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CO 102 C
• Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspectio~++n of the file. ~~ ~~a l~ Order File Identifier Organizing (done> RESCAN ^ Color Items: ^ Greyscale Items: ~oor Quality Originals: ^ Other: NOTES: BY: Maria _ .~- Project Proofing BY: Maria Scanning Preparation BY: Maria Production Scanning Stage 7 Page Count from Scanned File: ~ J (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: YES _ BY: Maria Date: ~/aD ~O Stage 1 If NO in stage 1, page(s) discrepancies were found: YES BY: Maria Date: Scanning is complete at this point unless rescanning is required. NO /s/ NO iuuiiuuuuii ReScanned II I II II II I ~ III I I III BY: Maria Date: ~s~ Comments about this file: Quality Checked III II'lll III IIII III ,.o.=aed iuumiuiiuiui DIGITAL DATA ^ Diskettes, No. ^ Other, No/Type: Re,~a~~.~~E~ uiiuuiniiuiui OVERSIZED (Scannable) ^ Maps: ^ Other Items Scannable by a Large Scanner OVERSIZED (Non-Scannable) ^ Logs of various kinds: ^ Other:: Date: ~~~p~ ~ ~~0 /s/ Date: x30= Date: r~/~ /s/ + =TOTAL PAGES (Count does not include cover sheet) , n n~ /s/ v ~/~, 10/6/2005 Orders File Cover Page.doc • Index Conservation Order 102C 1. November 15, 1971 2. March 22, 1972 3. March 23, 1972 4. March 29, 1972 5. Apri13, 1972 6. Apri14, 1972 7. Apri17, 1972 8. April 13, 1972 9. April 19, 1972 10. April 25, 1972 11. May 2, 1972 12. May 4, 1972 13. May 11, 1972 14. May 18, 1972 15. May 18, 1972 16. May 18, 1972 17. May 19, 1972 18. June 21, 1972 Mobil Oil Petition for review Letter from Clayton Oslund Prof. of Horticulture UAA Letter from AAG re: Mobil Oil v. State 71-3432 Letter from AAG re: State formally served with case Letter from V. B. Porter Joint Interest and Gas Mobil-Granite Pt. No flare case Union Oil Pipeline Participation letter Memo re: Mobil flaring suit Amoco Letter re: Verbal request for emergency flaring Order on Appeal Letter from AAG re: Order signed by Judge Lewis Notice of hearing, affidavit of publication Holland Letter Subpoena's Inventory of Exhibits Hearing transcript Union Oil request rehearing Letter to Judge Lewis re: public hearing Conservation Order 102C • • STATE OF ALASKA DEPARTP~ENT OF NATURAL RESOI.JRCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Re: THE ORDER OfJ APPEAL OF TfJE ) SUPERIOR COURT FOR THE STATE OF ) ALASKA, ThJIRD JIJDIGIAL [)ISTRICT, ) P>1OBIL OIL CORPORATION, Appellant, ) vs. STATE OF ALASKA, DEPARTP~gENT OF ) NATURAL RESOURCES, through its Oil ) and Gas Conservation Committee, ) et al, Appellees, No. 71-3432 ) Conservation Order No. 102-C Granite Point Field ~-1iddle Kenai Oil Pool June 10, 1972 IT APPEARING THAT: I. The Superior Court for the State of Alaska, Third Judicial District, by Order dated April 25, 1972, in the case of MOE31L OIL CORPORATION, Appellant, vs. STATE OF ALASKA, DEPARTP~ENT OF NATI.JRAL RESOURCES, through its Oil and Gas Conservation Committee, et al, Appellees, ordered the Alaska Uil and Gas Conservation Committee to consider additional facts to be pre- sented by the appellant, as specified in said order. 2. Pursuant to this order, the Oil and Gas Conservation Committee published a notice of public hearing in the Anchorage Daily News on Play 4, 1972. 3. A public hearing was held on Play 18, 1972 in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time the appellant and subpoenaed witnesses were heard. The hear- ing record was held open through P.Jay 19, t977_, and additional information was received. ~. Subsequent to the public hearing on May IS, 197?_, Conservation Order PJo. 102-8, which was issued on June 8, 1972, amended Conservation Order No. 102 to permit the flaring or venting of excess casinghead gas from the Granite Point Field until 7:00 A. P~., ADST, October 15, 1972, and provided for administrative extension of this date, but not beyond 7:00 A. P=1., ADST, November I, 1972. 5. Conservation Order No. 114 issued June 9, 1972 established the daily average volume of casinghead gas permitted for a safety flare from each platform and shore facility serving the referenced field including those of the appellant herein. FINDINGS: I. Appellant operates an oil-producing platform in the Granite Point Field in Cook Inlet. ~_l ~,r. Z ~ r Conservation Order No. 102-C Page 2 June 19, 1972 2. Casinghead gas is produced with the oil, and assists in moving the oil to the well bore and to the surface. 3. The oil production from appellant's oil and gas lease is predicted to result in the production of approximately ~i.2 million cubic feet of Casinghead gas per day by mid-Ig72. 4. Approximately 2 million cubic feet of Casinghead gas per day is used as fuel and 1 to I-I/2 million cubic feet per day is or will b~ sold to Atlantic Richfield Company. Appellant plans to flare the remaining 4.7 to 5.2 million cubic feet per day, but much less is required to maintain adequate safety flares. 5. Appellant estimates production of Casinghead gas will gradually decrease, and there will no longer be gas in excess of the amount required for fuel and safety by the middle of 1977. 6. Appellant has offered its excess Casinghead gas for sale, but has received no bona fide offer to purchase the gas. 7. Appellant and other producers have received substantially identical offers from Parathon Oil Company to take their excess Casinghead gas with- out payment, delivered at a specified location and at a specified quality and pressure, and total dedication of the excess is required. E3. Appellant estimates the capital cost of delivering its excess Casinghead gas in conformance with rarathon Oil Company's offer to be $487,~0~, and the annual operating cost of the necessary compression and stripping. equipment to be $29,750. 9. Appellant has not accepted Marathon Oil Company's offer. 10. Appellant has not made application for a reduction in royalty rate an the oil and gas lease it operates in the Granite Point Field, pursuant to AS 3~3.05.140(d) and Title II, Alaska Administrative Code, Section 509.21. tl. Appellant refused to divulge its estimate of barrels of recoverable oil underlying the oil and gas lease it operates in the Granite Point Field. 12. The Cook Inlet Pipeline Company, on P-larch 24, 1971, filed a report with the Interstate Commerce Commission estimating 4£~,OOO,OOO barrels of recoverable oil originally. underlying the oi) and gas lease operated by appellant in the Granite Point Field, with 45,501,000 barrels estimated to to be produced from January I, 19F7 through 1989. 13. The Cook Inlet Pipeline Company is operated by personnel of and partially owned by P.lobil Pipeline Company, a wholly-owned subsidiary of appellant. • s Conservation Order fJo. 10?_-C Page 3 June 19, 1972 14. Appellant has applied for a permit to drill a replacement well on the lease it operates in the Granite Point Field, at an estimated cost of ~i:30O,000 to ~ I ,000,000. 15. Appellant estimates repair costs of X7.00,000 each for each of three wells on the lease it operates. 16. Appellant has spent funds for pollution control on the platform it operates in the Granite Point Field, and in other areas appellant has spent funds to drill wells for the sole purpose of disposing of salt water produced with the oil. 17. Appellant presented expert testimony in Conservation Files PJos. 102 and 102-A that the restriction of oil-producing rates in the referenced field would lessen ultimate recovery of oil and constitute waste, but the Committee finds that a difference of opinion exists among recognized experts on this subject as to the effects of restriction of producing rates from oil reservoirs in general, and there is evidence in these files that such differences of opinion do exist. CONCLUSIONS: I. Appellant is currently flaring more than 50°~ of the casinghead gas produced with the oil from the lease it operates in the Granite Point Field. 2. The appellant could conform to Conservation Order No. 102 and beneficially utilize the excess casinghead gas now being flared by delivering the gas to P~1arathon Uil Company, pursuant to Parathon 0il Company's written offer and proposed contract. 3. Appellant is unwilling to expend the funds necessary to accept h":arathon Oil Company's offer, and thereby maintain maximum oil production rates. However, appellant is willing to expend far more funds to redrill and repair wells, install and maintain pollution contro- equipment and, in other areas, drill salt water disposal wells, all designed to maintain or permit maximum oil production rates. ~. Appellant contends the expenditure of funds necessary to accept Marathon Oit Company's offer would be uneconomical, yet appellant has made no applica- tion for a reduction in royalty rates on the lease it operates in the Granite Point Field, pursuant to AS 38.05.140(d) and Title II, Alaska Administrative Code, Section 509.21. 5. Evidence presented by the appellant showing unfavorable economics of a sale or transfer of casinghead gas to Parathon Oil Company will not be given significant weight by the Committee in the absence of a showing that compliance with Conservation Order No. 102 would preclude operation of appellant's oil and gas lease at a reasonable profit, considering income • s Conservation Order PJo. 102-C Page 4 June 19, Ig72 from the sale or disposition of all hydrocarbons, and in the absence of a showing that appellant has exhausted all administrative remedies in seeking a reduction of its royalty rate on all hydrocarbons produced from its oil and gas lease. ~. The flaring of gas in excess of the amount required for safety consti- tutes waste when beneficial utilization of the excess gas is reasonably practicable. 7. The flaring of casinghead gas in excess of the amount necessary for safety could also be eliminated by restricting oil production rates. F3. Appellant has not submitted substantial evidence that restriction of oil-production rates would lessen ultimate recovery of oil in the Granite Point Field. NOW, THEREFORE, IT IS ORDEREQ THAT: Conservation Order No. 102, as amended by No. 102-B, shall remain in full force and effect. QOfJE at Anchorage, Alaska, and dated June 19, 197?. ~~- L ~ '~r~ Thomas R. ~•~arsha I I , J r. , Execut i e Secretary 4'' Alaska Oil and Gas Conservation Committee ~ ~ "'1 ~~ Concurrence: s - Rti Homer L. Burrell, Chairman ~?'~ON CO~~ A I aska 0 i I and Gas Conservat i on Committee 0. K. Gi Ibreth, Jr., P1em Alaska Oil and Gas Conservation Committee X18 WILLIAM A. EGAN, GOVERNOR OFFICE OF THE ATTORNEY GENERAI The I-Honorable Eben H. I~evais JLld~is Vf vi ~ ~l:i~'l~x'~~.lL' Caurt q41 I+'<;'ttrt't. A~yenue Anchorage, Alaska. gg501 360 KSTREET -- SUITE IOS ANCHORAGE 4y501 June 21, 1872 Re: Mobil Oil Corporation vs. State of Alaska, Department of Natural RL sources, et al. Nc7. 71-3432 ' Dear Judge Lewis: DIR C. GEOI C. ENG --I- 1 ENG --I--2 .ENG_.. ,. __ i 3 F~vC --- _ 4 ENG 5 ENG 1 GEOi -I 2 GEOL_ 3 GEOL REV --~ DRAF7 I CONFER: FiiE: r~ In accordance with the Courtts Order of April 2~, 1972, r=~manding tYie referenced matter to the 0i1 and Gas Conservai~ion Committee for further hearings, enclosed is a copy of Consez°,,ation Order No. 102-C prepared by the Oil and Gas Conservat~.on Committee pursuant to publ.a_c hearing held on r~iay i8, 1g72. Very truly yours, JOHN E . HAVELO~~ ATTORNEX GEN f,, _... ~ fc ,~~~ Johri. A. Reeder, Jr. Assis,~ant Attorney General JAR:m Encl. cc: Homer L. Burrell H. Russel Holland -- ~~; i w '' ~ t ~~~ ~~ t~ ~ 1;,; ~,~ `~, ;~ l~ ~ _~ _T__ ~17 Union Oil and Gas ion: Western Region Union Oil Company of California 909 W. 9th Avenue, Anchorage, Alaska 9950 °iR Telephone: (907) 279-7681 -< c. Gfo~ i May 19, 1972 ~ -- -- - ~ c. ENG ,. ` - ;.~,,; 1 ENG =, < L ~~' 76 ~ --- - 2 ENG ~~~- ~ 3 ENG--I 4 E~aG.._ry f1 -I-- - ' . I 5 ENG 1 GECGL ~ ._,_ Eugene F. Griffin Mr. Homer L. Burrell ~ 2 ~lo~ ~ ~: ' District Operations Manager Alaska Oil Conservation Committe a GEOt ~°` .~ Anchorage District Department of Natural Resources ~EV- 3001 Porcupine Drive °~AFT ~` Anchorage, Alaska 99504 SEC ~,; CONFER: _ , -. Dear Mr. Burrell: COu~,E, y/{ •t~t.~~ During the rehearing of Conservation File #102, Granite Point Field, ~f~pfl~' Middle Kenai Oil Pool, on Thursday, May 18th, you requested additional information regarding Union Oil's compressor installation aboard the Monopod Platform. In addition to providing that information to 'you, I will reconcile the apparent misunderstanding of a portion of Mr. R. C. Keller's testimony given regarding Conservation File #103 on May 11, 1972. In direct testimony, Mr. Keller indicated in Paragraph 4, that the two 3300 h.,p, turbine-driven centrifugal compressors would provide the follow- ing multiple-use service: 1. Transporting gas to shore 2, Fuel needs 3. Gas lift compression at 500 psig. Mr. Keller further testified that one 1100 h.p, turbine-driven centrifugal compressor will compress the gas lift gas from 500 psig to 1100 psig. Listed below you will find an approximate use percentage for these three services and their allocated horsepower at maximum rated conditions: 1. Gas to shore 3234 HP 42% 2. Fuel needs 726 HP 9% 3. Gas lift 3740 HP 49% 7700 HP 100% These conditions and percentage allocations will change as platform gas lift and gas transmission requirements change. The inference expressed in the May 18 Hearing that the compressor package is being installed totally for transporting gas to shore is not true. Without the benefit of the May 11 Hearing transcript, I can not be sure ppf Mr~. Kelley's S"//8'~ ~'L- F ~~ ~ ~ C,O {p2-~Cp~~`f '~.~ oay~~M~r ~. • • Attach . EFGrnnb cc: j. L. White, Mobil, Anchorage B. G. Howard, Marathon, Anchorage Mr. H. L. Burrell May 19, 1972 Page 2 remarks concerning compressor usage during the question and answer period. His intent was to indicate the compressor package would handle only casinghead gas. It is obvious from the figures above and Mr. Kelley's direct testimony (a copy of which is attached) , this package is not totally dedicated to gas to shore transmission. I hope this will answer the question of horsepower service allocations and clear up the misconception of the gas to shore/gas lift relationship. /'/e truly yours ,> / ~ ~ E "ge F, riffin Dis r'ct Operatio anager .x.16 i ~~1 C> ~ ~~ ~ ~ 2 3 4 5 s 7 8 9 10 11 12 ~ ''~ 13 14 15 16 17 18 19 20 21 22 23 24 25 II '~' 1 ~~ a~~` I) . " i ~ ~~ BEFORE TiiE STATE OF ALASKA DIVISION OF OiL AND GAS OIL AND GA5 CONSERVATION COMPtITTEE TRANSCRIPT OF PROCEEDINGS RE-HEARING ON CONSERVATION ORDERS 102 and 102 (a) MOBIL OIL COt'iPANY, APPELLANT • l~~ay 18 , 19 72 APPEARANCES: HO1~R BURRELL, Chairman •THOHIAS R. r'fARSHALL, JR. , Executive Secretary 0. K. GILBRETH, JR. , P~ember JOHN REEDER, Assistant Attorney General, State of Alaska R & R COURT REPORTERS ~2S WEST E16MTH AVENUH-SUITE >I 277.4713 ANCHORAGE, ALASKA 89301 i Page 2 • 1 P R O C E E D I N G S 2 MR. BURRELL: Good morning, ladies and gently 3 mgn. My mama ~•~ homer Harrell; x'm Chairman of the Alaska Oil 4 and Gas Conservation Committee. To my right is Mr. O. K. Jr. 5 Gilbreth/who is a member of the Oil and Gas Conservation Com- 6 mittee. To my extreme left is Mr. Thomas R. Marshall, Jr., ? also a member of the Alaska Oil and Gas Conservation Committee. $ To my immediate left is Mr. John Reeder, Assistant Attorney 9 General for the State of Alaska. 10 This hearing is called pursuant to order of the Superior 11 Court of Alaska. I shall read the notice of the hearing which 12 encompasses the Judge's order. It's entitled Conservation File 13 No. 102, Order on Appeal, Mobil Oil Corporation, Appellant, 14 vs. State of Alaska Department of Natural Resources through its 15 Oil and Gas Conservation Committee, et al., et aliis, No. 71- 16 3432, Superior Court for the State of Alaska, Third Judicial 17 District. Notice is hereby given pursuant to order of the 18 Superior Court for the State of Alaska, Third Judicial District, 19 dated April 25, 1972. The Alaska Oil and Gas Conservation Com- 20 mittee will hold a public hearing to consider additional evident 21 and to further consider the effect on Appellants of Conservation 22 Order Nos. 102 and 102 (a), restricting the flaring or venting 23 of casinghead gas from the Granite Point Field, Middle Kenai 24 Oil Pool, to the amount required for safety. The hearing will b 25 held on May 18, 1972, at $:00 o'clock a.m. in the City Council R 8t R COURT REPORTERS SID WEDT l16HTH AVENUE-3VITE D 277.4713 ANCHORAGE, ALASKA D9501 '~' 1 Page 3 1 Chambers of the Z. J. Loussac Library, Fifth Avenue and F Strut 2 Anchorage, Alaska, at which time the Appellant, operators of the 3 r~ferenCed p~rol and affeGt~cl at~d l.z~terest~d parties will be heat 4 It's signed by Thomas R. Marshall, Jr., Executive Secretary of 5 Alaska Oil and Gas Conservation Committee and was published g May 4, 1972 in the Anchorage Daily News. 7 We will try and conduct this hearing in the best possible 8 fashion to satisfy the Judge's order. We realize the ambivalenc g if you will, of our position here inasmuch as we are not only 10 holding the hearing, we are required to rule on it from the. 11 facts or information which may be submitted. ~~~e intend to be 12 extremely liberal with respect to admission of evidence, recog- 13 nizing objections may be raised. We feel that --- I personally 14 feel I am not qualified to judge on the admissibility of evidenc 15 Your objectior~swill be noted. Anything other than reading the 16 telephone directory backwards probably will be admitted, as 17 far as I'm concerned, .but. subject to objection, of course. Mr. 18 Reeder will be my guide here, and I trust everybody will bear 19 with me from the procedural standpoint if we go off the record 20 occasionally so I may have benefit of his advice as to the con- 21 duct of the hearing. And, Mr. Reeder, do you have any comments 22 at this point? 23 MR. REEDER: No, I don't believe so. 24 MR. BURRELL: All right, sir. 25 MR. HOLLAND: Mr. Chairman, I am Russell R & R COURT REPORTERS !23 WEST E16HTN AVENVE-SUITE 5 277-4713 1 ANCHORAGE, ALASKA CO'301 ~. Page 4 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 1~ Holland. I am appearing this morning for Mobil Oil Corporation in this continuation of the hearings on Conservation Order No. •102. On my left is Mr. Bill Harrison who will co-counsel with me on behalf of Mobil on this matter, and to my right is Mr. Vance Porter who will testify this morning. If now is the appropriate time, Mr. Burrell, I would like to make a very brief opening statement. ' • MR. HUBBELL: Yes., sir, please do, Mr. Hollan . MR. HOLLAND: As the Chairman has already indicated, this re-hearing is scheduled as a result of a special remand of this matter to the Committee to consider new evidence which has developed subsequent to the original hearing on Order No. 102 and to .the first re-hearing thereon. This hearing today was duly noticed, as ha s. already been stated by the Chairman, for the purpose of taking such additional testimony. The notice does, in fact, accurately reflect the Judge's order that the Committee is to consider additional evidence and to further reconsider the effect upon Appellant of Order No. 102 and 102 (a). I would note that we do presume that it was both the court and the Committee's intention to limit this hearing to the purpose for which the matter was remanded by the .court. We will present first a brief summary of the evidence whic has gone before us since one of the jobs of this Committee is to more or less reconsider its position. Secondly, we will present new evidence on two points which we discussed with the Judge in R & R"COURT REPORTERS S3sl WElT EIO NTH AVENUE-HUITH S 277.4719 ANCHORAGE. ALASKA >a9S01 • • Page 5 1 2 3 4 5 6 7 8 9 10 lI 12 ' 13, 14 ', 15' 16 17 18~ 19 20 21 22 23 24 25 -1 chambers in the presence of Mr. Reeder as to the reason and necessity for a further re-hearing. These points are, first, i ~I Mobil's continued efforts to find a buyer for an ac~.ditional quantity of casinghead gas over and above that already beneficial used on the platform or sold; secondly, testimony will be offere as to the contract proposed to Mobil by Union and Marathon by which P~iobil's casinghead gas in excess of its sales and plat- form uses would be, injected into the riobil --- I'm sorry.--- into the Union-Marathon pipeline-which will cross the Inlet and which is presently under construction. We will also update our previous testimony as regards the volumes of casinghead gas being produced and ,incorporate into our. evidence as to our re-use of casingheadgas the estimated amount of gas required for a safety flare, since by a recent hearing before this Committee that particular use of gas has been given a manner of recognition which it has not heretofore had. At this time, I would ask the Committee to swear Mr. Porter and we will call him as our first witness. MR. BURRELL: Thank you, Mr. Holland. I wish to make a few comments on your opening remarks simply for the record. One, you indicated that you ..desire to have the hearing today restricted to the Judge's order which is of course appropriate. There may be a difference of opinion as to interpretation of thef Judge's order, however. ( ~~i MR. HOLLAND: Well, that can frequently R & R COURT REPORTERS ~1D W[8T EIONTH AVENUE-SUIT[ !t 277.4713 ANCHORAGE.ALASKA ~a50t Rr#4 1 2 3 4 5 6 7 8 9 10 I1 I2 13 14 15 16' I 1? 18~ 19 20 Z1 22 23 24 25 ~-1 i • Page 6 happen, Mr. Chairman, I recognize. MR. BURRELL: I specifically say, and I believe I quoted from the Judge's order in the notice that read:, the Alaska Oil and Gas Conservation Committee .will hold a public hearing to consider additional evidence, so for that reason, I do not read the Judge's order as strictly as you may have ~ intended. And secondly my second comment on your introductory remarks would be with respect to your comment that the safety flare was not previously recognized. I don't think that ever has -~- the necessity for a safety flare, I believe, has always I~~ been recognized. I at no time would think that the Alaska Oil i, and Gas Conservation Committee would deny the need for a safety flare. I think this is the first time the size or the volume has ever been defined, however. MR. HOLLAND: I'll stand corrected on that. MR. BURRELL: Okay. I just wanted to make those two points. You may proceed with your witness. (Pause.) MR. HOLLAND: Mr. Porter, would you stand and be sworn, please? MR. MARSHALL: Will you please raise your right hand. In the matter now appearing, do you swear to tell the truth, whole truth, and nothing but the truth, so help you God? MR. PORTER: I do. MR. MARSHALL: Thank you. You may be seated. R & R COURT REPORTERS f2f W[fT EIO NTN AVENUB-fU1TE f 277.4713 _ ANCHORAGE, AWSKA D9501 . ~, , Page 7 • 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 '~' 1 I MR. BURRELL: Let the record state that Mr. Thomas R. Marshall, Jr., Executive Secretary, has sworn Mr. Vance Porter, witness for Mobil Oil Company. MR. HOLLAND: Thank you, Mr. Chairman. As the Chairman recognizes, I believe, Mr. Porter has testified before the Committee a number of times. I wonder if his quali- fictions to testify as an expert are still recognized? MR. BURRELL: The Committee, without objecti will accept Mr. Porter's qualifications as an expert witness. MR.HOLLAND: As a preliminary, Mr. Forter, would you state, please, for the record your full name, resi- dence address and employment? MR. PORTER: My name is Vance B. Porter. I reside at 2567 Arlington Drive in Anchorage. I am employed by Division Mobil Oil Corporation as/Joint Interest and Gas Development Administrator for Mobil's Alaska Exploration and Producing Division. MR. HOLLAND: Thank you. Please proceed with your testimony. MR. PORTER: Good morning, gentlemen. I will take a few minutes to briefly review certain points of previous testimony presented in behalf of Mobil Oil Corporation concernin Conservation Order No. 102. (Mr. Porter's testimony is attached as an exhibit to this transcript.) MR. HOLLAND: Mr. Chairman, if you please, R & R COURT REPORTERS !20 WEST EIO HTH AVENUE-SUITE O 277.4713 ANCHORAGE, ALASKA CC501 Page 8 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 I would like to ask Mr. Porter I believe about two questions concerning the contract, and we will then offer Exhibits Three through, what is it, Six --- MR. PORTER: Six. MR. HOLLAND: --- into evidence. Mr. Porter, would you please examine what has been marked Exhibit Number Six and tell me whether,or not that is an exact and complete copy of the contract which you have previously described in your testimony? that document? ~I guess. with me. MR. PORTER: Yes, it is. MR. HOLLAND: From whom did you receive MR. PORTER: This was mailed by P4arathon, MR. HOLLAND: And it --- MR. PORTER: I don't have the cover letter MR. HOLLAND: your capacity with Mobil Oil Co MR. PORTER: MR. HOLLAND: --- is that the document? MR. PORTER: MR. HOLLAND: Exhibits Three through Six into And it was received by you in rporation? Yes, sir. And is that the document that Yes. I would at this time offer evidence. I R & R .COURT REPORTERS 030 WEfT EIO HTH AYENUE-SUITE >!; 277.4713 ANCHORAOE,ALASKA 99501 ~1 Page 9 1 MR. BURRELL: Mr. Holland, have you offered 2 Exhibits One through Two also? Exhibits One and Two also? 3 MR. fiOLLAND: Oh, yes, thank you very much. 4 MR. BURRELL: Exhibits One through Six then 5 are offered into evidence; is that correct, sir? 6 MR. HOLLAND: Thank you. Yes. 7 MR. BURRELL: Could we identify them 8 individually? I don't think .we .d id. For the record. 9 MR. HOLLAND: Yes. 10 MR. PORTER: Exhibit Three --- 11 MR. HOLLAND: Exhibit Three, Mr. Chairman, is 12 the letter of March 22, 1972 from Mr. Oslund to Mobil. Exhibit 13 Number Four is the letter of April 3, 1972 from Mobil by Mr. 14 Porter to Mr. Oslund. Exhibit Number Five is the letter of ~15 April 7, 1972 from, jointly, Marathon and Union to Mobil; and 16 Exhibit Number Six is the contract which we've just described. 1? MR. BURRELL: Thank you, Mr. Holland.. Does 18 that conclude --- 19 MR. HOLLAND: I think I have one further 20 preliminary. If it pleases the Committee, I would present a 'li copy of prepared testimony which has been offered by Mr. Porter. 22 As is usual, this is not offered as an exhibit, but --- 23 ~- MR. BURRELL: I'm sure it will be of great 24 assistance in the reproduction purposes. Thank you. Does that 25 conclude Mobil's prepared testimony? R & R COURT REPORTERS 830 WEST EIO NTM AVENUE-SU1T6 S 277-4713 1 ANCHORAGE. ALASKA 92501 Page 10 1 MR. IIOLLAND: That concludes Mr. Porter's 2 direct presentation, yes. 3 MR. BVRRL'LL: ~'r©m a procedural standpoint, 4 we have a very slight problem. I hope we never get to it, but 5 in case you should -- from noon to one, I've been advised by 6 the Librarian that there's a group, commonly known as the ? Women's Liberation Group, meeting here, and we will be excluded. 8 from the premises .from twelve until one. 9 MR. HOLLAND: That's not right, Mr. Chairman 10 that's not right. If they're entitled to go into our private 11 bars and clubs and what have you, we ought to be able to sit 12 in on their meeting. 13 MR. BURRELL: Well, we probably could, but 14 this space is available on a reservation basis only, and they do .15 have it from twelve to one. (Laughter) I don't think they'd 16 ~ exclude us if we choose to be here rather than at lunch. 17 MRS. HOLLAND: Really, I think I'll go to 18 lunch . 19 MR. BURRELL: Let's take a~twenty minute 20 break. 21 (OFF THE RECORD) 22 (ON THE RECORD) 23 MR. BURRELL: We'll reconvene the hearing 24 at this time. I think Mr. Gilbreth has some questions of the 25 witness, Mr. Porter. ~1 R & R COURT REPORTERS 120 W66T EIO NTM AVENUi-SUITE 3 277.4713 ANCMORAGE.,ALASKA >i9301 Page 11 1 2 3 4 5 6 7 8 9 10 21 12 13 14 15 i6 17 18 19 20 21 22 23 24 25 ~'1 MR. GILBRETH: Mr. Porter, you testified that you are now flaring three and a half to four million per day, ar~d an ydu~° Exhl.bit mwc, for example, yot~c estimated curvy there was up above the eight, and then I believe you testified without some well that's included in it that you're currently producing 6.5 million a day, is this right? MR. PORTER: Yes, sir. 3 MR. GILBRETH: This three and a half to four million a day that's being flared, is that half of the 6.5 milli per day rate? MR. PORTER: Yes, sir. , MR. GILBRETH: Of the total production rats? MR. PORTER: Yes, sir, it is. MR. GILBRETH: It's not at the eight million rate? MR. PORTER: No, it's at the six million rate. MR. GILBRETH: Okay. o- MR. PORTER: If you'll notice, that excludes of course, the safety pilot because that's burning anyway, and that's from three million per day at mid-'-72 up to six and a half million per day. MR. GILBRETH: All right. I notice that as a result of the reservoir simulation study there's been a rather dramatic drop in estimated future production and reserves R & R COURT REPORTERS X10 WEST EIONTH AVENUE-SUITE E 277-4713 ANCHORAGE,ALASKA 29501 ' Page 12 ,~ 1 I believe in Juneau you testified that there would be about 2 18.9 billion to be flared, and then about a year ago about 16 3 billion to be flared, and now about 4 bill~.on. .Could you give 4 us a little more detail on the changes or the results of the 5 simulation study that resulted in such a significant reduction 6 in this flared volume between the time the Order was issued and 7 this hearing? 8 MR. PORTER: Yes, sir. Our gas/oil ratio 9 from the field has shown a greater decline than we anticipated 10 a year - year and a half ago, and of course the simulator runs it match histories, and therefore we have a lower prediction of 12 total casinghead gas to be produced. 13 MR. GILBRETH: Is this the only change? 14 you haven't changed any of the physical parameters that fed into 15 the computer study to get this, to get your match? Let me --- 16 pardon me, let me phrase it another way. What parameter did you 17 have to chan a to g get the match then besides the gas/oil ratio? 18 Or was that the only one? '~ 19 MR. PORTER: The production history again, 20 ~I sir. 21 MR. GILBRETII: Just production history? You 22 didn't change any of the physical parameters dealing with the 23 reservoir itself --- 24 MR. PORTER: No, sir. 25 MR. GILBRETH: ---- in your computer? Okay. ~~ 1 R & R COURT REPORTERS X10 WEOT EIO NTN AVENUB-SUITE S 277.4713 ANCHORAGE, ALASKA >i9'J01 ~~ . • Page 13 1 The cost figure that you gave us, $487,000 capital, is that 2 the equipment that would be necessary then to dispose of this 3 three --- to put this three and a half million into the line 4 that's supposed to come through the vicinity? 5 MR. PORTER: Yes, sir, it would be. Equip- s ment of this nature is not too sensitive to volume. And let me ? reiterate part of my testimony, that from Exhibit Two, where you 8 figure the three to four billion :cubic feet excess, assumes that 9 ARCO will continue our gas contract that expires in 1976. I 10 stated that if they did not, we would have more excess gas, and 11 that would be in the neighborhood of seven and a half to eight 12 billion. 13 MR. GILBRETH: If the ARCO contract then 14 is not renewed, the area shown on your Exhibit Two shown as gas '15 sales would cease to exist in '76, is that right? 16 MR. PORTER: Yes, sir. 17 MR. GILBRETH: And then your safety pilot ~18 plus your platform usage would in effect be the total usable lg gas? 20~ MR. PORTER: Unless we were able to find 21 another market, yes, sir. 22 MR. GILBRETH: All right. I believe one 23 of the things you've mentioned, you object to the proposed 24 contract on the basis that you would have to dedicate your 25 casinghead gas reserves and this would Leave you no room to R & R COURT REPORTERS ~iS W[>{T EIOMTN AVENUE-IUITE 5 277.4713 ANCHORAGE. ALASKA 96301 ~~ 1 Page 14 1 negotiate. for a future market. It seems to me that we have been 2 hearing a lot of testimony that there just isn't any market, and ~ th~r~ ~:~»'t ~ol.ng to bo any market, and I wond€~r why you abject 4 so much to dedicating your reserves to --- 5 MR. PORTER: I say there is no market now, 6 sir. 7 MR.GILBRETH: Well, your testimony has been, 8 on several occasions, that the volume is so low that there will 9 be no market, hasn't it? 10 MR. PORTER: I don't foresee any market; it - however, I did have hopes for Dr. Oslund's project, that we 12 could utilize the gas. I don't know what may come up tomorrow, 13 but I don't foresee any.' 14 MR. GILBRETH: But-the ---- the story that 15 you will be telling each of the people will be essentially the 16 same, will it not, similar to that which you told the horti- 17 culture rou that ~ g p you wrote to. 18 MR. PORTER: Oh, yes. It's the truth. 19 (Laughter.) 20 MR. QILBRETH: Your Exhibit Two shows the ll estimate of roduced as that p g you get from your simulation study 22 and that, as I understand it, has one well out of it; I'm sorry 23 that I cannot locate the number. 24 MR. PORTER: It's Well No. 33-13. The 25 curve --- I testified that the curve shown for gas produced ~ R 6e R COURT REPORTERS X36 WEST EIO HTH AVENUE-BUTT! 6' 277.4713 ANCHORAGE. ALASKA >a9501 ~T 1 i~ Page 1S 1 assumes replacement of Well No. 33-13. 2 MR. GILBRETH: Could you tell us what the $ effect would. be on this curve --- well, first, let me ask about 4 the 33-13. Do you have plans to re-drill this well? 5 MB. PORTER: Yes, sir. We have applied for 6 a permit. 7 MR. GILBRETH: If the well is re-drilled, 8 you would expect it then to follow the curve as shown in Exhibit 9 Two? 10 MR, PORTER: Yes, sir. 11 MR. GILBRETH: Is this to be a water injectic 12 well or a producing well? 13 MR, PORTER: Well, our current work with 14 the simulator indicates that initially it will be a producing I' 15 well and then subsequently converted to water injection service. 16 MR. GILBRETH: It would serve a dual purpose 17 then so far as recovering reserves? It would --- 18 MR.. PORTER: If our current simulator work 19 turns out to be a proper prediction tool. 20 MR. GILBRETH: Let me ask this question, 21 Mr. Porter: the as oil ratio is normall dro -- g / y pping in your - 22 with our roduction, is it not as the effect of Y P , your pressure 23 maintenance program becomes evident? 24 MR. PORTER: Yes, sir. 25 MR. GILBRETH: Do you. expect it to go down R & R COURT REPORTERS 188 W68T [IONTN AVENUE-8UITE 8 277-4713 ANCHORAGE,ALASKA X0501 1 n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1? 18 19 20 21 22 23 24 25 ~~ 1 ~ w • Page 16 in the future even more than it has in the past? MR. PORTER: Yes, we expect some decrease in the future. MR. GILBRETH: With the amount of gas that is being flared now, would it be possible to improve the efficiency of any of the wells that you are now operating that have higher than average gas/oil ratios? ' DiR. PORTER: I don't understand the question Mr. Gilbreth. MR. GILBRETH: ~^Ihat are the highest gas/oil ratios that you are now experiencing on your lease? MR. PORTER: Let me see if I have that. about (Pause.) Well, sir, here is one at/1500 gas/oil ratio. That's Well 11-13. That. appears to be about the highest. I don't have the ratios calculated here; I just have the producing rates. MR. GILBRETH: I see. None of the wells are producing substantial quantities of free gas then, would you say? MR. PORTER: No, sir. I stated in my testi- mony that our average ratio at this time was 1,050. MR. GILBRETH: Well, what I was wondering --- I was trying to explore that area, how it might be possible to reduce the gas production for this three and a half million a day that you're flaring. I was wondering if there was excessive R & R COURT REPORTERS •1D WE6T EIGHTH AVENUE-BUTTE S 277-4713 ANCHORAGE, ALASKA 09'SO1 • 11 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 .21 22 23 24 25 ~~ 1 • Page 17 gas being produced from your high ratio wells? MR. PORTER: Oh, by selective production of wells, is that what you mean? MR. GILBRETH: Yes, sir. MR. PORTER: Oh, no, sir. We have to keep these wells on maximum rate of production because we, well, we're experiencing a little water breakthrough with some of them now. And we have testified in the pas t, and it's still true, that we believe in producing to the maximum rate, and we are not in excess of any statutory G/OR --- MR. GILBRETH: Well, T realize that. MR. PORTER: --- regulation to my knowledge. MR. GILBRETH: It's --- it's only the gas that is being flared that is the problem. How many of your wells are producing water? MR. PORTER: Well, one at the current time. We had one that did show water breakthrough, and that's 'the well we lost, Well 33-13, and one more well is currently making water. MR. GILBRETH: I see. What about in your --- in your injection project, wouldn't it be possible to reduce the injection rate somewhat to reduce the producing rate? MR. PORTER: Well, we testified to this too, sir. We're --- right now we are barely matching-with goals with out inejction. We've got three injection wells out of six R & R COURT REPORTERS •10 WBST EtO HTH AVENUE-SUITE 0 277.4713 ANCHORAGE, ALASKA 99401 Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13' 14 15 16 17 18 19 20 21 22 II 23 24 25 ~., i left. V]e have AFE's to repair those wells. Any reduction..--- in my opinion, reduction of injection rate or producing rate will result in an ultimate loss of crude oil. MR. GILBRETH: You mean a reduction in injection rate and a simultaneous reduction in producing rate or conversely a reduction in producing rate and a simultaneous reduction in injection rate will reduce ultimate recovery? MR. PORTER: Yes, sir. I testified to that at the last re-hearing. MR. GILBRETH: And there are also many experts who disagree with that, are there not? MR. PORTER: Not concerning the Granite Point Field, sir. MR. GILBRETH: All right. MR. PORTER: And this is based on evidence from the Granite Point Field. MR. GILBRETH: You have no evidence to support your contention though, do you, in the Granite Point Field? MR. PORTER: Yes, sir. MR. GILBRETH: That it is rate-sensitive? That the recovery will be rate-sensitive in the Granite Point Field? MR. PORTER: Yes, sir, we do. tie suffered water damage out there, and it was pointed out. R & R COURT REPORTERS 826 WE8T EIt3 NTM AVENUE-BUTTE 8 277-4713 ANCHORAGE, ALASKA 8>iSO1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18' 19 20 21 ::2 23 24 25 ~~ 1 • Page 19 MR. GILBRETH: You have information that indicates that the Granite Point Field ultimate recovery will be rate-sensitive? MR. PORTER: Yes, sir. MR. GILBRETH: All right, sir. This I expect we'll dig more into,__Mr. Porter. MR. PORTER: Well, it was all laid out at the last hearing, P2r. Gilbreth. MR. BURRELL: Excuse me for interrupting. Mr. Holland, of which last hearing is DZr. Porter speaking? MR. HOLLAND: I think he will have to ans~:<_: that. I presume the re-hearing. P11R. PORTER: Well, it was the hearing held-- " MR. BURRELL: Was it the re-hearing? MR. PORTER: --- in August. MR. BURRELL: I see. MR. MR. that led to 102 (a), is the record of that is i MR. to my understanding. PORTER: One --- BURRELL: 102 .(a). It was the hearing that correct, sir, and I presume that ncorporated in this. HOLLAND: In fact, it has been accordi;. MR. BURRELL: Great, yeah. I just wanted ±~: make sure that we all could understand that we all can find ou~: what we're talking about. R & R COURT REPORTERS •2D WEBT EIGHTH AVENUE-SUITE 9 277.4713 ANCHORAGE.ALASKA OD801 Page 20 1 2 3 4 5 6 7 8 9 10' 11 12 13 14 15 16 1? 18 19 20 21 22 23 24 25 ~- i II MR. PORTER: And it was also testified to in a.previous hearing. MR. HURitELL : ~'haank you. Mz . Holland , Exaus~ me, sir. MR. PORTER: There was just more detail on the subject. MR. GILBRETH: Mr. Porter, I am well aware of the testimony about the damage by shutting in the well. I didn't recall offhand about testimony about rate-sensitivity. MR. PORTER: Yes, sir. The recovery from the field is dependent upon fore volume of water to --- MR. GILBRETH: Yes, sir. But not with respect to time. • MR. PORTER: Yes, sir, with respect to time because our wells have a finite life; our equipment has a finite life; so we have to get the most we can through in the life of those wells. MR. GILBRETH: I believe MR. PORTER: Mechanical life. MR. GILBRETH: --- now --- I believe you're talking about a finite life. All of your testimony has been on the basis that there is some assumed safe life on a platform, is this not right? MR. PORTER: On the platform, but most particularly on the well, sir. Now, as time goes on these wells R & R COURT REPORTERS 136 WEST EIGHTH AVENUE-SUITE 0 277-47 f 3 - ANCHORAGE, ALASKA 99501 Page 21 1~ to replace the wells becomes economic as the .reserve decreases. 