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Home My WebLink AboutCO 412Imae Pro'ect ~r+der File Covar"~a ~e 9 J 9 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. 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III II II II I{I II I I III R.=~,~~„ iiii!iuur,uuii BY: Maria Date: /s/ Comments about this file: Quality Checked III illlll III Ili! III 10!6/2005 Orders File Cover Page.doc ~ • INDEX CONSERVATION ORDER N0.412 1. November 25, 1997 2. December 4, 1997 3. December 31, 1997 4. December 31, 1997 5. January 8, 1998 6. February 10, 1998 7. January 2, 1998 LAPP Resources, Inc. request to expand the Houston Gas field AOGCC request for more information Letter to the AOGCC from GRI Letter to the AOGCC from GRI Notice of Hearing, Affidavit of Publication Transcript Volume Requirements for Air and Gas Drilling Conservation Order 412 ~o~c'~io~ns o~- ~1~-s C~ we.r~ ~~1w.e.~ ~~n GO P~~. u~1~ 1r~e. ,re~;1 w.e.~l ~/ GO '`~ t ~. c4wr, •~ Scyea•~e.. L~ ~ 8~ ~3~9$ 358 1~~ a~~.c34e..ti~- ,,~,~,~ a,,., e.1n.v E,. • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 3001. Porcupine Drive Anchorage, Alaska 99501-3192 Re: THE APPLICATION OF GRI, INC.) Conservation Order No. 412 for an order allowing air drilling ) below the conductor in wells in the ) Houston Gas Field Houston Gas Field. ) Houston Coalbed Gas Pool February 24,1998 IT APPEARING THAT: 1. GRI, Inc. (GRI) submitted an application dated December 31, 1997 requesting a variance td 20 AAC 25.033 to enable wells in the Houston Gas Field to be drilled using air as the drilling fluid. 2. The Commission published notice of public hearing in the Anchorage Daily News on January 8, 1998 pursuant to 20 AAC 25.540. 3. A public hearing was held on February 10, 1998 at the Commission office at 3001 Porcupine Drive, Anchorage, Alaska. FINDINGS: 1. Conservation Order No. 358 defines the Houston Gas Field, Houston Coalbed Gas Pool. 2. GRI assumed operatorship of the Houston Gas Field from Lapp Resources, Inc. on December 1, 1997. 3. GRI owns all of the leases that comprise the Houston Gas Field. 4. GRI proposes to drill Coalbed gas wells in the Houston Gas Field as straight holes using air as the drilling medium below the conductor casing set at 500 feet. 5. Several nearby oil and gas wells found small amounts of low volume, low-pressure gas .with no indication of overpressure within the interval GRI intends to develop. 6. GRI has subcontracted with Wayne E. Westberg, M-W Drilling, Inc., to drill wells to the Houston Coalbed Gas Pool. Mr. Westberg has considerable experience drilling with air to depths up to 500 feet in Alaska for water and to 4700 feet in the Tuscaloosa trend in Alabama for Coalbed methane. Conservation Order February 24, 1998 Page 2 7. GRI will employ a foam and mist drilling system, in addition to air. Drilling with foam or mist is more effective than drilling with air because it increases the ability of the fluid to remove cuttings from the well bore, improves clay stability and limits the risk of downhole fires. The foam is biodegradable. 8. Drilling with air has been done for at least 50 years and is common in the lower 48 where over 100 drilling contractors use air for drilling. 9. The merits of drilling with air include higher penetration rates and lower cost because there is no active mud system, no mud to dispose of, and less formation damage. 10. The disadvantages include caving tendencies in some holes, the possibility of water influx, and minor risk of downhole fire. 11. GRI will use compressed air rates exceeding one million cubic feet per day to lift cuttings from the well bore. This high flow rate, coupled with mist or foam, tends to stabilize the wellbore, can make beneficial use of formation water, and tends to reduce the risk of downhole fire. 12. Blowout prevention equipment will be flanged to seven inch casing cemented at 500 feet, and will include a set of pipe rams, an annular preventer or rotating head, a diverter with seven inch vent line, and a stripper or rubber packer. 13. GRI will have a mud system, with a tank containing 100 barrels of 10 ppg bentonite gel mud, appropriate heaters and pumps, on standby should it be needed. for well control. 14. GRI will employ two gas sensors, one located near the BOPS and other near the rig operating area to help protect the crew. CONCLUSIONS: 1. Drilling with air is an established method that is commonly used in other parts of the country. 2. It is highly unlikely that there is any large volume, high-pressure gas sands in the interval proposed to be drilled for coalbed gas development in the Houston Gas Field. 3. The proposed well control system, including the standby mud system and related safety equipment, appear adequate for drilling the interval to be developed. 4. Drilling with air, and using foam or mist, should improve productivity because formation damage is reduced. 5. Drilling with air will allow faster drilling, with lower cost and fewer environmental problems associated with. disposal of drilling muds. Conservation Order No ~ Pa e 3 g Februan' 24, 1998 6. Drilling with air in the Houston Gas Field to a depth of 2200 feet is appropriate and should not cause waste. NOW, THEREFORE. IT IS ORDERED: I. Drilling for coalbed methane in the Houston Gas Field using air, with mist and foam, is hereby approved to depth of 2200 feet. 2. Based on engineering and geologic data, the Commission may administratively modify the depth and areal limits approved for drilling with air. DONE at Anchorage, Alaska and dated February 24, 1998. ,, ,~ h 1 ~. f ~.~s~ ~~ °~~..: M .~ ~~ ~..,w ~_~ ~• ~pnn ~; 3 -~' _ '°t i S i~y // ~ 5 Robert N. 'stepson, P.E. Commissioner AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a parson affected by it may file wish 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 retiise the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. 1n affected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both beingihe final order ofthe Commission, to appeal the decision to Superior Court. \'1'here 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., 10th day after the application for rehearing was filed). ~7 r VOLUME REQUIREMENTS for AIR & GAS DRILLING R. R. ANGEL Exploration 8c Production Division Natz~ral Resources Group Phillips Petroleum Company gp Gulf Publishing Company a Book Division Houston, London, Paris, Tokyo C~ y ~ Z. . *, ~ , ~ ~' ~ ,., `~'. :ii-;;` n. yy .t ~. ~y 1+ I~~+y y,. '"i.~~d'~G ~. ~ ~ r.l C; ~~. ~i1 ~1+}r 1S1~1 t4d ft:.~~t61~A1 tr:i~:;hc~~c! • C FOREWORD This book presents the circulation rates that are required for air and gas drilling. These rates are the minimum necessary to produce veloci- ties in the bottom of the annulus that .are equivalent in lifting power to a standard air velocity of 3000 feet per minute. This standard air velocity is required for best results in drilling dry formations. Each curve gives the air or gas requirements in standard cubic feet per minute versus depth for a particular drilling rate. Data for gas gravities of 1.0 (air), 0.8 and 0.6 are included. Circulation rates for in- termediate gravities can be found by interpolation. Each curve is a plot of solutions to the following equation 6.61 S (TS -~ G h) QZ I (p2 V S -{- b T~a„ ) e21n ~ Ta,. - b Ta,, (Dh -- DP )2 Ve - Where: S Q -f- 28.8 K D2,, a = 53.3 Q 1.625 X 10-s Q2 b = (Dh - Dp) 1.333 (D2 - D P ) 2 Dh =Hole diameter, Ft. Dp =Pipe outside diameter, Ft. e =Base of natural logarithms, 2.71828 G =Annular temperature gradient, °R/Ft. h =Depth, Ft. K =Drilling rate, Ft;/Hr. Pg =Pressure in the annulus at the surface, #/Ft.2 Abs. Q =Required circulation rate, standard Ft.3/Min. (60°F and 14.7 psia) S =Specific gravity of the gas related to air, dimensionless TS =Surface temperature in the annulus, °R Tay =Average down hole temperature in the annulus, °R Ve =Velocity of standard density air, Ft./Min. This equation includes the effect of the drilled solids on down hole pressures and velocities. It was derived by applying the Weymouth fraction factor to vertical flow. This derivation was presented in the author's paper 873-G, "Volume Requirements for Air or Gas Drilling" at the annual fall meeting of AIME in Dallas, Texas, on October 8, 1957. The solutions that are presented in this book were obtained on a digital computer. The use of this computer saved about six months of slide rule calculating. ~~ i 1 GAS GRAVITY I.0 ~ HOLE SIZE 4" DRILL PIPE OD.31/2" 6 l/ 16 15 0 w oc 0 z s U 0 oc 0 Z H W Q Z O Q J U ~_ U 120/HR. 90%HR. 60~/HR. 30%HR. 0'/HR. -, _; r , - - ~ ,-, 1 _ __ ~ _ I-+ - -- - ~ ~ - ' - ~ __ 1 J ~~ - t -t f- -- i ~ - ~ i ~. r t ~ ~ i t ~ _ ~ _ ~ L. ~- ~ € ._ ~ ,- ~ ~ t ~ 0 0 2 6 4 8 0 12 I 14 b. i .F', , rd ,~~ , DEPTH THOUS ANDS OF FEET~~ ~3?~ ~`u~~l~. ~;~~i2.11f`~:~1Cln 3 ,... ti ~s , EE,, 1/. \//11 (IAAC DC/'1111DCAlCAITC GRI-95/0132.2: Successful Drilling Practi...Basin - 1 mg Plan Overview: Part 1 • 4. DRILLING OPERATIONS PLAN - SPIRO FORMATION http://vrworg/tech/e+p/reports/gri95_0132/dop_ark/partl.htm 1. DRILLING PLAN OVERVIEW: PART 1 1.0 BASIC WELL DATA 1.1 WELL GOALS 1.2 STRATIGRAPHIC COLUNIN Well Name: SUCCESSFUL SPIRO WELL #1 Revision Date: March 1995 1.0 BASIC WELL DATA Overview for this Study: The Arkoma Basin contains varied, diverse drilling conditions. This study focuses on Oklahoma wells near the Choctaw fault in Pittsburg, Latimer and Leflore counties. Of the three plays in this area; 1. Atoka sands, 2. thrusted Spiro-Wapanucka, and 3. Arbuckle, the Spiro was chosen for this evaluation. The specific Spiro area that has been selected for this well plan is located in the area of Townships 4 to 5 North and Ranges 19 to 20 East. Total Depths of offset wells ranged from 12,300 ft. to 15,750 ft., with the average being 14,900 feet. Horizontal displacements range from 2500 ft. to 4200 feet. In developing a well plan in this area of the Arkoma Basin, severe faulting and thrusts make it difficult to correlate data and to utilize offset well information effectively. Wells that are several hundred feet apart may have markedly different drilling characteristics and conditions. The diverse conditions encountered include dip angles, formations and thrusts. Surface dip angles range from 0 to 80 degrees making deviation a major problem. Offsetting the surface hole location is one method employed to counter this problem. Percussion air hammers using flat bottom bits have proven to be most effective with respect to penetration rate and deviation control (i.e. "drill the fastest and straightest possible holes"). The unpredictability of the Jack Fork sand is a major problem in this area. This formation is significantly harder than the others drilled and will increase days-to-drill and well cost drastically. Finally, thrusts cause problems due to sudden deviation changes and rubble zones which adversely impact borehole stability and increase the likelihood of getting stuck. 1.0.0 BASIC WELL DATA FOR SUCCESSFUL SPIRO WELL #1 ~~~~~~~ JAS ~~' ~9~~ Alaska Qil & Gas Cons. Cammissior~ AnChara~a 1 of 5 1/2/98 1:56 PM GRI-95/0132.2: Successful Drilling Practi...Basin - 1 ling Plan Overview: Part 1 http:/I orgltech/e+plreports/gi95_0132/dop_ark/partl.htrn ~~ Township/Range: T4-SN, R19-20E Proposed Well Intent, E (Exploration), A (Appraisal), or P (Production): E • License Number: 35-121-2369 Planned Start Date (mm/yy format): 04/95 Planned Total Depth of Well: 15,155 ft.1l~ID Planned Total Depth of Well: 14,686 ft. TUD Horizontal Displacement: 2928 ft. Azimuth (0-360 Deg.): 337 1.1 WELL GOALS 1.1.0 PROJECT SCOPE 1.1.1 GEO-TECHI~TICAL SCOPE 1.1.0 PROJECT SCOPE 1.1.Oa PROJECT GOALS The objective of this well is the Spiro sand with an expected top at 14,500 ft. and a planned TD of 14,686 feet. This plan calls for air drilling using percussion hammers and bits to be used for the surface casing (3500 ft.) and to be attempted to 6000 ft., or until hole instability requires the hole to • be mudded up with oil base mud. The planned days from spud to setting of production casing is 61 days. This equals an average daily ROP of 250 ft/day from the spud date to setting of the production casing. The probable production is lOMM SCFPD with a potential rate of 30MM SCFPD. An option of setting 7 inch production casing instead of 5-1/2 inch casing is planned if production is determined to be greater than lOMM SCFPD. The estimated AFE for this well is $1,888,000 and is based on the average cumulative cost of offset wells that do not encounter Jack Fork sands. 1.1.Ob WELL TYPE The well described in this plan is an exploratory well that will require directional control. 1.1.Oc TARGET OBJECTIVES The target objective is the Spiro sand. The exact angle at which the wellbore intercepts the target is not critical due to formation faulting. Our planned target inclination is 21 degrees at a 337 degree azimuth. This inclination is perpendicular to the formation dip angle. The Wapanucka limestone could be fractured and contain gas. The surface location will be offset approximately 3000 ft. to allow for the drift caused by the formation dip angle. Our directional well plan will take maximum advantage of the natural drift rate. Deviation control while air drilling the surface hole will be maintained by using percussion hammers to approximately 6000 feet. After mudding up with an oil base mud, an IADC 5-1-7 bit on a packed hole assembly will be used, and the natural build rate of 1 degree per 100 ft. will increase the inclination to 21 degrees. This is the estimated dip angle of the remaining formations to TD. Oil based mud will aide in maintaining hole stability and reducing torque and drag. Directional 2 of 5 1/2/98 1:56 PM GRI-95/0132.2: Successful Drilling Practi...Basin -fling Plan Overview: Part 1 adjustments will be made with a mud motor. 1.1.1 GEO-TECHNICAL SCOPE l.l.la GEO-TECHNICAL GOALS http:// org/tech/e+p/reports/gri95 Q 132fdop_ark/partl.htm The main goal will be to air/mist drill to 6000 ft. or until hole instability becomes too great. Deviation control will take maximum advantage of the natural build rates of the formations. l.l.lb GEOLOGICAL MARKERS The following table lists the approximate depth of the formation tops encountered. l.l.lc DOWN HOLE DRII.LING ENVIRONMENT • A. Potential Drilling Problems and Hazards -The following is an overview of problems encountered in this area. Potential drilling problems and hazards are discussed further throughout the well plan along with recommended operating and design practices. The main hazard in this area is hole instability. While percussion air drilling the hole tends to slough in leading to stuck pipe, the proper air flow rates and annular velocities must be maintained for proper hole cleaning. Foaming agents are required when shale sticking prevents even exhaust of cuttings. Reaming of the surface hole can cause problems by knocking large pieces of shale into the hole causing the drillstring to become packed off. The same problem can occur when tripping with the flat bottom bit. The Atokan Shale contains water sensitive sand stringers starting at approximately 4000 feet. Moisture in the hole while percussion drilling at this time must be avoided as the sand stringers will heave into the hole and stick the pipe. Switching to an oil base mud initially can cause unconsolidated material to fall into the hole. Therefore, higher viscosity sweeps should be used to help clean the hole. Sudden changes in formation hardness can cause bit damage to the carbide button inserts on the flat bottom bit if penetration rates are too high. This damage is caused by the change in the instantaneous penetration rate when drilling from a softer formation to a harder one. Jack Fork sands are harder than surrounding formations and will reduce penetration rates. • Deviation control due to high dip angles is a major problem. High dip angles also lend to hole cave in. Successful practices to counter these problems will be discussed in detail in the individual 3 of 5 1/2/98 1:56 PM GRI-95/0132.2: Successful Drilling Ptacti...Basin - 1 mg Plan Overview: Part 1 http:// org/tech/e+p/reports/gri95_0132/dop_arWpartl.him drilling programs. • B. Offset Well Problems -Following are several problems encountered on offset wells. Stuck pipe due to hole cave in. Reaming due to bit gauge wear and hole swelling. Other problems attributed to specific wells and noted as follows: Problem Offset Well #1 (TSN, R20E Sec30): The surface hole was drilled with no problems to 3600 ft. using a flat bottom bit. While tripping to run casing, the hole caved in sticking the drill pipe. After attempting to jar without success the contractor backed off at 3444 ft., filled the hole with oil base mud, pumped high viscosity sweeps to clean the hole, and were finally able to screw into the fish. Attempts were made to jar again without success and a decision was made to whipstock. A cement plug was set at 2861 ft., and the sidetrack was drilled from 2881 ft. to 3592 ft. on water mud where 10-3/4 inch casing was set with no problem. The cave in may have been caused by the severe dip angle and the walls tendency to break offwhen tripping. We recommend that trip speed be minimized to help prevent cave in. Hole section trouble response tables are listed at the end of this plan. Problem Offset Well #2 (T4N, R19E Secl): The surface hole was started on air with a 12.45 inch flat bottom bit. After mudding up with fresh water mud, the contractor attempted to follow with a 12-1/4 inch tri-cone bit on a packed assembly. They couldn't get to bottom and reaming was necessary. One of their after well conclusions was to start with a 13-1/2 inch bit to reduce the need for reaming and delays caused by mudding up. Our recommended plan includes a tapered hole • design and is critical in reducing reaming. Problem Offset Well #3 (TSN, R20E Sec19): Drilling was conducted to approximately 1750 ft. where the contractor had problems dusting and attempted to load the hole with mist. They became stuck, backed off, loaded the hole with oil mud, attempted to retrieve the fish, cemented and sidetracked. At 4246 ft., while percussion drilling, a similar problem occurred. They left two hammers in the hole. At 12,100 ft. the contractor became stuck, but was able to work the pipe free. To decrease the likelihood of becoming stuck, our recommended well plan includes "listening" to hole conditions and making "necessary and timely" adjustments (such as pumping mist) before conditions deteriorate. Problem Offset Well #4 (T4N, RZOE Sec6): Operations became stuck at 1446 ft. while drilling ahead on mist. After backing off and loading the hole with a gel mud they were able to recover the fish. Becoming stuck while drilling the surface hole appears to be the most frequent problem encountered in this area and should be anticipated in rig selection and specifically rig power requirements. G Pressure/Temperature Environment -This is not a HTHP well. Pressure curves should be used as a guide only. Pressure PPG(EMW) Mazimum Anticipated Pressure (and associated Depth): 8260 osi at 15,000 feet. MW; maz. =10.6 PPG 4 of 5 1/2/98 1:56 PM C~RI-95/0132.2: Successful Drilling Practi...Basin -fling Plan Overview: Part 1 G PressurelTemperatureErwironment -continued ~~ Temperature fDeg. F) http:// org/tech/e+p/reports/gri95_0132/dop_ark/partl.htm Mazimum Anticipated Static Bottom Hole Temperature (and associated Depth): 250 Degree F. at 15,000 ft. l.l.ld EVALUATION REQUIREMENTS A. Overview -Our evaluation requirements include mud logging, MWD while running the mud motor and a log suite upon reaching TD. The standard logs run at TD are dual induction, gamma ray, compensated density and compensated neutron. x Geological Sampling Program -The following mud logging program will be followed. Notes: Mud logger gas readings are not totally reliable for determining mud weight. Oil base mud and low permeability formations may not give accurate gas readings. C. MWD Requirements - MWD will be run with the mud motor to provide directional surveys. D. Coring Program -Coring of the Spiro is not required. l.l.le SUCCESSFUL OFFSET WELLS 1.2 STRATIGRAPHIC COLUMN The depths listed are for approximate formation tops. Successful Spiro Well #1 Lithology 5 of 5 1/2!98 1:56 PM CrRI-95/0132.2: Successful Drilling Practi... 6. Surf~le Interval SOft. - 3500ft. • 4. DRILLING OPERATIONS PLAN - SPIRO FORMATION http:// org/tech/e+p/reports/gri95_0132/dop_ark/part6.htm 6. SURFACE HOLE INTERVAL SOft. - 3500ft. 6.0 Hole Section Overview 6.1 Offset & Experience Information 6.2 Equipment List 6.0 Hole Section Overview Our surface hole interval will be drilled with a flat bottom bit on a percussion air hammer. Beginning with air drilling, soap will not be added until water causes cutting removal to be a problem. At that time soap will be added and pumped to prevent cuttings from sticking together. The use of water or foam helps to reduce dust at the surface. Excessive dust at the surface can damage drilling equipment and be a inhalation hazard for rig personnel. Water injection also cools the compressed air helping to prevent galling of close fitting hammer parts. Foam will also help remove small amounts of produced water. Our tapered hole will go from a 15 inch bit to a 14-3/4 inch bit or slightly smaller. One and one half hole volumes of freshwater standby mud will be maintained in the pits if the hole cannot be cleaned with mist. Planned surface casing depth is 3500ft., 10-3/4 inch, 45.50 lb./ft, K-55 casing will be used. 6.1 Offset & Experience Information HOLE SECTION TROUBLE RESPONSE WELL: SUCCESSFUL SPIRO WELL #1 HOLE SECTION: 15 inch, 14-3/4 inch 1 of 3 12/31/97 5:33 PM GRI-95/0132.2: Successful Drilling Practi... 6. Surfa~le Interva150ft. - 35008 http://org/tech/e+p/reports/gri95_0132/dop_azk/part6.htm .......... ................................................................... .. ...,r ........................................._._._..............._..., ;:HOLE :INDICATIONS :FIRST ACTION BY ::PREVENTION ' S DRII,LING :;TRIPPING ... ,;. .. DRILLING :TRIPPING DRILLI N G ::TRIPPING tHole Cleaning Reduced ;;Fill on : _ Come off ::Leave kelly __ ':Maintain :;Make sure :returns. ::bottom. : bottom. Use on and ':sufficient air ::hole is clear :Lower ROP .`Increased : mist pump ;circulate ::flow rate to ~~before 'Increased ::drag when : and add ::every joint. :provide ::tripping. ~` ;back ;;first coming: soap. x;4000-5000 ;pressure. ::off bottom.: Increase air ':FPM annular f :Cuttings : volume to :'velocity. Use sticking maintain ::mist pump together : pressure. ::and soap. with :swatch for moisture. ::steady flow :Irregular ~ of cuttings at flow at sblooey line. :blooey line. ...................... ....................... ................. _. ~sUnconsol-idated :Reduced ::Fill on : Come off ::Leave kelly ~s''Maintain ::Make sure :Formation :returns seen ::bottom. : bottom: Use on and ::annular :hole is clear at surface. :;Increased : mist pump ?:circulate ::velocity. :before ;:(ratty shale) :Increased ~sdrag when and add ::every joint. :; ::tripping. torque & :'first coming: soap. (KCL is usedss drag. 'soffbottom. Increase air sas a shale :Sporadic : volume to ::control agent:; cuttings ` maintain by some :discharge at ; pressure. ::contractors :blooey line. : Blowing in ::but this is : one spot too ' ::corrosive to long will ~sthe hammer.):: produce a cavern. :Pack-OffBridge :Decrease in ~sIncreasing : Pull off ::Pick up ::Keep hole :Make sure ROP. ::set down : bottom. ::kelly and ::clean with ':hole is clear :Reduced ~sweight. : Work pipe ::work pipe. ::required air ::before returns. ~sOverpull off while ::velocity and :;tripping. Increased ::slips. : cleaning :'volume. Do ssMonitor 'torque & hole. ::not allow ::drag trends. drag. sROP to Increased ::exceed back :;ability to pressure. :;clean hole. .. sA if ~ dd soa .. P ~~cuttings ::indicate. 6.2 Equipment List A Sandvik Mission Silverdril 12 hammer with a Megabit 15 inch bit and 14-3/4 inch bit 2of3 12/31/97 5:33 PM Gt'tI-95/0132.2: Successful Drilling Practi... 6. Surfa~e Interval SOft. - 35008 http://org/tech/e+p/reports/gri95_0132/dop_ark/part6.htm (approximately) will be used for the first 3500 to 3600 feet. Four air compressors, 2 boosters and 1 mist pump will supply the air requirements 3 of 3 12/31/97 5:33 PM Damage Free Air Drilling. ~ ~ http://www.gri.org/libraryabsdabstracts/7727.htmt Damage Free Air Drilling. "'~'~`~'~``` Document Types Conference Pa er P Conference Title: International Gas Research Conference, 1992. Authors: Graham, Reuben L.; Foster, John M.; Amick, Paul C.; Shaw, J. Stanley Corporate Source: Reuben L. Graham, Inc.,. Charleston, WV Publisher: Government Institutes, Inc., Rockville, MD Publication Date: April 1993 Pagination: vl, p291-303 GRI Contract Number: 5090-213-2016 Project Manager: Fink, Kent T. Summary This paper examines the use of reverse circulation and air dryer to prevent formation damage during air drilling operations. Results are presented from three wells drilled in Pike County, Kentucky, to demonstrate Damage Free Drilling (DFD) achieved. Penetration rates, required air volumes, gas entries, and sample size and quality are discussed in addition to the damage free condition of the wellbore. Modifications to the drilling rig, encountered problems, well control considerations and other safety precautions are also discussed. Modifications made to the drilling bit and the fabrication of an air box or Continuous Circulating Chamber (CCC} are presented. Recommendations are included for modifications to the surface return systems i.e., gooseneck, rotary hose, and blooie line. Indezing Terms: Appalachian Basin; Kentucky; Gas wells; Well drilling; Formation damage; Air drilling; Damage-Free Drilling technique; Reverse circulation drilling; Pike County Availability: Publisher ~J 1 of 1 12/31/97 5:29 PM I. EXECUTIVE SUMMARY I. Executive Summary h.gri.org/tech/a+p/reports/gri95_0039/sectOl.html The advantages of air drilling, which include high penetration rate and reduced formation damage, have been known for many years. In spite of these advantages, there are several geographic azeas where air drilling is not commonly used. To find out why this is the case, Reuben L. Graham, Inc. (RLG), Advanced Resources International, Inc. (ARI) and Pennsylvania State University (PSU), in conjunction with the Gas Research Institute (GRt), conducted afour-month study in the Permian, Mid-Continent, and Rocky Mountain basins. These basins were selected for study because of their historical limited use of air drilling, and of the potential impact on drilling economics. To gain insight and direction into the types of problems experienced by contractors and operating companies with air drilling, a questionnaire was developed. This questionnaire was circulated to drilling contractors and operating companies in these basins. To augment the results obtained from the questionnaires, on-site meetings were held and telephone interviews were conducted. Specifically, we were directed to determine: what barriers existed to increased air drilling usage; what reseazch was needed to overcome these barriers; and what would be the economic impact and benefit of a successful research program. Survey Results Over 100 organizations participated, including Amoco, Chevron, Shell, Conoco, Enron, Mobil, and Pazker & Pazsley, and drilling contractors who operate in the basins studied. There were three major findings in this study: 1. Air Drilling Can Significantly Reduce the Cost of a Well. Naturally, there is significant interest on the part of operators who want to save money, and a disinterest on the part of drilling contractors who aze paid on day work rates rather than penetration rates. 