consent is contingent upon (1) Aurora's diligent pursuit of revision of the NCU PAs, and (2) all royalty payments must be adjusted retroactively to the date of first production from these wells when the revised PAs become effective. b. A reservoir surveillance report for the period of time from 2002 through September 12, 2006 that includes bottom hole pressure measurements was submitted to the Commission on September 14,2006. c. Aurora submitted applications to the DNR on July 28, 2006 and September 26, 2006 to expand the affected PAs to include those stratigraphic intervals affected by NCU IB, NCU 2, and NCU 9. Rule 6 of CO 478A allows the Commission to administratively waive the requirements of or administratively amend any rule within the order as long as the changes do not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not results in an increased risk of fluid movement into freshwater. Conclusions Regular gas production from NCU IB, NCU 2, and NCU 9 is based on sound engineering and geoscience principles and will not promote waste, jeopardize correlative rights, or increase risk of fluid movement into freshwater. Accordingly, public comment and hearing are not required for this action. Aurora has now satisfied the requirements of CO 478A and the additional requirements imposed by the Commission on September 1, 2006. The affected landowners, owners, operator and surface owners have all consented to regular gas production from well NCU 1B. NCU 2 and NCU 9 have regularly produced gas since about December 1,2003. Decision and Conditions As stated previously, the Commission, in accordance with Rule 6 of CO 478A, approves Aurora's request to commence regular gas production from well NCU-1B, so long as Aurora complies with the conditions within the letters of consent from BLM and TLO. Regular gas production from wells NCU-2 and NCU-9 may also continue. CO 478A.Ol October 27, 2006 Page 4 of 4 . . All other well testing, allocation, and reporting requirements for the NCU shall be in accordance with applicable Commission regulations and orders and are not affected by this Approval. This Approval does not preclude additional judgments, penalties, or enforcements that the Commission may render for any prior failures by Aurora to comply with Commission regulations, orders, or conditions concerning operations at NCU. As provided in AS 31.05.080, within 20 days after written notice of this decision, or such further time as the Commission grants for good cause shown, a person affected by it may file with the Commission an application for rehearing. A request for rehearing is considered timely if it is received by 4:30 PM on the 23rd day following the date of this letter, or the next working day if the 23rd day falls on a holiday or weekend. A person may not appeal a Commission decision to Superior Court unless rehearing has been requested. DONE at Anchorage, Alaska and dated October 27,2006. Cathy P oerster Commissioner Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise, ID 83702 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Ciri Land Department PO Box 93330 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 . 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 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 . 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 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 Baker Oil Tools 4730 Business Park Blvd., #44 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 (~1 A ~ I l!'~ \ Ó (J ~ \ \ \ Various Orders . . Subject: Various Orders From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Wed, 08 Nov 200608:35:35 -0900 To: undisclosed-recipients:; BCC: , Christine Hansen <c.hansen@iogcc.state.okus>, Terrie Hubble <hubbletl@bp.com>, Sondra Stewrn . as P.com>, stanekj <stanekj@unocal.com>, ecolaw <ecolaw@trustees.org>, trmjrl aol.c, jdarlington . @fo stoil.com>, nelson <knelson@petroleurnnews.com>, cbod @us i.com>, Mark Da <mark.dalton@hdrinc.com>, hannon Donnelly <shannon.dOnilelly conocophilli m>, "Mark P. Worcester" <markp.worcest onocophillips.com>, Bob <bob ee >, wdv <wdv@dnr.state.akus>, tjr <tjr@dnr.state.ak.us>, bbritch <bbritch ka ~nelson <mjnelson@purvingertz.com>, Charles O'Donnell <charles.o'donne ec >, "Randy L. Skillern" <SkilleRL@BP.com>, "Deborah J. Jones" <JonesD6@BP.com>, "Steven sberg" <RossbeRS@BP.com>, Lois <lois@inletkeeper.org>, Dan Bross <kuacnews@kuac.org>, Gordon Pospisil <PospisG@BP.com>, "Francis S. Sommer" <SommerFS@BP.com>, Mikel Schultz <Mikel.Schultz@BP.com>, "Nick W. Glover" <GloverNW@BP.com>, "Daryl J. Kleppin" <KleppiDE@BP.com>, "Janet D. Platt" <PlattJD@BP.com>, "Rosanne M. Jacobsen" <JacobsRM@BP.com>, ddonkel <ddonkel@cfl.rr.com>, mckay <mckay@gci.net>, Barbara F Fullmer <barbara.f.fullmer@conocophillips.com>, Charles Barker <barker@usgs.gov> , doug_schultze <doug_schultze@xtoenergy.com>, Hank Alford <hank.alford@exxonrnobi1.com>, Mark Kovac <yesnol@gci.net>, gspfoff <gspfoff@aurorapower.com>, Gregg Nady <gregg.nady@shell.com>, Fred Steece <fred.steece@state.sd.us>, rcrotty <rcrotty@ch2m.com>, jejones <jejones@aurorapower.com>, dapa <dapa@alaska.net>,jroderick <jroderick@gci.net>, eyancy <eyancy@seal-tite.net>, "James M. Ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>,jah <jah@dnr.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hanley <mark_hanley@anadarko.com>, 10ren_Ieman <loren_Ieman@gov.state.ak.us>, Julie Houle <julie--,houle@dnr.state.ak.us>, John W Katz <jwkatz@sso. >, tablerk <tablerk@unocal.com>, Bra dy@ao Brian Hàvelock <beh@dnr. .ak.us>, bpopp <bpopp@borough.kenai.ak Jim White white@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonrnobi1.com>, marty <marty@rkindustria1.com>, ghammons <ghammons@ao1.com>, rmclean <rmclean@pobox.alaska.net>, rnkrn7200 <rnkrn7200@ao1.com>, Brian Gillespie <ifbmg@uaa.alaska.edu>, David L Boelens <dboelens@aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Schultz <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoil.com>, Sharrnaine Copeland <copelasv@bp.com>, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoi1.com>, John Tower <John.Tower@eia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe <lambes@unocal.com>, jack newell <j acknewell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, nI617@conocophillips.com, Tim Lawlor <Tim_Lawlor@ak.blm.gov>, Lynnda Kahn <Lynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry.C.Dethlefs@conocophillips.com>, crockett@aoga.org, Tamera Sheffield <sheffield@aoga.org>, Jon Goltz <Jon. Goltz@conocophillips.com>, Roger Belman <roger. belman@conocophillips.com>, Mindy Lewis <mlewis@brenalaw.com>, Kari Moriarty <moriarty@aoga.org>, Patty Alfaro <palfaro@yahoo.com>, Jeff <smet . @unocal.com>, Todd Kratz <ToddKratz@chevron.co >, Gary R rs <gary_roger evenue. state. ak.u hur Copoulos <Arthur_Co s@dnr.sta .us>, Ken <ken@sec nc.com>, Steve L rt <salambert@unoca1.com>, Joe Nicks <ne radiokenai.com>, Jerry McCu eon <susitnahydronow@yahoo.com>, Bill Walker <bill-wwa@ak.ne ris Matthews <Iris_Matthews@legis.state.ak.us>, Paul Decker <paul_decker@dnr.state.ak.us>, , Aleutians East lof2 11/8/2006 8:50 AM Various Orders . . Borough <admin@aleutianseast.org>, Marquerite kremer <marguerite_kremer@dnr.state.ak.us>, , Mike Mason <mike@kbbi.org>, Garland Robinson <gbrobinson@marathonoi1.com>, Cammy Taylor <Camille_Taylor@law.state.ak.us>, Wi GAubert <winton_aubert@admin.state.ak.us>, Thomas E Maunder <torn _ maunder@admin.state. , Stephen F Davies <steve _ davies admin.state.ak. us>, Keith Wiles <kwiles@marathonoi1.com>, a Gamble <dgamble@kakivik. ames B Regg <jimJegg@admin.state.ak.us>, Catherine P Foerster <cathy_foerster@admin.state.ak.us>, Bob <Bob@fairweather.com>, gregory micallef <micallef@clearwire.net>, Laura Silliphant <laura _ silliphant@dnr.state.ak.us>, David Steingreaber <david.e.steingreaber@exxonrnobil.com>, akpratts@acsalaska.net, Robert Campbel bert. pbell@reuters.com>, Steve Moothart <steve_moothart@dnr.state.ak.us>, Ann < @dowjones.com>, CI y <cliff@posey.org>, Paul Bloom <paul_bl @m1.com>, , Meghan Powell <Meghan.Powell@asrcenergy.com>, Temple Davidson <temple_davidson@dnr.st .us>, Walter Featherly <WFeatherly@PattonBoggs.com>, Cynthia B Mciver <bren_mciver@admin.state.ak.us> Jody Colombie <iody colombie@,admin.state.akus> Special Staff Assistant Alaska Oil and Gas Conservation Commission Department of Administration I. Content-Type: application/pdf I erIo3.pdf Content-Encoding: base64 Content-Type: application/pdf Content-Encoding: base64 . Content-Type: application/pdf co478a-01.pdf . Content-Encodmg: base64 2of2 11/8/2006 8:50 AM #110 .' . . . Subject: RE: Follow-up NCD 1B & LC 1 From: Jessica Guinn <jguinn@aurorapower.com> Date: Wed, 30 Aug 200607:52:02 -0500 To: steve_davies@admin.state.ak.us CC: Ed Jones <jejones@aurorapower.com>, Andy Clifford <acclifford@aurorapower.com>, "G. Scott Pfoff" <gspfoff@aurorapower.com> Mr. Davies, Ed Jones asked me to answer a few of the additional questions concerning the NCU #1 B. Below are my responses to questions #4-6 on your e-mail dated August 28, 2006. If you have any further questions regarding my answers or need me to elaborate further please do not hesitate to contact me. 4. Could you please describe Aurora's reporting of production and royalties to BLM and DNR? BlM: We report everything online. Production is reported monthly on the MMS OGOR form (Oil and Gas Operations Report). " The numbers I report are taken from the State Production Reports (AOGCC). The royalty is reported monthly on the 2014 form (Report of Sales and Remittance MMS-2014). Again the numbers I report are taken from the State Production Reports. Both types of reports are due the last day of the month following the production month as is the payment for the royalty due. Once the reports are finished they are "validated" and then we can see they were sent and reconciled by the MMS. " DNR: Production is reported to the DNR through their worksheet formats calculating production tax. There are three worksheets (one that calculates an ELF factor using production and well days, one that calculates any production tax due, and a summary sheet). I complete these (again using the numbers from the AOGCC reports) and then e-mail them into the DNR (I also send a hard copy the tax division). If tax is due, we then send a check. Royalty is reported the same way; using form worksheets created by the DNR. The two reports that are in the workbook are the 01 and A 1. There is an 01 and an A 1 for each leaselwell. Once the royalty is calculated the worksheets are e-mailed (and a hard copy mailed) to the DNR. They upload the information and let us know everything balances. Then Aurora wires any royalty due by the last day of the month following the production month. 5. Have these reports been made retroactive to the ftrst day of production? Yes. ,¡ 6. Are royalty payments being made as required by Conservation Order 478A? Yes. ¡ Jessica Guinn Accountant Aurora Gas, LLC 713.977.5799 Phone 713-977-1347 Fax RE: F01lOW-up NCU 1B & LC 1 . . Subject: RE: Follow-up NCD lB & LC 1 From: Andy Clifford <acclifford@aurorapower.com> Date: Tue, 29 Aug 2006 09:07:49 -0500 To: 'Stephen Davies' <steve_davies@admin.state.ak.us>, 'Ed Jones' <jejones@aurorapower.com> CC: 'Chad Helgeson' <chelgeson@aurorapower.com> See my responses below. Andy Clifford. From: Stephen Davies [mailto:steve_davies@admin.state.ak.us] Sent: Monday, August 28, 2006 6:01 PM To: Ed Jones Cc: 'Chad Helgeson'; 'Andy Clifford' Subject: Re: Follow-up NCU 18 & LC 1 Ed, We have a few more questions concerning NCD IB: 1. Concerning DNR's decision establishing the Southern and Beluga PAs at Nicolai Creek Unit, what were the reactions ofBLM and other interested parties to the PA boundaries established by DNR? As far as I recall, the other parties, including the BLM, were silent on the revised PA boundaries and went along with the DNR. ,¡ 2. Did BLM and other interested parties concur, acquiesce, or object to DNR's decision? As stated above, I believe they acquiesced. ,¡ 3. Did BLM comment on the Southern P A and its restriction to state land only? Not as far as I know but as you can see from the attached legal description, a small sliver of BLM lands onshore were included in the Southern PA. Our royalties take this into account since we don't get royalty relief on the BLM lands. .,I 4. Could you please describe Aurora's reporting of production and royalties to BLM and DNR? 5. Have these reports been made retroactive to the first day of production? 6. Are royalty payments being made as required by Conservation Order 478A? Thanks, Steve Davies Ed Jones wrote: Steve, Any word yet on the Nicolai Creek 1 B or Lone Creek 1, as to when we might be able to produce them? Please let us know when you get word or if there is any thing else needed. Thanks, Ed Ed Jones Vice President Engineering & Operations 10f2 8/30/2006 9:48 AM RE:,Follow-up NCU 1B & LC 1 . e Aurora Gas, LLC 713-977-5799 (Houston) 907-277-1003 (Anchorage) Content-Type: application/msword Nicolai_Creek _ Unit_ P A_Iegals.doc Content-Encoding: base64 20f2 8/30/2006 9:48 AM . <I...... .. . . Proposed Nicolai Creek Unit: South PA, North PA, Beluga PA Tract DescriDtions: Unit 1 - TIIN, RI2W, S.M. Section 20: Wl/2 2 - TIIN, RI2W, S.M. Section 29: SWl/4SWl/4NWl/4 and that portion ofNl/2NWl/4SWl/4 lying landward of shoreline; Section 30: El/2NE1/4 SEl/4 lying landward of shoreline 3 - TIIN, RI2W, S.M. Section 29: SI/2NW1/4SWl/4 and all of the Nl/2SWl/4SWl/4Iying seaward of shoreline 4 - TIIN, RI2W, S.M. Section 30: El/2NEl/4SEl/4Iying seaward of shoreline South P A 2 - TIIN, R12W, S.M. Section 29: Nl/2SWl/4NWl/4SWl/4 lying landward of shoreline; ./ Section 30: Nl/2SEl/4 NEl/4SEl/2Iying landward of shoreline ,¡ 3 - TIIN, RI2W, S.M. Section 29: SWl/4NWI/4SWl/4 and all of the Nl/2SWl/4SWl/4Iying seaward of shoreline 4 - TIIN, RI2W, S.M. Section 30: SEl/4NE1/4SEl/4Iying seaward of the shoreline North PA 1 - TIIN, R12W, S.M. Section 20: Wl/2 Belue:a P A 2 - TIIN, RI2W, S.M. Section 29: SWl/4SWl/4NWl/4 and that portion ofNl/2NWl/4SWl/4 lying landward of shoreline; Section 30: El/2NEl/4 SE1/4lying landward ofshoreHne 3 - TIIN, RI2W, S.M. Section 29: SWl/4NWl/4SWl/4 and all ofthe Nl/2SW1/4SWl/4 lying seaward of shoreline Re: Follow-up NCU 1B & LC 1 . . Subject: Re: Follow-up NCU 1B & LC 1 From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Moll, 28 Aug 2006 15:00:50 -0800 To: Ed Jones <jejones@aurorapower.com> CC: 'Chad Helgeson' <chelgeson@aurorapower.com>, 'Andy Clifford' <acclifford@aurorapower.com> BCC: Tom Maunder <tom_maunder@admin.state.ak.us>, Camille 0 Taylor <cammy _taylor@law.state.ak.us> Ed, We have a few more questions concerning NCU lB: I. Concerning DNR's decision establishing the Southern and Beluga PAs at Nicolai Creek Unit, what were the reactions ofBLM and other interested parties to the PA boundaries established by DNR? 2. Did BLM and other interested parties concur, acquiesce, or object to DNR's decision? 3. Did BLM comment on the Southern PA and its restriction to state land only? 4. Could you please describe Aurora's reporting of production and royalties to BLM and DNR? 5. Have these reports been made retroactive to the first day of production? 6. Are royalty payments being made as required by Conservation Order 478A? Thanks, Steve Davies Ed Jones wrote: Steve, Any word yet on the Nicolai Creek 18 or Lone Creek 1, as to when we might be able to produce them? Please let us know when you get word or if there is any thing else needed. Thanks, Ed Ed Jones Vice President Engineering & Operations Aurora Gas, LLC 713-977-5799 (Houston) 907-277-1003 (Anchorage) Steve Davies 1 of 1 8/30/2006 9:48 AM Re: NCU IB: Notes to File . . Additional Comments: 1) CO 478A does have the language to allow administrative changes. 2) Reading Aurora's response to the question of expanding the PA closer they appear to NOT have acted in good faith to expand the PA. They state "With minor exceptions (about 5-acres total in the corners of three aliquots), this proposed PA of about 470 acres would have included all lands within 1500' of the take points of the productive sands in NCU 1B and NCU 2." Therefore, regardless of the actions that the DNR took to reduce the size of the PA the fact remains that Aurora, by their own admission, did not propose a PA in the first place that would meet the conditions CO 478A Rule 1. 3) CO 478A Rule 2 states that "Aurora shall keep the Commission timely informed in writing of the status of its proposed changes in the NCU and PA." Did they do this? I don't think that there is any problem with what Aurora wants to do, but since the did not attempt to fully comply with the original CO I don't know if is appropriate for us to administratively amend it. Dave Thomas Maunder wrote: I agree. From the record, it appears that Aurora attempted to get the PA set up appropriately but that DNR reduced the area. On doing the spacing administratively, it will depend on if that rule is in the prior orders. Tom Dave Roby wrote, On 8/21/2006 8:33 AM: I concur. We should investigate whether or not we can provide the spacing exception administratively since the affected parties have previously commented on this issue. Dave Stephen Davies wrote: My thoughts are attached. I wil be back on Tuesday. Steve 1 of 1 8/22/2006 9: 12 AM Re: Production of the Nicolai Creek No. lB, 2, and 9 . . Thanks Ed, In looking for some information for Duane I read the conservation order and noted the requirement. My intent is sending the note to Duane was to "make sure it was out there". It would be unfortunate to have everything ready to produce and not have this "i" dotted. Aurora has multiple concerns to satisfy around Nicolai Creek. Good luck. Your geological questions for the West Side should be directed to Steve Davies at 793-1224 and reservoir questions to Jack Hartz at 793-1232. Within the Commission, Steve, Jack and myself have the responsibility for Cook Inlet offshore and the West Side. Please do not hesitate to contact any of us with regard to activities over there. With regard to your facilities, it would be appreciated if you could send a copy of the "meter specs" similar to what you sent for Lone Creek # 1. Torn Maunder, PE AOGCC Ed Jones wrote: 1í/"d-Ç:, - a) Tom, Duane Vaagen forwarded your note to me regarding this matter. Aurora is working toward expanding the Nicolai Creek Unit and has been in ongoing discussions with the DNR, Mental Health Trust, and BLM, all surface and mineral owners, for some time. I believe that Bob Crandall is in the loop or soon will be (Andy Clifford--geology/geophysics-- and Randy Jones--Iand/contracts-- from our Houston office are very involved in this, incorporating the recent 3-D seismic data into the geological interpretation there). We are aware of the prohibition to produce until all have approved and are working toward obtaining all necessary approvals. Nonetheless, we appreciate the reminder. Regarding the schedule for facilities, we plan to start the pipeline about the first of September and the compressor-dehy facility about the middle of September, expecting 4-6 weeks to finish the work. Please let me know if you need any additional information. I am in Anchorage for the next several weeks and am available at 277-1003, in person, or by email. Regards, Ed J.Ed Jones Vice President Engineering & Operations Aurora Gas, LLC 1 of 1 9/1/20061:15 PM Re: NCU pressure surveys . . Subject: Re: NCU pressure surveys From: Dave Roby <daveJoby@admin.state.ak.us> Date: Tue, 01 Aug 200610:12:10 -0800 To: Stephen Davies <steve_davies@ad.min.state.ak.us> CC: Tom Maunder <tom_maunder@admin.state.ak.us> Never mind, I checked the well files and they did submit well potential tests for the three wells and this form included a static bottorohole pressure for each well. It may not be a reservoir surveilance report, but I believe it meets our needs. Dave Stephen Davies wrote: Dave, I'd recommend talking with them first. If you don't get a satisfactory response in a reasonable amount of time, then we'll can initiate a more formal request involving the Conunissioners. Steve D. Dave Roby wrote: Steve and Tom: CO 478A, dated October 16, 2003, required Aurora to: 1) Conduct a pressure survey on each of the three wells prior to regular production (Rule 3), 2) Perform a minimum of one bottom-hole pressure measurement per well annually (Rule 4), and 3) Submit data and results in an annular reservoir surveillance report (Rule 5) No pressure survey results have been submitted to the Conunission. According to our production data well NCU IB has not commenced regular production. Through May of this year it has produced for a total of 8 days (2 in 11/03, 5 in 3/04, and 1 in 4/06) . However, wells NCU 2 and NCU 9 both began what I would consider regular production in December of 2003. They produced on a regular basis through December 2004 and then began a period of irregular production that lasted until regular production was resumed in November 2005. Therefore, I would argue that Aurora is not in compliance with the three rules mentioned above, at the very least they should provide initial bottom-hole pressure survey information for wells NCU 2 and NCU 9. Do we want to talk with the Conunissioners and send a consolidated response, or should I go ahead and talk with them? Dave 1 of 1 9/1/2006 11:58 AM . . Subject: NCU Info pt 2 From: Andy Clifford <acclifford@aurorapower.com> Date: Mon, 31 Jul2006 09:10:41 -0500 To: steve_davies@admin.state.ak.us Steve, This should be all of it. I will be forwarding a complete hard copy in due course and we are submitting a letter to Mike Menge today that requests a stratigraphic expansion of the SPA at NCU to include the productive intervals in the NCU-1B well. Regards, Andy Clifford. Content- Type: application/msword NICOLAI CREEK UNIT EXPANSION_CONFIDENTIAL TEXT. doc Content-Encoding: base64 ----------------------- Content-Type: application/pdf NICOLAI CREEK UNIT EXPANSION_LANDSCAPE SLIDES.pdf Content-Encoding: base64 Content-Type: application/vnd.ms-excel NICOLAI CREEK UNIT EXPANSION_TABLES.xIs Content-Encoding: base64 Content- Type: application/vnd.ms-excel TABLE OF FIGURES FORNCU REPORT.xIs Content-Encoding: base64 · e Subject: NCU Information Pt. 1 From: Andy Clifford <acclifford@aurorapower.com> Date: Mon, 31 Ju12006 09:07:24 -0500 To: steve _ davies@admin.state.ak.us Steve, I tried unsuccessfully to e-mail you the NCU PA expansion information last week but I think there is a 2MB filter at your end. Anyhow, I will send the information in parts, with part 1 attached. Regards, Andy Clifford, Aurora Gas. Content-Type: application/pdf NICOLAI CREEK UNIT EXPANSION.pdf Content-Encoding: base64 . . eerx. fid LlA..-h;" ( e:t./- kc." Jft c~ .5t-~ ~ (7~+:i.c:l.c.~..{., ~ ( /'f¡c:.o( et.i. Ore.P þ tLK i ¡. Aile!. HI£. ..4 ~"'Ob Subject: Nicolai Creek Unit From: Andy Clifford <acclifford@aurorapower.com> Date: Fri, 28 Jul2006 11:58:38 -0500 To: steve _ davies@admin.state~ak.us CC: 'Ed Jones' <jejones@aurorapower.com> Steve, I will forward you a hard copy in due course, but meanwhile here are the digital files relating to the Nicolai Creek Unit Expansion Application, which in fact led to a contraction with the inadvertent omission of the NCU-1B productive intervals, which I will address separately in the coming week. Any table or figure which is deemed to be confidential is marked accordingly. Regards, Andy Clifford, VP Exploration, Aurora Gas, LLC. Content-Type: applicationlmsword NICOLAI CREEK UNIT EXPANSION_CONFIDENTIAL TEXT.doc Content-Encoding: base64 Content-Type: applicationlvnd.ms-excel NICOLAI CREEK UNIT EXPANSION_TABLES.xls Content-Encoding: base64 Content-Type: applicationlvnd.ms-powerpoint NICOLAI CREEK UNIT EXPÁl"l[SION.ppt Content-Encoding: base64 Content-Type: applicationlvnd.ms-powerpoint NICOLAI CREEK UNIT EXPANSION_LANDSCAPE SLlDES.ppt Content-Encoding: base64 . . Subject: Re: NCU pressure surveys From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Tue, 25 Jul2006 16:20:00 -0800 To: Dave Roby <daveJoby@admin.state.ak.us> CC: Tom Maunder <tom_maunder@admin.state.ak.us> Dave, I'd recommend talking with them first. If you don't get a satisfactory response in a reasonable amount of time, then we'll can initiate a more formal request involving the Connnissioners. Steve D. Dave Roby wrote: steve and Tom: CO 478A, dated October 16, 2003, required Aurora to: 1) Conduct a pressure survey on each of the three wells prior to regular production (Rule 3) , 2) Perform a minimum of one bottom-hole pressure measurement per well annually (Rule 4), and 3) submit data and results in an annular reservoir surveillance report (Rule 5) No pressure survey results have been submitted to the connnission. According to our production data well NCU IB has not commenced regular production. Through May of this year it has produced for a total of 8 days (2 in 11/03, 5 in 3/04, and 1 in 4/06) . However, wells NCU 2 and NCU 9 both began what I would consider regular production in December of 2003. They produced on a regular basis through December 2004 and then began a period of irregular production that lasted until regular production was resumed in November 2005. Therefore, I would argue that Aurora is not in compliance with the three rules mentioned above, at the very least they should provide initial bottom-hole pressure survey information for wells NCU 2 and NCU 9. Do we want to talk with the connnissioners and send a consolidated response, or should I go ahead and talk with them? Dave Steve Davies . Subject: NCU2 to NCUlB Cross Section From: Andy Clifford <acclifford@aurorapower.com> Date: rue, 25 Jul2006 11:46:08 -0500 To: steve _ davies@admin.state.ak.us CC: 'Ed Jones' <jejones@aurorapower.com> . Steve, Please find attached a log correlation between Aurora's NCU2 and NCU1 B wells showing the perforated sands in both wells. We can discuss this with you this morning at 10.30am along with pressure data etc. Regards, Andy Clifford. NCU2 TO NCUIB CORRELATION_3APR2006.ppt (!~'~'dn. ~Î-' 2£·..0<0. Content-Type: application/vnd.ms-powerpoint Content-Encoding: base64 AOGCC Nicolai Creek Field TOP TYONEK TIME STRUCTURE MAP o , 3 . miles REPRODUCED WITH OPERATOR PERMISSION MODIFIED FROM ORIGINAL SUBMITTAL BY AOGCC N __u_uuu...... Nicolai Creek Unit Boundary Cook Inlet Shoreline AURORA GAS, LLC NICOLAI CREEK UNIT NO.1B WELL TEST RESULTS··JUNE 2006 WORKOVER DATE INTERVAL (MD) MCFPD FTP SITP of PKR PLUG TEST TOP PERF BTM PERF psig psig COMMENTS SAND AFTER PERFORATING WI RBP AND PKR 2.0/ 6/15/2006 6/17/2006 3150 3500 140 280 1200 W/ 2-3 BWPH Carya 2-5 & ~ 3191 3401 2002 perfs 6/18/2006 6/19/2006 2816 3150 260 420 1260 new perfs: Carya 2-3 2837 2918 6/20/2006 2457 3155 556 556 1140 new perfs Carya 2-3 & 2-2 2480 2913 some open in NCU #2 6/22/2006 2295 2468 1405 820 1000 new perfs Carya 2-1 2307 2370 open in NCU #2 . AFTER RUNNING COMPLETION PACKERS, SCREENS, AND SLEEVES 6/27/2006 2761 3500 420 350 1200 commingled old Carya 2-3 to 2-6 2837 3401 + some new 6/28/2006 2436 2761 196 200 1000 Carya 2-2.1 & 2-2.2 2480 2622 6/28/2006 2275 2438 914 590 1000 Carya 2-1.2 2307 2370 . RECE\VED JUL 2 4 2006 0·, & Gas Cons commission Alaska I . Anchorage RH: NCU 1tl - Information Needed . . Subject: RE: NCU 1B - Information Needed From: Ed Jones <jejones@aurorapower.com> Date: Fri, 21 Jul2006 16:37:45 -0500 To: 'Stephen Davies' <steve_davies@admin.state.ak.us> CC: 'Andy Clifford' <acclifford@aurorapower.com> Steve, Let's plan to get together Monday--I'II call you Monday AM and set a time when we see how the day is going, being a Monday. Thanks, Ed Ed Jones Vice President Engineering & Operations Aurora Gas, LLC 713-977-5799 (Houston) 907-277-1003 (Anchorage) ---------..- -- From: Stephen Davies [mailto:steve_davies@admin.state.ak.us) Sent: Thursday, July 20, 2006 3:27 PM To: Ed Jones Cc: 'Andy Clifford' Subject: Re: NCU 1B - Information Needed Ed, I'll be in tomorrow and Monday. Come by whenever it is convenient for you and Andy. Thanks, Steve Davies 793-1224 Ed Jones wrote: Steve, Andy Clifford and I are both in Anchorage, and most of the info you requested is readily available in Houston (in non-electronic format), so we'll have to get you a formal response after Andy returns to Houston. However, he and I are available to meet with you for 1/2 hour or so tomorrow afternoon or mid-morning Monday to give you a preview of our response if that would be helpful. (If the info was available up here, I am confident that we could cover all your questions in short order, saving both you and us time, but it is not). Please let me know if this would be helpful, and if so, what time would be best for you. Thanks, Ed Ed Jones Vice President Engineering & Operations Aurora Gas, LLC 713-977-5799 (Houston) 907-277-1003 (Anchorage) 10f2 8/15/2006 4:00 PM RE: NCU 1B - Information Needed . . From: Stephen Davies [mailto:steve davies@admin.state.ak.us] Sent: Thursday, July 13, 2006 6:40 PM To: Ed Jones Cc: Tom Maunder; David Roby Subject: NCU 18 - Information Needed Mr. Jones, In response to your request concerning requirements to commence regular production from NCU lB, please provìde the Commission with the following information: 1. A structural cross-section presenting GR, resistivity and porosity well log curves for NCU 1B and NCU 2. The well log curves should be displayed in true vertical depth, with both measured depths and true vertical depths annotated in the depth tracks (if your geologic workstation software permits). On this cross-section, please annotate clearly: · sand tops for all sands that are productive or considered productive by Aurora in both wells (e.g. Carya 2-4.2, Carya 2-5.1, Carya 2-6.1, and so on), · zones perforated prior to the most recent workover in NCU lB, · zones opened by the most recent NCU lB workover, and · the vertical extent of the NCU Southern Participating Area defined in the AK. Div of Oil and Gas Decision of the Director issued March 10, 2005. 2. An index map that legibly displays: · the shoreline of the Cook Inlet, · the Southern Participating Area boundaries, · the trajectories of the NCU wells within the Southern Participating Area, · sand tops clearly annotated along each well trajectory for all sands that are productive or considered productive by Aurora in the Southern Participating Area (e.g. Carya 2-4.2, Carya 2-5.1, Carya 2-6.1, and so on), and · a scale bar. 3. A statement as to why regular production úom common zones spaced less than 3,000' apart (as prescribed by Commission regulations) will not cause waste or decrease ultimate recovery from those zones. Thanks for your help, Steve Davies Sr. Petroleum Geologist Alaska Oil and Gas Conservation Commission 907-793-1224 20f2 8/15120064:00 PM . . Subject: NCU IB - Information Needed From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Thu, 13 Jul2006 15:39:50 -0800 To: Ed Jones <jejones@aurorapower.com> CC: Tom Maunder <tom_maunder@admin.state.ak.us>, David Roby <dave_roby@admin.state.ak.us> Mr. Jones, In response to your request concerning requirements to commence regular production from NCU IB, please provide the Commission with the following information: 1. A structural cross-section presenting GR, resistivity and porosity well log curves for NCU lB and NCU 2. The well log curves should be displayed in true vertical depth, with both measured depths and true vertical depths annotated in the depth tracks (if your geologic workstation software permits). On this cross-section, please annotate clearly: · sand tops for all sands that are productive or considered productive by Aurora in both wells (e.g. Carya 2-4.2, Carya 2-5.1, Carya 2-6.1, and so on), · zones perforated prior to the most recent workover in NCU lB, · zones opened by the most recent NCU lB workover, and · the vertical extent of the NCU Southern Participating Area defmed in the AK. Div of Oil and Gas Decision of the Director issued March 10, 2005. 