2 MR. GILBRETH: Yes, sir, I understand that. 8 MR. PORTER: All right. So we've got to get 4 in there and get that oil while the gettin's good. 5 MR. GILBRETH: If there were no life on 6 your platform, would this statement still hold? 7 MR.,PORTER: Yes, sir, because of the wells. 8 - MR. GILBRETH: Is there any difference in 9 the Granite Point reservoir in this z`espect and any other 10 reservoir in the United States? it MR. PORTER: Any other --- there wouldn't 12 be any difference in any similar reservoir where you have these 13 lon deviated holes coal seams hi h g~ . , g pressures, injection 14 pressures; this is very detrimental to well conditions. X15 MR. GILBRETH: I'd just like the record to 16 show that as an engineer, I do not agree with the testimony 17 necessaril , but I won't Y pursue the matter of questioning 18 I .equipment . 19 MR. PORTER: The testimony is factual, sir. 20 MR. GILBRETH: Mr. Porter, you mentioned 21 that it was not economically feasible to commit this gas to a 22 as line. Have 4 you done any figuring as to just what the cost 23 er MCF o f p gas would be for you to piace.it in the gas line? I 24 believe ou ave some total fi ures; ma be Y g g y you could back it 25 out? R 8i R COURT REPORTERS 120 WlBT EIO HTH AVENUE-SUITE 277-4713 ANCHORAGE.ALASKA 90501 ~* 1 i~ Page 22 1 MR. PORTER: Well, I didn't bring my slide 2 rule, but take $500,000, plus operating costs, say, well, say 3 $500,000 divided by four million --- four billion; that's a 4 dollar a cubic foot, is it not? Approximately. Or per MCF, 5 a dollar per MCF. I didn't slip the decimal point. 6 MR.GILBRETH: Would you agree with me that 7 it might be ten cents an MCF? 8 MR. PORTER: I don't know. I might --- 9 MR. GILBRETH: Ten or twelve? (Pause.) 10 MR. BURRELL: Perhaps we can solve this it decimal point problem before we proceed. I think that it is 12 somewhat pertinent as to whether it is a dollar or ten cents. 13 MR. HOLLAND: I think we're working on it. 14 MR. BURRELL: I thought so; that's why --- .15 MR. PORTER: You're correct, sir. ? slipped 16 the decimal point. It's only about twelve or twelve and a half 17 cents. 18 b1R. BURRELL: So would it be fair to say 19 that the capital cost of handling the casinghead gas would be 20 roughly twelve and a half cents per MCF? 21 MR. PORTER: Yes, sir. I didn't enter 22 into this situation because it's --- 23 MR. BURRELL: No. 24 MR. PORTER: If I can't --- 25 MR. BURRELL: That's a question, sir; that's R & R COURT REPORTERS 828 WE8T EIO HTM AVENUE-SUITE 277.4713 '~'1 ANCHORAOE.ALASKA D9D01 1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ~• i l a question. Page 23 MR. PORTER: All- right. MR. BURRELL: Is that approximately the correct answer? MR. PORTER: Yes, sir. The arithmetic checks. MR.jBURRELL: Thank you. MR. GILBRETH: That's all I have right now. MR. BURRELL: I have some questions for Mr. Porter also. Mr. Porter, would you review for me --- I'm not sure I understand it. I gathered that there was some kind o an ok~jection from the pipeline owners as to your refusal or unwillingness or objection to dedicating one per cent of the • gas volume; is that a fair statement, or something? In other words, you indicated you weren't willing to dedicate some gas, or you indicated you might not be willing to dedicate some gas to this proposed pipeline, and as I understood, it, it amounted to roughly one per cent of the casinghead gas. MR. HOLLAND: Excuse me, Mr. Chairman. I -- I --- MR. BURRELL: I'm asking him about his previous testimony. MR. HOLLAND: Yeah, I understand, but I'm just trying to help straighten it out. MR. BURRELL: So am I. R & R COURT REPORTERS !ts WE6T E16 NTN AVENUE-SUITE 0 277.4713 ANCHORAGE,ALASKA 99301 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 '~' 1 ~~ around a little bit. • Page 24 MR. HOLLAND: I think we've got it turned MR. HUBBELL; Good. MR. HOLLAND: The testimony is that the Mobil-Union people wrote us indicating --- MR. BURRELL: Excuse me, the Marathon-Union people? MR. HOLLAND: .The Marathon-Union people wrote indicating that they could not understand why we were interested in, in effect, investing in the pipeline when we had only one per cent of their concept of the total reserves. I don't think that any discussion of dedication came into it at that point. MR. BURRELL: Well, would it be fair to say that P•iobil has indicated an objection to dedicating one per cent to this line because of the deal, the contract, the proposed contract? MR. PORTER: No, Mr. Burrell, these are two different items. MR. BURRELL: Okay, maybe I've got it mixed up. I'm just try~.ng to get it sorted out. MR. PORTER: Well, we made an inquiry of Marathon-Union as to whether or not we might be able to consider participation in the line. We didn't say we want to participate we wanted to consider participating. ~ R & R COURT REPORTERS 025 WlBT E16 HTH AVENUE-SUITE E 277-47 f 3 ANCHORAGE,ALASKA 9950 1 Page 25 1 2 3 4 5 6 8 9 10 11 12 13 14 . ,15 16 17 18 19' 20 21 ~~I 22 ~i 23 24 I~ 25 '~ 1 ~~ MR. BURRELL: Okay. MR. PORTER: And they in turn replied to us that we have such a small interest they couldn't even under- stand why we asked them the question. MR. BURRELL: I see, all right. I wasn't quite clear on that point. MR. PORTER: It had nothing to do with dedication. MR. BURRELL:. I wasn't quite clear on that point. Thank you. MR. PORTER: V7e11, this was an effort on our part to follow what we might do to dispose of this gas. MR. BURRELL: Mr. Porter, you testified that implementation of Conservation Orders 102 and 102 (a) would, result in physical and economic waste. I would like you to explain to me what the physical waste would be if you put the casinghead gas from your pipeline into the Mobil-Union line --- into the Marathon-Union line? MR. PORTER: This would be economic waste. MR. BURRELL: YOu said implementation of the Orders would result in physical and economic waste. I'm asking --- MR. PORTER: Sir, there are two ways by which I can comply with your Order. One is to reduce the rate of production from the field to the point where I am not flaring. R & R COURT REPORTERS ~2D W66T EI6NTH AVENUE-SUITi S 277.4713 ANCHORAGE. ALASKA 99'SO1 ~, 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 ~-1 • • Page 26 any gas except that required for safety. I have testified and presented evidence to the effect that this will result in the wa®te of cruele oil. MR. BURRELL: tVe --- we recognize that testimony. And also the other testimony, contravening testimony. MR. PORTER: Your Order says that after thi s date there will be no gas flared except that required for a safety flare. ~ . MR. BURRELL: That is correct. Well, all right, let me rephrase it then. If you put your gas into the Marathon-Union line, will there be any physical waste? Yes or no, please. MR. PORTER: Well, to the extent that you would be wasting funds and equipment necessary to do so. MR. BURRELL: Sir, I asked you about physical waste, not economic waste. Will there be any physical waste if you put your gas into the Marathon-Union line? MR. PORTER: If you consider that you have high priced machinery and equipment out there doing a useless job, yes, sir; that's physical waste. MR. BURRELL: Is it physical waste or economic waste? economic. MR. PORTER: It's both. I said physical ands MR. BURRELL: Well, can we define physical R & R COURT REPORTERS ~1D WEBT E16 HTH AVEN Ufi-SUITE 5 277.4713 ANCHORAGE,ALASKA a9S01•. 1 2 S 4 5 6 7 8 9 10 11 12 13 14 15 16' 17 18 19 20 21 22 23 24 25 ~, ~ 1 II • Page 27 waste as waste of a natural resource and economic waste as waste of money, and then to proceed to re-ask the question? Or do you accept those definitions? MR. PORTER: Well, if you want to go on that premise, fine; we'll say it's economic waste. MR. BURRELL: Very good. If physical waste is defined as waste of a natural resource and .economic waste is a waste of money, then there would be no physical waste if you put your gas into the Marathon-Union line; is that a correct statement? MR. PORTER: The way you define physical waste, yes. MR. BURRELL: Accepting my def --- or not • accepting it, but based on my def inition. MR. PORTER: Right. MR. BURRELL: Thank you. As far as you know, is the Union-Mara thon offer still open to you, or has that been withdrawn? MR. PORTER: The contract? MR. BURRELL: Yes, sir. MR. PORTER: Yes, sir, it's still open to us, MR. BURRELL: You have not accepted it? MR. PORTER: No, sir. !, MR. BURRELL: The end of paragraph six of I believe it' s Exhibit Six, which is the Union-Marathon contract, R & R COURT REPORTERS !2D WEBT EIGHTH AVENUE-SUITE D 277.47 t 3 ANCHORAGE. ALASKA OOD01 Page 28 7 8 9 10 •11 12 13~ 14 15 16 17 18 19 20 Z1 i~ 22 23 24 ~ 25 ~i --1 ~• ~~ it states, "As full consideration for the gas and all components thereof delivered to Buyer hereunder, Seller conveys its casing- head gas at no charg@ to Buyer in exchange for Buyer's putting such gas to beneficial use.". Is --- you may not be able to answer this, but I'm going to ask it anyhow. In your opinion, is that not considered --- putting the gas to beneficial use, is that valid consideration for a contract? MR. HOLLAND: Well, Mr. Chairman, I'll let him answer that if he can, but it does seem to me that that cal1G for a legdl conclusion. I would object to the question. • MR. BURRELL: Very well. I will accept that although I~wanted to bring that out. .For the record, is the Middle Kenai Oil Pool the only pool we are talking about in this subject in reference to~this platform in this area? MR. PORTER: Yes, sir. MR. BURRELL: The Middle Kenai Oil Pool is composed of oil with gas in solution with it, is that correct, sir? MR. PORTER: Yes, sir. MR. BURRELL: We're not talking about any separate gas reservoir or pool; --- MR. PORTER: No. MR. BURRELL: --- we are talking about gas in solution with the oil, which is produced with the oil neces- sarily, is that correct, sir? R & R COURT REPORTERS 94D W[87 EIGHTH AVENUE-6WTE.3.: ??T.47I 83 `~Ah: Fa"4'~R~s£.'.l'a:.C.4FCA `-~^i35i01 R 1 2 S 41 5 6 7 8 9 10 11 12 13 14 . 15i 16 17 II 18 19 20 21 II 22 23 24 25 1 ~~ C • MR. PORTER: Yes, sir. Page 29 MR. BURRELL: This may be --- excuse me just a second. (Pause.) You are apparently producing, I believe, 6,100, roughly, barrels per day from the platform? MR. PORTER: That's correct, sir. MR. BURRELL: Could you give me some estimate of the ----let,'s start with, one, the capital cost that we're talking about here of $487,000, I believe, of the compression equipment, stripping equipment. Could you give me some relationship between that capital cost and the number of barrels of oil you would expect to produce off this platform in the remaining life of the field? MR. HOLLAND: For the record, Mr. Burrell, I think I would interpose an objection at this point in that that strikes me as going entirely beyond the scope of the Judge': order or the notice of this hearing.. MR. BURRELL: This no doubt is, and I appreciate your right to speak, but this no doubt is dependent upon interpretation of the order. We understand we're to con- sider economic and other areas we consider as economic evidence.' You have testified as to the economics of this project; in fact, you've indicated it's uneconomic in your opinion. We are now seeking to find out whether it really is or not: MR. HOLLAND: I appreciate that, and just so my position is clear on it, this hearing, in my understanding, R & R COURT REPORTERS 023 WEST E10 HTH AVENUE-SUITE 3 277.4713 ANCHORAGE,ALA3KA DD601 • ~ ~ Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1? 18 19 20 21 22 23 24 25 -~-1 I! deals with casinghead gas. The question you are asking goes tc~ the marketing and economics of oil, if I understand it correct. MR. HUBBELL: Well, sir, that's the reason for my previous question in which I asked if the pool is the same pool, the one pool would not consist of both oil and gas, and is being produced as one, comes to the surface together necessarily. So your objection's noted for the record, and I would ask for an answer, if ynu would. MR. HOLLAND: Thank you. The question has probably been lost though. MR. BURRELL: The question is what relation- ship between-the total number of barrels of oil you intend to produce in the field, expect to produce in the field, and the .$487,000 capital cost of complying with this order? MR. PORTER: Mr. Burrell, to answer this question would require me to divulge proprietary information on reserves. This is proprietary to all companies, so therefore I cannot answer your question. MR. HUBBELL: Very good, sir. We have a may.. under subpoena today to give us evidence of the reserve data you have filed with the Interstate Commerce Commission. We presume that was compiled honestly and in good faith and without .any prevarication of the facts, and we will ask him~to testify to that later today. MR. PORTER: Mr. Burrell, I'd like to make R & R COURT REPORTERS !ZO WE6T EIO HTM AVENUE-SUITE 5 277-4713 ANCHORAGE,ALASKA ODi01 1 2 4 5 6 7 8~, 91I 10 11 12 13 14 15 16~ 17 18 19 20 21 I 22 23 24 25 ~1~ • • Page 31 the record clear that we didn't file this information, not Mobil Oil Corporation. MR. i~UR.R~LIIa Vary ~oa~, sir. F7e'l1 1~t the record state that the Cook Inlet Pipeline Company filed it. Since we are unaware of any reservoir engineers on this staff, we will immediately conclude where they got it. (Pause.) You have indicated some economic problems here with respect to casinghead gas. There is a statute, AS 38.05.140 (d), imple- mented by regulation 11 AAC 509.21, provides far royalty relief to be made under certain circumstances, mainly economics. Have you made application for royalty relief under this statute or regulation? . MR. PORTER: No, sir. MR. BURRELL: Do you intend to do so that you know of, to your knowledge? MR. PORTER: Well, when you get nothing for the gas, I assume there is no royalty due and owing, so relief wouldn't help particularly. MR. BURRELL: Well, this relief arguably runs to both products, rather than one or the other, but to both. As far as you know, you have not made application and do not intend to? MR. PORTER: No, sir. We - - MR. BURRELL: For royalty reduction: MR. PORTER: We are currently paying five R & R COURT REPORTERS 816 WE8T EIGHTH AVEN Vfi-SUITE 8 277•d713 ANCHORAGE,ALASKA 99501 • • 1 2 8 4 5 6 7 8 9li 10 11' 12 13 III 14' 15 16 1? 18 19 I 20 I 21 22 I~'~ 23 24 25 ~~ 1 ~) per. cent discovery royalty. Page 32 MR. BURRELL: Yes, sir. I wanted to point that out. You are .paying the five per cent royalty on the lease at this time. And that runs, what, until 19 --- MR. PORTER: '75, I think. MR. BURRELL: 1975? MR. PORTER: I stand to be corrected on that, but I believe it's '75, sir. MR. BURRELL: Ten years from discovery. MR. PORTER: Right. MR. BURRELL: You mentioned that three of your injection wells are down at the current time, I believe, sir? MR. PORTER: Yes, sir. MR. BURRELL: Could you tell me why they are down? What the problem is, roughly? MR. PORTER: Well, casing failure on a coup] of them, communication between the tubing and the annulus on them due to the high injection pressures which we must carry on them. We are in the process of tooling up to repair them. MR. BURRELL: Could you give me any idea what your guesstimate is on the cost of repairing each well? I mean one thousand dollars, one hundred thousand dollars, or wr MR. PORTER: Well, I don't remember the exact cost estimates, but let me say around $200,000. R & R COURT REPORTERS B10 WEST E~6 HTH AVENUE-SUITE 4 277.4713 ANCHORAGE, ALASKA 29'301 t? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1? 18 I 19 20 21 L 22 23 24 ~, 25 i +~~ 1 II is that a fair --- • Page 33 MR. BURRELL: Around $200,000 per well, MR. PORTER: About average, yes, MR. BURP.ELL: Average? MR. PORTER: They vary, you know, one hundre fifty, over two hundred, you know; it depends on the exact nature of the work to be done, but they are expensive repairs. MR. BURRELL: Uh-hmm. And you previously testified that the cost of re-drilling or drilling a substitute for the well that you've lost, I guess, would be $800,000 to one million, is that correct, sir? MR. PORTER: Yes, sir. MR. BURRELL: You are producing some 6,100 barrels a day on this platform now? MR. PORTER: Yes, sir. MR. BURRELL: And it would cost you roughly half a million, or $487,000, to comply with this order, capital cost? MR. PORTER: To comply with it by placing the gas in the line, yes. MR. BURRELL: Yes, sir, right. I'd like the~I on record to reflect that at the hearing held/May 12, 1972 with respect to the Monopod platform, the testimony was that platform was producing 15,000 barrels of oil per day, which is roughly two and a half times the rate from your platform. The capital R & R COURT REPORTERS !45 WEST E16 HTH AVENVE-iVITE II 277-4713 ANCHORAGE. ALASKA 00501 ,- • r: Page 34 1 cost testified to by the operator of that platform to comply 2 with that order was $2,000,000. 3 MR. HOLLAND: And I would object to this as 4 being part of the record. If that testimony was taken at a 5 hearing which is not part or in any way connected with this 6 proceeding, use of that evidence deprives us of any opportunity 7 to cross examine the witnesses who presented that testimony to 8 bring out facts which, to my knowledge, would raise serious dif- 9 ficulties with the utility of that testimony. 10 MR. BURRELL: Mr. Holland, I would point .out 11 that at that particular hearing, the representatives of your 12 com an and their le al counsels were ' P Y g present, and they were 13 invited to cross examine or make statements and cross examine 14 the witnesses. 15 MR. HOLLAND: I am aware of that, Mr. Burrei 16 but the purpose of that hearing was entirely different from the 17 ur ose of this hearin P P g, and there would have been no purpose. 18 and it probably would .have been objectionable to draw out in tha 19 proceeding evidence which had to do with this proceeding. 20 MR. BURRELL: Weil, that's a decision which 21 of course you can make. Your objection is noted for the record, 22 sir. Mr. Porter, you indicated that your current contract with 23 Atlantic Richfield Company expires in 1976? 24 MR. PORTER: Yes, sir. 25 MR. BURRELL: And your projections, I R & R COURT REPORTERS ' e25 WEiT E16 HTH AVENUE-SUITE 9I 277.4713 ~~1 ANCHORAGE,AIASKA 89501 '. ~ Page 35 1 believe, are based on a renewal --- 2 MR. PORTER: Yes, sir. 9 MR. BURRELL: --- of that contract? 2 4 wonder why ARCO would renew it? I am just asking you, why 5 would they renew it when they have high pressure gas available 6 to them, some of which they own? If this line goes through ? and this project, this Union-Marathon project, goes through? 8 MR. PORTER: Sir, I can't answer that for 9 Atlantic Richfield. ~10 MR. BURRELL: I didn't expect you to. I 11 ust wondered wh Would j y. you, if you were they, under these 12 circumstances? 'I realize that this is somewhat speculative, 13 but your opinion as to the question? 14 ~ MR.•PORTER: It would depend upon the 15 economics involved of tying into the gathering line and if or 16 not they could obtain gas from the gathering line. 17 MR. BURRELL: But it may ---- 18 ~ MR. PORTER: It may be continuation of 19 taking gas from us for a few more years would be mare economica: 20 desirable than spending money to tie into the high pressure linE 21 at that time. Now, I don't intend to express the thoughts of 22 Atlantic Richfield, as well as hurry 1976. I didn't mean to 23 be --- to set up any kind of a subterfuge here on future gas 24 use because I previously testified as to what would happen if 25 they did not renew it. R & R COURT REPORTERS !14 WEDT E16 HTH AVENUE-SUITE D 277.4713 y ANCHORAGE,ALASKA H9501 ~1 ' ~ Page 36 1 MR. BURRELL: Very good. I'll just point 2 out that assuming, which may or may not be right, that Atlantic g Richfield has been o£f@red the same contract as yourselves, i.e. 4 they get no money for the gas from the buyers, and also I point 5 out --- and unless somebody wants to object for the record --- g I'll point out it will be available to them by line, that is the 7 connections exist or will exist when the lines are all in so the: g could get it ,. they could get their own gas back, so to speak. g MR. HOLLAND: I would object to that, Mr. 10 Chairman. That contract, if my understanding is correct, has no 11 been signed yet, so I --- 12 MR. BURRELL: I understand. 13 MR. HOLLAND: --- don't know how we could '~ 14 know what the contract would permit. 15 MR. BURRELL: Very good. We won't pursue 16 that any longer. Mr. Marshall has some questions for Mr. Porter 17 MR. MARSHALL: Mr. Porter, referring to your 18 Exhibit Two, at the far right of the exhibit, at the conclusion 19 of 1987 you will be needing a volume of gas for your platform and 20 shore site operation, and I believe, if I understand correctly, 21 if ARCO renews their contract with you in 1976 and it continues 22 to the right for presumably an additional period of time, 23 depending on theirlrojected need for gas, that you will be, 24 according to your graph, needing that volume of gas in 1987, 25 ~ which would look like approximately a million cubic feet a day, ~~ 1 R & R COURT REPORTERS !Z4 WEBT EI6 NTH AVENUE-SU1T6 D 277.4713 ANCHORAGE,ALASKA D9501 Page 37 1 2 3 4 5 6 7 8, 9 10 11 12 13 14 - • 15 16 17 18 19 20 21 22 23 I 24 25 ~~ 1 ~ which you would have to purchase or find an alternate fuel for your platform needs. In view of --- if that's correct, I would be interested in your thoughts as to whether or not gas could be conserved in the reservoir to replace that gas which eventually. would apparently have to be purchased by a voluntary reduction of the produced gas at this time, let's say up until the end of 1976, where it appears that there obviously is one, two, three, four, about five million cubic feet per day over the volume used for safety pilot. My question is: would you please commer on the economics of saving that gas voluntarily now as opposed to buying it starting in 1984. MR. PORTER: I'm not sure I understand your question. -When you started out, you said by curtailing rates and then you said by saving gas. What is the question exactly? MR. MARSHALL: Well, I would presume that by curtailing the production rate of oil, you will make a similar reduction in the rate of produced casinghead gas, and that a savings, let's say, between now and 1976 in casinghead gas produced would then be available starting in 1984, the end of 1984, to supply you with platform and shore site use gas which otherwise I presume you would have to purchase. MR. PORTER: Mr. Marshall, a curtailment of producing rate on this field will result in the loss of crude oil, the waste of crude oil, in the reservoir. MR. MARSHALL: If an entire --- let me put R & R COURT REPORTERS 818 WEBT EIO MTN AVENVE-8VITE 8 277-4713 ANCMORAGE,ALASKA 99501 • Page 38 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 ~• 1 it this way: do you intend to do any further field development drilling off of your platform? MR. PORTER: Pto, we have no current plans other than to, when economically feasible, to replace wells that we might use --- that we might lose. MR. MARSHALL: Gdell, if you did lose a well, you couldn't very well argue that a decline in the production rate was affecting recovery; I mean if there was some mechanical reason why the well failed; and I think it will probably happen in view of past history of these wells that such might happen in that field. My point is that if there is a -- iet's say an act of God, however disagreeable it might be, that a well or more wells were lost, that that may, in effect, curtail the amount of produced casinghead gas which hopefully could be recovered at the end of 1985 to prevent you from having to buy fuel gas for the .platform operation. MR. PORTER: V7e11, when we lose a well, we consider replacement, and we do replace them when necessary. I mean this is to maximize the recovery of crude oil from the reservoir. MR. MARSHALL: Well, then I gather that you don't entertain of any possibility that you would voluntarily restrict produced gas production in the period between now and '76 so that you could use that gas starting in 1985? This is oui of the question in your present thinking? R & R COURT REPORTERS 026 WEST E16HTH AVENUE-SUITE 5 277.4713 ANCHORAGE, ALASKA 09501 Page 39 1 2 S 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 '~sy' 1. MR. PORTER: I am obligated by the lease to prevent the waste of crude oil, and I've just stated that reduction in rate now would result in the ultimate loss of crude oil. I mean I don't know how I can state it plainer. MR. MARSHALL: ~4e11, I should think that the e would be combinations of production rates or selective productio of we31s that may or that might accomplish this. I'm throwing out the question for your comments. I realize that there is a difference of opinion on this matter of how much oil would be lost by a curtailment of production, but I believe you have '~i answered my question, possibly, by your statement that you don't feel that you can curtail production of crude oil at this time without the ultimate loss of oil in the ground. I recognize that there may be a difference of opinion on that question. MR. PORTER: Yes, sir, and I answered the same question for Mr. Gilbreth. ~ - MR. MARSHALL: I realize.. This is a point which probably occurs~to all of us, and after looking at the Exhibit Number Two. MR. BURRELL: Mr. Marshall, may I interrupt for just a moment iz light of Mr. Porter's most recent statement. I believe you said, sir, that you are obligated by the lease to prevent the waste of crude oil? . MR. PORTER: Yes, sir. MR. BURRELL: Are you not also obligated to R' & R COURT REPORTERS SZS WEST EIGHTH AVENUE-SUITE S 277.4713 ANCHQRAGE,ALASKA 09301 l 1 2 4~ 5 6 7 8 9 10 it 12 13 14 15 16 17 18 19 20 21 22 23 24 25 X11 • prevent the waste of gas? • Page 40 MR. PORTER: This is not wasted, sir. It is bene~icialiy utilized to bring the oil t® the well b©re; it gets to the surface. We re-utilize that which we are able to economically. MR. BURRELL: Yes, sir. If you had the opportunity to utilize it rather than flare it though, is that not precluding waste? MR. PORTER:' No, sir. The gas is beneficial: utilized, as I stated. MR. BURRELL: One time? MR. PORTER: And a great portion of it is re-used. • MR. BURRELL: I see, but back to my original question: as you interpret the terms of the lease, you are obligated to prevent the waste of crude oil, correct? MR. PORTER:. Yes, sir. MR. BURRELL: The same will run true with gas. MR. PORTER: The gas is not being. wasted, sii MR. BURRELL: I didn't ask for that basic conclusion on your part, sir; that of course is the issue. MR. PORTER: Yes. The lease would obligate. us to not waste the gas. MR. BURRELL: You are obligated to prevent R & R COURT REPORTERS !2e WlST EIGHTH AVENUE-SUITE a 277.4713 ANCHORAGE.ALASKA 98501 .y • ~ Page 41 1~~ the waste of crude oil and gas, is that correct, sir? 2 MR. PORTER: Yes, sir. S MR. BURRELL: Under your interpretation of 4 the terms of the lease. Thank yo u. Mr. Marshall. 5 MR. MARSHALL: One other question on Exhibit 6 Two. At the conclusion of 1972, there is a approximately half 7 a million cubic foot pez day rise in the gas sales; could you 8~~ explain that, please? 9 MR. PORTER: Yes, sir. Atlantic Richfield 10 has indicated that they would like as much as 1.6 million per 11 day, provided we could provide this to them at a pressure of 12 250 pounds. Now, in order to gel this much to shore at that 13 pressure, we have to make modifications to our main gas lift 14compressor, which is a Cooper-Bessemer. tae have had the neces- 15 sary equipment to do this on order for some months, and the 16 factory has not yet produced the heads, but I think they --- 17 aren't they on the way now? Yeah, they're on the way now to 18 make the necessary modifications where we can delivery gas to - 19 MR. MARSHALL:' I see. Thank you. 20 MR. PORTER: --- Atlantic Richfield. 21 MR. MARSHALL: That is all the questions I 22 have at this time. 23 MR. BURRELL: Mr. Gilbreth. 24 MR. GILBRETH: Mr. Porter, the gist of 25 Mobil's contention here is that the economics of disposing of R & R COURT REPORTERS B20 WEST Et6 HTH AVENV[-SUITE !S 277.4713 ANCHORAGE.ALASKA a950t -~~ 1 1 2 4 5 6 7 8 9 10 11 . 12 13 14 15 16 17 18 19 20 21 22 23 24 25 •~* 1 ~~ • • Page 42 this excess gas do riot warrant the expenditures that would be necessary to do it, is it not? M~. ~6~~~~: Y~~, a~.~. then you ~ ~e gst to spend money for no return, that's pretty uneconomical. MR. GILBRETH: Mr. Porter, on Piobil's platform in the Granite Point Field, have you taken any pre- cautions or installed any equipment for pollution control? • MR. PORTER: Yes, sir. MR. GILBRETH: Is there a return on that? MR. PORTER: Mobil Oil has never objected to spending money for pollution control; the return on that is a better environment. MR. GILBRETH: You install equipment to keep from polluting the Inlet, polluting the air, and so forth, but you do not get any economic return on it, do you? MR. PORTER: This is true. MR. GILBRETH: Direct economic return? MR. PORTER: This is true. MR. GILBRETH: Do you not do the same thing in.terms of salt water disposal or waste water disposal? Is there an economic return to you in those cases? • MR. HOLLAND: Excuse me. Is it contended that we have that problem at the Granite Point platform? MR. GILBRETH: No, sir. I am trying to point out that there are several facets in the oil operation R. & R COURT REPORTERS _ ~2s WEST EtG HTH AVENUE-SUITE O 277.4713 ANCHORAGE,ALASKA D9801 • • Page 43 1 that there is na economic return, where you company spends money 2 to comply with the Legal laws and regulations. 3 MR. HOLLAND: dust for the record, Mr. 4 Chairman, I want to object to this line of questioning because 5 it appears to me to go exclusively to pollution control, which 6 is a matter entirely beyond the scope of this hearing. 7 MR.~BURRELL: Mr. Holland, we will certainly 8 note your objection for the record. However, the line of 9 questions which Mr. Gilbreth is pursuing is to point out that in 10 other areas where there are problems with salt water disposal, 11 and/or in Alaska, where in pollution problems, money is spent 12 by the operators, without return, in order to comply with valid 13 laws and re ulations to revent waste or g p pollution, and we want 14 to simply point out that it's done in other areas. And that's 15 the line, and you objection is noted for the record. 16 MR. HOLLAND: Thank you. Yes, we appreciate 17 that, Mr. Burrell, but it does seem that this is a matter that lg of that goes to another department/this state/'requires us to comply with 19 the pollution control statutes and regulations. ~ 20 MR. BURRELL: I would point out. Excuse 21 me, Mr. Holland. I would point out that this Department of the 22 State does have the responsibility for salt water pollution. If 23 this were a problem in the Granite Point Field, we would have 24 the responsibility. 25 MR. HOLLAND: I think the record should R & R COURT REPORTERS •ZS WEST EI6 HTM AVENUE-SUITE 5 277.4713 ANCHORAGE,ALASKA flfl801 ~~ 1 . 1 2 4 5 6 7 81'' 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 -~ 1 • • Page 44 also show though that these are entirely two different .fields. we are talking about one area now of pollution, and the basic premise that our testimony has been is in the field of conser- vaton. MR. BURRELL: Yes, sir. MR. GILBRETH: Is it not true that in the realm of pollution control there are laws and regulations which prevent pollution, and in the case of conservation, AS-31 says the waste~of oil and gas is prohibited, Mr. Porter? MR. PORTER: This is true. MR. GILBRETH: Mr. Porter, have you in the case of the Mobil Granite Point platform installed equipment to take the gas to shore? Say in your original design, did you incorporate design to take the produced gas to shore? Or was it intended then to be flared on platform? MR. PORTER: Sir, we have never been in the mechanical condition there to take our full stream of gas to shore. MR. GILBRETH: The original design did not include this? MR. PORTER: Yes, sir. MR. GILBRETH: Or is it because that you recovered --- obtained more production than. you thought? MR. PORTER: No, we obtained less production than we thought. R & R COURT REPORTERS !20 WEmT EIO HTH AVENUE-BUTTE S 277-4713 •. ANCHORAGE.ALASKA 09301 Page 4 5 . 1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2a 21 22 23 24 25 '~ 1 MR. GILBRETH: I see. All right, sir. (Pause.) Mr. Porter, one last question. You mentioned that restricting the production here would result in loss of recovera le oil; you are .aware of the regulation that provides for restricting production if the gas/oil ratios exceed a G/OR of 2,000 to 1, are you not? MR. PORTER: Yes, sir. MR. GILBRETH: This would be a valid restriction then on production if exces:-ive gas were being produced in excess of 2,000 to 1? MR. PORTER: Provided waste would occur, yes; that would be right. I mean`if waste would occur if you exceeded that,~yes, sir. MR. GILBRETH: Well, the present regulations have been adopted in public hearings; they have been adopted to prevent waste. (Pause.) MR. HOLLAND: Is that a statement or a question? MR. PORTER: He made a statement. Or is he questioning me? MR. GILBRETH: Are you implying then that the present regulation does not prevent waste? MR. PORTER: No, sir. I am. 3n no way implying that. MR. GILBRETH: Okay. I thought you indicat R & R COURT REPORTERS 825 WEST EIO HTH AVENUE-SUITE 5 277-4713 ANCHORAGE, ALASKA >a9501 .Page 46 1 there had to be some showing of waste. That's all I have. • 2 MR. BURRELL: Well, ane last little bit on ~ the ~~~~ t1~it~g, M~'. Fetter. Yau have worked in ~exae~ s.~,. 4 MR. PORTER: Yes, sir. 5 MR. BURRELL: --- in the past, as I recall 6 in your qual~Eications? ? MR.; PORTER: Yes, sir. 8 MR. BURRELL: Is Mobil inolved in oil fields 9 in Texas --- 10 MR. PORTER: Yes, sir. 11 MR. BURRELL: --- in which there is salt 12 water produced with the oil? 13 MR. PORTER: Yes, sir. 14 MR. BURRELL: And in some cases do you have 15 to drill salt water injection wells? 16 MR. HOLLAND: Well, again, for the record, 17 I would ob'ect. But we 7 have alread y gone through it, so I will 18 leave it at that. ', 19 MR. BURRELL: Right. Your objection has bee 20 acknowledged, sir. , 21 rll2. PORTER: Yes, sir. We have injection 22 wells. 23 MR. BURRELL: Yes, sir. 24 MR. PORTER: Water disposal wells. 25 • MR. BURRELL: Right. Salt water disposal R & R COURT REPORTERS X26 WE9T E10 HTH AVEN UE-SUITE 3 277.4713 '~'1 ANCHORAGE,ALASKA 92501 • Page 47 wells, and they are built for the purpose of complying with. valid laws and regulations in the State of Texas, is that 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 ~ 21 22 23 24 25 ^~ i II yes, sir. MR. PORTER: Concerning pollution control, NIR. BURRELL: Concerning pollution control, right. I have nothing else on that line. NIr. Marshall,,ao you have anything further to say? MR. MARSHALL: No further questions.. MR. BURRELL: I think we have no further questions for Mr. Porter, and I suggest we take about a ten minute break. MR. HOLLAND: Could I ask just a couple of redirect questions? minute s. MR. BURRELL: Yes, sir. MR. HOLLAND: It will take just a'•.cauple•of MR. BURRELL: Please. Excuse me. MR. HOLLAND: And I'll be through. MR. BURRELL: Yes, sir. MR. HOLLAND: Mr. Porter, I would like you to tell the Committee whether or not Mobil Oil Corporation has any dry gas wells or reserves that have been discovered anywhere in the vicinity of Cook Inlet? MR. PORTER: No, sir. We do not. R & R COURT REPORTERS •1D WEST EI6 MTH AVENUE-SUITE 0 277.4713 ANCHORAGE, ALASKA 99301 ' . Page 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 . .15I 16 1? 18 19 20 ~ 21 22 23 24 25 ~1- riR. HOLLAND: To your knowledge, do Union or Marathon, the pipeline owners, proposed pipeline --- to your knowledge, do they have any dry gas reserves in the vicinity of the head of the pipeline which is under construction? MR. PORTER: It is my understanding that there are some reserves which could possibly be developed. MR. HOLLAND: In rehabilitating or drilling new wells after a casing or other failure on your Granite Point platform, do the economics of reworking or re- drilling those wells vis a vis the expected oil production from them, the economics of the same, get considered before you drill the well? MR. PORTER: Yes, sir. _MR. HOLLAND: And exactly what consideration is made in that regard? V~hat I'm getting at, do you dra.ll --- ', MR. PORTER: Dell, we --- MR. HOLLAND: --- do you drill the wells if it becomes apparent that they will pay out, if not you give therm up? MR. PORTER: Yes. On any investment that we make we make every effort possible to assure ourselves that there will be a reasonable return from that investment. MR. HOLLAND: That's all I have, Mr. Chair- man. MR. BURRELL: Thank you, Mr. Holland. Thank you very much, Mr. Porter. That is all the questions we have, R & R COURT REPORTERS ' 130 WfiBT ilO HTH AVENUfi-SUITE E 277-4713 ANCHORAGE,ALASKA 99501 1 2 3 4 5 6 7 8 9 10 11 12, 13 14 15 °16 1? 18 19 20 21 22 23 24 25 '~' 1 • C Page 49 and we'll take a ten minute break. (OFF THE RECORD) (ON THE RECORD) MR. BURRELL: We will reconvene the hearing at this time, and we will ask Mr. Jemy Mhoon of the Cook Inlet: Pipeline Company to take the stand and be sworn by bir. riarshall. MR.,MARSHALL: Would you raise your right hand, please. In the matter now appearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? seated., Mr. Mhoon. MR. MHOON: I do. MR. MARSHALL: Thank you. You may be MR. BURRELL: Why don't you sit over there, MR. MHOON: All right. MR. BURRELL: If it's all right with every- body, and would you state your full name and address, and who you work for, and your title, and all those kind of good things for the record, please, sir? MR. MHOON: My name is Jemy J. rihoon; the last name is spelled M-h-o-o-n. I am an employee of Mobil Oil Corporation, assigned to Cook Inlet Pipeline Company as Office Manager. MR. BURRELL: Thank you, Mr. Mhoon. Pie R & R COURT REPORTERS !SO WEBT E16 HTH AVENUE-SUITE 0 277.4713 ANCHORAGE,ALASKA 99501 ' ~ Page 50 1' 2 3 4 5 6 7 8 9 10 11 12 13 14 15 I 16 17 18 19' 20 21 22 23 24. 25 ~i II should tell them about the subpoena duces tecum which was served on you. We seek information which has been filed with the Interstate Commeroe Commission by the Cook Inlet Pipeline Company. Could you give us that information with respect to the reserve figures in the Granite Point Field that have been made available in a public record by the Cook Inlet Pipeline Company? . MR. MHOON: Yes, sir, I believe I can. MR. HOLLAND: For the record, I object to these figures going into the record, but we've already made this objection and I will stand on the grounds previously stated MR. BURRELL: Thank you, sir. Your objectio is noted for the record. • MR. MHOON: The following records as to the oil reserves in the Granite Point Field were submitted to Mr. M. Myo1a, Director of the Bureau of Accounts, Interstate Com- merce Commission, Washington, D.C., from our Dallas accounting office on March 24, 1971, with other data relating to Cook Inlet Pipeline Company rate of depreciation. In other words, this is just supplemental information that we supplied to the ICC. MR. BURRELL: Yes, sir, I understand you submitted a great deal of data, such as reserves on the other fields that are served by Cook Inlet Pipeline and various other economic data. R & R COURT REPORTERS OYD WEST EIO HTH AVENUE-SU1T6 D 277.4713 ANCHORAGE. ALASKA 99•S01 • 1 2 3 4 5 6 7 8 9 10 11 12 i 13 14 • • 15 16' 17 18 19 20 21 22 23 24 II ~ 25 ^~.'