2. Lack of Familiarity with Recent Developments in Air Drilling Technology. Many operators had tried air and failed many years ago and therefore have not kept abreast of the latest developments. Booster compressors, Trans•Foam, hammerdrills and personal computers with the appropriate soflwaze in the field can solve many of the previous problems largely related to water influx and sloughing. Industry training of the state-of--the-art could address this barrier. 3. Expansion of Air Drilling Will Require Demonstration Projects. Few, if any, operators have pulled together all the latest innovations in a scientific manner. Significant research remains to be undertaken in areas of the country that have little or no air drilling underway. Preliminary cost studies indicate substantial drilling cost savings may be realized in the Permian, Mid Continent, and Rocky Mountain basins through air drilling technology. Based on the National Petroleum Council 1992 study (which forecasts wells to be drilled by the year 2010) and actual drilling costs provided by industry, our projected savings is $5 billion over 16 years, as shown in the following table. 1 of 2 12/31/97 5:06 PM I. EXECUTIVE SUMMARY h.gri.org/tech/e+p/reports/gri95_0039/sectO l.html During normal drilling opeartions, significant drilling damage can occur when drilling overbalanced, even in subsequently fractured wells. Air drilling techniques could have a positive economic impact in those situations where damage is occurring. These additional benefits have not been quantified. 2 of 2 12/31/97 5:06 PM II. SURVEY ANALYSIS II.5urvey Analysis Air Drillin Survey Answers h gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 Question #1: Where is your principal geographic area of operations Question #2: How many wells do Xou drill per calendar year? Question #3 : What is the average depth of wells drilled? Ouestion #4: Do you use any form of air drilling? 4uestion #5: What percentage of wells do you drill totally with air? Question #6: What percentage of wells do~ou drill partially with air? Question #7: Would you be interested in discussin{~ air drillin tg echniques that might result in lower drillin costs? Question #8: How would you rank your reasons for not using air drillin tg echniques~~i,ist from 1 =Highest to 6 =Lowest concern Question #9: Have you ever used aerated water or pressure balanced drilling? Question #10: Do you ever drill sections of a well with air/mist/foam then drill other sections with muds Question #11: Do you ever experience drilling rates slower than 20 feet/hour? Question #12: Do kou have sufficient problems with deviation to warrant the use of corrective downhole tools such as reamers, stabilizers, downhole motors, etc.? Question #13: Have you ever tried Using a Hammerdrill (percussion type drill Question #14: Do you feel that lowering drilling costs would result in more wells being drilled? Question #15: Would a foam that could be recycled be important to you? Question #16• Would you enclose your corporate brochure or list your available equipment with reference to rigs, mud systems, air svstems, and B.O.P.'s? Question #17• If~uali tt~a.lning was available for your rig hands and engineers would that change or enhance your outlook on air drillin tg echnic~ues? Originally, we believed drilling contractors to be our best source of information on the low-level use of air drilling, since they were actually performing the work in specific areas. However, the survey results proved our original assumptions wrong. A large percentage (80+) of those contractors participating in the survey drilled a very small percentage of wells with air. As a result, these contractors seemed generally uninformed about recent developments in air drilling. In many cases, where contractors are drilling on day work rates, they would have to purchase or rent air equipment and then face a drastic reduction in the number of days to drill a well with air. We found contractors to be primarily either mud drillers or air drillers, but not true combination drillers. Unfortunately, the driving force to better and cheaper drilling will probably have to come from the operators because drilling contractors are reluctant to change equipment only to lose drilling days of work. The lack of implementation of air drilling techniques is primarily a function of limited knowledge of new developments and inadequate and unavailable training -- both are a result in part of major work i force reductions experienced in the oil and gas industry in recent years. Additionally, the industry's natural resistance to changing methods has retarded the expansion of air drilling technology into non-historic areas. The level of expertise in air drilling technology currently found in the study areas, 1 of 7 12/31/97 4:54 PM IL SURVEY ANALYSIS ~ h.gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 for example, is comparable to the country's general knowledge of hydraulic fracturing methods two decades ago. The current situation, though serious, is correctable. Training provided by experts in air drilling methodology is of paramount importance, as is the use of proper equipment and techniques. Also, adaptation of air drilling technology to formation characteristics in the new areas will likely be necessary. In addition, improvements in air drilling technology must be made to the current technology in order to realize the full potential of air drilling or underbalanced drilling. These improvements will require some demonstration work and extensive research both on-site and in the laboratory. Variation and flexibility are necessary in any successful air drilling procedure; each situation is unique, as is its solution. Most of the drillers surveyed, for example, reported water influx to be the number one problem with air drilling. When water influx occurs, foam and aerated liquids maybe used in a balanced system for excellent economic results. Successful application of balanced or controlled underbalanced systems requires an expert level of supervision which is not commonly available. The required level of supervision can, however, be realized through GRI demonstration wells and training seminars. Other main concerns were unstable formations, drill pipe corrosion and downhole fires. In regard to unstable formation, chemicals are readily available to prevent possible swelling. It is believed, however, that stress failure is uncommon based on discussions with operators. With the discontinuance of chromates for corrosion protection, many operators are concerned about corrosion. Field testing is needed to identify the best corrosion inhibitors for differing environments. One possible solution to downhole fires is the use of nitrogen, nitrogen rich, or hydrocarbon gases in lieu of air. Another solution is to substitute foam for air. Some operators were worried about formation damage from mud drilling and were interested in air drilling to prevent such damage. You can drill with air under most conditions but depending upon the depth of the hole configuration of the casing strings and equipment on site, the following may become problem areas: 1. High R.O.P. with mud [3100 feet/hour]; 2. H2S gas in volume; 3 . Stress relieving formations; ~ M ~ . ~ ~ ~ '~ ~ 4. Large oil flows; ~ K , ; ~; ;< =~,~ 5. High pressure; and ,, ~ t ~ ; -: ~~;,,• G;Tlttl~~"~~ ~`~;~~~F~ut~ 6. Extremely high water influx. The study revealed that new developments such as Trans•Foam, hammerdrills, and balanced systems are not being used in the specified geographic areas. Predictive programs are needed to estimate the fluid volumes necessary to achieve proper cleaning of the hole. Most operators are not aware of these technological innovations; thus, hands-on training would be necessary for air drilling to be successfully introduced in these areas. Many member companies have expressed interest in joint • participation in projects with GRI. Approximately half of the survey respondents drilled more than fifty wells per year, typically in the 2,500_ to 8,000_ depth range and have tried using air on at least one occasion and therefore, this is 2 of 7 12/31/97 4:54 PM II. SURVEY ANALYSIS ~ h.gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 a representative survey. While approximately half the respondents have either used aerated water (or pressure balanced drilling) or used hammerdrills, only 25 percent have used both. This indicates that while operators may be cognizant of one of the more recent techniques, they generally are not aware of all of them. While not a specific survey question, the use of Trans•Foam was found to not be used in conjunction with other techniques when we questioned people in interviews. When asked in Survey Question 8 "How would you rank your reasons for not using drilling techniques?", the overwhelming number 1 ranking was water influx. At number 2 would be lack of proper equipment or knowledge of optimally sized equipment. Another concern, generally thought to be in the middle range of reasons; is drilling into high pressure formations. Safety problems along with H2S seem to be of ma}or concern to less than 14 percent of the respondents. We interpret these results to indicate a general lack of knowledge of proper equipment that can be used and of techniques that could be employed to handle high water influx or high formation pressures. A brief statistical summary of the results follows. AIR DRILLING SURVEY ANSWERS QUESTION #1: Where is your principal geographic area of operations? • ` Other areas include: North Central Texas, North Texas, Kansas, Oklahoma QUESTION #2: How many wells do you drill per calendar year? QUESTION #3: What is the average depth of wells drilled? 3 of 7 12/31/97 4:54 PM II. SURVEYANALYSIS ~ h.gri.org/tech/a+p/reports/gri95_0039/sect02.htm1 23°,6 16°~ 02500 2b01-8000 8001-ib,000 ib,000+ WELL DEPTH (feet) QUESTION #4: Do you use any form of air drilling? QUESTION #5: What percentage of wells do you drill totally with air? QUESTION #6: What percentage of wells do you drill partially with air? '` No. Wells Percentage ~. 1-20% $0% Z 1-40% 7% 41-60% 2% 60-80% 0% 80%+ 11% QUESTION #7: Would you be interested in discussing air drilling techniques that might result in lower drilling costs? 4 of 7 12/31/97 4:54 PM II. SURVEY ANALYSIS :.....:.~:.....~;::.--.._........:--'Percentage ....................•----~~~ --~~~~..-----...-- ~':. 76% 24% Sof7 h.gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 QUESTION #8: How would you rank your reasons for not using air drilling techniques? (List from 1=Highest to 6 =Lowest concerns) In this question, the survey has a blank requesting that the person specify any OTI-~R reasons for not using air drilling. Written comments included caving, shales, lost circulation and reservoir damage as the number one reasons for not utilizing air drilling. Additional comments included zones with large flow capacities, unstable shales and people. la% 0 sz% zri le-i ,3% B'/. 8% 0 o a ~ ~ ~ ~ N z~ 4% 0 a ~% x~ >3% _~~ Rank No. 1 Rank No. 2 Rank No. 3 zs% ~ zs% 24% 19% 2r/. 14% t3Y. 13'/. ~/ 11/'. ir/. 3Y. 3l. 3Y. ^ ^ ^ ~ i~ ~ ~ Q ~ [ fl 3 f1 ( ~ N 3 Rank No. 4 Rank No. ~ Rank No. 6 ;~i~~, ~ ~ (~'i.ac ~ tG~+s" c~.si}i~:.:1~ : Est, ` %a~^~fj(~r"s:€3~ 12/31/97 4:54 PM II. SURVEY ANALYSIS ~ h.gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 . QUESTION #9: Have you ever used aerated water or pressure balanced drilling? #~ Percentage €° .....................Yes :.......................~~ .........................~ No :....---................ :: QUESTION #10: Do you ever drill sections of a well with air/mist/foam then drill other sections with mud? ;:...._...-~ ;~ ::::n ......................:.Percentage................_........::: ~::....... ~~. .Y~._.... No ;: o :~ o , ~~ ......................... 73. /o.........................~........................ 27 /o..........................: QUESTION #11: Do you ever experience drilling rates slower than 20 feet/hour? :: `' w Percentage r QUESTION #12: Do you have sufficient problems with deviation to warrant the use of corrective downhole tools such as reamers, stabilizers, downhole motors, etc.? Percentage ,. _ ;......__..~............~...... V......... ~..........._ ................_......................... V....w...._....~..v ;: ~` Yes ~-- No QUESTION #13: Have you ever tried Using a Hammerdrill (percussion type drill)? ~~ ~ Percentage ---• ...............::e Yes ::....--•-••---........ ......._..........-......... No .....-...........---.......~ ~~ 54% 46% QUESTION #14: Do you feel that lowering drilling costs would result in more wells being drilled? Percentage ~` Yes ~ No ................:::::::88%::::::.....-..----- ~~----...................12% ---...........----......~ QUESTION #15: Would a foam that could be recycled be important to you? 6 of 7 12/31/97 4:55 PM II. SURVEY ANALYSIS • Percentage F :.................... ...... - -- '~ Yes No ' 53% ~ 47% h.gri.org/tech/e+p/reports/gri95_0039/sect02.htm1 QUESTION #16: Would you enclose your corporate brochure or list your available equipment with reference to rigs, mud systems, air systems, and B.O.P.'s? Approximately 8 companies either mailed equipment listings or referenced the type of equipment utilized. QUESTION #17: If quality training was available for your rig hands and engineers, would that change or enhance your outlook on air drilling techniques? .................................................................................................................................. Percentage Yes No :........................ ...................... ;: 7 of 7 12!31197 4:55 PM III. ECONOMICS AND BENEFITS OF AIR DRILL III. Economics and Benefits of Air Drilling h.gri.org/tech/e+p/reports/gri95_0039/sect03.htm1 Cost reduction is the number one benefit of air drilling systems. Reduced costs result from increased penetration rates, prevention of lost circulation, and less mud pit disposal requirements. To quantify the cost benefits, we developed calculations for two typical wells. These calculations were based on actual costs for mud drilling and were provided to us by operators. The cost for drilling these wells partially with an air system were calculated based on our conservative economic model. The cost comparisons are for one well 6,700_ deep and one well approximately 13,000_ deep. Table 1 lists the actual drilling costs for the 6,700_ well to be drilled with mud. Table 2 lists the actual cost for the 6,700_ well to drill to 1,500 with mud and the calculated cost to drill to total depth with an air system. The hybrid well drilled with a combination of mud and air was $44,000 lower in drilling cost. Table 3 lists the actual drilling cost for the 13,000_ well to be drilled with mud. Table 4 lists the actual cost for the 13,000_ well to be drilled with mud to 500 and the calculated cost to be drilled with an air system to total depth. The cost savings of the hybrid well to 13,000_ is approximately $220,000. These cost savings do not reflect any savings from less mud pit disposal required or reduction of formation damage. Preliminary cost studies indicate substantial drilling cost savings may be realized in the Permian, Mid Continent, and Rocky Mountain basins through air drilling technology. Based on the N.P.C. 1992 study (which forecasts wells to be drilled by the year 2010) and actual drilling costs provided by industry, our projected savings is $5 billion, as shown in the table below. The projected air usage percentages were derived from an examination of the GRI Gas Atlases and discussions with local drillers. With additional resources, a more detailed study could be done by obtaining the mechanical rock properties data in a given area to improve the accuracy of the benefits calculations. ~~. ~; ~"~~ ~; ~..E t.. 1 of 5 ~'l~r`[, S~i~ ~z i~ a=iS ~if3tlS, ~fllllls'!F ~;~~?~"+ ~i.~hUr~i~~ 12/31/97 5:11 PM III. ECONOMICS AND BENEFTI'S OF AIR DRILL h.gri.org/tech/e+p/repoits/gri95_0039/sect03.htrn1 Table 1 Drilling Costs Well Drilled with Mud to 6,700 Feet .. --------- -- ---- --------Input Mud ~ Air/Water ~ Mud •- -..•. -•.•- --Total.. ,--~ rs --. ... ~, ft 1 500: 0 5,200:: 6 700 ft/hr ~---• ................................................................... .........:::::::~50 35.4: 22.55? :: :: • Per Day ':. 20 20 22 "• 1.364: 0.000: 10.482; 11.846 Mud ~ Air/Water ~ Mud Rig,- $/daY 5,000: 5,000; _.. .._ 5,000; ( Fixed, $/day :: 2,500: _,._._ _....__. 2,500: ..______.._. 2,500: Initial.Mud.Cost,.$:------------------------------------- ........... .... . ------------- - ::::::15,000 :f :::::---...-----.....---.....:::::::0:~ : _ :::::-....---::::::::o ~ .. _. ............-................._...................................... Mud Maintenance, $/day------------------------ .................. ------------- - ---.~-- ...................... .....-.:j ---------------- 0€ ............. ........................... 0 ......................................... .........................: 0. ~..-----....-.-..-..----.... Foam, $/day Aerated Water, $/day CompressorBooster, $/day Other Air, $Iday Personnel (2 men), $lday Bits, total $ 0 0 15 000: Mud ~ Air/Water ~ Mud Rig, total $ _ __ _ _ 6,818; 0 ~ -~.~ 52,409: _ Fixed, total $ ' 3,409 r 0 26,204: Initial Mud Cost, $ 15,000: .............. 0 ... 0 Mud Maintenance, total $ 01 ~ ~.-- ..... Foam, total $ __~_.__,_..w_.. ................ .................. 0 . .....................-............... 0 ............ .... 0 _.._______._w...__.......__..._.________________________ Aerated Water, total $ ::::::: : ---- ____________________ - _______._~._._~__- 0 :::~ ::: 0 :::: : 0 -- -- $ CompressorBooster, total ------------ ------•---- 0 :o -----------------------::_ : _:::::--------::::::::0 Other Air, total $------------------------------------------- ------------- - ---------------- 0. 0 Os Personnel (2 men) total $ ~ 0 0 0 Bits, total $ 0 ~ 0 15,000: TOTAL $ -_ :: 25,227: 0 .. 93,613:; 118,840 2 of 5 12/31/97 5:11 PM III. ECONOMICS AND BENEFITS OF AIR. D lq\.gri.org/tech/e+p/reports/gri95_0039/sect03.htm1 Table 2 Drilling Costs '` Well i~ Drilled with Air to 6 , 700 Feet ;. t; Input f~ .................................................................................... :: ~` Mud ~ ...................::......... .. Air/Water Air Total ;:Factors ,. :: ~De t ft ~...... p..........__ ............................ ..... :: ~~ _ ~~ 1 500: .. 0 5 200;; 6 700. ~~Rate, ft/hr .. . 50~~ .. -: 100:; 72• ;;Hours Per Da y .. .. -~ -' 22'~ 18 ~. 18' ,,D `~ ays .. ~~............1.364:~ ... ...................... 0 :000:`..... .......4.012: 5.376' Mud Air/Water Air ;:Rig, $/day :: 5,000:; 5,000:; 5,000 ::Fixed $/day .. 2,500'; 2 500:; 2 500: :: >Initial Mud Cost, $ .. :: 1 500€ 0 - 0's t: ;;Mud Maintenance, $/day o„ --- ----------------------------------0,.... .....--------...-_o. ::Foam, $lday 1,800: ;:Aerated Water, $/day 240: CompressorBooster, $/day 1 100;: 1,100; ':Other Air, $/day ... ......... .. ....... 615;' - 615; `;Personnel (2 men), $/day .. ...- 800:: ---800: - - ...................... ;:Bits, total $ ... .... 0 15,000 0 Mud ~ Air/Water Air ,. ,. Rig, total $ .. .. ., 6, 818 ~ 0 € 20, 062 kFixed total $ .. ..... 3,409: .. ........................... 0 10,031: . 'Initial Mud Cost, $ ~ 1,500:; 0 0 >Mud Maintenance, total $ 0~ 0 0 ... .. .. ::Foam total $ -~ ~ ~ 0? .. 0 7,222: ;:Aerated Water, total $ 0~~ 0 0 >: ~CompressorBooster total $ .. ? 0 ... ......................................... 0 ............................................ 4,414 . >. :;Other Air, total $ .. :: 0~ 0 2,468: - ..-., ;:Personnel (2 men) total $ :. ~ ~ 0 .. 0 3 Z10 :;Bits, total $ ~~ ......................0.... ....................15,000:x..... ............--- - 0 ;;TOTAL $ -- ; 11,727: 15,000;; 47,406:; 74,133 3 of 5 12/31/97 5:11 PM III. ECONOMICS AND BENEFTfS OF AIR DRIL~ Table 3 ''~ Drilling Costs Well Drilled with Mud to 1 Input ~ Mud ~ Mud h, ft $/hr 's Per Day 4of5 Fixed, $/day Initial Mud Cost, $ Mud Maintenance, $/day Foam, $/day Aerated Water, $/day Compressor/Booster, $/day Other Air, $/day Personnel (2 men), $/day 500 50 20 0.500 Mud ......-----•5,000 2,500 15,000 --------...1, 000 .......................... I~.gri.org/tech/e+p/reports/gri95_0039/sect03.htm1 3,100 .................... 35.4 20 4.379 Mud 5,000 2, 500 0 1,000 Blts, total $ ~ 0 ~~ 0 Rig, total $ Fixed, total $ Initial Mud.Cost,..$------------------------ .............:......................................................... Mud Maintenance, total.$ ..... ................................................................... Foam, total $ Aerated Water, total $ Compressor/Booster, total $ Other Air, total $ Personnel (2 men), total $ Bits, total $ TOTAL $ Mud Mud 2 500 ~ 21 893 1,250 _ 10 946 15,000: 0 .. - ......... ~ ~ . T .. ~ . ^ .~ . .~ . . . ~ ~ .. i ................. 500:.....-.....4,379 ~ 0 0 ............~ii ...........................~ --_.._~1..--.---...... ~'~ - --- - --.0 0~0 --- ! ....--......?l-.....-..19,250:1..... 37,218 Feet Mud Total 9,115: 12,715 13.5 20 33.759:: 38.638 Mud ......-----5,000: 2,500: 0 .........................: ---...-----1,000; 50,000 Mud..'--. 168,796: 84,398: 0 33 759? -------------------o 0 -------------------0 -------------------0 0 50,000: 336,954:: 393,422 A..~ ~ §n, ~~~ ~~ ~a i., ~ ~., r"~~3~Yet~ L: ~ ~; vu;:,4. 1E11TI1~1~ 1/97 5:11 PM ~~. .,hUC~~Q III. ECONOMICS AND BENEFTfS OF AIR DRIL~ ~.gri.org/tech/e+p/reports/gri95 OQ39/sect03.htm1 t' t: r Table 4 : x; Drilling Costs Well Drilled witb Air to 13,000 Feet n ut P ........ . ..,,.. .., .. ~`• Mud . .. ... --- Air/Water ... .. Air Total .. s .... ........................ ................ ;:Factors .. •- -------------- --~ ------ ---- -- -- --- ------.-.....-...- ------------- ----- -.:...-.....------ ......-........ f: '`De t ft t:::::: P .h' :::::::::::::::::::::::::::::::::::::::::::: ::: .. ~~~ 500: 3,100 ` ~~ ~~ ~ ~~ 12,715 9,115 ~~ ::: ::::::~ ::::::::::: ~~Rate, ft/hr :::::::::::::::: ::::::::::::::: 50 :::::..................... . 100: ........... ............. 70 ::Hours Per Day .. " .. 20 ~ 18 18 €Days 0.500 : 1.722 ___ 7.234' 9.456 t :- -......... ................ Mud Air/Water Air >: ';Rlg,, $Iday,, ,-.__,,,,"-......... ..,,. :: . 5 000: 000: 000; :: ;Fixed, $/day .. .. 2,500: 2,500: 2,500: _ >'Initial Mud-Cost,.$-------------------------------------- x -•-----...... ss ...:::15,000: -~---...........---......---------:::0; ~ :: .................:::p€ ..................................................................................... ,. ::Mud Maintenance $/day :. ................. ........................: . 1,000: ......................................... 0~ .........................; Os xFoam, $/day ...-._.-_ 1,800: ~'sAerated Water, $/day 200: Compressor/Booster $/day .. _ _ :::::::::::: 1 100: ..------ 1 100; , _ ...........•-----............... tOther Air, $/day ............- _ ---•---.....----......:::::::615 ::::::...::::::::615 :;Personnel (2 men) $/day :. 800: 800; ;Bits, total $ .: 0 50,000; 0 Mud '~ Air/Water ~ Air :: :'Rig, total $ _- _ .. >: _. ~ 2 500;1 . __ _ 8,611: 3621 71; :: ;:Fixed, total $ ~ 1,250; 4 306: . .. 18,085: (:Initial Mud Cost $ ,. '~ .. _--- 15,000: --- . --....... 0~ 0 _ ;:Mud Maintenance, total: $ ::::~ --------------- ------------- .. .. .. .. .. .....:::::::500 ..... . .. ::::::...---------------------:::_ ::o :~ :::--------..:::::::0 <~Foam, total $-------------------------------------- -------------- ------------- --------------------0 0 -=--..:::13, 021 ':Aerated Water total $ 0 ~ 344 ~~-`-- 0` ,. >Compressor/Booster, total $ :: :::---- ~' 0 1 894 ~ 7,958: $ ------------------------------------ `:Other Air, total :...... . -------------- ...~.. : --------------------0:' ~ :::::::.------------:::::::1,059: 1 :::::::::::4 449: .... ........................................................................... ,. Personnel (2 men) total $ .. ................ .. .. ........................: 0 .....-.-.................... --.........: 1 378: ............-. ~.....-....: 5 787; ~• ::Bits, total $ :: ? 0 50,000' 0 s; ;;TOTAL $ :: ;; _ -- -- ------------ --._-.19,250:1----- -- - - -- --- 67,593:...---. 85,471.;:___ ._ 172,314 5 of 5 12/31/97 5:11 PM N. MfiTHODOLOGY • ww.griorg/tech/a+p/reports/gri95_0039/sect04.htm1 ~ IV. Methodology To initiate the GRI Air Drilling Technology Needs Assessment study, we first reviewed GRI's Gas Atlas for the Rocky Mountain Area, the Mid-Continent Area, and Texas. As a result of this review and a check of the rig count by area, the study focused on the Rocky Mountain, the Mid-Continent, and the Permian basins. The primary reasons for this decision were: Air drilling technology can make a huge impact on drilling costs in these areas because of very slow penetration rates with mud and the presence of lost circulation zones; and A large number of wells are being drilled in these areas. The air drilling survey (questionnaire), presented in Appendix E, was submitted by mail to 268 drilling contractors and producers. As a result, 51 useable responses were obtained. Additional copies of the survey were given to the company representatives who met with us during our travels. Contacts were made with the International Drilling Contractors Association (IADC), ips were then planned to conduct in-depth discussions with drilling contractors, operating companies, and air-service companies in face-to-face type sessions. To give more meaning to in-depth discussions concerning air drilling technology, a prototype predictive computer drilling program was developed for aerated water and foam drilling. This is explained fully in the Predictive Model section of this report. Also, an accompanying economic program was developed to calculate cost savings. 1 of 1 12/31/97 5:14 PM V. RECOMMENDATIONS • V. Recommendations ~i.gri.org/tech/e+p/reports/gri95_0039/sectOS.htm1 The study has indicated that many operators and drillers were familiar with air-drilling as a concept, were interested in learning more about it, and in general were knowledgeable about its advantages. Some even indicated that they had tried air drilling. The principal reason for not using this technology was a lack of technical knowledge about how to apply it correctly under adverse conditions, and lack of awareness regarding the new developments in equipment and methods. Moreover, unlike conventional drilling systems, engineers and contractors had limited access to the support found in conventional drilling, i.e., training courses, modern textbooks, and PC based computer models. This state exists in spite of the fact that the proper application of air-drilling technology requires a significant level of technical sophistication not only on the part of the drilling-engineering, but also on the part of the tool-pusher and roughneck. It was noted that with cutbacks in personnel and reductions in the research budgets associated with drilling that this situation was not likely to change. To address the lack of a knowledge base among both operators and drilling contracts, we recommend developing a structured training format and new technology and equipment. This format should include the development of: . o An Air-Drilling Short Course. This short course should report on the latest developments in air-drilling equipment and methodology. The course should contain field case-studies and focus on the problems peculiar to specific drilling areas. The course must include access to PC based computer programs which can provide the support necessary to make engineering and economic decisions concerning the different drilling techniques. Field Demonstrations and Research. These field demonstrations should be designed to not only demonstrate air-drilling as a technique for drilling, but as a platform for acquiring drilling data necessary to provide the technical underpinnings for the development of scientific based well-side aids. Data to be collected should include such variables as air and liquid volumes, standpipe and blooie line pressures, penetration rate, weight on bit, torque, and quantification of produced fluids and solids. ~ Real-Time Drilling Simulator. Ultimately, drillers require computer software of the type available to users of conventional drilling methods. This simulator should be developed to include real-time input from MWD tools such as the electromagnetic system which measures downhole variables such as deviation and bottomhole pressure. Hammerdrills and Foam Technologies. The hammerdrill has consistently demonstrated in dry-hardrock environments penetration rates in excess of 150 feet/hour. Expanding the application of this device to drilling environments where formation water is present will require the use of a foam system. Field based research to quantify the working limits of foam (quality) to this application is a necessary prerequisite for defining the applicability of this equipment. Corrosion Mitigation Strategies. There exists various opinions concerning the severity of drillpipe corrosion in air-drilled applications. This was listed in the survey responses by two 1 of 2 12/31/97 5:08 PM V. RECOMMENDATIONS • I~.gri.org/tech/e+p/reports/gri95_0039/sectOS.html individuals who thought this could be an underlying problem for not using air drilling. To qualify and quantify this phenomena, a program where coupons are installed in the fluid circulation system needs to be undertaken. The extent to which this problem exists can then be determined. 