The URL can be used to link to this page

Home My WebLink AboutO 072 • Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. 0 7a Order File Identifier Organizing (done) ❑ Two -sided IIIIIIIMIII ❑ Rescan Needed 111 1111 1 1111 RESCAN DIGITAL DATA OVERSIZED (Scannable) ❑ Color Items: ❑ Diskettes, No. ❑ Maps: ❑ Greyscale Items: ❑ Other, No/Type: ❑ Other Items Scannable by a Large Scanner ❑ Poor Quality Originals: OVERSIZED (Non - Scannable) ❑ Other: ❑ Logs of various kinds: NOTES: ❑ Other:: BY: Maria Date: 3/7//:)._ /s/ Y1/1 P Project Proofing I 1111111111 BY: AIM Date: 3 / /s/ P Scanning Preparation x 30 = + = TOTAL PAGES f (Count does not include cover sheet) vvi BY: Maria Date: 3/ 7//. /s/ Production Scanning 1 II III Stage 1 Page Count from Scanned File: 0 (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: t` YES NO BY: Maria Date: 3/'/ /c. /s/ v vt p Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO BY: Maria Date: /s/ Scanning is complete at this point unless rescanning is required. 1111E11M IIII ReScanned 1 1111111111111111 BY: Maria Date: /s/ Comments about this file: Quality Checked III IIEII 11111'1 III 1/17/2012 Orders File Cover Page.doc • • INDEX OTHER ORDER NO. 72 MCARTHUR RIVER FIELD TRADING BAY FIELD TRADING BAY UNIT 1. Background Information • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: BY ITS OWN MOTION the Alaska Oil and Gas ) Docket 12 -04 Conservation Commission, in accordance with 20 ) Other Order No. 72 AAC 25.539 issues a Temporary Emergency Order ) authorizing the storage of McArthur River oil and ) McArthur River Field Trading Bay oil at Cook Inlet Energy's Kustatan ) Trading Bay Field Production Facility. ) Trading Bay Unit ) January 25, 2012 NOTICE CLOSING DOCKET BY THE COMMISSION: The Commission has the closed the Docket in the above captioned matter. ENTERED AND EFFECTIVE at Anchorage, Alaska and this 25th day of January, 2012. BY DIRECTION OF THE COMMISSION \( 1 k Jod olombie Spec a1 Assistant to the Commission r STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: BY ITS OWN MOTION the Alaska Oil and ) Docket 12 -04 Gas Conservation Commission, in ) Other Order No. 72 accordance with 20 AAC 25.539 issues a ) Temporary Emergency Order authorizing ) McArthur River Field the storage of McArthur River oil and ) Trading Bay Field Trading Bay oil at Cook Inlet Energy's ) Trading Bay Unit Kustatan Production Facility. ) ) January 25, 2012 TEMPORARY EMERGENCY ORDER The inability to offload stored oil to tanker for transport to the refinery has been a recurring problem in Cook Inlet this winter due to persistent and unexpected ice conditions. On January 20, 2012, Hilcorp Alaska LLC ( Hilcorp) contacted the Alaska Oil and Gas Conservation Commission (AOGCC) to advise that storage of produced oil at their Trading Bay Production Facility was nearing capacity. Hilcorp indicates that without the ability to drawdown oil stored at Trading Bay Production Facility it will be forced to begin shutting in Cook Inlet platform oil producing wells, possibly as early as January 24, 2012. A solution to alleviate the need to shut down Cook Inlet offshore oil production would be to allow diverting stored oil at Trading Bay Production Facility to Cook Inlet Energy's Kustatan Production Facility. This process was previously approved in Conservation Order 646 dated May 6, 2011, which provided for the temporary storage of oil at Kustatan Production Facility during 2011 while maintenance was performed on Trading Bay Production Facility storage tanks. Conservation Order 646 was issued to Union Oil Company of California (Union) and expired December 31, 2011. Agreements between Cook Inlet Energy and Union assured the AOGCC that there would be no custody transfer concerns, that the Union produced oil would be isolated and regulatory - compliant hydrocarbon measurement would be performed before any custody transfer occurred. The AOGCC previously determined the following in support of Conservation Order 646: 1) The unavailability of Drift River Facility storage tanks significantly reduces the storage capacity for oil produced from Hilcorp (formerly Union) oil wells located on Cook Inlet platforms. The Drift River Facility, the only tanker offloading terminal located on the west side of Cook Inlet, supports the Trading Bay, Granite Point, and Kustatan Production Facilities. 