~ 1 ~~ Page 51 MR. i~IHOON: The two exhibits that I have are numbered one and three, and which is the only two that are pertinent to your request. MR. BURRELL: Thank you, sir. MR. MHOON: Exhibit One is the Oil Reserve Analysis; it shows a total, original reserves for Granite. Point being 48 million barrels. Exhibit Three is a Production Fore- cast by year starting in 1967 thzough 1989. This reflects Granite Point Field being a total of 45,501,000 barrels. To the best of my knowledge, this information is the only oil reserve analysis by field ever submitted to ICC. MR. BURRELL: Thank you, sir. Could I ask a question? Your Exhibit One showed 48,000,000; your Exhibit Three showed about 45 and 1/2 million. What is the reason for the difference, or am I confused? MR. MHOON: Just due to the re-evaluation '~ of the reserve field. MR. BURRELL: But this is the same --- MR. MHOON: Based on different time elements MR. BURRELL: Oh, I'm sorry. I understood that both these exhibits were filed March 24, 1971. MR. MHOON: They were, and as I so stated prior, it was filed as supplemental evidence for other informati that was given to the ICC. MR. BURRELL: But why the discrepancy when R & R COURT REPORTERS SYO WEST EI6 HTH AVENVE-SUITE 5 277.4713 ANCHORAGE,ALASKA 99501 n __ .. ~I Page 52. 1 they were filed the same day? 2 MR. MHOON: Well, one was showing what the 3 oac#.ginal reserve was and one was showing an updated --- 4~ MR. BURRFLL: I see. Really, in other 5I words, Exhibit One is a reiteration of the original reserve 6 figure, --- ? MR.3 MHOON: Right. 8 MR. BURRFLL: --- and Exhibit Three is a 9 revised reserve figure; is that a fair way of stating it? 10 24R. MHOON: No, it is not a reserve figure. 11 It's based upon a recoverable -- - 12 MR. BURRFLL: Recoverable reserve figure. - 13 MR. MHOON: --- forecast. That is true. 14 - MR. BURRFLL: Am I right. or wrong? Is '15 Exhibit Three a revised recovera ble reserve figure? i6 biR. MHOON: No, it is not necessarily. 17 MR. BURRFLL: 64hat is it? 18 MR. MHOON: It is a production forecast 19 by field, per ye ar, on the avail able oil that is anticipated 20 to recover. 21 MR. BURRFLL: How's that different from wha 22 I said? 23 MR. MHOON: Well, I don't know, but I was 24 just telling you what this is. (Laughter.) 25 MR. BURRFLL: Okay. That's the number of R & R COURT R EPORTERS 025 WEST EIO HTH AVE NUE-SUITE S 277-4713 -ct.~-1 AN CHORAGE.ALASKA 99301 ~' Page 5~ 1 barrels of oil that you, as of March 24, 1972, thought you would 2 recover from the Granite Point Field; is that correct, sir? 3 MR. MI~QON: Uh~-hmm. The overall ata.tu~ 4 beginning with the year 1967. 5 MR. BURRELL: I see. So part of it is 6 history and part of it is projection, right? 7 MR.~MHOON: Right. 8 MR. BURRELL: I think that answers my 9 question. Do you have any questions, Mr. Gilbreth? 10 MR. GILBRETH: Yes. Mr. Mhoon, I believe it you indicated a time limit out on the end there. Does your 12 projection go to the assumed depletion of the field, or did it 13 just stop?~ Do~you know that? 14 MR.jMH00N: I really don't know what the --- 15 I am assuming that it would be a depletion of the field. There 16 are other fields indicated here that have various lack of figure: 1? indicated for the various years even prior to the field we have 18 shown here for Granite Point. 19 MR. GILBRETH: I see. 20I MR. MHOON: They are not all the same, and 21 I can give you these because this is public record. 22 MR. GILBRETH: iv1r. Mhoon, you indicated 23 II that this information was filed through your Dallas office. Is 24 this the Dallas office of Cook Inlet Pipeline Company or Mobil 25 Oil Corporation? R & R COURT REPORTERS 02D WEST EIG NTH AVENUE-BUITB 8 277.4713 ANCHORAGE, ALASKA fl9501 .~,.1 • • Page 54 1 1 MR. MIIOON: It was filed as Cook Inlet 2~ Pipeline Company, Dallas Accounting Office, right. 3 MR. GILBRETH: Do you know wha made the 4 estimate? 5 MR. MHOON: I believe it was Mr. C. R. 6 Thompson. 7 MR.~GILBRETH: And do you know what Mr. 8 Thompson's capacity is? 9 MR. MHOON: He is the secretary of Cook 10 Inlet Pipeline and he is also an accountant. 11 MR. GILBRETH: You do not know then whether 12 this was done by engineer or not, the estimate? 13 MR. MHOON: No, I don't know what their 14 source documents were derived upon. It's just analytical 15 facts and figures. 16 ~ MR. GILBRETH: I see. That's all I have. 1? MR. BURRELL: Mr. Mhoon, I have an additiona 18 ue~tion or two here. The fi ure 4 g you just --- the figures, 19 the reserve figures or potential production, estimated productio 20 figures, whatever you want to call them, which you gave, do thos 21 represent the entire Granite Point Field, or do they represent 22 the portions of the Granite Point Field that will move through 23 the Cook Inlet pipeline? 24 • MR. MHOON: This is indicated as being the 25 II Granite Point Field, so we are referring to the Granite Point' R & R COURT REPORTERS •YB WEST EIC HTH AVENUE-SUITE 5 277-4713 • '~' 1 ANCHORAGE. ALASKA flfl501 Page 55 • • 1 ~~ Field. 2 3 4 ' S 6 7 8 9 10 11 12 13 14 15 '' 16 1? 18 19 20 21 22 23 24 25 ~~ 1 ~ MR. BURRELL: Yes, sir, and there is a problem there, and I don't know if we're going to be able to fish it out; I hope we can. As you well know, at least half of the production, more than half the production of the Granite Point Field doesn't move through the Cook Inlet pipeline. This statement was-filed by Cook Inlet Pipeline with the purpose of justifying the depreciation and amortization rates of the pipe- line ,. justifying the tariffs, justifying the valuation, the ICC valuation, of the pipeline. And oil that did not move through it would not be --- would not justifiably be included --- in -my opinion, would not be justifiably included within that reserve or production figure. MR. HOLLAND: P~Ir. Burrell, might I take just ten seconds, and I may be able to solve your problem. MR. BURRELL: Thank you, sir. I need some clarification, and I'm obviously lost. (Pause.) MR. HOLLAND: Let me take a stab at solving the problem. I think we can agree, if it will answer your question, that the numbers that Mr. Mhoon has are Mobil's estimate of the Mobil-Union reserves and production projections for the portion of the Granite Point Field which is served by the Granite Point platform. MR. BURRELL: Thank you. That's what I thought it probably was, but I just want to get that clarified R & R COURT REPORTERS 6tD W687 E16 HTH AVENUE-SUITE S 277-4713 ANCHORAGE.ALASKA 99501 1 2 3 4 5 6 7 9 10 11 12 13 14 , 15 16 1? 18 19 20 21 22 23 ', 24 ~' 25 ~- i II • Page 56 for the record because I thought the field was substantially bigger than that. MR. HOLLANDe We might -- (unfinished). MR. BURRELL. For the record, we will apply the number of barrels vis a-vis --- in our own calculations vis a vis the capital costs as has been testified to by the previous witness so we have some idea of what we're talking a about here. Just for our own information. We have no more questiAns~of bir. Mhoon then. MR. HOLLAND: Might 2 ask just a couple --- MR. BURRELL: Excuse me, I do have one more. I apologize. One more. The only report you've indicated, Mr. Mhoon, was the one filed on 3/24/71? MR. MHOON: The only report that showed anything concerning oil reserves by field. MR. BURRELL: Yes, sir. Was this the report found in connection with the valuation of the Cook Inlet Pipeline Company? I believe it was valuated sometime considerab y prior to that and there were previously reserve figures submitte , like two or three years before that. MR. MHOON: Well, I checked with the Dallas office yesterday and this, on his opinion, was the only figures they had available at the time, yes. MR. BURRELL: I see. Well, then just for the record, it is my understanding -- and I may be wrong -- R & R' COURT REPORTERS 125 WEST 61O HTH AVENUE-SUITE 5 277.4713 ANCHORAGE,ALASKA 99501 • • 1 2 4 5 6 7 8 9 10 11 12 13 14 15' 16 17 18 19~ 20 I 21 I 22 23 24 25 ~~ i Page 57 that previously figures were submitted in connection with the initial valuation of the pipeline and they may or may not be identicai with these. I have nc~ way of knowing at this time. But since they are public record, I will endeavor to get ahold of them. So that's all. Just what is filed with the ICC is all I seek. MR. HOLLAND: Well, I think the point is, and perhaps I should ask this as a question, but let me just throw it out as a thought to consider. I think the problem -i.s that there were previous numbers submitted but that they were not by fields. Is that the problem, Mr. Mhoon? MR. MHOON: This is possible. This was what was so indicated in my discussion with our accountant in our Dallas office yesterday. Naturally, we have filed many reports with ICC, but to the best of his knowledge, and, there- fore, to the best of my knowledge from my only source, is that. this is the only information that was submitted as far as oil reserve analysis by field. MR. BURRELL: Very good, sir. I had a recollection that there was something else submitted at an earlier date, but we'll check that out, and I'm not blaming you because you don't have access to it on this short notice. There was no criticism intended: I have no further questions of Mr. Mhoon, but you do, sir. MR. HOLLAND: Yes, Mr. Chairman. R & R COURT REPORTERS •28 WE8T E10 HTH AVENUfi-SUITE 5 277-4713 ANCHORAGE,ALASKA 99801 • . Page 58 1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 I 17 18 19 20 21 22 I 23 24 25 '~ 1 ~~ R & R COURT REPORTERS 92ti WEST EtG NTH AVENUE-SUITE 0 277-4713 ANCHORAGE.ALASKA X9501 MR. BURRELL: Mr. iIolland. MR. HOLLAND: Thank you, Mr. Chairman. Mr. Nihoon, weld ~rou tell tho O~mmitt~o ~~~t b~°i~fly, pleas, what the corporate makeup of Cook Inlet Pipeline is in terms of its ownership and operation? MR. NiH00N: Well, the ownership of Cooke Inlet Pipeline Company, it's owned by Atlantic Richfield,. Marathon, Union, and Mobil. MR. HOLLAND:. And is it --- MR. MHOON: And it's .operated by Mobil Oil Corporation. MR. HOLLAND: As to Exhibit One which you mentioned which contains a figure of 48 million barrels, I .have just a couple of questions. Firstly, do you know or can you tell from the records you have the date on which that pre- diction or projection was made? MR. MHOON: This was a carryover of an original projection, and it showed a remaining amount timewise here of December 31, 1969. This was the date that this was submitted. MR. HOLLAND: But is December 31, 1969 the date upon which that 48 million estimate --- MR. MHOON: No, not necessarily. MR. HOLLAND: --- estimated reserve was. made? • Page 59 1 2 3 that? 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 it 22 II 23 24 25 ~- i II MR. MHOON: Not necessarily.. MR. HOLLAND: Was it made before or after MR. r1H00N: The total original reserves apparently was made prior. MR. HOLLAND: All right. MR. MIi00N: And then it was supplemented in this report, along with other information that was submitted MR. HOLLAND: All right. To your knowledge, is that 48 million figure total ultimate reserves, including crude and prospective reserves? MR. MHOOtJ: Well, I really can't answer .that. I don't know from what they base their figure on. MR. HOLLAND: All right. That's all the quei tions I have. Thank you. MR. BURRELL: Thank you Mr. Holland. Mr. Gilbreth? MR. GILBRETH: As a result of Mr. Holland's ', questions, I have one other question. Mr. Mhoon, isn't it customary that these reserve estimates are used in the evaluatio of the line and for establishing guidelines on the tariff, and wouldn't they normally be assumed to be the reserve, the devel- o ed reserve that would ~ p go through the line. MR. MHOON: These are used as a guideline for evaluation of a pipeline and also the life expectancy of a R & R COURT REPORTERS !ZO WEST E10 MTH AVENUE-SUITE E - 277.4713 ANCHORAGE, ALASKA D>as01 1 2 3 4 5 6 7 8 9 10 I1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 °~ 1 • pipeline. • Page 60 MR. GILBRETH: Thank you. That's all I have, MR. SURRELL: Do you have anything else, Mr. Holland? MR. HOLLAND: No, thank you, Mr. Chairman. MR. BURRELL: Thank you very much, Mr. Mhoon. , MR. MHOON: You're welcome. MR. BURRELL: Oh, we perhaps should accept those. • MR. HOLLAND: Would you like to have these, I guess as exhibits? MR. HUBBELL: Could we identify them for 'the record as Cook Inlet Pipeling Exhibits One and Three, some- thing like that? MR. HOLLAND: Committee exhibits. Would -- MR. BURRELL: Or Committee. Exhibits One and Three would be very good. MR. HOLLAND: -- probably be better. I am afraid that is going to be confusing. MR. MARSHALL: How about Seven and Eight? If they are all part of your. testimony. MR. HOLLAND: That's what I -- MR. PORTER: They're not part of our test- mony. • R & R COURT REPORTERS 125 WEfT E16 HTH AVENUH-SUITE i! 277.4713 ANCHQRAGE.ALASKA 99b01 • • Page 61 1 MR. HOLLAND: -- they are not part of our 2 testimony - - 3 I~iR. Pc~R~r~R; '~hey'r~ the Cc~mmitteo's t~sti- 4 mony -- 5 MR. HOLLAND: -- but we're going to have two 6 t's'and ~two~ . 3's if we call these 1 and 3. 7 MR. BURRELL: Well, why don't we just 8 relabel them,.if you could do so with your pencil, 7 and 8. Iiow' 9 that? Just ,Exhibits 7 and 8. (Pause.) Thank you very much, 10 ~ . D2hoon . 11 MR. MHOON: You're welcome. 12 MR. HOLLAND: I might indicate for the 13 record that there is a cover letter with this on Cook Inlet 14 .pipeline Company stationary. 15 MR. BURRELL: Thank you. 16 MR. HOLLAND: You can take a look at it 17 and decide what you want to do with that. (Pause.) 18 MR. BURRELL: We would ask Mr. J. L. White 19 to take the stand in and be sworn in. Mr. Marshall will do so. 20 MR. MARSHALL: Will you please raise your 21 right hand. In the matter now appearing, do you swear to tell 22 the truth, the whole truth, and nothing but the truth, so help 23 you God? 24 MR . jJHITE : I do . 25 MR. MARSHALL: Thank you, you may be seated. R & R COURT REPORTERS - !13 WEBT EIC HTH AVENUE-SUITE b 277.4713 ` ANCHORAGE,ALASKA 09501 ~1 ~.. Page 62 1 HIR. BURRELL: Mr. PThite, you have heard 2 Mr. Mhoon's testimony as to reserve figures. Are you able to 3 state whether they were prepared by Mobil Oil Corporation? 4 MR. HOLLAt1D: For the record, I would again 5 object to this line of questioning as being beyond the scope of 6 this hearing. ? MR. BURRELL: Objection noted. 9 8 MR. WHITE: I am not able to state that they 9 were prepared by l~iobil. 10 MR. GILRRETH: Pardon me, A'Ir. White. Could 11 you speak a little louder? 12 MR. WHITE: Yes. I am not in a position to 13 state that_they were prepared by members of Mobil Oil Corporation 14 MR. BURRELL: Do you know who prepared 15 them, Mr. L~]hite? 16 MR. ~~TfiITE: No, I do not. 17 MR. BURRELL: Does Cook Inlet Pipeline 18 Company have a reservoir engineer on their payroll that you 19 know o f ? 20, MR. WHITE: Not to my knowledge. 2I) MR. GILBRETH: This is Gilbreth. Mr. White, 22 you heard Mr. Mhoon testify that the exhibit that Cook Inlet 23 Pipeline Company file with the ICC, submitted 12/31/69, showed 24 an ultimate recovery apparently on the original reserve of 25 98 million barrels, and then another exhibit showed a production R & R COURT REPORTERS ' 92D WEST EtG HTH AVENUE-SUITE 277.4713 ANCHORAGE.ALASKA D9601 ~~1 1 2 3 4 5 6 7 8 9 10 11 12 13' 14 ,15 I6 1? 18 19 20 21 it 22 23 24 25 ~~ 1 ~~ • • Page 63 forecast which added up to 45,501,000 barrels. Let me ask you, sir, do these figures sound unreasonable to you, considering what you know about the field? MR. 6~1FiITE: The 48 million does not sound unreasonable. The 45, I'd have to observe; I haven't seen that table, so I cannot comment on that until I can observe it. biR. GILBRETIi: That's all I have. • MR. BURRELL: Mr. Marshall? MR. MARSHALL: No questions. MR. BURRELL: Mr. White, for the record, onE thing we've overlooked; Mr. Reeder called my attention to it. Will you state your position with Mobil Oil Corporation, sir? • MR. WHITE: Yes. I am now acting Division General Manager for P•iobil E & P, the Alaska Division, located in Anchorage. My position, officially, is Production Manager in that same division. MR. BURRELL: How long have you been in this position, or how long have you been in either position in Alaska? MR. MR. MR. MR. have you heard all the MR. WRITE: I moved to Alaska in August, lg; BURRELL: Dlearly two years then. ti•JHITE: Yes. (Pause. ) GILBRETH: .This is Gilbreth. Mr. Plhite, testimony presented here today? WHITE: Yes I have, with very minor R & R COURT REPORTERS !15 WEST EI6 MTN AVENUE-SUITE S 277.4713 ANCHORAGE,ALASKA 99301 • 1 2 ,, 8 4 5 6 7~ 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 it • exceptions. Page 64 MR. GILBRETH: All right, sir. In your capacity or in the capacity that you wark with with Mobil, you've worked in several different parts of the country, I assume? MR. WHITE: That's true. MR. GILBRETH: On the, in the Granite Point Field, has not your company made many expenditures for pollution abatement and minimized flaring and so forth? MR. HOLLADID: I object to this line of questioning also on the same grounds as before. MR. BURRELL: Noted. MR. 6VHITE: Yes, we have made numerous investments as~Granite Point as well as other places. MR. GILBRETH: P~Ir. White, I assume that you' read the lease under which your company operates at Granite Poin~ MR. WHITE: Yes, I have read the form lease, the Alaska form Lease. I just assume, I don't recall specifical: reading Granite Point, but at some time in the past I am sure I have. MR. GILBRETH: A11 right, sir. In that lease, are you not required to comply with pollution regulations as well as conservation regulations, all regulations of the State? MR. WHITE:. I would assume that:-- I don't specifically recall the words, but I assume that we do abide R & R COURT REPORTERS 828 W68T EIO HTH AVENUE-SUITE 8 277.4713 ANCHORAGE,ALASKA D9501 1 2 3 4 5 6 8 9 10! 11 ~'' 12 13 14 15 16 I 17 18 19 ~'I I 20 21 22 23 24 25 ~~ 1 ~ with all regulations of the State. • Page 65 MR. HOLLAND: Mr. Chairman, I think the lease speaks far itself in this regard. If there is a question about te~hat the lease provides, I think the proper way to hand- le the problem is to have a copy of the lease as an exhibit. MR. BURRELL: Very good. P]e will note for the record that the lease is accepted, and without objection will be made part of the record. MR. HOLLAND: Does someone have one? MR. BURRELL: I don't. MR. HOLLAND: I don't. MR. BURRELL: If you want to introduce the lease as an exhibit, a copy of the particular lease in question into the record of this Bearing. MR. HOLLAND: The record should also show that Mr. White has stated his position with Mobil and is not in the capacity of an attorney; consequently, he is unqualified to give a conclusion of law, based on his position and his expertise. MR. BURRZ£LL: That is correct. We did not intend to ask him for a conclusion of law,. but maybe we did. MR. GILBRETH: F]e asked him for an answer that calls for a conclusion of law, and I believe Mr. V]hite is unqualified to testify in this manner. MR. BURRELL: All right, sir. R & R COURT REPORTERS •2D WEST E16 HTH AVENUE-SUITE 0 277.4713 ANCHORAGE.ALASKA X0501 • Page 66 1 ~ MR. HOLLAi1D: Will the se be Committee 2 Exhibit #9? 3 MR. BURRELL: Would .that be #9? 4 MR. MARSHALL: That's right. I disagree with 5 the word, Committee "Exhibit." That would imply our Committee, 6 which ---- unless we are going to furnish the lease --- ? MR. HARRISON: We'll furnish it. 8 MR. HOLLAND: I suggest that Mr. White is 9 here under a subpoena from this Committee, and he is a Committee 10 witness. li MR. BURRELL: We have no objection to labelin 12 it Committee Exhibit Number Nine. Do you have any, Mr. ---- 13 MR. HOLLAND: Oh, no. I was just inquiring 14 'how we were going to handle it. 15 MR. BURRELL: Fine. 16 MR. HOLLAPID: I have no objection to that. 1? MR. GILBRETH: Well, Dir. White, we have heard 18 the objections to this line of questioning, but I would like to 19 ask one more question. It is common in the industry, is it not, 20 for companies to make expenditures for disposal of salt water 21 without expecting a return on the money that they spend for this 22 .purpose? 23 MR. HOLLAND: Same objection, Mr. Chairman. 24 MR. BURRELL: The objection is noted. 25 ~ MR. WHITE: I can't agree with that specifics ly R & R COURT REPORTERS ~2D WEST EIO HTH AVENUE-SUITE !! - ,. 277.4713 ANCHQRAGE,ALASKA D9501 ~1 i . ~ Page 67 • 1 because before we would make an investment on disposal of salt return 2 water, we'd have to see an overall/from that property or 3 properties which would justify the investment, otherwise we'd 4 abandon the project rather than spend money to lase money. 5 MR. GILBRETH: In other words, you would 6 look at the overall income from the property before you would 7 decide to put in a salt water disposal project, and if it were 8 unprofitable, then you might abandon the property rather than 9 put the project in. 10 MR. WHITE: Not necessarily the overall 11 property, but the overall investment required by the installation 12 of those facilities. We would have to anticipate a pay out or 13 profit as a result of that investment or probably would not make 14 it. 15 MR. GILBRETH: Could you explain that last 16 statement just a little bit more for me, please, sir? I don't i 17 understand your answer. • 18 MR. WHITE: Well, for instance, in the case 19 of salt water disposal at Granite Point, for instance, if the 20 requirement for investment to dispose of salt water was of 21 sufficient magnitude that we would not receive an overall payout 22 we wouldn't make the investment. I hope that's the answer. ~ MR. GILBRETH: Well, let me ask you this Z4 question then, sir: what kind of a return cari you get on a 25 salt water disposal or a waste water disposal project? It does R & R COURT REPORTERS 03D WEBT EIGHTH AVENUE-SUITE g 277-47 f 3 ANCHORAGE,ALASKA 90501 ~1 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 ELI i • Page 68 not result in any direct income to your company, does it? MR. ~~1HITE: 4Je11, I don't know what price you piece on environment ®r fresh water. There is certainly --- we are obligated as a public citizen to protect the fresh water, and I think that if you don't have this, you can't buy it, so -- MR. GILBRETH: Would you agree also that if we don't have gas in, the future, we can't buy it? MR. WHITE: If you don't have it, I don't know how you can --- you can manufacture it perhaps if there's economical means. MR. HOLLAND: It finances itself. MR. 1V1iITE : Yeah. MR. GILBRETH: If it is flared today, it certainly will not be available in the future, will it? MR. WHITE: If it's used today in anyway, it will not be available in the future. MR. GILBRETH: Yes, sir, agreed. That's all I have. MR. BURRELL: Mr. Marshall? MR. MARSHALL: No questions. MR. BURRELL: Thank you, Mr. White. Could we ask Mr. Woodruff to take the stand, please, and be sworn in by Mr. Marshall? .Charlie --- Charles ~•Joodruff? MR. A'IARSHALL: Please raise your right hand. In the matter now appearing, do you swear to tell. the truth, R & R COURT REPORTERS •2st WEBT EI6 HTH AVENUE-BUTTE D 277.4713 ANCHORAGE,ALASKA 99501 Page 69 1 2 3 4 5 6' 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ~' 21 II 22 23 24 25 {~ 1 ~~ the whole truth, and nothing but the truth, so help you. God? MR. WOODRUFF: I do. MR. MARSIiALL: Thank you. MR. BURRELL: Thank you, bir. Woodruff. Would you state your position with Mobil Oil Corporation? MR. WOODRUFF: Yes, my name is Charles C. Woodruff. As in the case of Mr. White, I'have got really, I guess, two positions. Permanently, I am Division Engineer for Mobil Oil in the Alaska Division; at the present time, I'm acting.as Producing Manager. MR. BURRELL: Thank you, sir. Would .you state how long you've been in Alaska, Mr. Woodruff, with Mobil Oil Corporation? MR. WOODRUFF: About five and a half years. MR. BURRELL: ABout five and one-half years. Sir, can you tell me where the reserve figures previousl testified to by Mr. Mhoon came from? MR. P700DRUFF: No, sir, I cannot. MR. BURRELL: You had, to the best of your knowledge, you had no input into those figures? MR. WOODRUFF: PJell, I don't know if we had input orrnt; we make reserve estimates, certainly, --- MR. BURRELL: I see. MR. WOODRUFF: --- at Mobil Oil which are then passed on to other portions of our E & --- Exploration and R & R COURT REPORTERS 923 WEST EIGHTH AVENUE-SUITE S 277.4713 ANCHORAGE,ALASKA 88501 1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 ~~ 22 I' 23 24 25 i I! • • Page 70 Producing Company, but where they go beyond that, I have no ..control or knowledge. MR. BURRELL: But you have made these estimates in the past on the reserves at Granite Point in your portion, the Mobil Oil Corporation portion, of the Granite Point Field; .you have rnade reserve estimates, have you, sir? MR. WOODRUFF: A number of times. MR. BURRELL: A number of times? Where did you send these reserve estimates? MR. POODRUFF: Well, we send out, of course, any number of different forms and reports and letters, and then an annual reserve survey that goes to our New York office. MR. BURRELL: I see. And riobil Pipeline Corporation is operator with Cook Inlet Pipeline Company, is that correct? MR. 6OODRUFF: I believe that's correct, yes. MK. BURRELL: And Mobil Pipeline Company is a wholly owned subsidiary of yiobil Oil Corporation? MR. WOODRUFF: I believe that also is correct. MR. BURRELL: I have no further questions. Does anybody else have any questions? MR. GILBRETH: Yes, sir. MR. BURRELL: Mr. Gilbreth. R & R COURT REPORTERS 828 WEST EIGHTH AVENUE-SUITE 8 277-4713 ANCHORAGE,ALASKA 89501 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 ', ~"'"~ 1 ~~ • • Page 71 MR. GILBRETH: rir. Woodruff, have you j I heard the testimony of Mr. Mhoon regarding the reserves :that were submitted to the TCC? MR. WOODRUFF: Yes. MR. GILBRETH: It's true in making reserve estimates that these are revised many times, are they not, during the life of the field?~ MR. WOODRUFF: It's true that they can be, depending on how accurate the initial, you know, estimate was. MR. GILBRETH: Mr. Woodruff, have your estimates been revised several times in the case of the Granite i Point Field? MR. WOODRUFF: As a matter of fact, they have, yes. MR. GILBRETH: The reserves that Mr. itiihoon testified to, did they sound unreasonable to you? MR. HOLLAND: Object for the record on the same grounds. MR. BURRELL: Objection noted. MR. PIOODRUFF: They are within the range, yes. .They are reasonable, I would say. MR. GILBRETH: Mr. Woodruff, in your employment with Mobil, have you worked in~arious sections of the country? MR. WOODRUFF: Yes, I have. R & R COURT REPORTERS 620 WEST EIGHTH AVENUE-SUITE 3 277-4713 ANCHORAGE, ALASKA 99301 1 2 8 4 5 6 7 8 9 10 11 12 13 14 1~ 16 17 • 18 19 ~ 20 21 22 23 , 24 25 ~",~ 1 ~~ • page 72 t~IR. GILBRETH: Is it not required in many other sections of the :country. to dispose of salt water, as well a~ i~ A1a~~3~a, through injection or some other means to get rid of waste water? • MR. WOODRUFF: Yes, sir, it is. Water has to be disposed of in one way or another, yes. MR.;GILBRETH: In disQosing of the waste water, is there any direct income. that a company will realize? MR. HOLLAND: Same objection to this line of questioning. DIR. BURRELL: Objection noted. MR. ti~700DRUFF: Well, I guess that the only way that I could answer that would be thatthe income to be • derived from the disposal of the water would be dependent upon the consequences if you didn't dispose of the water. MR. GILBRETH: That's all I have, sir. MR. BURRELL: Thank you, Mr. Woodruff. I have no further questions of Mr. Woodruff. D'Ir. Holland, do you --- MR. HOLLAr1D: No questions. MR. BURRELL: Thank you, sir. We're still going to try to make it by noon. I don't know whether the next question I want to ask --- I don't know who to ask it of, Union or Marathon, but in view of the circumstances under which Mr. Griffin was subpoenaed yesterday, I know he would be disappointe~ R & R COURT REPORTERS B29 WEST EIGHTH AVENUE-SUITE 3 277.4713 ANCHORAGE,ALASKA 99501 • • 1 ' 2 3 4 5 6 7 8 9 10 it 12 13 14 . 15 16 17 18 19 20 21 22 23 24 25 ~ ~'~ 1 II Page 73 if he wasn't called. So I would ask Mr. Eugene Griffin to to};e the stand and be sworn. (Laughter.) For the record, bar. Griffin was subpoenaed yesterday at lunch at-the Petroleum Club. MR. PQARSfiALL: Would you please raise your right hand. In the matter now appearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? MR. GRIFFIN: I do. MR . M1IRSHALL : Thank you .~ MR. BURRELL: Mr. Griffin, would you state, your name and position for the record, sir? MR. GRIFFIN: Yes. My name is Eugene. F. Griffin; I am District Operations Manager for Union Oil Company, and I would like to offer an objection in the manner that I was subpoenaed yesterday. MR. BURRELL: Objection noted. Mr. Griffin, could you tell us how long you have been in Alaska, sir? MR. GRIFFIN: Yes, I have been in Alaska approximately three years. MR. BURRELL: Could you tell me, ,sir,. whethe or not you have made an offer similar, without being necessarily identical, similar to that which Exhibit Six, I believe, the contract which has been entered in the record today as Exhibit Six, the offer to Mobil Oil Corporation, have you and/or Marathon Oil Company jointly made similar offers to other produce R & R COURT REPORTERS 82S WEST EIGHTH AVENUE-SUITE 6 277.4713 ANCHORAGE, ALASKA >i9501 r5? ' ! ;Page 74 1 MR. GRIFFIN: Yes,. sir. 2 MR. BURRELL: Could you give me the names o 3) aornpanies to wham ycu made such offers? 4 MR. GRIFFIN: We have made the offer to 5 those people that have gas that is produced in the Trading Bay 6 Unit, which would be Atlantic Richfield,.--- 7 MR. BURRELL: AMOCO? 8 MR. GRIFFIN: Abi000, uh-hmm. No, not AMOCO 9 MR. BURRELL: Phillips? I'm only trying 10 to find out who they are. 11 MR. GRIFFIN: We've only given the contract 12 to those major producers and those people that would be 13 associated with the disposal. The actual contract itself -- anc 14 the reason I'm in a little awkward position -- was mailed by 15 Marathon Company, and Kneed some help. 16 MR. BURRELL: ,Well,. if you can't testify 17 to this, we can get Marathon to do so. I thought maybe you 18 would be in the best position. Well, let me ask you one more 19 question then if you're not sure and Marathon handled it; that': 20 fine. That's why --- I didn't know; that's why I asked. 21 MR. GRIFFIN: The contract was mailed by 22 Marathon. ' 23 MR. BURRELL: I see. Do you know whether 24 or not any have been accepted yet? 25 MR. GRIFFIN: NOt to my knowledge. R & R COURT REPORTERS !20 WEST EIGHTH AMEN UE-SUITE 0 277.4713 '~' 1 ANCHORAGE, ALASKA flflS01 Page 75 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 ~. ~1 • • MR. BURRELL: R11 right, I have no further questions of Mr. Griffin. Do you, Mr. Gilbreth? Mr. Marshall? No further questions of rlr. Griffin. Thank you, sir. MR. HOLLAND: I think I have .one question, if I might. Mr. Griffin, have you heard --- were you here to. hear the Chairman's statement concerning some testimony at a previous hearing regarding, I believe it was stated to be, a $2,000,000 investment on the Monopod in connection with the dis- position of casinghead gas? MR. GRIFFIN: Yes, I was. MR. HOLLAND: Do you know, Mr. Griffin, what that $2,000,OOO~investment is for, and what I have particular reference to is this: is ail~of it directly related to the disposition of casinghead into the Union-Marathon pipeline? MR. GRIFFIN: Yes. V7e did give testimony last Thursday regarding this and other matters. This particular installation is the installation of a-pair of turbine-driven centrifugal compressors. It is a multi-purpose installation. It not only.--- it's primary purpose is to provide gas lift for the Monopod platform, and it also then in its first stage discharge does provide the necessary horsepower to transport the portion of the casinghead gas that is not utilized out on the platform to shore. MR. HOLLAND: Are you able to break down the investment between those two functions? R & R COURT REPORTERS 823 WEST E16 NTH AVENUE-SUITE 3 277.4713 ANCHORAGE.ALASKA 98501 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 iI • Page 76 MR. GRIFFIN: No, I really haven't analyzed the various horsepower that is used in each -- it could be done -- in each phase of its operation. MR. HOLLAND: Is that installation strictly for casinghead gas, or is there available at the Monopod any dry gas from a gas well? MR. GRIFFIN: No, this installation is basically a casinghead gas installation. MR. HOLLAND: All right. That's all I have. MR. BURRELL: I would state for the record at this time that Mr. R. C. Keller of Union Oil Company testi- fied on May 12,.1972, that the entire $2,000,000.00 estimated investment was for the sole purpose of complying with Conserva- tion Order No. 143, or whatever it was, the one that covered the Trading Bay Field. biR. HOLLAND: The gentleman's name was what? MR. BURRELL: R. C. Keller, K-E-L-L-E-R. MR. HARRISON: I would like to point out at: this time that Mr. Keller is not being present, -- MR. BURRELL: That is Ralph. MR. HARRISON: -- and you are having Mr. Griffin testify. MR. BURELL: That is correct. I am stating for the records of hearing at which Mobil Oil Corporation .was present. R & R COURT REPORTERS 623 WEST' EIGHTH AVENUE-SUITE !) 277-4713 ANCHQRAGE,ALASKA 99501 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 ~-1 ~~ ~ • Page 77 MR. HOLLAND: Might I just pursue that fora a moment with Mr. Griffin? MR. BURRELL: Yes. MR. HOLLAND: Do you know Mr. Keller? MR. GRIFFIN: Yes, I do. MR. HOLLAND: Are you in a position to tell me and the Committee whether or not you are correct or whether Mr. Keller is•correct as to the implications of this $2,000,000. investment? MR. GRIFFIN: I would have to review his specific testimony. The installation of the machines are dual- purpose. And it might have been inferred in Mr. Keller's testis mony that it's purpose was primarily for this. I don't remember • his exact words, but a large percentage of the horsepower that is being installed will be utilized to recycle gas for gas-lift purposes. P+IR. HOLLAND; Thank you, Mr. Griffin. MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: Mr. Griffin, in pursuing this last staement there, I believe Mr. Keller's statement, as Mr. Burrell quoted, was that this $2,000,000.00 resulted from this Conservation Order.. Would your company have made this ex- penditure had the Conservation Order not been issued? MR. GRIFFIN: Probably not. MR. GILBRETH: Mr. Griffin, the proposed R & R COURT REPORTERS B20 WEST EIGHTH AVENUE-SUITE D 277-4713 ANCHORAGE,ALASKA 99501 ~0 ,. 1 2 8 4 5 6 7 8 9 10 11 12 . 13 14 15 16 17 ." 18 19 20 '21 22 23 24 25 1 ~~ • Page 7$ contract that was offered to P~obil provided certain requirements for the gas to be in to enter into the line. If the requirement wire ~-et, wauiEl this be marketable gas, then? Would it have a quality such that it could be used for fuel on the market? Do you know? MR. GRIFFIN: The basic terms of the con- tract were designed to make the gas of such a quality that it could be injected in Swanson River to meet the requirements of Sc~an- son River injection. MR. GILBRETH: Could it be used for fuel when it was returned from Swanson River then? Would there be anything in it that would prohibit its use as a fuel? MR. GRIFFIN: It would depend on what fuel source we are talking about, Mr. Gilbreth. Returning then from the reservoir at Swanson River, it would again be saturated with hydrocarbons and would have to require further treatment, again depending on the specification of the fuel requirement. MR. GILBRETH: In other words, it would be co-mingled with dry gas and other gas that is already in the reservoir at this time? MR. GRIFFIN; Right. MR. GILBRETH: All right. That's all I had, Mr. Griffin. MR. BURRELL: Does anyone have any questions of Mr. Griffin? We're going to...I'm sorry. We are over now R & R COURT REPORTERS 82D WEST EIGHTH AVENUE-SUITE 3 277-4713 ANCHORAGE,ALASKA 99501 • ~ ~~ Page 79 1 2 4 5 6 . 7 8 9 10 11 12 13 14 1~ ~ 16 17 • 18 19 20 21 22 23 24 25 and they are standing outside the door yelling at us. We are going to have to start again. Shall we make it 1:30? We'11 Y`~~~3~V~t~~ ~t 1 t 30. (OFF TFIE RECORD) (ON THE RECORD) MR. BURRELL: Good afternoon, ladies and gentlemen. We will reconvene this hearing at this time. We have another .witness under subpoena, Mr. B. G. Howard, of Marathon Oil Company. I will ask him to come up and be sworn and take the stand. MR. MARSHALL: Will you please raise your right hand. In the matter now appearing, do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? MR. HOWARD: I do. MR. MARSHALL: Thank you. MR. BURRELL: Mr. Howard,. would you state your name and position with Marathon Oil Company for the record, sir? MR. HOW~~RD: Yes, my name is Bi11 G. Howard. I am employed by Marathon Oil Company as Division Manager of Operations for Marathon's-Anchorage Division activities. MR. BURRELL: How long have you been in Anch~ age, Mr. Howard? MR. HOWARD: I have resided in Anchorage the rt:~ 1 ~ R & R COURT REPORTERS • 82II WEST EIGHTH AVENUE-SUITE 6 277-4713 ANCHORAGE,ALASKA 99501 ~r- 1 2 3 4 5 6~ 7 8 9 10 11 12 13 14 15 16 I7 18 19 20 21 l 22 23 24 I 25 i II ' • Page 80 past three years. MR. BURRELL: In this position? MFt . HOt~7ARD : Negative . I was , -~ . T havd been in charge of Marathon's operations in ANchorage the past the years. we reorganized our office last July, I believe it was, and at that time my title was changed from District to Division Manager. ; MR. BURRELL: Your. duties have remained sub- stantially the same -- MR. HOWARD: Substantially, right. MR. BURRELL: -- over the three-year period, though. Is that correct, sir? - MR. HOWARD: That's true. - MR. BURRELL: Thank you. Mr. Howard, Mr. Griffin of Union Oil testified that the transmittal letter sendiz these proposed contracts out in connection with your gas system,i~ I gas pipeline system, were sent out by Marathon Oil Company. If that be correct, could you tell me to whom they were sent, I sir? MR. HOWARD: Yes, sir. We have offered those contracts for consideration of Atlantic Richfield, Standard, and Mobil, those three companies only, and we've not signed an agreement with anybody, and, as a matter of information, the contracts are really still at the drafting stages. MR. BURRELL: I see. You've sent them to R & R COURT REPORTERS B2D WEST EIGHTH AVENUE-SU17E 0 277.4713 ANCHORAGE,ALASKA 99501 gee ig P age 81 1 2 3 4 5 6 ?' 8' 9 10 11 12 I 13 14 15 16 17 18 19 20 21 22 23 24 25 mil those companies only, and none of them have been accepted or executed yet, is that correct? MR. HOWARD: That's correct, yes. MR. BURk2ELL: Have any o~E them indicated that they would accept them on different terms, or are you nego- tiating, or where do we stand? MR.~HOWARD: We've had several suggestions from the thres~companies and we are incorporating some changes as a result of these suggested suggestions at this time. - MR. BURRELL: Are there any other gas pro- ducers who would be affected by these various orders effective July I to whom you have not offered this contract, or a similar contract? MR. HOWARD: Yes ,. sir. In the trading bay unit, Phillips, and Skelly, and Amoco would also be affected by this Order, and we have not offered them a look-at the agreement, merely as a matter of convenience to us; we wanted to incorporate some of these changes before we offered the contract to everyone who participates in the Trading Bay Unit. MR. BURkELL: Is it your intent, however, to offer this or a similar contract to all producers of casinghead gas on the west side or that could be picked up by your proposed pipeline, sir? MR. HOWARD: Yes, sir. it is our intent to offer the same form of agreement to all west-side gas producers. R & R COURT REPORTERS 629 WEST EIGHTH AVENUE-SUITE 5 277-4713 ANCHflRAGE,ALASKA 99501 i i' ~ ~ ~ _8~_ I ~ ~ i l A1R. BURRELL : One of the comments i 2~ that was made by one of the witnesses related to. the, I believe 3 it's the dedication clause in your contract, requiring t2zem to 4 dedicate their gas in perpetuity; in effect far as long as you 5I got it, as long as they have it, as a condition of thz contract.i 6{ There was an indication that•was objectionable. In the particular 7~ case in which this testimony was introduced, the objection, that 8 is, Mobil Oil Corporation's witness indicated that one per cent 9 lift gas was apparently all they had of the casinghead gas, and . 