2 of 2 12/31/97 5:08 PM VI. ACKNOWLEDGEMENTS • VI. Acknowledgements \.gri.org/techie+p/reportsJgri95_0039/sect06.htm1 Several companies have been mentioned throughout the text of this report. Those companies and additional companies listed below provided data to our study. This information was then compiled in a statistical manner for inclusion in this report. To these organizations, we express our gratitude for participating in this survey. Air Drilling Services, Inc. Alexander Drilling, Inc. Allen Drilling Company Allison Brother Drilling Company Amoco Bandera Drilling Company Beredco, Inc. Bohannan Drilling Company Calumet Oil Centennial Drilling Company, Inc. Chandler Drilling Company Chevron . Cheyenne Drilling, Inc. Clearwater Clint Hurt & Associates Conoco Craig Drilling, Inc. Cyclone Manufacturing, Inc. D & H Drilling, Inc. D. C. Drilling Company Drill Systems, Inc. Duke Drilling Corporation E. H. Drilling Company Enron Evans Drilling Excell Drilling Company Exeter Drilling Company Farnsworth Drilling Company Four Corners Drilling Company FWA Drilling Company Great Plains Resources Harken Energy Hess Oil J. B. Drilling J-3 True King Kaiser Francis Oil Company Kudu Drilling Company Latigo Drilling Corporation M & D Drilling Company MAC Air Drilling Mallard Drilling Mallard J. V., Inc. Mitchell Energy Corporation Mobil Mustang Drilling, Inc. Nabors Drilling, USA Nequette Drilling Norton Drilling Company NUCOR Drilling Parker & Parsley Parker Drilling Company Parrish Drilling Company Shell SST Energy Corporation Triad Drilling Company True Drilling Turnbow Drilling Company Veco Drilling Viersen & Cochran Drilling Company Ward Drilling Company Williams Tools Company Zenith Drilling Corporation 1 of 1 12/31/97 5:16 PM APPENDIX A: BACKGROUND ON AIR DRILLI~YSTEMS ~www.gri.org/tech/e+p/reports/gri95_0039/app-a.html ~s ias~clE lntli p ~~ ~ Appendix A: Background on Air Drilling Systems A. Advantages of Air Drillin B. Disadvantages of Air Drilling C. Dry Air D. Mist and Foam E. Aerated Water Air drilling systems provide a cheaper and faster method of drilling. In spite of these advantages, as of 1994, only 10% of the wells drilled in the continental United States are drilled using an air drilling system. This investigation has also indicated that air drilling has applications beyond those presently used, and with the present technology, a greater percentage of wells could be drilled with air. A. Advantages of Air Drilling The advantages of air drilling are generally well known. For example, it is a cheaper and faster method of drilling and it prevents lost circulation. Other advantages include reduced formation damage, better show detection, and less environmental impact. A lesser known advantage of air drilling is its flexibility with respect to drilling in "balance". By using the appropriate equipment and techniques, the imposed bottom-hole pressure can be adjusted to be in balance with the formation pore pressure. This flexibility is an advantage of air drilling which has, to this point in time, been underexploited. B. Disadvantages of Air Drilling The disadvantages of air drilling are sometimes a direct result of its advantages. When the bottomhole pressure is less than the pore pressure of the formation being drilled, the movement of fluids (water, oil, andlor gas) resident in the formation into the wellbore will occur if the formation's permeability is sufficiently large. Uncontrolled influx of liquids into the wellbore has been cited by drilling contractors as the principal disadvantage of air drilling. Another disadvantage associated with air systems when compared to conventional mud systems deals primarily with its compressibility, low viscosity, and complex flow dynamics associated with cutting transport from the bit to the surface. The problems manifest during the connection of joints to the drillpipe when air circulation is interrupted. The lack of air viscosity permits cutting fall-back during this process. However, the air drilling industry has, over the years, developed tools and procedures to prevent the disadvantages from precluding the use of air drilling. To better understand air drilling systems, the following divisions have been made ~,. ~: 1 of 3 ~~i3~~~1 ~}~i p'. 4iz~ s ~;bh~. v E 1 ~;;ttts'1 1~~~/97 5:01 PM AC+G~IC ~ct~S APPENDIX A: BACKGROUND ON AIR DRILL~YSTEMS .gri.org/tech/e+p/reports/gri95_0039/app-a.html 1. Dry Air , 2. Mist and Foam • 3. Aerated Water These divisions will be addressed in the following sections. C. Dry Air The classic term used when referring to air drilling is "dust" or "dry" air drilling, In this case, drilling is accomplished by pumping compressed air or other gas down the drillstring and blowing the drill cuttings out of the hole. Typically, this is a low pressure operation, with injection pressures in the 100 to 300 psig range. Dry air drilling has in the past mostly been a low pressure, low cost, and low technology effort by the industry. The increased use of hammerdrills has forced more technology into use in the dry air systems, i.e. higher pressure compressors and more attention to air volumes. However, the industry has a long way to go to fully utilize the technology of dry air drilling. Nevertheless, penetration rates of 200 feet/hour can be achieved through the use of hammerdrills. Items for improvement consist of universal measurement of volumes of air, calculation of appropriate air volumes and use of such volumes in design calculations. Better compressors with intercoolers and drip pots need to be developed so that free water from the compressors is not dumped into the wellbore. D. Mist and Foam In mist and foam drilling, water, soap, and air or other gas are injected together. Mist is just a lesser percentage of liquid than foam. The term "quality" is the gas volume percentage used to define mist and foam. Mist is from 99.99 to 96+ percent gas (quality). Foam is from 96 percent to 55 percent (quality). At qualities below 55 percent, the mixture is called aerated water or aerated mud. The properties of mist and foam are, of course, greatly affected by density and quality, both of which change continuously as the mixture is pumped down the drillstring, through the bit, and up the annulus to surface. Mist and foam systems can achieve penetration rates in excess of 100 feet/hour. Almost every well gets wet due to formation water influx at some depth, requiring mist to prevent cuttings from building up on the wall and sticking the drillstring. For air drilled wells, casing points are influenced by the desire to seal the produced water off and return to dust drilling. Even though mist drilling is a normal operation, the industry has not utilized foam extensively. The prime reason foam has not been used more often is cost. In order to be cost effective, foam must be recycled in most operations. Lack of a readily available method to easily estimate the proper foam volumes has also been a deterrent to its use. Foam and mist systems are more complicated than dry air and require additional equipment and operational control. Explained briefly, the injection of water and soap adds two more ingredients that need to be measured and controlled for best results. A foam system is similar to a mud system in 2of3 12/31/97 5:01 PM APPENDIX A: BACKGROUND ON AIR DRILL~YSTEMS ~www.gri.org/tech/e+p/reports/gri95_0039/app-a.html terms of its ability to carry cuttings and its annular velocity of movement in the well. Also, separators, shale shakers and mud pits are needed to separate the gas from the liquid, separate the solids from the liquid, and condition the liquid prior to reinjection. The development of equipment for computerized operations control remains a need. Also, a computer program which utilizes instruments measuring input and output values and projecting a real time display of the downhole conditions is hopefully achievable in the near future. A combination of the proper equipment and computerized control programs would be a big factor in the increased applicability of foam. E. Aerated Water Aerated water has been used for many years, in many forms. A broad definition of aerated water would include nitrified mud, aerated mud, or any combination of drilling liquids and gases,where the gas volume percentage is less than 55%. Aerated systems can achieve penetration rates of 3 to 5 times those achieved by mud. The equipment used in aerated water is very similar to that used with foam, including separator, shale shaker and mud pits. However, there are some additional items that can be used to achieve aeration, such as parasite strings (small tubing string, reaching part way down the hole, through which air is injected). Aerated water is primarily used to prevent lost circulation and lower bottomhole pressure. Aerated water does not have the cutting carrying capacity of stable foam so the velocity required is greater than that of foam. 3 of 3 12/31/97 5:01 PM APPENDDC B: RECENT DEVELOPMENTS • Appendix B: Recent Developments A. Hammerdrills and Hammerdrill Bits B. Trans•Foam C. Rotating Airheads D. Com ressors ,~www.gri.org/tech/e+p/reports/gri95_0039/app-b.html Within the last five or six years, there have been several developments in air drilling technology. A brief explanation of some of the more important improvements is offered below. A. Hammerdrills and Hammerdrill Bits The primary use of hammerdrills has been in the mining industry and in water well drilling. Some use has been made of hammerdrills for setting surface casing in the oil and gas industry. As manufacturers of hammerdrills became more aware of the large profit potential in the oil and gas drilling business, they marketed hammerdrills and hammerdrill bits for drilling deep oil and gas wells. Hammerdrills can be used with both flat-bottom bits (no turning parts) and typical tri-cone type bits. The flat-bottom bits drill faster than the tri-cones and will not break as easily as the tri-cones. However, the standard flat-bottom bit tends to wear out of gauge much faster than the tri-cones. Many improvements have been made in this area, and today there is even available diamond gauge protection for flat-bottom bits. The main advantage of hammerdrills is that the hammer action, or jar, breaks the rock. Very light bit weights (1000 to 5000 lbs) and slow RPM (10-35) are thereby required. The hammerdrill is also excellent for maintaining a straight hole. It is an engine with its power controlled by the amount of gas expansion and the volume of gas put through it. Of course, the use of hammerdrills, while drilling faster and straighter, results in greater cost on a daily basis, sometimes by as much as $400 to $1000/day, depending on hammer size and type. As a rule of thumb, the hammerdrill can drill twice as fast as normal rotary drilling. Thus, the cost is justified in certain applications. The availability of smaller size hammerdrills permits the use of hammerdrills in slim holes, both for new holes and deepening of existing wells. The decrease in cost in these slim holes can be very significant, thereby allowing more holes of the slim variety to be drilled. In previous years, when water was encountered while using a hammerdrill, the ensuing changing pressure in the annulus would result in inefficient drilling. The recent development of the hydrocyclone, however, which separates the input water from the input air and diverts the water around the hammerdrill, has permitted greater use of the hammerdrill. Expanding the use of hammerdrills will require the use of a foam system. 1 of 3 12/31/97 5:18 PM APPENDIX B: RECENT DEVELOPMENTS ~ ~~www.gri.org/tech/e+p/reports/gri95_0039/app-b.html B. Trans•Foam Stable foam has been utilized in drilling operations for years (since the 1960s) and is, in many ways, a great fluid for drilling wells. Its drawbacks have been cost, and the creation of rivers of foam. These volumes of foam are hard to contain until it is broken into its elements of water, soap, and gas. The recently developed Trans•Foam by CKearwater, Inc., has reduced the cost and mitigated the disposal. Now, for the first time, stable foam can be recycled easily and used essentially just like a mud system. Trans•Foam is a two-phase system that is dependent on pH. When the pH is low (less than 5), the foam dissipates. When the pH is high (10--~-), the foam can reform. In operation, the stable foam is formed and pumped down the drill pipe, through the bit, and back up the annulus to the surface where acid is injected to break the foam into water and air. The air is removed by a separator, and the; water and cuttings are diverted to the shale shaker where they are separated. The water goes into the mud pits where it is cleaned of fines, treated with caustic, and made ready for re-injection. If some other gas such as nitrogen or methane is used, it is only necessary to capture the gas from the; separator and reinject it. This process can significantly reduce costs. For example, it takes at least one percent soap to foam water. If 42 gallons per minute of water a;re used, that results in using 11 drums (55 gallons) of soap a day, or approximately $5,500 worth of soap. However, if the soap is recycled as in the Trans•Foam process, this cost is reduced t:o make-up soap; only about 2 drums (55 gallons) per day or about $1,000/day. In addition, the large containment pits are not needed and the process can be used in environmentally sensitive areas. Again, as with hammerdrills, some additional daily costs will be experienced because of the need for automatic pH controls and more supervision, but these costs are comparatively minor in nature. In conclusion, the practice of using stable foam is in its infancy, but will expand as operators become acquainted with this new drilling system. I3y controlling air volumes, water volumes, and imposed pressure, the foam drilling system permits balanced pressure drilling and prevents lost circulation. C. Rotating Airheads Up until a very few years ago, air drilling was a low pressure, low volume operation, and the standard rotating head was used more as a~ diverter than as a pressure seal. The older airheads are not recommended for pressures over 100 ~psig. The use of modern high pressure airheads necessitates the rethinking of safety and drilling procedures, since the possibility of airheadl (rotating rubber) failure must be provided for. It is necessary for high pressure type applications to have a bag type preventer which can be closed quickly. The world of rotating airheads and their application has changed drastically. However, these more modern airheads permit the use of holding significant annular backpressure to control 2 of 3 12/31/97 5:18 PM APPENDIX B: RECENT DEVELOPMENTS ~ ~~www.gri.org/tech/e+p/reports/gri95_0039/app-b.html bottomhole pressure and the associated produced fluids, even to the extent of using a closed, gaseous system. D. Compressors The compressors currently available to the air drilling industry represent a significant improvement over those marketed just five years ago. Screw type compressors are now offered in gas field type equipment which will generate 350 psig. Also, two-stage boosters are available that will operate at 2,000 psig. These parameters are sufficient to have a major impact on the ability to use aerated water and stable foam for drilling wells where high injection pressures are needed. Previously, the best air compressor packages would not generate operating pressures above 1,400 psig, and most were about 1,000 psig. This lower pressure (1,400 vs. 2,000 psig) was a limiting factor for aerated water drilling volumes due to friction pressure. In addition, the higher pressures now attainable permit the use of jetting while drilling with aerated water, which increases drilling operation efficiency. • 3 of 3 12/31/97 5:18 PM APPENDIX C: PREDICTIVE MODEL Appendix C: Predictive Model ~www.gri.org/tech/e+p/reports/gri95_0039/app-c.html With the emergence of Trans•Foam and the increased use of aerated water comes the need for an accurate computer program for predicting appropriate values. These values are for: injection volumes of air, water and soap; pressure profiles for inside the drill string and for the annulus; pressure loss at the jets; and effect of the influxes. For this study, a simplified program was developed. The current computer program runs in EXCEL 4.0 (through WINDOWS). The program itself is moderately large in size (in excess of 2 meg) and requires the use of a compression utility in order to copy the program to diskettes for distribution to interested companies. The program is a work in-progress, designed for use with stable foams and aerated liquids. It provides the user with approximate answers because some of the basic algorithms have not been verified by research, nor are they expected to be verified (Tables 5 and 6 for example output). The program's working assumptions are explained hereinafter. Working Assumptions • This program is designed to calculate certain resulting values (pressure profile, velocity, density, friction, etc.) from input values (air volumes, water volumes, depth, hole size, casing I.D. and depth, drill pipe size and length, collar size and length, and jet area). In addition, optional inputs include fluid density and influx volumes of various densities. A temperature gradient is assumed at 1 ° /100_, and no other temperature changes (i. e., from expansion) are calculated. The program is in spreadsheet format and divides the well into 1000 segments from top to bottom, inside the annulus and inside the drillstring. Table 7 describes variables used in the program. The program assumes all volumes flow to the surface as they are introduced into the system (i.e., no surging, slugging or holdup is considered). Given the above, the program starts at the surface in the annulus and calculates as it steps down the annulus (1000 steps to bottom), then goes back up the inside of the drillstring to the surface (999 steps). The program uses operators (true or false) to locate the casing and hole, the influxes, and the drill pipe and collars. The program also calculates theoretical and practical drilling rates based on mud drilling rates, pore pressure (which are inputs), and bottomhole pressure. The equations used for calculation (spreadsheet form) are contained in Appendix D. 1 of 4 12/31/97 5:20 PM APPENDIX C: P DICTIVE MODEL ~ ;~www.gri.org/tech/e+p/reports/gri95_0039/app-c.html ~ ::::::............... ........ .,....~.....,..M....,,,....w.,.,~ ..,,.......M....~...~.~,,...,~..,.~.~..,.~,..-,„...,w...,~...,..,.-..,.....n,,,..,~~.~,....,,....,......M,.w............- Table 5 ----.-.....................-...-...M.~. . s Aerated Water s' OPERATOR: Midmorning Gas Co. ~~ WELL NAME: Gusher #1 LOCATION: Gaoline Valley $~ NOTES: ~: ::Well Parameters ~ .............................. Equipment ::Drill Rate Inputs ......................... .....................: Influx Water #1 ?:Casing Drill :Feet, hr ::Air, SCFM ::GPM 0 Pipe SID-IN ~ 9~ ID-IN 3.826: ......................15,................. -1100 Density..... `- 62.4: :Depth, .. 3500 0D-IN .. 4.5 0.098515885Water, ;:Depth, ft ~~2400 ~ft .. .. .. . .. GPM :Area F: ::0.44179: Drill Bottom To 400 p :€Influx Water #2 Collar ;Hole 8.5 € ID-IN 2.25: 2.25'sParticle ~sGPM 0 :Size, in. ;: ea :; .39406' ~OD-IN ~ 6 6'Size, ft ::Back ress ''s.Densi ~~s.62.4 Length, 600 30';0.020833 €Psig ~ ::Depth, ft ::3000: .. .. .. .. ft .. ~ .. .. .. .. .. . . .. .. .. - . .. . T.D., ft :: 5000 Jet Size, in. __ _ _ :'Particle 5 €Input Water :. .. :. .. .. .. ..................... y ::Den si .. .-- #1 # 2 , ' #3 €I)ensrt ~€Dra Co Y :: g- 62.4: 0.375:: 0.375: 0.375:: 2.6 1.11 ;:Pore 0.4 ::Pressure Outputs - :Time to Surface -15.42: • 2 of 4 Bottomhole 1236: :Pressure :Velocity -at------------------=--------- ----------414.9: :Bottom :Approx. 299; :Minimum ;Velocity Standpipe 1489: :Pressure :Pressure Loss at 1440: :Bit Bottomhole 0.213 :Quality ;Drill Rate, ft/lIr 30.32: 12/31/97 5:20 PM APPENDIX C: PREDICTIVE MODEL . i Well Parameters Casing (Equipn Drill Pipe ID-IN 9 ID-IN Depth, 3500 0D-IN ft Area ::0.44179: Drill Collar Hole 8. S ID-IN Size, in. :: ............................................. ................... Area 0.39406 OD-IN T.D., ft ~www.gri.org/tech/e+p/reports/gri95_0039/app-c.html Table 6 Foam OPERATOR Midmorning Gas Co. WELL NAME Gusher #1 LOCATION Gaoline Valley NOTES nt :Drill Rate Inputs :Influx Water #1 :Feet, hr ::Air, SCFM :GPM 0 3.826; 15 1100Density 62.4 4.5 0.098515885Water, ::Depth, ft ::2400 :'GPM -----------------------....~.......p......... .~~----~--.........-------------......................----------~----........ ., ottom ~ To 40Influx Water #2 . 2.25~~ 2.25 :Particle ::GPM .. 0 6 6 Size, ft Backpress :Density 62.4 600' 30 0.020833?Psig ::Depth, ft ?:3000 ..............................................::.................................~--~------.................-----~:----. p.............---.................. SOOOIJet Size, in. ::Particle SIn ut Water ::Density ;Density Drag-Co 62.4; 0.375 ::0.375 ~ 0.375 2.6 ::1.11 :;Pore 0.4 ::Pressure Outputs :Time to Surface 3.753: r-----------------------------------~---------~ ~--------------------........-~---• Bottomhole 92 Pressure :Velocity at 1013 :Bottom _---~pp ..................................,..................---~-~~---.....: A rox. 895.2; :Minimum ;Velocity . L~ 3 of 4 :Standpipe 318.3 :Pressure :Pressure Loss at 438.4: Bit Bottomhole 0.969: Qualit 'sDrill Rate, ftihr '. 86.98`:. ! ,., ,,a ash flsi ~ Oas Dons. Commiss~ar~ ~'~€~ctlorage 12/31/97 5:20 PM APPENDIX C: PREDICTIVE MODEL J ~.gri.org/tech/e+p/reports/gri95_0039/app-c.html Table 7 .. S' : :::::: ::::::: Pro ram Variables .. >: ~~ ...............•----..... Cell Address ~ .......----•--......-•-------........---------....-----------......--•-----•----.......---------•--.......---------......-------..........-•---....------•---------..... ~ Descri tion P H3 • Casing ID -Inches H4 ; Casing Depth -Feet H6 : Hole Size -Inches <; s H9 ; Total Depth -Feet .... x; ...........:::::::11:1::::::----.....------ : ...: ...----•--.......------......-•-•-----....---------....-------•---..._..--------......------............---------........-•-------........-•------•------•-•-----....... Jet Size #1 -Diameter Inches (~ ) J3 : Drill Pipe ID -Inches ~'• J4 ~ Drill Pipe OD -Inches J6 : Bottom Collar ID -Inches J7 : Bottom Collaz OD -Inches J8 ~ Length of Bottom Collar Assembly -Feet " J11 : Jet Size #1 -Diameter (inches) K6 : Top Drill Collar ID -Inches K7 : Top Drill Collar OD -Inches K8 : Top Drill Collar Length -Feet ~~ ~: K11 ; Jet Size #1 -Diameter (inches) L3 : Drill Rate - Feet/hour -Mud ;: L8 : Particle Size - Feet/diameter ~~ L11 : Particle Density -Specific Gravity M3 : Air Input - S CFM MS : Water input -GPM M9 s Imposed Back Pressure - PSIG Ml l ~ Drag Coefficient ;: O10 : - - Input Water Density - Lbs/Cubic Ft P2 : Influx Water # 1 -GPM P3 : Influx Water #1 -Density - Lbs/Cubic Ft P4 : Influx Water #1 -Depth -Feet P6 : Influx Water #2 -GPM P7 : Influx Water #2 -Density - Lbs/Cubic Ft P8 : Influx Water #2 -Depth -Feet : Pore Pressure - PSUft :::Program provides for o ne (1) size of drillpipe; two (2) sizes for collars. ;;Input statements are in "boxes" for easy viewing. ~It is suggested that practical penetration rates are limited to 100 ft/hour or 10 times the mud :;value: use whichever values is less. 4 of 4 12/31/97 5:20 PM APPENDIX D: EQUATIONS FOR USE IN EXCSHEET \~www.gri.org/tech/e+p/reports/gri95_0039/app-d.html s iasaarclE insli~Ea ~ Appendix D: Equations For Use in Excel Spreadsheet DEPTH(FT1=A16-A1016 PRE S SURE(PSIG)=B 16-B 1016 ANNULUS DENSITY IN LB/CUFT=C16-C1016 OPERATOR FOR WATER INFLUX#1=D16-D1016 CUTTING SLIP VELOCITY-E16-E1016 MINUTES TO SURFACE FOR CUTTINGS=F16-F1016 FOAM QUALITY=G16-G1016 HOLE OPERATOR=H16-H1016 CASING OPERATOR=I16-I1016 DRILL PIPE OPERATOR=J16-J1016 TOP DRILL COLLAR OPERATOR=K16-K1016 BOTTOM DRILL COLLAR OPERATOR=L16-L1016 FRICTION INANNULUS=M16-M1016 ACTUAL GALLONS OF MIXTURE INANNULUS=N16-N1016 PRESSURE IN DRILL STRING=016-01016 ANNULUS VELOCITY OF MIXTURE FT/MIN=P16-P1016 THEORETICAL DRILL RATE WITH FOAM OR AERATED WATER=016-01016 PORE PRESSURE -BOTTOM HOLE PRESSURE=R16-R1016 PRACTICAL DRILL RATE=516-51016 DRILL RATE LIlVIITER=T16-T1016 INPUT VOLUMES(ACTUAL1=U16-U1016 DENSITY INSIDE DRII.L STRING=Vl6-V1016 QUALITY INSIDE DRILL STRING=W16-W1016 WATER INFLUX#2 OPERATOR=X16-X1016 DEPTH(FT)=A16-A1016 A16=0 -Note: Surface starting point. NEXT DEPTH = A16+$H$9/1000 WIRE: $H$9=TOTAL DEPTH PRES SURE(PSIG)=B 16-B 1016 B 16=M9: M9 =INPUT SURFACE BACKPRESSURE PRESSURE AT NEXT DEPTH=B16+((C16)*(A17-A16)/144)+(M16) 1 of 9 1/2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCESHEET .gri.org/tech/e+p/reports/gri95_0039/app-d.htmi WHERE: C 16-DENSITY LB/CUFT; (A17-A16)=SEGMENT LENGTH; • M16=FRICTION ANNULUS DENSITY IN LB/CUFT=C16-C1016 C 16=((($L$4*$L$11 *62.4)+($S$3 *$O$10)+($R$5 *D 16* $P$3)+($R$7*$P$7*X16)+ ($M$3 *0.0779))/(((($M$3 * 15)/(B 16+15))*((520+A16/100)/520))+ $L$4+$S$3+$R$5 *D 16+$R$7*X16)) WHERE: $L$4=CU FEET DRILLED/1VIlN; $L$11=PARTICLE DENSITY (SP.GR.); $S$3=INPUT WATER CUFT/MIN; $0$10=INPUT WATER DENSITY (LB/CUFT); $R$S=WATER INFLUX#1 CUFT/NIIN; D 16=DEPTH OPERATOR FOR WATER INFLUX# 1; $P$3=WATER INFLUX DENSITY#1 LB/CUFT; $R$7=WATER INFLUX#2 CUFT/NIIN; $P$7=WATER INFLUX#2 DENSITY LB/CUFT; • X16=DEPTH OPERATOR FOR WATER INFLUX#2; $M$3=AIR INPUT SCF/M; B 16=PRESSURE(PSIG); A16=DEPTH(FT) OPERATOR FOR WATER INFLUX#1=D16-D1016 D 16=A16<$P$4 WHERE: A16=DEPTH; $P$4=DEPTH OF WATER INFLUX#1 CUTTING SLIP VELOCITY=E16-E1016 E16=SQRT(((4/3)*32.2*($L$8)*(($L$11 *62.4)-C 16))/($0$10*$M$11)))*60 2 of 9 1/2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCE~SHEET h.gri.org/tech/e+p/reports/gri95_0039/app-d.html WHERE: $L$8=PARTICLE SIZE FT-DIAMETER; $L$11=PARTICLE DENSITY(SPGR); C16=DENSITY-LBS. CLJFT,; $O$10=INPUT WATER DENSITY-LBS CUFT; $M$11 DRAG COEFFICIENT 1VIINUTES TO SURFACE FOR CUTTINGS=F~,16-F1016 Note: F16=MINUTES TO SURFACE FOR THE FIRST SEGMENT F 16=(A17-A16)/(P 16-E16) NEXT SEGMENT=F 16+((A18-A17)/(P 17-E 17)) WHERE: A16-A17 ARE DEPT~-IS-FT; P 17=FLUID VELOCITY; E 17=SLIP . FOAM QUALITY=G16-G1016 ', G16=1-((($L$4)+($S$3)+($R$5 *D 16)+($R$7 *X16))/(((($M$3 * 15)/(B 16+15)) ((520+A16/100)/520))+$L$4+$S$3+($R$5 *D 16)+($R$7 *X16))) WHERE: $L$4=CUFT DRILLED/MIN;' $S$3=WATER INPUT CUFT%NHN; $R$S=WATER INFLUX#1 CTJFT/NIIN; D 16=DEPTH OPERATOR F4R WATER INFLUX# 1; $R$7=WATER INFLUX#2 C~JFT/MIN; X16=DEPTH OPERATOR F(~R WATER INFLUX#2; $M$3=AIR 1PUT SCF/M; B16=PRESSUREPSIG; Alb=DEPTH (FT) HOLE OPERATOR=H16-H1016 H 16=AND (A 16> $H$ 4, A 16 <_ $H$ 9 ) 3 of 9 I/2/98 1:40 PM APPENDDC D: EQUATIONS FOR USE IN EXCESHEET WHERE: A16=DEPTH FT; $H$4=CASING DEPTH FT; • $H$9=TOTAL DEPTH FT CASING OPERATOR=I16-I1016 I16=0R(Al 6<=$H$4,A16>$H$9) WHERE: A16=DEPTH; $H$4=CASING DEPTH FT; $H$9=TOTAL DEPTH FT DRILL PII'E OPERATOR=J16-J1016 J16=A16<$R$10 WHERE: A16=DEPTH FT; $R$10-DRILL PIPE LENGTH FT • TOP DRILL COLLAR OPERATOR=K16-K1016 K16=AND(Al6>=$R$10,A16<=($H$9-$J$8)) h.gri.org/tech/e+p/reports/gri95_0039/app-d.html WHERE: A16=DEPTH FT; $R$10=DRILL PIl'E LENGTH FT; $H$9=TOTAL DEPTH FT; $J$8=BOTTOM DRILL COLLAR LENGTH FT BOTTOM DRILL COLLAR OPERATOR=L16-L1016 L16=A16>$H$9-$J$8 WIRE: Alb-DEPTH FT; $H$9=TOTAL DEPTH FT; $J$8=BOTTOM DRILL COLLAR LENGTH FT 4 of 9 1/2/98 1:40 PM APPENDDC D: EQUATIONS FOR USE IN EXCE~SHEET h.gri.org/tech/e+plreports/gri95_0039/app-d.html FRICTION INANNULUS=M16-M1016 M16=(0.0000765*N16^1.82)*((C16l7.48)^0.82)*((90*Gl6)^0.15)*($A$17-$A$16}/ (($U$3 *I16)+($U$4*H16*716)+($U$5*L16)+($U$6*K16)) WHERE: N16=GALLONS OF FLUID(ACTUAL)/NIIN; C 16=DENSITY LB/CUFT; G16=QUALITY; $A$17&$A$16=DEPTHS; $U$3=HYDRAULIC RADIUS OF CASING AND DRILL PIl'E ANNULUS INCHES; I16=CASING OPERATOR; $U$4=HYDRAULIC RADIUS OF HOLE AND DRII.,L PIPE INCHES; H16=HOLE OPERATOR; $U$S=HYDRAULIC RADIUS OF HOLE AND BOTTOM COLLAR INCHES; L16=BOTTOM COLLAR OPERATOR; $U$6=HYDRAULIC RADIUS OF HOLE AND TOP COLLAR INCHES; K16=TOP COLLAR OPERATOR Note: HYDRAULIC RADIUS OF AN ANNULUS IS CALCULATED BY ---- H.R.