2) At least eleven wells on Hilcorp- operated Cook Inlet platforms within the McArthur River and Trading Bay fields are completed with an electrical submersible pump (ESP) for artificial lift of produced oil to surface. The ESP wells account for 25 percent of the oil well count and 60 percent of Hilcorp's oil production from those fields. 3) Shutting in ESP wells creates a significant risk of ESP failure requiring rig workover. Other Order No. 72 W 0 2 Temporary Emergency Order January 25, 2012 4) Temporary utilization of excess storage at Cook Inlet Energy's Kustatan Production Facility will eliminate the need to shut in ESP wells. 5) Kustatan Production Facility tanks to be used by Hilcorp can be separated from the rest of the facility by block valves and security seals. Only oil and basic sediment and water (BS &W) from McArthur River and Trading Bay fields — currently stored at Trading Bay Production Facility - will flow into the Kustatan Production Facility tanks set aside for Hilcorp. In addition, the winter conditions in Cook Inlet create the following challenges: 1) Active producing wells and surface production handling equipment must be protected from freeze -back affects when extended shut -ins are expected. Oil producing wells from McArthur River and Trading Bay fields have a high water cut which creates additional time constraints for completion of freeze protecting the wells and production handling equipment. 2) Cook Inlet ice conditions have restricted tankers from accessing the offloading terminal at Drift River as needed to draw down oil stored at Trading Bay Production Facility and other west side Cook Inlet onshore production facilities. Temporary storage of oil from McArthur River and Trading Bay fields at Cook Inlet Energy's Kustatan Production Facility will not promote waste, affect correlative rights, or result in harm to human health or the environment. NOW, THEREFORE, IT IS ORDERED: 1. In accordance with 20 AAC 25.539, the AOGCC authorizes the storage of oil and BS &W from Hilcorp's McArthur River and Trading Bay fields (Trading Bay Unit) at Cook Inlet Energy's Kustatan Production Facility. Verbal approval was granted to Hilcorp on January 20, 2012, subject to the same conditions included in Conservation Order 646. 2. Hilcorp must provide AOGCC evidence that the Kustatan Production Facility tanks and the pipelines from Trading Bay Production Facility to be used by Hilcorp are isolated. AOGCC may request an opportunity to confirm by inspection. 3. This temporary emergency order remains in effect through March 31, 2012 unless a different expiration date is determined as provided in 20 AAC 25.539(c). ENTERED at Anchorage, Alaska, and dated January 25, 2012. .4.01 Daniel T. Seamount, Jr., Chair, Commissioner "4,(: )',,, , / , "f OIL Akta Alaska Oil and Gas Conservation Commission y *a l ' , ikt 2 IVO 4 002, 9 J •W . Nor an, ommiss' • ner Alaska !' d Gas Conservation Commission Other Order No. 72 4110 • 3 Temporary Emergency Order January 25, 2012 RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. As provided in AS 31.05.080(b), "[t]he questions reviewed on appeal are limited to the questions presented to the AOGCC by the application for reconsideration." In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 Ft. Worth, TX 76102 -6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton President 408 18 Street 6900 Arctic Blvd. Golden, CO 80401 -2433 P.O. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Bernie Karl CIRI K &K Recycling Inc. Land Department Baker Oil Tools P.O. Box 58055 P.O. Box 93330 795 E. 94 Ct. Anchorage, AK 99515 -4295 Fairbanks, AK 99711 Anchorage, AK 99503 North Slope Borough Richard Wagner Gordon Severson Planning Department P.O. Box 60868 3201 Westmar Circle P.O. Box 69 Fairbanks, AK 99706 Anchorage, AK 99508 -4336 Barrow, AK 99723 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Penny Vadla Cliff Burglin 399 West Riverview Avenue 319 Charles Street Soldotna, AK 99669 -7714 Fairbanks, AK 99701 \\T • Fisher, Samantha J (DOA) From: Colombie, Jody J (DOA) Sent: Wednesday, January 25, 2012 3:44 PM To: Aaron Gluzman; Ben Greene; Bruce Williams; Bruno, Jeff J (DNR); caunderwood @marathonoil.com; Casey Sullivan; Dale Hoffman; David Lenig; Donna Vukich; Eric Lidji; Franger, James M (DNR); Gary Orr; Smith, Graham 0 (PCO); Greg Mattson; Heusser, Heather A (DNR); Jason Bergerson; jill.a.mcleod @conocophillips.com; Joe