2. An index map that legibly displays: · the shoreline of the Cook Inlet, · the Southern Participating Area boundaries, · the trajectories of the NCU wells within the Southern Participating Area, · sand tops clearly annotated along each well trajectory for all sands that are productive or considered productive by Aurora in the Southern Participating Area (e.g. Carya 2-4.2, Carya 2-5.1, Carya 2-6.1, and so on), and · a scale bar. 3. A statement as to why regular production from common zones spaced less than 3,000' apart (as prescribed by Commission regulations) will not cause waste or decrease ultimate recovery from those zones. Thanks for your help, Steve Davies Sr. Petroleum Geologist Alaska Oil and Gas Conservation Commission 907-793-1224 Steve Davies · .. ;2..D z - / ~ :z..- e Subject: FW: Conditional Approval and Questions Concerning Nicolai Creek Unit WelllB From: "Randall D. Jones" <rjones@aurorapower.com> Date: Thu, 08 Jun 200614:05:03 -0500 To: steve _ davies@admin.state.ak.us CC: 'Scott Pfoff' <gspfoff@aurorapower.com>,'Andy Clifford' <acclifford@aurorapower.com>, 'Ed Jones' <jejones@aurorapower.com> Thank you for your email questions below. OUr replies to your questions are as follows: 1. Yes. Aurora is the only owner and operator within 3000' for all wells. 2. Yes. 3. No, but pursuant to 11 AAC 83.301-11 AAC 83.395 a PA may include only land reasonably estimated through the use of geological, geophysical, or engineering data to be capable of producing or ~~~~~~~~~~n~h~o D:e d~~~=~~~i~~s o~o hr~~~~~~b~~~o i~h~a~~~~h ~~n~~~;e~~e ¿¡CJ\NN~i} ,JUt aliquots which met said criteria. The DNR Decision only allowed 40.461 acres to the South PA. In order to have placed lands into the PA which extend 1,500' in all directions an approximate 70 additional acres from the BLM AA-8426 lease would have had to have been placed into the South PA and an additional 20 acres each from DNR ADLs 17585 and 17598 even though such lands were deemed not to contribute to the reservoir. c '21m h 1 ~ ~Ji'dt.,J Likewise, the Beluga PA, which comprises 80.753 acres, would have had to have placed into it an additional 20 acres from AA-8426 and an additional 10 acres from DNR ADL 17585 and 20 acres from 17598. However, I respectfully submit to you that in my opinion Conservation Order 478A did not require all lands within 1500' be placed into the South PA. I interpret the Spacing Exception Order 478A requiring only that lands "within 1500' of each of the 3 wells will be included, in whole or in part, in the expanded PAn or PAs. That requirement was met to the extent lands falling within that distance from the wellbore AND reasonably estimated through the use of geological, geophysical, or engineering data to be capable of producing or contributing to the production of hydrocarbons in paying quantities as to the reservoir were placed into the PA. So Aurora isn't in any violation there because that condition was met. 4. No. The IB well is currently open to zones deeper than the currently open zones in the 2 well. The IB open zones are the 2-4.2, 2-5.1 and the 2-6.1 and the planned zones to be added are the 2-3, 2-2.2, 2-2.1 and 2-1.2 with only the "planned zones to perf of " 2-2.1 and 2-1.2 being stratigraphically equivalent to the currently open zones in the 2 well. These 2 stratigraphically equivalent zones in the IB won't be produced until said zones in the 2 well deplete; however, isn't the purpose of Spacing Exception Order 478A to allow common zones to be simultaneously producible from 2 wells within 3,000' from each other? Therefore, I ask you to visit the Spacing Exception Order 478A to see if it allows such in the broadest sense. I will remind you both the IB and 2 wells are allocable to the same Southerly PA so there is no injury to any royalty or ORRI owner by allowing both wells to produce from the same intervals simultaneously. 5. "Yes" to the 2 well and "No" to the 9 well. The 3,000' limit in your question will encompass the NCU IB, 2 and 9 wells. The answer is "Yes" to the 2 well and "No" to the 9 well because the No.9 well's open zones fall within 1,320'MD and 1,477' MD. The common open zones in the 1B, which are planned to be perfed and the No.2 well, will be the 2-2.1 and 2-1.2 zones, but said zones in the 1B aren't presently planned to be produced in 1B until said zones deplete in the 2 well. 6. Yes. To summarize our conversation today, I will check with the DNR if the definition of the Southerly PA needs to be reformed/modified to include the deeper zones in the 1B from which Aurora has been producing namely the 3,191'-3,575' MD, but I note to you the last 2 PODs covering same have described our production from these depths and each have been approved by the DNR. Additionally, I will check and see if the 2-2.1 and e 2-1.2 zones in the 1B and 2 are fault separated, but I think not as their take points tops are only a few hundred feet apart, but by copy of this note to Andy I will ask for both intervals' distances. Finally, you will check the Spacing Exception Order 478A to see if it allows these 2 zones can be produced simultaneously form the 2 wells, which to me seems to be one of the essential purposes for granting spacing exceptions. Thank you for opportunity to furnish these answers to your email questions and please call me if any further questions arise. . . e Randall D. Jones, CPL Manager, L 20 AND & Negotiations AURORA GAS, LLC 10333 Richmond Avenue, Suite 710 Houston, TX 77042-4176 Telephone 713-977-5799 Facsimile 713-977-1347 Mobile 713-409-2378 rjones@aurorapower.com rskn@houston.rr.com -----Original Message----- From: Stephen Davies [mailto:steve davies@admin.state.ak.us] Sent: Tuesday, June 06, 2006 12:33 PM To: ACClifford@aurorapower.com; rjones@aurorapower.com Cc: jejones@aurorapower.com Subject: Conditional Approval and Questions Concerning Nicolai Creek Unit Well IB Randy and Andy, Yesterday afternoon I received Aurora's application for well operations in Nicolai Creek Unit IB ("NCU IB") that included perforating additional, shallower sands within the Tyonek Formation. Because Aurora's rig was on standby, the commission granted provisional approval for the proposed operations, including perforating and limited-duration testing of these additional sands. However, regular production from NCU IB will not be approved until the Commission is satisfied that all conditions and requirements of Conservation Orders 478 (the spacing exception) and 478A (the order allowing regular production) have been met. Please provide answers, with detailed supporting evidence, to each of the following questions: 1. Is Aurora the only owner and operator within 3000 feet of wells NCU IB, 2 and 91 2. Are the State of Alaska and the Federal Government the only landowners within 3000 feet of wells NCU IB, 2 and 9? 3. Have all properties within 1500 feet of wells NCU 1B, 2 and 9 been included in the expanded PA as required by Conservation Order 478A? 4. According to the Alaska Division of Oil and Gas findings and decision document dated March 10, 2005 and titled "Approval of the Revised Nicolai Creek Unit Area, Revised Participating Areas A and B, and Formation of the Beluga Participating Area," Gas Pool PA-A (renamed the Southern Participating Area) is limited to the stratigraphic interval in the Tyonek Formation encountered between 2422 and 2918 feet measured depth in well NCU 2. Do all intervals that have been perforated or that will be perforated during the proposed operations in NCU 1B fall within this expanded PA as required by Conservation Order 478A? 5. Will the additional perforations in well NCU IB open intervals that are currently open to production in other wells within 3000' of NCU 1B? 6. Do previous and currently planned operations in well NCU IB conform Re: Aurora Gas NCU-IB Workover -- . Subject: Re: Aurora Gas NCU·IB Workover From: Thomas Maunder <tom_ maunder@admin.state.ak.us> Date: Th~ 08 lun 2006 12:56:02 -0800 ..~_ ·~~'š;i~fCP! Bill and Ed, Your proposal is acceptable. I think the proposed setting depth will wind up being not much shallower than originally planned. Good luck getting the equipment out of the hole. Tom Maunder, PE AOGCC Bill Penrose wrote, On 6/8/2006 11:12 AM: Tom, In attempting to de-complete well NCD-1B, Aurora Gas has found the completion sanded in and cannot pull it in its entirety. (See the attached schematic of the current wellbore configuration.) Fill in the tubing has been tagged with a sinker bar at 3,379' (in the second sand screen) and a free point indicator shows the tubing free above 3,283' (the packer has been intentionally pulled loose). Aurora Gas wishes to cut the tubing as deeply as possible between the top and middle sets of perfs, set a bridge plug just above the point of recovery and not have to go below the bridge plug in the future when the well is permanently P&A'd. Aurora proposes that the bridge plug be treated as the bottom of the well when it is eventually abandoned with cement per the Commission's regulations. The cement required to abandon the current top set of perfs would extend from the bridge plug to 100' above those perfs, thereby additionally isolating the perfs below the bridge plug. Please let me know if this plan adequately sets up the bottom two sets of perforations for future permanent abandonment without having to intervene below the proposed bridge plug. Regards, Bill Penrose Vice President / Drilling Manager Fairweather E&P Services, Inc. 2000 E. 88th Avenue, Suite 200 ;O::f"oi.·ïYtI.u;:-' '·Ut 1 . ~r.u~nlfllif.J 'J' 1\ 1'1 2ûQf) Anchorage, Alaska 99507 907-258-3446 1 of I 6/8/20062:18 PM Re: FW: Aurora . . Bill, Thanks for the information. This really helps. One thing I noticed is the reference to Nicolai 1-2-9. I know this refers to the wells at the end of the airstrip and the point I have to make may not be for you specifically. In the regulatory scheme of things, the wells at the end of the airstrip are 1B, 2 and 9. For the AOGCC purposes, NCU 1 and 1A are/have been plugged and abandoned. I am aware of a few other items that Steve Davies is concerned with mostly with regard to spacing exceptions. He has been in contact with the land person at Aurora (not sure who) and has sent an email noting what he requires. He has yet to have his needs addressed. According to our status tracking board, the wells are Long Lake #1 and W Moquawkie #1. Please call if you have any questions. Tom Maunder, PE AOGCC Bill Penrose wrote: -----Original Message----- From: Ray Eastlack Sent: Friday, June 06, 2003 11:26 AM To: 'Glenn G:cay@dnr.state.ak.us' Cc: Bill Penrose; 'j~jgEes_~~~£<2.£~.<:?':'!~F_:r::;90'; '9_§.p~S?ßf@auF_?.£9:P'g':'!.~E_:~<211~' Subject: RE: Aurora Glenn, You're about to get some paperwork. Since the pre-app meeting, the NCU 1-2-9 facilities and pipeline have been moved way up in priority by Aurora gas so we've been concentrating on that. We've surveyed in the pipeline route and had a biologist delineate wetlands along it. The wetlands report will be ready for submittal to the Corps and to your office (along with the CPQ for this phase of the project) next week. We have also been in contact with ADEC and EPA concerning storm water runoff and hydro test water discharge and will be submitting the appropriate paperwork to them with copies to your office. We have requested ADEC to issue a C-Plan exemption and they in turn have requested the AOGCC to provide verification of our justification for it. Steve Davies at AOGCC indicated agreement verbally and will notify ADEC in writing soon. We will ensure your office receives a copy of the C-Plan exemption when/if it arrives. Once all this is in motion next week for NCU 1-2-9, we will be sending the surveyors and biologist back out to tackle the Long Lake 1, Lone Creek 3, NCU #7, and possibly Kaloa 2 routes and locations. This is scheduled for late next week. Once the wetlands report for these locations is prepared, we will submit it to the Corps for their determination of Corps permitting needs. Any projects that they determine will need a permit from them will receive a permit application from us and you will receive a CPQ. We don't expect to need any permits other than AOGCC well work permits for the Moquawkie wells as they're on a well-established road and pad system. Regards, Ray Eastlack 1 of 1 9/1/20061:15 PM . . . Subject: Conditional Approval and Questions Concerning Nicolai Creek Unit Well1B From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Tue, 06 Joo 2006 09:32:52 -0800 To: ACClifford@aurorapower.com, rjones@aurorapower.com CC: jejones@aurorapower.com BCC: Daniel SeamOoot <dan_seamOoot@admin.state.ak.us>, Cathy P Foerster <cathy _foerster@admin.state;akus>, Tom Maunder <tom_maooder@admin;state.ak.us>, David Roby <daveJoby@adm1n state.ak.US> . ~....I'~ Randy and Andy, Yesterday afternoon I received Aurora's application for well operations in Nicolai Creek Unit 1B ("NCU 1B") that included perforating additional, shallower sands within the Tyonek Formation. Because Aurora's rig was on standby, the Commission granted provisional approval for the proposed operations, including perforating and limited-duration testing of these additional sands. However, regular production from NCU 1B will not be approved until the commission is satisfied that all conditions and requirements of Conservation Orders 478 (the spacing exception) and 478A (the order allowing regular production) have been met. Please provide answers, with detailed supporting evidence, to each of the following questions: 1. Is Aurora the only owner and operator within 3000 feet of wells NCU 1B, 2 and 9? 2. Are the State of Alaska and the Federal Government the only landowners within 3000 feet of wells NCU 1B, 2 and 9? 3. Have all properties within 1500 feet of wells NCU 1B, 2 and 9 been included in the expanded PA as required by Conservation Order 478A? 4. According to the Alaska Division of oil and Gas findings and decision document dated March 10, 2005 and titled "Approval of the Revised Nicolai Creek Unit Area, Revised Participating Areas A and B, and Formation of the Beluga Participating Area," Gas Pool PA-A (renamed the southern Participating Area) is limited to the stratigraphic interval in the Tyonek Formation encountered between 2422 and 2918 feet measured depth in well NCU 2. Do all intervals that have been perforated or that will be perforated during the proposed operations in NCU IB fall within this expanded PA as required by Conservation Order 478A? 5. Will the additional perforations in well NCU IB open intervals that are currently open to production in other wells within 3000' of NCU IB? 6. Do previous and currently planned operations in well NCU IB conform to all other requirements established by Conservation Orders 478 and 478A? Thanks for your help. Steve Davies AOGCC 907-793-1224 Steve Davies ·"f":.'· ~1,,~~(1 ~.....?.... \: . ..-... 1\ 1t.'1 ;",1_;,',. ":-~ '~-;' :, "~ o¡/ ...., ,.,.r,f)¡") ~. ~~. ¿i,\'.'··¡ Re: Nicolai Creek Unit 1B (202-162) . . Ed and Bill, Please be advised that Aurora's original sundry application has been found. It was received by the Commission on May 30. The document was evidently misplaced due to a combination of a staff member vacation and hurried departure of another staff member due to a medical emergency. We are reviewing your work application and will be in touch with you in the early afternoon when all staff members have completed their review. Tom Maunder, PE AOGCC Thomas Maunder wrote, On 6/5/2006 10:14 AM: Ed and Bill, It appears that workover operations on Nicolai Creek Unit IB are underway. It also appears that no Application for Sundry Approvals (Form 403) has been approved for this work. I have spoke to Commissioner Foerster with regard to this matter and she has instructed me to inform you that Aurora should complete what work is necessary to make the well safe and halt operations pending resolution of the required work authorization. Call or message with any questions, Tom Maunder, PE AOGCC 1 of 1 9/1/2006 1 :20 PM =4f/'5 · . ~~rAurora Gas, LLC WW\lY.aurorapower.com RECE\VED OCT 0 5 2006 Alaska Oil & Gas Cons. Commission Anchorage October 5,2006 John K. Norman, Chairman State of Alaska Oil and Gas Conservation Commission 333 W. 7th Avenue, Suite 100 Anchorage,AJ( 99501 ADMINISTRATIVE AMENDMENT OF CONSERVATION ORDER 478A ALLOWING REGULAR PRODUCTION FROM THE NICOLAI CREEK UNIT WELLS NO. lB. NO.2 AND NO.9 WITHOUT PUBLIC NOTICE OR HEARING Aurora Gas, LLC (Aurora) respectfulIy requests an administrative amendment, without hearing, to Conservation Order No. 478A (CO 478A), alIowing regular production from the Nicolai Creek Unit (NCU) welIs NO. 1B, No.2 and No.9 (NCU-1B, NCU-2 and NCU-9). CO 478 was issued on October 16,2003 with the folIowing generalized Rules: 1) Approval of regular production is subject to possible additional conditions if an expanded Participating Area(s) (PA's) is not effected within 100 days commencement of production. 2) Aurora to keep AOGCC informed of status of proposed changes to the NCU and P A's. 3) Aurora to take pressure measurements from each well prior to regular production. 4) Aurora to perform at least one bottom-hole pressure measurement, annually, for each well. 5) Aurora to submit data and results from certain tests and procedures in an annual reservoir surveillance report. 6) The AOGCC reserves the right to amend CO 478A without public notice or hearing. Subsequent letters from the AOGCC, dated September 1, 2006 and September 8, 2006, required additional conditions for the approval of an administrative amendment to CO 478A, allowing regular production from the NCU-1B and NCU-9 wells, respectively, as follows: 10333 Richmond Avenue, Suite 710· Houston, Texas 77042. (713) 977-5799. Fax (713) 977-1347 1400 West Benson Blvd., Suite 410· Anchorage, Alaska 99503. (907) 277-1003· Fax (907) 277-1006 . . 1) All effected owners and landowners must provide written notice to the commission stating that they are aware that the perforated intervals of the NCU IB and NCU 9 lie both inside and outside the Southern Participating Area (SPA) and the Beluga Participating Area (BP A), respectively, and that they consent to regular production from the NCU lB and NCU 9 wells. 2) Aurora must submit a reservoir surveillance report for the NCU IB well. 3) Aurora must comply with other requirements of CO 478A that are within Aurora's ability to control. The State Department of Natural Resources, Division of Oil and Gas (DNR) approved the revised P A's for the NCU, forming the SPA and BP A in the Findings and Decision ofthe Director, dated March 10, 2005. An application to stratigraphically expand the SPA was submitted to the DNR on July 28, 2006. An application to stratigraphically expand the BP A was submitted to the DNR on September 26,2006. The annual NCU Plan of Development (POD) was submitted to the DNR on September 27,2006. Copies of the aforementioned are attached for your convenience. The DNR has no established timelines for the approval of an application to expand a P A. Because there are no definite timelines for this approval, and because Aurora has submitted all the required documents pertaining to the formation, expansion and development of the SPA and BP A, Aurora asserts that Rules No. 1 and No.2 of CO 478A have been satisfied. In a transmittal from Aurora to the AOGCC, dated September 13, 2006, Mr. J. Edward Jones submitted a Reservoir Surveillance Report for the NCU-lB, NCU-2 and NCU-9 wells. Aurora asserts that the receipt of this report by the AOGCC satisfies Rules No.3, 4, and 5 of CO 478A and condition No.2 of the AOGCC letter dated September 1,2006. Letters acknowledging and consenting to regular production ftom inside and outside the SPA and BP A were issued from the DNR on September 26, 2006, the Bureau of Land Management (BLM) on September 26,2006, and the Alaska Mental Health Trust Land Office (MHTLO) on October 5, 2006. Aurora asserts that the receipt ofthese letters by the AOGCC satisfies condition No.1 of the AOGCC letters dated September 1 st and 8th, 2006. By receipt of the aforementioned applications, reports, letters and other documents, Aurora asserts that all the applicable Rules of CO 478A and conditions detailed in the aforementioned AOGCC letters have been satisfied. An Administrative Amendment to CO 478A allowing regular production from the NCU-IB, NCU-2 and NCU-9 wells is based on sound engineering and geoscience principals, will not promote a waste of resources, jeopardize correlative rights, nor result in an increased risk of fluid movement into fteshwater. THEREFORE, pursuant to Rule No.6 of CO 478A, Aurora requests a timely decision approving this Administrative Amendment of CO 478A, without public notice or hearing. Respectfully Submitted By, ;¡g;;: U ~ Bruce D. Webb Manager, Land and Regulatory Affairs . . RECEIVED OCT 0 5 Z006 n1RUST LAND OFFICE Alaska Oil & Gas Cons. Commission Anchorage October 5, 2006 John Norman, Chairman Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage~ Alaska 99501·3539 Re: Nicolai Creek Unit Letter in Support of Production from Well Nos. IB and 9 Dear Mr. Nonnan: The Trust Land Office (TLO) supports the petition of Aurora Gas, LLC (Aurora) to the AOGCC to allow Aurora to begin regular production from Well Nos. IB and 9 from the Nicolai Creek Unit. This letter is in response to the AOGCC's requirement that, before Aurora is allowed to produce from these wells on a regular basis, all affected owners and landowners must provide written notice to the AOGCC stating that they are aware that the wells will be producing from intervals that, in part, are outside of the existing participating area and that the affected owners consent to regular production from these wells. The TLO's consent and support for this petition is predicated on the understanding that Aurora is currently in the process of amending the Nicolai Creek Unit Participating Areas to account for production outside of the current participating areas~ that this amendment will be pursued in a diligent manner, and that royalty payments will be adjusted retroactively to the date of production ITom these wells when the participating areas are adjusted accordingly. Sincerely, ~~~~ V - Executive Director Cc: Bruce Webb, Aurora Gas, LLC Alaska Mental Health Trust Land Office 718 L Street, Suite 202 Anchorage,Alaska 99501 Tel: 907-269-8658 Fax: 907-269-8905 www.mhtrustland.org */4 · e Th1RUST LAND OFFICE October 5, 2006 John Norman, Chairman Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501-3539 RECEIVED OCT 0 6 2006 Alaska Oil & Gas Cons, Commission Anchorage Re: Nicolai Creek Unit Letter in Support of Production from Well Nos. IB and 9 Dear Mr. Norman: The Trust Land Office (TLO) supports the petition of Aurora Gas, LLC (Aurora) to the AOGCC to allow Aurora to begin regular production from Well Nos. IB and 9 from the Nicolai Creek Unit. This letter is in response to the AOGCC's requirement that, before Aurora is allowed to produce from these wells on a regular basis, all affected owners and landowners must provide written notice to the AOGCC stating that they are aware that the wells will be producing from intervals that, in part, are outside of the existing participating area and that the affected owners consent to regular production from these wells. The TLO's consent and support fpr this petition is predicated on the understanding that Aurora is currently in the process of amending the Nicolai Creek Unit Participating Areas to account for production outside of the current participating areas, that this amendment will be pursued in a diligent manner, and that royalty payments will be adjusted retroactively to the date of production from these wells when the participating areas are adjusted accordingly. Sincerely, .w ~~~~ {/ . Executive Director Cc: Bruce Webb, Aurora Gas, LLC Alaska Mental Health Trust Land Office 718 L Street, Suite 202 Anchorage,Alaska 9950 I Tel: 907-269-8658 Fax: 907-269-8905 www.mhtrustland.org · e Th1RUST LAND QrncE October 5, 2006 John Norman, Chairman Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501-3539 Re: Nicolai Creek Unit Letter in Support of Production from Well Nos. IB and 9 Dear Mr. Norman: The Trust Land Office (TLO) supports the petition of Aurora Gas, LLC (Aurora) to the AOGCC to allow Aurora to begin regular production from Well Nos. IB and 9 from the Nicolai Creek Unit. This letter is in response to the AOGCC's requirement that, before Aurora is allowed to produce from these wells on a regular basis, all affected owners and landowners must provide written notice to the AOGCC stating that they are aware that the wells will be producing from intervals that, in part, are outside of the existing participating area and that the affected owners consent to regular production from these wells. The TLO's consent and support for this petition is predicated on the understanding that Aurora is currently in the process of amending the Nicolai Creek Unit Participating Areas to account for production outside of the current participating areas, that this amendment will be pursued in a diligent manner, and that royalty payments will be adjusted retroactively to the date of production from these wells when the participating areas are adjusted accordingly. ~ Sincerely, ,?J¿-ry¿ v."JGi~ Marty K. R~erford1.....ø'1 Executive Director Cc: Bruce Webb, Aurora Gas, LLC Alaska Mental Health Trust Land Office 7! 8 L Street, Suite 202 Anchorage,Alaska 9950 I Tel: 907-269-8658 Fax: 907-269-8905 www.mhtrustland.on' 4\=\3 . ~íJ&íJ~ @~ &[h&~~ . OFRCE OF THE COMMŒmONER FRANK H. MURKOWSKJ, GOVERNOR DEPARTMENT OF NATURAL RESOURCES o 400 WILLOUGHBY AVENUE JUNEAU, ALASKA 99801-1796 PHONE: (907) 465-2400 FAX: (907) 465-3886 o 550 WEST 7TH AVENUE, SUITE 1400 ANCHORAGE, ALASKA 99501-3650 PHONE: (907) 269-8431 FAX: (907) 269-8918 September 26, 2006 Mr. John K. Norman, Chairman Alaska Oil and Gas Conservation Commission 333 W. ill Avenue, Suite 100 Anchorage, AK. 99501-3539 RE: Letter supporting regular production approval and Administrative Arn,endment to Conservation Order 478A (CO 478A) for the following wells: Nicolai Creek Unit No. IB, Southern Participating Area Nicolai Creek Unit No.9, Beluga Participating Area Dear ChairmanN orman: The Depal1ment of Natural Resources (DNR) supports Aurora Gas, LLC's (Aurora) petition to the AOGCC to allow Aurora to begin production of the Nicolai Creek Unit No. IB and No.9 (fo1111erly well No.8) wens. It is my understanding that Aurora is currently prohibited from plaCÍngthese wells on regular production under CO 478A. The AOGCC requested that aU affected owners and landoWners provide written notice to the AOGCC stating that they are aware that the perforated intervals in theaboye referenced Wells lie both inside>and outside of their respective participating areas and that they consent to regular production from these wells. Aurora is currently in the process of amendingthe Nicolai Creek Participating Areas to include the appropriate production intervals. An application was sent to DNR Commissioner Menge the last week of Juiy 2006, DNR agrees to this regular production and amendment to CO 478A. If you have any questions regarding this letter, please do not hesitate to call. Z~¿ William VanDYke~·A REdEIVE D Acting Director t/ ,;:- P 2 6 2006 AlasK<.; ,)~ Cons. Commission ·p::horage Cc: Temple Davidson Bruce Webb, Aurora Gas LLC "Develop, COllserve, alld EIl/rance Natural Resources for Present alld Future Alaskflns." #l:l . . United States Department of the Interior BUREAU OF LAND MANAGEMENT ALASKA STATE OFFICE 222 W. 7th Avenue, #13 ANCHORAGE, ALASKA 99513-7599 http://www.ak.blm.gov 3180(ak941) gin September 26, 2006 Mr. John K. Norman, Chairman Alaska Oil and Gas Conservation Commission 333 W. ih Ave. Suite 100 Anchorage, Alaska 99501-3539 RECEIVED SEP 2 6 2006 Alaska Oil & Gas Cons. Commission Anchorage The Bureau of Land Mànagement supports Aurora Gas, LLC's petition to the AOGCC to allow Aurora to begin production of the Nicolai Creek Unit Nos. 1B and 9 wells. Dear Mr. Norman: Before the AOGCC will allow Aurora to produce from these wells you have required that all affected owners and landowners provide written notice to the AOGCC stating that they are aware that the wells are producing from intervals that, in part, are outside of the existing participating areas and that the affected owners consent to regular production from these wells. The Bureau of Land Management consents to this regular production based on the understanding that Aurora is currently in the process of amending the Nicolai Creek Unit Participating Areas to include the productive areas outside the existing participating areas and that the effective date of production allocation from the revised participating areas will precede production from these wells. Sincerely, ~ ~ Energy Branch Chief *11 . . PHilliPS Alaska, Inc. A Subsidiary of PHilLIPS PETROLEUM COMPANY Moquawkie Unit RECEIVEDj SEP 1 3 2006 Alaska Oil & Gas CQns. CommiS=.~.··. '.., An~ '.: ~~... , ~:;¡.~, Unit Application August 15, 2001 . . MOQUA WKIE UNIT AGREEMENT Table of Contents RECITALS ....................................................................................................................................................................3 AGREEMENT ..............................................................................................................................................................3 ARTICLE 1: DEFIN1TIONS .............. ....... ... ...... ................ .............. ...........................................................................3 ARTICLE 2: EXHIBITS .... ..... ............................................ ..................................................................... ....................5 ARTICLE 3: CREATION AND EFFECT OF UNIT...................................................................................................6 ARTICLE 4: DESIGNATION OF UNIT OPERATOR...............................................................................................7 ARTICLE 5: RESIGNATION OR REMOVAL OF UNIT OPERATOR ....................................................................7 ARTICLE 6: SUCCESSOR UNIT OPERATOR ......................................................................................................... 