=((OUTSIDE DIAMETER-1NSIDE DIAMETER)^3)*(OUTSIDE DIAMETER + INSIDE DIAMETER)^1.82 !ALL DIAMETERS ARE IN INCHES ACTUAL GALLONS OF MIXTURE INANNULUS=N16-N1016 N16=7.48 *(($M$3 * 15/(B 16+15+(C 16*(Al7-A16))/ 144))*((520+A16/100)/520)+ $L$4+$S$3+($R$5 *D 16)+$R$7*X16) WHERE: $M$3=SCF/M OF INPUT AIR; B16=PRESSURE AT ANNULUS DEPTH SEGMENT; C 16=DENSITY LB/CUFT; A17 & A16=DEPTHS FT; $L$4=AMOUNT OF DRILL CUTTINGS CUFT/MIN; $S$3=INPUT WATER CUFT/MIN; $R$S=WATER INFLUX#1 CUFT/MIN; D16=OPERATOR FOR WATER INFLUX#l; $R$7=WATER INFLUX #Z CUFT/MIN; X16=OPERATOR FOR WATER INFLUX #2 '~ "~ ~` `' ~iaska Ot ~ ~~~,s Coned ~asn~tt~:~tu~r Anchnr~g~ 5 of 9 1/2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCESHEET PRESSURE IN DRILL STRING=016-01016 ~r'~.gri.org/tech/e+p/reports/gri95_0039/app-d.html O 16=017+0.0000765 *((((I717^1.82)*((V 17/7.48)^0.82)*((90*W 17)^0.15)* (A17-A16))/($J$3^4.82)*716)+((((1717^1.82)*((V 17/7.48)^0.82)*(90*W 17)^0.1 S)* (Al7-A16)/($7$6^4.82))*L 16)+((((1717^1.82)*((V 17/7.48)^0.82)*((90*W 17)^0.15)* (A17-A16))/($K$6^4.82))*K16))-(Al7-A16)* V 17/144 WHERE: 017=PRESSURE IN DRILL STRING IN NEXT DEEPER SEGMENT PSI; U17=INPUT VOLUMES ACTUAL GAL/NIIN; V 17=DENSITY LB S/CUFT; W 17=QUALITY; A17 & Alb =DEPTHS FT; $J$3 DRII.L PIPE LD. IN; J16=DRII,L PIl'E OPERATOR; $7$6=BOTTOM DRII.,L COLLAR LD. IN; L16=BOTTOM COLLAR OPERATOR; $K$6=TOP DRILL COLLAR LD. IN; K16=TOP COLLAR OPERATOR Note: PRESSURE IN BOTTOM SEGMENT(01016) IS CALCULATED AS PRESSURE LOSS THROUGH THE BIT BY THE FORMULA: O 1016=($C$1016/7.48)*(U 1016^2)/(12031 *0.9 * ($W$7^2)) THEN PRESSURE 1N NEXT SEGMENT UP(01015) IS CALCULATED BY THE FORMULA: O 101 S=$B$1016+01016+0.0000765 *((((U1016^1.82)*((V 1016/7.48)^0.82) ((90*W 1016)^0.15)*(A1016-A1015))/($7$3^4.82) *J1015)+((((171016^1.82)* ((V 1016/7.48)^0.82)*(90*W 1016)^0.1 S)*(A1016-A1015)/($7$6^4.82))*L 101 S)+ ((((U1016^1.82)*((V1016/7.48)^0.82)*((90*W1016)^0.1 S)*(A1016-A101 S))/ ($K$6^4.82))*K101 S))-(A1016-A1015) * V 1016/144 Note: IN THE ABOVE TWO FORMULAS $C$1016=DENSITY IN THE ASTNULUS AT THE BIT LB/CUFT; $W$7=1ET AREA IN SQ; $B$1016=PRESSURE IN THE ANNULUS AT THE BIT ANNULUS VELOCITY OF MIXTURE FT/MIN=P16-P1016 P 16=(((($M$3 * 15/B 16+15)* S20+A16/100)/520)+$S$3+$L$4+($R$S *D 16)+ ($R$7*X16))/((($H$S*I16)+($H$7*Hl6))-(($V$3*J16)+($W$S*K16)+$W$3*L16}) 6 of 9 Il2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCESHEET .gri.org/tech/e+p/reports/gri95_0039/app-d.html WHERE: 017=PRESSURE IN DRILL STRING IN NEXT DEEPER SEGMENT PSI; U17=INPUT VOLUMES ACTUAL GAL/MIN; . $M$3=SCF/M OF INPUT AIR VOLUME; B16=PRESSURE IN ANNULUS PSI; A16=DEPTH FT; $S$3 WATER INPUT GAL/M; $L$4=AMOUNT OF DRILL CUTTINGS CUFT/MIN; $R$S=WATER INFLUX#1 GAL/M; D 16=WATER INFLUX#1 OPERATOR; $R$7=WATER INFLUX#2 GAL/M; X16=WATER INFLUX#2 OPERATOR; $H$S=AREA OF CASING INSIDE SQFT; I16=CASING OPERATOR; $H$7=AREA OF HOLE SQFT; H16=HOLE OPERATOR; $V$3=AREA OF DRILL PIPE OUTSIDE SQFT; J16=DRILL PIPE OPERATOR; $W$S=AREA OF BOTTOM COLLAR OUTSIDE SQFT; K16=BOTTOM COLLAR OPERATOR; . $W$3=AREA OF TOP COLLAR SQFT; L16=TOP COLLAR OPERATOR THEORETICAL DRILL RATE WITH FOAM OR AERATED WATER=Q16-Q1016 Q 16=$L$3 *2.718^(2.303 *(40* 10^-5)*R16) WHERE: $L$3=MUD DRILL RATE FT/HR; R16=PORE PRESSURE-BOTTOM HOLE PRESSURE PORE PRESSURE -BOTTOM HOLE PRESSURE=R16-R1016 R16=A16*$Q$11-B16 WHERE: Alb=DEPTH FT; $Q$11=PORE PRESSURE GRADIENT; B 16=BOTTOM HOLE PRESSURE 7 of 9 1/2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCE~SHEET PRACTICAL DRILL RATE=516-51016 S16=$L$3*T17 WHERE: $L$3=MUD DRILL RATE FT/HR; T16=DRILL LIlVIITER(SEE BELOW) DRILL RATE LIlVIITER=T16-T1016 T 16=IF(Q 16/$L$3<3,"3",IF(Q 16/$L$3> 10," 10",Q 16/$L$3)) WHERE: Q16=THEORETICAL DRILL RATE FT/HR; $L$3=MUD DRII,L RATE FT/HR INPUT VOLUMES(ACTUAL)=U16-U1016 U16=7.48*(($M$3 * 15/(15+017))*(520+A16/200)/520)+$M$5 .gri.orgftech/e+p/reports/gri95_0039/app-d.html . WHERE: $M$3=SCF/M INPUT AIR VOLUME; 017=PRESSURE IN SEGMENT BELOW PSI; A16=DEPTH FT; $M$S=INPUT WATER VOLUME GAL/M DENSITY INSIDE DRILL STRING=V16-V1016 V 16=(($S$3 * $O$10)+($M$3 *0.0764))/(((($M$3 * 15)/(O 16+15))*((520+ A16/ 100)/520))+$S$3) WHERE: $S$3=INPUT WATER VOLUMES CUFT/M; $O$10=INPUT WATER DENSITYLBS/CUFT; $M$3=SCF/M INPUT AIR VOLUME; O 16=PRESSURE IN DRILL STRING PSI; A16=DEPTH FT QUALITY INSIDE DRILL STRING=W16-W1016 W 16=1-$S$3/((($M$3 * 15/(O 16+15))*(520+A16/100)/520)+$S$3) 8 of 9 1/2/98 1:40 PM APPENDIX D: EQUATIONS FOR USE IN EXCESHEET ~i.gri.org/tech/e+p/reports/gri95_0039/app-d.html WHERE: $S$3=INPUT WATER VOLUMES CUFT/M; • $M$3=INPUT AIR VOLUME SCF/M; 016=PRESSURE IN DRILL STRING PSI; Alb=DEPTH FT WATER INFLUX#2 OPERATOR=X16-X1016 X16=A16<$P$8 WHERE: A16=DEPTH FT; $P$B=WATER INFLUX#2 DEPTH FT 9 of 9 1/2!98 1:40 PM APPENDIX E :AIR DRILLING SURVEY • Appendix E :Air Drilling Survey Air Drilling Survey GRI Project No. 5094-914-2773 Individual's Name and Title: Company Name: Address: City, State, Zip Code: Phone: (_____) - PART 1-BASIC INFORMATION l~.gri.org/tech/e+p/reports/gri95_0039/app-e.html Fax: (_~ - 1. Where is your principle geographic area of operations? Rocky Mountains Mid-Continent West Texas Other (Please spec 2. How many wells do you drill per calendar year? 1-20 21-50 51-100 100+ 3 . What is the average depth of wells drilled? 0-2500' 2501'-8000' 8001'-15000' 15000'+ 4. Do you utilize any form of air drilling? (AERATED (DRY) (MIST) (FOAM) WATER OR MUD) YES NO YES NO YES NO YES NO 5. What percentage of wells do you drill totally with air? 0-20 Z1-40 41-60 61-80 80+ 6. What percentage of wells do you drill partially with air? 0-20 21-40 41-60 61-80 80+ 7. Would you be interested in discussing air drilling techniques that might result in lower drilling costs? 1 of 3 12/31/97 5:26 PM APPENDD~ E :AIR DRILLING SURVEY • h.gri.org/tech/e+p/reports/gri95_0039/app-e.html YES NO IF YOU ANSWERED NO TO QUESTION #7, PLEASE DISREGARD THE ENSUING QUESTIONS. 8. How would you rank your reasons for not using air drilling techniques? (List from 1 =highest to 6 = lowest concerns.) SAFETY EQUIl'MENT WATER INFLUX HIGH PRESSURE H2S OTHER (Please Specify) 1. 2. 3. 4. 5. 6. 9. Have you ever used aerated water or pressure balanced drilling? YES NO 10. Do you ever drill sections of a well with air/mist/foam then drill other sections with mud? • YES NO 11. Do you ever experience drilling rates slower than 20 feet/hour? YES NO 12. Do you have sufficient problems with deviation to warrant the use of corrective downhole tools such as reamers, stabilizers, downhole motors, etc? YES NO 13. Have you ever tried a hammerdrill (percussion type drill)? YES NO 14. Do you feel that lowering drilling costs would result in more wells being drilled? YES NO 15. Would a foam that could be recycled be important to you? YES NO 16. Would you enclose your corporate brochure or list your available equipment with reference to rigs, mud systems, air systems, and B.O.P.'s? 2 of 3 12/31/97 5:26 PM APPENDD~ E :AIR DRILLING SURVEY • h.gri.org/tech/e+p/reports/gri95_0039/app-e.html 17. If quality training was available for your rig hands and engineers, would that change or enhance your outlook on air drilling techniques? • YES NO 3 of 3 12/31/97 5:26 PM ~s • C~ 412 1 2 ' 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALASKA OIL AND GAS CONSERVATION COMMISSION PUBLIC HEARING In Re: ) TO REQUEST A VARIANCE FROM 20 AAC 25.033 ) TO DRILL WELLS IN THE HOUSTON COALBED ) GAS POOL USING AIR AS THE DRILLING FLUID.) TRANSCRIPT OF PROCEEDINGS Anchorage, Alaska February 10, 1998 9:00 o'clock a.m. APPEARANCES: Commissioners: GRI, Inc.: MR. DAVID W. JOHNSTON, CHAIRMAN MR. WILLIAM N. CHRISTENSON MS. CAMILLE OECHSLI MR. DAVID W. LAPPI MR. WAYNE E. WESTERBERG .~ , E illli i„1 ~J1~" E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 2 1 P ROC E E D I N G S 2 (On record - 9:01 a.m.) 3 CHAIRMAN JOHNSTON: I'd like to call this hearing to 4 order. I'd note the time is approximately 9:00 o'clock in the 5 morning, the date is February 10, 1998. We are located in the 6 offices of the Alaska Oil and Gas Conservation Commission, 7 located at 3001 Porcupine Drive, Anchorage, Alaska. To begin 8 I'd like to introduce the head table. My name is 9 Dave Johnston. To my right is Commissioner Cammy Oechsli, and 10 to her right is Commissioner Bob Christenson. Laurel Earl, of 11 Elite Court Reporting will be making the transcript of these 12 proceedings. If you wish to receive a copy of the transcript, 13 please contact Elite Court Reporting directly. 14 The purpose of these proceedings are to consider an 15 application submitted to us by GRI for a variance to our 16 regulations 20 AAC 24.033 (sic). That variance would allow the 17 drilling of wells in the Houston coal gas pool -- Coalbed Gas 18 Pool using air as the drilling fluid. 19 The notice for this particular hearing was published in 'I 20 the Anchorage Daily News. It was published on January 8, 1998.11 21 We'll conduct these hearings in accordance with our regulations. 22 20 AAC 25.540. Basically, I think, everybody is pretty much '' 23 familiar with that, but it does allow us to take sworn 24 testimony or unsworn statements. Greater weight, of course, 25 will be given to sworn testimony. If you wish to be considered E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • ' 3 1 an expert in this matter, we will consider that. If you desire 2 that we`d ask that you would state your qualifications as it 3 pertains to the testimony that you'll be giving. 4 We'll have the applicant going first and followed by 5 others interested in saying something on the subject. 6 Currently I'm looking at the sign-up sheet, I do not anticipate 7 any other people, although that may change and we'll solicit or 8 provide an opportunity for comment after the applicant gives 9 his testimony. Members of the audience will not be permitted 10 to ask questions directly of the applicant, but if you do have 11 questions, we'd ask that you jot them down and send them to the 12 front table, and if we feel that's germane to the topic, the 13 commission then will ask that question of the applicant. 14 With that, I guess I'd like to invite Mr. Lappi as the 15 applicant or representative of the applicant to approach the 16 commission. And, Mr. Lappi, do you wish to be sworn this 17 morning? 18 MR. LAPPI: Yes. 19 CHAIRMAN JOHNSTON: If you'd raise your right hand? 20 (Oath administered) 21 MR. LAPPI: I do. 22 CHAIRMAN JOHNSTON: Thank you. And do you wish to be 23 considered an expert witness? 24 MR. LAPPI: Although I'm not an expert in drilling 25 matters, I do have experience with air drilling and if the E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 4 1 commission wants to consider that expert testimony, I'd be 2 happy to have them consider it so. 3 CHAIRMAN JOHNSTON: Do you -- will you also be offering 4 testimony relative to the geology of the area? 5 MR. LAPPI: Insofar as it pertains to the drilling, 5 yes. 7 CHAIRMAN JOHNSTON: Okay. I think in terms of your 8 drilling knowledge we will note that you've. had experience i 9 using air drilling, but you are probably not an expert in the 10 application of air drilling. So I think with that we will 11 accept you with a caveat that your knowledge with regard to air, 12 drilling is not the same as if you had had years of experience. 13 You do have some familiarity, we note. You do have some 14 research experience under you belt relative to the application 15 of air drilling elsewhere in the country, and I note that you 16 also are a geologist and have some familiarity with the 17 regional geology of the area that you are working in. 18 MR. LAPPI: Yes, that would be correct. 19 CHAIRMAN JOHNSTON: Okay. Is there any objections to 20 accepting him as a partial expert in this matter? 21 MR. CHRISTENSON: I have no objection. 22 MS. OECHSLI: I have no objection. 23 CHAIRMAN JOHNSTON: Thank you, Mr. Lappi. Please 24 proceed. 25 MR. LAPPI: Okay. Just to -- my name is Dave Lappi, E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • 5 1 president of GRI Inc. GRI Inc. is the operator of the lease 2 and the party that's progressing the Houston coalbed gas pool 3 development and the Houston gas field. As far as the project 4 stands is concerned we have over the last month drilled three 5 conductor casings, drilled three 500' holes in -- at Houston 1, 6 2 and 3 locations, and set and cemented 7" steel surface casing 7 -- not surface casing, conductor casing into those holes. And 8 that work was completed last Thursday. 9 The -- our application before the commission today is 10 to drill the next 1600' in each of those holes to TD of 2100' 11 using downhole air drilling techniques in preference over mud 12 drilling techniques which are common in the state. The target 13 horizons are coalbeds in the Tyonek formation which is a coal 14 measured in the Cook Inlet Basin, and the object of using air 15 to drill those target horizons would be to limit formation 16 damage, plugging of the porosity and permeability by mud. 17 Using air drilling techniques, we think we can limit the 18 formation damage quite significantly and hopefully end up with 19 abetter chance of commercial production. 20 Previously to this hearing I have submitted to the 21 commission on December 31, '97, a survey conducted by the Gas 22 Research Institute based in Chicago that researched the air 23 drilling -- the use of air drilling by over 100 operators and 24 d i r lung contractors in the Lower 48. And 1_f I could dust 25 reiterate what that survey showed, it showed that most of the E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 6 1 operators -- well, about 50~ of the operators have experience 2 using air drilling techniques to drill either entire wells or 3 portions of wells that were otherwise drilled with mud. And 4 most operators continue to use air either to drill new wells or 5 portions of their mud drilled wells where the technique seems 6 to be appropriate. The merits of air drilling -- well, so that 7 survey is in your files and I hope that it gives you quite a 8 bit of information about what's happening in the rest of the 9 country. 10 Here in Alaska I've only been able to find one oil and 11 gas well that had any air drilling occurring on it and that was 12 ARCO's Lake Number 1 on the North Slope which had the first 13 500' drilled and reamed using air drilling techniques. 14 However, here in the state of Alaska it doesn't seem to have 15 been a very common practice, and hopefully with the advent of 16 coalbed gas drilling we can use air drilling more and more to 17 good effect. 18 The merits of air drilling include lowering the cost of 19 drilling and this is primarily achieved by the higher 20 penetration rates which air drilling can enable, and the fact 21 that you don't have to buy mud and mud supplies and maintain 22 that mud system and the fact that you don't have to dispose of 23 the mud once you're done with the well. Also the merit that 24 I -- one of the merits that I mentioned earlier is less 25 formation damage. E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 I ~ 1 A couple of the disadvantages include caving -- caving 2 conditions in certain holes where the rocks are loosely i 3 cemented there is the possibility of sloughing or caving 4 occurring during the drilling operation. A possibility of 5 downhole water influx is another potential problem which could 6 occur during the drilling process, and the risk of downhole 7 fires -- downhole fires can occur in oil and gas drilling 'i 8 situations using air as a drilling fluid, however, if the I 9 drilling contractor is using water injection in the compressed 10 airstream going down the well or drilling with home (ph), 11 either of those techniques are very effective at limiting the 12 risk of downhole fires. For all of our drilling below the ' 13 ~ conductor casing that we have set we're proposing to use mist . 14 or foam drilling partially to enable better hole cleaning and 15 partly to limit the risk of downhole fires. 16 Normally when a downhole fire occurs in an air drilling 17 situation the operator would probably be unaware of it until -- 18 if -- unless and until the drill string became stuck in the 19 hole. The higher temperatures caused by the downhole fire 20 would cause the cuttings to cake up around the drill string or 21 the bit and eventually stick the drill string. So that's the 22 primary way that an operator would know that there is a 23 downhole fire occurring. It's not particularly risky to the 24 rig or to the personnel but it would cause some drilling 25 problems. E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage A.Iaska 99508 907.333.0364 8 1 CHAIRMAN JOHNSTON: Wh would it not be risk for the Y Y 2 personnel? 3 MR. LAPPI: Well, the fire is really contained down the 4 hole. It's not going to come very far up the drill string, and 5 the crew is normally unaware that there is a fire occurring. 6 CHAIRMAN JOHNSTON: Why wouldn't you have explosive 7 concentrations of gas at the surface? 8 MR. LAPPI: Well, if there is a fire occurring there 9 probably won't be, there will be a lot of C02 generated. There 10 could be explosive concentrations of gas at the surface if 11 there was an influx of gas that was not on fire, for instance. 12 CHAIRMAN JOHNSTON: Right. And how..... 13 MR. LAPPI: However, just as in normal oil and gas 14 drilling operations those gas and air coming out of the. rig is 15 vented at some distance from the rig and it does not pose a 16 threat to the personnel on the rig. 17 CHAIRMAN JOHNSTON: So how do you know if you are 18 having an influx of gas into your boring? 19 MR. LAPPI: During normal drilling operations you would, ~ 20 I not know. The well is flowing air at a rate in excess of 21 a million cubic feet a day, and even a substantial influx of 22 gas would not necessarily show up in the stream of gas that's 23 coming out of the well. 24 CHAIRMAN JOHNSTON: But you also said that you're 25 venting that gas away from the rig? EL I TE COURT REPORT I NG 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • I 9 1 MR. LAPPI: Yes, that's correct. There's a blooey tube 2 -- in our case it will be a 7" steel pipe which will be venting 3 the gas away from the rig. And BOPs, we actually have a single 4 ram BOP proposed for the first law of prevention device; an 5 annular BOP or a rotating head BOP on top of that, and then 6 finally the blooey tube is connected to a less substantial 7 diverter which has a rubber packer surrounding the drill 8 string, and that rubber packer effectively vents all of the 9 cuttings and all of the air and gas, if there is gas present, 10 through the blooey tube and to a safe location. In addition to 11 that we'll have a two detector -- a two sensor gas detector 12 system on the rig and fully functional at all times. 13 Some operators, when they're drilling, actually have a 14 small flare at the end of the blooey line to burn any 15 combustible gases during the drilling process. We're not 16 proposing to do that, but it can be done and operators do use 17 that technique in the Lower 48 on occasion. 18 CHAIRMAN JOHNSTON: Do you have with you a copy of your 19 BOP equipment? 20 MR. LAPPI: Yes. Our drilling permit application shows 21 the single ram preventor and the annular BOP. 22 CHAIRMAN JOHNSTON: And when you do have an influx of 23 gas or fluid into the wellbore and you make the decision to 24 shut your BOPS in, what criteria are you looking at to make 25 that decision? What is your evidence that would tell you that E L I T E C O U R T R E P O R T I N G 405I East 20th Avenue #65 Anchorage Alaska 99508 I 907.333.0364 • 10 1 at this moment you need to shut those BOPS? 2 MR. T,ApPI: Well, I don't think an influx of gas would 3 be a triggering event. If we had some other flow of -- some 4 other liquid flow from the well, I think that would bs a 5 triggering event to shut th BOPs. 6 CHAIRMAN JOHNSTON: Okay. And please explain why you 7 wouldn't shut the BOPS for gas? 8 MR. T,ApPI: Well, in some parts of the country, in fact 9 natural gas is used as a drilling fluid, and the fact that the 10 well was flowing natural gas is not in itself a dangerous 11 condition. In fact that's what we're after is natural gas. 12 And, you know, if we're flowing natural gas that`s a good sign. 13 It's not an abnormal condition during the drilling process to 14 flow some natural gas. 15 CHAIRMAN JOHNSTON: As long as that flow is reasonably 16 controlled. We have had situations in the state where we've 17 had gas blowouts and they have done tremendous damage. 18 MR. LAPPI: That's right. That's..... 19 CHAIRMAN JOHNSTON: And that's the point I'm trying to 20 get at. At what point do you use your BOPS to control a flow 21 of gas that could potentially create a hazard? 22 MR. LAPPI: Right. I think that's the decision to be 23 made at the rig during the event. Certainly if we believe that 24 the flow of gas coming out of the blooey tube was sufficient to 25 create a hazardous condition that would certainly be a decision E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 11 1 point to shut the BOPS. 2 CHAIRMAN JOHNSTON: But what kind of monitoring 3 equipment or process do you have that would give you that 4 warning that you have now encountered a flow of gas that was 5 significant enough to warrant putting in the BOP? 6 MR. LAPPI: Well, every 20' the drilling crew would ~ 7 shut the flow of air off to add another drill pipe, and at that) 8 oint the drill crew would be able to see if there is a P 9 continuing flow from the well. So every 20' we've got to check 10 on the actual influx of gas into the well. And if the crew or 11 the operator thought that that flow was sufficient to cause a 12 hazard that would be a point at which the BOP could be shut, 13 either the annular preventor or the BOP. 14 CHAIRMAN JOHNSTON: And so how is the crew going to 15 know; every 20' they're going to open the system to the 16 environment and..... 17 MR. LAPPI: No. In fact the system is never opened 18 except through the blooey tube. 19 CHAIRMAN JOHNSTON: Right. 0 2 -- MR. T,ApPI: There is a check valve in the drill the 21 downhole hammer that we're using to drill these wells which 22 prevents the flow of gas up the drill stream. There's also 23 another check value in the drilling sub at the bottomhole 24 assembly. So there are two safety valves at the bottom of the 25 drill string that prevent reverse circulation up the drill E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 12 1 stream. The only other circulation that's available. is up the 2 annulus, and that's vented safely out the blooey tube. 3 CHAIRMAN JOHNSTON: I guess I'm still having troubles 4 visualizing this system. I mean in a mud system's -- or in a 5 mud system you have monitoring devices on the mud tanks and 6 you'll be able to detect an influx of fluid or gas into your 7 mud system, and that would -- based upon that monitoring then 8 the driller would take certain actions up to the point of even 9 closing in the BOPS based upon that evidence. 10 MR. LAPPI: Right. 11 CHAIRMAN JOHNSTON: What I'm looking for is do you have 12 a similar process that would cause the warning lights to go on 13 and say we're into a serious situation, we had better slap 14 these BOPs shut..... 15 MR. LAPPI: Right. 16 CHAIRMAN JOHNSTON: .....and then take corrective 17 action. 18 MR. LAPPI: Right. 19 CHAIRMAN JOHNSTON: And I'm not understanding what..... 20 MR. LAPPI: Okay. 21 CHAIRMAN JOHNSTONs .....you're looking at, what is 22 telling you that you're into a situation that is no longer 23 desirable. 24 MR. LAPPI: Okay. During the drilling process the well 25 was flowing at a rate of over a million cubic feet a day but S L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • 13 1 it's air --..... 2 CHAIRMAN JOHNSTON: And that's compressed air..... 3 MR. LAPPI: .....mostly air..... 4 CHAIRMAN JOHNSTON: .....that you've had..... 5 MR. LAPPI: compressed air that we put in. Every 20' 6 when the drillers add a new piece of pipe to the well they shut 7 that air supply off, break the drill pipe at the surface and 8 add a new piece of pipe. During that process if the -- if the 9 well continues to flow at some significant rate that indicates 10 that there is an influx of fluid into the wellbore, and at that 11 point you can -- you can very ea- -- there is no mud pit to 12 monitor fluid levels in, and so then you can make an assessment 13 as to the rate of influx and type of influx, for instance. If 14 it's water or some other fluid, some other liquid, you'll see 15 that as soon as you reconnect the pipe and start blowing air 16 into the well again. The fluids in the -- the liquids in the 17 well are produced almost immediately to the surface as soon as 18 you resume drilling. So you can see what's going on instantly 19 during the drilling process. 20 So I don't know if that answers your question, but as 21 soon as you shut the air off you can see if there's continuing 22 flow out of the blooey tube. The other thing is that the gas 23 detectors on the rig will notify the rig personnel if there is 24 any gas around the rig itself. 