Longo; King, Kathleen J (DNR); Lara Coates; Lois Epstein; Marc Kuck; Steele, Marie C (DNR); Mary Aschoff; Matt Gill; Maurizio Grandi; Ostrovsky, Larry Z (DNR); Bettis, Patricia K (DNR); Peter Contreras; Richard Garrard; Ryan Daniel; Sandra Lemke; Talib Syed; Ted Rockwell; Wayne Wooster; Woolf, Wendy C (DNR); William Hutto; William Van Dyke; (michael.j.nelson @conocophillips.com); (Von.L.Hutchins @conocophillips.com); AKDCWelllntegrityCoordinator; Alan Dennis; alaska @petrocalc.com; Anna Raft Barbara F Fullmer; bbritch; bbohrer @ap.org; Bill Penrose; Bill Walker; Bowen Roberts; Brandon Gagnon; Brandow, Cande (ASRC Energy Services); Brian Havelock; Bruce Webb; caunderwood @marathonoil.com; Chris Gay; Claire Caldes; Cliff Posey; Crandall, Krissell; D Lawrence; dapa; Daryl J. Kleppin; Dave Harbour; Dave Matthews; David Boelens; David House; Scott, David (LAA); David Steingreaber; ddonkel @cfl.rr.com; Dennis Steffy; Elowe, Kristin; Erika Denman; Francis S. Sommer; Fred Steece; Garland Robinson; Gary Laughlin; schultz, gary (DNR sponsored); ghammons; Gordon Pospisil; Gorney, David L.; Greg Duggin; Gregg Nady; Gregory Geddes; gspfoff; Jdarlington (jarlington @gmail.com); Jeanne McPherren; jeff.jones @alaskajournal.com; Jones, Jeffery B (DOA); Jerry McCutcheon; Jill Womack; Jim White; Jim Winegarner; news @radiokenai.com; Easton, John R (DNR); John Garing; John Katz (john.katz @alaska.gov); John S. Haworth; John Spain; Jon Goltz; Jones, Jeffrey L (GOV); Judy Stanek; Houle, Julie (DNR); Kari Moriarty; Kaynell Zeman; Keith Wiles; Kelly Sperback; Kim Cunningham; Ostrovsky, Larry Z (DNR); Gregersen, Laura S (DNR); Marc Kovak; Mark Dalton; Mark Hanley (mark.hanley @anadarko.com); Mark P. Worcester; Kremer, Marguerite C (DNR); Michael Dammeyer; Michael Jacobs; Mike Bill; mike @kbbi.org; Mike Morgan; Mikel Schultz; Mindy Lewis; MJ Loveland; mjnelson; mkm7200; knelson @petroleumnews.com; Nick W. Glover; NSK Problem Well Supv; Patty Alfaro; Decker, Paul L (DNR); Paul Figel; Randall Kanady; Randy L. Skillern; Delbridge, Rena E (LAA); Renan Yanish; rob.g.dragnich @exxonmobil.com; Robert Brelsford; Robert Campbell; Ryan Tunseth; Scott Cranswick; Scott Griffith; Shannon Donnelly; Sharmaine Copeland; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); Sondra Stewman; Steve Lambert; Moothart, Steve R (DNR); Steven R. Rossberg; Suzanne Gibson; tablerk; sheffield @aoga.org; Taylor, Cammy 0 (DNR); Davidson, Temple (DNR); Teresa Imm; Terrie Hubble; Thor Cutler; Tim Mayers; Tina Grovier; Todd Durkee; Tony Hopfinger; trmjrl; Vicki Irwin; Walter Featherly; Will Chinn; Williamson, Mary J (DNR); yjrosen @ak.net; Ballantine, Tab A (LAW); Brooks, Phoebe L (DOA); Colombie, Jody J (DOA); Crisp, John H (DOA); Davies, Stephen F (DOA); Fisher, Samantha J (DOA); Foerster, Catherine P (DOA); Grimaldi, Louis R (DOA); Herrera, Matt F (DOA); Johnson, Elaine M (DOA); Jones, Jeffery B (DOA); Laasch, Linda K (DOA); Bender, Makana K (DOA); Herrera, Matt F (DOA); Maunder, Thomas E (DOA); McIver, Bren (DOA); McMains, Stephen E (DOA); Mumm, Joseph (DOA sponsored); Noble, Robert C (DOA); Norman, John K (DOA); Okland, Howard D (DOA); Paladijczuk, Tracie L (DOA); Pasqual, Maria (DOA); Regg, James B (DOA); Roby, David S (DOA); Saltmarsh, Arthur C (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA) Subject: Other 72 Temporary Emergency Order Kustatan Production Facility Attachments: Other 72.pdf Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage „4k 99501 (907)793 -1221 (phone) (907)276 -75 (fax) 1 I i i • Regg, James B (DOA) From: Chris Myers [cmyers ©hilcorp.com] � tl'4 < <2 Sent: Tuesday, January 24, 2012 12:18 PM To: Regg, James B (DOA) Subject: RE: Temporary Storage at Kustatan Jim, Basically, sustained below average temperatures are creating heavy ice buildup in the Northern Cook Inlet affecting vessel docking and travel. This is causing long delays in the shipping schedules. The dates and times for the ship arrival has become a continually moving target. Thanks, Chris Myers Operations Manager TBU /TBF /CIPL E1ileot p Alaska i.l.t' Work 907 - 777 -8333 CeII 907 - 398 -9955 Fax 907- 777 -8510 From: Regg, James B (DOA) [mailto:jim.reggftalaska.gov] Sent: Tuesday, January 24, 2012 9:10 AM To: Chris Myers Subject: RE: Temporary Storage at Kustatan Thanks, Chris. One more request. Please summarize the challenges you have experienced this winter in getting tankers to Drift