10 I wondered why dedication of one per cent is important to you, ii or is it important? Is the dedication clause critical? Is the 12 dedication of one per cent of the gas critical to your contract? 13I Or are you in a position to answer that? 14 MR. HOWARD: I don't believe that .15 we consider that one par cent of the west side solution gas i6 reserve is critical to our project. Does that answer your 17 question? 18 MR. BURRELL: Yes, sir. I'll ask ~ 19 one more. If that were the -- shall we say the sole problem witY~ 20 respect to consummating that contract, do you think you could 21 back off on that dedication clause with respect to one per cant 22 f of the gas? 23 MR. HOWARD: Just offhand, I belie ,e 24~ we would feel that we are not putting an undue burden on anyone 25 by asking them to dedicate the gas, the solution qas reserves, • R & R COURT REPORTERS !25 WEST EIGHTH AVENUE-6UITfi S 277.4713 ANCHORAGE,ALASKA 88501 '~' 1 ~ • 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 ~~-1 ~~ • • -83- in that we have indicated to everyone that any prior commitment would have precedence over this contract. I believe we would probably havQ to stick with our position that we would expect them to dedicate their excess solution gas over and above their lease r®quirements, and over and above any. prior commitments to this agreement. NIR. BURRELL: Well, I see a certai~j inconsistency there ; in rasronse to m~- irmt~-dediately previous 'question, you said that the one per cent is not at .all critical !' to your operation, and in response to this question, as I understood it, you indicated that you wouldn't back off', however.`; MR. HOWARD:. Yes, sir. I would comment in response to your first question that we would not i consider one per cent or five per cent critical to our project in that we are committed to the project anyway; but I believe ~•: .. would stand fairly firm on asking anyone that wanted us to tak4 i their gas to commit it to the agreement. MR. BURRELL: Yes, okay, you hava made it clear that you don't intend to back off, but you have also made it clear that you don't need it, the one per cent. Is '. that a fair summary of your testimony? MR. HOWARD: Yes. i MR. BURRELL: Mr. Gilbreth? MR. GILBRETH: Mr. Howard, I notic. on Page 3 of the proposed contract that Mobil has put into R & R COURT REPORTERS ' •2! WEST EIO HTH AVENUE-SUITE ! 277.4713 ` ANCHORAGE, ALASKA 89801 1 2 3 4 5 6 71 8' 9' 10 ~I 11 ~, ( 12 13 14 15 16 17 18 19 ~ 20 21 22 23 24 25 ~ ~~ 1 ~~ • • -84- evidence here, Section three provides for point of delivery pressure. They are required, "--- the casinghead gas shall be -- " an8 I am reading from that section right now, "'--the casinghead gas shall ba dalivered at the inlet side of Buyer's facilities for metflring and control of such gas at the pressure required to entAr a Buyer's system, but not to exceed 1600 psig.` Is this pressure requirement -- this is an upper limitation, I understand, but is this the same pressure requirement that will be exerted on .your own facilities at West-Foreland? 2dR. HOWARD:, Yes, sir. It is. We would -- normally, the system would operate about 1250 pounds at West-Foreland, slightly less than that at Granate Point, so as to deliver a 1;050 pounds at this Nikishi end. However, in the event one of the submarine lines was out of service for soma reason, the pressure -- the operating pressure would be upwards towards 1600 pounds. MR. GILBRETH: I see. MR. HOP7ARD: That is the reason we used the 1600 pound number in the contract: N,R. GILBRETH: That's all I have. MR: BURRELL: NIr. Marshall? DIR. MARSHALL: No questions. MR. BURRELL: I don't have any further questions. Do you have any questions far the witness before the summing up stage? R & R COURT REPORTERS 128 WE8T EIG MTH AVENUE-SUITE 8 277.4713 ANCHORAGE,ALASKA 89501 ~ • -85- 5) 6I 7 8 9 10 11 ( 12 13 14 15 16 17 18 19 20 21 22 23 24 25 '.1 I( MR. HOLLAND: Yes, thank you, Mr. Chairman. Mr. Howard, do any of the suggestions that your firm is presently considering regarding this proposed gas contract go to paying anyons for the gas, or is it still contemplated that the gas would be taken with no payment? MR. HOWARD: That is correct. We have no.t offered anyons monetary consideration for their West side --- we have not offered anyone any monetary consideration for tiieix West side gas . A4R. HOLLAND: Is the reasoning or part o.f the reasoning, I should perhaps say, behind insisting upon dedication.of the gas the desire to keep the contracts for all concerned substantially identical? r MR. HOWARD: I'm sorry, would you repeat that question? MR. HOLLAND: Is the reason for sticking with the dedication of the .gas, where in Mobil's instance we are talking about one per cent of the total, your desire to keep the contracts for all concerned substantially identical? riR. HOWARD; I guess you Could consider that part of ttie reasoning. However, I think the primary .purpose in asking that anyone commit their gas is to that we would then have a viable contract essentially. If there is no commitment on the seller's part, well, then we really don' R & R COURT REPORTERS 823 WE8T E16 NTH AVENUE-SUITE 3 277•d713 ANCHORAGE, AU15KA 69501 • • a< 1 2 8 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 i have much of an agreement, much of a contract. riR. HOLLAND: Is -- again, with regard to the c®ntract and the suggestions that are apparently being considered for modification of it, is there, in your opinion at this .time, any possibility of a banking arrangement for i~iobil which would permit them to withdraw the gas at a later date? . DSR. HOWARD: The changes that are. being made in the draft at the moment da not include any substan- tial changes to the form of agreement and they do not include any provision for banking of Mobil's gas. MR. HOLLAND : Alb right now, changing the subject, if I might. Mr. Howard, does Marathon . have an interest in the Monopod platform? i~iR. HOWARD: Yes, sir, we do. MR. HOLLAND: To your knowledge, is there dry gas, that is, gas not in solution with oil, under .the Monopod? riR. HOWARD: No, sir.- To our knowledge, there is not. There is not any dry gas reserves. MR. HOLLAND; There is no gas cap there? N.1R. HOWARD: There are a couple of small reservoirs, oil reservoirs, that have gas caps. We do not consider those dry gas reserves. They are associated with the o: .1 R & R COURT REPORTL-RS 323 WEST EIGHTH AVENUE-SUITE S 277-4713 ANCHORAGE.ALASKA 9950E 1 2 3 4 5 6 7 8'' 9, 10 11 12 13 14 15 16 1? 18 19 20 21 22 23 24 25 .~' 1 I! • reservoir. gas? what you consider free gas. • _$,_ AIR. HOLLAND:. But they are free AIR. HOWARD: Well, I'm not sure MR. HOLLAND: Well, let me r2phras i it. There is a gas cap. in several instances under the Aionopod? NIR. HOWARD: There is a gas cap in one instance, in ons reservoir that I recall offhand. This gas cap is ,associated with the E pool oil reserves. There may b? others, but to my knowledge, that is the only one I can think of at the moment. biR. HOLLAND: Thank you. Regard the investment that is bung made on the i•Ionopod for -- I believe its pumps in connection with the gas lift project -- MR. ANDERSON: Air. Chairman, may I interject here a moment? riR. BURRELL: Yes, sir. Why don't you stand up so wQ can get your name in the record. MR. ANDERSON: Robert Anderson, attorney for Marathon Oil Company. For the same reasons that were presented this morning, this is a hearing pzrtaining to the Granite Point Field, and we don't believe the testimony concerning the Monopod, which is in a different field, would be-pertinent here. R & R COURT REPORTERS 028 WEST EIGHTH AVENUE-SUITE 5 277.4713 ANCHORAGE,ALASKA fl9501 ~~ _88_ i MR. BURRELL: We'll certainty note 2 your objection far the record, Mr. Anderson. Thank you. 3 MR. HOLLAND: Do 2 understand that 4 I am in a position to procQed with this? 5 MR. BURRELL: Yes, sir, I have no 6 ob~1action to your proceeding. 7 MR. HOLLAND; Mr. Howard, my 8 question is this: Do you know the relative horsepowers that wil: 9 be employed for gas lift under this investment project, as 10 opposed to that which will be employed in injecting gas into tha li pipeline? 12 ~ MR. HOWARD: You are still 13 referring to the Monopod? 14 ~ ~ MR. HOLLAND: Yes, sir. 15 MR. HOWARD: No, sir. I'm not 16 aware of the a~.location of the horsepower between the gas in 17 this service and the transportation service. • 18 ~ MR. HOLLAND: You do agree with 19 Mr. Griffin, though, that pumps are being employed for dual use., 20 one of these bein to g provide gas lift to produce the wells? 21 ~I MR. HOWARD: Yes, sir. The 22 compressors, as Mr. Griffin stated, will serve a dual purpose, 23 rimaril for P Y gas lift and also for transportion of gas to shore. 24 . MR. HOLLAND: I see. They are 25 rimaril to furnish ~ P y gas lift, is that correct. R & R COURT REPORTERS 010 WEST EIGHTH AVENUE-SUITE 0 277-4713 ANCHQRAGE,ALASKA 99501 ~1 • • -89- MR. HOWARD: Yes, sir, that`s correct. MR. HOLLAND; Fine. I have no further questions. MR. BURRELL: Thank you very much. Mr. Gilbreth has some additional questions. ASR. GILBRETH: Mr. Howard, I will ask you the same question I asked Mr. Griffin. Would these compressors have been placed into operation in the absence of the Order of this Committee prohibiting flaring clearance? In your opinion? MR. HOWARD: No, sir, not at this 1 time. . ~ MR. GILBRETH: The installation is due -- was instigated by the Order? ~, MR. HOWARD: That's correct. MR. GILBRETH: Mr. Howard, are you aware of Union, as operator of your property there, having close in a well producing gas some two or three years ago under .-:pressure of the Conservation Committee to keep from producing excess gas? MR. HOWARD: I guess I should be, but I can't really state that I have personal knowledge of it. MR. GILBRETH: All right, sir. That is all I have. R & R COURT REPORTERS 62'J WEST EIGHTH AVENUE-SUITE D 277-4713 ANCHORAGE,ALASKA 89501 • 1 2 3 4 5 6 7'~ I I 8'~, 9~I 10~ 11 12 13 14 15 16 17 18 19 • 20 21 22 23 24 25 ~:°~ 1 • -90- MR. IiOLLAND: Mr. Chairman, might I go back and ask one question? I have something that I wish -- MR. BURRELL: Sure. MR. HOLLAND: -- to ask that was completely overlooked. Mr. Howard, regarding the pipeline that is under construction, can you tell the Committee, please, sir, whether or not rlarathon has a r~:asonable expectation of that line making a profit over its expected life? NIR. HOWARD: We expect to market the dry gas reserves in the McArthur River Field through that system when profitable, so I believe the answer to your question is yes. j That was the question. MR. HOLLAND: Thank you, sir. bIR. BURRELL: Thank you, Mr. Holland. I'll ask one more question, Mr. Howard, that came out in soma of-this redirect, or whatever we were working on. This additional compression equipment on the Monopod, is it going to increase the productive capacity of the wells in any way above thecurrent.production rate? Is there going to be any improvement in the production rate as a result of this gas lift equipment? MR. HOWARD: Maybe -- 1~IR. BURRELL : And i f sa , how much? ' MR. HOWARD: -- the new compressor; R & R COURT REPORTERS A2D WEST EIGHTH AVENUE-SUITE 6 277-a~ 1 s ANCHORAGE, ALASKA 99501 1 2 4 S 6 7 8 9 10' 11 12 13 14 I'I 15 16 17 18 19 20 21 22 23 24 25 .&~ 1 • • -91- installation will offer morn gas lift gas; we~l1 have mar8 gaa lift gas available for lift. I don't believe I Could answer ®~'fnand* i 9ot~'~ knew whether we cauid expect an increase in o: ~I production as a result of this additional gas lift gas at the outset. Certainly, it would help us down the road. P4R. BURRELL: When the witness testified on this subject Thursday, h~ testified that the production rate was about 15,000 barrels a day on the tdonopod at this time. Do you anticipate increasing by this Fall, or whenever the equipment is installed, this new equipment? MR. HOWARD: Certainly we expect an increase from our pressure or water flood project in the near future, as a result of injecting water into the reservoir. I really couldn't answer the question as to whether this gas, this additional gas lift volumes, will result in immediate increase in oil production. MR. BURRELL: Thank you. That's all I have. Anybody else have any questions for Mr. Howard? MR. HOLLAND: Might I pursue that last question just one step further? MR. BURRELL: Yes, sir. MR. HOLLAND; Mr'. Howard, if you know, will the installation of the gas lift egiipment now contemplated, to your knowledge, permit you to sustain a level of production rather than suffer a potential decrease in R & R COURT REPORTERS •28 WEST E16 NTH AVENUE-SUITE 8 277.4713 ANCHORAGE,ALASKA G9S01 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 ~• 1 ~ !~wstwits* • • -92- production because of difficulty in raising the oil in the well? MR. HOWAP.D : Would, you mind running that by ms one more time? (Laughter) P2R. HOLLAND: Will the installation of the gas lift equipment now contemplated permit you to -- let me back up because this may help you with it --- You have testified that you don't know whether it will permit you to increase your production. My question is, will the installation of this new equipment permit you to sustain a level of production that you have now? MR. HOWARD: Oh -- MR. HOLLAND; Whereas, without it, you will lose some ability to produce because of difficulty in raising the oil in the well? MR. HOWARD: If you had stopped your question there before that last phrase, I could have answered it. (Laughter) MR. HOLLAND: All right. Withdra the last phrase and answer the question. MR. HOP7ARD: Certainly we could maintain our present rate of production with this equipment. MR. HOLLAND: Without it, could you maintain your present rate of production? MR. HOWARD: I believe.we~could. ,' ItiiR. HOLLAND: Well, then., why are j R & R COURT REPORTERS B28 WEST EIGHTH AVENUE-SUITE S 277.4713 ANCHORAGE,ALASKA D9501 • • -93- 1 2 3 4 5 6 8 9 10 11 12 13' 14 15 I6 1? 18 19 20 21 22 , 23 24 ~ i 25 '" 1 you putting in this new equipment? MR. HOWARD: I thought you never mould ask that. ~I,aughter) MR. HOLLAND: It's probably. the one I shouldn't have asked, but I know someone was going to ask it, so I might as well. 3 MR. HOWARD: We are installing thi new equipment because even thougY~ we had adequate gas lift compression on board for lift purposes, we were not covered as far as transportation toyshore, in order to comply with the no flare Ordzr. We had a space problem, such that the only practical way to add additional horsepower was to remove these large, rather cumbersome reciprocating machines and replace them with a smaller, rotary type compressors. Does that h21p salve -- MR. HOLLAND: Uh-huh. MR. HOWARD; -- the mystery? MR. HOLLAND: Yes. That's all. MR. BURRELL: Is that all, Mr. Holland? Do you have any questions? MR. GILBRETH: No, sir.• . MR. BURRELL: That is all the questions we have of Mr. Howard. Thank you. Mr. Gilbreth has asked that we recall Mr. Griffin to the stand. That was, unless there was an objection from somebody. Remembering that he'is still sworn. R & R COURT REPORTERS B26 WEST EIGHTH AVENUE-6UITE O 277-4713 ANCHORAGE,ALASKA 99901 • • 1 2 3 4 5 6 7 8 9 10 it 12 13 14 • 15 16 17 18 19 20 I', 21 22 ~'~ 23 it i. 24 ~', 25 I ~~ 1 II MR. GILBRETII: Dir. Griffin, we are all mixed up in some questioning here on the gas lift gas and the aompz~;sson due to send the gas to shor8 at the bionopod, In your earlier testimony, you did indicate you could break out or make some reasonable allocation of the costs attributable to each of these operations. Would you be willing to do that and furnish it to the Committee? MR.. GRIFFIN : Yes . MR. GILBRETH: There were some questions asked about free gas, or dry gas, at the Monopod. Car you tell us the circumstances surrounding the closing in of one of your wells some two or three years ago because of the high gas production? - MR. GRIFFIN: Well, as you asked that question, Mr. Gilbreth, I was trying to recall what specific well you had reference to and what particular Order caused the closing in of :.the well, and I can't recall the incident. I do know, as NIr. Howard indicated, that we have .had a gas cap in the ~~ E oil reservoir that has given us gas/oil ratios during the productive life the last couple years of several wells that brought us beyond the statutory limit, and we have, in these cases, restricted production. Plow, there might be some well tha you have reference to that I can't remember. • MR. GILBRETIi: For the record, I'm sorry I don't know the well number, but one well was producing R & R COURT REPORTERS •20 WEST EIC NTH AVENUE-SUITE S 277.4713 • ANCHORAGE.ALASKA D9S01 • • _y5_ 1 excessive gas from an associated gas cap, and under pressure from the Conservation Commtt~;e, your company did close the well in, and it stayed in a closed in status some two or three or more years, I don't know how long. But I merely bring that out to point out that the Committee would not approve the production of gas from an associated gas cap on the rionopod. MR. GRIFFIN: Well, Pdr. Gilbreth, we would produce in accordance with the statutes and wouldn't necessarily need the pressure from the Conservation Committee to abide by those standards. MR. GILBRI;TH: There was no order ever given, in this case. - MR. BURRELL: Is that all? - MR. GILBRETH: Yes, sir. MR. BURRELL: Mr. Griffin, how long will it take you to obtain the information rir. Gilbreth requested, i because I will have to hold the record open for it, and I just wonder how long to hold it open? Unless somebody wants to object to that. MR. GRIFFIN: Well, I would certainly think -- let's see, today is Thursday. I would certainly think we could you give that information by the close of tomorrow, by then. Is that adequate? I think that would 2 3 9 10 11 12 I 13 14~ . 15 16 j 17 ~' 18 19 20 21 22 23 24 25 {I i it MR. BURRELL: rIR. GRIFFIN : R & R COURT REPORTERS s1a wesr EtG MTM AVENUE-SUITE E 277-4713 ANCHORAGE, ALASKA D9801 • • 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 I~ 21 22 23 24 25 1 ~) be adequate. Now, it depends on how fancy a calculation you want. I mean, we can give you just a rough horsepower allocation. If you really want to get into the exact engineering details, I mean to the nth degree, it would require more time, a lot more time. MR. GILBRETH: It is my own opini that some reasonable estimate -- I simply want to get an idea there in view. of the apparent conflict in-testimony.between the case two days ago and the one today, to see what the magnitude was. MR. GRIFFIN: Yes. , i MR. BURRELL: ~•lell, shall we give you until the middle of the week? Does that you give more time? • Make it any better? MR. GRIFFIN: I think we can give you a -- it's a 50 -- 55 per cent in this type of range answer. I Certainly by. tomorrow, the end of tomorrow. MR. BURRELL: All right. We will plan to hold the record open until 4:30 tomorrow for that purpose. Does anybody have any furthQr questions for Pdr. Griffin MR. HARRISON: Mr. Chairman, I presumz that that information is furnished by Mr. Griffin. That will be made available also to Mobil 0i1 Corporation? MR. BURRELL: That .will be part ~ of the record, sir, and copies will be available any time you wan. R & R COURT REPORTER8 B2S WE9T EIGHTH AVENUE-SUITE D 277.4713 ANCHORAGE,ALASKA 99301 ~.,~ • -g~_ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 . 15 16 17L 18' 19 20 21 22 23 24 25 {. I """ 1 II them. As soon as we get them. you. 2QR. IiARRISON : All right, thank MR. BURRELL: Thank you, Mr. Griffin. Mx. Holland, do you have anybody else who wishes to testify? MR. HOLLAND: T1o, sir. MR. BURRELL: Is there anybody in the audience who wishes to testify, make a comment, make a statement, or ask a question of any of the witnesses or anybody else? Is there anybody who would 1ikQ to be heard who has not. yet been heard: Is there anybody on the Committee who has any further questions of anybody? Nx. Reeder, do you have any questions? MR. REEDER; No questions. MR. BURRELL: Mr. Holland, would you care to make soma closing remarks pQrhaps? riR. HOLLAND; Yes, I would, thank you. First, might I say, gentlemen, you have available to you in the record of this matter my closing argument from our previous re-hearing; I would hope that you would reconsider it in the light of this new testimony, and I will not -- I will endeavor not to repeat the arguments that I made there. Other. than to say that to the extent that the facts have changed between the re-hearing and today, those facts, in my opinion, R & R COURT REPORTERS !36 WEST EIGHTH AVENUE-SUITE >! 277-4713 ANCHORAGE. ALASKA 99301 i 1 2 8 4 5 6 7 8 9 10 11 12' 13 14 15 16 1?I 18 19 20 21 22 23 24 25 1 ~ • • _gg_ lend further, quite dramatic support to our contention that Ord, No. 102 should be rescinded. The Committee has authority under ~l~t~ka ~tatut4 X70. ;11.30.101 li (h) to permit the flaring of casinghead gas to -- I•m sorry. 2 phrass~d that badly. --- you have the authority to stop the flaring of cas~ngh.ead gas to prohibit waste. But the Statute further provides that you may permit flaring as authorized. Turning it around, you are in a position. under this Statute to authorize N~obil to flare a certain quantity of gas. The Statute does not require you to limit that flare to the amount required solely for safety. The Statute that we are operating under is very broad. I submit to you that it is unconstitutionally vague. And that therefore, extreme caution should be employed in using that Statute. To my knowledge, the Committee has adopted no regulations interpreting the Statute, and I really don't know if the Legislature expected any such, since this is a definitional-paragraph of the Statute. Even if the Committee is deemed under this Statute to have absolute discretion as regards the flaring of gas, the Statute, I think, must clearly be employed in a reasonable fashion, must be interpreted, implemented in a reasonable fashion The conclusion .that I am obviously leading to is that I believe a re-examination of the facts of the case will demonstrat that it is totally unreasonable to require the kind of inv©stment that is, by the uncontroverted evidence, required in order to R & R COURT REPORTERS B2D WEST EIO HTH AVENUE-SUITE D 277-4713 ANCHORAGE.ALASKA 99501 - -- ~ ~ i -99- 1 dispose of a quantity of casinghaad gas which again, under the 2 uncontroverted testimony, has already provided .one, indeed, 3 its primary beneficial use in providing lift in the wells. 4 We submit that with the concluding of this hearing, they 5 is still no evidence in the record of a market for P4obi1's ~6 casinghead gas in exc°ss to that presently being sold,.used on 7 the platform, and in my opinion at least, the obligation that 8 t~2obil is under is that which I characterize as, namely, to 9 market the gas. I think that is different from what I 10 understand the Committee to be undertaking at-this point. To it me, a market contemplates something other than a gift of the 12 gas. It contemplates a sale of the gas. And there is no 13 evidence before this Committee that anyone is willing to purchase 14 Mobil's excess easinghaad gas. 15 We surmise that the Committee deems the Union-Pdarathon 16 pipeline to be a beneficial use, and obviously in various senses) 1? that pipeline has a number of beneficial uses, but we deem that 18 the Committee feels that pipeline vie-a-vie Mobil is~a beneficiaj 19I use to which Mobil's excess gas should be applied. We would 20 have you consider this question: to whom is this use, or I 21~ should say re-use to be consistent about it, to whom is this i 22 rs-use of the gas beneficial? It certainly isn't beneficial to 23 mobil. The contract that as proposed would require a capital I 24 investment on the order of a half a million dollars, annual costs 25 on the order of thirty thousand dollars, and will preclude any R & R COURT REPORTERS ' ~ ~2>f WEST EIGHTH AVENUE-SUITE 6 277.4713 ANCHORAGE,ALASKA 99501 ~1 ~. -100-- 1 2 4 5 6 7 8 9 10 11 12 I 13 14 I 15 16 17 18 19 20 21 22 23 24 25 I 1 li further sale ar marketing of the gas when, as, and if, but especially if that possibility should ever arise. For such i~v~~~nt th~r~ will b~ 8b~oluteiy r~® return. This is riot just a situation where we are confronted with a loss situation, and ~ w~e are worried about how big the loss will be. We can. tell i going in that under thz proposed contract, the investment of a quarter of a million dollars will be a total loss, as well as the i annual expense entailed. 1 We might also ask ourselves whether or not the disposition i of this gas into the Union-Marathon pipeline is of benefit to I the State or the public? And we have some, difficulty seeing the there is any benefit to the State or t t o he public in this disposition of gas, for the State will receive no royalties i • from the gas, because it would have been given away at no recovery. And, in fact, while I don't presume to be an accountant, it would appear to me that the State would actually lose corporate tax revenues by requiring this additional investment, which I presume would involve deductible expenses on State tax returns. So, we ask ourselves, who really does benefit from this potential disposition of the gas? Seemingly., it would be the owners of the Swanson River Field. Or, as some of the gas is to be used, as I believe I have been told, at the Collier Carbon ~ Plant, perhaps it is Union Oil and their Collier Carbon Plant that will reap some benefit from this gas. And, believe me, I R & R COURT REPORTERS 615 WEST EIGHTH AVENUE-SUITfi 5 277.4713 ANCHORAGE,ALASKA 99501 -lol- l I don't mean to belittle these people for attempting to get the 2 gas for nothing. T am not in the least being critical of their 8 efforts to get a benefit Pram this gas. What I do frankly 4 quarrel with is that Diobil will be placed in the position where 5 it must, in effect, subsidize the Swanson River Field or whatever ~g other use is going to be made of this gas. to the tune of a half 7 a million dollars and thirty thousand dollars a year. 8 We submit that the prospect of injecting this gas into 9 the pipeline is a totally unreasonable requirement, a totally 10 unreasonable interpretation and implementation of the regulation it -which deals with the questions: "When is the flaring of gas 12 ~ waste such that it should be prohibited?" As a matter of fact, 13 I think the problem goes a little bit further, and as rir. Render 14 will perhaps recall, I think that Judge Lewis alluded to this 15 in his conference with us. It really appears to me that the 16 required injection of this gas into a pipeline amounts to a 17 confiscation or condemnation of the gas, which P4obi1 admittedly . 18 has an obligation to market if a market can be found, but I 19 submit that that is different, entirely different, from the 20 situation that we have before us, where the~gas has been 21 beneficially used once and wz are confronted with the question of 22 whether or not there is some further use that can be made of it. 23 The other choice that we are left with as regards 24 disposition of the casinghead gas under Order No. 102 involves -- { 25 and there has been very substantial testimony on this, and I will R & R COURT REPORTERS B25 WEST EIGHTH AVENUE-SUITE 6 277.4713 ~~~ 1 ANCHORAGE, ALASKA 98301 • • -102- 1 ,2 8 4 5 61 7 8 9 10 11 12 13 ~~ 14 "15 16 17 18~ 19 20 21 22 I 23 24 25 ! '~' 1 II not attempt to repeat it -- it involves the restriction of production. Our testimony in this regard is that to do so Will ~eopardi~a th$ water flood pro~`ct which this Committee has specifically authorized and which I submit Mobil has an obligation to carry out in the most efficient manner possible. The testimony is clearly that the most efficient manner of accomplishing this in the Granite Point Field -- not necessarily some place else -~ in the Granite Point Field, is to produce these wells at the highest volume possible. It really seems to me that in the last analysis, our concern over the re-use of a small portion of the casinghead gas is a classic example of the tail wagging the dog, in that in the the gas is-primarily uszd to lift the oil/well, 80 plus per cent of it over the life of the lease, as depicted in our exhibits, beneficially will be/re-used. And it is only the Smdll_ fYac~tinnal difference, which we are talking about here. To to};e on the ris of damaging wells and losing oil production in order to force an uneconomical disposal of the remaining casinghead gas is, I submit, unreasonable. I might finally point out to the Committee, because the place of economics, or whether economics should be considered as regards the disposal of this gas, seems to be, in and of itself, a question that we can obtain some guidance as to wh£the or not economics have a place in these considerations by referring to Alaska Statute 31.05.110, which deals with uni~.ization. It is' R & R COURT REPORTERS •2!f WEST EtG HTH AVENUE-bU1TE 0 277-4713 ANCHORAGE, ALASKA 99501 • • 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 -~ 1 ~ -103- clear there that before approving a unit, this Committee must find that the establish;,lint of a unit and the additional. cost, if any, therewith connected of conducting such operations will not exceed the value of the additional oil or gas recov~rad. I submit that it is clear from this statutory provision, if not fr1 general industry practice: and our knowledge of that practice, that economics are very definitely a correct and vital consideration in the kind of decision that you are about to make. The Legislature has recognized it, and I submit that the Committee must recognize the impossible economics of dealing with perhaps 16 per cent of the casinghaad gas fora matter of a few, short years. I respectfully request the Committee to reconsider its'position, and in the light of this record, rescind its Order No. 102. Thank you, Mr. Chairman. MR. BURRELL: Thank you, Mr. Holland. MR. ANDERSON: Mr. Chairman, in view of Counsel's closing statement with respect to burdens and benefits, we feel that Mr. Howard would be entitled to make an additional statement with respect to the Marathon-Union pipeline. MR. BURRELL: I have no objection whatsoever. If Mr. Howard cvishes to take the stand, hlr. ~~ Anderson it is perfectly fine. Or you? Whoever. MR. HOWARD: Mr. Chairman, we don't R & R COURT REPORTERS 623 WEST EIO HTH AVENUE-6UITE D 277.4713 ANCHORAGE,ALASKA 99501 -104- 1 feel that we really owe anyone an apology for our gas acquisitio 2 agreement that has been submitted to Mobil and others. There 3 has been a lot of refQrence here to the burden of investments 4 and to uneconomic situations, and just for the benefit of the 5 record and for the benefit of the Press, we would just like to g: 6 ~=t on the record that we, too, face some uneconomic situations 7 on this pipeline system, and the reason that we are unable to g offer anyone a monetary consideration for their westside gas is 9 because of this uneconomic situation. Our gas forecast for the 10 westside gas, total westside gas productions, for the first 11 year,- that this system would be in operation, that is, 1973, havz 12 been estimated at only 32,000,000 a day, and considering an the 13 amortization on/ln;restment of the pipeline system from Granite 14 Point -- well, from only~Granite Point to the east side into 15 Nikiski, handling cost of that gas would approach 20~ per biCF. 16 And we're going to be delivering that gas into the Nikiski area 17 for approximately 9C per P~ICF,.which amounts to -- if you are '18 rea3 quick with arithmetic -- that's about an 11G loss on each I' 19 MCF we deliver.during the first year. And by 1976, this 20 casinghead gas volume would have declined to approximately 21 11,000,000 a day. And on the same basis, again, a straight-line 22 amortization and a reasonable, direct operating cost for the then 23 systems our handling cost will/increase to SOC per riCF. This is 24 the reason that we are not in a position to offer any monetary 25 value for westside as. I g just didn't want Mobil or anyone else R & R COURT REPORTERS S2S WEST EIGHTH AVENUE-SUITE S 277.4713 ~1 ANCHORAGE,ALASKA 99501 -105- 1 to feel that we were driving a hard bargain. That's all I 2 have to offer, sir. 3 MR. BURRELL: Thank you,. P~Ir. 4 Howard. I will Hots for the record, however, that your remarks 5 as were Mobil's, were summary remarks, that were directed to 6 speaking about the casinghead gas as if it were the only product 7 being produced, disregarding the oil altogether that's being 8 ~ rod ce ~ p u d from the same pool. 9 MR. HARRISON: We would raise the 10 same objection to you including that in the record as we have ii previously. We think these things are distinct entities and 12 no part of this record. 13 MR. BURRELL: We understand 14 clearly that we have a difference of opinion on that, and your 15 objection is noted for the record. Is there anybody who wishes 16 to make any additional statements? If not, w2 will adjourn and 17 hold this hearing record open until 4:30 tomorrow for a statesmen 18 which Mr. Griffin is providing for us. Thank you very much. 19 20 21 22 23 24 25 1 11 END OF PROCEEDINGS R. & R COURT REPORTERS •2D WEBT EIGHTH AVENUE-SU17E O 277-4713 ANCHORAGE,ALASKA 99801 ~`I5 NVEf STORY COPlSERVAT I ON ORDER ~E 102 - C tcourt ordered reconsideration of C. 0, #102 & #102 A) TE(~.9 i ~ . 2. 3. 4. 5. 6. 7. 8. 9. 10. II. 12. 13. 14. 15. 16. 17. 18. 18A. 19. 20. Inventory of record C. 0. #102 C C. 0. ~'I02 C (4 pages) Affidavit of Publication Notice of Publication Notice of appeal, Superior Court 171 - 3432, November 15, 1971 Letter from Holland to Reeder, dated - March 23, 1972 (2 pages) Letter from Reeder to Holland, dated - March 29, 197?_ Motion for stay pending appeal, dated - April (9, 1972 Appeal conference memorandum, dated Apri{ 19, 1972 Memorandum in support of motion for stay pending appeal, dated - April 19, 1972 Affidavit signed by Vance Porter, plus 12 page attachment, dated - April 19, 1972 Cover letter and order on appeal, signed by Judge Lewis, dated - April 25, 1972 Letter dated -.May II, 1972 to Judge Lewis conveying the . notice of hearing (item 4) Letter, Holland to Reeder, dated May II, 1972 Letter, dated - June 21, 1972 to Judge Lewis conveying copy of C. 0. ,'.`I02 C (Item 2) Hearing testimony of Nance Porter with Ma~bil exhibits, I-6 attached Cook Inlet Pipeline Company, Exhibit ~f7 Cook Inlet Pipeline Company Exhibit ~$ Statement of J. J. Mhoon, Cook Inlet Pipeline Co. Competative oil and gas lease. Oil Pa Gas Conservation Committee exhibit r'~9 Committee E>:h i b i t i 10 Letter to Burrell from Griffin, dated - May 19, 1972 (2 pages) with attached testimony of R. C. Keller, previously given as part of C . 0 . ~~ 103 & 10 4 . ~~~~ j MECHANICAL ENGINEERING TESTIi~10NY TO SUPPORT THE APPLICATION` 1=OR Ah1ENDPIENT OF ORDER .2 OF CONSERVATION ORDERS N0. 103 AND 104 - `~ ~` i ? ~ ~~ ~~ MAY ~ Z 19IL TRADING. BAY FIELD • MC ARTHUR RIVER FIELD DNISiON ~~ ND GA`s ~-id CONSERVATION FLLE td0. 103 ~ ( ~. ~OZ . ` ~ ` CONSERVATION FILE P10. 104 ~ . // // p r d a / a o~ r e e.rw ge s. a, T re t~, Coo . - PRESENTED BY R. C. KELLER, AREA ENGINEER UNION OIL COMPANY OF CALIFORNIA PUBLIC HEARING - ~~AY'11, 1972 -ANCHORAGE, ALASKA • cr,,,. ~ ~ ~ l ~ a ~ a ' ' . r~e~ aTro vrc s e,. -i e~~ ~ ~ ~~Z couv C• . oh EYG , ~ , ~- to /~ r QZ Q • • ~rvt ~ ~ ~~~'{'tv o •f Ma~'"P ~9~L CTw // •'/ /p 1J4~-; t!! `• ~ ~_.... • MECHANICAE EPJGINEERIPJG TESTItriOiJY t~fy name is Richard. Keller, and I am currently Area Engineer for Union Oil Company, Anchorage Oistrict,_Alaska. i1y purpose `here today is to describe the gas to shore transportation capability of the Monopod platform, Trading Bay Field. ' Union Oi 1 Company operates the. i~lonopod_ platform, 1 orated. in the Trading Bay Fueld. This platform ~r1l have adequate facilities to .transport all excess casnghead gas to shore, in compliance with Conser- vation Order No. T03, by September 1, 1972. We are noar in the process of removing t!.~o 945-Hors~poarer com- pressor packages from the platform in order to make room for near com- pression equipment needed in order to comply arith Conservation Order ', No. 103. Five near compressors are being installed for-a total. of 7700 Horsepoarer. Nel~r process equipment--heat exchangers, scrubbers, and de- ~~ hydration equipment--is also being installed. Taro compressor sets, each consisting of taro compressors driven by a 3300 Hp turbine, grill supply the gas to shore, fuel needs, and gas lift gas at a pressure of 500 psig.• An 1100 Np turbine-driven, centri- fugal compressor eri71 boost gas lift gas from 500 psig to 1100 psig. Our total gas to shore. transportation capacity, arith the new system operational, will be in excess of 20,000 i.CF/D, at expected operat- ing pressures of 50 psig intake, 500 psig discharge:. Current solution gas production is averaging 15,000 MCF/D. _ As stated, we expect this near equipment to be operational by " September 1, 1972. R. C. Keller 5/11/72 Z r r '~ ~ ~ MECHANICAL Ei~TGINEERI~TG TESTIMONY' My name is .Richard Keller, and I am currently Area Engineer for Union Oil Company, Anchorage. District, .Alaska . My purpose here today. is to describe the gas to .share. transportation. capabilities of each pl~+tform in the McArthur River Fsld, Trading Bay Unit. The McArthur River Field, Trading day Unit platforms: Grayling, Dolly Varden, and. King Salmon, all. either. nova have, or .will have ade- quate capacity to transport all excess casinghead gas to shore for disposition in complionce with Conservation Order No. 104, by July 1, 1972. Specifically: 1. The-Grayling platform now has adequate gars compression and treating. facilities to transport all excess casinghead gas,. not used as fuel, to shore. One of the two gas to shore compressors will be overhauled, and the compressor discharge relief valves will be replaced in order to achieve the required capacity. This work should be completed by July 1 , 1972. The. gas to shore compressors. consist of two 1.100 Hp, i turbine-driven, centrifugal compressors, operating in parallel. These two compressors have a combined capacity of 20,000 MCF/D, with an intake pressure of 50• psig and a discharge pressure of 250 psig. The current solution gas production is approximately 18,000 NICF/D, ~:nd is expected to decline. C~ `~ `"~ ~ ~ 2. The Dolly Varden platform now has adequate compression end treating facilities to .transport to shore all produced casinghead gas not .used as .fuel or needed for a safety pilot. No modifications will be required on this platform. in order to comply with the no-.flare order . • The gas compre sion facility o,n the Dolly Varden. platform. consi is of twp 3000 Hp, three-stage. reciprocal compressor units. A portion of the horsepov~er developed in the first stage in each compressor unit is utilized to transport. casinghead gas to, shore and supply fuel needs. This gas is compressed from 90 to 250 psig. The first. stage has capacity in excess of the current 12,000 MCF/D solution gas production . 