25 CHAIRMAN JOHNSTON: Where are the gas detectors E L I T E C O U R T R E P O R T I N G ~ 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 14 • • • 1 2 3 4 5 6 7 8 91 10 11 12 13 14 15 16 17 18 19 20 211 22 23 24' 251 located? MR. LAPPI: We don't anticipate putting one at the end of the blooey tube because we anticipate that there will be gas coming out. the blooey tube. There will be a mixture of air and gas in that return line. So I don't see that it would necessarily be advantageous to put a detector out there. We propose to put one of the detectors near the BOP and the other one around the rig operating area, mainly to protect personnel. We hope there is gas in the return air. MR. CHRISTENSON: What does your research show about high pressure gas areas and so forth in the area out there? MR. LAPPI: We know that previous wells did encounter some gas. The wells were drilled in the mid-'50s and early '60s by some fairly primitive methods, and so it's hard for us to actually guage how much gas they found and at what rate the wells they were able to make the well flow. In one case, for instance, in Rosetta 3 they had a gas flow from a sand at about 1300' which they did a single packer DST on and it actually flowed gas for several hours. We don't know what rate that was now because the records just aren't there. That's the only gas flow from the five wells that were drilled in that area that seem to flow at commercial rates. There have been a lot of other gas shows in the previous drilling and we anticipate that those gas shows probably came from coal seams that they drilled at the time. E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • 15 1 CHAIRMAN JOHNSTON: If you did not have this data 2 available, these other wells being drilled in the area, would 3 you still advance a proposal like this if there was absolutely 4 no other data available in the area? 5 MR. LAPPI: I think in the -- in a wildcat area I think 6 mud drilling would be a safer option, just from a well control 7 point of view. Here in the Cook Inlet basin we know that there 8 -- there is unlikely to be any oil at these shallow depths and 9 so we think the air drilling option is certainly a safe option 10 for us. 11 CHAIRMAN JOHNSTON: Is your concern only for oil at 12 shallow depths then? 13 MR. LAPPI: Yes, I think so. If we encounter gas, I 14 think that the equipment that we have on the rig to handle 15 compressed air is also capable of handling the gas flows. You 16 know, the well control equipment, for instance. 17 CHAIRMAN JOHNSTON: We have had, again, instances in 18 the inlet and on the North Slope where drilling has encountered 19 shallow gas pockets and have resulted in the loss of 20 significant property. These things are potentially extremely 21 hazardous..... 22 MR. LAPPI: That's right. 23 CHAIRMAN JOHNSTON: .....and I'm just -- I'm intrigued 24 when you say that the equipment that you have on your rig would 25 be able to handle a flow of gas if you were to encounter an ELI T E C O II R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 16 1 i overpressured zone of gas at a shallow horizon that your rig ~ 2 would be able to handle it whereas a rig that is used for deep 3 drilling with proper mud systems and that sort of thing has had 4 very difficult time handling that. What is the difference? 5 MR. LAPPI: Well, it's not the rig so much, it's the 6 casing string that we have in the ground. We've got 500' of 7 conductor casing set and cemented in place. The -- I think the' 8 events that you're referring to are instances where other 9 companies have drilled, in some cases, up to a couple thousand 10 feet with the only protection being a hundred or so feet of 11 conductor casing set at the surface, .and under those 12 circumstances a shallow gas pocket would certainly be 13 hazardous. There's no way to shut the flow in. You basically 14 just have to let it flaw. If we encountered a shallow gas 15 horizon we have a BOP system in place and we can shut in and 16 stop the flow if we want to. The drilling program that we have 17 calls for this 500' conductor string to be the foundation for 18 the BOP system that we've gat, so we believe that that 19 particular equipment is what makes us different from other 20 operators that have been drilling deeper surface hales 21 unprotected by any sort of casing. 22 CHAIRMAN JOHNSTON: And what kind of BOP do you have? 23 MR. LAPPI: Well, we haven't act- -- we don't own it, 24 it's going to be a rented piece of equipment, but it would 25 probably be a Shafer BOP itself. The only one available in the EL I TTs CO DR T REPOR T I NG 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 17 1 state is probably a 5000 pound unit. Our drilling permit calls 2 for a working pressure in excess of 2000 pounds. 3 CHAIRMAN JOHNSTON: And what's the closing device on 4 it, is it designed to close around your drill pipe that you 5 have in the ground or..... 6 MR. LAPPI: Yes. 7 CHAIRMAN JOHNSTON: .....is it designed to shear the 8 drill pipe? 9 MR. LAPPI: No, it's a -- it would be designed to close 10 around the drill pipe. 11 CHAIRMAN JOHNSTON: Then what -- so that would take -- 12 that would close off this space between your casing and your 13 drill pipe. What is to -- but presumably, and correct me if 14 I'm wrong, I guess you're saying that then you would rely on 15 the check valves in the drill string itself to check the flow 16 of gas from this horizon. Is that..... 17 MR. LAPPI: That's correct. When we're making 18 connection only. When we're not making a connection, when 19 we're drilling ahead we have some very big air compressors 20 attached to the top of that drill string and they're pumping 21 air into that drill string as fast as they can. So, yes, 22 you're right, there is a check valve down the hole, there is 23 probably going to be a check valve at the surface at the Kelly 24 -- where the Kelly actually attaches to the drill string. And 25 then we've got the compressors running, too. So I don't see a i E L I T E C O U R T R E P O R T I N G 4051 East 2Dth Avenue X65 Anchorage Alaska 99508 907.333.0364 1$ 1 big risk of flow coming from the drill string. 2 CHAIRMAN JOHNSTON: And then if you were to encounter a 3 flow of this nature, as remote as it may be in this area, what 4 would -- what actions would you then..... 5 MR. LAPPI: Sorry. A flow of..... 6 CHAIRMAN JOHNSTON: .....of gas from a shallow horizon 7 that would cause you to shut in the BOPS, what then would you 8 do? 9 MR. LAPPI: Well, we will have a hundred barrel mud 10 system, pre-mixed, standing by in case we wanted to kill the 11 well with mud we can then run that mud possibly through the 12 drill string but more probably through the annulus and kill the 13 well from the top down. 14 CHAIRMAN JOHNSTON: And so would your lines all be 15 hooked up or would there..... 16 MR. LAPPI: Yes. 17 CHAIRMAN JOHNSTON: And you have pumps right there and 18 you'd be basically -- all you'd have to do is trigger the pumps 19 and start pumping mud down..... 20 MR. LAPPI: That's correct. 21 CHAIRMAN JOHNSTON: And what would you be doing, 22 running the mud at a predetermined mud weight? 23 MR. LAPPI: Yes, about 10 pounds a gallon. 24 CHAIRMAN JOHNSTON: Okay. 25 MR. LAPPI: Which should be more than sufficient to I~ ~ ELI TE CO DR T REPOR T I NG 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 19 1 balance the formation of fluids that we see -- that we 2 anticipate. 3 CHAIRMAN JOHNSTON: And has your calculation shown that 4 the hundred barrel tank is adequate to -- for your purposes? 5 MR. LAPPI: Yes, it's about two hole volumes. 6 CHAIRMAN JOHNSTON: Two hole volumes. 7 MR. LAPPI: And I might say that we -- in the first 8 500' of drilling the formation has acted extremely well. We 9 anticipated some sloughing, some caving in the hole, and we in 10 fact saw very little. The cement volumes that the hole 11 actually took were very close to the anticipated calculated 12 volume, so we think that there is very little belling of any of 13 the formations in the hole and we think that the formation 14 drilled very well with the downhole hammer that we were using. 15 We had penetration rates between 40 and 60' per hour, and those 16 are very good penetration rates for us. And we anticipate that 17 those penetration rates would be achievable all the way to TD. 18 CHAIRMAN JOHNSTON: Does the foam or mist system -- 19 what is the advantages of running a foam and mist system? 20 MR. LAPPI: Well, you can -- mist allows better 21 clearing of the cuttings. The air coming out of the air 22 compressors is hot. It's probably 170° Fahrenheit, and adding 23 water to that vaporizes some of the water, adding to the volume 24 there that you're actually putting into the well. Some of the 25 air that you're adding, some of the water that you're adding E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 20 1 stays liquid and goes through the downhole hammer and ends up 2 flushing the cuttings from the hole more effectively than just 3 air would by itself. When you're drilling with just straight 4 air what can happen is that dust is created at the bit and that 5 dust comes up the drill -- up the annulus during the drilling 6 process. Until it encounters a formation that's producing some 7 water, and at that point the dust collects at that wet spot and 8 causes a build-up of cuttings, and that can reduce the flow -- 9 the return flow of cuttings and air up the well. By adding 10 water at the bit you prevent that from happening and end up 11 with more effective clearing of the well. So that's the mist 12 system. 13 Using foam is a little bit different. Biodegradable 14 soap can be added to the water that you're injecting, and when 15 it goes through the downhole hammer and is used at the bit it 16 creates a very thick sud basically that provides excellent hole 17 cleaning. The capacity to carry chips away is greatly enhanced 18 by the bubbles, and you end up with a very clean hole as a 19 result. Both the air and the foam -- sorry, the air, mist and 20 the foam effectively prevent downhole fires also. 21 CHAIRMAN JOHNSTON: Do they help you with well control 22 problems? 23 MR. LAPPI: In -- especially foam can help with 24 limiting water influxes into the well. The foam seems to add 25 some back pressure to the annulus because it has a certain E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 ' 21 1 viscosity greater than water. It adds a little bit of back 2 pressure to the annulus and prevents some water influx. 3 Certainly if there's a high water influx you may have to switch 4 to mud just to limit that water influx. But we don't 5 anticipate that will happen in our drilling. 6 CHAIRMAN JOHNSTON: Will you be drilling -- obviously 7 your target is some coal seams at depth. Will you be 8 penetrating coal seams higher? 9 MR. LAPPI: Oh, in the first 500' we penetrated three 10 significant seams already. 11 CHAIRMAN JOHNSTON: And when you say "significant" what 12 thicknesses are you talking about? 13 MR. LAPPI: Well, I'd be happy to tell you after the 14 hearing. 15 CHAIRMAN JOHNSTON: Okay. 16 MR. LAPPI: We haven't announced these results yet. 17 CHAIRMAN JOHN5TON: Have you had any problems or any 18 indications that you're going to have problems with the coals 19 flowing in on you and causing you to become stuck? 20 MR. LAPPI: Certainly some of the previous drilling 21 reports indicated flowing coals and shales in the section from 22 the Rosetta wells. Our experience with the coals that we've 23 drilled indicate that they're going to behave very well, at 24 least in the first 500'. We are hopeful that they will 25 continue to behave well at depth. The previous drilling in E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • 22 1 Rosetta wells, I think, is quite a bit different than the 2 drilling that we're doing in that they -- some of the wells 3 were in the process of being drilled for more than a year at a 4 time, and we expect to have our wells completed in about a week 5 once we've got the bit turning to the right. So we anticipate 6 that while the previous drilling experience may indicate there 7 are flowing coals and caving shales and things like that, 8 that's possibly because they spent so long with an open hole. 9 We hope that that won't be the case for us. 10 CHAIRMAN JOHNSTON: If your drill pipe becomes stuck 11 what is your -- what do you do? 12 MR. LAPPI: Well, we have the same options that any 13 operator would have to try to get the pipe unstuck, including 14 running mud into the well. And at that point we've got a -- 15 we've got a stuck pipe. The drilling contractor would have all 16 the options available to him that any drilling contractor has 17 to try to get that pipe through. 18 CHAIRMAN JOHNSTON: And if you couldn't -- and you have 19 to abandon the lower hole, that's possible, you could then come 20 in and put a whipstock in and sidetrack out of the original 21 boring to -- and..... 22 MR. LAPPI: Yes. 23 CHAIRMAN JOHNSTON: .....go parallel? 24 MR. LAPPI: That would be possible. 25 CHAIRMAN JOHNSTON: That's possible? E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 I 23 1 MR. LAPPI: It may also be possible that it would be 2 cheaper for us just to cement that well in and start over 3 again. 4 CHAIRMAN JOHNSTON: Yeah, right. 5 MR. LAPPI: It just depends on the relative cost of 6 doing either option. Since these are shallow wells, 7 whipstocking and milling through casing may be more expensive 8 then just redoing the well. ' 9 CHAIRMAN JOHNSTON: What kind of pressures do you 10 anticipate encountering at depth -- at your TD? 11 MR. LAPPI: Well, the calculated bottomhole pressure is 12 about 1000 psi at 2100'. And that assumes that we have no 13 fluids, no liquids in the well at all. Our drilling experience 14 in the first 500' indicated that when we stopped drilling water 15 does invade the hole and in fact we had static water level 16 about 50' in the wells prior to cementing them. 17 CHAIRMAN JOHNSTON: This is not necessarily a question 18 that is relevant for commission purposes, but I think it is an 19 issue that is of interest to the state. When you encounter or 20 if you encounter brackish water how do you dispose of -- or how 21 do you anticipate disposing of that? 22 MR. LAPPI: Well, one option for us would be to -- if 23 we have a large influx of brackish water to use that water as 24 the addition to the drilling as a -- basically recycle the 25 water in the well, and operators' experience in the Lower 48 E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 24 1 indicates that some of that water is actually lost to some 2 formations during the drilling process, so that by recycling I 3 the water you can actually, I guess in some sense, reinject I 4 i water into certain formations below the conductor casing. 5 I Another option for us is to use a vacuum truck to take the 6 water to a disposal point. For instance, the City of Wasilla II 7 has a sewage treatment plant, and the DEC has given us II 8 permission to dispose of discharges from the well in I 9 unpermitted facilities, so that that option would be available 10 I to us if we wanted to choose that one. 11 CHAIRMAN JOHNSTON: We notice that Mr. Westberg is 12 present in the audience. If Mr. Westberg would -- is certainly 13 welcome to help answer any questions that we may ask here, so 14 don't be shy, I guess. II 15 i MR. WESTBERG: Thank you. I might just make a few 16 statements, and I apologize for being a little late, but I had 17 crews moving this morning. ~ 18 CHAIRMAN JOHNSTON: Mr. Westberg, before we take any 19 testimony from you it's generally our practice to offer to have 20 you either consider being sworn or unsworn. What is your 21 preference? ~ 22 MR. WESTBERG: Whatever is required. 23 CHAIRMAN JOHNSTON: It's really up to the individual 24 testifying. We, of course, put greater weight in sworn 25 testimony, so we..... E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • 25 1 2 3 4 5 6 ~~ 7 8 9 10 11 I 12 13 14 15 16 17 18i 19 20 2111 22 23 24 25 MR. WESTBERG: Then by all means, let's swear. CHAIRMAN JOHNSTON: Okay. If you'd raise your right hand, please. (Oath administered) MR. WESTBERG: I do. CHAIRMAN JOHNSTON: sworn. Thank you. Consider yourself MR. WESTBERG: Just a few items. Could I go ahead and add or elaborate..... CHAIRMAN JOHNSTON: Please. MR. WESTBERG: ..... a little bit? We're not -- we're talking about basically 50-year-old technology as far as air drilling, particularly in coalbed methane. I've had two years' experience with another rig in Alabama in the Tuscaloosa trend. We were drilling through approximately 4700 feet with air there and downhole hammer. Avery similar situation to this. There we just used 300' of conductor cemented in in a drilled open hole with air with no appreciable problems. There are, to my ~I knowledge, at least a half dozen fields that actually do the Ii initial surface or conductor drilling with air and then switch over to once they have a producing well in the field, switch over and actually use the gas produced from other wells at line pressure for the drilling medium. And, of course, just vented. In essence they're using the methane gas the same way as we would use air. E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage A3aska 99508 907.333.0364 26 1 One particular field just outside of Farmington has 2 been very successful and there's some 300 wells in the field 3 that I'm aware of, and it's almost exclusively now gas drilled 4 with end field gas at end field pressures, and very successful, 5 very efficient and, obviously, very cost effective. 6 The gas detectors as Dave mentioned, the main reason 7 that I would see to shut in a well, other than an obvious heavy 8 flow out the blooey pipe, that would be in addition to whatever 9 we were injecting so far as air, bearing in mind that we are -- 10 the amount of air that we`re drilling with amounts to about 11 something like a million cubic feet per day or something like 12 that, so the detectors that we're using actually detect 13 percentage of air, gas mixtures. And so the main concern, as 14 far as shutting in a well, would be potential explosive mixture 15 at areas of potential ignition which would be, of course, 16 adjacent to the BOPS, although there's no real ignition source 17 there, but you're always interested to see what you're getting 18 back, and then around the rig itself. And that is the main 19 concern, as far as any kind of a safety situation. The gas 20 itself is not very ignitable. An ordinary cigarette or 21 something like that would not be able ta, you know, ignite it. i 22 And of course when it's being expelled out the blooey tube ~ i 23 under pressure mixed with air, it's a very unignitable thing. '~ 24 If you really got serious and tried to touch it off, and in thee. 25 2~ years that we were in Alabama, we never had any problem with. E'L I TE' CO UR T R.h'POR T I NG 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 27 • 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21i 22 23j 2 4 '', 25 ~_..J that . Other than that, I've been air drilling all. around the state of Alaska, primarily water wells, but also construction drilling for some 28 years, and it's an efficient means. There are actually -- there will actually be two inside pipe BOPS downhole; one in the top of the downhole hammer and one in the sub, immediately above it. In addition to that there will be an inside pipe BOP in the saver-sub coming right out of the rotary head. We're not actually drilling with a Kelly or table drilling, we're top head drive drilling where the top head provides the rotation, and so the saver-sub immediately below the top head also will have an inside pipe BOP, or basically a check valve -- that's what a BOP is. So we feel we're covered there. Foam or mist. One very important factor as far as hole conditioning when in use of foam is the fact that it's also a shale inhibitor, and of course these coals are interbedded in shales. And we have not really had to inject very much foam in the surface hole, but I've been amazed at how stable the hole has been maintained, and in particular the coals. I was a little bit concerned that we were going to have flowing coals because some of the seams that we encountered were significant as far as thickness. The only -- well, maybe not the only, but I would anticipate the main reason that we have not had problems is that we're foaming, number one, and, number two, E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 28 1 the Rosetta wells which did have, I understand, a few problems 2 with flowing coals, were drilled with mud. T'm not sure what 3 their mud weight was, but it's entirely possible that they 4 actually -- if you're drilling with say 9'~ pound mud in a 5 fractured coal seam you could actually start fracking just by 6 downhole mud weight pressures. And that is probably the cause 7 of any flowing situations that they had. And, of course, this 8 is not, you know, the use of air gets around that. 9 Foam and mist also are down of h' i or a r s h e in ib t s s fa a 10 any ignition problems. You had expressed some concern as far 11 as downhole fires. I'm not aware of any downhole fires that 12 we've ever had in any of the drilling that we've done, but we 13 always mist and usually foam downhole. And, of course, that 14 has a cooling inhibition factor as far as any ignition 15 problems. So another thing, any downhole ignition that could 16 occur normally is when you get into a quartzitic sand or 17 something like that and you could have a little bit of a 18 sparking problem with the bit, and to the best of my knowledge, 19 as far as the logs of all the surroundings things, we're 20 strictly dealing with shales, mudstone, siltstone, claystones, 21 with a few interbedded, very silty sand or sandstones. 22 Another potential alternative, if in fact we encounter 23 some very large flows of brackish water, would be -- and this 24 of course would probably take some permitting, but would be an 25 injection well. It's a little bit unclear from the logs -- E L I T E C O U R T R E P O R T I N G 405.2 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 ! ~ 29 1 well it's more than a little it's basicall unclear fro the y m 2 logs as far as how much .water really was encountered in the 3 coal seams in the existing wells. i 4 And that's just about all that came to my mind when T 5 was listening to the testimony. i 6 CHAIRMAN JOHNSTON: Just so we can get this on record, 7 Mr. Westberg, you kind of touched upon your experience a little 8 bit as you talked. Could you briefly summarize for us what ~ 9 your experience has been relative to drilling operations so we i 10 can - ..... 11 MR. WESTBERG:. Okay. 12 CHAIRMAN JOHNSTON: .....the commission can consider 13 whether we'd look at you as an expert witness or not? 14 MR. WESTBERG: Uh-huh. 15 MR. LAPPI: Particularly in petroleum, you. mean? 16 CHAIRMAN JOHNSTON: Well, oil and gas -- drilling wells 17 in particular and then more specifically with the use of air as 18 a drilling fluid in the system. 19 MR. WESTBERG: Okay. Let's start then when I first 20 came to Alaska in 1960. I graduated from Iowa State University 21 with a degree in geology. As a lot of people in this room 22 know, geologists in the '60s couldn't buy jobs. I came to 23 Alaska and worked as a civil engineer for the Bureau of Public 24 Roads and then I went to work for United Geophysical. They put 25 me in their training program because they didn't have an Y ~ ~ E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 ~ 907.333.0364 • • 30 `rte u r~ • 1 2 3 4 5~, Gil 7 8 9 10 11 12 13 14 15 16 17' 18'~ i 19 20~ 21 22 23' 24 25 ~ positions for geologists, which means that in three months I was drilling. This is in 1962. And then I had various jobs around the state as a consultant or working for consulting firms. Usually when the job was done the geologist .got laid off, the drill crews went out to the next job. So before long I was working for a drilling contractor. And then I ended up in the inlet. I spent 3'~ years on the floaters and the jackups in the inlet working for Geologic Engineering Service, basically mud logging. And also worked Fluors for Wadeco offshore, in between wells if we were laid off as far as mud logging. I logged and worked the first 13 wells on the Monopod and the first 14 wells on the Greyling. Logged something like 400,000 feet of hole in the 18 month period, or whatever that timeframe was. Worked on the pipeline, the initial pipeline foundation investigation and drilling, first as a geologist and then as a driller in 1968. And then went into business for myself in '69 and have been drilling primarily water wells and doing construction drilling, pipeline related, ever since with the -- in 1982 we did some workover work with a cable tool rig, saw an opportunity. I built a workover drilling rig which is still in the -- down on the Kenai. When the bottom fell out in 1987 I ended up selling the rig to FDIC and settling with them, and the rig is still sitting, it's known as the "Chicken Rig," and I understand it's still sitting in Kenai. But in the period that we -- the two year period that we did operate the E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #55 Anchorage Alaska 99508 907.333.0364 31 1 rig, we did some eight workovers for Marathon, drilled an 2 injection well in the Kenai gas field to 3500' for Unocal. Oh, 3 we probably did about a dozen jobs with the rig. It also went 4 to Barrow when I leased it to Brinkerhoff and drilled some gas 5 wells up there. My drilling superintendent at the time for the 6 oil field then told me what I knew, that I could no longer 7 afford to pay him, so he went south and ended up in his home 8 territory around Alabama. He called me and said that there was 9 drilling going on, there was a coalbed methane subsidy at the 10 time. That made it pretty attractive and he was unable to put 11 together a rig package, so I went down and we put together a 12 rig package and we drilled for three years down there, 13 primarily coalbed methane in the Tuscaloosa trend. 14 , CHAIRMAN JOHNSTON: Using air system? 15 MR. WESTBERG: Using air strictly. 16 CHAIRMAN JOHNSTON: All right. Okay. 17 MR. WESTBERG: And we moved the rig to Grants, 18 New Mexico, and did a couple geothermal wells for the USGS to 19 some 3500', a very interesting project. Tailed it in with air. 20 One of the nice things about doing hot water or geothermal work 21 with air is when you get -- you can kill a well real easily by 22 injecting water if it gets too hot. And that kind of brings us 23 up to date. We`re continuing to drill. We do probably 200 24 wells a year and we had a sev- -- well, no, that's. an 25 exaggeration. We have a seven year average of 165 domestic E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 32 1 wells in addition to public and commercial work, going into the 2 slow down which now has picked back up. 3 CHAIRMAN JOHNSTON: Okay. Thank you. Any objections 4 to considering Mr. Westberg an expert, at least as it pertains 5 to drilling with air? 6 MR. CHRISTENSON: No problems. 7 MS. OECHSLI: I don't have any problem. ' 8 CHAIRMAN JOHNSTON: We'll consider you an expert then, 9 Mr. Westberg. I also am heartened any time I see a geologist 10 working a real job. 11 MR. LAPPI: One thing that I didn't add on the foam 12 drilling, it's also possible to add polymer along with the -- 13 it's a biodegradable polymer along with biodegradable soap and 14 make a stiffer foam mixture, and that's probably one of the 15 things we're going to be doing here. So it's..... 16 MR. WESTBERG: It also inhibits the shales even more as 17 far as any squeezing. 18 CHAIRMAN JOHNSTON: With the foam system, again, is 19 this kind of an enclosed system or what happens to all this 20 foam when it gets back on the surface? 21 MR. LAPPI: Well, when you freeze it it basically 22 shatters and you end up with a little pile of foam flakes. 