7 ARTICLE 7: UNIT OPERATING AGREEMENT .......... .................... .......... ............... ............. .................. ................ 8 ARTICLE 8: PLANS OF DEVELOPMENT .............................................................................................................8 ARTICLE 9: ALLOCATION OF PRODUCTION .........................................................,.........................,..................9 ARTICLE 10: LEASES, RENTALS AND ROYALTY INTEREST PAYMENTS ,.................................................10 ARTICLE 11: UNIT EXPANSION AND CONTRACTION ....................................................................................11 ARTICLE 12: UNIT EFFECTIVE DATE, TERM AND TERMINATION ..............................................................11 ARTICLE 13: EFFECT OF CONTRACTION AND TERMINATION ....................................................................12 ARTICLE 14: COUNTERPARTS AND AMENDMENTS.......................................................................................12 ARTICLE 15: LAWS AND REGULATIONS ...........................................................................................................12 ARTICLE 16: APPEARANCES AND NOTICES .....................................................................................................12 ARTICLE 17: AUTHORIZATION FOR AGREEMENT..........,.............. ....... ......... ........................ ....14 Moquawkie Unit Agreement August 15,2001 Page 2 . . MOQUA WKIE UNIT AGREEMENT TIDS MOQUAWKIE UNIT AGREE:MENT (Agreement) is by and between Anadarko Petroleum Company (Anadarko), PHILLIPS Alaska, Inc. (Phillips), Cook Inlet Region, Inc. (CIRI) and Marathon Oil Company (MOC), herein referred to individually as a Party and collectively as the Parties. RECITALS The Parties to this Agreement are the lessors (as to different depths) and the Working Interest Owners (as to all depths) of certain oil and gas leases (covering the lands that are subject to this Agreement. The Parties wish to enter into this Agreement in order to create a unit such that oil and gas operations can be conducted on a field-wide basis rather than lease-by-Iease basis. This Agreement is subject to the consent and approval of COO and MOC, which consent and approvà1 COO and MOC are willing to provide; AGREEMENT In consideration of the mutual promises in this Agreement, the Parties commit their respective interests in the Unit Area defined in Exhibits A and B to this Agreement, and agree as follows: ARTICLE 1: DEFINITIONS 1.1. Alaska Oil and Gas Conservation Commission (AOGCC) means the independent quasi-judicial agency of the State of Alaska established by the Alaska Oil and Gas Conservation Act, AS 31.05,and any successor agency with jurisdiction. 1.2. CIRI means the Cook Inlet Region Inc., or COO's authorized representative, and COO's successors and assigns. 1.3. Effective Date means the time and date this Agreement becomes effective as provided in Section 12.1. 1.4. Lease or Leases means that portion of an oil and gas lease or those portions of the oil and gas leases committed to this Agreement for which COO and MOC are the lessors. 1.5. Lessor or Lessors means COO or MOC, individually or collectively as the context indicates. 1.6. MOC means the Marathon Oil Company, or MOC's authorized representative, and MOC's successors and assigns. Moquawkie Unit Agreement August 15,2001 Page 3 . . 1.7. Outside Substances means oil, gas, other hydrocarbons or non-hydrocarbon substances purchased or otherwise obtained from outside the Unit Area and injected by the Unit Operator into a Reservoir in the Unit Area with the Relevant Lessor's prior written approval. 1.8. Paying Quantities means a quantity of Unitized Substances sufficient to yield a return in excess of unit operating costs, even if drilling and equipment costs will never be repaid and the undertaking considered as a whole will ultimately result in a loss. 1.9 Relevant Lessor means: (a) as to Tracts 1, 2, 3, 4 and 6 as listed on Exhibit A, COO as to operations above the top of the stratigraphic equivalent of the Granite Point C-1 Sands as encountered in the Lone Creek #1 PB Well at the depth of 7,130 feet, and MOC as to operations below this depth; and (b) as to Tract 5, as listed on Exhibit A, COO as to operaûons above the top of the stratigraphic equivalent of the Granite Point C-l Sands as encountered in the Lone Creek #1 PB Well at the depth of 7,130 feet, MOC as to operations from this depth to the stratigraphic equivalent of the top of the Hemlock Sands as encountered in the Mobil Oil Corporation Moquawkie #2 Well at a depth of 12,530 feet, and COO as to operations below this depth. 1.10. Reservoir means that portion of a porous and permeable underground formation containing or appearing to contain an individual and separate, continuous accumulation of producible Oil, Gas, and lor Associated Substances, as those terms are defined in the Leases, which is confined by impermeable rock or a defined oil~water or gas~water contact. 1.11. Royalty Interest means an ownership right to or interest in the proceeds or value of Unitized Substances other than a Working Interest. 1.12. Sustained Unit Production means continuing production of Unitized Substances in Paying Quantities from a well in the Unit Area into production facilities and transportation to market, excluding temporary production for initial testing purposes. 1.13. Tract Participation means the percentage assigned to a Unit Tract lying within the Unit Area for the purpose of allocation of Unitized Substances produced from said Unit Area. 1.14. Unit Area means the lands subject to this Agreement and described in Exhibits A and B to this Agreement. 1.15. Unit Equipment means all personal property, lease and well equipment, plants, platforms and other facilities and equipment constructed, used, taken over or otherwise acquired for the benefit of Working Interest Owners for use in Unit Operations. 1.16. Unit Expense means all costs, expenses or indebtedness incurred by the Unit Operator for Unit Operations. 1.17. Unit Operating Agreement means that certain Moquawkie Operating Agreement dated September 1, 1996, by and between the Working Interest Owners, as more particularly described in Article 7, submitted herewith, and as such may be amended from time to time. Moquawkie Unit Agreement August 15, 2001 Page 4 . . 1.18. Unit Operations means all operations conducted in accordance with a Unit Plan or Unit Plans. 1.19. Unit Operator means the Party designated by the Working Interest Owners to conduct Unit Operations. 1.20. Unit Plan means a unit plan of development as described in Article 8. 1.21. Unit Tract means each separate parcel that is described in Exhibit A and given a Unit Tract number. 1.22. Unitized Substances means all Oil, Gas, , and/or all Associated Substances , as these terms are defined in the Leases, within or produced from the Unit Area, including, without limitation, methane producible by in situ extraction methods from coal seams and all substances produced as an incident of production of oil or gas by ordinary production methods. 1.23. Working Interest means the right to explore for, drill for, develop or produce Unitizeçl Substances, or cause Unitized Substances to be explored for, drilled for, developed or produced as provided in the Leases. 1.24. Working Interest Owner means a Party who owns a Working Interest. ARTICLE 2: EXIllBITS 2.1 The following described Exhibits shall be attached to and made a part of this Agreement or will be subsequently attached and incorporated into this Agreement as provided in this Agreement. When this Agreement is first submitted for approval by Lessors, only Exhibits A, B, and C are required. The Unit Operator shall supply all Exhibits and revisions thereto. 2.2 Exhibit A is a schedule that identifies and describes each Unit Tract, shows the Working Interests in each Unit Tract, and shows the Royalty Interests applicable to each Unit Tract. Within 30 days after of any expansion or contraction of the Unit Area under Article 11 or any change of the Working Interests in any Unit Tract, the Unit Operator shall submit a revised conforming Exhibit A to Lessors. 2.3 Exhibit B is a map that shows the boundary lines of the Unit Area and of each Unit Tract. Within 30 days after Lessors are notified of any expansion or contraction of the Unit Area under Article 11, the Unit Operator shall submit a revised confonning Exhibit A, B and C to Lessors. 2.4 Exhibit C is a schedule that identifies and describes the Unit Area established under this Agreement, including schedules showing Unit Tract numbers, legal descriptions, lease numbers, Working Interests, and Tract Participations. An original or revised confonning Exhibit C shall be submitted to the Relevant Lessor or Lessors for approval (with an information copy to the other Lessor or Lessors), which approval shall not be unreasonably withheld, within 30 days of: a) the Effective Date of the Unit Area, b) any expansion or contraction of the Unit Area, or Moquawkie Unit Agreement August 15, 2001 Page 5 . . c) any division of interest or allocation formula establishing or revising the Tract Participation of any Unit Tract or Tracts. 2.5 Exhibit D will be the Unit Plan of Development, as more particularly described in Article 8 herein. ARTICLE 3: CREATION AND EFFECT OF UNIT 3.1. All Working Interests in the lands described in Exhibit A and shown in Exhibit B are subject to this Agreement so that Unit Operations will be conducted as if the Unit Area were a single lease. 3.2. So long as Unit Operations are conducted or suspended as provided in this Agreement and in the Leases, each Lease shall continue in effect. Where only a portion of a Lease is corrunitted to this Agreement, the commitment constitutes a severance of the Lease as between the unitized and non-unitized portions of the Lease. The portion of the Lease not corrunitted to this Agreement shall be treated as a separate and distinct Lease having the same Effective Date and term as the original Lease and may be maintained thereafter only in accordance with the terms and conditions of the original Lease. Any portion of a Lease not corrunitted to this Agreement, shall not be affected by the unitization of any other portion of the Lease, by operations in, or production of Unitized Substances from the Unit Area, or by any approved suspension for the Unit. 3.3. Production of Unitized Substances in Paying Quantities from any part of the Unit Area shall be considered production from each Unit Tract in the Unit Area. Such production shall cause the portion of each Lease in the Unit Area to continue in effect as if a well were producing in Paying Quantities from said Lease. 3.4. If any of the provisions of the various Leases or other agreements or instruments pertaining to said Leases or production from said Leases are in direct conflict with this Agreement, the provisions of such Leases or other agreements are amended only to the limited extent necessary to make them conform to the written provisions of this Agreement, but otherwise, shall remain in full force and effect without change so long as the remaining terms of the Leases are satisfied. 3.5. This Agreement shall not be construed to transfer title held by any Party in or to Working Interests or Royalty Interests by any Party to any other Party or to the Unit Operator. 3.6. Except to the extent modified by this Agreement, the Unit Operator shall have the same rights and obligations regarding use of the surface and the subsurface and any other rights and obligations that are granted or provided for in the Leases. 3.7. Subject to the provisions of Article 13 hereof, all Unit Equipment and any other lease or well equipment, materials, and other facilities placed by the Unit Operator or any other Working Interest Owner in or on the Unit Area shall be and remain the personal property of the Working Interest Owners in accordance with the terms and conditions of the Unit Operating Agreement. Moquawkie Unit Agreement August 15,2001 Page 6 . . 3.8. The Unit Operator shall provide the Relevant Lessor with copies of all documents filed with the AOGCC and with copies of all data and interpretations concerning Unit Operations pertinent to the relevant COO or MOC interests in the Leases. Such data and interpretations shall remain confidential as provided for in the Leases. The Unit Operator and the Working Interest Owners make no representations or warranties, either express or implied, as to the correctness, validity, or fitness for any purpose of any data or interpretative material provided hereunder. ARTICLE 4: DESIGNATION OF UNIT OPERATOR 4.1.1. Phillips is designated by the Working Interest Owners as the Unit Operator and agrees to accept the rights and obligations of the Unit Operator to conduct Unit Operations and to explore for, develop and produce Unitized Substances as provided in this Agreement. 4.1.2. Except as otherwise provided in this Agreement and subject to the terms and conditions of the Unit Plan, the exclusive rights and obligations of the Working futerest Owners to conduct operations to explore for, develop and produce Unitized Substances in the Unit Area are delegated to and shall be exercised by the Unit Operator. This delegation shall not relieve a lessee of the obligation to comply with all lease terms. The Unit Operator shall keep the other Working Interest Owners and Lessors reasonably informed of its actions under this Agreement and in accordance with the Leases. ARTICLE 5: RESIGNATION OR REMOVAL OF UNIT OPERATOR 5.1.1. The Unit Operator may resign or be removed as provided in the Unit Operating Agreement. Lessors shall be provided with copies of all notices or other papers provided by, to, or among the Unit Operator and Working futerest Owners relating to any such resignation or removal. 5.1.2. The resignation or removal of the Unit Operator shall not release the Unit Operator from liability for any failure to meet obligations that accrued before the effective date of the resignation or removal. 5.3 The resignation or removal of the Unit Operator does not terminate or affect any right, title, interest or obligation of said Unit Operator as a Working Interest Owner or owner or holder of other interest in the Unit Area. ARTICLE 6: SUCCESSOR UNIT OPERATOR 6.1 Whenever the Unit Operator tenders its resignation as Unit Operator or is removed as provided in Article 5, a successor Unit Operator may be designated as provided in the Unit Operating Agreement. The successor Unit Operator must accept the rights and obligations of a Unit Operator in writing. The successor Unit Operator shall file executed copies of the designation of successor Unit Operator with Lessors and AOGCC. The designation of successor Unit Operator shall not become effective until approved by AOGCC and notification of such designation is received by Lessors. Moquawkie Unit Agreement August 15,2001 Page 7 . . 6.2 If no successor Unit Operator is designated within ninety (90) days after the resignation or removal of a Unit Operator, Lessors may, in their discretion designate another Working Interest Owner as successor Unit Operator, and the Working Interests Owners agree to accept such designation. ARTICLE 7: UNIT OPERATING AGREEMENT 7.1. The Working Interest Owners have entered into the Unit Operating Agreement. The Unit Operating Agreement does not modify any term or obligation of this Agreement. If the terms of this Agreement and the Unit Operating Agreement conflict, this Agreement controls. Where any conflict exists solely between the Working Interest Owners, the Unit Operating Agreement shall control. 7.2. Any allocation(s) of costs, liabilities, or production of Unitized Substances or other unit benefits set forth in the Unit Operating Agreement are not binding on Lessors or any other owner of Royalty Interests for the purposes of determining or settling Royalty Interests. Allocations of Unit Expense or Unitized Substances for the purposes of determining, settling and paying Royalty Interests shall be based on Exhibit C of this Agreement, and must be received by the Relevant Lessor in writing before taking effect. Nothing herein shalllirnit Lessor's rights under applicable Lease provisions to question or challenge the basis upon which Royalty Interest payments have been computed. 7.3 The Working Interest Owners and the Unit Operator may enter into such other agreements addressing any other rights and obligations among the Unit Operator and the Working Interest Owners as they deem necessary and appropriate. Such· other agreements shall not affect the terms of this Agreement, and in the event of a conflict between the terms of this Agreement and any such other agreement, this Agreement shall control. 7.4 A true and correct copy of the Unit Operating Agreement is herewith provided to Lessors. Providing a copy of the Unit Operating Agreement to Lessors is for informational purposes only, and approval of the Unit Agreement by Lessors shall not be construed as approval of the Unit Operating Agreement. Complete copies of any amendrnent(s) to the Unit Operating Agreement will be provided to Lessors within 30 days after execution. ARTICLE 8: PLANS OF DEVELOPMENT 8.1. Exhibit D contains the Unit Plan of Development ("Plan of Development"). Such Unit Plan shall have the same effect and be subject to the same terms and conditions as the Lease plan~pf development required by the terms of the Leases, except that such Unit Plans shall apply to the all Unit Operations within the entire Unit Area. 8.2. If, on the Effective Date of this Agreement, a well has been drilled by a Working Interest Owner within the Unit Area or is being drilled to a bottornhole location within the Unit Area, said well shall be considered a Unit Well. Moquawkie Unit Agreement August 15,2001 Page 8 . . 8.3. The Relevant Lessor shall, in its discretion, approve in advance in writing of any injection of Outside Substances within the Unit Area. Any injection of Outside Substances within the Unit Area must also be part of an approved Unit Plan. 8.4. Any Working Interest Owner is entitled to conduct operations on that part of said Working Interest Owner's lease included within the Unit if and when the Unit Operator declines to conduct such operations, provided that such operations must be: (1) consistent with the terms and conditions of the Leases, the Unit Operating Agreement and a Unit Plan for the Lease for which the operations are proposed or conducted; and (2) coordinated with Unit Operations that are conducted by the Unit Operator. ARTICLE 9: ALLOCATION OF PRODUCTION 9.1 The Unit Tract allocations provided for in Exhibit C shall be applied to determine the Unitized Substances allocated to each Unit Tract in the Unit Area and to calculate the royalty due under this Agreement and the Leases. 9.2 The Working Interest Owners shall pay obligations due for Royalty Interests in each Unit Tract in proportion to each Working Interest Owner's ownership in that Unit Tract. The amount of Unitized Substances allocated to each Unit Tract shall be deemed to have been produced from that Unit Tract. 9.3 The allocation of Unitized Substances saved, removed or sold for purposes other than settlement of the Royalty Interest obligations of the Working Interest Owners shall be on the basis prescribed in the Unit Operating Agreement, whether in conformity with the basis of allocation set forth above or otherwise. If there is a separate division of interest or allocation formula among any of the Parties holding an interest in the Unit Area that is different from the division of interest or allocation formula provided to the Lessors, the Parties to the separate division of interest or allocation formula shall submit a c<?py of that formula to the Relevant Lessor or Lessors, and a statement explaining the reasons for the difference. Such separate division or allocation shall not alter or affect the rights of Lessors under the Leases or this Agreement. 9.4 No payment shall be due or payable to any Royalty Interest owner for any Royalty Interest on that portion of Unitized Substances used for unit development or production purposes or unavoidably lost. 9.5 Before Injecting any Outside Substance(s) into any Reservoir, the Working Interest Owners and the Lessor or Lessors shall agree to a deemed recovery rate and a commencement date for each recovered Outside Substance. Recovered Outside Substances are not subject to royalty obligations. If only dry natural gas is injected as an Outside Substance, products recovered from the natural gas subsequently recovered shall bear royalty, but the dry natural gas from which those products were extracted shall not. Moquawkie Unit Agreement August 15,2001 Page 9 . . ARTICLE 10: LEASES, RENTALS AND ROYALTY INTEREST PAYMENTS 10.1. The Working Interest Owners of Leases shall pay rentals and royalty, including minimum royalty and shut-in royalty, payments due under said Leases as provided therein. 10.2. Each Working Interest Owner under a Lease shall pay its share of the Royalty Interest obligation due to the Relevant Lessors or Lessors on Unitized Substances as provided under the terms of said Lease, except that any reference in a Lease to the "Leased Area" shall mean "Unit Area," and "Oil, Gas, and Associated Substances" shall mean Unitized Substances. 10.3. The Unit Operator shall give the Relevant Lessor or Lessors written notice of the anticipated date for commencement of production at least 120 days before the commencement of Sustained Unit Production from a Unit Area. Each Relevant Lessor shall give the Working Interest Owners at least 90 days' written notice of any election(s) by said Lessor to take in kind all, none, a specified percentage, or a specified quantity of said Lessor's Royalty Interest share in any Unitized Substances produced from the Unit Area. Each Lessor may, in its discretion, increase or decrease (including ceasing to take Royalty Interest Unitized Substances in kind) the amount .of Royalty Interest share of Unitized Substances said Lessor takes in kind, by giving written notice to the relevant Working Interest Owners 90 days before the first day of the month in which such increase, decrease, or cessation is to be effective. 10.4. The Unit Operator shall deliver each Relevant Lessor's royalty-in-kind gas for Unitized Substances produced from the Unit Area, if any, at the custody transfer meter at the point where such Unitized Substances first enters a common carrier pipeline unless another point is mutually agreed upon in writing by the Relevant Lessor and the relevant Working Interest Owners pursuant to the Lease tenns. Each Lessor shall, in its discretion, designate any individual, finn or corporation to accept delivery. In no event, shall the cost to Lessors for transportation of royalty-in-kind gas beyond the Unit Area exceed the limit on such costs as specified in the Leases or 50% of the net sales price of the Unitized Substances, whichever is the lesser cost. 10.5. The Unit Operator shall maintain records of all development and production of Unitized Substances. Each Working Interest Owner shall maintain records of the disposition of its portion of the Unitized Substances, including records of sales prices, volumes and purchasers for seven years iller the date of said disposition. The Unit Operator and the Working Interest Owners shall make available for inspection by Lessors, to eXaIIÙne such relevant books and records, at Unit Operator's offices in Anchorage, Alaska, at all reasonable times upon prior written request. Such books and records may be provided in an electronic format. The Unit Operator and Working Interest Owners shall use generally accepted accounting procedures. ARTICLE 11: UNIT EXPANSION AND CONTRACTION 11.1 The Unit Area may be expanded at the election of the Working Interest Owners of the affected lands to include any additional lands subject to Leases that are determined to overlie a Reservoir that is at least partially within the Unit Area, or to include any additional lands subject to Leases that facilitate production. Any unit expansion shall not be effective until the Moquawkie Unit Agreement August 15,2001 Page 10 . . Unit Operator submits revised exhibits to Lessors and provides Lessors with the data supporting such expansion and Lessors have approved such expansion. The Unit Area may be contracted at the election of the Working Interest Owners. Any unit contraction shall not be effective until the Unit Operator has submitted revised exhibits to Lessors. ARTICLE 12: UNIT EFFECTIVE DATE, TERM AND TERMINATION 12.1. This Agreement is effective as of 12:01 a.m. on the day after the Lessors approve it. At least one copy of this Agreement shall be filed with the AOGCC. This Agreement is binding upon each Party who signs any counterpart. This Agreement shall continue in full force and effect for so long as a unit well in the Unit Area is capable of producing Unitized Substances in Paying Quantities, provided Sustained Unit Production commences on or before February 27, 2003. 12.2. After Sustained Unit Production in Paying Quantities commences, Unit Operations shall be maintained as continuously as possible. Each suspension or lapse of Unit Operations may not exceed 180 consecutive days unless such suspension or lapse has been ordered' by the AOGCC or approved in writing by the Relevant Lessor or Lessors. Said Lessor or Lessors shall not unreasonably withhold approval of a request for suspension. Unit Plans may provide for a suspension of Unit Operations if a reasonable justification is provided therefore, consistent with the purposes for which the unit has been established. A suspension of Unit Operations pursuant to this Article shall be deemed to constitute a suspension as to each Lease in the Unit Area. A suspension or lapse exceeding 180 consecutive days and not otherwise allowed hereunder shall terminate this Agreement unless Unit Operations are resumed within 30 days after written demand to resume Unit Operations is received from the Relevant Lessor or Lessors. The foregoing notwithstanding, the total of all suspensions within any three year period shall not exceed 365 days without the prior written approval of the Relevant Lessor or Lessors, unless so ordered by the AOGCC or the State of Alaska. 12.3. This Agreement may be extended with the prior written approval of the Lessors. An extension shall not exceed five years from the approval date of such extension. 12.4. If the AOGCC has ordered a suspension of production or other Unit Operations, this Agreement may be extended for a period equal to such suspension, provided, however, that in no event shall such extension exceed five years. 12.5. The Working Interest Owners may vote at any time to terminate the Unit under the provisions of the Unit Operating Agreement. The Unit Operator shall immediately submit notice of such vote to Lessors. 12.6. Nothing in this Article shall suspend or otherwise hold in abeyance any valid obligation to pay rentals, royalties, minimum royalties, shut-in royalties, or other production or profit-based payments arising or resulting from operations or production in or on any part of the Unit Area as provided in the Leases. Moquawkie Unit Agreement August 15,2001 Page 11 · e ARTICLE 13: EFFECT OF CONTRACTION AND TERMINATION 13.1 If any Lease or portion of a Lease is eliminated from the Unit Area pursuant to this Agreement. it may be maintained only in accordance with the terms of the relevant Lease. 13.2 Each Lease committed to this Agreement on the day that this Agreement terminates shall remain in force for an extension period of 90 days, or any longer period if provided by the relevant Lease or as approved by the Relevant Lessor or Lessors. After the extension period expires, each Lease shall be maintained only in accordance with the terms of the relevant Lease. 13.3 The Working Interest Owners shall abide by the terms and conditions of the "Rights Upon Termination" provision and the sub-paragraph entitled "Termination of Lease" under the "Environmental Provisions" of the Leases. and any other applicable Lease provisions. ARTICLE 14: COUNTERPARTS AND AMENDMENTS This Agreement may be signed in multiple counterparts. The signing of a counterpart shall have the same effect as if all Parties had signed a single original of this Agreement. Any amendment to this Agreement must be in writing and signed by all affected Parties. ARTICLE 15: LAWS AND REGULATIONS 15.1. The Parties hereto shall comply with all applicable laws, rules, regulations and orders in effect on the Effective Date or which may later be adopted or enacted. 15.2. The table of contents and the title headings of this Agreement are used for convenience only and have no other significance. 15.3 A judicial finding that any term or provision of this Agreement is unlawful or invalid shall not operate to invalidate this Agreement or any other valid tenn or provision of this Agreement, unless such finding materially affects the right of the Parties hereunder. 15.4 The venue for any action relating to this Agreement shall be in the Third Judicial District at Anchorage, State of Alaska. ARTICLE 16: APPEARANCES AND NOTICES If Lessor gives the Unit Operator a notice or order relating to this Agreement it shall be deemed given to all Working Interest Owners. All notices required by this Agreement shall be given in writing and delivered personally, or by United States mail or by facsimile machine to the Unit Operator and to the Relevant Lessor or Lessors at the address or facsimile number listed below. All notices actually received will also be deemed properly given. The Parties may change their notice addresses by giving 30 days written notice to the Lessors and the other Working Interest Owners. Moquawkie Unit Agreement August 15, 2001 Page 12 . . Address of the Unit Operator: PHILLIPS Alaska, Inc. 700 G Street Anchorage, Alaska 99501 Attention: Land Manager Fax: (907) 263-4933 Address of COO: Cook Inlet Region Inc. 2525 C Street, Suite 500 Anchorage, Alaska 99509 Attention: Land Manager Fax: (907) 263-5190 Address of MOC: Marathon Oil Company 2525 C Street, Suite 500 Anc~orage,Alaska Attention: Land Manager Fax: (907) 263-6489 Address of Other Working Interest Owner: Anadarko Petroleum Corporation 17001 Northchase Drive Houston, Texas 77060 Attention: Manager, Land-Alaska Fax: (281) 874-8850 ARTICLE 17: AUTHORIZATION FOR AGREEMENT Each Party hereto represents and warrants that the entering ,into, execution, and delivery of this Agreement has been duly and properly approved and authorized by any and all necessary corporate or other action. IN WITNESS OF THE FOREGOING, the Parties have executed this Agreement on the dates opposite their respective signatures. WORKING INTEREST OWNERS PHilLIP. ' ,S ALASKA,;¿ . / By / h~ ~ '~ames M. Ru Its: Attorney-in-Fact --d,-~) ..