3. The King Salmon platform-also now has adequate compression and treating facilities to transport to shore all casinghead gas note used: as fuel. on the platform or needed fora safety pilot. The. gas to shore compression is accomplished by an 1100 Fip, turbine- driven, centrifugal compressor, capable of delivering 10,-000 MCF/D at a discharge pressure of 250 psig, expected operating conditions when the LEX modification is complete. This compression equipment is sufficient to handle all produced solution gas, which will be trdns- ported to shore and utilized as fuel on the platform. Current solution ' gas production is averaging 8500 MCF/D, and is expected to decline. Thin., then, sumn~Grizes the status of the !'rading Bay Unit platforms' ability to comply with the no-flare order. These platforms will be ready to R. C. holler / .5/11/72.... _2_ ~ `` I 1 ~' deliver all excess casinghead gas .into the new gas gathering system " when it is complete _ R. C. Keller ~~ 5/1I/72 -3- ~-- COOK INLET PIPE LINE COMPAN P. O. DRAWER 4-XX, ANCHORAGE, ALASKA 99508 May 18, 1972 STATEMENT OF J. J. MHOON: The following records, as to the oil reserves in the Granite Point Field, were submitted to Mr. M. Paolo, Director, Bureau of Accounts, Interstate Commerce Commission, Washington, D. C., from our Dallas Accounting Office on March 24, 1971, with other data relating to Cook Inlet Pipe Line Company rate of depreciation. Exhibit" -Oil Reserve Analysis, shows a total original reserves for Granite Point being 48,000,000 Bbls. Exhibit ~ -Production Forecast by year starting in 1967 - through 1989, shows Granite Point Field being a total of 45,501,000 Bbls. To the best of my knowledge this is the only oil reserve analysis, by fields, ever submitted to I.C.C. ,~______ . J. Mhoon Office Manager Cook Inlet Pipe Line Company C o. la Z-c. Coop ~ ,.~~-~~ ~a 1 FORM NO. DL-1 ` (REYISED APRIL, t981) .' ~ STATE OF ALASKA ~ ~. y ,.~ llEi'ARTAZENT OF NATURAL RESOURCES ~~~~ DiV181011 Qf Lands LEASE NO, ADL- Competitive Oil and Gas Lease , THIS LEASE, dated the-.-_~-St_.--.day of .---...-.`~:,~tr.?~e~..-: ............... 1~____6.? .., is made by and between the State of Alaska, acting by and Through the U;rector of the Davision of Lands, Department of Natural Iltisources or his author- ized agent, hereinafter cs,?led "lesser", and - ------------------------------------------------'Jr,ion Oil ~orriparry--oi %aiiforni~,=--A-.California-corporation-----.,.......----...----• ------------------------Socony Mobil Oil Company,---I.~-c., ~.- ~e~~a Fork .,or~eraton: hereinafter called "Lessee", whether or.~ or more. 1. GRANT. For and ir. consideration of a cash bonus and the fir,t year's rental, the receipt of whi^_lt is hereby acknowledged, and of the rentals, royalties, covenants. and conditions herein cor_tained e the part of `ha Lessee to t;e paid, kept and performed, and subject to the conditions and reserve±lans Y:2r~in I°cntained, Lessor does hereby grant and lease unto Lessee, exclusively, without wairaniy, for the sole and only purposes of exploration, development, production, processing and marketing of oil, gas, anu assoi:iat~d substances produced therewith, and of installing pipe lines and strsctures thcre~ . t, find, produce, save, stoi`e, heat, process, t*ansport, i~ke care of and market all such substances, and for drilling !•:•ater wells and takin5 underground and sarface water fop• use ir: its operations thereon, and for ltousi.ng and boarding employees ..=:n its operation thereon, the foLowing described tract c tone; ir. Alaska: S-I3-6--35 ^_ontainin 5088----_-_....acres, more or less, hereinafter coiled "said lane'". g-----------~- Far the purposes of this lease,. said land ct~ntains ...... .........~.'.--.-....._-.-__--_1Pga1 sut,~iivsioiis, as shown on the plat of said land attached hereto, rna,ked Lxlaioit A and bu this reference made a part of t.ri;' lease If said ?and i:; described above by protracted legal sudivisicns, or by officially ie?signaied tree` numbers, anti T~e~~i,x• hereafter causes said land to be surveve; under the public iartl re•~tangular system, the boundaries of saki lard shall be those established by such sur•~ey, :when approved, ~1'.;;ect, however, tc the provisiaas of t1:e reg'taati~~ns relating to st:ch surveys. 2. "OIL AND GAS". "OiI" means crude petroleum oil and other hydrocarbons regardless of gravity which are nro- duced and saved in liquid form at the well by ordinary production methods. "Gas" means all natural gas and all hyd*ocar- bons produced at the -well not defined herein as oil. "Associated substances" means all substances produced in associa- tion with oil or gas and not defined herein as oil or gas. ° 3. TERM. This lease is issued for an initial printery term of fine years from ±he date hereof, subject tc extension as provided in Paragraph S hereof, and shall continue so tong thereafter as oiI ana gas nr either or any of them are produced in paying quantities from said land; provided, ±hat this lease may be extended beyond its primary term as provided in Paragraph 5 hereof and shall not expir,.::rucr the conditions set furtii in Paragraphs o", 7, artd 8 hereof. 4. EhTENSiGI~T 3Y USPEI\'SI03~: OF' OPEt~•A1'iO~VS. If, prior to the expiration of the primary term, Lessor; iri the interest, of conservation, directs or asserts to the susueneica of all operations and Hroduction, if any, Y,ereander, the primary ter:,. will b~ extended l:~y adding the :,arioii .;; ;ucpensinn tl?erete K EXTENSION BY TT1~jTT PRODUCTION (a) R•his Lase shall without application be exi.etidecl 1~eyoixd its prit7~ary term if upon or prier to the expiration date of such term the tease is committed tc a unit agrcemer_t approved or pr°- scribed by Lessor as provided in the regulations, nroductien of oil nr gas is had in paying quantities under the agree- ment, and a portion of such production is allocated to said lard under the agreement. In such. event this lease shah. ~on- tinue in effect so long as it rerr,ains sUbJect to such dKt'ee:t:eni and action production under said agreement is allocated. to said land; (b) The Commissioner may, in his discretion Urovide for the extension of the term of this lease, if such 3ease is on the expiration date thereof included in an approv2c3_ tmi± plan or if it is included in a program of s~cardary re..^overy operation designefl to bring about or restore product.;on, pro-tided, however, that if zn;• lease ar portiu.t thcrYOf is elim- inated from such unit plan -or recovery progr`am,' cr if such unit plan or recovery grogram is terminated, then no such .lease or portion thereof shall centirue in full farce and effect far ninety (~v) days from the date of such elimination or termination and so long thereafter as drilling or redrilling operations are being conducted thereon and so Iorg thereafter as ail ar gas is produced in paying quantities. 6. EXTENSION BY DRILLING. (a) If production shall have been obtained in paying quantities during the primary term, and if, at the end of the primary term, or at any time prior to the end of the primary term, such production shall have ceased from any cause, or in the evert production shall at any time ur times after the expiration of the primary term cease from any cause, then tris lease shall not terminate if the Lessee commences drilling or reworking operations (either in a well from which such production has ceased or ir_ a new well) within sixty days after the cessation of pro- :iuction, and the tease shah remain in fall-force and effect so long as such operations are prosecuted with reasonable dili- gence or are suspended under Paragraph ?? <^.ereof; and; if such drilling or :eworkistg operation, ~~sult i : t:.i: produrti:,r. of oil or gas, the lease shall remain in ft.ill farce and effect so long as oil or gas is produced therefrom in paying quanti- ties; (b) if actual drilling has eomnienced on the expiration date of the primary terms of the lease and is continued with reasonable diligence, such operations to include re~rilling, sidetracking or other means necessary to reach the originally proposed bottom hole location, the lease shall continue in full force and effect until ninety (90) days after such drilling had ceased and for so long thereafter as oil or gas is produced in paying quantities; (c) if all or part of the lands covered by the lease are lands that have been selected by Alaska under laws of the United States granting lands to Alaska and the conditional lease was issued thereon, the term of the leasQ shall be extended for a period equal to the period during v~hich the lease was conditional. 7. EXTENSION BY SHUT-IN PRODUCTION. If, upon the expiration of the primary term or at any time or times thereafter, there is on said land a well capable of producing oil or gas in paying quantities, this lease shall not expire be- cause Lessee fails to produce the same unless Lessor gives notice to Lessee allowing a reasonable time, which shall not be less than sixty days, after such notice to place the well on a producing status,. and Lessee fails to do so; provided, that after such status is established such production shall continue on the said land unless and until suspension of production is allowed by Lessor. 8. EXTENSION BY SUSPENSION OF PRODUCTION. This lease shall not expire because of any suspension of operations in or upon or production from said .land if such suspension is .made under any ®rder or with the consent O€ Leecnr_ ~ ~ i~~ ~ ~fi~~ 1 ~ ~~ ~( s~ f ~I 9. RENTAL. This lease shall termin~on say analverearp date hereof. prior to the letfan on cold land of a well capable of pta,3ucin;, oil or as In paying quantities, unlzFS on or before said anniversary date Lessee shay or tender to Lessor as annual rental s atrrrt equal to 51.00 per acre, or inaction thereof, then included in this ]ease, or uNesa such annual rental has been waivod or auapenfted as provided fn Patagrapnh 13 oP tl:fa lease. IP Lessor's office Is not open for business on the anniversary date, the time for payment S® extended to include the next day on which saki office 1s open for business. Any rental paid for any one lease. year shall be credited on any royalty for that year. 10. ASYNIMUM ROYALTY. Commencing ~rfth the lease year beginning on or after completion on acid land of a well capable of producing oil or gas in paying quantltiea, Lessee shall pay Ixseor, at the expiration oP each lease year, in lieu of rental s minimum royalty equal to ~1.OU per acre, or fraction thereof, then included fn this lease, or the difference between the actual royalty paid on production during tho year if less than =1.00 per acre and the prescribed minimum royalty. 11. ROYALTY O:~ PROD"UCTION. Eacept for oil and gas naed on said land for development and production or unavoidably loot. Lessee shall pay Lessor as royaltytite following: (a) On oil~z..~~2 per cent in amount or value of the otl produced and saved and removed or sold from said land. (b) On gas~~i..~.~.~i_ per cent 1n amount or value of the gas produced a.nd saved and sold or used off said land or used for the eztrac- tlon of natural gaaolina or other pro Cris t e~'efrom. (c) On asaoclated substances~f...~.~4 per cent in amount or value of such substances produced and saved and removed or sold fror*t -aid ]ands. 12. REDUCTION OF °OYALTY RATES FOR DISCOVERY. If Lessee shall drill on said land and mako the first discovery of oil or ~as in commercial quantltiea in any geological structure, the rcyslty rate under this lease shall, Instead of the rates prescribed in Paragraph 1, he !fee per cent Por a pericd oP to :years Policwi,-,g the date oP such discovery, and thereafter the royalty rates shall be these prescribed in Paragraph il. If this lease is convaitted fn a ur_it Agreement approved or prescribed by Lessor as provided in the regulations, tY.e five per cant royalty rate shall apply to all, but only, the production allocated to this lease under such agreement. Iv. REDtiCTIOiv OF RENTAL AND ROYALTY. Rental or minimum royalty may be waived, suspended, or reduced, or royalty may be reduced on a21 oP said land or any tract or portion thereof segregated for rnyalty purposed if Lessor finds that such relief is necessary for t'.:c purpose c! encouraging t :2 greatest ultimata recovery of oil or gas and is in the interest of conservation of natural resources and either thaS such relief is necessary in order to promote development or Lhai the lease cannot be successfuay operated under tte terms provided herein. 14. ROYALTY IN KTND. Whenever, at the option of Lessor, which may be exercised from time to time upon not less than six months notice to Lessee, Lessor elects to take its royalty in kind, Lessee shall deliver free of charge. (on said land or at such place as Lessor sad " Lesse<_ mutually a nee neon) to Lessor cr to such individual, firm, or corporation as Lessor may designate all royalty oil and/pr gga produced and saved Prom said 1-nd. Such oil and/or gas shall he .n good and merchantable condition. Lessee shall, if pecessary, furnish storage for royalty oil free of charge Por thirty days alter the end of the calendar month in which the oil is produced from said land; provided, that Lessee shall not be hel~4 liable for loss or destruction of royalty oil and/or gas from causes beyond Lessee's reasonable control. Should Lessee dehydrate or clean the oil or gas produced Prom said land, Lessee shall be entitled to an allowance of the actual cost of dehydrating or clean- ing said royalty oil or gas. I6. ROYALTY IN "VALUE. At the option oP Lessor, which may be exercised from time to time upon not_ less than six months' notice to Lessee, and in lieu of royalty In kind, Lessee shall pay to Lessor the fie1R market Fr'fce ei• value "st-the well oP a71 royalf3 oil a. :3/cr gas. All royalty that may become payable in money to Lessor shall b? paid on er before the last day of the calendar month following the month in which the oil or gas is ;.roduced. Zne payments shall to accompanied by copies oP run tickets or other satisfactory evidence oP sales, ahlp- ments, and amounts or gross production. i6. PRICE. The field market price or value oP royalty oil or gas shall not be less than tihe highest oP: (]) The price actually paid or agrees *~ be paid to Lessee at the well by the purchaser thereof, if any; or (2) The posted price of Lessee in the field Por such ail or gas at th!! we+.l, lP any; or, (3) The prevailing price received by other producers in the field at the well Por oil of like grade and gravity or gas of like :ind and quality at the time such oil or gas is removed from said land or run into storage, or such gas is delivered to an extraction plant. 17. PAYDIF.NTS. All payments to Lessor under this ie~ se shall be made payable to the I?epartment of Revenue of the State oP Alaska and shall be tendered iu Lesser at the place designated under taragraph a3 nor Fiving notices to Lessor. 18. GFFSET 1'4ELL5. Less^e shall drill such wells as a rea~on~blp predont operator world drill to protect LBuSGr adcyuately fa'0YG less by reason cf drainage resnltirs P_.,m p•,'oduNion on other land. Yiti~unt limitin; the generality of the foregoing sentence, if oil or gaa si?Quid be produced in a well en other :and not owned b. Lessor or on which Lessor receives a lower rate of royalty Than the royalty under this 18..00, which well is within u00 feet in the case of an oil well or 1,E00 feet in the case of a gas well of lands then subject to this lease, s?nd each well shall nred^_ce oil ^- gas i^ payi^o Guartities Pcr a period of thirty ^-nsacutive days- and if, oiler notice to Lessee ae•3 an oppor- tunity to be heard, Lessor finds that production from such well s draining lands Lhen subject to this lease, Lessee shall within. 12C days sitar written demand by Lessor begin in ;%ood faith and prosecute diligently drilling operat.tons for an offset well on said land. In lleu.of drilling any well required by this paragraph. Lessee may. with Lessor's consent con,nensa*_e Lessor in full each month for the estimated ]ors o: royalty through drainage in the amount determined by lessor. i9. OTHER WELLS. T'ilis lease contemplates the reasonable development of said land for oil and gas as the facts may justify. upon discovery of oil or gas in paying quantities on said land, Lessee shall drill such wells as a reason- ably prudent operator would drill having due regard for the interests of Lessor as well as the interests of Lessee. ?0. DILIGENCE; PREVENTION O~ WASTE. 7.essee shall exercise reasonable diligence in drilling, producing, and operating wells on said land unless consent to suspend operations temporari"ly is granted by Lessor; shall carry on all operations hereunder in a good and workmanlike manner in accordance with approved methods and practices, hav- ing Sue regard for the prevention of waste og oil and gas and the entrance of water tc the oil and gas bearinit sands or strata to the dc~structiou or injary of such Jepcsits and the preservation and conservation of tha property for future p:-~~:ICt-~'2 operations; shall use re:s,nable care and all Proper safeguards to prevent the pollution of water; Shaii plug securely in an approved manner any .veli before abandoningit; shall allow L<~ssor to inspect aL "~peratiens at any time; shall carry out at Lessee's 2xpensc zli reasonable orders and requirements of Lessor rotative to the prevention of waste and Lilt preservation of said laud, and on failure of Lessee so to do, L essor shall have the right. together with any other recnurs~ available to it to enter on said lard to repair damage or prevent k+aste of Le~or's expense; and shall abide by and conform to valid applicable rules and regulations of the !A'.aslca Oil and Gas Conservation Comr:,issioil .and the remillations of Lessor relating to the matters covered ;~y this paragraph in effect on the effective date hereof or here- af.±er i_^< effect if riot inconsistent -with any spe~iric provisions of this lease. 21. S'rELL LOC~iTIONS. Lessse shall within five days after spudding in a well advise Lessor in writing of the lc~ation and dale of spudding of said well. 2l. A>'PI30VAi OF PLANS. Le sec shall not place into actual operation any plan or metied for the purpose of stimulating or increasing production nn s?id land other than glans and methods in common use «Tithn~rt first hay;"_ag obtained the written approval of Lessor. 23. LC^-S ~ T;?~ RECORDS. An eloctric log or radioactive log, if taken, and a descriptive geologic sample log, if taken, and a record of all tests run for each welt drilled on said iar:d, together with a plat showing the exact loc«tian of each such well, shall be filed ~+.•ith Lessor within thirty (30) days after such ~.vell has been completed, suspended, or aban- doned. Any and all information filed by Lessee with Lector in connection with this lease shall be available ai all times for the con,idential use of Lessor for the purpose cf enforcing compliance with the terms, covenar_ts, and conditions of this lea:.••e and the regulations of the Le^sor but shall nbt be open for inspection by any person o±ller than officers, or employ- ees of Lessor and persons performing any function or work assigned•to them wy Lessor for a pericd or tw~rty four (24) months after the thirty (30) day filing period, except uron ~:written consent of Lessee. Notwithstanding any other provision hereof, said information ma;+ be disclosed to any person where such disclosure is reasonably necessary for the admini- stration of the functions, responsibilities, and duties vested by law in the Commissiol:er of the Department of Natural Resources or in the Divisor of Lards or the Director thereof. .ncluding but not limited to functions, responsibilities, and duties arising in connection with any litigation or administrative adjudication relating to this lease or to the rights, duties, and obligations arising hereunder. 24. RECORDS. Lessee shall keep and have in its possession books and records showing the production and dis- position of all oil and gas produced from said land and shall permit Lessor or its agents at all reasonable hours to examine the same. Such records and reports of production shall be based upon such methods and techniques as shall insure the most accurate figures reasonably available without requiring the Lessee to provide .separate tankage for each well. 25. DAMAGES. Sect. 2 of Article VII of the Alaska Land Act, Chapt. 169., S.L.A., 1959, as amended, provides in part that no rights under reservations contained in certain leases or grants of Alaska land shall be exercised by Lessor or its Lessee until provision .has been made to pay to the owner of the land upon which the reserved rights are sought to be exercised full paymnnt for all mages sustained by said owner by reason of entering upon said land; provided, that if said o~~ner for any cause why ~r refuses or neglects to settle said don- 's, Lessor or its Lessee shall have tht right to institute such legal prove ;cgs in a court of competent jurisdiction.' ,erein the land is situated as may ~ _ necessary to determine the damage which .the carer of such land may suf er: ~-f~e~see hereby agrees to pay any dant- ai;f tll%t may bf'COIT"ie Dav, ti,tn .,.,.,,... -a ~~-.wt-. 1.4 ._ +~„e.~ "`t - - - -,-..tL~ns trnrri ~ ses a sin rpm or io of a bond In compliance with this T.e- ~ will be regarded by Lessor as a sufr~ciFnt provision for. the payment of all damage that may become payabl said statutory provisions. ' 2G. BONDS. (a) Lessee shall maintain t..t-bond furnished prior to the issuance of this ease in an amount equal to at least $2.00 per acre or fraction thereof contained in .said land but not less than X1,000.00. (b) Before beginning drilling operations on said land Lessee must have furnished and shall maintain a bond in an .amount of at least $5,000.00. (,c) Lessee may, in lieu of the foregoing, furnish and maintain a statewide bond in the amount of $100,000.00 (d) Lessor may, after notice to Lessee and an opportunity to be heard, require a bond in a reasonable amount greater th?n the a,. punt specified above in this paragraph where such greater amount is justified by the nature of the surface and its uses and improvements in the vicinity of said land and the degree of the risks involved in the types of operations being or to be carried out under this lease. A statewide bond will not satisfy any requirement of a band imposed under this subparagraph but will be considered by Lessor in determining the need for and the amount of any additional bond under this subparagraph. ~ (e) If said land is committed in whole or in part to a cooperative or unit agreement approved or prescribed by Lesser pursuant to taw and the regulations and a unit bond is furnished in accordance with the regulations, Lessee need act Yh~reaft::r mairtaii~ any bond with respect to the portion of said land so committed to such agreement. F' 27. ACTS OF GOD. Should Lessee be prevented from complying with any expressed or implied covenant of this lc^s~, from conducting drilling- operations thereon, or from producing or marketing oil or gas from said land after efforts made in good faith, by reason o war, riots, acts of God, severe weather in the area of said land, acts of govern- mental authorities, failure or lack of adequate transportation facilities, or any other cause beyond Lessee's reasonable control whether similar te,~ those enumerated or not, then while so prevented and for a reasonable time thereafter with- in which to resume. operations. L,essee`s ebligatior. to comply :vich such cc: e-~ant shall be suspended and Lessee shall net be liable for darnsnes for fail.:re to comply therewith. If drilling or reworking operations are suspended by virtue o: this paragraph and the prose-r_ution of such operations would have had the effect of prover.*.ing the e;:piration or Yerminaticn of this lease, then tl.is lease s::all not terminate during the period which the obligation tc, perform suci~ aperations iS siisuenued under this paragraph; provided, ho_wev.~r, that nothing in this paragraph shall be construed to susp.~nd the payment of rentals or of minimum royalties. 28. SUSYE;N SIGN'. Lessor may fi oni time to time direct or .assent to the suspension of production or other oper- ations or both under This lease if auch action is necessary or justified in the interest of conservation. 29. RESEItJATIGNS. Lessor reserves the right to dispose of the surface of said tent`. to .others subjsct'to this lease, and the right to authorize others by grant, lease, or permit subject to this least and under such conditions as will prevent un :ecesary or u: reasonab:~ interference with the rights of Lessee and operations under this lease, to enter upon and use sa~C land: (a) to explore for oil or gas by geological or geophysical means ~rci;:ding the d_:Iling of shallow core holes or strati- graphic tests to a depth of not more than 1,000 feet. (b) To explore for, develop and remove natural resources other than oil, gas, and associated substance on or L*om said land. (c) For ncnexelusive easements and. ^ights of way for any lawful 'purpose including shafts and t*snn~ls r.ec~essary or apprcrriate for ±he working of said land or other lands for natural resources other than oil, gas or associated substances. (d} For well sites and well. bores of wells drilled from or through said land to explore for or produce oil, gas, and associated substances in and from other lands. (e) For any oche: purpose now or hereafter authorized by law and not inconsistent with the. rights of Lessee under this lease. 30. UNDERGROUND STORAGE. This lease does not authorize the subsurface storage of oil or gas except as a necessary incident to recycling pressure maintenance, repressurirg, cr other similar operations designed io i^crease the ultimate recovery of oil or gas or prevent the waste of oil or gas produced from said land or from any unit area. of which the said land is a part. Lessor reserves the right to authorize the subsurface storage of oil or gas in said land by Lessee or by others in order to avoid waste or to promote conservation o% natural re~oui°ces anti upon suc)'i eon- ditions as rill prevent unnecessary or unreasonably interference with the rights and operations of Lessee under tl2is :ease, including conditions prohibiting the sLOraQ~ of oil or gas without the consent of Lessee in any reservoir covered by this lea~~ cnnabl~ ~f producirb oil or gas ir. .:ayirig quantities. 31. ASSIGir'TV2ENT5. This lease or any undivided interest herein may with the approval of Lessor be assigned or subleased as to laic: land or any one or more legal subdivisions included therein, or any separate and distinct zone or geological horizon underlying said land or such one or more legal subdivisions; to any person or persons q'salified to hold a lease. NTo transfer of any interest in this lease including assignments of working or royalty interests and op- erating agreements and subleases shall be binding upon Lessor unless approved by Lessor. Lessee shalt remain liable for all obligations under this lease accruing prior to the approval of such transfer. Approval of transfer of this lease or an interest thereir_ will not be denied except (1) for failure to comply with the regulations; (2} in the discretion of Lessor, where the trnsfer covers any distinct zone or geological horizon. or (3) where Les:;or determines that the best interests of Lessor justify such actior_. applications for approval of a transfer under this paragraph must comply with the regulations and must be filed within ninety days after the date of final execution of the instrument of trar.s- for. Where a transfer is made of all or a part of Lessee's interest in and to a portion of the acreage in said land the assigned acreage shall, at the option of Lessor, or may upon request of the transferee and with the approval of Lessor be segregated into a separate and distinct lease having the same effective date as this lease. 32. UNITIZATION. Whenever determined and certified by Lessor to be necessary or advisable in the public interest for the purpose of properly conserving the natural resources of any oil or gas pool, field or like area or any part thereof, which includes or underlies said land or any part thereof. Lessee may unite with ether Lessees of Lessor or tivitYt others owning or operating lands not belengirg io Lessor including lands hclcr,gi..g to the'Jnited States find wit othe-a, jointly or separately, in collectively adopting and operating under a cooperative or unit agreement for the development or operation of tiro pool or field or like area or part thereof. Lessee shall within thirty days after demand by Lessor t subscribe to such a cooperative or unit agreement, which agreement shall be reasonable and shalt note quately protect all parties in interest including Lesser. Lessor may witl-i the consent of Lessee establish, alter, change, or revoke driil- ing, producing, rental, minin-:um royalty, and royalty requirements of this lease if committed to any such cooperative ~ or unit agreement and may make such regulations with reference to this lease with the like consent of I essee in con- nection with the institution and operation of any such cooperative or unit. agreement as Lessor may determine to be necessary or proper to secure the proper protection of the public interest. If a portion of said land is committed to an approved or prescribed unit agreement, the committed acreage shall at the option of Lessor and may upon the request of Lessee and with the approval of Lessor be segregated into a separate and distinct lease having the same effective date as this lease. 33. SURRENDER. Lessee may at any time make and file with Lessor a written surrender of all rights under this lease or any portion thereof comprising one or more legal subdivisions or, with the consent of Lessor, of any separate and distinct Zone or geological horizon underlying said lands or such one or more legal subdivisions thereof. Such a surrender shall be effective as of the date of filing subject to the continued obligations of Lessee and his surety fo make payment of all royalties theretofore accrued and to place all welts on the surrendered land or in the surrendered zones or horizons in condition satisfactory to Lessor for suspension or abandonment; thereupon, Lessee shall be released trout all other obligations accrued or to accrue under this lease with respect to the surrendered lands, zones, or horizons. • "34. DEF~IULT; TERMINATIOi~Whenever Lessee fails to comply with a f the provisions of Lhis lease other than the payment of rental and Lessee fads within sixty days after written notice'!such default to commence to remedy and thereafter prosecute diligently operations to remedy such default, Lessor may cancel this lease if at that time there is no well on said land capable of producing oil or gas in paying quantities. If at such time there is on said land. a well capable of producing oil or gas in Baying quantities, this lease may be cani:elled only by judicial praceedizlgs. in the event of any cancellation under this paragraph, Lessee shall have the right to retain under this lease any and all drilling or producing wells as to which no default exists together with a parcel of land surrounding each such well or wells and such rights of way through said Iand as may be reasonably necessary to enable Lessee to drill and .operate. such retained well or wells. 35. EXCESS ARF..A. If for any reason said land includes more acreage than the maximum permitted under ap- licable laws and/or regulations, this lease shah not be void but the acreage included in said land shall be reduced to the permitted maximum. ~~ i enaver Lessor determines that This lease so exceeds the permitted acreage and notifies Lessee stating the amount of acreage that must be eliminated, Lessee may withir. sixty days after such notice surrender one or more Ieoal subdivisions included in said lands comprising at least the amount of acreage that must be eliminated. If such a surrender is na*. filed within such sixty days Lessor may terminate this lease as to the acreage that must bz? elim- i*,ated by mailing notice of such termination to Lessee describing the narcei or parcels eliminated. S>_?ciI a notice shall have the effect of terminating this Iease as to the parcel or parcels described in such notice. 36. RIGHTS ON TERMINATION. Upon the expiration or earlier termination of this lease as to all or any porti~r. of said Iands; Lessee shall have tihe privilege at any time within a period of six months tY:ereafter. or such extension thereof ac m?y be granted by Lesrar, cf removing from said land or portion ihereo{ ail. machinery, equipment, tools, and In3tprials other than improvements. needed for producing wells. Any materials, tools, appliances, machinery, strut- tures, and equipment subject to removal as above provided which are allowed to remain on said Iand or portion thereof :shall become the property of Lessor upon expiration of such period; provided, that Lessee shall remove any and all of such properties when sc dire,^.ted by Lesser. Subject to the foregoing, Lessee shah deliver up said Iands or such portion or portions thereof in good order and condition. 3'. INTEREST IIV LANTD. It is the intention of the parties that the rights vested in Lessee by this lease shall constitute an interest in real property in said land. 33. LESSOR INTEREST. If Lessor owns a lzsser interest in the oil are! gas deposits in said Iand ±han the entire and undivided fei: Simyt~ estate, then the royalties and rentals herein provided shall be paid Lessor only in the propor- tior_ which its interest ucars to the whole and undivided fee. 30. CONDITIONAL LEASE. If all or a part of said land is land that has been selected by t'rle Lessor under laws of ±he United States granting Iands to Lessor; but such land has noi: been patented to Lessor by the United States, then this lease is a conditional lease as provided by law until such patent become effective. If for any reason suoh a sclec- t~on is not finally approved or such a patens does not become effective, and rental, royalty or minimum royalty pay- menu made to Lessor under .his lease will not be refunded. 40. DRILLING OPERATION'S. Ac used in this lease "driLi;lg operaticnc" ,^:ean any warn o,' actual ~peratiors undertaken or contmenceu in goad faith for the purpose of carrying ou` any of the rights, privileges or du±ies of Lessee under ±his ?ease, fellosved diiiGen±ly and in uue ^ourse by the construction of a road or derrick and/or other necessal'v structures far the drilli,^.c of a^ oil cr gas well, and by the actual operation of drilling in the ground. Any such work cr cpcraticns prelirrinary ~,~ il~°illing in tl-~e ground may be undertaken either on said Iand or in the vicinity of said land in any order Lessee shall see fit. '10. (a) ACTUAL DP~ILLING. A_s used in this Iease, "actual driilir_g" beans any and all operatiens necessary cr convenient to the drilling of a well in the ground after the first drilling or spudding with equipment cf sufficient size and capacity to drill to the total deptl-. proposed for the well. 41. RULES. AND REGULATIONS. As used in this lease "regulations" mean the applicably and valid oil and gas leasing regulations of the Commissioner of the Department of Natural Resources in effect on the effective date of this lease unless otherwise specified. - - 4~. INTERPRETATION. As used ir, this lease words which are defir_ed 'n the regulations have the meaning ar- sir;rleci by sl:.ch dEfiniticn except where the context clearly requires a diff:;rent meaning. The paragraph headings are :got a hart of this Iease and are inserted only fc~ convenience. 43. NOTICES. Any nonce regaired or permitted under this lease shall be in writing and steal? be given by reg- istered cr certified mail, returl~ receipt requested, addressed as follows: To Lessor: To Lessee: Director, ?Division of Lands ___Mo~il Oi3 Corr_pany -_- _- --- Stale of Alaska ~a_ 344 Sixth Avenue ..- b l 2_ a ,__ F lov~'P r S --__-_ Anchorage; Alaska ._.LLt~..Arzg~ltr.s..I.Z.; .-~a1i£,,. Any such ncticp shall be deemed given when delivered to the foregoing ada.-ess. r itY.er party may change the aadr.'ess t~ which such notices are to be sent, by a notice given in accordance with the i aragraph. 44. HEIRS AND ASSIGN'S. Subject to the other provisions of dais lease, the covenants, conditians, and agreemen±s contained in this lease shall extend to and be binding upon the heirs, executors, adrninis±rators, successors, or a~igna of Lessor and Lessee. 45. V;'ILDLIFE STIPULATIONS. This Iease is subject to such stipulations as are attac:'led. IN yyITN, a 4.1LT~ifD~FVl the artie ' eve r;xecuted this lease. _Jni~n Jil_~,omrany o~ Ca1~i~orlll.a ' --•~ ~-.~ t .--• ..................... STATE OF ALASY•_A :-~ nl,,torney In F;act -------------------------- `~ .S~cpny.,~!obl..Q11 Gorripany1..Ince......... By --k''~'-.~'--~'~=}~----~-~-r,/~ -~- ,~___~. .,. . rri~ U. %akice .:r•--....--•_-. LE/SSOR Attorney-in-Fact LESSEE Titlj-orals--~~r`icer T.L JNITED STATc,3 OF AMERICA ) ss. STATE QF ALASKA ) n This certifies that on the.day, of. ... -. .... 19..G...a? b e , a notary public 1n and for the State of Alaska, duly commissioned and sworn, ~oi~l~IS (.'' BA;z~, ~' to me known and known to me to be personally aPPeared.-.-....°----- --•--......- - - - - - - - - - --- •-------•---°-------••-•--•-~ t e person descrfb~d in and who executed the foregoing lease on behalf of the State of-Alaska as of the Division oP Lands, Depart- ment of I\'atura} Resources, ar his authorized agent. The ~?ORRIS C' Br'~h~' I--" ~~ said. -.-.....-- ------- -- °- -- - ---------- ---- ----- --' --°-°-----°------ -- -------.-executed said Iease in' my presence and, after belr.n duly sworn according to ]aw, stated to me under oath that he fs the Director of N+a~~ien oP Lands, Department of Natural P,esources, cr hfs authorized agent, and has authorit pursu:.nt to law to execute the fare,,oin>; lease as such iasr~cw, or authorized agent, on be};alf of the State of Alaska, actin.e fiirough the Division of Lands, Department of Natural Resources and that he executed the same Preeiy a colur.tar}ly as the free °nd voluntary act and decd of the safd State of Alaska and for the Divislor. of Lands, De artment of Natural Iies~~ P~ WIT- my h c a icfai ' of the day and gear in this certificate above w ~. /j i ••••----°-••- • ~'L/•---`~4~~.~.~2 t~,.~l~,Q~•. --..••-•-.....-•-.:.... ._.._.... 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Ctn.:'%,`l~;i'".,~.7 rr"~.;:~ rOitT^? ;.;, THIS CONT~?CT enterer into this day o;: 1972,. by and between ~:obil Oil Corporation (Mobil} , hereinafter .:eLaxred to as "S~ller", and Marat'r.o:~ Q:.~ Conp~,ny, an t7ho corporation (Marathon), and Union Cil Co,,,pany of Ca~.fornia, a California corporation (Union),, hereinafter collectively referred to as "Buyer"~, t^1 I T N E S S E T H WHEREAS, Seller owns and holds a certain valid oil and gas lease, or leases, conveying the right to produce oil and gas and is producing oil .and casinghead gas from wells ' located thereon; and WHEREAS,. Seller, because of a lack of facilities for tx'ansporting•said casinghead gas to a potential market and further lacking a market for disposing of surplus casinghead gas is flaring same; and WHEREAS, The Alaska Oii and Gas Conservation Committee has issued orders providing that effective July 1, 1972, the flaring or venting of casinghead gas from various fields in • Cook Inlet is prohibited except for adequate safety f laces and except in emergencies; and WHEREAS, Buyer is building a gas gathering system to collect casinghead gas produced from wells in which either Marathon or Union, or both, have an interest with the intention. . of making such gas available for use in a market.or potential ~' • future markets across Cook Inlet in the Nikiski area; and WHEREAS, Buyer has a market and is. willing to use its best efforts to utilize.. casinghead gas in its market in the interests of conservation in the. State of Alaska; NOG~7, THEREFORE, in consideration of the premises and good~and valuable considerations and covenants hereinafter con- tained, Seller hereby grants, bargains, and agrees to convey • all c~sirghead gas that Buyer car, dispose of to beneficial use,. and Buyer agrees to use.its best efforts to take all of Seller's casinghead gas that Buyer can dispose or in such beneficial manner, subject to the provisions ho~'eGf, from .the lands described in "E}:hibit A" attached hereto. . 