River. Jim Regg AOGCC 333 W. 7th Ave, Suite 100 Anchorage, AK 99501 907 - 793 -1236 From: Chris Myers [mailto:cmyers@ hilcorp.com] Sent: Monday, January 23, 2012 12:59 PM To: Regg, James B (DOA) Subject: RE: Temporary Storage at Kustatan Jim, This will be for TBPF production only. No Gra e point oil. With the exception of when we empty th:. anks and pipeline later, there will no commingling of and Cook Inlet Energy's production. We will explain the evacu. ion process in the new agreement. We are still working with Cook 1► et Energy on the agreement and we will not put any fluid into their system without the agreement in place. Thanks, Chris Myers Operations Manager TBU /TBF /CIPL 1 Regg, James B (DOA) From: Chris Myers [cmyers @hilcorp.com] Sent: Monday, January 23, 2012 12:59 PM�,^ l'23`�� To: Regg, James B (DOA) Subject: RE: Temporary Storage at Kustatan Jim, This will be for TBPF production only. No Granite point oil. With the exception of when we empty the tanks and pipeline later, there will no commingling of and Cook Inlet Energy's production. We will explain the evacuation process in the new agreement. We are still working with Cook Inlet Energy on the agreement and we will not put any fluid into their system without the agreement in place. Thanks, Chris Myers Operations Manager TBU /TBF /CIPL Ililc <zrp :\laska i.I,C' Work 907- 777 -8333 Cell 907 - 398 -9955 Fax 907 - 777 -8510 From: Regg, James B (DOA) [mailto:jim.reo t alaska.gov] Sent: Monday, January 23, 2012 12:35 PM To: Chris Myers Subject: Temporary Storage at Kustatan I need some clarification from you about temporarily storing oil at Kustatan so our emergency order is accurate: - Are you diverting production from TBPF only? What about Granite Point oil? [original approval was for Trading Bay Unit /McArthur River field oil production]. - I need to understand your agreement with CI Energy; to accommodate Hilcorp storage needs at Kustatan, will CI Energy be commingling WMRU and Redoubt production? If so, AOGCC will have to reissue or extend by admin approval CO 644 which allows commingling of WMRU and Redoubt oil production with certain conditions. It would help if we could get a written description of what Hilcorp's plans are; response to this email is sufficient. Jim Regg AOGCC 333 W. 7th Ave, Suite 100 Anchorage, AK 99501 907 - 793 -1236 1 • Regg, James B (DOA) From: Foerster, Catherine P (DOA) 1 `v Sent: Friday, January 20, 2012 4:07 PM (2e,lq To: Regg, James B (DOA) Cc: Seamount, Dan T (DOA); Norman, John K (DOA) Subject: Re: Request for Temporary Storage of Produced Oil at Kustatan Production Facility I concur. Sent from my iPad On Jan 20, 2012, at 6:57 PM, "Regg, James B (DOA)" <iim.regg(alalaska.gov> wrote: > I received a call from Hilcorp's Chris Myers (777 -8333) this afternoon about temporarily storing oil at Kustatan as was done earlier this year. Reason for today's request is ongoing challenge of getting tankers into Cook Inlet due to ice, preventing the offloading of oil stored at Westside Cook Inlet tank farms. Mr. Myers indicated that Hilcorp's tank farms (Granite Pt, Trading Bay) will be full on January 24 and only option will be to shut in production from the platforms if cannot use the excess storage capacity at Kustatan. As you are aware, storage of oil at Drift River is not allowed. [Hilcorp is working with ADEC parallel to this request for emergency approval to use 1 tank at Drift River.] There are numerous concerns associated with shutting in the platform wells. > According to Mr. Myers, Hilcorp would enter into the same agreement that Chevron had with CI Energy; same transport and custody transfer measurement protocols would be implemented as outlined in CO 646 (expired December 31, 2011). I discussed options for allowing this temporary storage at Kustatan with Tab Ballantine - he suggests an emergency order allowing the temporary storage because of circumstances; most of findings and conclusions from CO 646 are valid. An administrative approval extending CO 646 would not seem appropriate in this situation given reason for temp storage is different and different company. > Recommendation: grant approval to Hilcorp for the temporary storage of oil at Kustatan subject to the same conditions imposed in CO 646. If you concur, I will give Mr. Myers verbal approval and follow up with formal written correspondence (emergency order) next week. I also