{3·}~ Date: Au"" )-- Ie- . 1"':;- ( \"\ ~ J, ,;.lC(1 ¡ Moquawkie Unit Agreement August 15,2001 Page 13 e . ANADARKO PETROLEUM CORPORATION qc¿<.- L Date: September 27, 2001 By: Us: Vice President International & Alaska Operations APPROVAL BY COOK INLET REGION, INC. Cook Inlet Region, Inc. hereby approves the foregoing Unit Agreement for the Moquawkie Unit and the attachments thereto, and acknowledges receipt of a copy of the Unit Operating Agreement. Approval of the Unit Agreement is not approval of the Unit Operating Agreement. Its: . r ~y¡t~( /. ,J' ¥--\V \::::.- VV\ (we VI i). f {'('SlJ~t Lf - C:;-Dì- By: Name: Date: APPROVAL BY MARTHON OIL COMPANY Marathon Oil Company hereby approves the foregoing Unit- Agreement for the Moquawkie Unit and the attachments thereto, and acknowledges receipt of a copy of the Unit Operating Agreement. Approval of the Unit Agreement is not approval of the Unit Operating Agreement. By: ~rl A-ßevv- Name John A. Barnes Us: Alaska Business Unit ManW Date: November 5, 2001 Moquawkie Unit Agreement August 15,2001 Page 14 . . EXHIBIT A Moquawkie Unit Agreement O.R.R.I. Tract CIRI Lease NoJ Effective Datel % Lessor Owner- Working Interest No. PAl Lease No. Expiration Date Legal Description Acres Royalty % O.R.R.I. Ownership C-061395 11/01/95 T12N-R11W, S.M., 1411.0000 16.67' Mobil Phillips - 50% ALK-4744 02127/03 Sec. 6: E2; Sec. 7: All; 1.46713% Anadarko - 50% Sec. 8: W2, W2E2. 2 G-061501 02127/98 T12N-R11W, S.M., 480.0000 16.67' Mobil Phillips - 50% AUK-5032 02127/03 Sec. 5: W2, VV2E2. 1.46713% Anadarko - 50% Marathon .187500% Anadarko .187500% 3 C-001500 02127/98 T12N-R11VV, S.M., 603.0000 16.67' Mobil Phillips - 50% ALK-5031 02127/03 Sec. 18: All. .733565% Anadarko - 50% Marathon .421250% Anadarko .421250 4 C-001396 11/01/95 T12N-R11W, S.M., 1031 .5300 16.67' Mobil Phillips - 50% ALK-4745 02127/03 Sec. 17: VV2: Sec. 19: 1.46713% Anadarko - 50% Frac. All:, Sec. 20: Frac. W2; Sec. 29: Fr::lr. N?N?NWLI. 5 C-061388 02101/95 T12N-R11VV, S.M., 657.1900 16.67** Mobil Phillips - 50% ALK-4734 02127/03 Sec.19: Frae. ALL; 1.46713% Anadarko - 50% See 20: Frae. W2; Sec. 30: N2. 6 G-061389 02101/95 T12N-R12VV, S.M., 424.0000 16.67' Mobil Phillips - 50% ALK-4735 02127/03 Sec. 24: Frac. E2; 1.46713% Anadarko - 50% Sec. 25: NE4. Total Unit Acreage: 4606.7200 , CIRI own interests above the top of the Granite C-1 Sands; Marathon owns interests in the Granite C-1 Sands and deeper. ** CIRI own interests above the top of the Granite C-1 Sands and below the bottom of the Granite C-1 Sands; Marathon owns interests in the Granite C-1 Sands. e- Exhibit- B· . Moquawkie Unit Boundary Scale: NTS 6-19-{)1 00050202A06 -->- PHilliPS Alaska, Inc. A Subsidiary of PHILUPS PETROLEUM COMPANY C Unit Area 35 36 31 A~848 MHT930001 2 A 5 PAl 50 2-2l-D ALK503 ADL0031 C06150 APC 50 PAl 50 2-2]-03 ALKS033 ADL003180 C061502 PAl 50 APG50 3 - 7-03 /4 Œ) ~5 <0 22 . . Exhibit D Unit Plan Moquawkie Unit 1.0 Introduction Exploration drilling in late 1998 led to the discovery of a natural gas accumulation approximately seven miles North of Tyonek, within the Moquawkie Prospect Area. Subsequent testing of the discovery in June 1999, indicated the presence of gas in commercial quantities. A sales contract to supply Enstar's gas transmission affiliate (Alaska Pipeline Company) beginning in January 2002 was executed in April of 2000. This Plan of Development is respectfully submitted to Cook Inlet Region Inc. ("CIRf') as required by CIRI Oil and Gas Lease C-0615OO dated August 20, 1998 and the Moquawkie Unit Agreement. The effective plan period for this submittal is August 15,2001, through August IS, 2007. Assumptions that form the basis of this plan are consistent with the current business climate and the current understanding of the potential of the Moquawkie reservoir. Changes in the business conditions and/or new insights into reservoir performance could alter the timing or scope of one or more of these plan components. Permitting, regulatory, and/or other rights-of- way or pipeline agreements could also alter the project timing or scope. 2.0 Field Status The Lone Creek #1 Well is currently shut-in pending installation of gas compression and processing facilities and a gas pipeline. Summer 2002 is the target date to begin sales to Enstar. 3.0 Summary of Activities Summarized below are the key Moquawkie events and accomplishments since the last Plan of Development was submitted: · The Lone Creek #2 Well was decisioned as a dry hole and has been plugged and abandoned. As a result, the drilling of Lone Creek #3 was canceled. · The gas sales pipeline route has been finalized and permits for the construction of the production facilities and pipeline for Lone Creek #1 have been received. However, right-of ways across native allottee lands are pending. In addition, the State of Alaska Department of Natural Resources must still issue a letter of non-objection to cross certain state lands. · Native Allotment land surveys and appraisals have been completed and applications for the pipeline ROWs have been submitted to the BIA August 15,2001 Page 1 of 3 2001 Unit Plan . . · An Interconnection Agreement has been reached in principal with Marathon Oil Company to tie into their Beluga pipeline, which connects to the Enstar gas transportation system at Beluga River. This agreement is subject to RCA approval. · The on-pad compression design is complete and processing facilities are in the final stages of design phase. · A conceptual ballot agreement to operate the field out of Beluga River has been agreed to and is under legal review by the Beluga River owners. 4.0 Development Plan 4.1 Development Operations · No further development wells are planned at this time. · Unit Operator may conduct all other operations that may be necessary in connection with the continued production of the Lone Creek #1 Well once commenced, including but not limited 'to sidetracking, redrilling, reworking, or shutting in or drilling a substitute well. 4.2 Facilities Pending approval of an agreement with the Beluga River owners, operation of the Lone Creek #1 (LC#I) Well and facilities will be carried out by Phillips Alaska's Beluga River Field personnel. The Beluga River Field is located approximately 15 miles by road from the LC#1 Well pad. The well pad will be equipped with a surface safety valve, choke, compression equipment, dehydration equipment, produced water holding tank, SCADA telemetry system, meters, and on- pad utilities. The capacity of the facilities is approximately 15 MMSCFD and will be designed to ASME/ ANSI B31.3 and API RP 14C standards. The SCADA system will allow for remote monitoring and limited control, including remote shut down capabilities to help ensure safe operations. The compressor will be an approximately 600-HP reciprocating compressor driven by a gas-fired engine, enclosed in a building. The dehydration system will be a recirculating TEG type with a gas-fired glycol regenerator, also enclosed in a building. Produced water will be collected in a heated tank and periodically hauled away for disposal. The gas sales line will be a 6" line designed to ASME/ANSI B31.8 and 49CFR Part 192 standards. The line will depart the LC#l Well pad in an easterly direction and extend approximately 6-miles to a tie-in with Marathon's Beluga pipeline. Originally scheduled for late summer 2001, facility installation and pipeline construction has been delayed, primarily due to a lack of right-of way permits that have yet to be issued. With a preference for summer construction due to the higher costs associated with winter operations, construction is now slated for early summer 2002. August 15, 2001 Page 2 of 3 2001 Unit Plan . . 4.3 Reservoir Management Near term reservoir management will be based on the assumption of a depletion drive recovery mechanism. The reservoir understanding gained through surveillance data gained through production will ultimately determine reservoir management practices. 5.0 Notices and Inauires To the extent additional information regarding this Plan of Development is desired or notices as to the status of this filing are made, please direct correspondence/communications to: Dora 1. Soria Senior Landman Phillips Alaska Inc P.O. Box 100360 Anchorage, Alaska 99510-0360 Phone: (907) 265-6297 Fax: (907) 263-4966 Todd Liebl Manager, Land-Alaska Anadarko Petroleum Corporation P.O. Box 1330 Houston, Texas 77251 Phone: (281) 874-8850 Fax: (281) 874-8850 August 15,2001 Page 3 of3 2001 Unit Plan . . EXHIBIT C Moquawkie Unit Agreement Tract No. CIRI Lease No. Legal Description Tract Participation 1 C-061395 T12N-R11W, S.M., Sec. 6: E2; Sec. 7: All; Sec. 8: W2, W2E2. 0.190 2 C-061501 T12N-R11W, S.M., 0.029 Sec. 5: W2, W2E2. 3 C-061500 T12N-R11W, S.M., 0.435 Sec. 18: All. 4 C-061396 T12N-R11 W, S.M., 0.148 Sec. 17: W2; Sec. 19: Frac. All:, Sec. 20: Frac. W2; Sec. 29: Frac. N2N2NW4. 5 C-061388 T12N-R11W, S.M., 0.197 Sec.19: Frac. ALL; See 20: Frac.W2; Sec. 30: N2, 6 C-061389 T12N-R12W, S.M., 0.001 Sec. 24: Frac. E2; Sec. 25: NE4. 1.000 *"ID e . ---. FRANK H. MURKOWSKI, GOVERNOR ALASKA OIL AND GAS CONSERVATION COMMISSION 333 W. T" AVENUE. SUITE 100 ANCHORAGE, ALASKA 99501·3539 PHONE (907) 279-1433 FAX (907) 276-7542 September 1, 2006 G. Scott Pfoff President Aurora Gas, LLC Aurora Power Resources, Inc. 10333 Richmond Avenue Houston, TX 77042 via facsimile and mail Dear Mr. Pfoff, Approval to produce well Nicolai Creek Unit No. 18 ("NCU 18") has been delayed as we here at the Commission review all information to ensure that Aurora has fulfilled the requirements of Conservation Order 478A ("CO 478A"). From what we can determine, not all requirements have been met. The following conditions must be met before the Commission will consider an administrative amendment to CO 478A allowing regular production from NCU IB: I. All affected owners and landowners must provide written notice to the Commission stating that they are aware that the perforated intervals in NCU 1 B lie both inside and outside of the Southern Participating Area ("SPA") and that they consent to regular production from NCU IB; 2. Aurora must submit a reservoir surveillance report to the Commission; and 3. Aurora must comply with all other requirements of CO 478A that are within Aurora's ability to control. As soon as these three conditions are satisfied, Aurora may apply to the Commission for an administrative amendment to CO 478A to allow regular produ~tion to commence from well NCU IB. Please call Steve Davies at (907) 793-1224 if you have any questions. cc: Steve Davies #Cf . . Note to File Approval to Commence Regular Production Nicolai Creek Unit IB 202-162 August 18,2006 Concern On June 5, 2006, the Commission received Aurora's application for well operations in Nicolai Creek Unit IB ("NCU IB") that included perforating additional, shallower sands within the Tyonek Formation. Because Aurora's rig was on standby, the Commission granted provisional approval for the proposed operations, including perforating and limited-duration testing of these additional sands. However, Aurora was notified on the Form 10-403 that regular production from NCU IB was not approved without further action from the Commission. The concern is that all conditions and requirements of Conservation Orders 478 (the spacing exception) and 478A (the order allowing regular production) were met prior to regular production. On June 6, 2006, Commission staff sent an email to Aurora further notifying their geologic and land representatives of the provisional approval for the proposed operations and the concerns outlined above. Six questions were posed concerning ownership, operator, proximity to other producers and conformance with requirements of CO 478 and CO 478A. Each question along with the operator's response and my comments is discussed below. Question 1: Is Aurora the only owner and operator within 3000'ofweUs NCU IB, 2 and 9? Yes. Aurora is the only owner and operator within 3000' of the NCU IB, 2 and 9 wells. Question 2: Are the State of Alaska and the Federal Government the only landowners within 3000'ofwells NCU IB, 2 and 9? Yes. Question 3: Have all properties within 1500 feet of wells NCU IB, 2 and 9 been included in the expanded PA as required by Conservation Order 478A? No. Conclusion 1 of CO 478A states: "An expanded NCU PA encompassing the NCU No. 1B, No.2 and No.9 wells and including, in whole or in part, all properties within 1500 feet of these wells will satisfy the objective of offsetting any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations, and regular gas production from these wells . . within such an expanded P A will not result in waste or jeopardize the co"elative rights of adjoining or nearby owners. " Condition 1 of CO 478A states: ''Aurora's request to begin regular production from NCU No. IB, No. 2 and No.9 is approved, subject to the condition that if an expanded PA meeting the description set out in Conclusion I is not effected within IOO days after regular production commences from the NCU No. IB, No.2, or No. 9 well, the Commission will determine whether other or additional conditions will be imposed on further regular production from those wells in order to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations Such other or additional conditions may be made effective as of the date of first production from NCU No. IB, No.2 or No.9." For the southern portion of the Nicolai Creek Unit, Aurora proposed to DNR a PA based on what appear to be 2.5-acre aliquots encompassing the areal extent of all Upper Tyonek (Carya 2-1.1 to Carya 2-6.1) accumulations mapped using 3D seismic and well information. With minor exceptions (about 5-aces total in the corners of three aliquots), this proposed PA of about 470 acres would have included all lands within 1500' of the take points of the productive sands in NCU IB and NCU 2. It was a reasonable attempt to outline the expected productive area to meet the requirements of Condition 1 in CO 478A. AS 11 AAC 83.351(a) states: "A P A may include only land reasonably known to be underlain by hydrocarbons and known or reasonable estimated through use of geological, geophysical, or engineering data to be capable of producing or contributing to the production of hydrocarbons in paying quantities" Despite Aurora's detailed 3D and 2D seismic mapping, DNR representatives apparently felt that Aurora's interpretation of the extent of the Upper Tyonek accumulations did not meet the criteria to be included in a P A. DNR subsequently trimmed Aurora's proposed PA ftom about 470 acres on State and Federal land to approximately 40 acres on State land only. The current 40-acre Southern P A consists of four 10-acre aliquots that immediately surround the NCU IB, 2, and 9 wells. The resulting non-compliance with Condition 1 of CO 478A was the result of DNR decision, rather than Aurora's action. Therefore, the Commission should not consider this a willful violation by Aurora. But, nonetheless, all properties within 1500' of the take-points of these wells have not been included in the P A. Conclusion 3 of CO 478A states: "If a P A expansion that meets the description set out in Conclusion I is not effected within IOO days after regular production commences from the . . NCU No. lB, No.2, or No.9 well, the Commission may need to revisit the conditions under which further regular production from those wells is approved" Regular production commenced about December 1, 2003 in the NCU 2 and 9 wells. On January 7, 2004, Aurora submitted a request to the Director of the Division of Oil and Gas to suspend the P A application process until technical details could be resolved. On January 8, 2004, the Division approved suspension of the P A application and encouraged Aurora to continue working with interested parties to reach agreement on the revised unit and P A boundaries. About one year later, on January 21, 2004, Aurora submitted a final, revised application to the Division of Oil and Gas. Aurora's application to expand the NCU PAs is dated August 6, 2004 and was received by the Commission on August 16,2004. The Division of Oil and Gas approved the expanded P A 15 months later, on March 10, 2005. The resulting non-compliance with Condition 3 of CO 478A appears to be the result of technical negotiations, rather than Aurora's lack of action. Therefore, the Commission should not consider this a willful violation by Aurora. Question 4: According to the DOG's approval of the revised PAs, the Southern PA is limited to the stratigraphic interval in the Tyonek Formation encountered between 2422 and 2918 feet measured depth in well NCU 2. Do all intervals that have been perforated or that will be perforated during the proposed operations in NCU IB fall within the expanded PA as required by Conservation Order 478A? No. NCU IB well is currently open to zones that lie beneath the expanded P A as currently defined by DOG. These deeper zones, termed Carya 2-4.2, 2-5.1 and the 2-6.1, are not open in any other wells in this area. However, these zones lie within 1500' of the shoreline of the Cook Inlet, which is the boundary between Federal and State leases. Federal acreage within 1500' of the NCU IB lies outside of the Southern P A. Aurora originally requested these zones be included in the Southern P A, and believes that DNR inadvertently omitted them ftom the final decision. On August 17, 2006, Aurora provided the Commission with a copy of their letter to the Commissioner of the DNR to expand the NCU Southern P A to include these deeper zones. Question 5: Will the additional perforations in well NCU IB open intervals that are currently open to production in other wells within 3000' of NCU IB? The 3,000' limit will encompass the NCU IB, 2 and 9 wells. The answer is "Ves" to the 2 well and "No" to the 9 well because the No.9 well's open zones fall within 1,320'MD and 1,477' MD. The common open zones in the IB, which are planned to be perforated and the No.2 well, will be the 2-2.1 and 2-1.2 zones, but said zones in the IB aren't presently planned to be produced in IB until those zones deplete in the 2 well. According to information presented by Aurora during . . a meeting with Commission staff on August 17,2006, NCU 2 is nearing depletion in the shallow zones. Pressure information suggests that those zones in NCD IB are isolated are isolated from their stratigraphic equivalents in NCU 2. Question 6: Do previous and currently planned operations in well NCU IB conform to all other requirements established by Conservation Orders 478 and 478A? Yes, other than as noted above. Recommendation Even though the Commission approved CO 478A, a spacing exception allowing regular production from NCU IB, 2 and 9, all conditions of that spacing exception have not been satisfied, whether through Aurora's fault or not. A separate spacing exception should be required, if only inform all affected parties and allow them opportunity to be heard and comment. Alternately, the Commission could allow regular production if all affected parties provide the Commission with letters of non-objection. The violations noted above largely seem to be due to decisions and actions that are not under the direct control of Aurora. They should not be considered willful violations, and accor . ngly Aurora should not be punished for them. ~8 . . RECEIVED AUG 1 7 7006 Michael Menge, Commissioner DNR 550 W. 7th Avenue, Suite 1400 Anchorage, AK 99501 . . Alaska Oil & Gas Coos. Commission ..- Anchorage APPLICATION TO STRATIGRAPmCALLY EXPAND THE NICOLAI CREEK SOUTHERN PARTICIPATING AREA The original application by Aurora Gas, LLC (Aurora) had requested the inclusion of the stratigraphic interval in the Tyonek Formation encountered between 3,191 and 3,580 feet (measured depth) in NCU-IB. AOGCC issued Conservation Order No. 478A on September 5, 2002, further supported by Exhibit "L" issued on October 16, 2003, allowing for regular production :£Torn the NCU-IB, NCU-2 and NCU-9 wells using an interim reporting methodology on October 16, 2003. Aurora believes that the producing intervals within the NCU-IB were inadvertently omitted :£Tom the Nicolai Creek Southern Participating Area (SPA) by the DNR, even though they clearly understood that the NCU-IB and NCU-2 wells were both allocable to the SPA. The NCU-IB productive intervals, namely the Carya 2-4.2, 2-5.1 and 2-6.1 sands, which lie between 3,191-3,580 feet measured depth (3,087-3,475 feet subsea true vertical depth) are not perforated within any other well within the Nicolai Creek Unit. Neither is the recently completed Carya 2-3.1 interval between 2,783-2,864 feet measured depth (2,680-2,760 feet subsea true vertical depth). The following passage is a direct quote :£Torn Section ITI entitled "Participating Area Decision Criteria" of the Oil and Gas Commission's March 10, 2005 approval of the Revised Nicolai Creek Unit Area and Revised Participating Areas A and B: "The Geological and Engineering Characteristics of the Proposed PAs Within the NP A and SPA, reservoirs sandstones are restricted to the Upper Tyonek Formation. Eight individual sand members have been identified :£Tom log correlation and mapped across the Nicolai Creek field. Within the Nicolai Creek field, individual sands have been assigned names based on standardized industry palynological zonation. The sandstones are within the Carya 2 palynological zone and have been subdivided using an appropriate numeric designation (2-1.1,2-1.2,2-2.1,2-2.2,2-2.3,2-4.2,2-5.1, and 2-6.1). Log data indicate the NCU wells show the relative conformity of the shallower Carya 2-1 through Carya 2-2.3 section with some possible expansion of the deeper Carya 2-4.2 through Carya 2-6.1 section. The apparent expansion of the deeper section in the NCU-2 well could be explained by faulting. Gas appears trapped in the Upper Tyonek Formation in unconsolidated, non-marine sandstone reservoirs between 1,680 and 3,475 feet subsea true vertical depth (SSTVD). Since the Tyonek reservoirs of both the NPA and SPA are stacked sandstone bodies, the composite areas of the reservoir extent, which is controlled by structure and sandstone distribution and confirmed by seismic and well data, are summed together to define the outline of the SPA and NP A areas." 1 . . With respect to the above determination, the subsea true vertical depth of 3,475 feet clearly encompasses the intervals which are productive in the NCU-IB well. The following passage is a direct quote from Aurora Gas' Thirty Second Plan of Development for the Nicolai Creek Unit, submitted to the DNR on October 19,2005: "The initial production from the No. IB Well is from the Carya 2.4-2,2.5-1 and the 2.6-1 perforations found at 3,191'-3,211', 3,371-3,401', and 3,560-75', respectively. Cumulative production from the No. IB well through August, 2005, is 1,974 mcf, with no production during the Thirty-first Plan period. Additional perforations may be added to these completions as production (see Section C above) and the operations related thereto continue." The NCU-IB has recently been the subject of a workover operation with additional perforations added to those already in existence, including the aforementioned Carya 2- 3.1 interval, which we would seek to include in the revised SPA. Aurora will make a separate application for permission to produce gas from any intervals common to the NCU-2 well but wishes to rectify the apparent oversight in the March 10,2005 approval decision, thereby allowing for continued production from the existing NCU-IB perforations between 3,191-3,580 feet measured depth and including the new perforations between 2,783-2,864 feet measured depth, consistent with the original intent, by stratigraphically expanding the Nicolai Creek SPA. Sincerely, Andrew C. Clifford Executive Vice President 2 AURORA GAS, LLC NICOLAI CREEK UNIT NO.1 B WELL TEST RESULTS SUMMARY·.JUNE 2006 WORK OVER DATE INTERVAL (MD) MCFPD FTP SITP of PKR PLUG 6/26/2006 TEST TOP PERF BTM PERF pslg pslg COMMENTS SAND STATUS AFTER PERFORATING W/ RBP AND PKR 6/15-17/2006 3150 3500 140 280 1200 W/2-3 BWPH Carya 2-4 & 2.5 OPEN . 3191 3401 2002 perfs 6/18-19/2006 2816 3150 260 420 1260 new perfs: Carya 2-3 2837 2918 OPEN 6/20/2006 2457 3155 556 556 1140 new perfs Carya 2-3 & 2-2 Isolated by Pkrs & Sldg Slvs 2480 2913 some open in NCU #2 6/22/2006 2295 2468 1405 820 1000 new perfs Carya 2-1 Isolated by Phs & Sldg 51\1$ 2307 2370 open in NCU #2 AFTER RUNNING COMPLETION PACKERS, SCREENS, AND SLEEVES 6/27/2006 2761 3500 420 350 1200 commingled old Carya 2-3 to 2-6 OPEN 2837 3401 + some new (all unique to NCU 1 B) 6/28/2006 2436 2761 196 200 1000 new perfs Carya 2-2.1 & 2-2.2 Isolated by Plus & 51dg 51vs 2480 2622 (the 2-2.1 is open in #2) 6/28/2006 2275 2438 914 590 1000 new perfs Carya 2-1.2 Isolated by Phs & Sldg Slvs 2307 2370 (common to NCU 2) . RECEIVED AUG 1 7 2006 Alaska Oil & Gas Cons. Commission Anchorage 2-7/8.. 6.5 # J-55 tbg to surface 13 3/8" 54# J-55 Surface Csg at 1,904'. Cmtd to surface wI 1.530 sx "G". Carya 2-1.2 Perfs: 2,307' - 2,326' MD 2,350' -2,370' MD (TVD 2,254' - 2,316') Carya 2-21 Perfs: 2,480' -2,486' MD (TVD 2,426' - 2,434') Carya 2-2.2 Perfs: 2,604' - 2,622' MD (TVD 2,550' - 2,568') Carya 2-3 Perfs: 2,837' -2,842' MD 2,862' - 2,867' MD 2,913' - 2,918' MD (TVD 2,783' - 2,864') Carya 2-4.2 Perfs: 3,191' - 3,211' MD (TVD 3,137' - 3,157') Carya 2-5.1 Perfs: 3,371' - 3,401' MD (TVD 3,307' - 3,348') Carya 2-6.1 Perfs: 3,560' - 3,575' MD (TVD 3,506' - 3,521') Float collar @3,604' MD Float shoe @ 3.648' MD TD @ 3,672' MD (3,617' TVD) . e Aurora Gas, LLC Nicolai Creek Unit No. I-B Current Configuration (6/26/06) Drilled 26" Hole 20" 94# H-40 Conductor set at 232', Cmtd to surface w/300 sx "G". Drilled 17 1/2" Hole Sliding Sleeve wI X-profile @ 2,268' G-77 Packer @ 2,280' (Closed) Sliding Sleeve wI X-profile @ 2,375' G-77 Packer@2,440' (Closed) Sliding Sleeve wI X-profile @ 2,742' G-77 Packer@2,765' X-nipple @ 2,775' (Closed) VTA Packer @3,145' XN Nipple @ 3,184' Well completed with sand exclusion screens across the indicated perforations. Cement Retainer @ 3,500' RECEIVED AUG 1 7 2006 7" 23# J-55 Production Csg @ 3,650'MD (3,595' TVD). Cmtd to surface wI 82 bbls "G" lead at 12.5 ppg and 67 bbls "G" tail at 15.8 ppg. Alaska Oil & Gas Cons. Cemnission Anchorage Proposed o Current Nicolai Creek NO.2 Nicolai Creek Field Alaska Production 26" Hole Attachment I 3S" Hole 30" @ 80' CMrO to surface WI 300 SX 20" 94# @ 286' CMrO to surface WI 650 SX 5 SPF @ 298' Squeezed wi 200 $IX in 1991 11112" Hole 5 SPF @ 677' Squeezed wi 215 sx in 1991 13 3/8" 54.5# @ 1934' CMrO WI1600 SX TOC @ -191)0' MO in 13318" X 1" annulus 2.313" 10 X-Nipple at 2288.8' Permanent Packer at 2321' 5" Meshrite Screen Perforate @ 5 SPF 2425' - 2476' Perforate @ 5 SPF 2100' - 2716' 9718" Hole Perforate @ 5 SPF 2893' to 2916' Original production Perforations 4112 SPF from 3270' to 3315' cemented oVer during 1991 Suspension Procedure -- 7" 26# @ 3585' MO CMrD Wl1400 SX 81 Sk Class "G" Cement Plug 3102' - 3531' PI ug (Baffle Plate ¡ @ 3543' MD TO @ 5011' M0408ô' TVD DRAWNG NOf TO SCALE NICOLAI CR FAIRWEATHER E&P Rev. 01 ¡ DHV 05-Sept-02 SERViCES lNe. *1 /'7 (/ "V/'-~ {Q/'"t",J éé;J$/?L-ET/ð# DIA-6æ4/Þt & !2--to/Ob v (\j CL c: o '1B :5 a. E w 0 ..-ü ...- ([J 00 ->-.. (j) ~ (j) en .~ . OJ o c: zw ? EIZPò£/l-77¿;/VS G/1-:J'ÆL__Z - L¿ 2.507-.20/ MD @ fX w ..J l- e w ;3 Ui ~ 2.sSV- 7¿>" MÐ (TJ/D 2-25'1 - z:n/p) I éàvya 2-~~1 I 2 c¡ fjo - 86 / /J1,pf I (T VD - 212b - .51/) . · I I CO"Y4 £-: 2,-~,,_? I 26ð'l - 22 ' ! MJ) I (TvD - ¿SSlJ-hf3") I I éàY¥i~?!:;:: It ! 2q/3-/8!/1f) I (TI/p- 27B3- 28ø<¡l) "t I I éây-ya 2. - '1.- 2.- ¡ --. , :1 /91- 3211'/119+ I (fl/D - :11:17- 571) I ¡Car )L¿L..- 2 -5'. / 1 I .3 57/- JL/OI M!) f I (7VD- 3Jo7-Lfa') i I ex V;V~__Z -0. ( ¡ I .JS-bO - .JS7S' fVlO . I I(TV Ð - :?S-Ob -2/') - I I ¡ ì ¡ í ¡ ! ! EeL JCJne J '( / ¿ 3 /O~ If II /IIi! ~. rilli RECEIVED JUL 2 4 2006 Alaska Oil & Gas Cons. Commission Anchorage S'/;Cúy SI~er¿ ~ G -- 77 /bcRer (?J :2 -U;; /" -¡¿;b/~ 2- 2!P8 - f!,o I ( clósecL) 2 280 I' I I (C'/o.J:e, ~ S//d/~ J/eCt/é' r? 2:575-8'7" &; - 77 f?::tc£t'r@ Zt./L/O/ fl/tJle: Each, J'fd/:!f, J/P"é'ré". Úff~6,t hers 4';7 X ¡;a/ft'k- In "r I S//<£''!i Jkcve- 0!. 27.112'-57/ (CúJlld) 6-77 Pædá@ 2-765" 'Xl MIlk @J 2775"· Scýee?? r? 283'S--L/'S/ I S C-v-u" ~ 2¿3bD -70 I I 5~-ee,,-~. 29'11- 2(1 I I ,\ITA Padðf.:Jf 3F/s- 3/5¿1 II XIV Nifplt ~ 5/8f" SCr-eM ª- J ¡q 2- - 1:51 z. I I I I I , Séý~ @ :5J1S-~5J1?1 Lemer,f !<e!z¡//1ðr @ 3s"ðo / pß TD :;- :J þOl! I 7" 2:>#.)-55 édSI"2 Sf!'frtff;:: ,~ NCU2 10000 1000 100 -- ~MCFPD _ __ ____^^_^____^____.~M__M_~~M_____ T Press 10 - 1 . 4/15/2006 5/15/2006 6/15/2006 AURORA CUM o 9635 0 o 8464 1 o 6296 0 595,159 MCF date MCFPD T Press 11/15/2003 1914 775 12/15/2003 4124 700 1/15/2004 4111 650 2/15/2004 2840 755 3/15/2004 2758 780 4/15/2004 2514 680 5/15/2004 2504 500 6/15/2004 2213 580 7/15/2004 2329 410 8/15/2004 1634 340 9/15/2004 1128 300 10/15/2004 873 260 11/15/2004 848 280 12/15/2004 735 300 1/15/2005 0 340 2/15/2005 0 340 3/15/2005 6 370 4/15/2005 1174 285 5/15/2005 0 390 6/15/2005 0 390 7/15/2005 873 340 8/15/2005 0 400 9/15/2005 0 400 10/15/2005 0 420 11/15/2005 994 350 12/15/2005 819 240 1/15/2006 601 200 2/15/2006 464 180 3/15/2006 395 150 4/15/2006 321 130 5/15/2006 273 120 6/15/2006 210 120 . o o o 1 1 1 30 31 30 AURORA GAS NICOLAI CREE~ RECEIVED JUL 2 4 2006 Alaska Oil & Gas Cons. Commission Anchorage 4t;./p ,~. II ~urora Gas, I.LC www.aurorapower.com May 22, 2006 Mr. John Norman, Chairman Alaska Oil and Gas Conservation Commission 333 West 7th Ave., Suite 100 Anchorage, Alaska 99501 RE: Application for Sundry Approval: Workover ofNCU #lB (P'ID No. 202-162) Dear Mr. Norman: Aurora Gas, LLC hereby applies for approval of its plans to work over the Nicolai Creek Unit #IB gas well in the Nicolai Creek gas field on the west side of Cook Inlet. The workover is expected to commence the first week in June. This workover will involve adding perforations in intervals shallower than those presently existing in the well, extensive flow testing of all old and new perforated intervals and the running of a multi-packer completion to allow selective testing and production of all intervals. Enclosed please find a Form 10-403, Application for Sundry Approval, for this work Also enclosed are a summary work plan and a current NCU #IB wellbore schematic. The BOP system to be used for this workover is the same as that previously used on the A WS # 1 rig and is on file with the Commission. If you have any questions or require additional information, please contact me at (713) 977-5799 or Bill Penrose at 258-3446. Sincerely, AURORA GAS, LLC )~ / ._¿:..