1. DEFINLTIONS. The term "casinghead gas" means ' gas issuing from oil wells, produced from'the same sand or s'.= ~. .- -~_.:om which the oil is produced or as a result of the induction of gas by any method for facilitating or increasing the production of the oil and gas vaporized from oil after production. The term "Buyer's .Gas Gathering System" shall mean. the gathering lines extending from the Trading Bay Production Facility on the west shore ofCook Inlet. to the vicinity of Granite Point and thence across the Inlet to the Nikiski area.. • •for~ the purpose. of gathering gas from such facility for de- ,livery to the Nikiski `area: 2.• TAKES. It is understood that Buyer represents ~~that it ,will make a best-efforts attempt to take as much of Seller's casinghead gas as possible so as to relieve Seller from having to flare or vent same, but Buyer has no obligai:ion to do so hereunder notwithstanding the fact that Seller hereby .dedicates its casinghead gas to Buyer. Seller dedicates its casinghead gas hereunder to Buyer for the term hereof in order to permit Seller to~the e~:tent possible to comply with said Co,•nmittee orders prohibiting the flaring of such casinghead gas and to obtain the resulting benefits of being able to continue the production of oil from Seller's leases, and Seller recognizes that Buyer is making a large investment, which may. never be recovered,, in such gathering facilities ,that will be uneconomical to Buyer at the outset: Insofar ~~ r i. t, l/ r _2_ ~ ~ as it is able to do so, Buyer agrees to give priority over gas weli~gas to Seller's casinghead gas and other casinghead gas which may be dedicated to Buyer during 1972 in any bene- ,ici.al use outlet Luyer mirht have. Buyer reserves the right. to shut off Seller's gas flow t•:henever necessary for the proper operation of Buyer's gas gathering system or to pre- ven-` flaring of gas from the system. Buyer agrees to give as much notice as possible to Seller prior to shut off. In the event that Buyer deems the operation of its gathering system to be uneconomical and has no further reason ~to continue operating said system, Buyar shall have the right to refuse or cease taking the gas from Seller and may terminate this '~ contract on 30 days' .notice in writing to Seller. 3. DELIVERY POINT, DELIVERY PRESSURE, AND TRANSFER OF TITLE. The casinghead gas shall be delivered at the inlet side of Buyer's facilities for metering and control of such gas at the pressure required to enter Buyer's system but not to exceed 1600 PSIG. Upon delivery, title to such~gas and all the components thereof shall pass to and vest in Buyer without regard to the purposes for which it may thereafter . be used or disposed of by Buyer and liability and risk shall follow title. 4. MEASUREP~IENT. The casinghead gas delivered here- under shall be measured by an orifice meter or meters of standard make to be furnished, installed and kept in repair by Buyer at the point of delivery and all volumes of such gas shall be computed to a standard cubic foot at a pressure base of 14.65 pounds per square inch absolute and at a temperature base of 60 degrees Fahrenheit. In making such measurements, the flowing temperature. of the gas and the variable factors necessary to calculate the metered volumes in accordance with the Ideal Gas Laws and the -3- variable factors to correct for de<riation from the Iceal G~:s Laws shall be in accorCance with the rmer~.can Gas nssociation's Gas 'Measurer;~ent Cc.;,.-nittee Report No. '3, dated April 1955, in- „ _. eluding the appe~.d.;~ th~re-~o as may be m~.de from ti., ~ 4o t~.m~ by the A.G.A. Gas :Measurement Committee; The specific gr~.vity shall be determined by a method acceptable in the industry. Buyer shall test said meter periodically for accuracy of measurement and Seller may witness said test. Tn case anv question arises as to the accuracy of the meter measurement, said meter shall be tested upon the demand of either party, and if any error found, the meter shall be corrected. A registration within 2 percent of correct shall be considered correct. The volume delivered for any period of inoperation of the meter or of inaccurate measurement shall be determined by using. an arithmetic average daily volume based upon total measured volume for 30 days prior to and 30 days following the period of inoperation or inaccurate measurements. 5. GAS FOR LEASE OPERATION. As said oil and gas leases are being operated primarily for the production of oil,-the taking of casinghead gas by the Buyer shall be sub-~ servient to said oil operations. Seller shall have the right to use casinghead gas for lease operation s. including the maintenance of an adequate safety flare. Seller shall have no call upon any volumes of casinghead gas that have been delivered to Buyer. 6. PRICE. As full consideration for the gas and all components thereof delivered to Buyer hereunder, Seller. conveys its casinghead gas at no charcte to Buyer in exchange for Buyer's putting such gas to beneficial use. Buyer shall furnish Seller with a monthly statement on or before the 25th day of each calendar month for gas received during the imme- diately preceding month. .: ~.~ ~ ! ! 7. TITT.,~ Seller warran~s title to all gas de- livered herzurder and its right to deliver the same to 3uyer, and agrees to hold Buyer harmless from and indemnify Buyer 4gafnst any and all loss, Camag~, cost, ~Xpense, 4r liability of any kind' arising out of claims or, demands of third parties with respect to the title of such gas. Buyer is granted the right to refuse to take deliveries of casinghead gas under the best-efforts provisions in this contract until such time as Seller's title is freed from such question to the satisfaction of Buyer, or until Seller furnishes bond conditioned to save` Buyer harmless with surety acceptable to Buyer. 8. ROYALTY AND TAXES. Seller agrees to make all payments accruing from the production and sale of gas here- under to the owners of all royalties, .overriding royalties, bonus•payments and production payments and to hold Buyer harm less theref S 11 rom. e er also agrees to pay all taxes of any nature that are imposed on•~~the producer in connection with the production and gathering of said casinghead gas. Where Buyer may be~required to pay such taxes, Seller.shal.l promptly reimburse Buyer for any sums paid. ~ ~~ 9. QUALITY OF GAS TO BE DELIVERED. All gas delivered hereunder shall: (1) not contain more than 2 pounds of water .per 1,000,000 standard cubic feet or mere than 3/lOths of a ' grain of hydrogen sulphide per 100 standard cubic feet or-more than to air by volume or more than 3% carbon dioxide by~volume, .(2) shall be commercially free_of dust, gums, gum forming con- stituents, or other liquid or solid matter which might become separated from the gas in the course of movement through the gathering system, and shall have~a hydrocarbon_dewpoint of 20°F at 1200 PSIG, and (3) shall have. a temperature•of not more than 120°F.,~ -• 10 . RIGS'" OF ~^7.;Y . Buyer is 5ranted thz right to '. any equipment on the land des with the purchase•o~ Seller's free entry thereon during .the a:zd other equipment placed by .the property of Buyer and may InSOiar as Seller's lease per„its, lay and maintain dines and instaI.l Bribed necessary in connection gas and shall have the righ~ of tern, of this contract. All lines Buyer on said land shall remain be removed by Buyer at any time. 11. LAWS ANn REGULATIONS. This contract shall be subject to all valid statutes and rules and regulations of any duly constituted Federal or State regulatory body having juris- diction. ~ ~ ~. .. ' 12. .FORCE MAJEURE. In the.event`either party is . rendered unable wholly or in part by force majeure.to carry out: its obligations under this Agreement •(payments of money due excepted), the obligation of such party, insofar as,they are affected by such force :~ajeure, shall be suspended during. the • continuance of any inability so caused, but for no longer period, and such cause shall, insofar as possible, be remedied with reasonable dispatch. Should either party invoke the pro= .visions of this Paragraph, it shall immediately_so notify the other party, including in such notice the particulars of such .~ force majeure. The term "force majeure" as employed herein shall mean acts of God, acts of public enemy, wars, blockades, insurrections, strikes, or differences with workmen, riots, disorders, epidemics, landslides, lightning, earthquakes, fires, • storms, floods, washouts, arrests and restraints, civil dis- turbances, explosions, breakage or accident to machinery or lines of pipe, diversions, embargoes, priorities or expropriations of- governmental authorities, interference by Civil or military authorities, legal or de facto, whether purporting to act under~• ~. some constitution, decree, law or otherwise, failure, disruptions, -G- .~ ~ ~ . • ~ or brear,downs or machinery or of facilities 'of production, gathering, manufacture,,transportation and distribution, or failure of 3uyer's market to take sufficient gas to utiii.ze all casinghead gas Buyer has taken into its system, and with ,__ out limitation by enumeration, any other cause or causes, whether of the kind enumerated or otherwise, not reasonably • within the control of the party in default;. such terms shall likewise include (a} in those instances where the obtaining of servitudes, rights-of-way grants, permits or licenses is .necessary or advisable in the performance of•obligations hereunder, inability to acquire, or delay in acquiring, at reasonable cost and after. the exercise of reasonable diligence, such servitudes, rights-of-way grants, permits or licenses; (b) in those instances where it is necessary to obtain materials and supplies for the purpose of constructing or maintaining • ~ facilities or to secure permits or permissions from any .governmental agency to.facilitate the performance of obli- • gations•hereunder, inability to acquire,. or delay in acquiring, at reasonable cost and after exercise of. reasonable. diligence, such materials and supplies, permits and permissions; and (c) any act or omission of a purchaser from or a contractor of Buyer which is excused by any event or occurrence of the .character herein defined as force majeure. It is understood" and agreed that the settlement of strikes or differences with .workmen shall be entirely within the discretion of the party,. having the difficulty. 13. TERM. Unless terminated under the provisions of Section 2 hereof, this contract shall remain in effect so long. as Seller is producing a volume of casinghead gas that is in excess of that needed for normal lease operations. Buyer shall have the right to terminate this contract at the time that pro- duction of casinghead gas declines so that Seller's gas volume -7- ;• ~ . ~~ •is sufficient only for its rormai Tease operations. Seiler shall notify Buyer within 30 days. of the date that casinrhead gas so becomes unavailable for delivery under this contract. 1 =.. :!SSIGi`? ^~1T . Tr'i1.5 contract may be assigned by either party. No transfer of or~succ~ssion~to the interest of Seller, however effected, shall bind Buyer until the original instrument or other proper proof that the claimant is legally entitled to such interest shall have been furnished Buyer. • 15. COUNTERPART. This contract may be executed in any number of counterparts, all of which shall be considered together as one instrument, and this contract shall•be binding . upon all parties executing same, whether or not executed by all parties owning an interest in the above properties. -. .SELLER: ~ BUYERS: . MOBIL OIL CORPORATION MARATHON, OIL 'COMPANY by ~ by Division Operations Manager . UNION OIL COMPANY OF CALIFORNIA . by • -8- ~R •. ~ ,~ _ ,~ ~- f-f- o ~..G ~._~ ___ .. ~ ~ ~ ~~ r _. ~ f .. . l / . 'rii.~. t TESTIMONY OF V. S. PORTER TO THE ALASI{A OIL & GAS CONSER VATIOi\T COMMITTEE MAY 18, 1972 :ORDER NO. -102 - GRANITE PONT FIELD I will take a few minutes to briefly review certain points. of previous-testimony presented in behalf of Mobil Oil Corporation concerning Conservation Order No, IOZ, 1. Mobil Qil Corporation is the. operator fox itself and Union Oil Company of California of State Lease No. ADL 18761 which contains the southern portion of the Granite point oil field in the Cook Intet. Thus lease and the platfan~i locates thereon are effected by Conservation Order No. 102. 2, The casinghead gas produced from that lease is beneficially used to assist in moving crude oil to the well bores and thence to the suxface. Current production ' is .about 6100 barrels of oii per day with a gas oil ratio of 1050. 3, ~ portion of the produced casinghead gas is further beneficially reused to fuel the various equipment on the platform and shore site anal 6200 MCF is repressured each day to gas lift the producing wells, 4. A portion of the produced casinghead gas. is being sold to Atlantic-Richfield, This is the only current sale of casinghead gas in Alaska. 5. A water injection project designed to maximize the ultimate recovery of crude oil from .the Granite Point Field is operative. This project will maintain reservoir pressure and thereby replace energy that is withdrawn, 6. All attempts to self casinghead gas additional: to current sales from the Mobil-Union platform have been unsuccessful. In rnid-1971, an offer to sill this gas was made to tt~~enty firms and individuals that to my knowledge maybe interested in purchasing the gas. No.favorable replies have been received. Developments an further. efforts to sell the gas will be discussed later in my ; testimony. 7. Projects designed to dispose of the gas by means other than sale or flaring would result in an economic and physical waste. The. projects considered were injection of the gas into the Middle Kenai producing re servoir,_ into shallow water i bearing. sand or into the Beluga gas field reservoir. Delivery to .the cast side of the inlet was also considered. -1~ ~'~ i e.~~ G, ~ s ~ - G ' ~ J 8. Reducing the oil production rate to comply with Order No. 102 will re salt in the waste of crude oil occasioned by (l} the. reduced. throughput of water during the life of the wells and platform, and (2} formation damage that will occur after water breakthrough if the wells cannot be produced at maximum rate. The essence of past testimony was, briefly, .that the casinghead gas produced from State Lease ADL 18761 is beneficially used to produce the crude oil. It is further beneficially .reused to the greatest extent economically feasible as fuel and sales. There is no viable: market or other use for the amount of casing gas excess to current reuse.. Redii~ction in producing and injection rate at Granite point to comply with Order No. 102 will cause crude oil to be wasted. Since the May 26 and August 26, 1971 hearings on the matter under consideration here, additional reservoir simulator runs .have been performed and as a result the total volume of casinghead gas estimated to be produced from ~DL`186._7-lrhas been. _v.----~ revised. The principal difference iti the nety runs and the old runs is that a longer historical period was used for matching purposes. I have prepared -Mobil Fkhibit 1, a graph depicting the most recent estimate .and the former estimate, and would like to give the members of the Committee. a copy of the exhibit. The exhibit shows from mid-1972 through 1987, .the estimated producing rate. of easingl2ead gas. The top line, which is dashed, shows the estimate presented in ' recent hearings and the lower line, which is solid, shows the current estimate. For the period shown,. t;ie area under former estimate represents 2$ billion cubic feet and. the area under the current .estimate represents 23 billion cubic feet, or a reduction of 18 percent. The Committee should note that the current producing rate prediction for mid-.1972 is shown as 8, 2 MMCF/D and our actual rate at this time is 6. 5 MMCF/D. This difference occurs because the simulator run was made a suming that ;'dell ~~33-13, which was lost because of mechanical difficulties, would be replaced.. This is under consideration by management at this. time. Should the well not be replaced, the estimate of casinghead gas production would be even lower.. Exhibit 2, which will be given to the Committee at this time, shows, as the upper line, the current estimate of gas production from. Exhibit t. The total estimated usage required for the Mobil-Union F'latforrn and shoresite is sho«n by the lower most line. The sale of gas to Atlantic-Richfield is layered on top of the • _2_ E i • . d ._ Mobil-Union use and an estimated amount required for a safety flare is a further addition to gas required to arrive at the line labeled "Total Reutilization". This Exhibit 2 shows that of the 23 billion cubic feet to be .produced. over the i period shown., 19 billion or 84°jo will be reutilized. The Committee should under- ~II stand that Exhibit 2 shows the .sale to Atlantic Richfield continuing as long. as gas is available. Our current contract with Atlantic Richfield expires in 197~and renewal is assumed. If, however, Atlantic Richfield does not renev~~, about t5 billion cubic. feet or 65°'0 of the produced casinghead ga will be reutilized. It should be noted that we are currently flaring 3. 5 to 4 million cubic feet per day compared to our previous estimate that at this point icx tune we «-ould be flaring 6 to 7 million cubic feet per day The foregoing paragraphs bring the Committee up to date on .our forward prediction ofcasinghead gas volume and reusage. Since the August 26,.1971 rehearing on Order No. 102, there has been no change in the casinghead gas market situation at the Mobil-Union Gxanite Point lease. There has been the partial completion of the Marathon-Union gas gathering line. The. relationship of that line to our operation will be discussed later. At the previously mentioned rehearing, it v~~as stated that the Native Village of Tyonek could not be considered as a viable market for. or user. of the Granite Point. casinghead gas although at the time we had been informed that the Village ~:-as con= sidering various alternatives to their problem. Currently, Chugach Electric is completing arrangements to purchase the generator from the Village of Tyonek and.: move it to Beluga. No natural gas is therefore required for power generation at Tyonek. By letter dated March 22, 1972, Mr. Clayton R. Oslund, Assistant Professor of Horticulture at the University of Alaska, informed of his interest in conc~.ucting an eh-perimental pilot operation of a controlled environment greenhouse facilt}'. His letter read -- (Letter of March 22, 1972) Exhibit 3 Our reply to Mx. Oslund, dated April 3, 1972 read as follows -- . (Letter of April 3, 1972) Fxhibit 4 On May 10, 1972, Mr. Oslund and Dr. Donald li. Dinkel, Head of .the Horticulture Department at the University visited with me here in Anchorane. The possible use of Gx•anite Point casinghead gas for. a pilot px•oject «•as discussed, but they related .that the has would not be useful in their plans because of the remote location, - 3- . 4 ' ~ ~ ~ '. '. declining volume and relatively short life of the supply. They are interested ir. a pilot operation at a site that could be expanded into an industry and expressed an interest in a 50-year supply of gas. Once again, the-lack of a market for the casinghead gas from the Mobil-Union Granite point platform has been demonstrated. Marathon and Union, the owners of .the gas gathering line now in the construction stage, transmitted a proposed contract setting out the stipulations under which they will accept the casinghead gas from. oux Granite Point Platform into their line. This document will be entered into the record before the close of the hearing. In discussing certain terms of the proposed contract,- it is not our intent to malign the good faith of Marathon-Union in offering us room in' their line, It is rea ized that their project is uneconomic for casinghead gas alone. Under the terms of the offered contract, Mobil would be required to: 1. • .Process the casinghead gas to contain not more than Z pounds of water .per MMC~', .not more than 3/10 grain of H2S per 100 scf, and a 20°F. .hydrocarbon dew point at 1200 psig. 2. Be capable of delivering the gas at 1600 psig. 3. Convey the casinglread gas at no charge to Marathon-Union. 4. Dedicate its surplus casinghead gas to the line. This, of course, precludes our entering into a market should one become available. 5. Have no opportunity to remove gas from the line in the future for gas given away-now nor to even purchase gas from the line when our platform . .becomes gas deficient. 6. Have no guaranteed take. 7. Agree to a 30-day termination clause subject to the sole discretion of the line owners. These terms are an unattractive arrangement for. Mobil. In order. to deliver the. ca singhead ga.s into the tine, Mobil-Union will have to :expend an estimated $4&7, 000 in unrecoverable .capital funds and incur an additional $2g, 750 per year in operating costs with no hope of any return either in the form of revenue or gas availability for the future. .The foregoing clearly sets out. that - there is no market for the casinghead gas from the Mobil-Union Granite Point. platform other than that which is being supplied. After announcement of the plans to build the Ibfarathon-Utlion gas gathering line, inquiry was made as to the possibility that Mobil might consider partial . _ , . ownership in the line, .This was an attempt to seek out ways that might be available to lessen the debilitating impact of Order No. 102 that would occur from either putting gas -into the line or from restricting producing rate. Marathon-Union answered the inquiry by letter dated April 7, 1972, It reads -.- (Letter of April ?, 1972) Exhibit 5 • The letter is a straight forward appraisal of Mobil's relative position in this mztter. Not being desirous of owning a portion of an uneconomic .gathering: line plus having to spend considerable unrecoverable capital and opera ng costs, no further discussions have been held with Marathon-Union. To summarize:. 1. The casinghead gas produced from the Mobil-Union Granite point. platform is being primarily beneficialty used to move the crude to the ~~~ell bore • and to the •surface. 2. Further beneficial use is being made by using it to fuel the water injection system, the gas lift system and other appurtenant equipment... 3. All available economic markets are being supplied. ~. There. are no further economic markets available, 5, Compliance with Order. No. 102 by either reducing the rate of crude production or by disposing of the casinghead gas into Marathon-Union gathering line will create physical and economic waste. 6, Mobil has and will continue to seek additional beneficial uses and economic markets far the Granite Point casinghead gas provided- that we .are nat forced to enter into a contract such as that offered by Marathon-LTni.on, In view of the foregoing, it is requested that the Committee rescind or grant an exception. to Order No. 102 as it applies to that portion of the Granite. Point Field covered by the Mobil-Union State Lease ADL 18761. This concludes. my to stiinony. Thank .you. - 5- ESTI~9ATED CAS~r~GHEAD GAS PPODUCTION ~~ P,~QSIL-Ui~1QP~ GP~t~ITE P016~T PLATFQRf~ ...- ~ io ~ 9 `t 8 1 d ~ 6 li. U 5 w W 4 ~ J O > 3 t 2 . i O ~ 72 73 74 75 76 77 78 79 80 81 82 83 84 65 86 87 } YEAR ' EXHIBIT I v-1B-72 w i___ ESTIMATED CASING~EAD GAS PRQDUCTiON APrD ~dE~TiLiZATlO~J , ii . i~i4DlL - U~~i4i~! C~~y~~~iTE FOiPdT PLATF©R~R ~o 9 8 O ? ts. U g , h! a.. ~ 5 ~. ~ _ . J O 4 3 2 1 I ' 0 72 73 74 ?5 76 17 78 79 80 81 82 83 84 85 86 87 YEAR EXHIBIT 2 5.18-T2_ r ~, 1;~~~ 1~-,1,' COOK INi.T:~T PIPF. LINE COi41'd;'iY. ~' ~~ ~ ~ Z+~'~~ ,.,,~.~...~.5 RESI ;ItVI: hr1AI~Y5IS -. Al,^.;lzl, '~'~/~/~Z„' Year Original Oil Productive Original Oil Estimated Recovery Factor Original Reserves ~ Tonal Original Cu 1~~ivC ,;r~_~, Field Discovered In Place Area 12/31/69 In P1aee Primary. Secondary Prirrlry Secondary Reserves Production F;c<, (BBIS/ACRE) (ACRES) (BBIS) (%) (%) (BBTS) (BBIS) (EL'LS) ~ 12/31/6 ~ ~ ~..,'i~ ~Ll <r>, Trading Bay unit 1965 105,587 12,350 1,304,000,000 16;8% 15.07 219,000,000 196,000,000 415,000,000 53,832,000 36~,i6c,~`,:~ Trading Bay Field 1965 250,000 750 181,500,000 15.0% 15.0% 27,567,000 27,566,000 55,133,000 8,8)1,000• 4b,262,Ov0 *iexaco y. Trading Bay --- --- --- --- --- --- --- --- 4,801,000 2,230,000 2,571,000 *Atlantic h. Trading Bay --- --- --- --- ..-. ... .-. --- 11,935,000 3,033,000 8,9Q,C0~ Granite Point 1965 125,000 1,200 150,000,000 19.0% 32.0% 28,000,000 20,000,000 48,000,000 12 512 000 35 rFS C`0 , , , , TOTAIS ~ ~ 534,869,000 80,4)8,000 454,39:,,_'_ *Blaak hers in lines for Texaco Korth ' Trading Say and Atlantic \orth Trading Bay sere :exult of produ cing oil compan ies' declination to disclose reservoir information. f L. 1~.XHIB7'1' ~ ~~ ,~ y~~«ti~~,s • COOK INLET PIPE LINE COMPANX PRODUCT:I:OiV FORECAST' Trading Bay Unit Trading Bay Field Granite Point ~~ N. Trading Bay Texaco N. Trading Bay Arco Tota,? s __ M Bbls. M Bbls. _ M Bbls, M Bbls. M Bbls, . M Bbls. 1967 - 749 ~ 727 2,458 - - 3 934 1968 1969 21,782 31 301 3,172 4 972 5,831 298 , 31,083 , , 4,223 1,932 3,033 45 451 1970 40,165 5,906 3,283 1,197 2,502 , 53 053 1971 35,735 8,208 2,.341 390 1,800 , 48 474 1972 31,730 7,234 2,867 390 1,800 , 44 021 1973 30,429 5,777 3,064 214 1,100 , 40 584 1974 29,328 4,563 2,750 140 100 , 37 481 1975 27,025 3,498 2,482 120 500 , 525 33 1976 23,922 2,790 2,239 ~ 65 ~ 300 , 29 315 1977 20,920 2,217 2,015 55 200 , 25 407 1978 18,417 1,777 1,811 - - , 22 005 1979 15,715 1,431 1,631 - _ , 18 777 1980 13,913 1,161 1,465 - - 16 539 1981 12,412 913 1,316 - - , 14 641 1982 10,910 787 1,183 - - , 12 $SO 1983 9,909 - 1,114 - ~ - , 11 023 1984 1985. 9,109 8,108 - - 1,011 892 - - , 10,120 1986 6,906 - 802 - - - 9,000 1987 6,206 - 723 -~ - 7 70~ 1988 5,505 - - _ 6 o?u 1989 47 04 _ - - 5 505 - - - 4.70 TOTALS 414,900 55,133 45~,50I 4,801 I1,935 532,270 ~` a . ~-14 _____ _ ALASKA OIL AND GAS CONSERVATION COMMtTTEE DEPARTMENT Of NATURAL RESOURCES STATE OF ALASKA Re: ORDER ON APPEAL, Mobil 011 Cor- ) Conservation File No. 1.02 poration, Appellant, vs. State of ) Granite Point Field • ) Middle Kenai Oil Pool Alaska, Department of Natural Resour-) ces, through its Oil and Gas Conser- ) vation Committee, et al, Appellees, ) No. 71-3432, Superior Court for the ) State of Alaska, Third Judicial ) District ) t'L SUBPOENA DUCES TECUM ~IMM t>~. M OoN TO : ~, YOU ARE COMMANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May I£3, 1972, at 9:00 o'clock A. M., with all available information and records as to oil reserves in the Granite Point Field, State of Alaska,•which have ever been filed with the Interstate Commerce Commission, and so long there- after as the referenced hearings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE By omer L. Burrell Chairman I hereby return that I served the annexed subpoena on by delivering a copy thereof to him and by tendering to him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of all Courts. a DATED: Serv i ce Fees Travel $ Services$ Total ~ • • ALASKA OIL AND GAS CONSERVATION COMMITTEE DEPARTMENT OF NATURAL RESOURCES STATE OF ALASKA Re: ORDER ON APPEAL, Mobil Oil Cor- ) poration, Appellant, vs. State of ) Alaska, Department of Natural Resour-) ces, through its Oil and Gas Conser- > vation Committee, et al, Appellees, ) No. 71-3432, Superior Court for the ) State of Alaska, Third Judicial ) District ) Conservation File No. 102 Granite Point Field Middle Kenai 011 Pool SUBPOENA T0: VANCE B. PORTER YOU ARE COMMANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May 18, 1972, at 9:00 o'clock A. M., and so long thereafter as the referenced hear- ings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE By Homer L. Burrell Chairman - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I hereby return that I served the annexed subpoena on by delivering a copy thereof to him and by tendering to him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of ali Courts. DATED: Service Fees Travel $ Services$ Total $ ALASKA OIL AND GAS CONSERVATION COMMITTEE DEPARTMENT OF NATURAL RESOURCES STATE OF ALASKA fie : Ot~C~ER ON APNEAL , P:4ab i I O i I Oar- ) Can~er°vat t ®n F t I e Na . 10~ poration, Appellant, vs. State of ) Granite Point Ffeid ' ) Middle Kenai Oii Pool Alaska, Department of Natural Resour-) ces, through its Oii and Gas Conser- ) vation Committee, et al, Appellees, ) No. 71-3432, Superior Court for the > ) State of Alaska, Third Judicial ) District ) SUBPOENA T0: J. L. WHITE YOU ARE COP9MANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May 18, 1972, at 9:00 o'clock A. M., and so long thereafter as the referenced hear- ings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE: By Homer L. Burrell Chairman I hereby return that I served the annexed subpoena on py delivering a copy thereof to him and by tendering to him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of all Courts. DATED: Service Fees Trave I $_ Services$_ Total $ a ALASKA 0 I L AND GAS CONSERVATION COP~'~1 I TTEE DEPARTMENT OF NATURAL RESOURCES STATE OF ALASKA Re: ORDER ON APPEAL, Mobil Oil Cor- ) ) poration, Appellant, vs. State of ) ) Alaska, Department of Natural Resour-) ces, through its Oil and Gas Conser- ) vation Committee, et al, Appellees, ) ) No. 71-3432, Superior Court for the ) State of Alaska, Third Judicial ) ) District > Conservation Ffle No. 102 Granite Point Field Middle Kenai Oil Pool SUBPOENA T0: B. G. HOWARD YOU ARE COMMANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May I8, 1972, at 9:00 o'clock A. M., and so long thereafter as the referenced hear- ings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE`. By Homer L. Burrell Chairman I hereby return that I served the annexed subpoena on by delivering a copy thereof to him and by tendering to him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of all Courts. DATED: ALASKA OIL AND GAS CONSERVATION COMMITTEE DEPARTMENT OF NATURAL RESOURCES STATE OF ALASKA Re: ORDER ON APPEAL, Mobil 011 Cor- ) poration, Appellant, vs. State of ) ) Alaska, Department of Natural Resour-) ces, through its Oil and Gas Conser- vation Committee, et al, Appellees, ) ) No. 71-3432, Superior Court for the ) State of Alaska, Third Judicial ) ) District ) Conservation File No. 102 Granite Point Field Middle Kenai 011 Pool SUBPOENA T0: CHARLES C. WOODRUFF YOU ARE COMMANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May 18," 1972, at 9:00 o'clock A. M., and so long thereafter as the referenced hear- ings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE <y Homer L. Burrell Chairman - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I hereby return that I served the annexed subpoena on by delivering a copy thereof to him and by tendering to.him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of all Courts. DATED: Service Fees Travel $ Serv i ces$_ Total $ ALASKA OIL AND GAS CONSERVATION COMMITTEE DEPARTMENT OF NATURAL RESOURCES STATE OF ALASKA Re: ORBt=1~ ON APPEaAL, P~1obt 101'I Cor- ) poration, Appellant, vs. State of ) • ) Alaska, Department of Natural Resour-) ces, through its Oii and Gas Conser- ) vation Committee, et ai, Appellees, ) No. 71-3432, Superior Court for the ) State of Alaska, Third Judicial ) District ) Conservation Fl le No. 102 Granite Point Field Middle Kenai Oil Pool SUBPOENA T0: EUGENE F. GRIFFIN YOU ARE COMMANDED to appear in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and "F" Street, Anchorage, Alaska, on May 18, 1972, at 9:00 o'clock A. M., and so long thereafter as the referenced hear- ings may be continued, to testify on behalf of the State of Alaska in these hearings. ALASKA OIL AND GAS CONSERVATION COMMITTEE By Homer L. Burrell Chairman I hereby return that I served the annexed subpoena on by delivering a copy thereof to him and by tendering to him the fee for each day's attendance and the mileage prescribed by the Rules governing the administration of ail Courts. DATED: Service Fees Travel $ Services$ Total $ X13 H. RUSSEL HOLLAND AND RISHER M .TMORNTON, III ATTORNEYS AND COUNSELLORS AT LAW 506 WEST SIXTH AVENUE P. O. BOX 2085 ANCHORAGE,ALASKA 995 ~~Iay lI, 1972 TELEPHONE 272-4471 - AREA CODE 907 1 ~- _ .~ °d 0 ~~r. Jahn A. Reeder, Jr. Assists.nt Attorney General Mate of Alaska 350 h Street, Suite 1G5 Anchorage, Alaska X95©l ' ICE ; f~Iobi.l cCil Corporation, et 2tl . vs . State of A18sk8, Dept. of PJatural Resources, iVo. 71-3432 i7ear John: ~neiosed please find a copy of our cover ~nemaran- dum and the check of ~Tabil Gil Corporation ~alich we have a'orwardeQ to Petroleum Publican©ns, Inc. in satisfaction of the invoices from that firm w'nich you forwarded to rye ® by letter dated 1~?ay 2, 1~7?. I an glad that we were able to resolve this utter in accordance with your request. Sincerely y© s, • ~^ ~i. , ussel ~-Tolland HRH:ak ec; Homer Darrell D1R~ GE I 6`iG 3 ENG 4 EPf6 5 EN/G~ ~I t=.Ft^/l ~)'(/~ 3 GAOL REY SEC i~ U ~ ~ ~ WftUAM A. EGAN, GOVERNOR I~E~'~~.Ti~~ENT (/~' LAW OfflCf Of THE ATTORNEY GENERAL 360 XSTREET -SUITE 105 --=~.... ANCHORAGE 49501 ~ ~~~ May 11, 1972: --~ ~~ ~ ,~~ j NG I 1 ENG ~ ENG 3 ~.-- The Honorable Eben H. Lewis Judge cif the superior Court 941 Fourth Avenue J~ Anchorage, Alaska 99501, ; ~, SE Re: Mobil Oil Corporation v. State of coNFER: Alaska, Department of Natural ~~FnE .Resources, et al., No. 71-332 ~-"~ Dear Judge Lewis: In accordance with the Court's order of April 25, 1972, remanding the above referenced matter to the 0il and Gas Conservation Committee for further hearings, enclosed is a copy of an order of the. Committee setting the matter for hearing. Very truly yours, JOHN E. HAVELOCK ATTORNEY G ERAL By~ ~~ Jn' ?~ A k RQec~Fr, Jr Assi tart Attarney~General JAR:me Encl. cc: Homer L. Burrell H. Russel Holland, Esq. x~ s ~ ~~ t~, ! ; E "' ~ i ; u1 f ~ ~ ~ ~~ X12 ~-FFIDAVIT OF PUBLIC~-TION STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT,) ss. Mary L Shake being .first duly sworn on oath deposes and says that_she _______. is the_._.Le&al__Clerk ___- of the Anchorage News, a daily news- paper.. That said newspaper has been approved as a legal news- paper by the Third Judicial Court, Anchorage, Alaska, and it is now and has: been published in the English language ~ntinually as a daily: newspaper in Anchorage, Alaska, and it is now and during all of said time was printed in an office maintained at the aforesaid place of publication of said news- paper, ,Th~lt the annexed is a true Legal Notice 2015 coRY of` e ................................... as it was :published in regular issues (and .not. in supplemental form) of said newspaper ~r a period of ___~ne-.._..__ insertions, commencing on the .!#_-..-_.-.day ~ --- ~~-..------•-----,19 72_ ,and ending on the_______. 4...----_ day of of .----9---,~-------------- - 19---~~• both dates .inclusive, and that such newspaper was regularly distributed to its subscribers dur- ing all of said period. That the full amount of the fee charged for the foregoing publication is the sum of Z 11.25 which amount has been paid in full at the rate of 25¢ per line; Mini- mum charge 67.50. ;~ r', ,~~ Subscribed wo n to before me this _?#_._. day of__-- Meg .__-_-_-. 19.?~. Notary Public in an for the State of Alaake, Third Division, Arxhorsge, Alaaka COMMISSION EXPIRES ~~ 7~.~-- ~ NOTICE OF t?1JBLIC NEAR3NG STATE OF. ALASKA DEPARTMENT OF NATURAL RESQURCES Alaska Qil and Gas Conservation Committee I Conservation Filr No. 102 ~Re: Order on' Appeal, Mobil OiI ~Corpora- lion; Appellant, vs. Stets of Alaska, Department of NaturaF :Resources, through 'its Oi.l and Gas Conservation Committee, et `81, Appellees, No. 71- 3432; Superior Court for the State. of Alaska,. Thit~ Judicial District. Notice is hereby given that pursuant to Order of tfie Superior Court for the State of Alaska, Third Judicial District, dated April 25, 1972, the- Alaska Oif and Gas'. Conservation Committee wiU hold a public; hearing to.cortsidar additional; evidence and: to further. reionsider the effect on ap-~ pellant of Conservation Order-,Nos. 102 and 102A, restricting the flanirig or. `venting of easin9head gas from She Granite Point Field, Middle- Kenai Oil Papl, M fhe emeunt required for safety: ', Th: hearing wilt be held en May 18, j197Z at 4:00 A.M. in the City Council. Chambers `of the Z. J. toussae Library, 5th Avenue and F Street; Anchorage,, Alaske,':at: which time -the eppeli'ant~ op- erators of fhe referenced pool and affected! and interested- parties will ba heard.- Thamas R: Marshall, Jt. Executive Secretary Alaska Dil and-Gee €onservation Commitfes• ;: 30Q1 Porcupine Drive Aricdorage, Aleska~ 99504 Publish: May 4, i972 Legal Notice No. 2015 i P '~" ~~ ,s19 rl Ar e I ~ -~- - ~' ~~~E~~`~1C~,j~~ DIVISION OF OIL at~:~ ~::+ ANG~iCl'2. r; NOTICE OF PUBLIC HEARING STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Alaska Oil and Gas Conservation Committee Conservation File No. 102 -~ G d~~ Re: Order on Appeal, Mobil Oil Corporation, Appellant, vs, State of Alaska, Department of Natural Resources, through its Oil and Gas Conservation Committee, et al, Appellees, No. 71-3432, Superior Court for the State of Alaska, Third Judicial District. Natice is hereby given that pursuant to Order of the Superior Court for the State of Alaska, Third Judicial District, dated April 25, 1972, the Alaska Oil and Gas Conservation Committee will hold a public hearing to consider additional evidence and to further reconsider the effect on appellant of Conservation Order Nos. 102 and 102A, restricting the flaring or venting of casinghead gas from the Granite Point Field, Middle Kenai Oil Pool, to the amount required for safety. The hearing will be held on May 18, 1972 at 9100 A.M. in the City Council Chambers of the Z. J. Loussac Library, 5th Avenue and F Street, Anchorage, Alaska, at which time the appellant, operators of the referenced pool and affected and interested parties will be heard. ~Y( Thomas R« Marshall, Jr, Executive Secretary Alaska Oil and Gas Conservation Committee 3001 Porcupine Drive Anchorage, Alaska 99504 Publish May 4, 1972 ~-te~ y X11 02-0018 STATE of ALASKA o ~I L ' ' 1V , J 'J ~ ~ w z z z z z o~W Wu.,www~o~ ~ ~ ~ ~,.~ .w V V :^ ~N M ~ j~.~ N I[h :u. ~ ~u DEPARTMENT OF LAW ro: ~- Homer L. Burrell Oil and Gas Conservation Committee DATE May ~, 1972 FROnn: John A. Reeder, Jr.~'l suB~ECr: Mobil Oil Corporation v. Assistant Attorney Gel eral Dil and Gas Conservation AG©-Anchorage Committee, No, 71-3.32 Under separate cover Ihave-sent you a copy of the. Order signed by Judge Lewis in this case. Other than the Judge's mistaking me for John Norman, S think the Order accur- ately represents our; agreement at the appeals conference and also indicates, particularly on line 17, page 2, the danger that this case may be cast in the light of one dependent upon economic information. It is for this reason I feel the Com- mittee should make clear at its hearings its position that economic information is not required to be'considered by the Committee. I would suggest that. this point be made by means of a definite statement by the Committee regarding the appli- cability of economic information to considerations involving waste as defined in the statutes. It is my opinion that the economics of a particular lease .should play no part in the determination of what consti- tutes waste under AS 31 unless the lessee can show that, in compliance with the orders of the Committee regarding waste, ' it has exhausted. all its administrative remedies fora reduc- tion of royalty and is forced. to either .shut in its wells from- lack of income or show a rate of return inconsistent with its investment. This is based on the theory that the Committee's primary responsibility is to maximize the production and utilization of oil and gas from a given lease and its-orders to achieve this. maximization may be modified by economic con- siderations only if, after the lessees have availed themselves of all administrative remedies regarding royalty reduction, .they-are. unable to show in their compliance with these orders a sufficient -rate of return to justify continued .operation of the lease. Ultimately this will place both the Department and the Committee. in the uncomfortable position of making judgments on a proper rate of return for a given lease, but this may be unavoidable. ~~~~~~. JAR: me ® L~ t~ ~ t _ >~ ~A~' ; 'ayt;~ DIVISION Ct= tJri. ;°.Aj ., , ,, ~~~:~o°, ~- ®, X10 ,. ~ ~ _I DIR C. GFOL C. ENG ~~~~_ i ~ ~ d ~ ~ t `».