recommend approval be granted for remainder of ice season (through end of March 2012). I will ask Hilcorp to provide written confirmation from CI Energy about agreements to use storage at Kustatan. > Jim Regg > AOGCC > 333 W. 7th Ave, Suite 100 > > Anchorage, AK 99501 1 1 1 Regg, James B (DOA) From: Regg, James B (DOA) Sent: Friday, January 20, 2012 3:57 PM c (- /70/1v To: Foerster, Catherine P (DOA); Seamount, Dan T (DOA); Norman, John K (DOA) Subject: Request for Temporary Storage of Produced Oil at Kustatan Production Facility Attachments: co646.pdf; co646- 001.pdf I received a call from Hilcorp's Chris Myers (777 -8333) this afternoon about temporarily storing oil at Kustatan as was done earlier this year. Reason for today's request is ongoing challenge of getting tankers into Cook Inlet due to ice, preventing the offloading of oil stored at Westside Cook Inlet tank farms. Mr. Myers indicated that Hilcorp's tank farms (Granite Pt, Trading Bay) will be full on January 24 and only option will be to shut in production from the platforms if cannot use the excess storage capacity at Kustatan. As you are aware, storage of oil at Drift River is not allowed. [Hilcorp is working with ADEC parallel to this request for emergency approval to use 1 tank at Drift River.] There are numerous concerns associated with shutting in the platform wells. According to Mr. Myers, Hilcorp would enter into the same agreement that Chevron had with CI Energy; same transport and custody transfer measurement protocols would be implemented as outlined in CO 646 (expired December 31, 2011). I discussed options for allowing this temporary storage at Kustatan with Tab Ballantine — he suggests an emergency order allowing the temporary storage because of circumstances; most of findings and conclusions from CO 646 are valid. An administrative approval extending CO 646 would not seem appropriate in this situation given reason for temp storage is different and different company. Recommendation: grant approval to Hilcorp for the temporary storage of oil at Kustatan subject to the same conditions imposed in CO 646. If you concur, I will give Mr. Myers verbal approval and follow up with formal written correspondence (emergency order) next week. I also recommend approval be granted for remainder of ice season (through end of March 2012). I will ask Hilcorp to provide written confirmation from CI Energy about agreements to use storage at Kustatan. Jim Regg AOGCC 333 W. 7th Ave, Suite 100 Anchorage, AK 99501 907 - 793 -1236 I I 1 • �7 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage, Alaska 99501 Re: THE APPLICATION OF Union Oil ) Docket Number: C0 -11 -13 Company of California for an Order ) Conservation Order No. 646 authorizing temporary storage of ) McArthur River oil and Trading Bay oil at ) McArthur River Field Cook Inlet Energy's Kustatan Production Facility. ) Trading Bay Unit ) Kenai Peninsula Borough, Alaska ) May 6, 2011 IT APPEARING THAT: 1. By application dated March 2, 2011 Union Oil Company of California (Union) applied to the Alaska Oil and Gas Conservation Commission (Commission) for an order authorizing temporary storage of McArthur River oil and Trading Bay oil at Cook Inlet Energy (CIE)'s Kustatan Production Facility (KPF). 2. On March 10, 2011 pursuant to 20 AAC 25.540, the Commission published in the Peninsula Clarion notice of opportunity for public hearing on April 14, 2011. 3. The Commission held a public hearing on April 14, 2011 at 333 West 7 Avenue, Suite 100, Anchorage, Alaska 99501. Testimony was presented by CIE and Union. 4. No protests to the application were received. 5. The hearing record was held open until April 22, 2011 so that CIE and Union could provide written responses to Commission inquiry. FINDINGS: 1. Prior to March 23, 2009 Union stored oil from the McArthur River and Trading Bay Fields at the Drift River terminal. Mount Redoubt volcanic eruptions beginning on that date now prevent oil storage at the terminal. Terminal piping has been reconfigured to allow oil to be pumped directly onto a tanker. 2. McArthur River and Trading Bay oil is currently stored at Union's Trading Bay Production Facility (TBPF). Trading Bay tank capacity is equivalent to about 18 days of production. Routine tank maintenance and repair reduce available storage capacity, and as the storage limit is reached, McArthur River and Trading Bay wells must be shut in to accommodate tanker scheduling. 