¿....., . / / J Edward Jones I VVice President, Engi ering and Operations enclosures cc: Bill Penrose - Fairweather 10333 Richmond Avenue, Suite 710" Houston, Texas 77042" (713) 977-5799. Fax (713) 977-1347 1400 West Benson Blvd., Suite 410. Anchorage, Alaska 99503· (907) 277-1003" Fax (907) 277-1006 . . AURORA GAS, LLC NICOLAI CREEK UNIT 1 B 2006 WORKOVER PLUG BACK, ADD PERFORATIONS, AND REPLACE SAND SCREENS SUMMARY PROCEDURE 1. Remove well house and disconnect production piping and controls. 2. Move in and rig up workover rig and associated equipment. 3. Blow well down through choke manifold and kill well by bullheading 9.8 ppg KCI/NaCL brine. 4. N/D tree and N/U BOPE. Test BOPE to 2,000 psi. 5. MIU to tubing hanger and un-sting seal assembly from permanent packer. Circulate well to ensure it is dead. 6. POH wi completion. 7. Mill over and retrieve permanent packer. 8. Run bit and scraper to 3,600'. ~~. ~\.o..~t'-.Cl~Q.. 'SSO(:)I ~~~'\\.\~~~; 9. Run and set-€IDP at 3,600', filter brine. b.l~ 10. RU Schlurnberger wireline unit and lubricator. PU and RIH wi 4-1/2" HSD guns wi 5 or 6 SPF jet charges and perforate: a) 2913-2918' b) 2862-2867' c) 2837-2842' d) 2604-10' and 2614-22' (20' gun) e) 2480-2486' f) 2350-2370' g) 2307-2312' and 2317-2326 11. Lubricate additional brine into well if necessary. Ensure well is dead. 12. Run casing scraper to 3,600' and re-filter brine. POR . . 13. Using a multiple-set test packer and swabs, perform extensive swabbing and testing operations on the old and new perforated intervals. 14. At the conclusion of testing, run a casing scraper to the emp and re- filter brine. POH. 15. Run production string: Three packers will likely be run, and well will most likely be set up with a selective completion to isolate shallower zone(s). Exact configuration will be determined by the peñorating and testing. However, assuming all zones are productive, the completion string will be as follows, from bottom up: --Bull plug --20' of 3-1/2" MicroPak 30/50 screen at 3375-95' --X-O (3-1/2" EUE X 3-1/2" 10 Rd) --3-112" tubing spacer --X-O --20' of3-1/2" MicroPak screen 3192-3212' --X-O --3-112" tubing spacer --7" Arrowset IX Mechanical-set Packer wI 2.31" X profile nipple 1 joint above or below, packer set at about 3150' --3-1/2" tubing spacer --X-O --10' of 3-1/2" screens at 2910-20',2860-70' and 2835-45' (all +1-) wI 3-112" tubing spacers and X-O's. --X-O --Extended 3-1/2" On-Off Tool --1 jt 3-1/2" tubing --2.31" X Profile Nipple --3-1/2" tubing spacer (1 jt) --7" HPR Hydraulic Packer at about 2765' (+1-) --3-112" tubing spacer --3-112" RIV Sliding Sleeve wI 2.31" X profile at about 2650' . --3-1/2" tubing spacer --Weatherford 7" X 3-1/2"" HRP Hydraulic Packer at about 2440' --2 jts 3-1/2" tubing spacer -3-1/2" RIV Sliding Sleeve wI 2.31" X profile at about 2375' --3-1/2" tubing spacer -- Weatherford 7" X 2-7/8"" HRP Hydraulic Packer at about 2280' --1 jt 2-7/8" tubing --2-7/8" XA Sliding Sleeve wI 2.31 X profile --2- 7 18" tubing to surface 16. Set packers, space out and land tbg. N/D BOPE, N/U tree. 17. Using sliding sleeve above top packer, circulate in packer fluid containing biocide and corrosion inhibitor. . . '. íe 18. By setting a plug in the x-nipples, selectively flow-test each of the three intervals isolated by the packers. Flow through the test separator. 19. Set BPV in tree, RID and release rig and place well on production. . . . Ie Nicolai Creek No. 1 B Nicolai Creek Field Alaska Producer D Proposed W Completed 2 7/8 6.5# EUE SRD J·55 Production tubing 9 718" Hole See original NCU 1 & 1A well records for perforation and squeeze information 26" Hole 20"94# H-40 @ 232' CMrD to surface WI 300 Sks Whipstock @ 645' in 17 1/2" hol 17 112" Hole 133/8" 54# J-55 @ 1904' Cmt'd to surface WI 1530 Sks 7" stage collar Installed at 1832' and baffle plate at 1789!. Stage collar not u,ed during cementing procedure. . Top Whipstock @ - 2186' Baker WindowMaster Bottom Set Whipstock Bridge Plug set at 2212' O2 Inhibited KCL packer fluid "Concor 303" in 2 718" X casing annulus to surface above Packer Perforations: 3615' - 3630', 2 spf 12 1/4" Hole 103/4" 40.5# J-55 @ 3817' Cmt'd to surface WI 900 Sks ~ X-nipple at 3080' ~I~ Pennanent Pack., Baked'C.' @-3112.7· ',', 31/2" J·55 Production Tubing Spacer , between screen intervals ~" 51/2" Meshrite Screen 3192' - 3215' 3373' . 3396' 3557' . 3580' Well perforations 3191' - 3211' 3371' - 3401' 3560' - 3575' @ 5 spf, 60-degree phasing 4112 HSD guns Attachment I 7" 23# J-55 Csg. @ 3650' MD(359S' TVD) Cmtd to surface wI 82 bbls 12.5 ppg lead 67 bbls 15.8 ppg tail 7" Float Collar at 3604' NCU 18 7" Guide Shoe at 364S' TO at 3672' MD Original NCU 1A TO'd 1966, Plugged Back 1991. eRA V\N3 NOT TO SCALE NICOLAI CREEK No. 18 FAIRWEATHER E&P R... 01 IDHV SERVICES ING. ~-1J2 ~ 'U'i~\ 1f [E (ill r /ÆL IA\ ~) IX( l~\ FRANK H. MURKOWSKI, GOVERNOR A..~ASK& OIL AND GAS / CONSERVATION COltlMlSSIOlY ;. 333 W. .,... AVENUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 Edward Jones Vice President, Engineering.and Operations Aurora Gas, LLC. ... . ..., ._¡ 1" 1 ¡ ZOGB 1400 W. Benson Blvd, SUIte 410 ~jCA.NNEJ;· ~Ut~ ~ ;t \~~ Anchorage, AK 99503 ~O d-- Re: Nicolai Creek Unit, Tyonek Undefmed Gas Pool, Nicolai Creek Unit IB Sundry Number: 306-195 Dear Mr. Jones: Enclosed is the approved Application for Sundry Approval relating to the referenced wen. Please note the conditions of approval set out in the enclosed form. The application for this work was received on May 30 but was misdirected within our office, which caused some delay in processing. Although the application was misdirected, 20 MC 25.285 (g) requires that a copy of the approved Sundry be on location. The planned work was begun without Commission approval. In addition, in the course of staff review it appears that the requirements of Conservation Order 478A that allows the subject well and other wells at the drill site to produce have not been fulfilled. Discussions on this matter are ongoing with members of your staff. In the interim, Aurora is specifically allowed to complete the planned well work including 30 cumulative days of testing. However Nicolai Creek Unit IB may NOT be placed in regular production without further approval by the Commission. When providing notice for a representative of the Commission to witness any required test) contact the Commission's petroleum field inspector at (907) 659-3607 (pager). As provided in AS 31.05.080, within 20 days after written notice of this decision, or such further time as the Commission grants for good cause shown, a person affected by it may file with the Commission an application for reconsideration. A request for reconsideration is considered timely if it is received by 4:30 PM on the 23rd day following the date of this letter, or the next working day if the 23rd day falls on a holiday or weekend. A person may not appeal a Commission decision to Superior Court unless rehearing has been requested. . . Aurora Gas, LLC _~ Nicolai Creek Unit 1~ Sundry Number: 306-195 . 4f ~t DATED this ~ day of June, 2006 Ene!. I STATE OF ALASKA t.I1 ~~... - rI__ C"-' AI.¡ OIL AND GAS CONSERVATION COM( ff~. ~ APPa.: CATION FOR SUNDRY APPRu AlS' 20 MC 25.280 1. Type of Request Abandon Suspend Operational shutdown Perforate J Waiver Other Alter casing 0 Repair well 0 Plug PerforatiOns 01lk. Stimulate 0 Tine Extension 0 Change approved programO Pull Tubì1g0 Perforate New Pool 0 ~ Re-enter Suspended Well 0 2. Operator Name: 4. Current WeB Class: 5. Permit to Drill Number: Aurora Gas. LLC Development 0 Exploratory 0 202·162 3. Address: Stratigraphic 0 Service 0 . API Number: 1400 W. Benson Blvd, Sulbl 410. Anchorage, AI( 99503 SÐ-283-10020-02 7. KB Elevation (I): 9. WeI Name and Number: 3S.5' AMSL (OF) Nicolai C...k Unit t1B 12. Attachments: ~n Stmvnæy of Proposal J 13. WeI Class after proposed work: DetaIed 0perati0!1S Program 0 BOP Sketch 0 ExpIorøtoIy 0 Development 0 14. Estimated Date for 15. WeI Status after proposed WQI1(: CommencIng Operations: 61512006 Oil ° ¡/fie Gas 0 Plugged 0 16. Verbal Approval: Date: WAG 0 1!'. ~ GINJ 0 WlNJ 0 Commission RepresentatIVe: NlA «.,0;'1,) 17. I hereby œr1ify that the foregoing is true and correct to the best of my knowledge. Contact Printed N J Jones Tille Signature Phone 8. Property Designation: 11. Total Depth MD (I): 3,672' Casing Structtnl Conductor Surface Intermediate Procb:tion Uner Perforation Depth MD (I): . 3,191' - 3,575' . Packers and SSSV Type: 10. FteIdIPooIs(s): ADL 17585 Nicolai CnI8k PRESENT WELL CONDITION SUMMARY Total Depth TW (I): Effective Depth MD (ft): Effective Depth TVD (ft): Plugs (measured): Junk (measwed): 3,618' 3,600' 3,510' None None Length Sia 1VD ~t CoIlapee 232' 20" 232' 232' NIA NlA 1,9Oot· 13-3#8" 1,904' 1,904' 1,531 psi 520 psi 2,186' 10-314- 2,186' 2,186' 3,510 psi 1,580 psi 3,648' r 3,648' 3,594' 3,140 psi 3,270 psi Pel1oration DepIh TVD (I): 3, 136' - 3,521' Baker 8C-1 packer, no SSSV TIÜng Grade: J-55 Tubing Size: 2-7tr Packers and SSSV MD (ft): 5efviœ 0 Abandoned 0 WDSPL 0 713-977-5799 COMMISSION USE ONLY Sundry Number:!n " qS Conditions of approval: Notify Commission so that a representative may witness BOP Test J'i. Other: ~QQ<:) ßt>~ \~\-Q~ ~\o..~"Q. Å\'9t"C~~\ '\> <9~" \0 (,!)~~ ~ ~ "O"'-J~"£., -\-\.....~ ~CL\ '~ ~~-.. ~~~;J~'~~~~ç--- SubsequentFonnRequired: 4c> 0" ~ ~"tè. ~'t-'-.\~~"-, T~":5... Q~ \,,~~,~ '\"':> \,~\ciJ ~ SO~",)"'''''\~~~f<~'1~' Date: 6".~-06 Plug Integrity 0 Approved by: Mechanicat Integrity Test 0 Location Clearance 0 APPROVED BY THE COMMISSION ORIGINAL RBDMS BFL JUN 14 2096 Form 10-403 Revised 07J2005 Submit in Duplicate #~/~ - , AURORA GAS, LLC NICOLAI CREEK UNIT 18 2006 WORKOVER PLUG BACK, ADD PERFORATIONS, AND REPLACE SAND SCREENS SUMMARY PROCEDURE 1. Remove well house and disconnect production piping and controls. 2. Move in and rig up workover rig and associated equipment. 3. Blow well down through choke manifold and kill well by bullheading 9.8 ppg KClINaCL brine. 4. N/D tree and NIU BOPE. Test BOPE to 2,000 psi. 5. MIU to tubing hanger and un-sting seal assembly from permanent packer. Circulate well to ensure it is dead. 6. POH wI completion. 7. Mill over and retrieve pennanent packer. 8. Run bit and scraper to 3,600' . ~~. ~\O-~~~Q. ~SQ(::)I ~tt-~'\"\.~~_ 9. Run and set£IÐP at 3,699', filter brine. bJ~ 10. RU Schlumberger wireline unit and lubricator. PU and Rill wi 4-1/2" HSD guns wi 5 or 6 SPF jet charges and perforate: a) 2913-2918' b) 2862-2867' c) 2837-2842' d) 2604-10' and 2614-22' (20' gun) e) 2480-2486' f) 2350-2370' g) 2307-2312' and 2317-2326 11. Lubricate additional brine into well if necessary. Ensure well is dead. 12. Run casing scraper to 3,600' and re-filter brine. POH ;, , 13. Using a multiple-set test packer and swabs, perform extensive swabbing and testing operations on the old and new perforated intervals. 14. At the conclusion of testing, run a casing scraper to the eIBP and re-filter brine, POH. 15, Run production string: Three packers will likely be run, and well will most likely be set up with a selective completion to isolate shallower zone(s). Exaet eonrlpration will be detel'llÙlled by the peñorating and testing. However, assuming all zones are productive, the completion string will be as follows, from bottom up: --Bull plug --20' of 3-1/2" MicroPak 30150 screen at 3375-95' -X-O (3-112" EUE X 3-112" 10 Rd) -3-1/2" tubing spacer --X-O --20' of3-1/2" MicroPak screen 3192-3212' --X-O --3-1/2" tubing spacer --7" Attowset IX Mechanical-set Packer wI 2,31" X profile nipple 1 joint above or below, packer set at about 3150' -3-112" tubing spacer --X-Q --10' of 3-112" screens at 2910-20',2860-70' and 2835-45' (all +/-) w/3-112" tubing spacers and X-Q's. -x-o --Extended 3-112" On-Off Tool -1 jt 3-112" tubing --2.31" X Profile Nipple --3-112" tubing spacer (1 jt) --7" HPR Hydraulic Packer at about 2765' (+1-) --3-112" tubing spacer --3-112" RIV Sliding Sleeve wI 2.31" X profile at about 2650' . --3-112" tubing spacer --Weatherford 7" X 3-1/2"" HRP Hydraulic Packer at about 2440' --2jts 3-112" tubing spacer -3-1/2" RIV Sliding Sleeve wI 2.31" X profile at about 2375' --3-112" tubing spacer -- Weatherford 7" X 2-7/8'"' HRP Hydraulic Packer at about 2280' -1 jt 2-7/8" tubing --2-7/8" XA Sliding Sleeve wI 2.31 X profile -2-7/8" tubing to surface 16. Set packers, space out and land tbg. N/D BOPE, NIU tree. 17. Using sliding sleeve above top packer, circulate in packer fluid containing biocide and corrosion inhibitor. . . '. (. 18. By setting a plug in the x-nipples, selectively flow-test each of the three intervals isolated by the packers. Flow through the test separator. 19. Set BPV in tree, RID and release rig and place well on production. ~IVI'B Gas, Lit: www.aurorapower.com ~. - May 22, 2006 Mr. John Norman, Chainnan Alaska Oil and Gas Conservation Commission 333 West 7th Ave., Suite 100 Anchorage, Alaska 99501 RE: Application for Sundry Approval: Workover ofNCU #IB (P'ID No. 202-162) Dear Mr. Norman: Aurora Gas, LLC hereby applies for approval of its plans to work over the Nicolai Creek Unit #lB gas well in the Nicolai Creek gas field on the west side of Cook Inlet. The workover is expected to commence the first week in June. This workover will involve adding perforations in intervals shallower than those presently existing in the well, extensive flow testing of all old and new perforated intervals and the running of a multi-packer completion to allow selective testing and production of all intervals. Enclosed please find a Form 10-403, Application for Sundry Approval, for this work. Also enclosed are a summary work plan and a current NCU #lB wellbore schematic. The BOP system to be used for this workover is the same as that previously used on the A WS # 1 rig and is on file with the Commission. If you have any questions or require additional information, please contact me at (713) 977-5799 or Bill Penrose at 258-3446. Sincerely, / -~ J Edward Jones Vice President, Engi . g and Operations enclosures cc: Bill Penrose - Fairweather 10333 Richmond Avenue, Suite 710. Houston, Tex.s 77042 · (713) 977-5799 · Fax (713) 977-1347 1400 West Benson Blvd., Suite 410. Anchorage, AI.sk. 99503· (907) 277-1003· FIIX (907) 277-1006 *5 . . Findings and Decision of the Director of the Division of Oil and Gas APPROVAL OF THE REVISED NICOLAI CREEK UNIT AREA, REVISED PARTICIPATING AREAS A and B, AND FORMATION OF THE BELUGA PARTICIPATING AREA Under a Delegation of Authority from the Commissioner of the State Of Alaska Department of Natural Resources March 10, 2005 . . Table of Contents I. DECISION SUMMARy........................................................ 2 II. BACKGROUND AND APPLICATION HISTORY .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 III. PARTICIPATING AREA DECISION CRITERIA ................................... 5 IV. FINDINGS ................................................................ 8 V. DECISION................................................................. 9 . . I. DECISION SUMMARY Aurora Gas, LLC (Aurora), as Nicolai Creek Unit (NCD) operator and sole working interest owner, applied to revise the existing participating areas, form the Beluga Participating Area, and revise the Nicolai Creek Unit Area (the Application). The State of Alaska Department of Natural Resources, Division of Oil and Gas (the DNR or the Division, as appropriate) approves the Application as follows: 1. Participating Area A is revised to reflect the current geologic and engineering interpretation for the reservoir and is renamed the South Participating Area (SPA). 2. Participating Area B is renamed the North Participating Area (NP A). 3. The new Beluga Participating Area (BPA) is approved. 4. A portion of federal lease AA-8426 is added to the NCU and the aerial extent of the Unit is revised to encompass the three PAs. As before, the unit area is limited to its approved participating areas. 5. Aurora shall work with the Division's Royalty Accounting Section to revise all royalty and operator reports back to November 1,2003. The production must be allocated based on the approved tract participation schedules for each participating area. Aurora submitted geologic and well data that indicate the revised SPA and proposed BP A are capable of producing or contributing to the production of hydrocarbons in paying quantities, which justifies revising the SPA and the NCU, and forming the BP A. Attachment 1 is a map showing the old and new NCU boundary. Attachment 2 is a map showing the old and new SPA boundary. Attachment 3 is Exhibit A to the NCU Agreement showing the approved boundaries for the NCU, BPA, SPA, and NPA. The Division also approves Exhibits B, B-1, B-2 and B-3 to the NCU Agreement (Attachments 4 through 7), the tract allocation schedules for each of the PAs. The tract allocation schedules equitably allocate production and costs among the leases in the NCD. II. BACKGROUND AND APPLICATION HISTORY Texaco formed the Nicolai Creek Unit and Participating Areas A and Bin 1968. It drilled the Nicolai Creek State No. I-A well (NCS-IA) in the Participating Area B and tested the well, but no facilities or pipelines were built to facilitate sustained production. It also drilled the Nicolai Creek No.2 well (NCU-2) and the Nicolai Creek No.3 well (NCU-3). NCU-2 tested gas from Participating Area A for nine months in 1968 and 1969. Facilities and a pipeline were installed for Participating Area Band NCU-3 produced from Participating area B from 1969 through 1977. 2 . . In 1973, the NCU boundary contracted to the discontiguous lands within Participating Areas A and B. Unocal and Marathon acquired the field in 1988, each holding 50% working interest, and Unocal was the designated unit operator. Beginning in 1998, AS 38.05.180(f)(5) provided for a temporary royalty reduction to encourage development of certain fields in the Cook Inlet Basin, including Nicolai Creek. The Statute establishes a royalty rate of five percent on the first 25,000,000 barrels of oil and 35,000,000,000 cubic feet of gas produced from eligible fields within 10 years of initial production for sale, if production for sale commenced before January 1,2004. To qualify for the reduced royalty rate on production from the Nicolai Creek Field, the operator was required to submit a written plan to the Alaska Oil and Gas Conservation Commission (AOGCC) in accordance with AS 31.05.030(i). This generous economic incentive was intended to encourage Unocal to bring the Nicolai Creek Unit on production earlier than planned. In November 2000, Unocal and Marathon assigned their interests to Aurora. Aurora became the operator with 100 percent working interest in the NCD. Aurora successfully restarted sustained production in the NCU-3 well in September 2001 and the AOGCC approved its written plan submitted under AS 31.05.030(i), which qualified the field for the royalty reduction. By letter date July 12, 2002, Aurora requested an order from the AOGCC allowing a spacing exception to drill and test the Nicolai Creek Unit No. lB (NCU-lB) and No.8 (NCU-8) wells and to recomplete and test the NCU-2 well. The AOGCC issued Conservation Order No. 478 (Attachment 9), on September 5, 2002, which approved Aurora's request for spacing exceptions but provided that the wells could not be placed on regular production until the AOGCC took additional action to offset any advantage Aurora may have had over other mineral owners by reason of the wells having been drilled to the exception locations. Aurora did not drill the NCU-8 well because it encountered a shallow obstruction while driving conductor pipe, but permitted and drilled NCU No.9 (NCU-9) as a replacement well. On September 2,2003, Aurora submitted an application to the Division for approval to revise the participating areas and the NCU boundary. The Division immediately notified Aurora that its application was incomplete and began working with Aurora to remedy the deficiencies. It quickly became apparent that the process was going to take an extended period of time due to v the number of parties involved, and the unresolved land ownership and title issues. The Division invited the Mental Health Trust Land Office (TLO) to participate in all pertinent Application communications, discussions, and meetings between Aurora and the Division because they are an adjacent mineral interest owner. As early as August 12, 2003, the Division's goal was to include the TLO throughout the process and arrive at a fair decision that the TLO would support. In the interim, Aurora proposed to report production from the NCU-lB and NCU-2 wells to the Division at a five percent royalty rate, and production from the NCU-9 to the Bureau of .¡ . . Land Management (BLM) using a 12.5 percent royalty rate. On September 25, 2003, the Division, the TLO and BLM agreed with this interim royalty reporting payment methodology, ". on condition that, upon approval of the [mal Application, Aurora shall submit revised royalty and operator reports to the Division and BLM retroactive to the first day of production (See Attachment 12). On October 9, 2003, Aurora submitted a revised Application, to the Division, along with additional supporting confidential geologic and engineering data. On October 16, 2003, the AOGCC issued Conservation Order No. 478A (Attachment 10) allowing regular production from the NCU-lB, NCU-2 and NCU-9 wells using the interim reporting methodology. In November 2003, Aurora completed pipeline and facility construction for PA-B and initiated production from the NCU-2 and NCU-9 wells. The Division worked with Aurora, the BLM and the TLO on the Application, and on / November 4, 2003, the Division determined that the Application included all of the items listed in 11 AAC 83.306 and constituted a complete application for public notice. The Division issued a public notice of the Revised Application on November 5, 2003, which DNR posted on the State's web page. The notice was published in the Anchorage Daily News and the Peninsula Clarion on Sunday, November 9,2003. The public notice invited interested parties and members of the public to submit comments on the Application by December 9,2003. The Division received two comment letters in response to the pubic notice. The first letter, ,/ submitted by the TLO to document its involvement in the process of approving the Application, is attached to this Decision (Attachment 11). The second letter was from the Kenai Peninsula Borough, which reviewed the proposed unit expansion for consistency with the Kenai Peninsula Borough Coastal Management Program enforceable policies. The Kenai ./ Peninsula Borough had no objection to approval of the Application. On January 7,2004, Aurora submitted a request to suspend the Application process until such time that the technical details could be resolved. On January 8, 2004, the Division approved the suspension of the Application and encouraged Aurora to continue working with the interested parties to reach agreement on the revised unit and participating area boundaries. After working with the various parties, on and off for approximately one year, on January 21, 2005, Aurora submitted a final, revised Application that included new tract participation schedules and a proposal to create an additional participating area (BP A). The Application proposes to include a portion of federal lease AA-8426, approximately 45.30 acres, in the ./ NCD. Aurora is the only working interest owner, but there are approximately 16 overriding royalty owners. There is geologic and engineering evidence to support the formation of the BP A to develop 4 . . the Beluga Reservoirs within the revised NCU. The data also supports revising the SPA to ./ develop the Tyonek Reservoirs under a unified plan of development. III. PARTICIPATING AREA DECISION CRITERIA AS 38.05.180(p) gives DNR the authority to approve an oil and gas unit. The DNR Commissioner (Commissioner) reviews unit and participating area applications under AS 38.05.180(p) and 11 AAC 83.301 - 11 AAC 83.395. By memorandum dated September 30, 1999, the Commissioner approved a revision of Department Order 003, and delegated this authority to the Division Director (Director). Under 11 AAC 83.303(a), the Director will approve the Application upon finding that it will: 1) promote the conservation of all natural resources; 2) promote the prevention of economic and physical waste; and 3) provide for the protection of all parties of interest, including the state. Subsection .303(b) sets out six criteria that the Director will consider in evaluating the Application. A discussion of the subsection .303(b) criteria, as they apply to the Application, is set out directly below, followed by the Director's findings relevant to subsection .303(a) and the Director's conditional approval of the Application. A participating area may include only land reasonably known to be underlain by hydrocarbons and known or reasonably estimated through use of geological, geophysical, or engineering data to be capable of producing or contributing to the production of hydrocarbons in paying quantities. 11 AAC 83.351(a). "Paying Quantities" means: Quantities sufficient to yield a return in excess of operating, costs, even if drilling and equipment costs may never be repaid and the undertaking as a whole may ultimately result in a loss; quantities are sufficient to yield a return in excess of operating costs unless those quantities, not considering the costs of transportation and marketing, will produce sufficient revenue to induce a prudent operator to produce those quantities. 11 AAC 83.395(4) 1) The Environmental Costs and Benefits Approval of the BP A and the revision of the SPA has no environmental impact. This Decision is an administrative action and does not authorize any surface activity. Potential effects on the environment are analyzed when permits to conduct exploration or development in the unit area are reviewed. In fact, unitized development has less impact on the environment than development on a 1ease-by-lease basis. 2) The Geological and Engineering Characteristics of the Proposed PAs The State's regulations provide that a unit must encompass the minimum area required to include all or part of one or more oil or gas reservoirs, or potential accumulations. 11 AAC 83.356(a). DNR technical staff evaluated all data provided by the unit operator including . . geologic cross sections, structure maps, electric log analyses, and interpreted seismic data to determine if the proposed unit area met the regulatory criteria. The reservoir sandstones of the NCU belong to the Oligo/Miocene Tyonek and Beluga Formations. Only those sands of the Tyonek Formation are currently producing. Deposition of these sands occurred within the Cook Inlet Basin, a feature characterized as an elongate, northeast trending, fault-bounded forearc basin that extends from the Matanuska Valley south along the Alaska Peninsula. The northwestern reaches of the Cook Inlet forearc basin are defined by a series of tight anticlines and associated structures that deform the Tertiary section and provide traps for both oil and gas. These features are part of a transpressional regime that results from strain transfer between the Castle Mountain Fault to the north and Bruin Bay Fault to the west. The structures manifested within the NCU have evolved through such processes. Subsurface geology of the NP A of the NCU indicates a combination structural and stratigraphic trap with gas trapped in Upper Tyonek sandstones. Sandstone units are draped over a four-way closure anticline formed along a southward-plunging axis on the west side of an eastward-verging fault (interpreted to be the northern extension of the Trading Bay fault). A similar setting exists in the subsurface of the SPA of Upper Tyonek gas bearing sandstones trapped within a fold and closed against a dominant west-east cross-fault (the Nicolai Cross Fault) that splays off the aforementioned Trading Bay Fault to the east. The Nicolai Cross Fault appears to separate the structure of the NP A from that of the SPA. From a maximum of approximately 500-600 feet in the east, the fault throw diminishes westwards. Within the NP A and SPA, reservoirs sandstones are restricted to the Upper Tyonek Formation. Eight individual sand members have been identified from log correlation and mapped across the Nicolai Creek field. Within the Nicolai Creek field, individual sands have been assigned names based on standardized industry palynological zonation. The sandstones are within the Carya 2 palynological zone and have been subdivided using an appropriate numeric designation (2-1.1, 2-1.2, 2-2.1, 2-2.2, 2-2.3,2-4.2,2-5.1, and 2-6.1). Log data indicate the NCU wells show the relative conformity of the shallower Carya 2-1 through Carya 2-23 section with some possible expansion of the deeper Carya 2-4.2 through Carya 2-6.1 section. The apparent expansion of the deeper section in the NCU-2 well could be explained by faulting. Gas appears trapped in the Upper Tyonek Formation in unconsolidated, non-marine sandstone reservoirs between 1,680 and 3,475 feet subsea true vertical depth (SSTVD). Since the Tyonek reservoirs of both the NP A and SPA are stacked sandstone bodies, the composite areas of the reservoir extent, which is controlled by structure and sandstone distribution and confirmed by seismic and well data, are summed together to define the outline of the SPA and NP A areas. ,/ The BP A is defined by the surface acreage covering the anticipated productive Beluga 6 . . Formation sandstones. Since the Beluga reservoirs appear to be stacked sandstone bodies, the composite areas of the reservoir extent, which is controlled by structure and sandstone distribution and confirmed by seismic and well data, are summed together to define the outline ofthe BP A. 3) Prior Exploration Activities in the Nicolai Creek Unit The NCU was formed by Texaco on February 29, 1968 after discovering gas in the NCS- lA and NCU-2 wells in 1966 and the NCU-3 well in 1967. NCS-lA produced an average 1.3 MMSCF/day of dry gas from December 1968 to February 1969 and NCU-2 produced an average of O.4MMSCF/day of dry gas from October 1968 through November 1969. Upon completion of the aforementioned periods of productivity both NCS-IA and NCU-2 were shut-in. NCU-3, produced an average of 0.3 MMSCF/day dry gas from April 1969 through October 1977, when it was shut-in. During the period 1970 to 1988 three wells, NCU-4 (1970), NCU-5 (1972) and NCU-6 (1988) were drilled and they proved to be dry. In 1988, Unocal and Marathon acquired the field, each holding a 50% working interest. Unocal was designated the NCU operator. In 1991, Unocal worked over NCU-4 but failed to achieve commercial production. In 2000, Aurora took over the unit as operator with a 100% working interest. In 2000 and 2001, Aurora worked over NCU-3, sidetracked NCS-lA to the NCU-1B location, and repaired NCU-2. In 2001, Aurora installed production facilities and a pipeline for the NCU-3. It commenced production at an average rate of 1.1 MMSCF/D with an average of35 barrels of water per day and continued to produce February 2004 when a workover to add additional perforations was completed. The well is currently shut-in but production is expected to be restored in 2005 at 0.5 to 1.0 MMSCF/D. In 2003, Aurora acquired a new 3-D seismic survey and drilled NCU-9 with a bottom-hole location between the two participating areas but outside of the NCD. Aurora also established new facilities and a pipeline to the SPA's drill site in 2003. During 2003, Aurora produced gas from NCU-9 and NCU-2 at rates of 2.3 and 2.5 MMSCFlDay respectively. 