23 CHAIRMAN JOHNSTON: Right. And that's all 24 biodegradable? 25 MR. LAPPI: Oh, yeah. It's used in -- always used in E L I T E C O U R T R E P O R T I N G 4052 East 20th Avenue #65 Anchorage Alaska 99508 f 907.333.0364 • 33 1 drinking water well drilling, so DEC is well aware of what's in'~ 2 it. 3 MR. WESTBERG: Years ago before the mud product 4 companies were putting it out we used to use liquid Tide. It 5 made the hole smell good, too. 6 CHAIRMAN JOHNSTON: Not Ivory, huh? 7 MR. WESTBERG: Also liquid Ivory, depended on the. 8 driller. 9 MR. LAPPI: But in fact what we're using these days is 10 more biodegradable than dishwashing liquid would be. 11 CHAIRMAN JOHNSTON: So basically it comes out the 12 blooey line and there it is? 13 MR. LAPPI: Yeah. 14 CHAIRMAN JOHNSTON: It just biodegrades back into the 15 environment, no problems whatsoever. 'i 16 MR. LAPPI: Right. In fact what we're going to be ~, 17 doing is disposing of it elsewhere, it won't be disposed of at 18 the drill site. 19 CHAIRMAN JOHNSTON: How about the blooey line itself, 20 is that well anchored? ~ 21 i MR. WESTBERG: Yeah, we'll cable -- you know, cable it 22 down, and it will be some 20 -- maybe even 30' out to the end 23 of the -- into the slush pit. 24 CHAIRMAN JOHNSTON: And that's a rigid line? Is that 25 what I heard? E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 34 • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LAPPI: Steel. MR. WESTBERG: Steel, yeah. CHAIRMAN JOHNSTON: A steel rigid line? MR. LAPPI: Uh-huh. CHAIRMAN JOHNSTON: What diameter? MR. LAPPI: 7". CHAIRMAN JOHNSTON: 7". MR. LAPPI: We're drilling a 6~" hole below the conductor casing, so 7" is more than adequate to carry everything away from the rig. CHAIRMAN JOHNSTON: So the cuttings are deposited at the end of the blooey line in what, a pit that you've constructed? MR. LAPPI: Yeah, we have a pit there. Yes. And basically what you end up with is a pit with ground up rocks and some water in it. CHAIRMAN JOHNSTON: Okay. And did the permit take any special permitting from DEC or..... MR. LAPPI: No, they've given us permission to do that. CHAIRMAN JOHNSTON: Good enough. Any other questions? MS. OECHSLI: No questions. MR. CHRISTENSON: I don't have any other questions. CHAIRMAN JOHNSTON: Okay. Mr. Lappi, Mr. Westberg, I think what T'd like to do at this time is to take maybe a 15 minute break and that will allow the three of us to consult E L I T E C OUR T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 i 35 . 1 with staff to see if there's any additional questions that we'd 2 like to ask and see if there's any additional information that 3 we need to get into the record on this matter. So with that if 4 we could recess for about 15 minutes. 5 (Off record - 9:55 a.m.) 6 (On record - 10:13 a.m.) 7 CHAIRMAN JOHNSTON: Just, I think, one or two 8 additional questions and some points we'd like to make. If you 9 were to ever go to flare under what situations would you see 10 occurring that would lead you to go to a flare? 11 MR. LAPPI: I think that if we had a flow of gas that 12 we wanted to continue to flow for some reason, either a well 13 control reason or something like that that we thought would 14 be -- we thought would be a danger from an explosive point of 15 view we would probably like to flare at that point. I don't 16 see any reason to flare other than to prevent dangerous gas 17 accumulation. I mean methane gas is a greenhouse gas. But 18 we're not anticipating such huge quantities that it would be a 19 i problem. 20 I CHAIRMAN JOHNSTON: So your first -- before you went toy 21 an actual flare if you were to encounter significant gas your 22 first plan of attack would be to close the BOP systems and try 23 and resolve the problem using your mud system? 24 MR. LAPPI: That's right. 25 CHAIRMAN JOHNSTON: So really the only time you'd go to i E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage AZaska 99508 907.333.0364 ' 36 1 a flare is if, what, if you had an equipment malfunction in 2 say, for example, your rams were unable to close? 3 MR. LAPPI: Yeah. If the rams were unable to close -- 4 the annular preventor was unable to close and we felt it was a 5 -- the amount of methane coming out of the well would be a 6 danger, then the possibility would be to flare the well. 7 CHAIRMAN JOHNSTON: Would you keep the thing on -- 8 would you then -- I mean is one of your plans of attack, would 9 it be to start reinjecting air again? 10 MR. LAPPI: During a..... 11 CHAIRMAN JOHNSTON: If you had a flow of gas would it 12 be helpful to start the compressors up again to dilute that 13 gas? 14 MR. LAPPI: It's possible, but only if you were misting 15 or using foam. 16 CHAIRMAN JOHNSTON: Yeah, right. So you do have some 17 options..... 18 MR. LAPPI: That's right. 19 CHAIRMAN JOHNSTON: .....at your disposal. Okay. 20 MR. LAPPI: Yes. And the best option, I think, if 21 you're -- if you've got some kind of an equipment malfunction 22 is to use your mud system, you know, inject mud. 23 MR. WESTBERG: Let me interject one other thing. And 24 there may be though people around who would geologically 25 disagree, but I think that any gas accumulations in a sand that E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • 37 • 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ~ ~ we would encounter probably would be the result or are the result of long-term seepage out of the coals, and we probably are talking about a limited supply. As a matter of fact there's a term in, you know, water well drilling, you pump a well until you get to the limits of recharge, which is basically how much is coming into that particular permeable aquifer formation, and another option is I would see that any initial flow that would be heavier would probably be the result of hitting an areas of increased permeability which you've got some accumulation, and I think that there would be a finite quantity there that once you've flowed it, you could close her in and put it on a choke and just determine, you know, what the extent of it is and then make the decision whether you're going to kill it with mud or not. But normally the actual recharge would be pretty light, as is the actual gas flow out of the coals. Normally they won't even flow gas until you start pumping the water and then actually producing or maybe even having to frack them. CHAIRMAN JOHNSTON: We would like to note that none of the wells that have been drilled in the area have any indication of any significant quantities of gas at shallow..... MR. LAPPI: That's correct. CHAIRMAN JOHNSTON: .... horizons, nor any significant overpressured zones that would cause a problem, so..... MR. LAPPI: Rosetta 3 is about a quarter-mile from E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 995D8 907.333.0364 ' 38 1 Houston Number 3, and it was drilled to 6109', and'I mentioned 2 that they had a gas flow from the sand to about 1300', but we 3 don't know exactly what quantities that they were producing. 4 They intentionally tested that sand with a single packer drill 5 stem test, so I don't think it flowed while they were actually 6 drilling. 7 CHAIRMAN JOHNSTON: All right. Any other questions? 8 MS. OECHSLI: Not from me. 9 MR. CHRISTENSONz I have no questions. 10 CHAIRMAN JOHNSTON: Are you planning on submitting any 11 other .information for us at all? 12 MR. LAPPI: I did last week submit a -- two copies of a 13 manual on air and gas drilling..... 14 CHAIRMAN JOHNSTON: Right. 15 MR. LAPPI: .....which I hope are in your files now. 16 CHAIRMAN JOHNSTON: Yes. And we would like to make 17 that a part of the record in this matter, as well as your other 18 submittals that you've provided on this that are also part of 19 the file that you gave us earlier. 20 I guess we have no other further questions then and we 21 do thank you for your time. Mr. Westberg, we appreciate your 22 comments. And so at this time I'd like to close the record in 23 this matter and thank you for your attendance. 24 MR. LAPPI: Thank you. 25 MR. WESTBERG: Thank you. I~, ~ EL I TE CO UR T REPOR T I NG 4052 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 C7 39 i • • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 z~ 25 (Off record - 10:17 a.m.) END OF PROCEEDINGS E L I T E C O U R T R E P O R T I N G 405I East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • i • 11 2 3 4 51 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 I 25 I C E R T I F I CAT E UNITED STATES OF AMERICA) )ss. STATE OF ALASKA ) I, Laurel L. Earl, Notary Public in and for the State of Alaska, and Reporter for Elite Court Reporting, do hereby certify: That the foregoing Alaska Oil & Gas Conservation Commission Hearing, was taken before me on the 10th day of February 1998, commencing at the hour of 9:00 o'clock a.m., at the offices of Alaska Oil & Gas Conservation Commission, 3001 Porcupine Street, Anchorage, Alaska; That the hearing was transcribed by myself to the best of my knowledge and ability. IN WITNESS WHEREOF, I have hereto set my .hand and affixed my seal this 10th day of February 1998. ~~.C,t~i~- ~~ Notary Public in and for Alaska ~4cel4NMN~wNtiW+NM1 OFFfCt~'~.L S=~L sTaT~ c~ ~:~..~s~~ ?~t•; ~. tti4' 4 3 :•1=' lt.i -a".Y.'# 4 d t h',9,' x V ~1 yA„• E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue #65 Anchorage Alaska 99508 907.333.0364 • • ALASKA OIL AND GAS CONSERVATION COMMISSION PUBLIC HEARING GRI, INC. Houston Coalbed Gas Pool -Air as drillins fluid F_ ebruary 10,1998 9:00 AM SIGN IN PLEASE NAME-COMPANY PHONE (PLEASE PRINT) DO YOU PLAN TO TESTIFY? YES NO dir. ~~.r~ ~P~S~rt PIU~- ~.~-8.3 6 a. ~ X ~~ ~ `~' ~~ ~jlt~~~t a~~-1~~~ ,~ ~~ • • Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Houston Coalbed Gas Pool Notice is hereby given that GRI, Inc. by correspondence dated December 31, 1997, requested a variance from the requirement of 20 AAC 25.033 for oil and gas wells to be drilled with a fluid of sufficient density to overbalance subsurface wellbore pressures. The variance will allow GRI, Inc. to drill wells to the Houston Coalbed Gas Pool using air as the drilling fluid. A hearing will be held at the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, AK at 9:00 AM on February 10, 1998, in conformance with 20 AAC 25.540. All interested persons and parties are invited to present testimony. If you are a person with a disability who may need special modification in order to comment or to attend the ubl' in a ct Diana P Fleck at 793- 1221 no later than Fe~iruar ~, 199$--~~ David W` Chairman Published January 8, 1998 ADN A02814018 ORIGINAL I ~~8958 STOF0330 $442864018 AFFIDAVIT OF STATE OF ALASKA, THIRD JUDICIAL DISTRICT Eva l•1. Kaufmann being first duly sworn on oath deposes and says that hejshe is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on Jan. 8, 1998 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private in ividuals. slgned~' Subscribed and sworn t b re me this .~. day ...~~L~ .... 19~~1 No Public in and f the St<ite of Alas Third Division. Anchorage, Alaska MY COMMISSION EXPIRES PUBLICATION TATE (2~!6t1-ASKA A~aaka aC~f 6a~ Conservatibtt Commission r Re: Houston Caafbed t>Pas Poe! ' Notice is kergpy p(v~n thpt 3R7, Inc. ay .correspAndence dated Decemp6r3t~']9,47; requested a ++atfaAce from The requirement Of''20 AAC 25.U3'3 for' oil aRd gas v18Tt5 ''to tie drilled wifh',:t~ fluid of sUffici2rrF deasiTV to av8rbalance GUbsur- face wellbare=pressures; The variance wilt Oltb'W CrRk,: ItK:. to drt[i webs fo Sfi@ 9lousion Coalbed-Gas Pool usinj:pir as me druurg fwid. ,' A heariii§' will be field ~bt the Alaska Oif and-Gas Con~va- tion CommlSSian,~3001 ; P'orcuaine (jr:ive; tnihoroja; AK aT '9:6© AM on Fe~uttrx 70, }998, in confaraia~e ; wHR 20 AAC 25,54Q: YUd`~ihf~nested p&+'son's'and uartiee are invited t0 pfeSelTf teSYlmOny. If you are a person with a' disability who may need-. - special modification in order to comment or to attend The pablic hearing, please contact Diana Fleck at 7p3-1221 no later than Februprv5, 1998. David W. Johnsion,Chairman Publishetl.lanuarv 8, 7998 ~~ ~~. ul "~ GRI, Inc. ~ 4900 Sportsman Drive Anchorage, Alaska USA 99502-4169 Telephone: 1 (907) 248-7188 a-mail: lapres@alaska.net Facsimile: 1 (907) 248-7278 December 31, 1997 Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3192 Attn: Mr. David Johnson -Chairman Re: Request for Conservation Order permitting Air Drilling in the Houston Garfield (Conservation Order 358, and Administrative Approvals 358.1 and 358.2), Initially for Drilling Permit Applications for Houston 1, 2, and 3 Dear Dave: I met with Jack Hartz and Blair Wondzell on December 23, 1997, and at that time, we agreed to meet again with our proposed drilling contractor and discuss our permit application to drill with air as the drilling fluid. We were not aware that drilling gas wells with air would be problematic in the State of Alaska, as it has been an industry standard practice in several regions of the USA for many years. Our proposed drilling contractor, Mr. Wayne Westberg (M-W Drilling, Inc.) and I met with Commissioner Christenson, Bob Crandall, Jack Hartz, and Blair Wondzell on December 30, 1997 to discuss our drilling project and drilling permit applications. We have selected M-W Drilling because: 1) they have oil and gas drilling experience, 2) their equipment is appropriately sized for our project yielding appropriate drilling costs, and 3) they are a local Alaskan contractor, and we are endeavoring to follow the spirit as well as the letter of the "local hire" provisions of our oil and gas lease with the State of Alaska. At the conclusion of that meeting, we agreed to provide further information regarding the use of air as a drilling fluid. I now enclose further air drilling information, including a survey of oil and gas air drilling practices of over 100 oil and gas operators and contractors in the Lower-48, conducted the Gas Research Institute in 1995. While we understand that most oil and gas operators in Alaska have not used air, we recently discovered that 17'/2 inch surface hole for ARCO's Lake #1 on the North Slope was drilled and reamed with air to a depth of approximately 500 feet. While drilling with air maybe unusual for the majors in Alaska, most water wells drilled in Alaska are drilled with air using downhole air hammers as bits. Water well drillers find that percussive air drilling gives them straighter holes and higher penetration rates (typically 40 to 100 feet per hour), while formation damage and well cleanup is minimized. The deepest well M-W Drilling has drilled in Alaska using these methods was a water well attempt for Chevron at Point Beaufort on the North Slope to a depth of 1,700 feet. No commercial water source was encountered. ~~~~~~~~ ,~.~.. _~ Exploration and Developme ' Anchorage • • I have personally supervised many engineering boreholes drilled with air along the route of the Trans Alaska Pipeline prior to and during its construction, and as the lease Operator, I have used air to drill one oil and gas exploration well overseas. We would like to spud our Houston wells in early January, 1998. If advertisement of our proposal can be effected immediately, and no substantive objections are encountered, we request that a conservation order be effected at the end of the objection period. As another alternative, would it be possible to bifurcate the permit to allow the surface hole to be drilled with air (using standard water well drilling equipment), and 7 inch oil well casing set and cemented (as per our permit applications), starting January 6, 1998, while the issue of drilling deeper gas production wells with air is resolved by normal conservation order procedures? In either case, please publish notice of our application for a conservation order to drill with air and start the public process as soon as possible. I request that any written communications to us from the Commission be FAXed initially, in addition to being mailed, as this will speed up our line of conununication. Thank you. Sincerely, ~n_ .~ David W. Lappi President .a :;~~ q _ ... ~ ~u , ,,,, ~3 JAN-03-' 98 SAT 13:51 ~ LAPP RESOURCES I NC TEL N0: 1 907 ~ 7278 #120 P01 GRI, Inc. ~ ~~ 4908 Sportsman Drive Anchorage, Alaska USA 99502-4169 Telephone: 1 (907) 248-7188 a-mail: lapres~alaska.net Facsimile: 1 (807) 248-7278 December 31, 1997 Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3192 Attn: Mr. David Johnston -Chairman Re: Houston Garfield Drilling Permit Applications Further Information on CBM Air Drilling in Alabama Dear Dave: Enclosed is a letter dated December 31, 1997 from Mr. Stan Graves to Mr. Wayne Westberg (our proposed driller), which accompanies: 1) Stan's resume (he is the national president of the Groundwater Association), 2) a set of typical "Pool Rules" (Deerlick Creek Field) in Alabama, 3) coalbed methane regulations for permits, drilling, producing, safety and testing. Please note that both the Pool Rules and the Drilling Regulations specifically provide for drilling with air used as the drilling fluid. This recognizes the routine use of air drilling for coalbed gas in Alabama. Thank you. Sincerely, 1- (/ , David W. Lappi Preaident ~~31 i~9~ ~lasi<a i;ii ~ aus i;+,ns. ~ammission "C~;Cra~B Exploration and Development .~'__ JAN-03-'98 SAT 13:52 APP RESOURCES INC TEL N0:1 907 .7278 #120 P02 - -~~~~ GRACO RESOURCES, INC. 2070 OLD 110CKY IIIDOL ROAD 6UIT! 119 BIpMINOHAM, ALABAMA 35243 -MON! !Of 979.1 L9L FAN L06 979.019• December 31, 1997 Wayne Westberg M W Drilling Inc. 12200 Avion Road Anchorage, AK 99511-0378 Dear Wayne: This is in response to our telephone conversation of last bight regarding standard practices for drilling coalbed methane wells. As you probably know, there have been approximatety 4,000 coalbed wells drilled in Alabama. Current production is approximately 10 BCF per month. To my knowledge, there are no known cases of ground water contamination as a result of coalbed methane activity. I have also been involved in coalbcd methane projects in Virginia, West Virginia, Wyoming, Colorado, Alberta, and Zimbabwe and know of no ground water related problems. There are some water problems in Colorado as a result of improperly plugged conventional oil and gas wells that predate the walbed methane activity. I am enclosing a copy of the Alabama Oil and Gas Board Regulations (my former employer) and a set of field rules for your review. Alabama .vas the first state in the United States to adopt field rules. It was a collaborative effort by the Oil and Gas Board staff and those of us in the industry who realized the necessity for workable regulations to guide the development of a major resource. Since adoption of these regulatio~is, over $2.0 billion has been invested in developing the coalbed methane fields in Alabama. Additionally, hundreds of high paying jobs were created. I wish you and the State of Alaska well on your ne~v and exciting venture and hope you have the same success we have enjoyed in Alabama. Very t 1 yours, S ey rave President SLO:dfb Enclosures JAN-03-'98 SAT 13:53 ID: LAPP RESOURCES INC TEL N0:1 907 2 778 #120 P03 `^" - RESUME STANLEY L. GRAVES HOME ADDRESS: 2125 Hickory Ridge Circle Birmingham, AL 352]6 BUSINESS ADDRESS: GRACO RESOURCES, INC. 2870 Old Rocky Ridge Road, Suite 119 Birmingham, AL 35243 (205) 979-1282 BtRTHDATE: October 26, 1944 EDUCATION B.S. Engineering, Auburn University, 1967 PROFESSIONAL EXPERTENCE President, GRACO RESOURCES, INC., Birmingham, Alabama. GRACO is involved in the development and management of natural resources. Vice President for Business Development -Ultimate Abrasive Systems, Inc., Atlanta, Georgia. UAS .has patented methods of attaching industrial diamonds to specialty tools used in a variety of industries. President -Eldridge Gathering System Inc. EGSI is a gas gathering pipeline company located in Walker County, Alabama. 1989, served as Vice President - Special Project Development of Energen Corporation, Birmingham, Alabama. From 1975 until March 1989, served as President and Chief Executive Officer of Graves Well Drilling Co., Inc. (GWDCI) and from 1970 until 1975 served as an officer of GWDCI. In 1985 GWDCI merged with Energen. GWDCI, located in Sylacauga, Alabama, specializes in groundwater, coal degasification, energy and environmental drilling programs. From 1967 to 1970, Geological Survey of Alabama and the State Oil and Gas Board, Water Resources Division, Hydraulic Engineer. Published articles in professional journals dealing with different aspects of energy-related and groundwater drilling and completion. Guest lecturer for the National Ground Water Association and served on numerous professional committees. Principle investigator on a Gas Research Institute project to test two artificial lift systems ("A Field Evaluation of Gas Lift and Progressive Cavity Pumps as Effective Dewatering Methods for Coalbed Methane Wells"). JAN-83-'98 SAT 13:54 ID: LAPP RESOURCES INC TEL N0:1 907 2 8 7278 #120 P04 - ~JtQFESSIONAL AND SCIENTIFIC MEMBERSHIPS Alabama Geological Society Alabama Ground Water Association American Water Works Association National Ground Water Association American Institute of Mining and Metallurgical Engineers Alabama Water Well Standards Board Charter Appointee, Alabama Environmental Management Commission University of Alabama, SOMED Advisory Committee Auburn University Research Advisory Council Bank of Alabama -Board of Directors Legacy -Past Member of Board of Directors The Newcomen Society of the United States First National Bank in Sylacauga, Board of Directors AONORS AND SPECIAL APPOINTMENTS President, National Ground Water Association. Past President, Alabama Water Well Contractors Association -Three terms: 1972, 1973 and 1981. Past Member -Auburn University Water Resources Advisory Council. Charter Appointee to the Alabama Water Well Standards Board. Single and multi-engine rated pilot. Member, Steering Committee -Gas Research Institute Coalbed Methane Forum. Member, Executive Advisory Committee -University of Alabama School of Mines and Energy Development. Past Chairman, Certification Committee -National Ground Water Association, 1985-1992. Past Chairman, Finance Committee -National Ground Water Association. Chairman, Government Affairs Committee -National Ground Water Association, 1994-1996. Guest lecturer at EPA Groundwater School. Guest lecturer at National Ground Well Association Groundwater School, Former Member and Past Chairman, Alabama Environmental Management Commission, 1982-1996. Chairman, Alabama Environmental Planning Council. Past member, First United Methodist Church of Sylacauga Administrative Board. ~~ ~"~ Member, Board of Directors -First National Bank in Sylacauga. ~~ ._. _, Member, Board of Directors -Financial Investors of the South. (Bank of Alabama). ` ~ ~' ~~~ 7 1~~~ ~ilask7 U7 . Past Member, Gas Research Institute -Environmental Project Advisor Group. ~% i,=yS ~,, , Member, Coalbed Methane Association of Alabama -Past Member of the Board of Directors'~R~hnr~gB ~'0mfi~sslpn Member, National Ground Water Association Hoard of Directors, 1991-1996, Past Member, Legacy Board of Directors (Alabama Environmental Education Coalition). JAN-83-'98 SAT 13:54 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 t#120 P05 ----- PUBLICATIONS Speigner, B.C., and Graves, S.L., 1975, Groundwater Development Problems Associated with Folded Carbonate Rock Aquifers in the Irondale Area. Alabama; published in Hydrologic Problems in Karst Regions, University of Western Kentucky. Graves, S.L., Patton, A.F., and Beavers, W.M., 1982, Multiple Zone Coal Degasification Potential in the Warrior Coal Field of Alabama; Unconventional Gas Recovery Symposium; Pittsburgh, PA. Graves, S.L_, Beavers, W.M., and Niederhofer, Joe, 1984, A Combination Air and Fluid Drilling Technique for Zones of Lost Circulation in the Black Warrior Basin; SPEIDOE/GRI Unconventional Gas Recovery. Beavers, W.M., and Graves, S.L., 1984, Completion Methods for Multiple Zone Coaibed Degasification in the Warrior Coal Field of Alabama; 1984 International Gas Research Conference; Washington, D.C. Graves, S.L., 1989, Coalbed Methane Development and Water Disposal in Alabama; Alabama Association for Water Pollution Control. Lambert, S.W., Graves, S.L., Jones, A.H., 1989, Warrior Basin Drilling. Stimulation Covered; Oil & Gas Journal, Vol. 87, No. 46, November 13, 1989. Lambert, S.W., Graves, S.L., 1989, Production Strategy Developed; Oil & Gas Journal, Vol. 87, No. 47, November 20, 1989. JAN-03-'98 SAT 13:55 ID:LAPP RESOURCES INC TEL N0:1 907 248 7278 #120 P06 aac-si-ies~ rcn ey~s• iD~.+~ oi~ a c~+s ®~ Trx~zos saw-zaci ~ .~ ~' - ~ . ~ ~ CURREN . - exNIeIT °o^ DATES a~9d °-. SPBCIIIL FIBW RU1.BS FOR THt C~RLICK CRI:SR COt1[, DBCiIIBIFICt1TiON FIELD TUSCJ1IAOS11 COUpTY, 71IA87-N1- (As t-mendad Mlareh 2, 1990) Rt1Ii it ~_. Tt1~ characterletics of the Potteviii• coal intorvai in tM Deerlick Crwk Coal t)egssltioation hold are such that wells drilled stM operated according to the rule. herein contained vill potait Cho drainage of oooluded qas troy the ooai. Theoe spooiai l~leld Rules viil promote the collection of data concorntnq th• ettlaient, eootsosaic dsainage of recovereblo hydrocarbons without !ho drilling of unnecessary wells and without the avoidsbl• waste of Oeai or oooiuded qas. nuns ss rlst.D „c~rttr'ra. Tho Doorllck Crock Coal Degesitication Field e• used herein i• that arse undoclaln by tho Pottsville Coal Interval deaoribed •at N/~ of N/=, 8E/4 Of SN/~, IPE/{ of NN/~ of seotlon 1!, N/~ of seatlott 1o and tho N/~ of Section 91, To~mship is South, Ranq• e Ne/tt seotiotls 1!, Z0, 21, 2t, 21, 21, ZS, 26, 27, Z8, Z9, 30~ ~l, ~_, 77~ ~~, 3s, and S6, Townshlp 19 south, Range 9 Nestt sections 1 through 7t, the N/! o[ section 7S end tho NN/f of section 2s, 'Pownahlp !0 soutif, Range 9 NesttJtha N/! of Section 61 th• N/2, and the SM/d o! SS/4 of Sovtion 7t tho 6N/~, and the s/z of NN/d of seotlon 17t the 8/T, ttio tIN/~, the N/2 of NE/~ and the s7C/~ of Nk/4 of aeotion lar the >f/z and the N/7 of sN/~ s»d the NN/a o! the st/4 of sectlon 191 and the NN/{ of Sactlon =o, Tavnshlp 10 South, Range f Nost, ail in Tnooaloosa County, t-labas~a, a• undsrlsln by the Pottavilio Coal Interval. RVt~ li ~~ D1E611NilIG?IOII 1tiR+.T O FlNRn. ~Pottsvill• cdel Interval Coal degaellieation well. drilled in the Deeriick Creek Coal Degasification Field, Tuscaloosa County, 7-labama, shall ba conattued to st~ean volla drilled for the purpose of rowovinq oooluded qaf tcom those strata correlative to the coal a~ams ~nrountcrod 1n hhe ~ntn~v~l h~tvnr~n 1~R1 fent. r~•~~ )'/in Moh 1-~nt~+v JAN-83-' 98 SAT 13:56 ID:LAPP RESOURCES INC TEL N0:1 907 248 7278 #120 P07 mo-aj`ita7 Ii0 sal as IDl at. biL ~ G.1E t!D• r~.Z06 fat-2e61 .r ~~ ground surface of the Ramsey l9eCocmick 35-3 He11, Permit 110. 38>t!-C, lOQated in the N/Y of the NN/~ o! Section 3S, Township 20 Routh, Range 9 Mast. Tuscaloosa County. Alabama, ea indicated on the density log of said well, end all tones in Communication theseNith and all productive eztensions thereof. RULE ~: BPACIIIQ OF CAAL Dj~,Si~,~jCJ-T2011 M1~,LS. A. lvarr well dtilled as a coal degaslEication wall in the Deerliek Creek Coal Degsaification Fieid shall by drilled on r drilling unit of spprozimstelT d0 contiguous acres consisting v[ a govssmaental quarter-quartet section or on a drilling unit of approximately 80 contiguous acres consisting of two edjscent geeermnental quarter-quarter sections. B. Unless an exception is granted by the Bogrd, e11 coal degasification wells snail be locsted at Least 1so Eeet from evetT eatetior boundary o[ the unit, at least 300 teat from any otMr coal degssifiestlon well, end at least 300 twat Croat every estarior boundary of the Field. 