3. Eleven Union wells completed with electric submersible pumps (ESP) account for 26% of producing wells and 60% of oil produced from the McArthur River and • Conservation Order 646 Page 2 West McArthur River, Redoubt Shoal May 6, 2011 Trading Bay Fields. Shutting in ESP wells exposes Union to significant risk of ESP failure requiring a rig workover. 4. To provide temporary substitute storage capacity during regularly scheduled tank maintenance, Union wishes to utilize two of CIE's KPF storage tanks. Temporary utilization of CIE tanks would eliminate the need to shut in Union's ESP wells. Union would deliver some of its McArthur River and Trading Bay oil to CIE, which would receive, store, handle and redeliver the oil into the Cook Inlet Pipe Line for ultimate delivery. 5. KPF storage tanks to be used by Union will be separated from the rest of the facility by block valves and car seals. Only Union's oil and BS&W will be allowed by CIE into these tanks and the pipeline between the tanks and Union's TBPF. CIE will not allow either its oil or other liquids, or third party liquids, into the tanks and pipeline. 6. Union proposes to store oil in CIE's KPF for approximately 4 months beginning in June, 2011, at which time one of Union's TBPF storage tanks is scheduled for maintenance and repair. CONCLUSIONS: 1. The Drift River terminal configuration and Union's regularly scheduled oil storage tank maintenance and repair reduce available storage capacity to the point that Union must shut in some McArthur River and Trading Bay ESP wells. 2. Frequent well shut in renders ESPs susceptible to failure, and replacing ESPs requires rig workover. 3. Temporary storage of Union's McArthur River and Trading Bay oil in CIE's KPF will allow Union to avoid production upsets that would likely follow the shut in of Union's McArthur River and Trading Bay wells. 4. Spare KPF storage tanks can be effectively isolated from the rest of KPF. 5. Temporary storage of Union's McArthur River and Trading Bay oil at CIE's KPF will not promote waste, affect correlative rights, or result in harm to human health or the environment. NOW, THEREFORE, IT IS ORDERED THAT the following rules, in addition to statewide requirements under 20 AAC 25, apply to the storage of Union's McArthur River oil and Trading Bay oil at CIE's KPF: Rule 1: Temporary storage of Union's McArthur River oil and Trading Bay oil at CIE's KPF is approved. Rule 2: This approval expires on November 1, 2011. • • Conservation Order 646 Page 3 West McArthur River, Redoubt Shoal May 6, 2011 Note that this Order does not authorize CIE to commingle West McArthur River and Redoubt Shoal oil. Conservation Order No. 644 governs CIE oil commingling. DONE at Anchorage, Alaska, and dated May 6, ?011. • © • 1 `orm. , Com 1111111 Alaska it d Gas Conservation Commission - Cathy Foerster, Commissioner " w +` ` ` Alaska Oil and Gas Conservation Commission RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a). within 20 days alter written notice of the entry of this order or decision. or such funk!' time as the Commission grants for good cause shown. a person affected by it may file with the Conunission an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of nine shall he 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to he etoneous. The Commission shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is tiled. Failure to act 00 it s ithin 10 -days is a denial of reconsideration. If the Commission denies reconsideration, upon denial. this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST he tiled within 33 days alter the date on which the Commission mail:. OR 30 days if the Commission otherwise distributes. the order or decision denying reconsideration, UNLESS the denial is by inaetion. in which ease the appeal MUST he filed within 40 days after the date on which the application for reconsideration was IiteJ. If the Commission grants an application for reconsideration, this order or decision does not become final. Rather. the order or decision no rectnrsideration will he the FINAL order or decision of the Commission. and it may be appealed to superior court. That appeal MUST be tiled within 33 days after the date on which the Commission mails. OR 30 days if the Commission otherwise distributes. the order or decision on reconsideration. As provided in AS 