4) The Applicant's Plan for Development ofthe Participating Areas The Application included a revised Plan of Development (POD) for the NCD. The new POD is approved for the period beginning on the effective date of this Decision through December 31,2005. The POD proposes extensive review and interpretation of existing 3D seismic data, which will 7 . . possibly lead to a new development well targeting the stacked Carya 2 (Upper Tyonek) channel sands. The unit operator also plans to reestablish production in the NCU-3 and continue production trom NCU-2 and the NCU-9 wells. The NCU No. IB well is currently shut-in pending further evaluation. Production rate is declining rapidly in the NCU-2, so Aurora plans to recomplete the well in the Tsuga 2-8.2 and 2-8.3 sands with the hopes of producing those intervals. The NCU-9 well produces trom the Tsuga 2.8-1 sands, and Aurora plans additional recompletions in future years. NCU-3 produced sales gas between October 3, 2001 when the pipeline was installed, and February 2004, when the current work over program began. Aurora plans to commingle production of the deeper Tsuga 2-8.1 perforations with the shallower Carya 2-1.1, 2-1.2, and 2-2.1 in the NCU-3 well. 5) The Economic Costs and Benefits to the State Approval of the proposed BP A and associated field development will provide economic benefits to the state. The long-term goal is to maximize the physical and economic recovery of hydrocarbons trom each of the productive reservoirs. Maximum hydrocarbon recovery will enhance the state's long-term royalty and tax revenue stream. Any additional administrative burdens associated with the participating areas are far outweighed by the additional royalty and tax benefits derived trom production. The Division finds Aurora's tract allocation schedules acceptable for allocating production and costs among the leases in the participating areas. Aurora shall work with the Division's Royalty Accounting Section to submit royalty and operator reports to properly allocate the production trom the NCU-2 and NCU-9 wells to the SPA and BPA, back to November 1, 2003. Aurora shall submit revised royalty and operator reports for the NPA back to November 1,2003 to correct inaccuracies in the reports. The production will be allocated based on the approved tract participation schedules for each participating area. Aurora must report production trom the SPA, NP A, and BP A using production accounting unit codes NCP A, NCPB, and NCBE, respectively. IV. FINDINGS 1) Conservation of Natural Resources The formation of oil and gas units, as well as the formation of participating areas within units, generally conserves hydrocarbons. Coordinated development of leases held by diverse parties maximizes total hydrocarbon recovery and minimizes waste. Formation of the BP A will provide for efficient, integrated development of the Beluga reservoir within the NCD. A 8 . . comprehensive plan of development governing the area will help avoid duplicative development efforts on and beneath the surface. Producing hydrocarbon gas from the area through the NCD facility reduces the incremental environmental impact of the production. Creating the BP A will help maximize gas recovery, while minimizing negative impacts on all other natural resources. 2) Prevention of Economic and Physical Waste Generally, the formation of a participating area facilitates the equitable division of costs and allocation of the hydrocarbon shares, and provides for a diligent development plan, which helps to maximize hydrocarbon recovery from a reservoir. Further, the formation of a participating area, which enables both facility sharing opportunities and adoption of a unified reservoir management strategy, may allow economically marginal hydrocarbon accumulations to be developed. Formation of a participating area promotes complete development of a reservoir with variable productivity across adjoining leases. Commingling production from the Tyonek and Beluga Formations in the NPA will maximize drilling and completion efficiency and result in lower development costs, possibly extending the economic life of the field. 3) Protection of All Parties Because hydrocarbon recovery will more likely be maximized, the state's economic interest is promoted. Diligent exploration and development under a single approved unit plan without the complications of competing leasehold interests promotes the state's interest. The formation of the BPA advances the efficient evaluation and development of the state's resources, while minimizing impacts to the area's cultural, biological, and environmental resources. Operating under the NCD Agreement provides for accurate reporting and record keeping, and royalty settlement. These all protect the state's interest. The proposed BP A and revised SPA protect the economic interests of the working interest owner and the royalty owners. V. DECISION Based on the facts discussed in this Decision and the administrative record, I make the following Findings and Decision: I) The proposed acreage is underlain by hydrocarbons and known and reasonably ./ estimated to be capable of production or contributing to production in sufficient quantities to justify the formation of the BP A, the revision of the SPA, and the revision of the NCU area. 9 . . 2) The geological and engineering data justify the inclusion of the proposed acreage within the participating areas under the terms of the applicable regulations governing formation and operation of oil and gas units (11 AAC 83.301 - 11 AAC 83.395) and the terms and conditions under which these lands were leased from the state. 3) The Beluga Participating Area (BPA) is limited to the stratigraphic interval in the Beluga Formation encountered between 1320 and 1477 feet (measured depth) in NCD-9 (API 50-283-20102). 4) The Gas Pool PA-A, which is renamed the Southern Participating Area (SPA), is limited to the stratigraphic interval in the Tyonek Formation encountered between 2422 and 2918 feet (measured depth) in NCD-2 (API 50-283-10021). 5) The Gas Pool P A-B, which is renamed the Northern Participating Area (NP A), is limited to the stratigraphic interval in the Beluga and Tyonek Formations encountered between 1494 and 2238 feet (measured depth) in NCU-3 (API 50-283-20003). 6) Formation of the BPA and revision of the SPA provides for the equitable division of costs and an equitable allocation of produced hydrocarbons under a development plan designed to maximize physical and economic recovery from the reservoirs within the approved participating areas. 7) The allocations of production and costs for the tracts within the NCD participating areas (Exhibits B-1, B-2, and B-3), Attachments 5, 6, and 7 to this Findings and Decision are approved. 8) Approval of the formation of the BPA, revision to the SPA, revision to the NCD, and approval of the attached Exhibits to the NCD Agreement are retroactively effective to November 1, 2003. 9) Aurora shall report all production from the SPA, NP A, and BP A to Production Accounting Units NCP A, NCPB, and NCBE, respectively. 10) Aurora shall submit revised operator and royalty reports for accounting unit code NCPB from November 1,2003 forward in order to correct inaccuracies in the reports. 11) Aurora shall submit separate original operator and royalty reports for accounting unit codes NCPA and NCBE from November 1,2003 forward. Aurora shall also provide the royalty accounting section copies of all revised AOGCC reports (Form 10-422) from November 1,2003 forward. For these reasons I hereby approve the formation of the Beluga Participating Area, the revision and renaming of the South Participating Area, the renaming of the North Participating Area, and the revision of the Nicolai Creek Unit area. Since the Application was approved by 10 . , . . the BLM on March 1, 2005 retroactively effective November 1, 2003, this Decision is also retroactively effective to November 1,2003. 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. If no appeal is filed by the appeal deadline, this decision becomes a [mal administrative order and decision of the department on the 31 st day after issuance. An eligible person must first appeal this decision in accordance with 11 AAC 02 before appealing this decision to Superior Court. A copy of 11 AAC 02 may be obtained from any regional information office of the Department of Natural Resources. Signed on 03-14-2005 bv Sean Parnell for Mark Myers Mark D Myers Division of Oil and Gas 03/14/2005 Date Attachments: 1. Map of old and new NCD boundaries 2. Map of old and new SPA boundaries 3. Exhibit A to the NCU Agreement (Map ofDnit and Participating Areas, 3 pages) 4. Exhibit B to the NCD Agreement (NCU Tract Schedule) 5. Exhibit B-1 to the NCU Agreement (Tract Participation Schedule for the North PA) 6. Exhibit B-2 to the NCD Agreement (Tract Participation Schedule for the South P A) 7. Exhibit B-3 to the NCD Agreement (Tract Participation Schedule for the Beluga PA) 8. Exhibit G to the NCU Agreement (Plan of Development) 9. AOGCC Conservation Order No. 478 10. AOGCC Conservation Order No. 478A 11. TLO letter commenting on the public notice ~A- Uni! States Department of thffnterior BUREAU OF LAND MANAGEMENT ANCHORAGE STATE OFFICE 222 W. 7th Ave. #13 ANCHORAGE, ALASKA 99513 3180 (941) wrd March 1, 2005 Aurora Gas, LLC Randall D. Jones, CPL Manager Land and Negotiations 10333 Richmond Avenue Suite 710 Houston, Texas 77042 Re: Final Approval for Nicolai Creek Unit Revision, Formation of the Initial Beluga Participating Area and Revision of the South Participating Area Gentlemen: Your request for revision of the Nicolai Creek Unit, Third Judicial District, State of Alaska, is hereby approved, pursuant to Section 20( d) of the Nicolai Creek Unit Agreement and upon concurrent approval by the State of Alaska, Division of Oil and Gas. Request for final approval for revision ofthe unit was received by letter dated August 6, 2004. All ofthe requirements set forth in Section 2 ofthe unit agreement have been fulfilled. Said revision is hereby approved and retroactively effective as of November 1,2003 based on first production from the NCU No.2 and NCU No.9 wells. The basic information is as follows: 1. The revision of the unit area was given preliminary approval by Bureau e-mail dated January 19,2005. 2. As a result ofthe revision the unit area comprises 410.745 acres, more or less, of which: a) 45.3 acres ofthe Beluga PA are Federal lands and 35.453 acres are State lands, b) 4.10 acres ofthe South PA are Federal lands and 36.361 acres are State lands, and c) 0.0 acres ofthe North P A are Federal lands and 320 acres are State lands. 3. Federal lease AA-8426 embraces lands within the revised unit area and is considered for segregation pursuant to Section 18(h) of the unit agreement, Public Law 86-705, and 43 CFR 3107.3-2. f 4. All lands i" unit area are fully committed. In vieAfthe foregoing commitment stZ, effective control of operations withi~e revised unit area is assured. Weare of the opinion that the revision is necessary and advisable in the public interest for the purposes of more properly conserving natural resources. Approval of this revision does not warrant or certify that the operator thereof and other holders of operating rights hold legal or equitable title to those rights in the subject leases which are committed hereto. The Nicolai Creek Unit application for revision also included requests for establishing the Initial Beluga Participating Area and for revision of the Gas Pool "A" Participating Area, now renamed the South Participating Area. The Initial Beluga Participating Area, Nicolai Creek Unit, is hereby approved effective November 1, 2003, pursuant to Section 11 of the Nicolai Creek Unit Agreement and upon concurrent approval by the State of Alaska, Division of Oil and Gas. The Initial Beluga Participating Area results in an area of 80.753 acres and is based upon the completion ofNCU No.9 well, a well capable of producing unitized substances in paying quantities. Well NCU No. 9 is located in Section 29, Township 11 North, Range 12 West, of Unit Tract No.2, Lease No. AA-8426. The 1 st Revision of the South Participating Area, Nicolai Creek Unit, is hereby approved effective November 1, 2003, pursuant to Section 11 of the Nicolai Creek Unit Agreement and upon concùrrent approval by the State of Alaska, Division of Oil and Gas. The 1 st Revision of the South Participating Area results in an area of 40.461 acres and is based upon the completion of Unit Well Nos. IB and 2. These wells are located in the Section 29, Township 11 North, Range 12 West, of Unit Tract No.2, Lease No. AA-8426 and are capable of producing unitized substances in paying quantities. For production and accounting reporting purposes all submissions pertaining to the Beluga Participating Area should reference AA-085788B. All submissions pertaining to the South Participating Area should reference AA-085788A. If the subject well is producing, this approval requires the submission of a Payor Information Form MMS-4025 to the Minerals Management Service (MMS) within 30 days (30 CFR 210.51). Please notify the designated payor or payors as soon as possible regarding this requirement. Any producing royalties that are due must be reported and paid within 90 days of the Bureau of Land Management's approval date or the payors will be assessed interest for late payment under the Federal Oil and Gas Royalty Management Act of 1982 (See 30 CFR 218.54). Copies of the approved unit revision, formation of the Initial Beluga P A and revision of the South P A are being distributed to the appropriate Federal and State offices and one copy is returned herewith. Please advise all interested parties with appropriate evidence of thís approval. · Sincerely, . ~ 4?L- Greg Noble Chief, Branch of Energy 5 Attachments: 1. Exhibit B to the NCU Agreement (NCU Tract Schedule) 2. Exhibit B-1 to the NCU Agreement (Tract Participation Schedule for the North P A) 3. Exhibit B-2 to the NCU Agreement (Tract Participation Schedule for the South P A) 4. Exhibit B-3 to the NCU Agreement (Tract Participation Schedule for the Beluga P A) 5. Certification-Determination Letter (2pp) cc: Mr. Mark Meyers Director, Division of Oil and Gas Alaska Department of Natural Resources 550 West ih Avenue, Suite 800 Anchorage, Alaska 99501-3560 Minerals Management Service P.O. 5760 MS 357B 1 Denver, Colorado 80217-5760 Attn. Pricí11a Botkin Alaska Oil and Gas Conservation Commission 333 West 7th Ave # 100 Anchorage, Alaska 99501-3539 Attn: Mr. Steve Davies Alaska Mental Health Trust Authority c/o Mental Health Trust Land Office 718 L Street, Suite 202 Anchorage, Alaska 99501 Attn. Ms. Wendy Wolfe, Acting Director AK94l: WDiel:wTd:03/0 1/05 :x449:NicolaiCreekUnitrevision.doc · . United States Department of the Interior BUREAU OF LAND MANAGEMENT ANCHORAGE STATE OFFICE 222 W. 71b Ave. #13 ANCHORAGE, ALASKA 99513 3180 (941) wrd March 1, 2005 Aurora Gas, LLC Randall D. Jones, CPL Manager Land and Negotiations 10333 Richmond Avenue Suite 710 Houston, Texas 77042 Re: Nicolai Creek Unit Dear Mr. Jones: Enclosed is a Certification-Determination whereby, as royalty owners in Federal Lease AA-8426, we commit lands within the lease to the Nicoali Creek Unit. The lands committed to the unit are described in the Unit Agreement Exhibit "B" as tract No 2 comprising 45.3 acres. Sincerely, ó Greg Noble Chief, Branch of Energy .. 'j .. . . CERTIFICA TION-DETERMINA TION Pursuant to the authority vested in the Secretary of the Interior, under the act approved February 25, 1920, as amended (41 Stat. 437, 30 U.S.c. 181, et seq.) and delegated to the Authorized Officer of the Bureau of Land Management by Order of the Secretary of the Interior, I do hereby: A. Approve the attached agreement for the development and operation of the Nicolai Creek Unit, Third Judicial District, State of Alaska. B. Certify and detennine that the unit plan of development and operation contemplated in the attached agreement is necessary and advisable in the public interest for the purpose of more properly conserving the natural resources. C. Certify and detennine that the drilling, producing, rental, minimum royalty, and royalty requirements of all Federal lands committed to said agreement are hereby established, altered, changed, or revoked to confonn with the tenns and conditions of this agreement. Approved: ó..~~d (Authorized Officer) Bureau of Land Management Date: #-' *3 . . wW'W.aurorapower.com Exhibit "Nt" Mark Myers, Director Alaska Department of Natural Resources Division of Oil and Gas 3601 C Street, Suite 1380 Anchorage, Alaska 99503-5948 October 1, 2004 RE: Thirty-First Plan of Develooment NICOLAI CREEK UNIT STATE OF ALASKA Unit Agreement Nicolai Creek Unit Area Thirtv-First Plan of Develooment and Ooerations Dear Mr. Myers: Reference is made to the captioned Unit Agreement being DNR No. 14-08-0001- 8913 Pursuant to Article X of the Nicolai Creek Unit Agreement, Aurora Gas, LLC, as designated Unit Operator, submits for approval this Thirtv-First Plan of Development and Operations. A. DURATION: This plan shall be in effect fÌ'om January 1, 2005, through December 31, 2005. B. DRILLING OPERATIONS DURING THE THIRTY-FIRST PLAN OF DEVELOPMENT AND OPERATIONS: No finn development wells are cummtly planned for the Plan Period. However, an extensive review and interpretation of the existing 3D seismic data will possibly lead to a new development well which will target stacked Carya 2 (Upper Tyonek) channel sands. c. REMEDIAL AND DEVELOPMENT WELL WORK DURING THE THIRTY-FIRST PLAN OF DEVELOPMENT AND OPERATIONS: No remedial well work is currently planned for the Plan Period. The No. 2 Well is currently producing from the Carya 2.1-1, 2.1-2 and the 2.2-1 perforations found at 2,422'-76', 2,694'-2,714', 2,870'-76' & 2,892'- 2,918'. Since production is declining rapidly, it is likely that there will be a recompletion of the Tsuga 2-8.2 and 2-8.3 sands found at 2,000'-10' , 2,065'- 80',2,155'-65' and 2,240'-70', which have not been produced within the confines of the field to date. 10333 Richmond Avenue, Suite 710. Houston, Texas 77042· (713) 977-5799· Fax (713) 977-1347 1400 West Benson Blvd., Suite 410. Anchorage, Alaska 99503· (907) 271·1003· Fax (907) 277-1006 ·. . · ~N2 2005 Also, the No. IB Well is known to produce some sand and water fuQbV/SION OF preliminary tests, so the sand-exclusion screens run upon recompleh'Óh ~~~ the Twenty-Eighth Plan Period are apparently damaged and will be replaced. If production cannot be sustained at commercially attractive rates from the existing Carya 2-4.2,2-5.1 and 2-6.1 sands found at 3,191 '-3,211',3,371'- 3,401' and 3,560' -75', a recompletion might be performed on the Tsuga 2-8.3 sands found at 2,307' -26' and 2,348' -75'. D. PRODUCTION: The initial production fÌ'om the No. IB Well is fÌ'om the Carya 2.4-2,2.5-1 and the 2.6-1 perforations found at 3,191 '-3,211',3,371-3,401', and 3,560- 75', respectively. Cumulative production from the No. IB well through August, 2004, is 1,974 mcf. Additional perforations may be added to these completions as production (see Section C above) and the operations related thereto continue. The initial production from the No.2 Well is from the Carya 2.1-1,2.1-2 and the 2.2-1 perforations found at 2,422'-76',2,694'-2,714',2,870'-76' & 2,892' -2,918' respectively. Cumulative production from the No.2 well through August, 2004, is 367,659 mcf. Additional perforations maybe added to these completions as production (see Section C above) and the operations related thereto continue. The initial production from the No.9 Well is from the Tsuga 2.8-1 perforations found at 1,320'-30', 1,343'-93' and 1,407'-47'. Cumulative production from the No. 9 well through August, 2004, is 440,855 mc£: Additional recompletion opportunities have been identified for later attention in subsequent years. The No. IB, No.2 and No.9 wells combined have produced a cumulative total of810,488 mcfthrough August, 2004, since production was restored in August, 2003, during the Twenty-Ninth Plan Period. Gas production and sales from the No.3 Well have been curtailed since February, 2004, when a workover was undertaken to add additional perforations in the Tsuga 2-8.1 sand interval. Once production is restored, production from the Carya 2-1.1, 2-1.2, and 2-2.1 perforations found at 1,900' -50', 2,005'-32' and 2,201' -38' will be commingled with these new shallower zones. Cumulative production from the No. 3 well through August, 2004, is 1,890,838 mef, which includes 893,000 mcf of production prior to the Aurora recompletion in early 2001. Production is expected to be restored at a nominal rate of between 500-1,000 mcfper day in the Thirty-First Plan of Development Period. E, PLANNED FIELD MODIFICATION AND OPERATION: ·. . JAN 2 1 2005 DIVISION Of~ No additional major modifications or additions to field operatió)ilâblfiût\&d. F. WELL DATA: ~ll~- 0 Producing- 4 (No.3 ,No. IB & No. 2, No.9) Shut-in Pending Facility Installation- 0 Suspended- 0 Abandoned· 2 (No.4 & 6) G, DRILLING I WORKOVER I FIELD MODIFICATION DURING mE THIRTIEm PLAN OF DEVELOPMENT AND OPERATIONS: The No.3 Well was worked over during the Thirtieth Plan Period, with additional sets of perforations added at 1,494'-1,502', 1,506'-12' and 1,516'· 42' in the Tsuga 2·8.1 sand interval. H. OWNERSHIP I OPERATOR CHANGES DURING THE THIRTIETH PLAN OF DEVELOPMENT AND OPERATIONS: There were no changes during the Thirtieth Plan Period. I. OWNERSHIP IOPERATORSIDP CHANGES DURING THE Thirtv- First PLAN OF DEVELOPMENT AND OPERATIONS: None planned. Aurora Gas, LLC;2 designated as Unit Operator, reserves the right to modify the Plan of Development and Operations if economic or geological factors warrant; however, such modifications are not to be commenced without prior consent of the Department of Natural Resources. Your approval of this submitted Plan is respectfully requested. Sincerely, Aurora Gas, LLC By-~~~(PL ~.~ Andrew lifford TfI"- Executive Vice President aurora ncu 2005 pod-revised · . Attachment 1 T 11N) R 12 'vJ) Sewûrd Meridiûn ------ Ne . . A tachment Ne South P A 80 ndary n et Coast ne SEC17 - -~ ~ -- --- v¿ ~ NICOlAI CKEEK ~' ~ U""IT ~ UNtïs :" if..æ 0' - 0 ~~~ ~'WIT~K ~-,Lz,~ ~~ ¡- .. .. -'-., '-., 'r-'-~~W'-""-~~"--'-"W"_~_"W'_"""_'__'" . Protracted Sections 19, 20, 29 and 30, T11 N, R12W, SM, AK SEe 18 :::Ul;u """¡'i~ (.,JIM ~I~ - n_~_ 'T'~- I '.A..g.¡ 26 f ,\1 S~~O~WT--W lG<;(.:t::~iõTJ ' . Nicolai North PA, ~ Nicolai South! PA & ~ Beluga PA llracts ,.."...... .EXHIBn "AU ()~'g(' 1 of 3 ION OF ND GA~ ßHUGA PAITRACTS SEE SHE:ETi¿ .. SEQ.·29-- ) , ; '~TtfclCeµJ CKEEK ~J I tJNtï 9 J AfL-I75F \.jl>'··"'¡ . ,~, ·>-·w,·,... , !.. "'.; .. ¡ <~_ ....', ~ N~CQLAJSOÜTH ÞA 'lRAcTS r ~:-LI;-t- i \. !"~$HEEn ~_w~L -1 .~-_L~wJ~_,\L_,LL_L._._w __w____ SEe 31 l' T11 N ""._-._,,,....__.....-.-"-~~~-,,-------, ,_.._~-,-_.__....~~- -_·_·,··v..~-""_·,-.·---~v~~~·__··._·'·~,_~m.w_. _._N.~~~_,_~~~___ ".G. .... ... ....._ _..... ,...,.CiUi ,,_,. ~ C-.LtIoø «..... t.1d..- T o!SiiIø ~:,Aurora Gas, LLC - ,- AOL,H!¡ð5 \"l' SEC32 ~L-< ~r w_~_..__._._'".~~~_.."..-c._~._~..__.....__~_~ SHEET: 1 of 3 1WIn'000NlO_ .\'MiII JIII.O...IG._ . NICOLAI SOUTH PA TRACTS within See 29 and 30 T11 N R12W 8M AK EXHIBIT" A" Page 2 of 3 ca;_ . t~'~ ADL 36138 NCAiC "1 -.;.H)t. e;. ,... TRACT 4 ?j 7.003 AC ADt. 11_ TRACT 3 28,458 AC A.Ot.. 175M UIJI!H) o 1'$ .#".......'.~'_i' _.__..~. COOK INLET . t ~AC4~ ;>!! ... e .:;w tfH! . wc..;e ~- :lMM .MM2á U"'!JM~ .__tal~_ ,,,. l~ìIttì ØD...1.rse IJ1iJ.6 -AlL 17W- I____....~-- .----.......---.-.,"',.""-- ..--.......~.hwMM_....-. ...--.--.-....-.-..---...... ~#OIt................_~___~_ .........._-'WI~.._M&f....___.. ....... Aa......_".~....____....~ _.....~-,.~-..._---- ...u.c-.....1'........ .. 8E_,Nf. ~R,,,i.~NO'if)1ar~ $Wr.-""}~M~l-Vl!l;J~OlF~ N:t.M¥~.þ')~I,;~~r;,,,.fW SEl'"iliilEj.IE,..,lr1jlfQ~0i'~ ~}~!Wt;'MJ:;. ,,,-,__~L GRAPmC SCALE ~¡29 31f32 ~ - ~ ( III J'U'l' ) 1 inch - 400 It. --- - ....-- - ~Aul'Ora Gas, LLC T - . BELUGA PA TRACTS within See 29 and 30 T11NR12WSMAK ADL 36136 ŒE 1114 1í!j~ x % P.3 P· e g " ~ ~¡~~... . . !" NC\.iPl\!) \_" ! NClJ129 i . J---J-~ ¡ --... ..~ ,_ ~ -;;, ::--~r' -"..,...~ _MENlIIGHWA1ER\JII! 1'ERN111?31!1 ADL C3 I 1'21 I WCMC WCMCADL C. PI TRACT 4 7.903 AC ADl. 17598 -0 "?J_~_'.;J:>",-~.¥_""""'M1~ IJ!OI!ND . K~"-.r-__r_____" COOK P1 fIN ._dfW.. Þ2 .r....14Rt. P3 ,..~..x$W)'. Nt'4NN"tw"4 SEt4 .,>j¡..'41WIGIØIT}I·()Ç,"" $'iIt!>4 NW'4,. ~ 1."t'INC HOfnH OF..., aE}'¡fE.~:8Et1..~~Of."""" -'..,.. Hf~ 8EJe4l_ SCI!ftI""_ ~,...wJe4I1W"l_SCI!ftI OF...... se" NW% .....y.i\.YI'IÇ $OUTHCIF....." ,. 1.14 _..,.- ...... ""- ... M_ U50 ""_ '......""- 1.7ØlM6131 UCII5 . "".... ,- -..... ..- _ '1M& ... -... ~b~ 31f32 EXHIBIT" A" Page 3 of 3 Pi TRACT 2 45.300 AC j¡.' COR '"M ä:i2f¡ ~ PI TRACT 3 27.550 AC ADl11585 1"11 INLET . t WC?D:.~ I ,~M WCMC ADL C1 1"10 . ..,,~~ tJ~£· ~ ¡ " . ,),'-\1 cw 1M WCMC ¥;,ot"__~-"/.-.':~,,,.¡oo&;>j".""'* ~I._;¡'''J'''"',,!, ....-w~""~........,J~;,;¡t;',,$_ ~qJ..".!lP"i__~£fi;:;!ilt1.../f:!m~M""'-~·Ø!':~ 1«rl1!S ,_~~,..po>-,rr_:u,..",........"""AØ'~ ~c_.tt:IIt.~..,...,.;;""...Ø_,M'?t'......-.rttcr~f~~*... '"-,......;;;« oIDI, ~·~"':.,.....£;;~¡,_~U1"_"1!i&£~1W)OóØ\'VI"..A~"'$" ~~..'.t::~~:~~~"""''''';:.:c,~S~i,.,M..C~~=..... GRAPHIC scALa _ 0 - <VII ~ - ~ ( 'IN J'ß'I' ) 1 IDch = 400 It. ~.o. __... ___ -..... Gc-.l~ ~..... ~ T""tin¡, ~Aurora Gas, LLC _~........ __ r.Þ_IO_ - ,- I LeD\\m[)\\ 2 ; 2óo~1bV :2 0.125 BLM AA-S426 0.0025794 0.0012500 Aurora 1.00 HBP N/A NlA all of !he N1/2SW1I4SW1/4. 4 0.125* David Boelens 0.0100000 Aurora 1. 00 HBP 47 83 Aurora NCU rellisecU:ìURVEVEDApplicationLeaseExbChrisBLM 1119/2005 :3 Siate 01 Alsslœ 0.125' Dsv¡¡¡ Boelens (1.0100000 Aurorn 1 00 Hep ADL-17585 Msntel Hesttl1 Trusl Land Office loml 4 Siam 01 Alaska O.12S' David Boelens 0.0100000 Aurora 1,00 HElP ADL-17598 Mental Heallh Trusl Land Office 0.0050000 lotal 0.015??oo . lineot comprising Aurora !'ICU 0.080913 total (W028571 of 3 " 7,003 00978663 7.003 "B$3" aLM AM!426 0,125 Iota! 0.125* David Boelens Mental Heallh TruIII Land O!fíœ Iolal 0,125' HIiIP 1.00 HBP Aurora 1.00 HBP Conservation Order No.4 78 . . Page lof3 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Re' THE APPLICATION OF . Aurora Gas, LLC for an order granting an exception to the spacing requirements of 20 AAC 25.055(a)(2) and (a)(4) to provide for the drilling and testing of the Nicolai Creek Unit Wells No. 1 B, NO.2 and NO.8 in an undefined gas pool. IT APPEARING THAT: Anchorage Alaska 99501 ) Conservation Order No. 478 ) ) Nicolai Creek Unit Wells ) No. 1B, NO.2 and NO.8 ) Drilling and Testing ) ) September 5,2002 1) Aurora Gas, LLC ("Aurora") by letter dated July 12, 2002 has requested an order from the Alaska Oil and Gas Conservation Commission ("Commission") allowing a spacing exception in accordance with 20 AAC 25.055 to drill and test the Nicolai Creek Unit NO.1 B and NO.8 wells and recomplete and test the NO.2 well within 3000 feet of each other and within 1500 feet of a property line. 2) The Commission published notice of opportunity for public hearing in the Anchorage Daily News on July 17, 2002, and the Peninsula Clarion on July 19, 2002, pursuant to 20 AAC 25.540. 3) On August 5, 2002 the Alaska Mental Health Trust Land Office requested that the tentatively scheduled hearing be held. 4) On August 19, 2002 the Alaska Mental Health Trust Land Office withdrew the request for the hearing. Subsequently, the Commission decided to issue an order without a public hearing. 5) On August 26 and 28, 2002 Aurora provided a corrected exhibit and accompanying text to the July 12, 2002 application for spacing exception. FINDINGS: 1) The surface location of the Nicolai Creek Unit Well No. 1 B well is 2018' from the south line (FSL) and 195' from the west line (FWL) , Section 29, T11 N, R12W, Seward Meridian (SM). 3/23/2005.. Conservation Order No. 478. . Page 2 of3 The top of the anticipated productive interval is 1637' FSL and 97' FWL, Section 29, T11 N, R12W, SM. The projected bottom hole location for this well is 1637' FSL and 97' FWL, Section 29, T11N, R12W, SM 2) The surface location of the Nicolai Creek Unit Well NO.2 is 2018' FSL and 205' FWL, Section 29, T11 N, R12W, SM. The top of the anticipated productive interval is 1176' FSL and 696' FWL, Section 29, T11 N, R12W, SM. The projected bottom hole location for this well is 877' FSL and 870' FWL, Section 29, T11 N, R12W SM 3) The surface location of the Nicolai Creek Unit Well NO.8 well is 2030' FSL and 245' FWL, Section 29, T11 N, and R12W SM. The top ofthe anticipated productive interval is 2030' FSL and 245 FWL, Section 29, T11 N, R12W SM. The bottom hole location is 203' FSL and 245' FWL, Section 29, T11N, R12W, SM. 4) The anticipated productive interval of Nicolai Creek Unit Wells 1 B, 2 and 8 are within 1500 feet of a property line between State of Alaska and Bureau of Land Management leases. 5) Currently subsurface control in the Nicolai Creek Unit is inadequate to constrain with certainty the productive limits of the reservoir. However, Aurora's interpretation of the present well and seismic control suggests that the reservoirs and structure are complex. 6) Gas production from the Nicolai Creek Unit has come from an undefined gas pool in the Tyonek Formation. The individual sands are named sequentially by depth prefixed by the letter T. 7) The Nicolai Creek Unit Well NO.1 B is proposed to be perforated in the T 2350 @ (-2557' sstvd), T3330 @ (-3074'), T3450 @ (-3162'), and T3650 @ (-3347') sands. 8) The Nicolai Creek Unit Well NO.2 is proposed to be perforated in the T1900 @ (-2070'), T2000 @ (-2242'), and T2200 @ (-2419') sands. 9) Nicolai Creek Unit Well NO.8 is proposed to be perforated in three Beluga Formation sands that have not been previously developed and overly the undefined Tyonek Formation gas pool. 10) An exception to the well spacing provisions of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (a)(4) is required for the drilling and testing of wells in a common pool within 3000 feet of each other and within 1500 feet of a property line where ownership changes. 11) Aurora sent notice of the application for spacing exception by certified mail to all offset owners, landowners, and operators of all properties within 3000 feet of the proposed productive intervals in Nicolai Creek Unit Wells NO.1 B, NO.2 and NO.8. CONCLUSIONS: 1) An exception to 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (a)(4) is necessary to allow drilling and testing of the Nicolai Creek Unit Wells NO.1 B, NO.2 and NO.8. 