1tULE S t QRI r.IifO A!!D COQ, L6TjQh OP>"[UT20M6. Drilling and completion operations shall be subject to and in accordance with the following provisions: A. Unless an a:eeption is granted by the Supervisor, suclsce casing for each coal degaaiticstion well shall be set to a ainisrum depth o! 300 feet or at least 50 feet into the Cop of the Potls~ille Formation, KhiChever shall be the deeper, and Cl91a11t shall be CirCglated to ground surface. H. The surface easing and cement shall be designed to withstand three hundred (300) psi. The cement shell be alloxed to stand a totsl of eight (e) hours before drilling the plug. C. All other Cssinq :squiretteents shell be in sccordance with Rule d00-4-3-.02(2) saainq k$auirements of the RLi,1,pi1~9D4 ]~~ulatioas G ern ng th Penaittino. Drilli,hg,,,and_Ptodugt o of ~l~thane~~a. D. Other methods of completion are subieot to approval by the w JAN-03-'98 SAT 13:57 ID:LAPP RESOURCES INC TEL N0:1 907 248 7278 #120 P08 11~G-tl-1f~7 rCD tos~M ro.a.. on R ass sa . Tc~.zres how-zt»- ~ . ~upatcvieor. E, ~ divtrtsr consisting o! a pack-oil assembly and s biooi• line valve shall bs utilized a• atrinimum blowout prevention dsviw _ when walls are drilled with sir. y. Cuttings need not be tiled for any coal dsgasitiaatien Yell. RULE 6 s ~,i~ 1'oit TSS 8. Each producing well shall be so equipped that capacity and Pater r^tio tests may ba made. at,~uipmant shall b• maintained in a pcopsr operating condition e• will permit the edaquats testing of •sch produoing well withvu! tt-s necessity o! oloslnq in any other well. each equipment end connaotions thereto shall be subisct to the approval of the supervisor. RULE 7 = Ml:~OREl~tT Of ppODUP2'iON. They opsratoT of the peeslick Creek Coal Degasifieation tilld than eaves to b• provided proper metering devices. and such conaeations thereto as are necessary to ptenaurs the total production ttheretrom. Rule so ysE or' tKSrr.Ra. The use of leetsre for testing and for measurement v! total produotion shell be subject to end in aocordancs with the following provisions: A. All mstere used to measure total production shall bs desitgned atb installed in conformance with recognised mvterinq praatieer and approved by the t3taty 011 and cos supervises. psoduotia+ irtm, the individual wells may be ao~mirxJlod Prior to measurement, provided tMre is proper allocation to vaoh producing unit for its share of total production. E. All meters anti equipasnt affecting the accuracy o! meters that moasusv total. production shall bs kept in good working Dryer. Each such mater shall ba calibrated at loser once vavh duartaY by means of a calibrated tank, s calibrated meter prover JAN-03-'98 SAT 13:57 ID:LAPP RE50URCES INC TEL N0:1 907 248 7278 #12@ P09 CtC-ti-lYe7 FiD 09t1o 1D~AL OIFB G.5 ~ rE~~2~. 8aH-28E1 0'i i`~ • l or a ~aatar Boter. When a meter is found to deviets in i ~, `' reeosclinQ by mots than two percent. it shall be adjusted to oonforR to tha said toleranoe liwitation of two percent or the mater .. calibration factor corrected. RULE 9s ~• Each well in the Desrlick Crsek Coal Dsgasification Fisld shall be allowed to produce 1001 of its daily production per day. ~yL jp = ~NE_R1-L RvLEB AND RECUI.i1TIO,I~B. • in addition to the 6peaial Field Rules horeinabove set forth, all of the provisions of statewide rules promulgated by the Board. ae~d all amendments thereto, which rules and all amsnda~snto thareto are Bads a part hereof by refersnas, shall remain in full force end sffaot with respect to the Deerlialc Crssk Coal Dsgasification Field, except as modified Dy the Bpeeial Field Ruls• set lorth herein. In the event of conflict betwssn the provisions of said statewide orders, or the amendments thareto~ and th• Special Field Rulsa proscribed horein, the spacial Field Rules adopted herein shall govern and control. Y'he Board •xprassly reserves its right, attar notice and hearing, to grant axceptiona, alter. amend os repaal any and all of the above rules and regalations. ' JAN-03-'98 SAT 13:58 I~APP RESOURCES INC TEL N0:1 907 7278 kt120 P10 ADO-4. RULES AND REGULATIONS GOVERNING THE PERMITT)NG, DRfLLING AND PRODUCTION OF COALBED METHANE GAS 400.41. General 400-4-1•.01. Applicabi{ity. The following rules and regulations have been adopted by the Board and are general rules of statewide application in regard to the permitting, drilling and production of coafbed methane gas. These rules explicitly exclude and except operations of coal mining where it is necessary for safety or efficient operations of the mine to vent coalbed methane gas and where capture and sales of coalbed methane gas is not a part of the operations. 400-4-1-.02. Definitions. Except where the same conflict with or are inconsistent with these definitions pertaining specifically to coalbed methane gas, all definitions found in Rule 400.1-1-.03 shall remain effective with regard to coalbed methane gas, unless excluded by Rule 400-4.1-.03. (1) Cased completion shall mean a coafbed methane gas well in which production casing is set through the productive coalbed or coalbeds. (2) Cased/open hole completion shall mean a coafbed methane gas well in which at least one coalbed is completed through casing and at least one coalbed is completed open hole. (3) Coalbed methane gas shall mean occluded nature! gas found in coalbeds. (4) Coalbed methane gas field shall mean the area as defined by the operator and approved by the Board which is underlain or appears to be underlain by at least one coalbed, capable of producing occluded natural gas. (5) Coalbed methane gas well shall mean a well capable of producing occluded natural gas from a coalbed or coalbeds. (6) Open hole completion shall mean a coalbed methane gas well in which no production casing is set through the productive coalbed or coalbeds. (7) Produced water shall mean water produced from a coalbed methane gas well as a necessary by-product of dril ling, completing and/or producing methane gas from a coalbed or coalbeds. 400-4-1-.03. Application of Other Rules and Orders of the Board. Ali General Rules and Regulations of the Board shall be applicable to the permitting of coalbed methane gas wells and to the installations and operations for the drilling and production of coalbed methane gas with the exception of the following: (1) Rule 400-1-1-.03. Definitions. (those listed below will not apply to coalbed methane gas wells) (a) 400-1-1-.03(10) Common Source of Supply. (b) 400-1-1-.03(12) Condensate. (t) 400-1-1-.03(24) Illegal Oil. (d) 400-1-1-.03(27) /.ease Tank. {e) 400-1-1-.03(30) Oil. (f) 400-1-1-.03(31) Oll Well. (2) Rule 400-1-1-.05. Determining and Naming Fields and Pools (Common Sources of Supply). (3) Rule 400-1-2-.02. Spacing of Wells. (4) Rule 400-1-3-.02. Notice of Activities. (5} Rule 400-1-3-.03(2) & {3). Casing Requirements. (6) Rule 400-1-3-.05. Plugging Methods and Procedures. (7) Rule 400-1-3-.12. Drilling Fluid. (B) Rule 400-1-3-.17. Cleaning Wells. (9) Rule 400-1-4-.01. Protection of Oil and Gas. (10) Ru1e400-1-4-.02.MultipleCompletions. (11) Ru1e400-1-4-.03.Tubing. (12} Rule 400-1-4-.08. Location of Fired Vessels. {13) Rule 400-1-4-.09. Notice of Recompletion and/or Rework. (14) Rule 400-1-4-.10. Permit to Clean Tank Bottoms. (15) Rule 400-1-5-.02. Hydrogen Sulfide Gas. JAN-83-'98 SAT 13:59 ID: LAPP RESOURCES ItJC TEL t`J0:1 907 2 7278 #120 Pit • D-2 (16) Ru1e400.1-5-.03(1). Pits `' (17) Ru1e400-1-6-.01.Oil Production Tests. (18) Ru1e400.1-6-.02. oil Allowable. (19) Ru1e400-1-6-.03. Witnessing of Tests. (20) Rule 400-1.6-.04.Oil to be Measured. (21) Ru1e400-1-6-.OS.OiI Measurements. (22) Ru1e400-1-6-.06.Gas-OilRatio. (23) Rule 400-1-6-.07. Permissible Tolerance in Production Volumes Allowed for Oil Wells. (24) Ru1e400-1-7-.01. Gas Production Test and Capacity Test. (25) Rule 400-1-7-.02. Gas Allowable. (26) Ruie 400-1-7-.05. Condensate to be Measured. (27) Rule 400-1-7-.07. Permissible Tolerance in Production Volumes Allowed for Gas Wells. 400-4-1-.04. Forms. A{I forms set forth in Rule 400.1-1-.04(1) shall be applicable to the coalbed methane gas rules with the exception of the following: (1) OGB-10, Multipointgack-Pressure Test Report for Gas Wells (1) OGB-10A, One-Point Back-Pressure Test Report for Gas Wells (3) OGB-14, Producer's Monthly Reportfrom Oil Wells (4) OGB-18, Gasoline or Other Extraction Plant Monthly Report (5) OGB-19, Refiner's Monthly Report {fi) OGB-21, Permitto Clean Tank (7) OGB-22, Well Capacity Test (8) OGB-23, Unit Reserve Calculation 400-4-1•.05. Determining and Naming Coaibed Methane Gas Fields and Pools. coalbed methane gas fields and pools shall be determined and named by the Board, provided that in the event any person is dissatisfied with any such classification or determination, an application maybe made to the Board for such classification or determination deemed proper and the Board will hear and determine the same. In naming fields, reference shall be given to common usage and geographic names. Each pool within the same field shall preferably be named according to the producing horizon. 400-4-2. Well Permit 400.4-2-.01. Permitting of Wells. (1) All toalbed methane gas wells shall be permitted in accordance with the procedures and requirements of Ruie 400-1-2-.01. (2) Each permit application to drill a coalbed methane gas well shall be accompanied by a check or bank draft in the sum of One Hundred and Fifty Dollars (5150.00} payable to the State Treasurer, State of Alabama, which sum is fixed by the Alabama coalbed Methane Gas Well Plugging Fund Act. Ruie 400-4.2-.02. Spacing of Wells. A coalbed methane gas well shal{ be spaced on a unit based upon the maximum area which may be efficiently and economically drained by one well. A unit shall not include any part of another unit established for the same pool. The spacing for a coalbed methane gas weft to be drilled to a pool in an established field shall be governed by special field rules for that particular field. With respect to a coalbed methane gas well to be drilled to a pool that is not governed by special field rules, the following shall be applicable: (1) Each coalbed methane gaswell shall be drilled on a unit consisting of a governmental quarter- quartersection (approximately 40 acres). Such well shall be located at least three hundred thirty (330) feet from every exterior boundary of the unit. (2) The Supervisor, upon receipt of written justification from an operator, may approve a permit application under paragraph (1) for a unit consisting of approximately 40 contiguous surface acres other than a governmental quarter-quarter section as set forth herein. (3) The Supervisor may require that a coalbed methane gas welt to be drilled on a unit contiguous with an existing field be driNed and completed as an extension of the field, in accordance with field spacing provisions in the special field rules thereof. If, however, an operator provides written justification that such proposed well will likely be completed in a pool or pools not defined 'in the JAN-03-'98 SAT 14:00 ID: LAPP RESOUP.CES INC TEL N0:1 907 2 7278 #120 P12 _^.. _._ D-3 special field rules for said field, the Supervisor may approve the drilling and completion of such wet{ incompliance with the spacing provisions asset forth herein. (4) Pursuant to Section 9-17-12(c) of the Code of Alabama (1975), the Board may grant an exception to the spacing rules as may be reasonably necessary where it is shown, after notice and hearing, and the Board finds, that the unit is partly outside the pool, or for some other reason, that a coalbed methane gas well located in accordance with applicable rules would be nonproductive, would not be at the optimum position in such drilling or production unit for the most efficient and economic drainage of the unit, or where topographical conditions are such as to make the drilling at an authorized location on the unit unduly burdensome or where an exception is necessary to prevent confiscation of property. (5) No coalbed methane gas well shall be located within 200 feet of any permanent residence, unless otherwise approved by the Board. (6) For a coalbed methane gas well completed in a pool for which specia}field rules have not been adopted, the Board shall determine, in conjunction with the establishment of special field rules after notice and hearing, the proper spacing for the production unit for said well. Subject to the approval of the Supervisor, the drilling of additional wells for development of a pool may continue prior to the establishment of special field rules for the pool. No well shall produce, other than on a test basis authorized by the Supervisor or Board, until special field rules applicable to the well are established. In order to obtain sufficienttechnical information to establish the proper spacing, a coalbed methane gas well may be produced on a test basis pursuant to Rule 400-4-6-.01. (7) if any coalbed methane gas well drilled in conformity with the provisions of paragraph one (1) above, or in conformity with the special field rules for a particular field is completed as other than a coalbed methane gas well, said well shall not be produced other than on a test basis until authorization has been granted by the Board after notice and hearing. This rule shall not apply to vent holes drilled for safety purposes in conjunction with coal mining operations. 400-4-3. Drilling 400-4.3-.01, Notice of Activities. (1) The status of each well or any operations performed on such wells shall be reported orally or in writing to the appropriate Board office from the time the permit is approved yr pits are constructed, whichever occurs first, until such well is plugged and abandoned or tested. Such status report shall be due by 10:00 a.m. on the first working day of each week. In addition, the Supervisor or one of his agents shall be notified and approval obtained thereof prior to performing any of the following operations: {a) Construction of any pit, (b) Spudding, (c) Setting surface casing, (d) Slotting casing, (e) Running intermediate or production pipe, (fl Cleaning, (g) Perforating, (h) Chemical treatment orfracturing, (i) l.o9ging, (j) Attempting to recover a radioactive logging source, (k) Testing of well, (I) Disposing of pit fluids, (m) Plugging, (n) Recompleting or reworking (See Rule 400-1-4-.09), (o) Rertorstion of location (See Rule 400-1-5-.07), and (p) Any other operations the Supervisor may designate. {2) The Supervisor may send a duly authorized representative to the location to witness such operations. JAN-83-'98 SAT 14: D1 ID: LAPP RESOUP.CES INC TEL N0:1 907 2 7278 #120 P13 . D-4 400-4-3-.02. Casing Requirement. •'~~ (1) Surface casing for coalbed methane gas welts shall be set in accordance with Rule 400-1- 3-.03(1). (2) All producing wells shall be completed with a production string of casing that shall be proper y cemented at a sufficient depth adequate to protect the methane bearing coalbeds. (a) For cased hole completions of cased/open hole completions of coalbed methane wells, casing shall be cemented in place with a sufficient amount of cement to fill the calculated annular space to a point at least two hundred (200) feet above the top of the uppermost coalbed which is to be completed, exceptthatthe annular space adjacent to a coalbed or coalbeds maybe left uncemented. (b) For open hole completions of coalbed methane wells, the bottom of production casing shalt be set not more than one hundred (100) feet above the depth of the uppermost coalbed which the emented to fill theccaicullated annular~spaceptova po nt at feast two hundred (200) feet above the base of the casing. (c) In completing all coalbed methane gas wells, after cementing, all wells shall be tested at a pressure of six hundred (600) psi before drilling the plug, if the plug is to be drilled. If at the end of thirty (30) minutes, the pressure gauge shows a drop of ten percent (10%} of the test pressure or more, such corrective measures shall be taken to insure that the producing string of casing is so set and cemented that it will hold the pressure for thirty {30) minutes without a drop of more than 10 percent (10%) of the test pressure on the gauge, unless otherwise specified by the Supervisor. Cement shall be allowed to stand 12 hours before continuing operations. (d) Other methods of setting production casing sha{I be subject to approval by the Supervisor. (e) The operator shall report casing tests on Form OGB-7. ~n a coalbed 400-4-3-.03. Plugging Methods and Procedures. The methods and procedures for piugg' g methane gaswell shall be as follows: (1) Plugging a coalbed methane gas well shall include setting a cement plug across each productive interval or intervals. A cement plug shall extend at least twenty-five (25) feet above and twenty-five (25} feet below each interval. (2) Cased hole completions or cased/open hole completions. A cement plug not less than one hundred (100) feet in length shall be placed immediately above the top of the uppermost completed coalbed. (3) Open hole completions. A cement plug of not less than one hundred (100) feet in length shall be placed fifty (50} feet above and fifty (50}feet below the base of the production casing: (4} Uncompleted wells. A cement plug of not less than one hundred (100) feet in length shall be placed fifty (50) feet above a nd fifty (50) feet below the base of the surface casing. (5) Alt coalbed methane welts shall have a cement plug of at least twenty-five (25) feet in length placed nearthe surface ofthe ground in each hole plugged, and casing cut in such a manner so as not to interfere with soil cultivation and a steel plate affixed on top of the casing stub. (6) Other plugging methods may be required by the Supervisor. 400-4.3-.04. Drilling Fluid. The use of drilling fluids shall not be required in the drilling of coalbed methane gas wells when other appropriate methods are available to control any pressure which may be encountered. 400-4-3-.05. Cleaning Wells. Unless otherwise approved by the Supervisor, a!I wells shall be cleaned into a pit prior to production. The pit shall be of sufficient size to contain all fluids and shall be constructed in such a manner that no fluids shall be discharged except as allowed by the appropriate permit(s) andlor regulation(s). JAN-83-'98 SAT 14:02 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #120 F14 D-5 400-4-4. Producing 400.4-4-.01. Commingling. Each combed methane gas welt shall be allowed to commingle production from distinctcoalbed methane pools. 400-4-5. Safety and Environment 400-4-5-.01. Produced Water. No produced water shall be discharged to land surface, streams or rivers unless the appropriate approved permit(s) allowing such discharge is on file with the Board. The Supervisor and/or Board reserves the authority to prevent the discharge of any substances that may be harmful to the environment. 400-4-5-.02. Pits. All pits and holding ponds for produced water shalt be constructed and maintained consistent with the appropriate permit(s) and/or regulation(s). The operator shall immediately notify the Supervisor of any modifications made to pits or holding ponds. (1) Reserve pits. (a) Ali pits utilized to contain fluids during the drilling and completion of a coalbed methane gas well shall be constructed and maintained to preventthe pollution of surface and ground water. Prior to utilizing such pit, the pit shall be inspected by a qualified engineer who shall make a determination that said pit is constructed in a manner that will prevent the pollution of surface and ground water. The operator shall keep a record of the determination and shall provide a copy of said determination to the Board, upon request by the Supervisor. It requested by an agent of the Board, an engineer may be required to be available at the well location for a review of the determination. (b) The fluid level i n such pits shall be kept at least two (2) feet below th a top of the pit. (c) After a well is completed or is plugged and abandoned, all fluids and recoverable slurry that remain in such pits shall be disposed of in a manner acceptable to the Supervisor within ninety (90) days of the completion or the plugging and abandonment of the Weil, except as otherwise approved by the Supervisor. Pits shall be backfilled with earth and compacted to the satisfaction of the Supervisor within ninety (90) days of the completion or the plugging and abandonment of the well, except as otherwise approved by the Supervisor. (d) Subsequent to the removal or elimination of debris and elimination of all conditions that may or will create a fire or pollution hazard, the Supervisor may, provided he has written approval from the appropriate surface owners, permit the operator to leave such pit open. 400-4.5-.03. Venting and/or Flaring of Coalbed Methane Gas. Upon approval of the Supervisor, venting and/or flaring of gas from a permitted coalbed methane gas well shalt be allowed where necessary for safety reasons or #or the efficient testing and operation of coalbed methane gas weals. With the exception of pressure relief valves, vents for the venting and/or flaring of coalbed methane gas shall be located at least twenty (20) feet above ground level, unless otherwise approved by the Supervisor. 400-4-6. Testing and Allowable 400-4-6-.01. Coalbed Methane Gas Production Test. All coalbed methane gas well production tests shall be made only after notification to and approval by the Supervisor. An operator completing a new gas well or recompleting an old well shall test the well to determine if the well is capable of producing and the amount it can produce. Before performing any coalbed methane gas well production tests, the water production in the well and the gas flow rate shall be stabilized for a period of not less than ten (10) days prior to measurement. The test shall be for aminimum oftwenty- four (24) hours duration and taken in a manner prescribed by the Board in its rules and regu{ations. The results thereof shall be verbally reported to the Supervisor immediately and filed with the Board on Form OGB-9 within fifteen (15) days after such test is completed. When more than one test is made, the reverse side of Form OGB-9 may be used to give complete test data. The test shown on the front side shall be considered the official test results for such well. 400-4-6-.02. Coalbed Methane Gas Allowable. The gas allowable for coalbed methane gas wells shall be set at 1D0% ofthe well's capacity to produce, unless otherwise ordered by the Board. ~~ P Resources, Inc' 4900 Sportsman Drive Anchorage, Alaska USA 99502-4169 Telephone: 1 (907) 248-7188 a-mail: lapres@alaska.net Facsimile: 1 (907) 248-7278 December 4, 1997 Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3192 Attn: Mr. David Johnson -Chairman Re: Area Expansion Request - Houston Garfield, Houston Coalbed Gas Pool Dear Dave: Thank you for your letter of November 25, which I received yesterday. You have requested two additional items of information in relation to our request to expand the affected area: 1. Documentation of Ownershiy. We have previously submitted a change in ownership form for the lease, a copy of which is attached. Also enclosed is the first page of the lease, and a map and legal description from the lease, and the DNR-approved transfers from Unocal and Marathon to LAPP Resources, Inc. 2. Information about the Productive Limits of the Pool. The numerous coal seams in the Tyonek formation which are present in the area of the Houston Garfield are regionally extensive. Recent work done by our company has shown that the coals encountered in the State's 1994 Wasilla corehole, AK-94-CBMl, can be reliably correlated with the coals encountered in Rosetta 3, although the equivalent section at Rosetta 3 is about 40% thicker. A copy of the well-to-well correlation is enclosed for your review. Since the new area requested lies between Rosetta 3 and AK-94-CBMI, we believe it is reasonable to conclude that the new area is underlain by the same clastic reservoirs and coal seams as the rest of the Houston Garfield. Based on the results of prior drilling, we believe that the coal seams in this area are gas productive. Profitable gas production will depend on the cost of drilling, development, and operation. We request that the SEl/4 of the SE1/4 of Section 21 T18N R3W Seward Meridian be included by Administrative Approval within the Houston Garfield, Houston Coalbed Gas Pool. Thank you. Sincerely, David W. Lappi President ~~~~~~~~ ~~, ,- 4 '~19?'. ~~ ~,~ ~ ~~ ~i~Stot! Exploration and Development STATE OF ALASKA - A'~IL AND GAS CONSERVATION CO ~' NOTICE OF CHANGE OF OWNERSHIP 20 AAC 25.022 1. Name of Operator UNION OIL COMPANY OF CALIFORNIA 2. Address P.O. BOx 196247 ANCHORAGE, AK 99519-6247 3. Notice is hereby given that the owner El, landowner ^ of record for the oil and gas property described below has assigned or transferred interest in the property indicated below: Property designation: PIONEER UNIT Legal description of property: TRACT 18 NORTH, RANGE 3 WEST, SEWARD MERIDIAN, ALASKA (Containing 2,765.22 acres more or TRACT 67A-135 less.) Section 19: Surveyed, Fractional, All, 620.92 acres; Section 20: Surveyed, SW/4 NE/4, S/2, S/2 NW/4, NW/4 NW/4, 480 acres; Section 21: Surveyed, SE/4 NE/4, SE/4j~S/2 SW/4, NE/4 SW/4, 320 acres; Section 28: Surveyed, NE/4, 160 acres; Section 29: .Surveyed, SE/4, W/2, 480 acres; Section 30: Surveyed, Fractional, Lots 2 and 3; NE/4, 231.62 acres; Section 31: Surveyed, Fractional, Lots 1 and 2, NE/4, EJ2 NW/4, 312.68 acres; Section 32: Surveyed, N/2 NE/4, 80 acres; Section 33: Surveyed, E/2 NE/4, 80 acres. Property P{at Attachedt=l 4. Effective date of assignment or transfer 5. Percentage interest assigned or transferred April 3, 1995 100 6. Assignee or Transferee: LAPP RESOURCES INC. Address: 4900 Sportsman Drive Anchorage, AK 99502-4169 7. Assignor or Transferor: UNION OIL COMPANY OF CALIFORNIA Address: p,0. BOX 196247 (909 WEST 9TH AVENUE) Anchorage, AK 99519-6247 8. I hereby certify that the foregoing is true and correct to the best of my knowledge L Signed 1 t.c.~ ri ~ ~C_~-.. Title ATTORNEY-IN-FACT Date JUNE 30. 1995 _ KF N A. TABLER Form 10-417, 12-1-85 Submit in Duplicate ~` (COMPETII'1VE OIL AND GAS LEASE) DNR 10-4037 (Revised 9/90) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Campe6tive Oil arxi Gas i.ease ADL No. 374135 THIS LEASE is entered into ~ ~~ ~ 1 ~ g g~ ,between the State of Alaska, "the state," anti Union Oif Company of California 50% Marathon Oil Company 50% "the lessee," whether one or more, whose sole address for purposes of notification is under Paragraph 25. In consideration of the cash payment made by the lessee to the state. which payment includes the first year's rental and any required cash bonus, and subject to the provisions of this lease, including applicable stipulation(s) and mitigating measures attached to this lease and by this reference incorporated in this lease, the state and the lessee agree as follows: 1. GRANT. (a) Subject to the provisions in this lease, the state grants and leases to the lessee. without warranty, the exclusive right to drill for, extract. remove, clean, process. and dispose of oil, gas, and associated substances in or under the following described tract of land: Tract 67A-135 T. 18 N., R. 3 W., Seward Meridian, Alaska Section 19, Surveyed, Fractional, All, 620.92 acres; Section 20, Surveyed, SW1/4NE1/4, S1/2, S1/2NW1/4, NW1/4NW1/4, 480 acres; Section 21, Surveyed, SE1/4NE1/4, SE1/4, S1/2SW1/4, NE1/4SW1/4, 320 acres; Section 28, Surveyed, NE1/4, 160 acres; Section 29, Surveyed, SE1/4, W1/2, 480 acres; Section 30, Surveyed, Fractional, Lots 2 and 3, NE1/4, 231.62 acres; Section 31, Surveyed, Fractional, Lots 1 and 2, NE1/4, E1/2NW1/4, 312.68 acres; Section 32, Surveyed, N1/2NE1/4, 80 acres; Section 33, Surveyed, E1/2NE1l4, 80 acres. 