~,r ~ ~ ~' ~.~ I 1 ENG o ( 2 ENG ' I.<.~.v ., - ~o .~~+._..,,:~.,, t.~ <a - i 3 ENG ~' I 4 ENG ~" Z. o~ ~ ~ ~ ~ 5 ENG ry TFard Dinrict fie`' I 1 GECtL F p ~-^, STATE ~F '~ ~ .._. ~ ~, GAO-- . ~. ~ L I !-. REV ~u~rri>3r ~>~ux# ~ os cr ~HAMaERS of RE : Mobil Oi 1 Cor (. Mute of '-~lusltu v s CoNF>=~: E6EN H. LEW15r JuoGe ~ C --~ -"---*~- Oi1 and Gas G THIRD JUDICIAL D15TRiCT { 941 FOURTH AVENUE Committee , et al - An!C!-IORAGE. fiLp:SKA. ~- 99so, 71-3~ 32 -April 25,1972 D z - L C•~ ~ ~ t ~ ~ . ~ ~ ~..P-..~. / ~ G4~ Ma ~. ~~~ :~ ~ ; John Norman, Esquire Assistant Attorney .General 360 K Street I xncnorage, ti:iasxa + Dear Mr. Norman: { ~~ • Please find enclosed a copy of my Order on Appeal-dated. April 25, 1972 regarding the above-entitled case. Very truly yours, ~`"~ F , ~~ y Eben H. Lewis ~uperi~r Lou~•t ~uu~e ~r~clos urn: 6 ~~ ~ ih t~J ~~ : , ' t! .~~ ~v1r~i~ ~y~t~ pN15lfJid Cf 4IL ^.~" ~ ~~~ ~..-~;~~c., . w f ~~ _ - ~r,- ~ IJ TI~r St}F'?~F?4~ GO~IR't' !~'QF~ Two: ~T1~T~ ..CIF` ALA: x:A f T~3I:~n Ji3DICIAT~ DIS""I?ZGT ? ~ r:.i_LT.t `!T 3 n.r yrti,'~~.~.•:.Ln;• `~ } 3 ~?.r~~~' 1 Ian t , ~ 4' it ~."; s ~ 'j a - , ~ r l n ~ .n ,~~;r ,rpl l T3P,~ l , ' Y.. .S ,r ..~ ~ i.lil it=1 .E. ~/aJ J~~ C.~~1 ~..! S - . 7 f.-.'r t. . ;, l ty N~~, 4 1..:....,i 1. 4L' ~ ~ ~ ~l ~ s 1 t` i / 8 !E ~' ~-" ~~ --__--__....,. _ ^~~._... ~`s . ~1. ~ ~ ~ ~ ~~'~ ~~ ~ j it ~' ~ ~f ~~' 10 ~I _~ I~{I{ C~R~?..':~ (1:d ~~.'.tl ~.~~ D1VfS10N C"f t?i ~. .~.:? I) - AT ~• ~„ ~~ ~txrsuant to this court's order rircv~?in~ fir -~n ant~~a~- 13 ~ 1 conference, dot d t~e:rch 23: 1~72,.such conference was held Agril to ~~~, Iy'~2. ~ eti Toner was represented by H. Russel T~i©31and, Esc. , _ (~ _ ~~ RishAr ?~. ~.'harn on, Fsc~. , and ~a;. R._ Harrison, Fsq., {house counse2).1 I! t~n~ellee , aSt~.te of ~ 1?~ka, t~~S ren*~',se?2tecl .3~6 John.:: ~torr.~ar-, E^~ . , 1? II l~ssistant r'~tto ey General; anpeliee, Amoco- Production Gor.:pany, ~~ f~ n II k7r'g.^ j'9f'T11^n£-".(~?"tt.!?C~{ Y~V 'i~a~.r~h, C~p~~,r~ ~'c,R - .. _. 19 !~ 20 ~~ ~c1.,.s acs: en is a pet:~tlon ~`or review ©f. orders. of the Rlask i ,~ ~~ !I r~~r~e'ctive2v ; ?t ne ~~, 171 any? t^c#;~b~*r ?_7, 19.71. <7ur.~c? ~t1_c~*~ ~f , ~~ ~~ t_ ~ c+ P ~.nM i ~. ~.~<..~i..-., .3 ~._Z' P^ ~~ ~ n•-~ 4.,r`n/t~A 24 l ! she eiie Y of the con.:~ervatinn orders 8pnealed from is a 25 (. ~~^ f-ngyv -~.Z.~t~-7 nv~ ~1~, t-}:~ nC~ ~"' !.f:tnr~ .~}~~ ~ ahn"l ^I''~.I1^; OI' ~TL'I? ~~T:~ C?~ _ II _. STATE. OF ALASKA COURT C.O. /.~ 2~C-. (, x . _ / ~ 3 J ~ r%` ~ ~~I i i ~ cry.:~in~°'~,ead ~;3s after 7:~~ o'clock ~..rT., July 1,197, in excess of ~ 2 I -.. ~ 1 r. {^~.. iS t}-„ -,x ~-.-,~- ,,~.~., •, ~ il1 constit?.~tc~ waste ~ s ~-.~.~~ i ~ Z~'~~~~.~. "s~r?E-'~~_r'1.rt CG;"ltr'i2G~ tilt t?'1E: C~^t^.:'?':~TI:.; fl[i {. in ;1.ri ~T C~t~~'i .'~ - 3 j . .. i . I a ~ ~ ti-on t~~~t enc~ -r^-:r fr~?^ ETune '?~, 1971 is a reasorTat~Ie ti~^e in 5 i ~ z.,~,i ~~, ~..-, ~~,.~,,1.~, ~ ~ -;r-~-~r r~-.w~~ ~ p r ~,~~o e~c~'~> ea~ir~},o~,~? r~~~; /, I` r'{t-^«,~rt1'1. Ft Y~~''+??"' ~'1.~rj.'ti i1 nOt : L11J10T't€':1 ~?;I .ilif~St.`ti.?l'~~c'1~ L'V~.CYGi1CE 1 .- z .., .. ~. i ; . ~": n:?ric~~:3 €~f t:~~tE~ will «^rectrired in the interests of e~°fectin;*, r;~=~:z~.-{ I~ ,s <+ ,-,-,ni ~-n '~ni ni' r~i, 1. fi.~1.d. xit file CGis`1'Or£'31CE' it 4+:?S jiQ~j`}tC'd aut t0 Lt1~ CC}LZY't t}2t~.t~ i ~ ! .~ 4-~ ,. r n .~-.,.,.. 1 n^t -,.~rl T (1~;~! [?»i nrt ~~ ~. r`•O"'^a±rsc7 t?~ . v-~. \;a. Zia.. _. .. ..~_ J -~.~_ i '~ l • E v1I2L iI - -. a ~ _ , , ` )) ~Z r'^r^t~~n*: ~i? ~'G'°'.^an;thave -t?een en~a~.ed in constrtrc-. i v li°vi:i~ic:~ ~ 13 (~ . . , C:. II tion iointly of ~. ~;as ~ ~.the*'in~° s~tster~ to collect casin~hea~i ~;~~s 14 !~ " '` ' t~~.1f? h~a Cs7C~"-FStY1 1+7 f ~.~. ~ ... _ .. _, : ~~ x_,., _. n..,;,....-,S s->. T3„~,.,i- f'i ..1 rt n ~S _..~.~,~..., .,~ ~a.,~i,,,,ni~,n ~~~~t^, ~~~ to ma,r~et in the ~~iki.s~fi area, ,~ ~ l , h ~~ ,.s-..:..1- ~i-,,,...,-, A~ l'~n~,t. t.,ln±, Annr~1.~.~1';t Ct)2'it~'~?C~~ , 1"la6Ar~t1c±I+? ,r ,. _ _ .. _ ., i7 ~I ~ 4 ._ _ _~_ ~' 4 t~13t it ~"lc'3~ X'i(3E'n t,'.n3.fJ~.E' ~C) I2F,3E?;0~:1.ii16£? c.I3~' 3~reeTkent ~xy~Lla °~i3E~' £~=i;;ir~'S Q ~ C~ cif tho rc~therln^; pipeline s~~ster~ for sale of the has can a ~ j9 - ~f I j! conTnensatory basis, apiC to t incorgors.L~.on ar' apgell.a~~ s ~ ~ ~ - ,_ . , , ~ . ~. ~. ~, r~ z ,r i :~ c !1 6 j~ .: e4t-n^ nnrT fn~+ ..rs•.in'-t it- t'~'ell~? hn etT~.,t-,~~ tO P.~'feCt c111:V recaVP.r°; f}r ~ _ dL II 23 ~ ~ ,.. _.,~ _,. ~,.__ ,,~ . ,~_ ~,, ~~±- t'~ese roc s~TOi~l~ ~,~ , sup:~Ie;-.ental proceeciin^;s, tie brotr~,ht to tre attertian of .the. 24 iI 1I co~-~^,~ tLc'e in fai~:~al nroce~~:~in.Ts ~~'rte?°ei9z ~.ppellant t~rould seep. to - ~{ _ ~~ i h~vF~ the car~~ittee fe3rthnr recc?ns3 rer the effect an appellant of + ` STATE OF ALASKA - COURT z °~ 3 a. .~ i i ~ .. t h f~ ~ ('~'3 nv_~ l "i:4 c r c+ ~r1 TC. ~~Y?}° b F+t , •~ ~ Y » I .r ~,.,r^ :L ~_ <_~. Qr_. F'n t~~,L > enc~ 3 I~. - ,, °z:~ ~~.:I.. t;~:itic: ~ "~'. I ~~ r 1 ~~ _ .r <-.^>i "F.~^t~~.i i1 t. x,~ ~~ r i~ ~-` ~ .. ~. Lr~ ~'(" t~ j{1~}!'l t. 5 j ,, .. , k x _ _ __ ~ ..., .., ~ ... .~- ~ _ , a F.,,.. ..~ ~ ~, ;, r-; ., . ~ ~:; ~, i' ~, _ _ ~q .. .. _ 5 y ii i'. b,v EJ i.~I...,Fs,', ,.~..~ .~ ~. 1~ l~ s.4 i.~~_s.J 7 ~.tr to ~S~~~: f..s. ei. t:.c L. l.. _... k-i~~l ~i t'1 A., ~,lr a? ~r~ rr f 4 ~~ tQ !I FJ~-~arlt.il.1Z-' c*_'%}C:<~. Sti4 ~ ~ s ~ C' ~ ~ ~ 1 ill b~. ca~~Lintr,~.c- to ~uc1~ 2~ 172 3t 1:3~") p.r~. tt ~~, nt a~z~,T tine prior to s~.ici hetrin~*, ~??nellant is liven le~.ve to 1 ~~ ,:::ii~r f'uri/~?cr ~.~encv?er~~: to ats petit3.c1 1'or revi~';i. in archer tc ~ - ~_ _. to l~ a:teme re].eva~~t facts developed during. the interin_ period. Ii 'T'here ~~as ind,?ed nn ~+areh 2~, 172 anpel2ant's amended ~~ I~~~petitinn for revie~a. Said amended petition a~~ears to the court ~~` jv ~~ {~ra~erly to a:i:t_eEe tree basis of the ap}~eal as i.t .now st<~.nds. ' ' [i t~ ? ~ccnrdin~3y, unless ~~ritten ob.~ectinn ~s filed with the t~~ ccu°;~t F.it';in l!} ~,z~~ hereof, t?le a;^ended petition lodged °arcl3 2~,' 20 ~~ 1~?72 v:ill be filed ~:s appellant's nleac3ing in the case, with Ieave,) i ,_ y _. ;. `i Tlnpl t~ .r. 4- A. rl nt~~r.~~-'~y !t. ~.~E'~-+a 4'e`~i <±.7L~.t1.1 L:.~~t (~f' Rr~y~i.~'9 ~~~`~• - I STATE QF AL~.SKA I CO U F,T fI ~, ~ 3 ~ 3 wwwal =aw 1, `° IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT h iYiORIL OIL CORPC7RATSON, ) ' ) v. } ' ) `'; STATE OF ALASKA, DEPAR^1MENT OF ) ~~ ~I;'TURAL RESOURCES, through its ) Cil and Gas Conservation } ~~ Committee, AMOCO PRODUCTION ) J~ION OiL COMPANY OF ) ~•>-~yli'~•.::vIA, P:~iILLIPS PETROLEUM ) COi~rPA?~'Y, SKELLY OIL COMPANY, ) ATi,ANT~ C R~ CfiFIELD COMPANY and ) STANDARD OIL COMPANY OF ) CALIFOR;vIA, ) ~" ) Appellees. ) ,r } No. 71-3432 RECE4VED Department of Law AI'K 1 ~~ iJ•i2 Office of the Attorney General Anchorage Branch Anchorage, Alaska ~ , ~ t / U L - ~--- MOTION FOR STAY PENDING APPEAL COMES NOW Mobil Oil Corporation, by and through counsel, and moves this Court fora stay of the administrative order wr.ich is the subject of the within appeal pursuant to A.S. 3I.05.0$0(e} and (d). ~~ In support hereof is the appellant's memorandum in su ort PP Hof motion and supporting affidavit. 1 ~ ~~ DATED this ~ ~ day of ~ 1972• ~~ o "~" HOLLAIv'D & 1^:iORNTON Attorneys for. Appellant z o " ~ ~ ° i~ ~ 47 Z Z c. ~- ~' W 01 n ' O ~ c a ~` = Y ~ F' = N ~ ~i O X '~ a t' 2 N Q z G E- W O Z yW 5 W , O J ,' J 0 V }' i~ O w a ~~ ~~ {( i H. Russet Hol ana ~. • ~ Ii~T THE SUPERIOR COURT FOR THE STATE Or ALASKA THIRD JUDICIAL DISTRICT ~~ ::CHIC OIL CORPOR:,TIOi'~, } ) Appellant, } ~ E C E ~ Y ~ t1 v . } Department of Law r-i n n Y ) lif ~ 1 ~ 1~~~ Si iE OF A~,ASKA, et al., ) ) A p p e 11 e e s. ) Office of the Attorney Gene ' `' } Anchorage Branch it ~~~~ ~ ~; ~~ No . 71-3 ~+ 3 2 ~~-- 0 Z . L-` •~ ~.~. ~ ~y ~.~ APPEAL CONFERENCE MEMORANDUM ~~ !~ By order entered March 23, 1972, the Court has scheduled }fan appeal conference in the above captioned matter which is an G;administrative appeal. from orders entered by the Alaska Oil and #Cas Conservation Committee. It is important to note with regard a' r~to this matter that this appeal is not taken under the Alaska i Administrative Procedures Act; but, rather, it is taken pursuant ~! Ito Alaska Statutes. 31.05.080. The latter statute provides in ~jpertinent part insofar as this appeal conference is concerned:, ~~ ,~ ~ (b) A party to the rehearing proceeding, dissatisfied with the disposition of the application .for rehearing, may ~j appeal from it to the superior court in the judicial distric ~ in which any property affected by the decision of the depart- ~~ ment is located, by filing a petition for the review of ~, the action of the department within 20 days after the ~~ entry of the order following rehearing or after the 4~ refusal of rehearing as the case may be. ,The petition shall state briefly the nature of•the proceedings. ~+ before the department and shall set out the order or ~~ decision of the department complained of and the grounds of invalidity of it upon which the applicant will rely. ~~ However, the questions reviewed on appeal shall be only Z questions presented to the department by the. application Z ~~ ~~ for rehearing. Notice of appeal shall be served upon ~ W~ h !~ one adverse parties and the department in the manner = aN N !~ provided for the service of summons in civil proceedings. ~ ~< N ~3 The trial upon appeal shall be without a jury, and the ~~ transcript of proceedings before the department, including ~ vi p o WQ a ;~ the evidence taken in hearings by the department, shall z 3o W ~; be received in evidence by the court in whole or in part '~ ~ x ~ J F~ O 0 < i ~f t~~ P; ~~ ~~ l~ s: ~~ k+ i} k, ~i __ ,.. F ~ ~1 r 1 • ~ 'f ~; upon of~:r by either party, subject to lega_1 objections ~~ to evidence, ir. the sane manner as if the evidencewas originally o ,fey^cd il~ the superior court. The department's action complwir,ed of is t ri.~"ia facie valid ar~d the burden is upon the party seeking r4vaew~to establish the ~,nval~.- rvt ally of tre actin , of the d:~pa~^tment . The court shall ~a deter,;:ine the issues of :act and of iati~r and shall, upon a prepor.dera;:,e a. '~::e cv~~. .ice .~n'c~_^oc~uced bef are oust tr~ich may include eviaezce in addition to the transcript !; of proceedings before the cepartment, and the applicable a~:~, enter its order eithe_~ a~"firming or vacating the `y o~~•der of the department. Appeals maybe taken from the judg:~,ent or decision of the superior court in the same manner as provided z'o~^ appeal's from any other final-judg- ~! ment entered by a superior court. +i Alaska Statutes 31.05.080 (c} makes provision for a stay of ~' ~~administrative orders pending appeal; and the appellants have $heretofore filed a motion for a stay together with a supporting i 9 ;memorandum, affidavit and exhibits. In this latter regard, we respectfully request that the court, at. the: appeal. conference, ;consider the matter of a stay with-counsel; and if a stay is opposed, fix a-time for response and hearing upon the appellant's .'motion. The court's order for this appeal conference specifies z z'~;_ a o a < K Z `l J D X < N Z N Q Z 4 } w p ~ W C W z 3 0 , O " a ~ x that the matter will be governed by comparable Supreme. Court Rules governing appeals; and the appellant concurs in this with certain exceptions .noted. herein .. Firstly, and as•is discussed in our memorandum in support of a stay, there. ..are certain changed factual circumstances which give rise to additional evidence not considered by the Alaska Oil and Gas Conservation Committee wht should be considered by the court pursuant to the authority con- erred upon it by Alaska Statutes 31.05.080 as above quoted. We ire under the impression that the State of Alaska. concurs in the necessity that additional evidence be considered by the court. Secondly, the appell'ant~has hereinafter designated as required ~y Alaska Statutes 31.05.080, those portions of the record which it desires to be received in evidence by the court. This request zas, of necessity, been assembled with documents available in the :h- -2- • • J ~ ~ . _ .. ~~el~u'.rl~' S ~ 1.1.C:.`..3 @Jflic;h :^ `- °nple .°; ,. c:t. ~ ..J v l::1. v e C a e r.• 1. G..i '. ; f a~,.:~ = ~~ ~' ^ _^ G S .. ~;,w 1_ C ~::j.b7~.i.S p~ eSen~LC-.d by ©.'.i~:`L' ~~'- ~ i..c:S . T''e ~^iGL`;' u ~ ~c;:~ ~.i'C":^L fiu.Vv~ VLiC coui t ~ x U. tiiw ^ 1 ~,~ l i a ie c4.1 Lei vLle o ~ ~^° l ^nn i..:.G i ...,G'A'G i:, c.V4__ :.b1G' ltJi~' ::iU~~t`~~G~~fte 1~uir'_C3n Cis oLr l"~:que5'„ ...C...._._~. .i V... r..V. V._ ~. C,_ ..w... ~o_^,~.o:~s o^ ;,. ~ ~^.:;o~~~. ~.., cvic.er.ce. ~' ~ ~ y ~ ... :, "`Alaska will wise to be allowed a certain tii:e to make its designatio; of portions o.f the transcript to be received in '`vidence; and we presume that it would 'oe appropriat~e,since ;:certain objections were made to evidence taken by the Committee, ii . t'for a time to be allowed for exceptions to requests nor admission ~of the record as evidence by each party. It would appear to ws appropriate that this be done in open court when additional M ,testimony as desired by the parties is taken. As suggested by the foregoing, the appellant is uncertain z z' ~ .. Lr u ~ n o ~ _ ~' N F- } ~ ~. n x a Z ~ z ~ ~, u o ~ W Q a z ~~ W 3 0 -' J o r. ~ o ~ x ~as to the exact status pf the record in this matter as regards availability; GJe are under the impression that it"has been ;requested; but as yet,. so far as we know, the record is not available. In this same regard, and because ~:~" hearings as to Ethe several"Cook Inlet oil fields were conducted more or less ~simultaniously, we surmise that there may be some difficul"ty in fixing exactly what constitutes the record in these proceedings. This matter is further complicated by reason of the fact that the Oil and Gas Conservation Committee took .into consideration some ~estirr:c;~y -from previous hearings; and"all such testimony should presumably be apart of the record certified to this court. For this additional reason, we feel that time needs to be allowed o the parties subsequent to the availability of the official ecord for appropriate requests for supplementation of the record uld it be incomplete. As suggested above,. we. are in agreement with the court's opting of the Supreme Court briefing schedule. We would -3- :; ;. ~~ ~. . • • z o F. u a z z ~, c ~ oQ~ ~ } 4 ~ o x a Z ~ Z ~ jj C i Z ~ w 4` ~ O W n- o ~ a ~ x :espectf;<11y recuest that a ;,riefiro schedule be set up in such s. fashicn as to co,:L,~e nee after t::e availability of the transcript ~, sf anY t~.tiralony ta.~cen by this court . Ori $ p~'eliminary basis, the s.ppeliai'It reouests the ad- r.issior. of the follot~aing evidence by the court for consideration ;ion this appeal: ,, Transcript of August 26, 1971 Rehearing 4i ~ e The complete transcript of the rehearing on Conservation ~} order 102 held August 26, 1971 except those por~ions ~+ thereof to which objection was taken by appellant. ~~ Transcript of May 26, 1971 Hearing ,, ^sestimony of Bart Giles pp 8 to 12 Dale Teel pp 34 to 50 `~ Vance Porter 51 to 80 ~ Granscript of May 25 Hearing Testimony of Dale Teel pp 38 to 44 ! Oscar Swan pp 45 to 6G Tom Logan pp 61 to 74 Dr. Casbarian pp 88 to 93 ~ Bart Giles pp 101 to 112 Lynn P. Bartlett pp 19 to 26 Shell Exhibit #12 Transcript of March 4, 1971 Hearing Testimony of • Vance Porter pp 104 to 111 Mobil Exhibits A &' B and Amoco Exhibit 6 Appellant will furnish transcript page references as soon as the official transcript is available. Respectfully submitted this lgth day of April, 1972. HOLLAND & THORNTON Attorneys for plaintiff By H. Russel Holland -4- ii ~ { ~` C ` li i} t± !; ;, MORIb 9IL CORPCRAT~C7V, THIRD JUDICIAL DISTRICT Plaintiff, v. ST::1^E OF ALAS,{ D~?ART!'+ir.~T OF 9 NA~i~URAL RSOURCS, t roug'r~ its Oii and Gas Conservation Committee , AT~fOCO PRODUCTION COMPANY, UNION OIL COiYiPANY OF CALIFORNIA, PHILLIPS PETROLEUM COifPANY, SKELLY OIL COMPANY, ATLANTIC RICHFIELD COMPANY and STANDARD OIL COMPANY OF CALIFORNIA, Defendants. No. 71-3432 RE~EI~I~D Department of Law ~~'K 1 ~J i~r Uffice of the Attorney General ,A,nchorage Branch r anchorages AJaslta ~-~ ~ -@. __.._--- ~~ - ~ ~ Z ~ C.... MEMORANDUM IN SUPPORT OF MOTION FOR STAY PENDING APPEAL The above-captioned matter is an appeal from an order of the Alaska Oil and Gas Conservation Committee, entered October 27, 1971. In considering this matter, it will at all times be both pertinent and important for all concerned to take note of the Ifact that this appeal is taken pursuant to A.S. X31.05.080. This is not an appeal under the Alaska Administrative Procedures Act. The above-cited statute provides in pertinent part insofar z o z' ~ u ~+ = Q :L ~ ~ ~ ~ r D X ,~ N Z rp C i a ~ w o Z W C W 3 O J Q ~. W m o ~ < ~, x as this motion is concerned as follows: (c) The pendency of proceedings to review does not of itself stay or suspend operation of the order or decision being reviewed, but during the pendency of the proceedings, the superior court may, upon its own motion or under proper application of a party, stay or suspend, in whole or in part, operation of the order or decision pending review, on the terms the court considers just and proper and in accordance with the Rules of Civil Procedure. Appellant, Mobil Oil Corporation, b,y the subject motion seeks to have the administrative orders which are the, subject of this appeal stayed pending completion of the .appellate process. r t ., ._ • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA STATEI~fENT OF FACTS As set forth in the Petition for Review herein, Mobil Oil ~~'rp°~`~tic'~ end '~h~ anion Oil C®r~p~.ny e C'aliforna are the joint owners of Alaska Oil & Gas Lease ~Io. ADL-y87~1, which lease is located in the .Granite Point Meld in Cook Inle~. The Mobil 0i1 Corporation is the operator of the platform; and the entire opera- tions are owned 75% by Mobil and 25% by Union. By ~ti~ay of background, it should be noted that the subject orders deal with casinghead gas which is that gas held. in solution ~~in crude oil while under pressure in the formation bearing the oil. The presence of such gas in crude oil serves a distinct beneficial fuse by way of moving the oil to the well bore and in lifting the crude oil to the surface through the well. Because the gas is in solution with the crude oil, it is impossible to produce the oil .without also producing the gas which is freed from the oiI due to the reduction of pressure at the surface.. Commencing with Conservation Order No. 32 which was entered ,'July 15, 1968, the Alaska Oil and Gas Conservation Committee has indicated its awareness of the flaring of casinghead gas produced in various of the Cook Inlet fields. As will be discussed in greater detail hereafter, the general thrust of these orders was to permit the flaring of casinghead gas which could not be further beneficially used on the platform or marketed. The Granite Point Field is being produced with the assist- z ' ~ ~ o F- Z Z ~ .. ~;~~~ O a 1 ~` S f- F Q n a x a Z ~% ~ z < W o II p W ~ i Z ~ ~ 3 0 ~ n x ~ J ~ Z o ance of a water flood project approved by the Alaska Oil and Gas Conservation Committee. Such procedure insures a greater ultimate recovery of oil than would be obtained by reinjecting surplus casinghead gas into the reservoir. Thus, there are the following ~~ site fuel. i~ :~ F4 F; 2 i 1 4 i :possible means of dealing with the casinghead gas produced in P3 ~rassociation with the crude oil. 1. The gas may be beneficially used as platform~or shore ., f' I • 2. Tree gas may be mw-r?cet~d to others . 3. The gas Tiiay be injected and stored in a gas reservoir. The pr®duc~tian rate ®f the Gr~.nite P®int F~.el~ could be restricted to the point that gas in e:ccess of the pla'~for~ and marketing requirements is not produced. As suggested above, the various orders of the Alaska Oil and z o j o z Z m C ~ c~ n O Q ¢ v x }- ~ a n ~ X -~ N Z N ~ Z 4 H w p C ~ ~ w 3 ~ W b 2 o"a~ x seas Conservation Committee, beginning with Order No. 32 and coming i down to the order which is appealed from, had ,required that, "Oil. producing operations in the Granite Point Field. be conducted din such a manner that the maximum quantity of casinghead gas be utilized and the quantity of gas flared be kept to a minimum." See Conservation Order No. 61, May 10, 1968, a copy of which is 'attached to this memorandum and the other like orders which preced- i fed Order No. 102. In keeping with such orders, Mobil Oil Corpora- `tion has used and will continue to use certain of the casinghead gas produced by it as platform fuel; and it marketed such of the i casinghead gas as it could. In essence, the Committee has in the ~~past by its orders said that the flaring of excess casinghead gas did not constitute waste since there was no further bene~'icial and economic use for the casinghead gas. With Orders No. 102 and I, 102-A, the Committee has, without evidence of a.change in condition; or circumstances completely reversed itself by prohibiting the ~'~, flaring of such excess casinghead gas. I Procedurally, this change in position came about as follows: In April, 1972 the Alaska Oil and Gas Conse rvation Committee called another in the series of hearings as regards the utiliza- ~ tiara of casinghead gas for May of 1971. The notice requested evi- dente on the following points: 1. Can excess casinghead gas be marketed, injected into any reservoir or pool, or otherwise beneficially: utilized by July 1, 1872? 2. Will the flaring or venting of casinghead gas 3. • • after June 30, 1972, in excess of t:~e amount required for safety consti~ute waste, as "waste" is defined in A.S. 31.05.170(il)? ~. t~~il~, maro vr~.5tc~ bo cauc~d tl~~.n pre~ronted by ~.n order restrictin; production of oil to a rate ~~rhereb,y all produced casinghead ~;as is beneficially utilized or is required for a safe~cy flare? z 0 z'~_ z = a 1 " = N N ~ X J N Z ffi d 2 d ~, LI p ~ W C `a z 3 0 ; J p~j Z ~ o ~ x !Mobil Oi Corporation and the other Granite Paint producer, Amoco Production Company, carne forward at this hearing in May of 1971 i with evidence on the above-mentioned points, which evidence is contained in the record before this Court. As a result of this shearing, Conservation Order No. 102, a copy of which is attached thereto, was entered. Appellant timely requested a rehearing of this order; and a rehearing was granted. .Order No. 102-A, a copy Hof which is also annexed hereto, resulted. The general thrust of Conservation Order No. 102 was to require that all casinghead gas ~be beneficially used by July 1, 1972. The flaring of casinghead f gas, except for an adequate safety flare, was prohibited by this order. We have eliminated as feasible alternatives further use i Hof casinghead gas as platform fuel for the reason that Mobil is ;presently making maximum use of the gas for this purpose; and we 'eliminate as a feasible alternative the injection of casinghead gas in a storage reservoir for the reason that such a procedure would cost on the order of 1.8 million dollars which cost would make this procedure far less desirable than another possibility to be discussed hereinafter. With the elimination of these alternatives, Mobil is left to finding a new market for its casinghead gas or to restricting production of its oil wells so as to limit the supply. of casing= head gas to that which can be used on the ,lease as fuel or marketed On rehearing, representatives of Mobil testified as to the risks of restricting production from its oil wells. Mobil repre- sentatives further testified at considerable length concerning the 4. •~ z z'~_ ~ u ~ ~ _ Q Y ~ }' F' C N o x a ~ z ~~ Z a'F ~ o z 3 0 J `~ = f O a a 2 _ ~ ~ j efforts t~rhich have been made to find additional markets and that ,# ~~they simply do nat exist for the quantities of casinghead gas t 'available. Mobil demonst:^ated to the Alaska Oil and Gas Conserva- s ~~ tion Committee that it ti~~y_1 u,.e o. mar~t~~ a ri c ''~ pproximately 66~ of ~~the casinghead gas ~- j produced in the fu~ure at the Granite Point ~i p latform. Nevertheless, the Committee reaffirmed Order No. 102 €'in its Order No. I02-A. t! ~; Since the entry of Order No. 102-A, construction has com- ~~menced on a gas pipeline for the purpose of transmitting casing- head gas from the west shore of Cook Inlet to the east shore of i 'Cook Inlet. Mobil has been contacted by the operators of this dine, Union and Marathon, as regards a proposal for these operators to take Mobil's Granite Point casinghead gas. The terms of this proposal are so hopelessly unfavorable that .this project cannot realistically be considered an alternative open to Mobil. This (situation is further amplified in the attached affidavit of Vance i~B. Porter, Joint Interest & Gas Development Administrator for NIobil, but in substance, the proposal is that Mobil should give away its casinghead gas. Further, such gas will be taken only if it is capable of being delivered at a pressure not to exceed 1,600 p.s.i., which pressurization will cost Mobil on the order of $500,000.00 capital investment for equipment and $30,000.00 per year in equipment operating costs. In addition, the current ver- sion of the casinghead gas contract would require that Mobil dedi- cate its gas reserves to the contract. Consequently, even in the remote possibility that Mobil is able, in the future, to find a buyer for its casinghead gas, it would be foreclosed from disposing of such casinghead gas by sale. ,This leaves Mobil with only the second alternative which is to restrict production of its oil wells. Because Mobil's witness ~n this point, H. H. Hamilton, Associate Reservoir Engineer, is no 5. ti i _ •` i . ,. t +{+E £t 1i ~rlon~;er available to execute an affidavit, we attach hereto brief ~jexcerpts from the testimony of Mr. .Hamilton at the rehearing in ,~ k; ~~ su~apart of the prapas2t3.an that- restr~.ct~.an of praduct3.on incurs. ~;a serious risk of damaging wells and decreasing the total amount k3 E?of recoverable oil. ~~ We conclude this statement of facts by noting that the ~~record adduced before the Alaska Oil and Gas Conservation Committee ~~is devoid of any testimony showing that the casinghead gas from l~ the Granite Point Field which is presently being flared can be ~~bereficially and economically used anywhere or for any purpose #~orior to July 1, 1972. Similarly, the only direct evidence as to ~zthe Granite Point Field on the effects of a cutback in production ~~is that such-will cause a loss in ultimate recovery of crude oil. E? ARGUMENT It is necessary that a stay be entered in these ~ proceedings ,l at this time for the reason that the effective date of Order No. `102 as affirmed by Order No. 102-A of the Alaska Oil and Gas Con- ~~servation Committee will soo n arrive. As demonstrated by the affidavit of Mr. Porter, the efforts of the Mobil Oil Cor oratio ,p n Ito market additional quantities of casinghead gas produced from the Granite Point Field have continued and will continue in an ,effort to find a market for all of I~ the casinghead gas produced. ~fSuch a market is, however, simply not available at this time. As indicated by the testimony of Mr. Hamilton, cutting back o ~~or restricting production will damage `,:~ appellant's wells and z i c ~,~,,. result in a decrease in the ultimate recovery of oil from the o > < a ~ ?~ ~ ;Granite Point Field. An additional meritorious consideration in n x a W '+ z this regard is the fact that a cutback in production will result h W J nz ~ ,~in a proportionate cutback of revenues to the State. of Alaska t ,immediately in addition to an overall loss of production and reve- ,i ~jnu~, if the ap~~ellant's ~ti~ells are damaged by compliance with. the E~ ~ !g Gm ; 1$ ° . ~, j ,, ,. ~~ l larder of the Alaska Oil and Gas Conservation Committee. z ~ ~ o Z ~ ci .- ~ m a' n o a x L 0 x Q N J z ~ a i E w c Z j C W > O '' O ~ Q H x '! We recognize that the pipeline now under construction holds '~ tho potont~.al ~'or s. future, s.lthough ~'inaneially disastrous., dis- .;position of the appellant's casinghead gas. :°resumably, this smatter will be dealt with more when the merits of this appeal are =considered; however., for purposes of the motion now before the Court, the tremendous cost of putting the casinghead into the Union-Marathon pipeline has a particular significance. It is the appellant's contention that both the law and the facts or both swill cause the Court to order that the Alaska Oil and Gas Conserva- tion Committee vacate Order No. 102 and Order No. I02-A as to the Granite Point Field. It would obviously be most unjust and burden- some upon the appellant to be required to commit the capital re- auired to take part in the pipeline project if, as we contend, the ~+ orders are likely to be reversed. As stated above, Mobil faces °the prospect of committing approximately $500,000.00 in capital (for equipment if it is to so dispose of the casinghead gas to the i i (Union-Marathon pipeline. Mobil will have no way of recouping this ',investment once it is made since it will receive no revenue at all from the casinghead gas delivered to the pipeline. Considering .this matter from the standpoint of the State of Alaska, we submit that the ,state is in no way injured or damaged by a stay of the Alaska Oil and Gas Conservation Committee orders pending this appeal. The only prospect for disposing of the sub- ject casinghead gas will result in no revenue therefrom; and as a consequence, there will be no revenue to the State of Alaska from that disposition of the gas. On the other hand, if during the pendency of this appeal, Mobil can develop a market for this casing head gas, it will certainly do so; and presumably, revenue to the state will be. generated therefrom. Similarly, the State of Alaska will continue to receive the present level of revenues from the 7. ..• • ,~ z ~ ~ z~~;_ ~ u ~' o a < a _ Y O X ~ N J Z. N Q = aFwo D W 4 a Z ~ O J J 0 U ~ o "Q x :, s~ t k ~~ ¢~production of oil whereas if no stay is entered and if production `s ~~ must be cut back, there will be a loss of revenue to the state on ~~ ~~ ~ t~~flp~~~.~+y and perm~.nent b~.sis . 4~ We have set forth the basic authority for this Court grant- Fling a stay oi" Orders Nos. 102 and I02-A of the Alaska Oil and Gas. ~q ~jConservation Committee in the opening paragraphs of this memoran- i f dum. So far as we are aware, there is no direct Alaska case i authority on the granting of stays u:~der this statute; however, Y ~ it is generally recognized that in considering whether ar not to ~~ .grant a stay, the Court should balance the effects of a stay upon _ the appellant as contrasted with the result of enforcement of the ;agency order pending appeal. See Cooper, State Administrative a ~~Law, page 629. Seemingly, this standard was adopted by the. Alaska ~~Supreme Court in the case-of A. J. Industries, Inc. v. Alaska `•Public Service Commission, 470 P.2d 537 (Ak. 1970). While this ~~was a case decided under the Administrative P ~ rocedure Act, .the ~~proposition stated therein would appear to have general applica- ~3tion. The court ruled as follows at page-540: r~ ~ The balance of hardships is determined by weighing ~~ the harm that will be suffered by the plaintiff if (~ an injunction is not granted, against the harm that ~~ will be imposed apon the defendant by the granting i~ of an injunction. The effect of the balance of ~~ ~ hardships approach.on the usual standard of probable ~~ success has much more recently been stated in ~~ Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d .738, 740 (2d Cir. 1953): i ~° To justify. a temporary injunction it is not ~~ necessary that the plaintiff's right to a final ~, decision, after a trial, be absolutely certain, ~~ wholly without doubt; if the other elements are present (i.e., the balance of hardships tips decidedly toward plaintiff), it will or- ` dinarily be enough that the plaintiff" has ~ raised uestions Q going to the merits so serious, substantial, difficult and doubtful, ~~ as to make them a fair ground for litigation ~J and thus for more deliberate investigation. Ii As argued above, we submit that there are few, if any, r, ;benefits to be derived from requiring the appellant to either give '° PI ~± !~ 8. r~ ,• if t~ li __ 1 I .~ • ` • ~ ti j:. { . ~ ~ ~~ f„ ~~ !i at~ray its casi:ighead gas at great expense or partially shutting C~Cxits wells pending this appeal. tiv'e subm~.t that there is most cer- C ~~ ta~.nly ~, moot '"fa~.r ground for litigation" when, as stated above, ~: ~~the appellant has been. ordered to use or market casinghead gas f ~~for which there simply is no present use or market except at a ~; 'substan~ial economic loss and when the alternative is to ~~ ~ partially i ~~snut in wells and thereby incur risk of damaging the wells and ;losing production. ~~ Respectfully submitted this ~`~ da of ~/ ~ r ~~ HOLLAND & THORNTON ~~ Attorneys for:Appellant a ~~ BY z 0 z' C W ~ ~` > O = Q 1 ~ J ~ X `` N Z W Q Z C ~, ui p O ~ < a z 3 0 J m = F- O ~ s 9. IN THE SUPERIOR COURT FOR THE STATE OF ALASKA z _ O W O • f" z Z m ~- ~ ~ ~ ~ O Q Y c ~ X Q N J 2 v < 2 C F„ w 0 ~ W Q a z 3 ~ J Q m = F o"< x 3a THIRD JUDICIAL DISTRICT k+ '` ~o~xL axe caRPaI~ATxoN, Appellant, v. ,i Srl'ATE OF ALASKA, DEPARTMENT OF NATURAL RESOURCES, through its i~ Oil and Gas Conservation t' Committee, AMGCO PRODUC^IGN ~~~~ COi~iPANY, UNION CiL COi`~PANY OF CALIFO NIA, P'tIILLIPS PETROLEUM COMPANY, SKELLY OIL COMPANY, ~' ATLANTIC RICHFIELD CGi~PANY and ~` STyNDARD OIL COMPANY OF CALIFORNIA, Appellees. RECEIV~[~ Depaztrnent of Law A1' K 1 ~J iy~ Office of the Attorney General A.nehorage Branch Anchorage, Alaska ~~ (~ 0 'L - G.. 4S f. VANCE B. PORTER, being first duly sworn, deposes ar.w says ti A F F I D A V I T ~~ ST.=ATE OF ALASKA ) SS . \• Tii~RD JUDICIAL DISTRICT ) No. 71-3~t32 upon oath: 1. I am employed by the Mobi1.0i1 Corporation as Joint Interest and Gas Development Administrator of Mobil's Alaska Exploration & Producing Division at Anchorage, Alaska. Mobil is the operator of State of Alaska Lease ADL-18761 which lease is ,jointly owned by Mobil, 75% of 100%, and Union Oil Company of California, 25~ of 100, which lease is located in the southern portion of the Granite Point Field of Cook Inlet. Mobil Oil Corporation is the operator of said lease and a drilling and pro- duction platform located thereon. ~. In connection with the producing of wells drilled from Mobil's Granite Poi;~t platform which wells have been designated by the Oil & Gas Conservation Committee as producing oil wells, Mobil must of necessity produce quantities of casinghead gas. Thi: N e ~ ~ t ~5 f ~' •~ :# ,> gas is in solution with the crude oil at formation pressure and is released as free gas in the well and at the surface as,~a+r.esult of a reduction of pressure. It is not possible to produce the oil without producing the gas. The presence of such casinghead gas. in solution serves a distinct beneficial purpose in that the freed gas is a form of natural energy which serves to assist in moving the crude oil to the well bore and raising the oil to the surface. In my opinion, the primary beneficial use of casinghead gas is to provide this form of reservoir energy. 3. The Granite Point Field is presently being produced under a water flood project approved by the Alaska Oil & Gas Con- servation Committee in order to maximize ultimate recovery of crude oil. It::is-not practical to reinject casinghead gas into the producing formation; and in fact such reinfection might well 3eopardize the efficiency of the water flood project. It is not economically feasible to infect casinghead gas into a gas reser- voir as such would cost approximately 1.8 million dollars.. , 4. To the extent possible, Mobil's producing and operating z O W ~ zz~,_ ~ W ~ ~ Q Q 4 a = Y N N O X J N Z W Q 2 Q F yj 0 O W ~ W Q 3 ~ W J mi-- O a a x equipment on its Granite Point platform and at its Granite Point shore site are fueled, as authorized by Mobil's lease, with casinghead gas. Additional quantities of casinghead gas are cur- rently being sold to the Atlantic Richfield Company. Currently, Mobil is beneficially using or selling about ~40~ of the total amount of casinghead gas produced from the Granite Point platform; and even if no further markets are ever located, Mobil will use or market approximately 66~ of the total future::~production of casinghead gas. from its Granite Point platform. 5. As regards further marketing of Mobi'1's casinghead gas, I have personally pursued every single inquiry which has come to my attention as offering any prospect at ali for selling additiona: quantities of Mobil's casinghead gas; and all of these inquiries 2. ~r J z' o z ~ ~ _ ~ u c, n O Q Y v O X Q a J Z ~ a z a F w+ o 0 W G a z ; C W O '' J 0 S ~W., opQ x •~. • rave proven fruitless. The basic difficulty with marketing Mobil's casinghead gas is the result of the combined effect of the fact that Moba.l h~~ rcl~tivc~.y little ~;aa to offer by ~.ndu~try ctand~rdP and the fact that the cost of transporti,~; „obil's casinghead gas from the west side of Cook Inlet where it is produced, to the east side of Cook Inlet where the only real prospect for a market exists would be greater than the prevailing price for gas well gas which is already available on the Kenai Peninsula, 6. Since the entry of Order No. 102-A by the Alaska Oil & Gas Conservation Committee, Mobil has received one additional inquiry as regards a potential sale of its casinghead gas'as per the attached letter. Mobil's response to this inquiry is also attached hereto. Mobil will most certainly continue its efforts to procure customers willing to purchase it's casinghead gas. 7. Sinee the entry of Order No. 102-A by the Alaska Oil & Gas Conservation Committee, Mobil, through its representatives, '~ including the undersigned, have become aware of the Union-Marathon project for the construction of a gas pipeline from the west side '~ of Cook Inlet to the east side of Cook Inlet. Mobil has, received a proposal pursuant to which the operators of the pipeline would presumably be willing to take Mobil's casinghead gas. A copy of the present form of this proposal is attached. This proposal call. ~~for Mobil to give away its casinghead gas on a dedicated basis,. by which I mean that Mobil could not withdraw from the agreement even if it located someone willing to purchase its gas; and this proposal further requires that Mobil be able to pressure its casinghead gas to 1,600 pounds per square inch. The equipment necessary to prepare the casinghead gas for this disposition would require a capital investment of $500,000.00 and would require annual operating costs of approximately $30,000.00 for which, as indicated above, Mobil would receive no monetary 3. •1 :,., !+ `' return whatsoever.., ~~ DATED. this ~ day of ~ ,_, 1972. !,I '~ ~~ ' CFA ~~____/..__~%' i/ VANCE B. F~ORTER ' SUBSCRIBED AND SWORN TO before me this day of { ~ `^ t, ~~ _ ~ 19 72 . Notary Public in and for~~A~l~a~ My Commission expires :~~"""~'_' z O W ~ Z Z m ~ W ~ ~ = Q Y a O X Q N J Z N Q z a F w a C~ W ~ m Z ; 0 ~ "~ 0 U ~ O a a • ~$ oz-oois STATE ~ /~ ~iR of ALASKA ®//i% ~ ~~ ~Fo~ ~ .DEPARTMENT _~' _~~_ ._ _,~~ ro: r Homer L. Burrell, Director ~' 4:fr~ Division of Oil and Gas ~ -( s EN.- Department of Natural Resources. ~i .