2) Granting a spacing exception to allow drilling and testing of the Nicolai Creek Unit Wells No. 1 B and NO.8 and to recomplete and test the NO.2 will not result in waste or jeopardize the correlative rights of adjoining or nearby owners. 3/23/2005.. Conservation Order No. 478. . Page 3 of3 3) Additional control, including additional seismic data and information obtained through the drilling and production of the subject wells may improve the definition of the limits of the reservoirs. 4) Before regular production is permitted from the Nicolai Creek Unit Wells NO.1 B, NO.2 and No.8, the Commission must take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling and testing of the wells as an exception, and so that drainage to the tract with respect to which the exception is granted will be prevented or minimized. AS 31.05.100(b). NOW, THEREFORE, IT IS ORDERED: Aurora's application for exception to the well spacing provisions of 20 MC 25.055 (a)(2) and 20 MC 25.055 (a)(4) for the purpose of drilling and testing the Nicolai Creek Unit NO.1 Band NO.8 wells and for the purpose of recompleting and testing the NO.2 well is approved. The Nicolai Creek Unit Wells NO.1 B, NO.2 and NO.8 may not be placed on regular production until the Commission takes additional action, upon petition, and after notice and hearing, to offset any advantage a landowner or owner may have by reason of the Nicolai Creek Unit Wells No. 1 B, NO.2 and NO.8 having been drilled to the exception locations. DONE at Anchorage, Alaska and dated September 5, 2002. Cammy Oechsli Taylor, Chair Alaska Oil and Gas Conservation Commission Daniel T. Seamount, Jr., Commissioner Alaska Oil and Gas Conservation Commission ççmservation OrdeJ'Jndex 3/2312005 . . f18/~6/2E!04 09 90721_; . AOGCC PAGE Exhibit "L" . STATE OF ALASK-\ ALASKA OIL ANn GAS CONSERVATION COMMISSION,. 333 'Vest Sevenfh Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICATION OF Aurora Gas, LLC for an order allowing regular production fTom Nicolai Creek Unit Wells No. IB, No.2, and No.9 in an undefined gas pooL DIVISION OF OIL AND GAS ) Conservation Order No. 478A ) Nicolai Creek Unit No. lB. No.2 ) and No.9 ) ) October 16~ 2003 IT APPEARING THAT: The Commission published a notice of public hearing in the Anchorage Daily News on July 17, 2002 and in the Peninsula Clarion on July 19, 2002, of an application by Aurora Gas, LLC ("Aurora") for a spacing exception to complete and produce three wells, Nicolai Creek Unit ("NCU") No. IB, NO.2 and No.8. 2) Aurora sent notice of the application by certified mail to all offset owners, landowners, and operators of al1 properties within 3000 feet of the proposed productive intervals ,in NCU No. 1 B, No_ 2 and No.8, as required by 20 AAC 25.055(d). 3) No objection to the application was received by the Commission. 4) In Conservation Order No. 478 ("CO 478"), i~sued September 5, 2002, the Commission granted Aurora's application but provided that the NCD No. IB, No.2 and No. 8 wells coulq not be placed on regular production until the Commission took additional action to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations. 5) NCU No.8 was not drilled because Aurora encountered a shallow obstructioo while driving conductor pipe. The conductor was pulled, the rig moved 7 feet to the east, and the NCU No. 9 wen was pennitted and drilled as a repJacement well. In this order, references to "NCU NO.9" include NCU No.8 as applicable 6) Aurora, by letter dated September 25. 2003, and received by the Commission that same day, has now requested that the Commission allow Aurora to place the Nicolai Creek Unit No. lB. NÞ. 2, and No.9 wells on regular production a9 soon as facilities are complete. . ~e/~6/2øØ4 69:12 ge7276~4 Conservation Order No. 4;_ October 16. 2003 AOGCC . e . PAGE 0: ~~~ FINDINGS: DIVISION OF OIL AND GAS 1) Newly acquired 3D seismic data and infonnation obtained through d.ril1ing the NCU No 9 well bave allowed Aurora to better define the limits of the NCD gas reservoirs. Sased on this improved understanding, Aurora is proPQsing changes to the existing Nicolai Creek Unit and Participating Area (UP A'') boundaries. These changes will include Federal acreage on the north side of the property line that cwrcntly separates FederaJ and State acreage and exclude some State acreage in ADL 17585. 2) Aurora is the only owner within 3000 feet ofNCU No. 1B, No.2 and No.9, 3) The proposed expanded fA will encompass NCU No. lB, No.2 and No.9. All properties within 1500 feet of each of these wells will be included, in whole or in pan, in the expanded P A... 4) It is expected to take no more than 100 days to obtain the necessary approvals of the proposed changes to the NCU and P A fi'om the Department of Natural Resources ("DNR') and the Bureau of Land Management (UBLM''), 5) In the interim, Aurora proposes to report production úom NCU No. IB and No.2 to DNR at a 5% royalty rate, and production from NCU No.9 to BLM using a 12.5% royalty rate. JfDNR and BLM approve Aurora's proposed revisions to the NCU and P A and associated tract participation percentages, Aurora will submit revised royalty and operator reports to DNR and BLM retroactive to the first day of production according to tenns of the Nicolai Creek Unit Agreement. 6) DNR and BLM have consented to Aurora's interim royalty payment methodology. 7) Allocation of gas resources to individual leases will require evaluation of technical data such as seismic, petrophysical, gas prQperties, reservoir pressure and temperature to anive at equitable division of royalties. CONCLUSIONS: An expanded NCU PA encompassing the NCU No. IB, No.2 and No.9 wells and including, in whole or in part, all properties within. 1500 feet of tbese wells will satisfy the objective of offseting any advantage a landowner or owner may have by reason of the wells having been driJIed to the exception locations, and regula{ gas production tèom these wells within such an expanded P A will not result in waste or jeopardize the corrc:lative rights of adjoining or nearby owners 2) Payment of royalties according to Aurora's interim plan for a period ofuot more than 100 days, subject to rotroactive adjustment when the proposed P A expansion is approved, wi11 adequately protected holders of affected property interests. . Eltll~6128f4 69: 12 98721_2 Conservation Order No. .,,1_ October 16. 2003 AOGCC . e e PAGE:84 ri3)1E©JEM I ~e3of4 L JAN 2 12005 I! 3) If a PA expansion that meets tbe description set out jJ1 ConcJusion lis not eftÐtWtSlON C within 100 days after regular production commences from the NCU No. IB, NoQl~ND GJ. NO.9 well, the Commission may need to revisit the conditions under which further regular production from those wells is approved. 4) Additional notice and public hearing poor to approving regular gas production from the Nicolai Creek Unit are not necessary under the circumstances and conditions of this order. 5) Regular reservoir pressure measurements will be rcquired to perform volumetric and material balance calculations. NOW, THEREFORE, IT IS ORDERED: I) Aurora's request to begin regular production from NCU No. IB, No.2 aod No.9 is approved, subject to the condition that if an expanded P A meeting the description set out in Conclusion I is not effectcd within 100 days after regular production com.mences wm the NCU No. lB, No.2, or No. 9 well, the Commission will determine whether other or additional conditions will be imposed on further regular production from those wells in order to offset any advantage a landowner or owner may have by reason of the weUs having been drilled to the exception locations Such other or additional conditions may be made effective as of the date of fIrst production from NCUNo. lB, No.2 or No. 9. 2) Aurora shall keep the Commission timely informed in writing of the status of its proposed changes in the NCU and P A. 3) Prior to regular production, Aurora shall take a pressure measurement on each well to detennine initial reservoir pressure. 4) Aurora shall perfonn a minimum of one bottom-hole pJ:essure measurement per well annually to monitor reservoir pressure. The surveys required in Rule 3 role may be used to fulfill the minimum requirements. A common datum for measurements in production intervals, if in communication, shall be established by the operator at a relevant depth in feet subsea. Pressure survC}'S may be stabilized static prcssure measurements at or near the production zone or extrapolated :&om surface (single phase fluid conditions), pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole formation tests. Pressure data must be representative of reservoir conditions for use in material balance and volumetric calculations. 5) Aurora shall submit data and results :trom pressure surveys in an annual rcservoir surveillance report on or before April I of each year. The report must include future development plans, reservoir depletion plans, and surveillance information for the prior calendar year, including: a. reservoir pressure map at datum, summary and analysjs of reservoir pressure surveys within the pool j · . 6a/1Ð6/2ÐØ4 Ð'3: 12 98727_42 AOGCC e PAGE as Conservation Order No. 47. ~fF:\I£.~' ~ .~f 4 Oetober 16.2003 Ù \,~ t:.,r \; b. results and, where appropriate, analysis of production s ; tIjMt S)U!~5 and any other special monitoring; and DIVISION ( c. review of pool production allocation factors and issues over thQlti~rvoo All data necessary for anal)l$ig of each survey need not be submitted with the rc:port but must be available to the Commission upon request. 6) Unless notice and public hearing is otherwise ordered, the Commission may admìnistratively waive the requirements of or administratively amend any role stated above as lon.g as the change does Dot promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk offlujd movement into freshwater. DONE at Anchorage, Alaska and dated October 16, 2003 ./ ~ ~~ Randy R~ C"""'¡";oner Alaska Oil and Gas Conservation Commission AS J 1.0S .080 KVVÏdcs IhAt within 20 days aRC!' n::ccipt (I( "'"!ten nøtice of the enlry o( 'n orcieI'. a JlC"C>n affected by it may file with the C(1mmission an applieatiOll (or rchcalÌng. A rcqu"" (or rehearing must be ra:eivcd. by 4:30 PM on the 23,, day followin¡ rhe œtc of the order. or nOli wt1I1cine døy if a holiday or wodccnd. 10 be 1imcl)' filed. The CQmmission shall granr or ref\asc the application in ",bole Qr in pan within 10 days. The Commission can refuJe an application by nor 8Cring (> it within the 'O-day peMud. An affected pcrsor¡ bas 30 daY' fron' the dale the Commi.,inn re(u$e$ the "Pplìcation or mail. «1r oth«wise dìstribulc$) "" order U,>(WI rehearing. both being the An.I order o( the C.,mmissìon, In appcallhc da:ision to Superior Cnun. Where a I'eqUC$I (or l'Chearing is denied by nonaction of the Commission. thl: JO.clay pcrind for a)pCi1 to Superior Court nm. fmm the date on which the rcqu~! is deemed denied (i.e.. I O'~ day .fter lhe ."plicallon (or rehcaring ""3$ filed). . A-rrt\e,\.\-~T II (¡ ð~Z-) . ~. The vn f: ..-- ~RUSI. . ._ ~;LANò~om' « ." . " .'~ ~ .- - -., ... -. - . -< "'- ~,,,,'~;~...-.': ~,:r_""":<:'_, .. "-~,~~......'-"..~>..:........._. December 8, 2003 Alaska Department of N atura1 Resources Division of Oil and Gas, Units Section 550 W. 7'6:1. Avenue. Suite 800 Anchorage. Alaska 99501 Attn: Chris Ruff ~©~Õ] · DEC 1 0 20031.!::b DIVISION OF OIL AND GAS Re: Expansion of Nicolai Creek Unit Dear Mr. Ruff: The Trust Land Office (TLO) bas reviewed the information associated with the application of the expansion of the Nicolai Creek Unit that has been submitted by Aurora Gas. ILC (Aurora). While the federal government currently manages the oil and gas interests associated with Trust lands in the Unit, 90% of lease revenues derived from Trost land within the Unit will be forwarded to the Trost, giving the Trust a signiticantstake in the outcome of decisions made by the State of Alaska on this matter. With that in mind. the TLO has the following observations and comments: 1. The information that was submitted by Aurora at their pre1iminaryapplication meeting on August 12. 2003 has been reviewed by the'ILO and our consultant (petrotecbnical Resources Ala.ska. or PRA). A subsequent discussion between PRA and Andy Clifford at Aurora clarified some of the information presented. Andy indicated at that time that he was still refining some of his interpretations for the formal application submittal, but he did not expect to change the participating areas or unit boundary from what was presented at the 8/12/03 meeting. 2. The Aurora application was formally submitted on September 12. 2003. The configuration of the gas pools and the associated proposed participating areas were changed significantly from what was presented a month earlier. although to our knowledge no new data had been obtained by Aurora in that period of time. The productive acreage depicted on land the Trust has an interest in was reduced by over 50 «J; from the August submittal to the September one. 3. PRA met with Andy Clifford and Don Krouskop on September 24. 2003 to review the seismic and other data on which Aurora is basing their application. The consensus following that meeting was that the existing data is ambiguous and it is difficult to map individual reservoirs accurately. 4. There has been a significant amount of discussion about how to determine the outline of the proposed Participating Areas (PAs) within the proposed expanded Unit because the existing data is not definitive. Any interpretation of the data is only a geological model of the subsurface. An interpretation provides a framework for discussion from which Alaska Mental Health Trust Land Office · Department of Natural Resources ~venue, Suite 1430 . Anchoøge, Aiaslca 99501 . Telephone: (907) 269-8658 . Fax: . ~l~rv...&"T" " (1... o~z..) . I !?~(r-aI~If\V!JÊt·~, U\l-: ~!,E;~.. . -': : DEC 1 0 2003 À...w....· negotiation begins to reach a mutually acceptable outcome for all parties. ~_~~ that Aurora has expended a significant amount of money collecting and interpreting data in the area, the TLO is inclined to refer to Aurora's original August submittal with respect to the proposed PAs. We realize that questions have been raised regarding the data that would support the original proposed Northern P A, but the same can be said regarding the data that would justify the reconfiguration of the Southern PAin the most recent proposal. 5. Aurora's original proposed Unit and PA boundaries should be modified because they have included acreage that their own interpretation indicates will not produce hydrocarbons. 6. The TLO supports the establishment of two PAs in the South and the requirement of a method of redetermination (including the Northern P A) in the future that is based on new data and is retroactive to the date of first production. 7. Because the existing data is ambiguous and open to interpretation, there is no absolute reason to believe that the acreage between the Northern and Southern PAs could not contain hydrocarbons. We request that further testing be required to try to determine this. In the absence of another well in this area (such a.~ the previously proposed No.7 well), we would like to see a pressure communication test between NCU #3 and NCU #9 to help determined if there is pressure communication across the projected cross fault separating the Northern and Southern PAs. Further, Aurora should provide a detailed cross-section between NCU #3 and NCU #9 to show the juxtaposition of the Tyonek and Beluga reservoirs at the projected cross fault. Mike Franger Senior Resource Manager Cc: Stephen C. Planchon Steve Martinez, BLM Paul Daggett-PRA . ®I~~LJI~ ,-.,.» i',:: ~~~ .. ....... Ai.l. jl¡....~¡ 1'.,.:0:") 'u·.·/ß'.\!,',..·.".. .1, .'.. ·.A', ' '¡ L. 'v I ¡. ..,/ I ' . " "., \I ~ L, L .i' L elL J:J . OFFICE OF THE COMMISSIONER o 400 WILLOUGHBY AVENUE JUNEAU. ALASKA 99801-1796 PHONE: (907) 465-2400 FAX: (907) 465-3886 o 550 WEST 7TH AVENUE, SUITE 1400 ANCHORAGE. ALASKA 99501-3650 ~E~ September 25, 2003 JAN 2 1 Z005 DIVISION OF OIL AND GAS Exhibit"K" DEPARTMENT OF NAtuRAL RESOURCES Sarah Palin, Commissioner AOGCC 333 W 7th Ave # 100 Anchorage, Alaska 99501-3539 RE: Nicolai Creek Unit, Letter ~upporting production petition and setting out interim royalty payment methodology. Well Nos.lB, 2, and 9 Dear Ms. Palin The Department of Natural Respurces (DNR), the Bureau of Land Management (BLM), and the Mental Health Trust Land Office (TLO) support Aurora Gas, LLC's (Aurora) petition to the AOGCC to allow Aurora to begin production from the Nicolai Creek Unit No. IB, No.2, and No.9 (formerly well No.8) wells, as soon as the facilities are completed. Aurora is currently prohibited from placing these wens on regUlar production under Conservation Order No. 478, dated September 5,2002. Aurora has acquired new 3-D seismic data over the area and is currently working with the DNR and BLM to revise the existing partiFipating areas and the unit area. In order to ensure the royalties are paid to the proper parties and allow development to proceed timely, Aurora will report production from wells number IB and 2 to the Division of Oil and Gas (Division) using accounting unit code NCP A and a 5% royalty rate. AUrora will report production from the number 9 well on lease AA 8426 to BLM using a 12.5% royalty rate. If the Division and BLM approves Aurora's forthcoming application to revise the pA and unit area arid the new tract participation percentages, Aurora will submit revised royalty and ope~tor reports to BLM and the Division back to the first day of production as provided for under Section II of the Nicolai Creek Unit Agreement. Signatures of the parties agreeinJg to this royalty payment methodology are set out below. If you have any questions regarding this letter contact Mr. Christopher Ruff with the Division at 907-269 8451. /1 l ;/;// ~.Vv~ {Je.lMark D. Myers ;7 ï Director BLM Printed Name ol.pl,('/'"IA Title Signature ,¡;..,~ 'G/ J/ '7-'1,,,.{.1.__ . .1"-, Date rLO I . 1 IÜ'¡ 1 tit. . ( í1.-'~'';:'¡./ ,) J -.-~ "ý.Þ t¿.£ J"kC>l . .. "Develop, Conserve, and Enhance Natural Resources for Present and Future Ala~·kans. 'V 1 ,400 1,200 1,000 1\1 800 ¡ii 11. 1! 11. :z: 600 In 400 200 o o LSMF Data 100 200 300 400 500 Cumulative Production, MMcf POINT NUMBER (Automatic) DATE (Optional) SITP, Psia BHP, Psia Z 1 2 3 4 5 6 7 8 9 1 1 1 2/11/2004 12/31/2004 413012005 7/16/2005 ExcL Data . EUR = 685 600 700 800 BHP/Z, Psia CUM PROD, Ml\llcf These results were prepared using Ryder Scott's Gas Material Balance. This is not Ryder Scott work. product. #2 ~J '----"' . .. Mr. Mark Meyers, Director Mr. Thomas Irvin, Commissioner State of Alaska Department of Natural Resources 550 West Seventh Avenue, Suite 800 Anchorage, Alaska 99501 ~AulOl'a Gas, LLC. ..];? www.aurorapower.com R E C E 'VIED '-;:::? AUG 1 .6:2004 August 6, 2004 Alaska Oil & G C as ons. COmmisaion SENT BY FACIMILE & FEd~NMIL RETURN RECIEPT REQUESTED RE: Application for Expansion of Nicolai Creek Uillt and North, South and Beluga Participating Areas Kenai Peninsula Borough Cook Met, Alaska . Ä!7_ tJ Ce.~A..~ ø~~ TJD ^~ Gentlemen: This letter seeks approval of the Department of Natural Resources (DNR) of this revised submission by Aurora Gas, LLC (AURORA) of the captioned Application, as amended herein, to enlarge the Nicolai Creek Unit, as well as, approve a new Participating Area identified as Belu2q, and amend one of the Unit's two cu'îreñt PartIcIpating Areas, hereinafter collectively referred to as the "UNIT". Please note AURORA previously sought approval to amend only the South Participating Area. AURORA and all interested parties have now agreed on the size of the Participating Areas and UNIT, as depicted on the plat identified as Exhibit "A" attached hereto and made a part hereof. Reference is made to my letter to you dated September 2, 2003 initially submitting AURORA's Unit Application. Reference is also made to my letter dated January 7, 2004 requesting a suspension of time following the termination of the public comment period to allow for all four (4) interested parties to the captioned Application to reach a consensus as to which portions of the lands subject to the four (4) leases involved are to be placed into the three (3) Participating Areas. Such consensus has now been reached, such lands surveyed and AURORA respectfully submits for your review the following amended Exhibits: 1. Exhibit "A" - Plat of the proposed reformed Nicolai Creek Unit. 2. Exhibit "B"- Schedule of Lands and Leases subject to the proposed reformed "Nicolai Creek Unit Area". 3. Exhibit "B-1"- Schedule of Lands and Leases subject to the proposed reformed Nicolai Creek South Participating Area allocable to the Nicolai Creek Unit Well Nos. 1B and 2. 4. Exhibit "B-2"- Schedule of the Lands and Leases subject to the Nicolai Creek Unit North Participating Area allocable to the Nicolai Creek Unit Well No.3. ~~ 10333 Richmond Avenue, Suite 710· Houston, Texas 77042· (713) 977-5799· Fax (713) 977-1347 1400 West Benson Blvd., Suite 410. Anchorage, Alaska 99503· (907) 277-1003· Fax (907) 277-1006 SCANNED SEP 1 42004 ~ Department of Natural Resources Page 2 8/6/2004 5. Exhibit "B-3"- Schedule of Lands and Leases subject to the proposed Nicolai Creek Unit Beluga Participating Area allocable to the new Nicolai Creek Unit Well No.9. Please recall this well was drilled, but not yet sufficiently producing at the time of my January 7 letter. 6. Now, sufficient production data has been derived from Well No. 9 allowing all interested parties to agree on the appropriate lands to be placed into this new Participating Area. AURORA is of the opinion all parties have received the requisite Geological, Geophysical and Engineering data and maps on the Beluga Participating Area. 7. All remaining Exhibits "C"-"J" originally submitted with my September 2, 2003 Application letter remain unchanged and by reference herein continue to be part of this Application. Consequently, pursuant to the terms of the Unit Agreement identified below, a redefinition of the areal extent of the captioned UNIT and. one of its two Participating Areas and the creation of a new Participating Area are now deemed bv the Unit Operator as necessary to protect all interested parties' correlative ri ghts and advisable in the public interest for the purpose of properly conserving the natural resources subject to the lands and leases described on Exhibit "B" attached hereto, and identified as such to match the Unit Agreement's Exhibits "A" and "B", respectively. Now, therefore, AURORA respectfully requests the DNR approve and render a Decision Letter as follows: Expansion of Participatine AreaslUnit Contractuallv Mandated Pursuant to Article II of that certain Unit Agreement dated February 29, 1969, by Texaco, Inc., as Unit Operator and AURORA's predecessor-in-title, covering the Nicolai Creek Unit, and codified by the DNR by that certain "Approval-Certification- Determination" instrument dated effective March 15, 1968 and by the Bureau of Land Management (BLM) by that certain "Certification- Detennination" instrument dated effective April 2, 1968, hereinafter referred to as the "Unit Agreement", AURORA hereby amends the Unit outline. Attached to my letter dated September 2, 2003 was a copy of the Unit Agreement, as Exhibit "C", with all previous renditions of its exhibits included for your benefit; therefore, AURORA hereby requests: (i) Approval of the reformation of the "South" Participating Area within the UNIT, as to the leases described on Exhibit "B-1" attached hereto. This refonnation includes a portion of BLM Lease AA-8426 and reduces the portions of ADL's 17598 and 17585 allocable to South Participating Area. The South Participating Area was fonnerly known as Participating Area "A"; (ii) Approval of enlargement of the area for the UNIT to include additional lands and leases, being only the portions of which to be pooled into the --- Department of Natural Resources Page 3 8/6/2004 '--"" proposed "South" Participating Area, the new Beluga Participating Area, and with the North Participating Area remaining unchanged within the refonned UNIT, and being all of the portions of the leases described on Exhibit "B"; (iii) Approval of the name change for the "North" Participating Area within the UNIT, as to the portions of the lease described on Exhibit "B-2" attached hereto. The "North" Participating Area was fonnerly known as Participating Area "B", and the "North" Participating Area is neither being enlarged nor decreased in its areal extent; (iv) Approval of the fonnation of the "Beluga" Participating Area within the UNIT, as to the leases described on Exhibit "B-3" attached hereto. This formation includes a portion of BLM Lease AA-8426 and portions of ADL's 17598 and 17585 allocable to Beluga Participating Area. Pursuant to Article XII of the aforementioned Unit Agreement "... all unitized substances produced from each participating area established.. . shall be deemed to be produced equally on an acreage basis from the several tracts of unitized land ... each such tract of unitized land shall have allocated to it such percentage of said production as the number of acres of such tract included in said participating area bears to the total acres of unitized land in said participating area...". Therefore, AURORA seeks approval of allocation of both production (i.e. revenue) and expenses to continue to be consistent with the Unit Agreement by being on a surface acreage basis. -- The "~orth" Participating Ar--ª is defined by the surface acreage covering the anticipated productive sands using all currently available data by, and geophysical seismic data acquired for, AURORA for this purpose. Since the Carya reservoirs are stacked sandstone bodies, the composite area of the reservoir extent which is controlled by structure and sandstone distribution and confinned by seismic and well data, are summed together to define the outline of the "North" Participating Area. The "South" Participating Area is defined by the surface acreage covering the anticipated productive sands using aIr currently available data by, and geophysical seismic data acquired for, AURORA for this purpose. Since the Carya reservoirs are stacked sandstone bodies, the composite area of the reservoir extent which is controlled by structure and sandstone distribution and confinned by seismic and well data, are summed together to define the outline of the "South" Participating Area. The "Beluga" Participating AI:.ea is defined by the surface acreage covering the anticipated productive sands using all currently available data by, and geophysical seismic data acquired for, AURORA for this purpose. Since the Beluga reservoirs are stacked sandstone bodies, the composite area of the reservoir extent which is controlled - Department of Natural Resources Page 4 8/6/2004 '-" by structure and sandstone distribution and confinned by seismic and well data, are summed together to define the outline of the "Beluga" Participating Area. Effective Date of DNR Approval Pursuant to Article II (a.) of the Unit Agreement, AURORA respectfully requests the Effective Date of the revised UNIT and Participating Area ".. .be the first day of a month subsequent to the date of notice. . ." by Unit Operator. This letter shall serve as such notice. As an alternative Effective Date of the revised UNIT and Participating Areas for DNR's consideration, AURORA is agreeable to recognizing an ".. . effective date of any revision shall be first of the month in which is obtained the knowledge or infonnation on which such revision is predicated... ", as pursuant to Article XI of the Unit Agreement. Since AURORA's aforementioned 2003 Nicolai Creek 3-D Seismic Program was initially delivered on June 17, 2003 as to the poststack time deliverables (with July 10, 2003 being the delivery of the prestack time deliverables) and the subsequent interpretation thereof culminating July 1, 2003, July 1 may be recognized as being the date AURORA "obtained the knowledge or infonnation on which such revision is predicated". Therefore, July 1, 2003 could be an acceptable Effective Date which meets the criteria of the Unit Agreement and is equitable to all involved parties if so desired by the DNR. Production Reallocation Performed For Period Since Application Submission By letter dated September 25, 2003 from the DNR, and approved by the execution thereof by the BLM and the Mental Health Trust Land Office of same date, attached hereto as Exhibit "K", to the Alaska Oil and Gas Conservation Commission (AOGCC), lifting of the AOGCC's prohibition against AURORA's ability to produce the Nos. IB, 2 and 9 Wells was sought. In response thereto by Conservation Order 478A dated October 16, 2003, attached hereto as Exhibit "L", the AOGCC concluded that production from the three aforementioned wells will satisfy the obj ective of eliminating any advantage a landowner (i.e. mineral estate owner) or owner (i.e. leasehold estate owner) may have over another adjoining landowner or owner by reason of the wells having been drilled and completed to the exception locations and gas production therefrom will not result in waste or jeopardize the correlative rights of any adjoining or nearby owners. Additionally, Conservation Order 478A mandated payment of royalties by AURORA in accordance with the aforementioned letter dated September 25, 2003 from the DNR, subject to a retroactive adjustment upon DNR approval of this Application. ~P" ..