31.05.080(b). "Nile questions revicoed on appeal are limited to the questions pnxertted to the Commission by the application for reconsideration." In computing a period or time above. the date of the event or default alter which the designated period begins to nm is not included in the peiod. the last day of the period is included. unless it falls on a weekend or state holiday, in which event the period runs until 5 :00 p.m. on the neat day that does not fall on a weekend or state holiday. • 410 _ezb STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7 Avenue, Suite 100 Anchorage, Alaska 99501 Re: THE APPLICATION OF Cook Inlet ) Docket Number: CO -11 -12 Energy for an Order authorizing the ) Conservation Order No. 644 commingling of West McArthur River oil ) with Redoubt Shoal oil, in conformance ) West McArthur River Field with 20 AAC 25.215. Redoubt Shoal Field ) Kenai Peninsula Borough, �, Alaska ) ) May 6, 2011 IT APPEARING THAT: 1. By application dated March 3, 2011 Cook Inlet Energy (CIE) applied to the Alaska Oil and Gas Conservation Commission (Commission) for an order authorizing the commingling of West McArthur River oil with Redoubt Shoal oil, Kenai Peninsula Borough, Alaska. CIE also requests approval of a Micro Motion Coriolis meter for determining the proper allocation of Redoubt Shoal oil. 2. On March 10, 2011 pursuant to 20 AAC 25.540, the Commission published in the Peninsula Clarion notice of opportunity for public hearing on April 14, 2011. 3. The Commission held a public hearing on April 14, 2011 at 333 West 7 111 Avenue, Suite 100, Anchorage, Alaska 99501. Testimony was presented by CIE and Union Oil Company of California (Union). 4. No protests to the application were received. 5. The hearing record was held open until April 22, 2011 so that CIE and Union could provide written responses to Commission inquiry. FINDINGS: 1. Prior to March 23, 2009 Union stored oil from the McArthur River and Trading Bay Fields at the Drift River terminal. Mount Redoubt volcanic eruptions beginning on that date have prevented subsequent oil storage at the terminal. Terminal piping has been reconfigured to allow oil to be pumped directly onto a tanker. 2. Union currently stores McArthur River oil and Trading Bay oil at its Trading Bay Production Facility (TBPF). Trading Bay tank capacity is equivalent to about 18 days of production. Routine tank maintenance and repair reduce available storage capacity, and as the storage limit is reached, McArthur River and Trading Bay wells must be shut in to accommodate tanker scheduling. • • Conservation Order 644 Page 2 West McArthur River, Redoubt Shoal May 6, 2011 3. Eleven Union wells completed with electric submersible pumps (ESP) account for 26% of producing wells and 60% of oil produced from the McArthur River and Trading Bay Fields. Shutting in ESP wells exposes Union to significant risk of ESP failure requiring a rig workover. 4. To provide temporary substitute storage capacity through its regularly scheduled tank maintenance period, Union wishes to utilize two of CIE's Kustatan Production Facility (KPF) storage tanks, which would eliminate the need to shut in Union's eleven ESP wells. 5. In order to free the tank storage required to store Union's oil, CIE must commingle its West McArthur River oil and Redoubt Shoal oil in a KPF storage tank. 6. In order to comply with Commission regulations, CIE Redoubt Shoal oil must be metered prior to commingling with CIE West McArthur River oil to determine the quantities produced from each. CIE proposes to allocate Redoubt Shoal oil using a Micro Motion Coriolis meter with a stated accuracy of ±0.05% of rate, which would be more accurate than the current field custody sales meters. 7, CIE proposes monthly third party meter calibration, which will provide verification and will identify changes, damage or degradation in meter measurement performance. Monthly meter calibration will be done by Industrial Instruments Service Company (IISCO), an experienced company known to provide reliable meter calibrations. CONCLUSIONS: 1. The Drift River terminal configuration and Cook Inlet oil tanker scheduling will require Union to shut in McArthur River and Trading Bay wells which use ESPs, absent an alternate production storage means. 2. Frequent well shut in renders ESPs susceptible to failure, and replacing ESPs requires rig workover. 