2765.22 cornaining approximately acres, more or less (referred to in this lease as the "leased area'; the nonexclusive right to conduct within the leased area geological and geophysical exploration for oil, gas, and associated substances; and the nonexclusive right to install pipelines and build structures on the leased area to find, produce, save, store, treat, Process, transport, take care of, and market all oil, gas, and associated substances and to house and board employees in rte operations on the leased area. The rights granted by this lease are to be exercised in a manner which will not unreasonably interfere with the rights of any PPermittee, lessee or grantee of the state consistent with the principle of reasonable concurrent uses as set out in article V{Il, section 8 of the Alaska Constitution. (b) For the purposes of this lease, the leased area contains the legal subdivisions as shown on the attached plat markked Exhibit A (c) It the teased area is described by protracted legal subdivisions and, after the effective date of this lease, the leased area is surveyed under the public land rectangular system, the boundaries of the leased area are those established by that survey, when approved, subject, however, to the provisions of applicable regulations relating to those surve s. If for any reason the leased area includes more acreage Than the maximum permitted under applicable law ~ncluding the "rule of approximation" authorized in AS 38.05.145 and defined in AS 38.05.965 (17)), this lease is not void and the acreage included in the leased area must be reduced to the permitted maximum. If the state determines that the leased area exceeds the permitted acreage and notifies the lessee in writing of the amount of acreage that must be eliminated, the lessee has 60 days after that notice to surrender one or more le al subdivisions included in the leased area comprising at least the amount of acreage that must be eliminated. Any subdivision surrendered must be located on the perimeter of the leased area as originally described. If a surrender is not filed EXHIBIT A N Tract 67A-135 T. 18 N., R. 3 W., Seward Meridian, Alaska Section 19, Section 20 Surveyed, Fractional, All, 620.92 acres; Survcyed, SW1/4NE1/4, S1/2, S1/LNW1/4, NW1/4NW1/4, 480 acres; , Section 21, Surveyed, SE1/4NE1/4, SE1/4, S1/2SW1/4, NE1/4SW1/4, 320 acres; Section 28, Surveyed, NEl/4, 160 acres; Section 29, Section 30 Surveyed, SE1/4, W1/2, 480 acres; Surveyed, Fractional, Lots 2 and 3, NEl/4, 231.62 acres; , Section 31, Surveyed, Fractional, Lots 1 and 2, NE1/4, E1/2NW1/4, 312.68 acres; Section 32, Surveyed, N12NE1/4, 80 acres; Section 33, Surveyed, E1/2NE1/4, 80 acres. This tract contains 2765.22 acres more or less. TONY KNpW G ,~pANOH ~, ~ F~ - ., ' V DEPARTMENT OF NATURAL RESOURCES TO: Houston DIVISION OF O/L AND GAS APR :; f995 3601 C STREET, SU/TE 1380 ANCHORAGE, ALASKA 99503-5948 PHONE: (907) 762-2549 DECISION APR ~ ~ 199 Assignor: Oil and Gas Lease Union Oil, Company of Califomia ADL 374135 Attn: Land Manager P.O. Box 196247 Anchorage, AK 99519-6247 Assignee: Lapp Resources Inc. : 4900 Sportsman Dr. Anchorage, AK 99502-4169 Assignment Application Approved Application for approval of assignment of 50.0 percent working interest from Union Oil Company of Califomia to Lapp Resources Inc. is hereby approved effective April 3, 1995. This assignment is approved as to the working interest only and does not constitute approval or acceptance of any stipulations or attachments to the assignment instrument. An approved assignment is enclo ed with this decision. Kenneth A. Boyd Acting Director Enclosure KB/JS/df/374135.1 RECEIVE; ®~C ~- 4 X99 Alaska 011 & Gas Cons, COlrlmisiti Anchorage DO&G 25-84 LEASE ADL: 374135 (LEASE ASSIGNMENT) EFFECTIVE DATE Revised 7/91 OF LEASE: 4/1/91. DNR #10-113 STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS ASSIGNMENT OF INTEREST IN OIL AND GAS LEASE The undersigned assignor _Union Oil Company of California , whose address is P.O. Box 196247. Anchorage, Alaska 99519-6247 , as owner of Fifty (50%) percent of the lease's working interest Zero (0%) percent overriding royalty interest does hereby assign to LAPP Resources Inc. ,the assignee, whose address is 4900 Sportsman Drive, Anchorage AK 99502-4169 , 1. Fifty (50%) percent working interest; 2. Zero (0%) percent overriding royalty interest. 3. The assignor is retaining Zero 0% percent of the lease's working interest. 4. The assignor is retaining .Zero (0%) percent overriding royalty interest. 5. The assignor previously reserved Zero (0%) percent overriding royalty interest. 6. The assignor previously conveyed Zero (0%) percent overriding royalty interest. 7. LANDS AFFECTED by this assignment of interest T 18 North , R 3 West , Seward Meridian ~~ Tract' 67A~1 ~ ` ~` ~ ~ ' Section 19: Section ~ ~ 20: Section . 21: Section 28: Section 29: Section 30: Section _31: Section 32: Section 33: Surveyed, ,fractional, All, 620.92 acres; S~$ryeyeci~'S~'1%4 NE1/4, S1/2, S1/2 NW1/4, Surveyed, SE1/4 NE1/4, SE1/4, S1/2 SW1/4, Surveyed, NE1/4, 160 acres; Surveyed, SE1/4, W1/2, 480 acres; Surveyed, Fractional, Lots 2 and 3, NE1/4, 231.62 acres; Surveyed, Fractional, Lots 1 and 2, NE1/4, E1/2 NW1/4, 3~~~~1"n~ Surveyed, N1/2 NE1/4, 80 acres; Surveyed, E1/2 NE1/4, 80 acres. NW1/4 NW1/4; 48Qacres; NE1/4 SW1/4, 320 acres; ~ ~C ~- 4199 containing 2,765.22 acres, more or less. Alaska.Oil &pncho~a~ Comm The Notification Lessee for the purpose of receiving any and all notices from the State of Alaska in connection with the lease will be: Name LAPP Resources Inc. Attn: David Lappi Address 4900 Sportsman Drive City, State, Zip Anchorage, AK 99502-4169 We, the undersigned, request the approval of this assignment application. We attest that this application discloses all parties receiving an interest in the lease and that it is filed pursuant to 11 AAC 82.605 and 11 AAC 82.615. We further attest that all parties to this agreement are qualified to transfer or hold an interest in oil and gas leases pursuant to 11 AAC 82.200 and 11 AAC 82.205. Whether approved in whole part, the assignee agrees to b~und by the provisions of said lease. A 'gnor's Signature Kevin A. Tabler, Attorney-in-Fact Assignor's Name (Print or Type) & Title THE UNITED STATES OF AMERICA ) SS. STATE OF ALASKA ) 'mate Union Oil Company of California Company Name Qualification File # 6 This certifies that on the 31st day of March , 1995, before me, a notary public in and for the State of Alaska ,duly commissioned and sworn, personally appeared Kevin A. Tabler, to me known and known to me to be the person described in, and who executed the foregoing assignment, who then after being duly sworn according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official seal the da and year in this certificate first above written. OFFICIAL SEAL State of Alaska 1VQTA~ Y FIJt~LIC Notary Pu lic Roxarrle Vii. Sinz M Commission Ex fires sty Commission Expires August ~ ,1937 y p _ ~., w Assignee's Signature Assignee's Name (Pant or Type) & Title THE UNITED STATES OF AMERICA ) SS. STATE OF ALASKA ) J f' Date ~ ~} #'f~ /~ ~SC~ l~ Q~~~ ~ Vie... , Company Name Qualification File #~?/02 ~ This certifies that on the~`~day of , 1995, before me, a n tary public in and for the State of Alaska ,duly commissioned a sworn, personally appeared . .„~J,~i,, to me known and known to me to be the person described in, and who executed the foregoing assignment, who then after being duly sworn according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official seal the day and year in this certificate first above written. OFFiClA!_ SEAL st~.t>~ ~~ .~}asks Notary ublic Y~~~~ ~ k FtJ~g.IC =~xar~n~ i'dt. Sinz My Commission Expires ~° /- 97 My Commission Expires August 1,1337 APPROVAL The foregoing assignment is approved as to the lands described in item 7 thereof, effective as of the date set forth below. ~- APR 0 31995 Sta of Alaska Effective Date of Assignment KENNETH A. BOYD ACTINGTOR DIVISIO L & GAS ~ ( ~ ( `~~ _ As 'gnor's Signature - Kevin A. Tabler, Attorney-in-Fact Assignor's Name (Print or Type) & Title THE UNITED STATES OF AMERICA ) SS. STATE OF ALASKA ) mate Union Oil Company of California Company Name Qualification File # 6 This certifies that on the 31st day of March , 1995, before me, a notary public in and for the State of Alaska ,duly commissioned and sworn, personally appeared .Kevin A. Tabler, to me known and known to me to be the person described in, and who executed the foregoing assignment, who then after being duly sworn according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official seal the da and ear in this certificate first above written. OFFiCIA! SE,4L .~ ~t~.te of Alaska ~.ei ~ N~?TA~ Y PITI~L~C Notary Pu lic Roxanr~le ~~. Sinz ~ "~1y Commission Expires August ~, 1987 My Commission Expires Assignee's Signature Date r Assignee's Name (Print or Type) & Title THE UNITED STATES OF AMERICA ) SS. STATE OF ALASKA ) Company Name Qualification File #~?~ This certifies that on they ~?/day of ~ , 1995, before me, a n tary public in and for the State of Alaska ,duly commissioned a sworn, personally appeared . ~ i , to me known and known to me to be the person described in, and who executed the foregoing assignment, who then after being duly sworn according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official seal the day and year in this certificate first above written. ~~~ OFFICIA!_ SEAL Sia~v ;~f .~:_?aska r~'~.~, ~ ~- p~~~g,$~ Notary ublic ~':'~xarir~.., iVl. My Commission Expires ~' /- 97 Sinz "qty tommission Expires August 1,1937 APPROVAL The foregoing assignment is approved as to the lands described in item 7 thereof, effective as of the date set forth below. `- APR Q 199 _Sta Of Alaska KENNETH A. BOYD Effective Date of Assignment ACTING C''^ECTOR DIVISION OIL & GAS ~9~ `I~CQM A NI ! ~ Lod w ~, 0 0 0 0 0 0 O O O 0 o ~~ ~ O O T- 160.5 ~ ~ 241.5' ,E ---- ~ 322.5 ~ 363.0 c 403.5 444.0 ~ c 484.5 s 525.0 ^ ~ 606.0 646.5 687.0 727.5 768.0 808.5 849.0 889.5 930.0 970.5 1011.0 1051.5 1092.0 1132.5 1173.0 1213.5 1254.0 1294.5 1335.0 1375.5 1416.0 1456.5 1497.0 1537.5 1578.0 l2S'O ~ TD 1618.5 400 -~~-~- Se~i~n ~ N1 1 r~ Lm9 Resistivity (ohm metres) O O O O O w D 3 RECEIVED ' ~~ ~ r'~~ Alaska Oil & Gas Cons. ~mtssian ~~ Se~~-~ e~ h Anchorage ~# 1 NOV-25-'97 TUE 18:05 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P01 -- ''" LAPP Resources, Inc. s 4900 Sportsmen Drive Anchorage, Alaska USA 99502-4168 Telephone: 1 (907} 248-7188 a-mail: lapres~alaska.net Facsimile: 1 (907) 248-7278 November 25, 1997 Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3192 Attn: IVIr. David Johnson -Chairman Re: Proposed Coalbed Gas Drilling Project, Houston Alaska Dear Dave: I~rther to our letter of November 2I, 1997, and my telephone discussion with Mr. Bob Crandall today, we request that the SEl/4 of the SEl/4 of Section 21 T18NR3W Seward Meridian be included by Administrative Approval within the Houston Gasfield, Houston Coalbed Gas Pool. This will allow us to drill the Houston 1 well at our ptanued location, which is in a previously disturbed area (which happens to fall within 330 feet of an interior corner of the "affected area"). The proposed location will minimize disturbance to the local vegetation, and to local residents and landowners. Also attached please find copies of the Oil and Gas Lease Assignments and Approvals from both Marathon and Unocal to LAPP Resources, Inc. dated Apri12 i, 1995. Also enclosed are copies of the Notice of Change of Ownership and Designation of Operator forms which were completed at the time of the transfer, but were apparently not submitted at that tune. Thank you. sin ely, David W. Lappi President ~~~~ Y G~ ~-laska0il &Anchoage~mm'sslan Exploration and Developm®nt _._.. NOV-25-'97 TUE 18:06 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P02 _._.. _ ~ TONY KNOWLES, GOVEANOA a ~ .a e e . DEPARTMENT OF NATURAL RESOURCES 3so r C STREET, SU1 rE rseo DlVIS/ON OF OtL AND CAS PHONERAGE, ALASKA 99503-5948 (907) 762-2549 DECISl01~ Assignor. Marathon Oil Company Attn: Contract and Division Order P.O. Box 2069 Houston, TX 77252-2069 Assignee: Lapp Resources Inc. . 4900 Sportsman Dr. Anchorage, AK 99502-4169 APR 211995 oil and Gas Lease ADL 374135 Assignment Application AoR~gv~~ Application for approval of assignment of 50.0 percent working interest from Marathon Oil Company to Lapp Resources Inc. is hereby approved effective April 3, 1995. This assignment is approved as to the working interest only and does not constitute approval or acceptance of any stipulations or attachments to the assignment instrument. An approved assignment is enclosed with this decision. enneth A. Boyd Acting Director Enclosure 1(H/J5MI9J41S5.2 R'E~~~~ QED ~~~ 2v 1g9? ~ pi1 & G$s ~~ p~1i~~n p{1Cb _. NOV-25-'97 TUE 18:07 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P03 DO&G Z5-84 -EASE ADL ~741s"5 LEASE ASSIG.~IMENT1 Reriset! 7/91 QF L.F~E D~~ 1 DNR M10-1 I3 STATE OF ALASKA DEPARTMENT OF NATURAL RE50URCES ~ ~ . , ', ~ ~ DNLSION OF OII. A,'VD GAS . ASSIGNMENT OF INTEREST L~f OII. AND GAS LEASE The undersigned assrgitor Marathon Oil Company wi10S~`addtrss is P.O. Box 1961b~ Anchorage, AK 99519-6i6E ' ~s owner or F ' °~ C ercau of tha Ieasa's wocicing intattst Zero (0"0) pctunt ovemding royalty interest does hereby assign to LAPP Resources Inc. the assignee. whose addtzss is_4_900 Sportsman Drive Anchorage, AK 99502-4]:69 1, Fifty (50X~ -- pcrant working iniettst: ~• Zero (0~) rercent ovemding royalty, interest. 3. The assignor is rctarnire Zero { 0 0) _ pert;crtt of the lease's working interest. •t. The assigiwr is rerouting One (1 °6 ) rertxnt ovemding royalty inreztse ;. The assignor previously reserved ZERO (030) pet~certt overriding royalty interest. 6. Thtt assignor previously conveyed Zero (0°~ ) pertxnt overriding royalty intaresr. ~• LANDS Ab'FFCTED by this assignment of intttt:st T 18 Nort R 3 t~lest Seward ~Icr'idian Section 19: Section 20: Section 21: Section 28: Section 29: Section 30: Section 31: Section 32: Section 33: All sw~rJE~ ,s~ ,s~Nw~ ,Ntr~Nwl SE#NE1, SE1,S~SWI,NE1Sbi1 NE$ SE$, W} Lots 2 and 3, riEl Lots 1 and 2, WE4, E#NWa N}NE1 E}NE$ 620.92acres REC~ivEa t~OV 2v '~'~'~~' 231.62 acres 312.68 acres Alasira Oil ~ Oas Cans. Commission Anchorage corttx~irtg 2 ~ 765.22 _~. mom or less. The Natligcatiou Lessee for the purpose of tzceiving any and all notices from the State of Alaska in connection with the lease will be: Name ores inc. Attn: David Ld i Address Spor sman rive CSty, Stauc. Zip nchorage, f~ as a a - We, the tatdetsigned. i~Cquest ~ app~,at of this assignment application. We attrst that this a ~ Pia revcivimg aA inttnest in the lease and that it is filed ~ discloses We t tt~ thu ~ ~~ to ~ a purstta:tt m 11 AAC 82605 and 1 I AAC 82.6IS. pttrsttatb so 11 AAC 82200 and i l AAC~Z?A5. Whether apptov~tn owholG or in part, ~assimtee ~ m ~ botufd by ~ Prv~visfiaats of said lease. NOV-25-'97 TUE 18:07 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P04 Asai~or = ~~~= L.R. Dartez ,Production Manager Assipmr's Name t'Print or Type) & TYtle TFIE UNTIED STATES OF AA~,RICA) )SS. STATE OF r ~~~~-' ~ Date t;1arathon Oil Company Company Name Qttaliftcation Flle 10 This eraKifres that on the ~~,~~~ day of ~?~/'C~'J . 1 ~ 9~ .before me. a notary public in and for the State of Alaska ,duly ooatmissiorted and swum. perso~aliy apps ar ez , ro uct~ on Manager , to me known and known to me to be the persorli described in. and who executed the ronrRoing asstgntnent. who then after beutg duly sworn according to law. ackmwiedged tome under oath that he executed same ireeiy and voluntarily for t3te uses and purposes therein meattitmed. RtTI'NFSS my hand and official seal the dav„~¢~,vear in this cxttiftcatt first above written. `~~c~,EN ~~ y~. .. , ~. ,. .. ,~ Zv' GARY ~~_ ~~=! . 0 ,~ : N - - - '. r No ~ Public " Y . ~, FU ~4~C ~ ~ My Cnmmssston expitr /~ ~ Asaigttx's Sipiatuty ~. ~- Assigree's Name (Ptin r Type) 8;. Title THE VI~ITIED STATES OF AMERICA) 1SS. STATE OF ~, r~ } vase Company Namt QualiBcxtivn Flle u ~?/.~ ~ This tatiftes that on tx:e ~ aav c : ~ ~ ~. beiort: me. a notary public in and ic- the State of . dots' commtsstottea ano sworn. personal:; appeared ~ „~J. ,C ~„~~ . to ire irnow and known to me to ~ the parse'. described in. and who executed the rorc~otne assignment. who then after being duly sworn accordng to laK . acauaowledged to me under oath that he executed same freely ana voittrttarily for the uses acid purposes tlt~tt:ir. menriorred. VVTT11ES5 my hand and official seat the day and year in this certific first above written. U-"FICiAI SFAL State of Alaska NOTAR'~C PUBLIC Roxanne M. Slnz Notary Public tity Commlwlon Exptree August 1,1897 My Cx~mission expitcs APPROVAL The ioR-otnr asslshimenc is anoro~'ed as to ~ ° ~ ds descrioed in cum 7 thereof. effective as of the lasre sal for_' hero - . ~ APR 0 31995 Start of AlBSi;.:: ~ ~ ~ ~ ~ V ~ ~ Eirecnve Late of Asst¢nmer.~ KENNETH A. BOYD ACTING DIRECTOR DNISION OF OIL 8 GAS ~,~~}~ ~ L~ 1~~~ Alaska Oil ~ Anch rags °mm~ssion NOV-25-'97 TUE 18:08 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P05 TONY KNOYY{.ES, DOYERNOR e Q a a ~ DEPARTMENT OF NATURAL RESOURCES 3601 CSTREET, SUITE 1380 ANCHORAGE, ALASKA 99603.5948 DIVISION OF O!L AND GAS PHONE: (90~) 7e2 2549 DECISION Assignor: . Union Oil Company of Califomia Attn: Lend Manager , P.o. sox 1 Ss247 . Anchorage, AK 99519-5247 Assignee. . Lapp Resources Inc. . 4900 Sportsman Dr, Anchorage AK 99502-4169 APR 21199 Oil and Qas Lease ADL 374135 ~ssig~ment Anolicatian r~,oved Application for approval of assignment of 50.0 percent working interest from Union Oil Company of Califomia to Lapp Resources Inc. is hereby approved effective April 3, 1995. This assignment is approved as to the working interest only and does not constitute approval or acceptance of any stipulations or attachments to the assignment instrument. An approved assignment is encl ed with this decision. Kenneth A. Boyd ' Acting Director Enclosure ~~~~ss.~ NOV ~G i~9~1 Ai~~~ 011 ~ Anc ~a~a amrn~~or+ NOV-25-'97 TUE 18:09 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P06 D08G 25-84 LEASE ADL:_ 34135 ~ __._ (LEASE ASSIGNMENT) EFFECTIVE DATE Revised 7/91 OF LEASE:.; 4/1/91 DNR #10-113 STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF 01L AND GAS .., ASSIGNMENT OF INTEREST IN OIL AND GAS LEASE i The undersigned assignor Union Oil Company of California whose address. is P.O. Box 19647. Anchorage. Alaska 99519247 ,,,~, as ow~ler of _ Fifty (50°~) percent of the lease's working interest Zero (0%) percent overriding royalty interest does hereby assign to LAPP Resources Inc. ,the assignee, whose address is __ 4900 Sportsman Drive, Anchorage. AK 99502-4169 , 1. Fifty i50%) percent working interest; 2. Zefo (0%~_ percent overriding royalty interest. , 3. The assignor is retaining .Zero (0%) percent of the lease`s working interest. 4. The assignor is retaining Zero (0°~L percent overriding royalty interest. 5. The assignor previously reserved Zero (0°!0) percent overriding royalty interest. 6. The assignor previously conveyed Zero (0%~ percent overriding royalty interest. 7. LANDS AFFECTED by this assignment of interest T 1 Nort , R W st , award Meridian ~ ~ ~ ~ ~ y L ~;jT'~act'67f4~1~i``„•, .... ~ . - - ,, . tdOV 2~ '997. Ataaks Oil ~ Gas Cans. Gansmission Section 19: Surveyed, actional, Ali, 620.92 acres; Ar~chora~e Section ~ 20:~ SSr~reye~i; 'I%4 NE1/4, S1/2, S1/2 NW1/4, NW1/4 NW1/4; 48Qacres; Section- 21: ~ Surveyed,. SE1/4 NE1/4, SE1/4, S1/2 SW1/4, NE1/4 SW1/4, 320 acres; Section 28: Surveyed, NE1 /4, i 60 acres; Section 29: Surveyed, SE1/4, W1/2, 480 acres; Section 30: Surveyed, Fractional, Lots 2 and 3, NE1/4, 231.62 acres; Section: 3]: .Surveyed, Fractional, Lots 1 and 2, NE1/4, E1/2 NW1I4, 312.68 acres; Section 32: Surveyed, N1/2 NE1/4, 80 acres; Section 33: Surveyed, E1/2 NE114, 80 acres. containing _..2.765.22 acres, more or less. The Notification Lessee for the purpose of receiving any and all notices from the State of Alaska in connection with the tease will be: Name ~P ~e.~ou ces Inc. Attn: David Lagg~_ Address ,4900 Sportsman Drive City, State, Zip Anchorage. AK 99502-4169 We, the undersigned, request the approval of this assignment application. We attest that this application discloses all parties receiving an interest in the (ease and that it is filed pursuant to 11 AAC 82.605 and 11 AAC 82.615. We further attest that all parties to this agreement are qualified to transfer or hold an interest in oil and gas leases pursuant to 11 AAC 82.200 and 11 AAC 82.205. Whether approved in whole or in part, the assignee agrees to be bound by the provisions of said lease. NOV-25-'97 TUE 18:10 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P07 -31~9s" -- _- _- nor's Signature Date ~gyin A. Taller. Attomev-in-Fact Union Oil ~omg~ny of California Assignors Name (Print or Type) & Title Company Name THE UNITED STATES OF AMERICA ) Qualification File # 6 SS. STATE OF ALASKA ) This certifies that on the 31st day of M,~ rch , 1995, before me, a notary public in and for the State of AI s ,duty commissioned and swom, personally appeared Kevin A. Tabler, to me known and known to me to be the person described in, and who executed the foregoing assignment. who then after being duly swom according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official seal the da and -ear in this certificate first above written. OFFICIAL SEAL State of Alaska ' NOTAR Y PUBLIC ~ ~ ~ ~ ~ ~ otary Pu lie Roxanne M. Sing My Comrtthel~ Explrss August 1.1997 My Commission Expires i~t~V ? G 1997' ~ ~ Assignee's Signature Al~~k~ iii ii< Gas ~ans• Cammi r ~ncharai~a ,~,.~~ ~ W L-a,o,~r ~r~E? r ~-~- L~ P~' ~~S©CC ~~S , .~1tlG Assignee's Name (P !r nt o Type) & Title Company Name THE UNITED STATES OF AMERICA ) Qualification File #~~~ SS. STATE OF ALASKA ) This certifies that on the~~/`day of , 1995, before me, a n tary public in and for the State of Alaska ,duly commissioned a swom, personally appeared ', to me known and known to me to be the person described in, and who executed the foregoing assignment, who then after being duly swom according to law, acknowledged to me under oath that he executed same freely and voluntarily for the uses and purposes therein mentioned. WITNESS my hand and official s®al the day and year in this certificate first above written. OFFtC1Al. SEAL State Uf Alaska Notary ublic NOTAF~ Y PUBLIC Roxanne M. Sinz My Commissfon Expires_ ~'' /• 97 ~ Canml~Ipn Explros August 1, t 997 APPROVAL The foregoing assignment is approved as to the lands described in item 7 thereof, effective as of the date set forth below. ~ APR 0 31995 Sta of Alaska KENNETH A. BOYD Effective Date of Assignment ACTING DIRECTOR plVISlON OF O1L & GAS .-_,..,..NOV-25-'97 TUE 18:11 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P08 STATE OF AUISISA • A! OIL AND (3AS CONSERVATION COMMtSSf r__-. NOTICE OF CHANGE OF OWNERSHIP 20 AAC 25.022 1. Name of Operator ~a~Y. UNION OIL COMPANY OF CALIFORNIA 2. Address P.O. BOX 196247 ANCHORAGE, At: 99519-6247 3. Notice is hereby given that the owner ta7, landowner ^ of record for the oN and gas property described below has assigned or trartsferrsd interest 1n the property indicated below: Property designatbn: PIONEER UNIT Legal description of property: TRACT 18 NORTH, RANGE 3 WBST, St:WARD MERIDIAN, ALASKA (Containing 2,765.22 acres more or TRACT 67A-135 1ess.) Section 19: Surveyed, Fractional, All, 620.92 acres; Section 20: Surveyed, SW/4 NE/4, S/2, S/2 NW/4, NW/4 NW/4, 480 acres; Section 21: Surveyed, SE/4 NE/4, SE/~2 SW/4, NE/4 SW/4, 320 acres; Section 28: Surveyed, NE/4, 160 acres; Section 29: .Surveyed, SE/4, W/2, 480 acres; Section 30: Surveyed, Fractional, Lots Z and 3; NE/4, 231.b2 acres; Section 3i: Surveyed, Fractional, Lots 1 and 2, NE/4, E/2 NW/4, 312.68.~acres; Section 32: Surveyed, N/2 NE/4, 80 acres; Section 33: Surveyed, E/2 NE/4, 80 acres. Property Plat Attachedtiil- 4. Effective date of assignment or transfer 5. Percentage Interest assigned or transferred April 3. 1995 1007 6. Assignee or Transferee: LAPP RESOURCES INC. Address: 4900 Sportsman Drive Anchorage, AK 99502-4169 7. Assignor or Transferor: UNION OIL COMPANY OF CALIFORNIA ~~~ ~ ~ ~~~~ Address: p,0. 'BOX 196247 (909 WEST 9TH AVENUE) Anchorage , AK 99519-6247 ~11SSka Oil ~ CaS Gpnw~, ~i0i{t{~ii$SIOr1 Anchorage 8. I hereby certify that the foregoing is true and correct to the best of my knowledge ~ 3lgned ~ Title ATTORNEY-IN--FACT DateJUNE 30. 195 N A. TABLER Form 10-417, 12-1-85 Submit In Duplicate ____ NOV-25-'97 TUE 18:12 ID:LAPP RESOURCES INC TEL NO:1 907 248 7278 EXHIBIT A #075 P09 Tract 67A-13S T. 18 N., R. 3 W., Seward Meridian, Alaska Section 19, Section 20 Surveyed. Fractional, All, 620.92 acres: Surveyed, SWli4NEI/4, S1/2, S1rlNWIl4, NWl/4NW1/4, 480 acres; , Section 21, Surveyed, SBl/4NEil4, SEll4, S1/ZSWi/4, NEl/4SW1/4, 320 acres; Suction 28. Surveyed, NEl/4,160 acres; Suction 29, Section 30 Surveyed, 5E1/4, Wl/2, 480 acc~es; Surveyed. Fractional, Lots 2 and 3, NEl/4, 231.62 acres; , Section 31, Surveyed, Fractional, Lots 1 and 2, NEl/4, EI/2NW1l4, 312.68 acres; Suction 32, Surveyed, NIRNEII4, 80 acres; Section 33, Surveyed, EI/2NE1/4, 80 acres. This tract contains 27bS.22 acres more or less. RE~~~ Y ~~ Np~' ~G i991 Alaska Oil & Gas Gans. Cammissian Anchara~t~ NOU-25-'97 TUE 18:12 ID:LAPP RESOURCES INC TEL N0:1 907 248 7278 #075 P10 _ ....... .._.... STATE OF ALASKA ~~ ALASK.. JIL AND GAS CONSERVATION COM. _SSION AESICNATION OF OPERATOR ZO AAC 25.020 1. Name and Address of Owners UNIOR OIL C014PANY OP CALIFORNIA P.o. Boa 196247 (909 NEST 9Ta AvF.NOE) ApCgORAGE, !~ 99519-b247 ~ O ~~ 2. Notice is hereby given Of a designation of operatorehip foX the oil and gas property described below: Legal description of property: S8E ATTAC® property plat Attached !r+ 3. Name and Address of Designated Operators LAPP ~~~ES ~~C. R E C E I V E D 4900 SPORTSI4Ali DRIVE ANCHORAGE, AR 99502-4169 ~~~ ~~ ~(~~~ Alaska Oil & Gas Cons. Commission 4. Effective date designation: APRIL 3, 1995 5. Acceptance of operatorship for the above described property with all attendant responeib ties a obligat ns is hereby a cknowledged. ~ ~ Signed Date .~(.i Q S ~ ~ ` ~ Nams {prinaQ{ V l , ~'t d P« ~- Titl®{printed l 6. The ow er hereb certifies t the foregoing is true and correct. signed ~~' 1 ~ ~ Date 30 JUNG 1995 Name (printed) j~VIN p, TAgLgj{ Title~prinred) ATTORNEY-ZN-FACT ?. Approved Date Coelrrioner Approved Date eoaeierioner Approved Date Ca~irrioner (requires two signatures) ALASKA OIL AND (iAS CONSSRVATTON OOlSiIBSION tosr l0•rii sngatL is aapilCaU Reo. Oi-0!•12 NOU-25-'97 TUE 18:13 ID: LAPP RESOURCES INC TEL N0:1 907 248 7278 EXHIBIT A #075 P11 Tract 67A-135 T. 18 N., R. 3 W., Seward Meridian, Alaska Section i9, Secdon 20 Surveyed, Fractional, All, 620.92 acres; Surveyed, SW 114NE1/4, S 1/2, S 1r2NW 1/4, NW 1/4NW 1/4, 480 acres; , Sccdon 21, Surveyed, SEl/4NE1/4, SEl/4, SI/2SW1/4, NEl/4SW114, 320 acra; Seedon 28, Surveyed, NEl/4, 160 acres; Suction 29, Suction 30 Surveyed, SEl/4, Wl/2, 480 acres; Surveyed, Fractional, Lots 2 and 3, NEl/4, 231.62 acres; , Section 31, Surveyed, Fractional, Lots 1 and 2, NEl/4, E1RNW1/4, 312.68 acres; Sxtion 32, Surveyed, N1/2NE1/4, 80 acres; Section 33, Surveyed, E1/2NE1/4, 80 acres. This tract contains 2765.ZZ acres more yr less. REC~11lED ~~t~V 2U 1997 Alaska Oil & AnchoOage ommisslon