~ f DATE April 13, 1972 ~ GEOL 3 GEOL- '~ I REV ~;. FROnn: John A. Reeder, Jr. ~ ~r^~~. sus~~cr: Mobil Flaring Suit ~ cRaFr-~ Assistant Attorney General -- --~ AGO -Anchorage. coP~~~;: -- FILE:~.~.~-OIL .~" I spoke with Rus Holland today regarding the Mobil flaring suit. He seemed to agree that it would be best for Mobil to wait on its application fora stay until the stay was actually needed, probably when the extension you may grant runs out.. He will pass this by his client and let me know if they feel differently. Otherwise, we will discuss details, such as setting the trial date, at the appeals conference on April 20. JAR:me I~ ~~~~[~ °R ~ 71972 t71b`1S1'~N Ot= Otl AND GAS ~ 7 ... ~ - - .. p ~f t i Union Oii and Gas Division: Western Region Union-0il Company of California 9.09 W. 9th 7~,venue, anchorage, Alaska 99501. Tetephone: (907j 279-7081 , April 7, 1972 ~- j-. i Eugene F. Griffin Mr.'V. B. Porter. .District Opcralions ! .ns3sr JOint Interest sc Gas Anchorage District ,~ Developmen~ Administrator , .. -.. Mobil Oil Corporation Post Office Pouch.7-003 Anchorage, Alaska 99510 Dear Mr. Porter: COOK INLET PIPELINE .SYSTEM Reference is made to your inquiry as to whither or riot Mo}}il v~,~ill have an opportunity to consider participation in that portion of the Union-Marathon gas pipeline system from your Granite Point onshore site to the East side of the Inlet. Pipeline participation is normally based on known gas reserves and ability to deliver these reserves over an extended period of time. In reviewing the. small casinghead gas resen~es now attributed to your Granite Point operation,. we find. these reserves approximate 1% of the total gas reserves nova being considered for delivery through subject system. Further, your platform fuel requirements and recently consurr:nl~:ted sale to 71RCo will greatly reduce the volume of gas that will be available to this system..... In light of the exceedingly low participation percentage and short period of gas avail- abi-lity, we find it difficult to understand Mobil's desire to participate in this pipeline system . In addition, you indicated interest in participation in .only that portion of the system from your Granite Point onshore site to-the. Fast side of the Inlet. This project has been designed as a complete gas transmission system and fractional ownership, in only a portion thereof, would seem most undesirable . We would be happy to discuss this more thoroughly with you. . Very iri y?yours , UNI j ~ OIL. COMPS •'Y, OF i 1 LIFO}~NI~ ~ / ~ ~• l --~ Dis rict '~pcratiens M<~ alter I i IVIAR11TIiQh ~ IL COi\-~,L'P.=f - r .~ . Division Upc:r~tt~otls Man~?ger E?iI-III3IT 5 5_1fi-72 ~~ oz-ooze of ALASKA ~~~~~~~//~//~~~~~~~~~ ~~~% F. ~~~.~~~,~~~~ a~ ~~~z ~~s~u~clrs ~ } v ~ s t ~t= ~ t ~. Al~tr~ BAs To: r ~. Gt #br~afih, .lr. GPa # e f Pefira # ~ End # nee r DATE Apra # ~, #~~~ FROM: ~r L..~it3!"i'@ t t ~ '' ' SUBJECT: ~?a~ # t ~S . Stafie of At aStCa ~~ # r~G't'ai' Via. ~ t ~~4~ ~". ~ ~ d ~• to txreparafi#Qn far tl~e rrese-F sfi~ap #n fibs ca~fi#c3ned case.. ~rhefit~er #fi be ad~Frt-- #sfirative ar #n cc~xsrt, t wautd' suggesfi the fot tour#nr~ # . A revs sit of ~artcaver and re # afied operafi # c~rss ¢erfarr~md by ~, # t at Gran # fie Pa'rnfi, aver- abaufi tl?~3 tfi teae yearn, spec#fytng fiyPe a# weark, period of fitme #nrratved, and resrrtfis of work frcxn bc~#t~ a r~erhan€caI sfancipa#nt arcd c~ aizge # n p r4duc:fi # cart rates 2. Cons#derattan be#~~ ~tven to serving l~b# t and/mr t.~.#an tab is partner afi Gran#te Paintl' w#fih a- subpoena daces tec #n order to r~btatrt the s dafia rent#cx~ed In F~€~. # above, ficther ~#th casfis aS st~€~rn ar} ~e A~ortt#es far Expend#'t~rre. 3. Subpoena#~ t€aca# !+[ # v~#trresses whr~ earl tesfi fy es fio casts and work performed an ~9€ab# i °s Grantfie ~o#nfi p#atfor€n far patlc~fi#an abatement. 4. Su~pc~na# n so€nebady a tse t preferab t~ wt th ~9ob # t ~ to abfiatn evt: dance of fide cas$ of pot#ut#Qrt--ova#d~na actvtt#es s~ as waste ~aatsr d#spasat weals to Texas and afiher areas, as rewired by the retevanfi stafie under ts. pat # ce pQa+e r . t nasm~ae~ as fibs fib rust of Pub # t 's case: a # t # bE tc~ r-eq€rt re fide ~}# f and Gas Guise rvaf t ©n Goy # ttee to car~sr de r ecan~ # cs , t ~ r€~p:ase tar at we bath de ve t op fib # s # nformat# can and earls# der srtbpoemas as ~entt' c~x°€ed, Pt us ar~atever a tse map ac~err to ~, to order fig shc~r fihat fi~te Stafie of Ata~tCa's ~nfi#-waste sfiafiute (~~ 3 t . t35 . ~# ? # s ncat an # ~} reascxtab t e and a Proper- axe rc # se cif patio peer, bufi r~sutfis #n a f#nanc#at burden s#~# tar to fibafi #n~urred in afiber Jurtsdtc-tic~ns in avatdt~ damage frays ~radua't-#an of Batt water ar, #n Atasl,a, fr€~ s~or~aver operations des#gned ~ maintain ar #ncr~ase praducti rafias, as watt as fia avoid pe~#tu##~n. Ott:; r cc: Ct~artes t=. t-lerbert, Ca~issianer i?epartnt of i~3attarat #2eso~rces John Reeder, Ass#stant Rfitarney Generat t:3e~~ri~ment of Law 9 .~. ~:.- d ©5 ~`~ a .~ ~ . April 3, 1972 T~~r. Clayton 12. Ostend _ Znstituto of Agricultural Scianc<is • I~orticutture Depa: i,-neat University of Alaska Collage, Ataslca 99701 Dear Mr. Oslund: Roferenco is :Wade to your teL-fior o; Mc.rch 22, 1972, concerning a proposal for an c~-peri,rr:ental p,iiofi operation of a grocahouse fucliLy. Mobil, as a produce, of oft and gas in Atas:ca, is i-ztero3ted in pursuing any i©ads that may result fn beneficial and ©conornic use o: our products. Tho gas that eve presently produce is casinghoad gas. It is gas that is in solutio-. with the crude oil in the underground reservoir, fs produced with . Che oiI and is released from fihe credo oil as L•Ito pressure upon the oil is lowered by 'oringing it to Lho surface. There is no way that the production of this gas can bo avoided if oil is to be produced. Mobil is the operator of a ptatiozZn in the Granite Point field which is joinL•ly owned with Union Oil Company of Caii:ornia and is currentcly producing about 6, 000 barrels of oil per day and about 7 million cubic feet of casfizghead gas. Of the gas pro- duction, about 2 million cubic fact era used as fuel and otherwise conAUnied • in the conduct of our op station. An aclditio:~at 1 to t. 5 million cubic fact are sold to Atlantic Richfield Comp any for use on their "5parlc" platform. The remainder of the gas, soma ~ to ~. 5 million cubic fact per clay is surplus to our needs and is hared because there is no furL•har economic and beno- ffeiat us© foe the gas, The heatigg. •valuo of this gas is 1100 to 1200 B. T. U. per cubic foot. . The Alaska Oil and Gas Conservation Cor~amitteo has issued as order stating that, effective rely I, 1972, no casing may be flared in excess of that required for a safety flare. Mobil is currently involved in litigation contesting the legality. of the order. • r dir. Ctaytou I~2. O&It~ ~i Patio 2 • ,April 3. 172 i Tho amount of ban in excess of our ncous in forecasted to decrease from the ~ to 4. 5 million cuaic Poet pm. day xnontioned above to nil by about 1973. Thio gas could be rnado available to a pilot project at low cost durinb tha no~:t faw yaars undo certain c:rcunastaacoc~. Thy second paragraph of your letter mentions "the possibility of law cast naturai gas". The cent of casinglzaad gas is basically clopQi~denL- upo:x throe itai~ns. These are (t) com- position, (2) pressures and (3) location. r'a. daU L•o 'ao useable far fuel, it must be free of the heavier rraolocutar weight components which would roliquify under curtain conditions. T:za composition of the Granite Point ' casinghQac3 gas is such. that the gas rnust be processed L-o remove certain co;nponentm before a uyaablo fool is obtained. Thio processin; is a part. of the cost of casinbhoad bas. Sipco cas:n~hoad gas is produced with crude oil, its preasu~•Q, after tibe:ation, is that prcesaure which is maintained in the separation facilities. At Granite point .this ie about 50 pounds pex square inch. Most uses to which the gas can ba put require a hiptier pi•eosure for trs.nsport and use. Cornprosoion to a useable pressure is th~~reforo anotlia•r part of tha cost of casinbhead gas. Tho location of the gas is quite important bacause the znovon~ent of bas over Long distances requires sizabtcs invesL•.-~zents in pipatino and compressor facilities. The portion of the cost of gas related to location is dependent; upon the distanca from source to ultimate consumption. The bay from our G~•anita Point platform is piped to our shoresite which is located in S©ction 23 of T itN 12 t21~~' s. M. Tf your pilot operation could be located naar this silo and could utilixo r©tativoty taw pressure gas (±250 psi) thou, for tha period that eheess gas is available in iha noeossary quantity, N,obii could pravido gaa to your project at a iow cost. L~ you so~da~:ro, Y will bra glad to meet with you to discuss this matter further. Yours very truly, i .r ~ '• ~ . ~ rye ~~ V. B. Porter . Joint Zntorest and Gas ' 17evslopment Administrator VBP / jk ;- . cc: Mr. D. L. Carney ; State Department of EcongmiC 1~3ovelopment .. , , 7th Floor, MacT{ay Building 338 ?~enali • Anchorage, Alaska 99501 . . _~ .5 .. . .~ ;' ~ - ' ~! p ~ i! 3, 1;'! 2 ~I2ri'.1L`:~'^ C-2 .l`~~~:°1C:i'i14L1?'c.s :iC«t;:2CCu L ,~ ? riv.i. 1.Ct;ii.L'TC L~~:L,_'.:'i.i71L':1~: ~2C c^^_ b z ^ Cc ; ~.lr."'. QSI: Y RErC'.2'Ci1CC iS 2i2^,'~u FC) ~a~ lC;~:4~r:«' Ct'' I'.'• :-J'C'L ZLy !~`.(!? 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I ;-c:zr pi?o.' o~ ~::r~.L-ica cotlc? be IUCu.i:Cd I'!c^,`c!1 4:i11.`i .`^i1L.'3 c1i2C~ C,OLllti L?i;II:ZC 1.'Gls':~?L'•'•l.j lUt°I i?XCu L7].^. L^ 3 ~~-~~~ l~Nl.} ti:l~~l, ~.a"1' {:120: 11~1.'LO Z tii~:.4. C.iCC.,f, v` $ is u.VcZ~i:i~JiC3 til ~t?.C C1CCi'.5::~ ry C1LLarll:i.f:y~ IV{Ql?11 CGL?iCI 1)i.'Gi~~,~tCi ~<;:f`i ~O yUL13.' I?;"OjCCi; c^+~ c~ lOi'T CO:,'t. . you e;o d::sire, T ~:=stl. Ue 3lacl do x2:eet ~-:it.a you L-o discus , i:hi~ r_~~i:•es' f ua' l-ilc` r. You;: s vexy truly, ~ ~ - .~ ~/f~ yJ~~oint hzt>e>.~c c((t //~~~ ad G~ :;t e .. •. JJvvi'2l U~Jl ji~!>Ir 1']1aI121C'!IJ 41.4401 VT1'/~l: Cc: ~Sr. D. Ia. C~ ,ncy ~t<f~c I;c:~~a7•tz-:.~^1t oa ?'cc,~.ox.~i.~ pc~r~lo,:~.ictzt EXIIIBI'I =~- • 7th ,,ic~o;:, I~v?,zc'::~}~ I%c.il;:l:!I 5-18-72 _ 333 ~~ .!x li C.. ~.d. X02--" .~aI14,i+Cr'i:f;C'~ t11.1,GT:1 9 jrltil ~ 4 02-0016 STATE of ALASKA ! Ar~-oaes~o~r To: r Homer Blzrrell, Chairman Oil and Gas Conservation Committee DATE FROM: J Ohri A . Reeder, Jr . SUBJECT: Assistant Attorney Ge ral AGO -Anchorage DEPARTMENT March 29, 1972 Mobil Oil Corp. v. S Alaska, No. C:A. 71- DiR L C.:~E l T~ ~ ENG 2 ENC --+ 3 E~iG ~a ~i` ~--_ 5 E~1G ---_.. 1 GfC?L ~2 G`Oi ~- - _EOi L'!T;_ ~ ' kEV SEf~ I ~o~f- vt~1•.~~i The attached. letter was received yesterday from Rus Holland representing Mobil Oil Corporation in the above referenced appeal.. As can be seen from the letter, Rus has asked. me to inquire of the Committee as to .the .feasibility" of stay of the order under review. In addition, he mentions the fact that the Oil and Gas Conservation Committee has not certified its record to the Superior Court. As to the latter observation, the State has not yet been served. and.. I will send. a letter to Rus Holland today pointing out this over- sight. To conceal this rather unimportant advantage any longer wauld serve no useful purpose. I think the Oil and Gas Conservation Committee should proceed to prepare the record of the proceedings for filing with the Court. In this respect, you should estimate the cost of preparing such record as the appellant, Mobil Oil Corporation, is required.. to pay same. r `` You will note from Rus Holland's letter that he ~ ,~ has proceeded on the assumption. that AS 31.05.080 is applic- ~ ~ able in this case to an appeal. I would agree that this . - ~"'` section is applicable except for the fact that it may be ~; ~~_ r, !~~ generally superseded by the Administrative Procedures Act. ~' Does the Committee have a position on this? It is my feeling ~~~~ ;`~~ that it is probably superseded. by the Administrative Procedures 'h ~-°' Act but I would rather proceed under AS 31 unless. you see the loss of some significant tactical advantage in so doing. ~M.. \~ d coy of a letter from this office to ~ Attached.. is a _ ,`~'\~' _- . Rus Holland indicatin that I have asked the Committee formally g ~-- ~ ~ ° whether it would entertain a stay and have set in motion the ~~ ~~ process of reproducing the transcript in this appeal. This ~`` ~ should be followed by a letter stating. whether we intend to ~ proceed under AS 31 or under the Administrative Procedures ;, ~ Act. To this end, I think we should discuss the matter-this week. JAR:me Attachments (2) -k,..t- ~.y,~ ~ ti.~.~.,...~ ®: 0 ~ 6 ~ wl[LtAM A. ELAN, GOVEtNOR" DIF.I'AlR.T1'1~F1T OlH' LA~V OffKE Of iNEATIORNEI' GENERA! 360 KSTREET -SUITE 10S ANg10RAGE 99SOi _._,,, ~~~ H. Russel Holland, Esq. ut~ ~, - q' Holland and Thornton ~ E~''~`~ `~ ~ ~~'~G P. 0. Box 2085 r,~• ri ~~. i L~.ON Or t yt. ".~~ ~ ('.~. .Anchorage, Alaska 99501 ~.~.~~~.r Re: Mobil Oil Corporation v. State of Alaska C.A. No. 71-3432 Dear Rus Thank you for your letter of March 23, 1972. I ' have put the question of a stay to Homer Burrell by memo and should have an answer later this week. In addition, I have set in motion the reproduction of the transcript and will forward you an estimate of the cost as soon as it becomes available. One matter I intended to mention to you last week: The State of Alaska has never been formally served with this case. I would appreciate your doing so now. I think we were omitted originally since the case was filed merely for purposes of preserving your rights on appeal, Finally, I will raise the issue of opening the hearing to additional information t~rith the Committee prior to the trial, as this may in the long run save us all con- siderable time. JAR:me ce: Homer Burrell Very truly yours, ' JOHN E. HAVELOCK ATTORNEY CENERI~L ~ ' By : ~ ,,, ~ Q~ , . ~' J o G A. Reeder, Jr. / Assis nt Attorney General t~~ . ~3 ~ '.j.~~ ~.R ~ - d. `. • ~ ~"?h.Russsc E#o~iahG ~-NbF~-sHEr~M:`(Ka~F~-,. ~~..~r ' ,.. ' -r. .' MRT017R~Y311ND CC-11NStLl.O1~~5 4T i A.s'J . ;..J••.+~iFC61e~'lS7~SIXt-iAVCNt~t: ~...... tELF!'-I.~NE27P-.aati P. O. 60X 20g°i Ah~A CODE 907 wai."~ft i r ~ ANCHOFtAIyE,ALA9KA 995x1 J d \l W.~~y ~ ~'i,....C2t:3., ' i • .:...,..March 23, 1972 ~.. _. r; (, It c; 4 ~ 1. - ~ ~.. ~,, Mr. John Reeder f~'j:~k ~ J g~' Assistant Attorney General 3G0 K Street oir~'is,o;v o~ i~r~. ,-.~~~ ~;.~-; Anchorage, Alaska 99501 ~~,~~_~,,..•-,-, RE: Mobil Oil Corporation v. State of Alaska - _Civil No,_ 71-3432 Dear John: Thank you for taking time out of your schedule .on March 22, 1972, to discuss the matter of .the above- refereneed administrative apphal. I will look forward to 7ie~.rin~ fr~:;r you early next week as to whether or nra?: the state is in a position to agree t:o a stay c ;~ ~:->u: "~,~:~;~ . pion of the op^ration of the order appealed fz~~.. ".ase•~:i .upon"'the faet.> •~ t fc~ - '~ in our affidavit in .1~•-~ port ~~~.~ an early hear'is:~,~~, a c~"~~~ of which is in your: ~';.es. It is m,- under:yt~~ : ;!..ink:, ;: indeod the statute ~.~>:~m to tie sn~c~ific on t`ic~ ;- _..' that *he ne~denc~r of ~~vj.err .r~-~ra~ readings does n~~t of ii;self shay or suspend trite operation of the order under ref-i ew. T1ae Superior Court does pursue an ~ • to A . ^ . 3i . 0 .080 (i:) have the authority to take t:he action urc;~r d:i..cttssion. I ~~m well ,::,aar ~ -. f the fact that it has .been t1~e past pr,~ctice of the. ~z``~rr~~,y General's office to dec~linE~ r-:'?:erinF~ :into such voluntaz~:; stay arrangeme I do not °~~ wher~f= such a practice ::.~ carefull,y poli ~., can po:.:-~~:- !. i.,~ cap ., ;,rou any difficu~! ~. It ;'oes seem to me t-'.• :. •7. . ,±:;~.;,~ :~.. rticularly apprc,r,os °in t;~_s sit? abion `an{i`::'~~s ,x t.h^?; the Oil p. <,as ~`t-~nservatio7= L'ommit~ ,ill ~~• -c:.keu ~:o extend the eiectf-~; date of t::ze no f".:s,e r~rcr~'r for th~~ i'thole inlet b.y reason of the. fact trat she ~'~: i,ipeline pz~esently t~rnder construction wil?: app.~"~~~.tly ,riot tie finished unt11 sore time in November. I gai,l;4-~ z~~ ~ ~~, ~ ~w ` ~ .'Law 1~Hte~,s cal 't~t)f_L.AiVi7 ANU I~HORNYUCd • d r..-a....A- t -:r~~~,..._ .^.: x1"i.:::.._._..w~,SG-_, s:.~'t,.~' i~"'-»-: ~«r: ~ Nt~.:R'~.~... _ ~L"10!~.--=.5.Tt~.«.: ~cL~ ~.. _ _.. Wit''- ..fi_. _ ....... - -.c ~ _2 .,_ 70:..~ ... v. t~lz~. .~nhn fleecier ; ~. • , ••~ ~:. .;tit: rlarch 23 ~ 1972' '.~ I~r.~ .. ,~~~.- ~~ ~'x~ram• t+tr. • I~urr~ell 't}jat; ho ~.s reasonably satisi'i~c~ arlt,h 2;fiu progress which is being made on the pipeline from .which I ~onc.lude that the. other .producers can probably safel,v expect to receive an extension of the effective date of the no flare order. One other matter occurs to me that I did. not mention to you. I have received no .n~acation that, the Oil & Gas :;Conservation Committee has certified its record to the Superior .Court. i am infor~;;f~•a by the calenc~arinE; office ~~'' . the Superior Court that a prehearin(; conference wi ';~~: scheduled in this matter for /1pri1. 20, 1972, at w'n-i.ci~ ~,ne the record will be reviewed. 7 assume that it is at this t:~me that we will make the anUroariate offers of evider.~`, out of the record pursuant to A.S. 31.05.080(b);~hence, it will be critical to have the record available at least several weeks in advance of kpril 20, 1972. I am thinking; about your comment concerning; a remand of this matter to the Oil & Gas Conservation Committee: I am discussing the matter with representatives of Mobil and you might want to do likewise. Sincerely yours, ~ - ~ ~ ~/~ H. Russel Holland HRH/~w ~ cc: Mr. W. R. Harrison 6 ~ ~~~ ~' ,E~ ,~ I. ~~ 1, ~~ , . ~.:.~' ~, , 7 ~~,1 a F1 ~j ~ 'i~•,~c. ,~~ 2 K I ~~a n i. - G.. ' '. iNST17UTE l7r AGRIGULTUK2AL SCIENCEa ` •1=10RTICULTUFYE DEPAR7MEtVT `~~ o~ o-y ~ ' W .- .. ~ ~ - /'~~ i1}~ ~ • X Jc 9 ~~;,y~ 1 '. ~ a ~~fUnhJr• ID17 UNIVERSITY O);' ALASKA C~LLEGE,ALASKA S970i ,~ ~~`~ 1 • ~,r, r h ~~ il~ara~ ~2, 172 • Director of Product Utilization Mobil Oil Corp. • Production and Exploration ~'~ , • 3300 C Street Anchorage, Alaska 99503 Dear Sir: The purpose of this letter is to make contact and begin correspondence on a possible means of utilization of natural gas in Alaska. It is my understanding that natural gas is presently being flared• from offshore wells in the Cook Inlet. It is further understood that federal • regulations will require that such flaring be stopped by July, with the result that a use will have to be made of the gas from these wells. With the situation of excess and the possibility of low .cost natural gas, we in the horticulture department at the University of Alaska • are suggesting and planning an experimental pilot operation of a controlled environment greenhouse facility. The facility would basically include a . power plant with gas-powered generators and heating plant. (\Naste heat from electric generation would be utilized to maximum efficiency) . The heat and electricity will be used to heat the greenhouses and totally controlled environment plant growth houses. A small laboratory for analysis and monitoring the experiments is planned, as well as basil . -office facilities for experiment planning, data analysis, etc. ' The purpose of the project can be briefly stated: To provic)e information for the economical production of salad fruit, vegetable and • floral crops. in Alaska and other northern latitudes on a year-round basis. Reasons for the above objective are manyfold. To outline a few of the major ones, the following are enumerated: 1.) High-quality, lower cost vegetables -Alaskans must depend on produce freighted long distances for their supply. Due to the distance, the cost is high and quality often low. ' .With the rapid advances in greenhouse culture of vegetables (tomatoes, cucumbers, lettuce, etc.), and the high quality of the greenhouse-grown crops, local fresh-picked and . marketed produce competes very favorably even in areas of the U . S . where there is a local'' aut-of-doors' production of the same produce . , i'LI'ANf: 1'il'I't.Y ClY /111tMAll., U.N=I V E R 5 I T Y O I: L~ T•"A S K A 2 Director of Product Utilization -- Dr. Oslund March 22, 1972 2.) Lower cost, higher quality vegetables would undoubtedly improve the nutritional level of the people. This would be especially true of the people with lower income levels, if the produc® would be braught mare in rang® of their limited budgets . It would also be true of the more ."affluent, " who can "afford" the prices of fresh vegetables, but avoid them • due to lack of high quality. 3.) Any Alaskan (or local) industry would enhance the economy of the state as well as that of the local community. 4.) There are many remote communities in Alaska. A controlled environment facility producing fresh vegetables year-round would enhance the diet and quality of life, as well as provide a local industry for these communities. 5.) Development of the trans-Alaska pipeline will create more communities . These communities will have electrical and heat generation. Utilization of the "off peak" electricity and waste heat for food production would increase the efficiency of the station. It would provide the inhabitants with fresh produce of excellent quality, as well as a place for "psychological enrichment" and/or "tempering" with green growing plants in a desert of nearly year-round ice and snow. 6.) GreenY~ouses in northern latitudes or colder climates have less need of summer cooling, a major problem in warmer ., climates. With greater control over the environmental conditions in the greenhouse, winter and summer, more uniform products will result. Colder climates generally have fewer disease and insect problems than do warmer climates. 7.) Potted plants are much more expensive to transport relative to their market value, as compared with.. cut flowers . With advantages of good environmental control producing high- quality potted plants as well as cut flowers, there is excellent potential for local market of potted plants and a probable market for cut flowers . With the relative low cost air freight for ahigh-value, low weight crap such as cut. flowers , .there is also potential for marketing cut flowers elsewhere . • The Institute of.Agricultural Sciences, University of Alaska, has begun a developmental research project concerning the feasibility of • commercial production of food and ornamental crops in controlled• I'I„1"n:il" 111?I''1_Y IlY /111fM/11L. ,. •' -;' U~' IV LIZSITY OI~ A~S KA 3 Marcn 22, 1972 Director of Product Utilization - Dr. Oslund environment situations. The State Department of Economic Development is now partially supporting this research. We are soliciting cooperation • from various state, federal, and private interests, including the major oil and gas operators, for the promotion of the many facets of this program.. Much interest is now being shown for greenhouse crop production on the . Kenai Peninsula . We anticipate that you would be interested to some extent,• since utilization of natural gas would play a very important role in the overall plan. No commitment of your interest or participation is solicited at this time, but we would_.like to know if you might have a •• continuing interest in this •~~ ~ `--~•` project. A detailed plan and proposal will • follow if you• so indicate such interest. • We would also like a comment from you on. sites where gas might • be available for this kind of~facilty, as well as a projected estimate of . gas prices for a large user, such as a several-acre greenhouse facility. • Thank. you for your consideration. I i• ,.: ~ _ Sincerely yours, Clay n R. Oslund :. Assi ant Professor of Horticulture • cro/vk • cc: Mr. Dominic L. Carney Office Manager • State Dept.' of Economic Development • • Anchorage: rLr••nrc: irrri.Y nY nutMnu. _ ~w~ -. _ ..:... t ._~ . ,, iNTITUTE DF AGF?ICULTURAL SCIENCES HDRTICULTURE DEPARTMENT `t,l o~ c ~ x _ ~'~ - 7 ~,. • .. ~ 1917, r t ~`i ~~ ~ UNIVERSITY OI~ ALASKA ~'.'~ COLLEGE. ALASKA 99701 March 22, 1972 Director of Product Utilization Mobil Oil Corp. Production and Exploration 3300 C Street - Anchorage, Alaska 99503 Dear Sir: The purpose of this letter is to make contact and begin correspondence on a possible means. of utilization of natural gas in Alas};.a. It is my understanding that natural gas is presently being. flared from offshore wells in the Cook Inlet, It is further understood that federal regulations will require that such flaring be stopped by July, with the result that a use will have to be made of the gas from these wells. With the situation of excess .and the possibility of low cost natural gas, we in the horticulture department at thl/ University of Alaska are suggesting and planning an experimental pilot operation of a controlled environment greenhouse facility. The facility would basically include a power plant with gas-powered generators and heating plant," .(Waste heat- from electric generation would be utilized to maximum efficiency) . The ,heat and electricity will be used to heat the greenhouses and totally controlled environment plant growth houses, A .small laboratory for analysis and monitoring the experiments is planned, as well as basic office facilities for experiment planning, data analysis, etc. The purpose of the project can be briefly stated:. To provide information for. the economical production of salad fntit, vegetable and floral crops in Alaska and other northern latitudes on a year-round basis. Reasons. for the above objective are manyfold, To outline a,few of the major ones, the following are enumerated.: 1..} high-quality, lower cost vegetables -- Alaskans must . - depend on produce freighted long distances for their supply. Due to the distance, the cost is high and quality often low. • With the rapid advances in greenhouse culture of vegetables (tomatoes, cucumbers, lettuce, etc.), and the. high quality of the greenhouse-grown crops, local fresh-picked and marketed produce competes very favorably even in areas of the U.S, where there is a local out-of--doors production of the same produce, EXT:ITI3TT 3 E'LEA~>F: Fif:f'LY (;1' ~11f;h:r1!(. 5-15-72 ~ . p ~ o 'L - ~-- 1 •tJNIVEItSI1'Y CAF ALASY.A 2 Director of Product Utilization - Dr. Oslund Z,) Lower cost, higher quality vegetables would undoubtedly • improve the nutritional level of the people.. This: would be especially. true of the people with lower income. levels,. if the produce would be brought more in range of their limited budgets, It would also be true of the more "affluent," who can "afford".the prices of fresh vegetables, but avoid them due to lack of high quality, 3,) Any Alaskan (or local) industry .would enhance the economy of the state as well as .that of the local community. 4 ,) There are. many remote communities in Alaska . A .controlled environment facility producing fresh vegetables year-round would enhance the diet and quality of life, ~s well as provide a local industry for these communities . ~~ 5.) Development of the trans-Alaska pipeline willcreate more communities. These communities..-will have. electrical and heat generation. Utilization. of the "off peak" electricity and waste heat for food production would increase the efficiency of the station. It would provide the inhabitants with fresh produce of excellent quality, as well as a place.-for "psychological enrichment".and/or "tempering" with green growing plants. in a desert of nearly year-round ice and snow. 6.) Greenhouses in northern latitudes or colder climates have less need of .summer cooling, a major problem in warmer climates. With greater control over the :environmental . conditions in the greenhouse, winter and summer, more uniform products will result. Colder climates generally have fewer disease and insect problems. than do warmer climates. 7.) Potted plants are much more expensive to transport relative to their market value, as compared with cut flowers, With advantages of good environmental control producing high- quality potted plants as well as cut flowers, there is excellent potential for local mar}>et of potted plants and a probable market for cut flowers. With the relative low cost air freight for ahigh-value, low weight crop such as-cut flowers, there is also potential .for marketing cut flowers elsewhere. The Institute of Agricultural Sciences, University of Alas}ca, has begun a developmental research project concerning the feasibility of commercial production of food and ornamental crops in controlled EXHIBIT 3 5-18-72 PLEASE' Rf'~'t_Y [~Y !~1':;e`,~Jl. • i ' UNIVF'sRSI'i'Y OI~ ALAS~:~ 3 March 22, 1J72 Director of Product. Utilization - Dr, Oslund environment situations, The State Department of .Economic. Development is now partially supporting this research, Vt~e are soliciting cooperation from various state., .federal, and private interests, including the major oil and cjas operators, far the promotion of the many facets of this program, Much interest is now being shown for greenhouse crop production on the Kenai Peninsula, We anticipate that you would be interested to some- extent, since utilization of natural gas would play a very important role. in the overall plan. No commitment. of your interest or participation is solicited at this time, but we would like to know if you might have a continuing interest in this project, A detailed-plan and proposal will follow if you so indicate such interest, We would also like a comment from you on sites where gas might ' be available for this. kind of facility, as weld a a projected estimate of gas: prices for a large user, such as a several-acre greenhouse facility, Thank you. for your consideration. i Sincerely yours, ''1jf`~/ ~ ~ r' Clay~~n R. Oslund Assistant Professor of llorticulture cro/vk cc: Mr, .Dominic L, CarnEY ©ffice Manager - . State Dept, of Economic Development Anchorage D~;TIIIiIT 3 ' ' ~ 5-1s-?2 F'l.l'ASF" f:f f'l_Y f~l' AIRP,1:11t_ ~ , O, ~ d Z ~~ • • IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT MOBIL OIL CORPORATION, ) ) Appellant. ) i ) v. ) ,, STATE OF ALASKA, DEPARTMENT OF ) NATURAL RESOURCES through its ) Oil and Gas Conservation ) Committee, AMOCO PRODUCTION ) COMPANY, UNION OIL COMPANY OF ) ~CAI-~FORN~A, PHILLIPS PE~RQLFUM ) COMPANY, BKELLY OIL COMPANY ) sand ATLANTIC RICHFIELD COMPANY, )~ Appellees. ) No. '7/-332, `~ . aj~~ ~a ~ .L ~~~~ oti 1 fw,J Gd PETITION FOR REVIEW ~~~ COMES NOW the Mobil Oil Corporation, by and through counsel,', Holland & Thornton, and for its petition for review of an action of the Alaska Oil and Gas Conservation Committee on behalf of the Department of Natural Resources, alleges as follows: I. Appellant, Mobil Oil Corporation, is a foreign corporation =wo „.. ° z' " oW~~ Q a J z Q Y ~ 20~a^ = X Q N Ill ~ ~ pj Z N ~ W Q a ~tr3~~ Il! ~ = W F _ !!1 a 2 ~ a licensed to do business in the State of Alaska. Appellant has paid all taxes and fees and filed all required reports as required by .law as a condition of prosecuting this appeal. II. r :. This Cou t h s r a jurisdiction of the instant appeal by virtue '', of A.S. 31.05.08o(b). I Iii ~ III. ~, Appellant, together with the Union Oi1~Company of Califon- ~nia, are now and at all times pertinent hereto have been the lessee under Alaska Oil and Gas Lease No. ADL-18761 which lease- ',hold property is located within the'Third Judicial District~of ,the State of Alaska. '~ i i . I IV. The Alaska Oil and Gas Conservation Committee, by notice .published in the Anchorage, Daily News, April 24, 1971, called a public hearing for May 26, 1971, for the purpose of taking testi- mony as to three matters affecting the flaring of casinghead gas under Conservation Order No. 100, which order was due to expire June 30, 1.971. .Evidence was sought as to the following: 1. Can excess casinghead gas lac marketed, infected into any reservoir or pool, or otherwise beneficially utilized by July 1, 1972? 2. Will the flaring or venting of casinghead gas after June 30, 1972, in excess of the amount required for safety constitute waste, as "waste" is defined in A.S. 31.05.170(11)2 3. Will more waste be caused than prevented by an order restricting production of oil to a rate whereby all produced casinghead gas is .beneficially utilized or is required for a safety flare? V. Subsequent to said public hearing, and by order dated June =mo ~ Z ~ ~ Z O w ~ a ~~>a JZ<Y `~ _ = X 4 N WF-ww z ~ o ~~~a d ~~3~.Wi ~ ~ = W F _ (n ip Z Q 30, 1971, the Alaska Oil and Gas Conservation Committee entered its Order No. 102 as to the Granite Point Field, Middle Kenai Oil Pool. By letter dated July 19, 1971, the appellant timely peti- ~tioned the Alaska Oil and Gas Conservation Committee for a rehear- ing on Order No. 102. By letter dated July 28, 1971, the Alaska Oil and Gas Conservation Committee granted the appellant a re- hearing, the same being scheduled for August 26, 1971. VI. On August 26, 1971, a further hearing was conducted by the Alaska Oil and Gas Conservation Committee regarding the flaring of casinghead gas from the Granite Point Field of. the Middle Kenai Oil Pool, at .which time additional evidence on the three matters set out in the original notice was taken. VII• On October 27, 1971, the Alaska 0i1 and Gas Conservation 2. • Committee entered its Order No. 102-A which in substance reaf- firmed Order No. 102. , IX. .Appellant timely filed a Notice of Appeal in accordance with A.S. 31.05.080(b) on November 15,,-T9~1. X. The grounds for this appeal from Orders No. 102 and 102-A dare: A. In drawing Order No. 102, the Alaska Oil and Gas Conservation Committee has employed much evidence that is irrele- vant to the Granite Point Field (although relevant to other fields in the Cook Inlet) as evidenced by the fact that the exact same order (except for the amounts of gas specified in finding 8) were .entered as to each field in the Cook Inlet of Alaska. Each field..-. i,has totally different circumstances and should be considered on. its own. B. Committee Finding No. l of Order No. 102. that there is zZz~ . ~.. Q o W Ol 1~ F. ~ a J Z Q Y a x°O~a^ = X Q N W ~ W yj Z 0 N N ~ W Q a ~~3~ .Wi ~ W ~ = W F = N w Z ~ a a growing shortage of natural gas in the contiguous 48 states and Hawaii is immaterial to the conclusions and order entered herein. C. Committee Finding No. l upon rehearing is in error for the reason that the applicant did present evidence in the record upon rehearing as to efforts to utilize its casinghead gas outside Alaska. D. Committee Finding No. 2 in support of Order No. 102 is in error for. the reason that it is contrary to 'the evidence which demonstrated that the need for addit oval supplies of gas, if any, cannot be supplied from the Granite Point Field casinghead gas since a buyer for such gas cannot be-found by reason of .the adverse econorhics involved. E. Committee Finding No. 2 upon rehearing is entirely irrelevant to the questions pending before the Committee as re • the use of casinghead gas, there being no showing that any of the entities therein named are now or will be at any particular time in the future ready, willing or able to take casinghead gas from the Granite Point Field. F. Although there was testimony that liquefied natural gas could be utilized in the contiguous ~8 states and Hawaii as stated in Finding No. 3 of Order No. 102, witnesses presenting .evidence to the Committee specifically disclaimed ~,py interest in the ~a~s produced fram the t3ranite Point Field to the west side of Cook Inlet. G. Committee Finding No. 3 upon rehearing is in error and contrary to the evidence presented upon rehearing which affirma- tively demonstrated efforts made by the appellant to sell excess casinghead gas to anyone who would. take it. H. There is no evidence before the Committee to support Finding No. 6 of Order No. 102 to the effect that casinghead gas hand entrained liquids now being flared from the Granite Pointe Field can be beneficially utilized in any manner other than the fuses to which it is .presently being put, i.e., natural reservoir energy.and platform fuel requirements. I. Committee Finding No. 10 of Order No. 102 is in error; O ~ W ~ . z' z z~- go~ JZaY`t N N S O H a n = X Q N W ~N~j z N W < a ~'~""_ 0 ~ItJ3~ W mx~, =u=i°~z ~ a for, although restricting the flaring or venting of casinghead igas from the Mobil Oil Corporation Granite Point Field Platform. Ito a volume necessary for an adequate safety flare will result in !,less gas being 'flared currently, the only testimony presented at the hearing, which testimony was supplemented upon rehearing, was clear and unequivocal that such restriction would reduce the ulti- mate total amount of oil recovered from the Granite .Point Field. J. Committee Finding No. 11 of Order No. 102 is in error, the said finding being contrary to the evidence before the Committee and based upon inadmissable evidence. 4. • K. Committee Finding No. 11 of Order No. 102-A is argu- ~mentative and provides no factual basis for the conclusions breached by the Committee. XI. Union Oil Company of California, Amoco Production Company, Phillips Petroleum Company, Skelly Oil Company and Atlantic Rich- (field Company are named appellees herein for the reason that said lappellees have an ~nte~~~t or inte~osts in oil and has lea~e~ in the Granite Point Field of the Middle Kenai Oil Pool. XII. The only competent evidence before the Oil and Gas Conserva- tion Committee demonstrated that casinghead gas from the Granite (Point Field was currently beneficially used or marketed to the maximum and could not be reinjected or otherwise beneficially used. The conclusion ,(Conclusion No. 1 of Order No. 102) that One year is a reasonable period of time in which to complete arrangements for use of excess casinghead !, gas currently being flared is based upon no evidence. XIII. The conclusions and directives of Order No. 102 are `not Q_'~. z Z O W ~ v gzaY~' _ = X G N W ~' N ~ Z ~~30'' W l1J ~ = W =v=i°z a a based upon any proper, relevant findings and constitute an arbi- trary and capricious abandonment of the policy set by Committee Order No. 100 and similar prior orders which recognized that Granite Point is an oil field, that casinghead gas was being used beneficially to provide lift for oil, that to the extent possible such gas was being beneficially used as platform fuel or marketed, and that flaring of the remaining gas did not constitute waste. WHEREFORE, appellant prays that Conservation Orders No. 102 and No .. 102-A. be vacated and that this matter be remanded to the Alaska Oil. and Gas Conservation Committee for. the purpose of the entry of new findings, conclusions and orders consistent with 5. ~ • M the evidence then contained in the record. DATED this ~ day of ~ Lc~1 1971 • HOLLAND & THORNTON Attorneys for Appellant By H. Russe QZ'~ . o~ Q O W W ~ J Z Q Y ~ = o f N N = X Q N W F" tl! ~ 2 U)~WQ a ~. W ~ ~ W ~ = F =N_IOZ ~ a ~ f r . 6 3 a -wo ~~ z Owm~ ~I-.>Qa JZax~' 2 0 f a n _ % aJ N W F. tll ~ 2 N ~ W C a ~4J3~ W = O U F. x N w Z ~ a ., STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS Alaska Oil and Gas Conservation Committee MOBIL OIL CORPORAThON, ) Appellant, ) v. STATE OF ALASKA, DEPARTMENT OF NATURAL RESOURCES through its Oil and Gas Conservation Committee, AMOCO PRODUCTION COMPANY, UNION OIL COMPANY OF CALIFORNIA, PHILLIPS PETROLEUM COMPANY, SKELLY OIL COMPANY and ATLANTIC RICHFIELD COMPANY, Appellees. j RM. 1~ ~~ ~- G .~ ~ ; j~..~~~ T ~ Z-' NOTICE OF APPEAL Pursuant to A.S. 31.05.080(b), Mobil Oil Corporation hereby gives notice of appeal to the Superior Court of the State of Alaska, Third Judicial District, from Conservation Orders 102 and No. 102-A of the Alaska Oil and Gas Conservation Committee restricting the flaring or venting of casinghead gas from the Granite Point Field, Middle Kenai 031 Pool. As required by the above-cited statute, the appellant has this day filed with the above-named. court its Petition for Review of the above-cited order. DATED this ~~ day o~f ~~ ._ , 1971. HOLLAND & THORNTON Attorneys for Appellant By ~ ~" ~ .~`'%' 'H. Russel Holland v i