3. Freeing CIE KPF oil storage capacity for temporary use by Union will allow Union to avoid production upsets that would likely follow the shut in of Union's McArthur River and Trading Bay wells. 4. Corniningling CIE West McArthur River oil with Redoubt Shoal oil at KPF is necessary to free KPF tankage for Union's temporary use. 5. Commission regulation 20 AAC 25.228(j) allows for the approval of a variance from production measurement equipment used for custody transfer if the variance will result in equal or improved accuracy in measuring hydrocarbons served from the property or unit. 6. West McArthur River and Redoubt Shoal oil volumes can be accurately determined utilizing Micro Motion Coriolis meters, and calibrating the meters monthly. • • Conservation Order 644 Page 3 West McArthur River, Redoubt Shoal May 6, 2011 7. Commingling of CIE's West McArthur River and Redoubt Shoal oil will not promote waste, affect correlative rights, or result in hann to human health or the environment. NOW, THEREFORE, IT IS ORDERED THAT the following rules, in addition to statewide requirements under 20 AAC 25, apply to the temporary commingling of West Me Arthur River oil with Redoubt Shoal oil: Rule 1: Commingling of CIE West McArthur River oil with Redoubt Shoal oil at KPF is approved. Rule 2: Use of Coriolis meters is authorized for temporary measurement of oil served from Redoubt Shoal Field. Rule 3: CIE Redoubt Shoal Coriolis meters must be third party calibrated monthly, not to exceed 30 days between calibrations. Commission must be provided forty-eight (48) hours notice for opportunity to witness Coriolis meter calibrations. Rule 4: Analysis of meter calibration results, including raw calibration data, must be provided to the Commission within 7 days of completing a meter calibration. Rule 5: CIE shall provide the Commission with 48 hour notice and opportunity to witness Redoubt Shoal allocation meter calibration. Note that this Order does not authorize Union to store oil at CIE's Kustatan Production Facility. Conservation Order No. 646 governs Union's temporary oil storage at KPF. DONE at Anchorage, Alaska, and dated May 6, 20 1. AV 011,4 11101 • r 1 orman Pommissio er #q a oil an as Conservat • Co ssion ..„„„ I 4, ,., * 1 3 di tr • - • * ■...1.4.4 LEILA: 4. Cathy P Focr: er, Corn issioner Alaska Oil and Gas Conservation Commission • 1 Conservation Order 644 Page 4 West McArthur River, Redoubt Shoal May 6, 2011 RECONSIDERATION AND APPEAL NOTICE A% provided in AS 31.05.080W. within 20 days aller written notice of the entry or this order or decision, or such further time as the Commission grants fur good cause shown, a person affected by it may the with the Coininission an application for rveonsideration of the matter determined by it. If the notice %Nas mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The Connnission bind I grant or retlise the application for reconsidetatim in whole or in part within 10 days alter it is tiled. Failure to act on it within 10-days is a denial of reconsideration, lithe Commission denies reconsideration, upon denial. this order or decision and the denial of reconsideration are FINAL and may he appealed to superior court. The appeal MUST he tiled within 33 days after the date on which the Commission inails, OR 30 days if the Commission otherwise disuibutes, tin order or decision denying reconsideration. UNLESS the denial is by inaction, in which case the appeal MUST he tiled within 40 days alter the date on which the application Ibr reconsideration was filed. If the Conunission grants an application for nxonsideration, this order or decision does not become final. Rather. the ()Wet or decision on reconsideration will he the FINAL order or decision of the Commission. and it may he appealed to superior court. That appeal MUST bc filed within 33 days alter the date on which the Commission mails, OR 30 days if the Commission otherwise distributes, the order or decision on reconsideration. As provided in AS 31,05.080(h), "itlhe questions reviewed on appeal are limited to the questions presented to the Commission by the application for reconsideration " In computing a period of time above, the date of the event or default after which the designated period begins to nub is not included in the period: the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 pin. on the next day that does not fall on a weekend or state holiday.