~-' Department of Natural Resources Page 5 8/11/2004 Pursuant to the request made in the aforementioned September 25 Letter and Conservation Order 478A thereafter, AURORA has, since first production of the 3 wells, been tendering 100% of the royalty proceeds from the Nos. IB and 2 Wells to the DNR and 1000/0 of the royalty proceeds from the No.9 Well to the BLM. Upon AURORA's receipt of the DNR's Decision Letter for this UNIT Application, AURORA will perform a Production Reallocation as to the South Participating Area as to all of the production from the Nos. IB and 2 Wells from first production following Conservation Order 478A crediting the BLM with a net .0112581 of said wells' production revenues being its South Participating Area Tract Participation Factor of .0900651 multiplied by its .125 gross royalty interest. The DNR's new net revenue interest shall be .0454967 being its South Participating Area Tract Participation Factor of .9099349 multiplied by its .05 gross royalty interest. Correlatively, the DNR shall be debited an amount from said proceeds allocable to it being equal to the difference between its .05% gross royalty interest and .0454967 from first production following Conservation Order 478A to the Production Reallocation Date. As to the new Beluga Participating Area as to all of the production from the No.9 Well from first production following Conservation Order 478A crediting the DNR with a net .0221770 of said wells' production revenues being its Beluga Participating Area Tract Participation Factor of .4435395 multiplied by its .05 gross royalty interest. The BLM's new net revenue interest shall be .0695576 being its Beluga Participating Area Tract Participation Factor of .5564605 multiplied by its .125 gross royalty interest. Correlatively, the BLM shall be debited an amount from said proceeds allocable to it being equal to the difference between its .125% gross royalty interest and .0695576 from first production following Conservation Order 478A to the Production Reallocation Date. ûperatine Aereement Since AURORA is a 100% Record Title and Operating Rights Interest Owner in the leases allocable to the UNIT and is Operator of the UNIT no Operating Agreement is applicable. Unit Aereement Reference is again made to that certain Unit Agreement dated February 29, 1969, by Texaco, Inc., as Unit Operator and AURORA's predecessor-in-title, covering the Nicolai Creek Unit, and codified by the DNR by that certain "Approval-Certification- Determination" instrument dated effective March 15, 1968 and by the Bureau of Land Management (BLM) by that certain "Certification-Determination" instrument dated effective April 2, 1968, hereinafter referred to as the ''Unit Agreement". "-- '-' Department of Natural Resources Page 6 8/1112004 Upon ten (10) years following the creation of the Nicolai Creek Unit in 1969, the Nicolai Creek Unit constricted to only the lands and interests in a then valid Participating Area or Areas. At such time BLM Lease AA-8426, which was originally subject to the Unit Agreement, was not in a Participating Area; therefore, BLM Lease AA-8426 may have been construed by some as being no longer subj ect to the Unit Agreement. Pursuant to Article XXVIII of that certain Unit Agreement, ".. .subsequent inclusion of lands and leases to the Unit Agreement shall be effective as of the first day of the month following filing with the Department of Natural Resources and Bureau of Land Management of all documentation necessary to establish effective commitment of any tracts to the Unit Agreement...". By letter dated August 25, 2003, AURORA submitted a revised Exhibit "B" to the Unit Agreement, which is the schedule of leases subject to Unit Agreement, as meeting the necessary documentation requirement. At the discretion of the Operator, by merely making a portion ofBLM Lease AA- 8426 subject to the terms of the Unit Agreement doesn't necessarily amend the Nicolai Creek Unit boundaries to include said lease. Nevertheless, since a requisite to "unitizing" certain lands and interests into the captioned UNIT is making such lands and interests subject to the Unit Agreement, AURORA requests that portion ofBLM Lease AA-8426, being Tract 2 of the Beluga Participating Area and Tract 2 of the South Participating Area, be deemed by all parties to be subject to all of the terms and conditions of the aforementioned Unit Agreement by virtue of DNR and BLM approval of this Application. Unit Wells The wells allocable to the "South" Participating Area are the Nos. IB and 2 Wells. The well allocable to "North" Participating Area is the No.3 Well. The well allocable to "Beluga" Participating Area is the No. 9 Well. As noted below, you will find the surface location, productive intervals and bottomhole locations for all of the aforementioned wells. For your convenience Exhibit "F" attached to the September 2 Letter is the Nicolai Creek Unit and its Participàting Areas in their current configuration prior to the submission of this Application. Well Surface Location Productive Interval Bottomhole Location 1B 2,018' FSL, 195' FWL Sec 29, T11N, R12W 1,637' FSL, 97' FWL, Sec 29, TI1N, R12W 1,637' FSL, 97' FWL, Sec 29, TIIN,R12W 2 2,018' FSL, 205' FWL, Sec 29, TIIN, R12W 1,176' FSL, 696' FWL, 877' FSL, 870' FWL, Sec 29, TIIN, R12W Sec 29, T11N, R12W '- Department of Natural Resources Page 7 8/11/2004 ~ 3 3,369' FSL, 1,6681 FWL, Sec 20, T11N, R12W 3,369' FSL, 1,668' FWL, 3,369' FSL, 1,668' FWL, Sec 20, T11N, R12W Sec 20, T11N, R12W 9 2,010' FSL, 261'FWL, (f/n/a 8)Sec 29, T11N, R12W 2,010' FSL, 2611FWL, Sec 29, T11N, R12W 2,010' FSL, 261 'FWL, Sec 29, T11N, R12W Vertical Definition The leases identified on Exhibits "B", "B-1 ", "B-2" and "B-3", attached hereto and shown on Exhibit "A", are proposed to be included in the UNIT, the revised and expanded "South" Participating Area, the renamed "North" Participating Area, the new Beluga Participating Area, respectively. There will be no vertical defmition of any Participating Areas. Not Previouslv Furnished Additional Data Included Herein Furthermore, enclosed with and in support of the requests identified in this Application are the following additional data, not previously a part of the Data Binder: 1. Exhibit "K"- September 25,2003 Letter from the DNR to AOGCC. 2. Exhibit "L"- AOGCC Conservation Order 478A dated October 16, 2003. Plan of Development It should be noted the 2005 Nicolai Creek Unit Plan of Development is due on or before October 1,2004. Since previous discussions with your staff and all relevant mineral owners regarding this matter have recently occurred, it is hoped this Application is deemed complete and a DNR Decision Letter is rendered without delay. Your prompt attention to this matter is appreciated and if you have any questions, please contact the undersigned at the number or email address noted below. Very Truly Yours, R~ Randall D. Jone , CPL Manager, Land & Negotiations rj ones@aurorapo\ver.con1 ~.I Department of Natural Resources Page 8 8/11/2004 cc: Bureau of Land Management 6822 Abbott Loop Road Anchorage, Alaska 99517 Attn: Mr. Greg Noble, Petroleum Engineer Alaska Mental Health Trust Authority c/o Mental Health Trust Land Office 718 L Street, Suite 202 Anchorage, Alaska 99501 Attn: Mrs. W endy Wolfe, Acting Director Alaska Oil and Gas Conservation Commission ¡./' 333 W 7th Ave # 100 Anchorage, Alaska 99501-3539 Attn: Mr. Steve Davies --- '-' Protracted Sections 19, 20, 29 and 30, T11 N, R12W- SM. AK Nicolai North PA, Nicolai South PA & Beluqa PA Tracts ~ Exhibit "A" Page 1 of 3 SEC18 SEC17 ;u;o ~ ~ WI\.) ~~ NICOLAI CKEEK UNITS SEC 19 ø NICOLAI NORTH PA ADL-63279 BELUGA PA TRACTS SEE SHEET 2 SEC 31 SEC 32 r T11 N í I SHEET: 1 of 3 8" __""''\.~'''I''I ?'-¡~ ~ ~ ;~~ ~~= "''.~:~,:- 'IoAt Sl:~f I·.t~ ~_: Aurora Gas, LLC J"!i.L.08lIQIIiI;HO 0.&.'01 ~. '-~ NICOLAI SOUTH PA TRACTS within See 29 and 30 T11 N R12W SM AK ~ Exhibit "A" Page 2 of 3 - CEE 1/64 . ~L~ ~R- -- T I I I , WCADLC2 I cw 1/16 . ADL 36736 I I ~I~ Q 0 ~ ¡:: ~I~ liRACli NCU129 Pipeline _ _ _ _~.¡¡:šbiP --. WCMC ~OP2 _~ 1966 MEAN HIGH W TER UNE WCMC ADL C1 PER ADL 36736 . . WCMC P1 WCMC ADL C4 P4 TRACT 4 7.903 AC ADL 17598 P3 TRACT 3 28.458 AC ADL 17585 lJ!OÐID P5 P6 ~ 'O\J"'OCOP,.(ltWElD5UItVEY~"'T-.DlY011 . .5E'...xrr.'._..2·""--_................UIO...ø.S COOK / N LET NOlES , SEAAPíG IoH.O DlSfllHCES .$H()WN tEAEON AREGACI 2.098 'AA8426 : 1.501M8426- . :8.482 u;AÒi"17585 ; t.99j~. ~AD(1T.:~. ~.9~_ ;~n~ 21H()I:IIlOHfAi COORDINATes ARE. .-.¡.ASI(. Sf"fE PlNllZOHfC~BA.."'£OO'\l THe. CNH-;CORNE~ BRASS CAP SEC 25 f11", ~12W SMM.ADL )1~mfOlJ.o 3) THE UPlAHO AHO I.DELAND AREAS S~ HEREOI'IARf BASEDOH ~P~S ~~~:EO'()I'I ADl J57)E AHO THE I.lONOIolEH':'S S~tfEREQP-I AS IŒCOYEAf.OTtftS PI SE . HE . SE . LYING NORTH OF t.lHW P2 . SWr. NWr. swr. LYiNG NORTH of MHW P3 sWKPf.,ý}'¡ sWr. LYlNGSol1THoFMHW P4. . SEr. HEr. SEr.-LYlNG 'ScnirH oF MHW P5 . NWr. swy. SW y. - 'r. r. r. 4' THE WEAN HIGH WATER liNE Of' COOK IHleTwA5OBTAPEDRfOI,I[)4.TA St<1hHOH ADL. 361J.ë WH1CH IiOTEO THIS liNE WAS ESIA!M.ISMEDn:tCNMf\.JYPUBlI9EDBY uSC&GS ON TiQ.4l BENCt-I .......RJt'S AT HOo'tTH "OR£~COOC MET Q&S£R\IH)8T IHE USC~GS .IU'~ Y 72·AUGUST U. 19'i& GRAPHIC SCALE 30 /29 31 32 ~ BOO I 1600 I ( IN FEET ) 1 inch = 400 ft. ..nil: ~.rjo.f ,....-:r ~.cAurora Gas, LLC SHEET: 3 of 3 O' ~~~I, ~JI*'"1~ DATE OF FlflOW'{.Q( ....Is,or.. F1ElO8CJOltHO (J.4J(!1 ~ :t~~= '1~~-4= ".~;,oo,-- la" .............' __~~\.'''I'11111 -¡p- , f.:Jßø* .~ ~7ij Ilt.~~""- DArE O"I'E.LO¥'lOl'tl< 6IIs,.oI ConsuLting c;- roup T esbng "OA: ~"""'l ,....r. FIELD !IO()IIf NO nuo~ .c.. 907 203 ..:: ID ,.... 90"72933265 ---- -- ~_:Aurora Gas, LLC SHEET: 2 of 3 1600 I ~ i ( IN FEET ) 1 inch = 400 ft. ~29 ? GRAPHIC SCALE NOO'F.S R .Mš426 M~26 M 8426 , M8!26 'M 8426 ~_~26 M 11426 . AcCri598 ADl17~ ADl17585 - Ari17s85 !L- ·10.000 ~'IÖ:002 . 1i.1is2 9.~ro 1.046 .1:rol 2.096 7.9ó3 8.482 9.084 9.984 swr.swr.~,. NE}'. NEY. SEY. NWY.N\-ÝY. swY. NE Y. NVt' Y. sw Y. SE r. NVt' Y. Sw):'L YlNGNORTH OF MHw sw Y. NVt' Yo ~ Y. LYING NORTH OF MHw SE r. NE r. SE r. LYING NORTH OF MHI'i SE Y. NE r. SE r. LYING sOurn OF Wiw . sw r. NVt' Y. fNi Y. L YlNGSOUTH OF MHW SE Y. NVt'r. sw Y. LYING SOUTH OF MHW NWY. SwY. sWY. f.ðB. PI P2 P3 P4 P5 P6 Pl P8 P9 P10 PI1 "JT!"IE ...E........I1I(;H WAIEAUNE OF COOl!; IHlEJ WAS OST.uEO FROIoI Oo&'A Sl-C:JWh"ON AD!.. 34ilJ06 WMlCIi HOTED lHIS llWE WAS ESfA&.r5KEDFROUOAI\lt.lPU'BlISHE08'f IJSC&GS ON TIDAl BENCH I.I.ARKS AT NORTH FOAEt...AJooOSCOOI. M-ET Q6S£R\,WfIY THE USC&GS.Jut. T :n·wGUSJ 1). ¡<FA JJ THE UPL<VtD A.."iO nOEl....."iO AREAS 5ÞtOWN HEREOffARE 8AS£DOH ßiE P~lS SURVEYED FOR AOl ]51J1!i AND THf "'Ofo!Ut,lEk1S S~HERfOfl ASRfUJVERE-O TICS 2"0AIlONTAl COORDINATES ME AlASIt... srATE Ft.AH£Z£W£..HA021S-.s£DOH T..e: C"'Nx" COIõtNER BRASSCAPSEC 2STl1HAI2W9oIAKAO..J17lU"CIlJI'O I BEARll'(û AADOlSt.......CES SHOWNtERECWW'ŒGRO / N L £ T COOK P11 -0 f'OVoto CoP"fR'"oNUD SURyt., ...Of'fVUt:"'T AD. Elf. J.mEND . SE'·J.·. )(T'..II.......~·_ø..-...-.....uo.~s TRACT 3 27.550 AC -------~-- - ADL 17585 P10 P9 TRACT 4 7.903 AC ADL 17598 WCMC WCMC ADL C4 P8 WCMC P4 -, P3 P2 ADL 36736 t WCADLC2 CW 1/16 TRACT 2 44.478 AC 1I4JCOR ~ 8426- ADLC3 CEE 1/64 P1 Exhibit "A" Page 3 of 3 BELUGA PA TRACTS within See 29 and 30 T11NR12WSMAK ~ -- Exhibit liB". Nicolai Creek Unit Agreement-Unit Area T11 N, R12W, S.M Section 20: W1/2 320.00 320.00 State of Alaska 0.125* Alice F. & J. Bailey Hinkle 0.0025794 Aurora 1.00 HBP N/A N/A Kenai ADl-63279 Mitsue & Robert K. Masuda 0.0028571 Keiso & Marcella T. Masuda 0.0028571 Donald L. Stroble 0.0025794 Alice Coulthard 0.0025794 Hatsuyo & Etsuo Miyamoto 0.0028571 Jayne Y. & Fred S. Hokama 0.0025794 Rose M. & Bernard Maresh 0.0025794 Ruth S. & Mobley Pharis 0.0025794 Patricia & Jack B Conway 0.0025794 laverna I. Traxinger 0.0025794 John R. Roderick 0.0012500 David Boelens 0.0100000 total 0.0404565 2 T11N, R12W, S.M. 44.479 44.479 BlM 0.125 Alice F. & J. Bailey Hinkle 0.0025794 Aurora 1.00 HBP N/A N/A Kenai Section 29 & 30: 44.479 acres, as Surveyed, AA-8426 Mitsue & Robert K. Masuda 0.0028571 being all that portion of Sec 29; Keiso & Marcella T. Masuda 0.0028571 N1/2NW1/4SW1/4 & S1/2NW1/4SW1/4 both Donald L. Stroble 0.0025794 lying directly landward of shoreline & all of Alice Coulthard 0.0025794 the SW1/4SW1/4NW1/4 comprising Hatsuyo & Etsuo Miyamoto 0.0028571 approximately 32.379 gross acres; and Jayne Y. & Fred S. Hokama 0.0025794 being all that portion of Section 30: Rose M. & Bernard Maresh 0.0025794 E1/2 NE1/4SE1/4 lying directly Ruth S. & Mobley Pharis 0.0025794 landward of shoreline comprising Patricia & Jack B Conway 0.0025794 approximately 12.100 acres. laverna I. Traxinger 0.0025794 John R. Roderick 0.0012500 David Boelens 0.0100000 total 0.0404565 Aurora NCU revised_SURVEYEDApplicationleaseExb 8/11/2004 Exhibit "B" Nicolai Creek Unit Agreement-Unit Area 3 T11N, R12W, S.M. Section 29: 37.542 acres, as Surveyed, being a portion of N1/2NW1/4SW1/4 lying seaward of shoreline; and all of the S1/2NW1/4SW1/4 and all of the N1/2SW1/4SW1/4 lying seaward of shoreline. 7.903 7.903 4 T11 N, R12W, S.M. Section 30: 7.903 acres, as Surveyed, being the SE1/4NE1/4SE1/4 lying directly seaward of shoreline. Total 409.92 409.92 State of Alaska ADl-17598 0.125* David Boelens 0.0100000 Aurora 1.00 HBP 47 83 Kenai Recapitulation of UNIT AREA land Categories State land: 365.45 BlM land: 44.48 Total 409.92 * Currently subject to Royalty Reduction Relief at .05 Percentage 0.8914945 0.1085055 1.0 Aurora NCU revised_SURVEYEDApplicationleaseExb 8/11/2004 Recapitulation of Working Interest Ownership Aurora 1.00 Exhibit "B-1" Nicolai Creek South Participating Area ~:'.~:r~~~ 2 T11N, R12W, S.M. 3.599 0.0900651 3.599 BLM 0.125 Alice F. & J. Bailey Hinkle 0.0025794 Aurora 1.00 HBP Section 29 & 30: 3.599 acres, as Surveyed, AA-8426 Mitsue & Robert K. Masuda 0.0028571 being all that portion of Sec 29; Keiso & Marcella T. Masuda 0.0028571 SW1/4NW1/4SW1/4 lying directly Donald L. Stroble 0.0025794 landward of shoreline comprising Alice Coulthard 0.0025794 approximately 1.501 gross acres; and Hatsuyo & Etsuo Miyamoto 0.0028571 being all that portion of Section 30: Jayne Y. & Fred S. Hokama 0.0025794 SE1/4NE1/4SE1/4 lying directly Rose M. & Bernard Maresh 0.0025794 landward of shoreline comprising Ruth S. & Mobley Pharis 0.0025794 approximately 2.098 acres. Patricia & Jack B Conway 0.0025794 Laverna I. Traxinger 0.0025794 John R. Roderick 0.0012500 David Boelens 0.0100000 total 0.0404565 3 T11N, R12W, S.M. 28.458 0.7121622 28.458 State of Alaska 0.125* David Boelens 0.0100000 Aurora 1.00 HBP Section 29: 28.458 acres, as Surveyed. ADL-17585 Mental Health Trust Land Office 0.0050000 being all of the SW1/4NW1/4SW1/4 total 0.0150000 and all of the N1/2SW1/4SW1/4 both lying directly seaward of shoreline. 4 T11 N, R12W, S.M. 7.903 0.1977728 7.903 State of Alaska 0.125* David Boelens 0.0100000 Aurora 1.00 HBP Section 30: 7.903 acres, as Surveyed, ADL-17598 Mental Health Trust Land Office 0.0050000 being the SE1/4NE1/4SE1/4 total 0.0150000 lying directly seaward of shoreline. Total 39.960 1.0000000 39.960 * Currently subject to Royalty Reduction Relief at .05 Recapitulation of PARTICIPATING AREA Land Categories Percentage I Recapitulation of Working Interest Ownership ~ State Land: 36.361 0.9099349 Other Land: 3.599 0.0900651 Aurora 1.00 Total 39.96 1 .0000000 Aurora NCU revised_SURVEYEDApplicationLeaseExbSheet3 Aurora 1.00 1.0 Recapitulation of PARTICIPATING AREA Land Categories State Land: 320.00 Other Land: Total 320.00 Recapitulation of Working Interest Ownership Percentage 1.0 * Currently subject to Royalty Reduction Relief at .05 320.00 1.0000000 320.00 State of Alaska 0.125* Alice F. & J. Bailey Hinkle 0.0025794 Aurora 1.00 HBP ADL-63279 Mitsue & Robert K. Masuda 0.0028571 Keiso & Marcella T. Masuda 0.0028571 Donald L. Stroble 0.0025794 Alice Coulthard 0.0025794 Hatsuyo & Etsuo Miyamoto 0.0028571 Jayne Y. & Fred S. Hokama 0.0025794 Rose M. & Bernard Maresh 0.0025794 Ruth S. & Mobley Pharis 0.0025794 Patricia & Jack B Conway 0.0025794 Laverna I. Traxinger 0.0025794 John R. Roderick 0.0012500 David Boelens 0.0100000 total 0.0404565 Total 320.00 1.0 320.00 Exhibit "B_2" Nicolai Creek North Participating Area 0.080913 Exhibit "B_3" Nicolai Creek Beluga Participating Area 2 T11 N, R12W, S.M. 44.479 0.5564605 44.479 BLM 0.125 Alice F. & J. Bailey Hinkle 0.0025794 Aurora 1.00 HBP Section 29 & 30: 44.479 acres, as Surveyed, AA-8426 Mitsue & Robert K. Masuda 0.0028571 being all that portion of Sec 29; Keiso & Marcella T. Masuda 0.0028571 N1/2NW1/4SW1/4 & S1/2NW1/4SW1/4 both Donald L. Stroble 0.0025794 lying directly landward of shoreline & all of Alice Coulthard 0.0025794 the SW1/4SW1/4NW1/4 comprising Hatsuyo & Etsuo Miyamoto 0.0028571 approximately 32.379 gross acres; and Jayne Y. & Fred S. Hokama 0.0025794 being all that portion of Section 30: Rose M. & Bernard Maresh 0.0025794 E1/2 NE1/4SE1/4 lying directly Ruth S. & Mobley Pharis 0.0025794 landward of shoreline comprising Patricia & Jack B Conway 0.0025794 approximately 12.100 acres. Laverna I. Traxinger 0.0025794 John R. Roderick 0.0012500 David Boelens 0.0100000 total 0.0404565 3 T11N, R12W, S.M. 27.550 0.3446680 27.550 State of Alaska 0.125* David Boelens 0.0100000 Aurora 1.00 HBP Section 27.55 acres, as Surveyed, ADL-17585 Mental Health Trust Land Office 0.0050000 being a portion of N1/2NW1/45W1/4 total 0.0150000 Lying directly seaward of shoreline; and all of S1/2NW1/4SW1/4 and all of the NW1/4SW1/4SW1/4 both lying seaward of shoreline. 4 T11N, R12W, S.M. 7.903 0.0988715 7.903 State of Alaska 0.125* David Boelens 0.0100000 Aurora 1.00 HBP Section 30: 7.903 acres, as Surveyed, ADL-17598 Mental Health Trust Land Office 0.0050000 being the SE1/4NE1/4SE1/4 total 0.0150000 lying directly seaward of shoreline. Total 79.932 1.000 79.932 * Currently subject to Royalty Reduction Relief at .05 Recapitulation of PARTICIPATING AREA Land Categories Percentage Recapitulation of Working Interest Ownership State Land: 35.453 0.4435395 BLM Land: 44.479 0.5564605 Aurora 1.00 Total 79.932 1.0000000 Aurora NCU revised_SURVEYEDApplicationLeaseExb ';®v&~~ ©~-&~®~ OFFICE OF THE COMMISSIONER ---- Fl. ,IK H. MURKOWSKI, GOVERNOR Exhibit ilK" DEPARTMENT OF NATURAL RESOURCES o 400 WILLOUGHBY AVENUE JUNEAU, ALASKA 99801-1796 PHONE: (907) 465-2400 FAX: (907) 465-3886 o 550 WEST 7TH AVENUE, SUITE 1400 ANCHORAGE, ALASKA 99501-3650 PHONE: (907) 269-8431 FAX: (907) 269-8918 Sarah Palin, Commissioner AOGCC 333 W 7th Ave # 100 Anchorage, Alaska 99501-3539 September 25, 2003 RE: Nicolai Creek Unit, Letter supporting production petition and setting out interim royalty payment methodology. Well Nos.1B, 2, and 9 Dear Ms. Palin: The Department of Natural Resources (DNR), the Bureau of Land Management (BLM), and the Mental Health Trust Land Office (TLO) support Aurora Gas, LLC's (Aurora) petition to the AOGCC to allow Aurora to begin production from the Nicolai Creek Unit No. 1B, No.2, and No.9 (formerly well No.8) wells, as soon as the facilities are completed. Aurora is currently prohibited from placing these wells on regular production under Conservation Order No. 478, dated September 5, 2002. Aurora has acquired new 3-D seismic data over the area and is currently working with the DNR and BLM to revise the existing participating areas and the unit area. In order to ensure the royalties are paid to the proper parties and allow development to proceed timely, Aurora will report production from wells number IB and 2 to the Division of Oil and Gas (Division) using accounting unit code NCPA and a 50/0 royalty rate. Aurora will report production from the number 9 well on lease AA 8426 to BLM using a 12.50/0 royalty rate. If the Division and BLM approves Aurora's forthcoming application to revise the P A and unit area and the new tract participation percentages, Aurora will submit revised royalty and operator reports to BLM and the Division back to the first day of production as provided for under Section 11 of the Nicolai Creek Unit Agreement. Signatures of the parties agreeing to this royalty payment methodology are set out below. If you have any questions regarding this letter contact Mr. Christopher Ruff with the Division at 907-269- 8451. /J / /d ~Vv~ /Jf( !Mark D. Myers /' ï Director BLM Printed Name Title S +¿p ~ ~n A.. )\J' C:c ;"J-, '}7 ¿ ;; Signature I 0 //;fitv¿~7· /' ~ ' Date 9 (-'c· j/' 7 ',/ "'--/ / í--~} TLO /.t )( /1 tit, . {. t 1../~j,:,/.(' rk .':Ii/A Dj/:::' c-·fv-r- ?b5/C5 "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " '08~85/2004 09:12 9072757'.::J..-L AOGCC PAGE 02 .~ ... Exhibit IILII . STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 An.cborage Alaska 99501 Re: THE APPLICATION OF Au.rora Gas, LLC for an order allowing regular production from Nicolai Creek Unit Wells No. IB, No.2, and No.9 in au undefined gas pool. ) Conservati on Order No.4 7 8A ) ) Nicolai Creek Unit No. IB, No.2 ) and No.9 ) ) October 16, 2003 IT APPEARING THAT: 1) The Commission published a notice of public hearing in the Anchorage Daily News on July 17, 2002 and in the Peninsula Clarion on July 19, 2002, of an application by Aurora Gas, LLC ("Aurora") for a spacing exception to complete and produce three wells, Nicolai Creek Unit ("NCD") No. IB, NO.2 and No.8. 2) Aurora sent notice of the application by certified mail to all offset owners, landowners, and operators of all properties within 3000 feet of the proposed productive intervals in NCD No. 1 B, No. 2 and No.8, as required by 20 AAC 2S.055(d). 3) No objection to the application was received by the Commission. 4) In Conservation Order No. 478 ("CO 478'1, i~sued September 5, 2002, the Com.mission granted Aurora's appli.cation but provided that the NCD No. IB, No.2 and No. 8 wells could not be placed on regular production until the Commjssion took additional action to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations. 5) NCD No.8 was not drilled because Aurora encoWltered a shallow obstructlou while driving conductor pipe. The conductor was pulled, the rig moved 7 feet to the ea.st, and the NCU No. 9 we]) was pennitted and drilled as a replacement well. In this order, references to "NCD No.9" include NCU No.8 as appJicable 6) Aurora, by letter dated Septem.ber 25, 2003, and received by the Commission that same day, has now requested that the Commission allow Aurora to p]ace the Nicolai Creek Unit No. IB, No.2, and No.9 wells on regular production as soon as facilities are complete. ~8/~6/2004 09:12 9072767~_ AOGCC PAGE 03 -< Conservation Order No. 4i'_ October 16, 2003 . Page 2 of 4 FINDIN GS: 1) Newly acquired 3D seismic data and information obtained through drilling the NCU No.9 well have al10wed Aurora to better define the limits of the NCD gas reservoirs. Based on this imprQved understandi:n:g, Aurora is prOPQsing changes to the existing Nicolai Creek Unit and Participating Area cup A") boundaries. These changes will ínclude Federal acreage on the north side of the property line that cUITently separates Federal and State acreage and exclude some State acreage in ADL 17585. 2) Aurora is the only owner within 3000 feet ofNCU No. IB, No.2 and No.9. 3) The proposed expanded PA will encompass NCD No. IB, No.2 and No.9. All properties within 1500 feet of each of these wells will be in.cluded, in whole or in part, io the expanded P A. . 4) It is expected to take no more than 100 days to obtain the necessary approvals of the proposed changes to the NCU and P A from the Department of Natural Resources ("DNR') and the Bureau of Land Management ("BLM"). 5) In the interim, Aurora proposes to report production from NCU No. IB and No.2 to DNR at a 5% royalty rate, and production from NCD No.9 to BLM using a 12.5% royalty rate. IfDNR and BLM approve Aurora's proposed revisions to the NCU and P A and associated tract participation percentages, Aurora will submit revised royalty and operator reports to DNR and BLM retroactive to the first day of production according to tenns of the Nicolai Creek Unit Agreement. 6) DNR and BLM have consented to Aurora's interim royalty payment methodology. 7) Allocation of gas resources to individual leases win require evaluation of technical data such as seismic, petrophysical, gas properties, reservoir pressure and temperature to arrive at equitable division of royalties. CONCLUSIONS: 1) An expanded NCU PA encompassing the NCD No. 1B, No.2 and No.9 wells and including, in whole or in part, all properties within. 150.0 feet of these wells will satisfy the objective of offseting any advantage a landowner or owner may have by reason of the wells having been dri]1ed to the exception locations, and regular gas production from these weBs within such an expanded P A will not result in waste or jeopardize the correlative rights of adjoining or nearby owners 2) Payment of royalties according to Aurora's interim plan for a period of not more than 100 days, subject to retroactive adjustment when the proposed PA expansion is approved, win adequately protected holders of affected property interests. ·' · 0el CoG/ 2004 09: 12 9072757542 AOGCC PAGE 04 Conservalion Order No.4 7_ October ) 6, 2003 . Page 3 of 4 3) If a P A expansion that meets the description set out in ConcJusion 1 is not effected within 100 days after regular production commences from the NCD No. IB, No.2, or No.9 well, the Commission may need to revisit the conditions under which further regular production from those wells is approved. 4) Additional notice and public hearing pdor to approving regular gas production from the Nicolai Creek Unit are not necessary under the circumstances and conditions of this order. 5) Regular reservoir pressure measurements will be required to perfonn volumetric and material balance calculations. NOW, THEREFORE, IT IS ORDERED: 1) Aurora's request to begin regular production from NCU No. lB, No.2 and No.9 is approved, subject to the condition that if an expanded P A meeting the description set out in Conclusion I is not effected within 100 days after regular production commen.ces ftom the NCD No. IB, No.2, or No. 9 well, the Commission will determine whether other or additional conditions will be imposed on further regular pr.oduction from those wells in order to offset any advantage a landowner or owner may have by reason of the wells having been drilled to the exception locations Such other or additional conditions may be made effective as of the date of flISt production from NCD No. IB, No.2 or No.9. 2) Aurora shall keep the Commission timely informed in writ1ng of the status of its proposed changes in the NCU and PA. 3) Prior to regular production, Aurora shall take a pressure measurement on each well to detennine initial reservoir pressure. 4) Aurora shall perform a minimum of one bottom-hole pressure m.easurement per well annually to monitor reservoir pressure. The surveys required in Rule 3 role may be used to fulfill the minimum. requirements. A common datum for measurements in production intervals, if in communication, shall be established by the operator at a relevant depth in feet subsea. Pressure survey"'S may be stabilized static pressure measurements at or near the production zone or extrapolated from surface (single phase fluid conditions), pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole fonnation tests. Pressure data must be representative of reservoir conditions for use in material balance and volumetric calculations. 5) Aurora shall submit data and results fiom pressure surveys in an annual reservoir surveillance report on or before April 1 of each year. The report must include future development plans, reservoir depletion plans, and surveillance infonnation for the prior calendar year, including: a. reservoir pressure map at datum, summary and analysis of reservoir pressure surveys within the pool; · 0e/Ð5/2004 09:12 90727E,,2 ---- Conservation Order No. 47. October 16. 2003 AOGCC PAGE 05 ,--,' . Page 4 of 4 b. results and, where appropriate, analysis of production surveys, tracer surveys, and any other special monitoring; and c. review of pool production a)]ocation factors and issues over the prior year. All data necessary for analysjs of each survey need not be sub1nitted with the report but must be available to the Commission upon request. 6) Unless notice and public hearing is otherwise ordered, the Commission may administratively waive the requirements of or administratively amend any rule stated above as lon.g as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of flujd movement into freshwater. ·DONE at Anchorage, Alaska and dated October 16,2003. ( "\ ........- ..\ aniel TI. Sþ.mout1t, Jr., Comm.issioner Alaska M and Gå'('Conservation Commission ~ ~~ Randy R1ch, Commissioner Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days :lfrer reccipt (If written no(iee of the entry of ~n order. 8 pCI"$(ln affected by it may file with thc Commission an application for rchcuing. A rcquc~t for rehearing must be rceeived by 4:30 PM on the 23rd day following !he d:Jte of the order. or next working dny if a holiday or weekend. 10 bc timely filed. The Commission sha.H gnant OT refuse the 8pplica.tion in wholc or in pan within 10 days. Thc Commission can rcru~e an application by net acting on it within the 10-day period. An affected pcTS011 has 30 dBY~ frQm the date thc Commission refu$es the applic;¡tion or maih¡ (or otherwise distribulc$) :1n order upon rehearing. hoth being thc final order of thc CQmmission, !(I 3ppeal1he dcci~ion to Superior Court. Where a request for '~hearing is denied by nonaction of the Commission. the JO-day period for appeal to Superior Court run~ fmm the date on which the request is deemed denied (i.e.~ I O'h dRY lifter the Ðpplication for rehearing was ñled). #1 OFFICE OF THE COMMISSIONER H. MURKOWSKI, GOVERNOR @~&~~ @~~~@~ DEPARTMENT OF NATURAL RESOURCES o 400 WILLOUGHBY AVENUE JUNEAU, ALASKA 99801-1796 PHONE: (907) 465-2400 FAX: (907) 465-3886 o 550 WEST 7TH AVENUE, SUITE 1400 ANCHORAGE, ALASKA 99501-3650 PHONE: (907) 269-8431 FAX: (907) 269-8918 Sarah Palin, Commissioner AOGCC 333 W 7th Ave # 100 Anchorage, Alaska 99501-3539 September 25, 2003 RE: Nicolai Creek Unit, Letter supporting production petition and setting out interim royalty payment methodology. Well Nos.1B, 2, and 9 Dear Ms. Palin: The Department of Natural Resources (DNR), the Bureau of Land Management (BLM), and the Mental Health Trust Land Office (TLO) support Aurora Gas, LLC's (Aurora) petition to the AOGCC to allow Aurora to begin production from the Nicolai Creek Unit No. 1B, No.2, and No.9 (formerly well No.8) wells, as soon as the facilities are completed. Aurora is currently prohibited from placing these wells on regular production under Conservation Order No. 478, dated September 5, 2002. Aurora has acquired new 3-D seismic data over the area and is currently working with the DNR and BLM to revise the existing participating areas and the unit area. In order to ensure the royalties are paid to the proper parties and allow development to proceed timely, Aurora will report production from wells number 1B and 2 to the Division of Oil and Gas (Division) using accounting unit code NCPA and a 5% royalty rate. Aurora will report production from the number 9 well on lease AA 8426 to BLM using a 12.5% royalty rate. If the Division and BLM approves Aurora's forthcoming application to revise the P A and unit area and the new tract participation percentages, Aurora will submit revised royalty and operator reports to BLM and the Division back to the first day of production as provided for under Section 11 of the Nicolai Creek Unit Agreement. Signatures of the parties agreeing to this royalty payment methodology are set out below. If you have any questions regarding this letter contact Mr. Christopher Ruff with the Division at 907-269- 8451. (:'~iJ Q r: ~.Jt~" ¡.J.) ,'I (I L·.' ~~,// ß*:~t~; Myers ~ .- ~- . LJ ~; ~-~ (J I) t 1 '.} :_~ L u d .~. ¡ - : \ BLM 'd;::h¡il Printed Name Title Signature S+e-p~"-nk MCd-l-(>H;? ¿%La ~ I1knc¿1 {. ¡J"o/Í Dep¡jIvDJk~ /eJ-n¿í 0~ , / j () Date 1/z> Þ 3 ~Þ5/o3 TLO "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans." - PROPOSED · · ~ · · ~ « · · · '" 19 ...êW....... .....~&......4.~V..........~.*+.*....4..*ê¥~ · · · .. · + · · · · · · .. .. · .. .. .. · · · 30 1 '" $ * . . · · · · .. · · · · · · · · ~ .. .. · .. .. · · .: .. .. .. · · · .........