Department of Commerce, Community, and Economic Development
Alaska Oil and Gas Conservation Commission
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HomeMy WebLinkAbout217-132DATA SUBMITTAL COMPLIANCE REPORT
3/20/2020
Permit to Drill 2171320 Well Name/No. DEEP CK SW4
MD 453 TVD 453 Completion Date 10/16/2017
REQUIRED INFORMATION
f�l43",
Mud Log
DATA INFORMATION
Operator Hilcorp Alaska LLC API No. 50-231-20061-00-00
Completion Status INFO Current Status P&A UIC No
i
Samples Yes✓ Directional Survey No`, -
List of Logs Obtained: GR -CCL, Lithology
(from Master Well Data/Logs)
Well Log Information:
Log/
Electr
Data
Digital
Dataset
Log Log Run Interval
OH /
Type
Med/Frmt Number Name
Scale Media No Start Stop
CH Received
Comments
ED
C
28786 Digital Data
452 2
11/13/2017
Electronic Data Set, Filename: Deep Creek SW4
Main.las
ED
C
28786 Digital Data
11/13/2017
Electronic File: Deep Creek SW4 Final.pdf
ED
C
28786 Digital Data
11/13/2017
Electronic File: Deep Creek SW4 Final.tif
Log
C
28786 Log Header Scans
0 0
2171320 DEEP CK SW4 LOG HEADERS
Log
C
28787 Log Header Scans
0 0
2171320 DEEP CK SW4 LOG HEADERS
Log
28787 Mud Log
25 Col 10 400
11/13/2017
Lithology Logs, 2" & 5"
ED
C
28787 Digital Data
10 500
11/13/2017
Electronic Data Set, Filename:
Hilcorp_Alaska_DeepCreek_S W 4_LAS.las
ED
C
28787 Digital Data
11/13/2017
Electronic File: Hilcorp Alaska LLC DeepCreek
SW4_SampleManifest.doc
ED
C
28787 Digital Data
11/13/2017
Electronic File:
Hilcorp_DeepCreek_S W 4_450ft_TD_2in_Field_Li
thologyLog.pdf
ED
C
28787 Digital Data
11/13/2017
Electronic File:
Hilcorp_DeepCreek_S W 4_450ft_TD_5in_Field_Li
thologyLog.pdf
ED
C
28787 Digital Data
11/13/2017
Electronic File: LITHOLOGY Deep Creek
SW4.docx
ED
C
28787 Digital Data
11/13/2017
Electronic File: ROP Deep Creek SW4.xlsx
ED
C
28787 Digital Data
11/13/2017
Electronic File: Deep_Creek_SW4.dbf
ED
C
28787 Digital Data
11/13/2017
Electronic File: deep_creek_sw4.hdr
ED
C
28787 Digital Data
11/13/2017
Electronic File: Deep_Creek_SW4.mdx
ED
C
28787 Digital Data
11/13/2017
Electronic File: deep_creek_sw4r.dbf
AOGCC
Pagel of 2
Friday, March 20, 2020
Permit to Drill 2171320 Well
MD 453 TVD 453
ED C 28787 Digital Data
ED C 28787 Digital Data
ED C 28787 Digital Data
Well Cores/Samples Information:
Name
Wet Samples
INFORMATION RECEIVED
Completion Report b
Production Test Information Y /
Geologic Markers/Tops b
COMPLIANCE HISTORY
Completion Date: 10/16/2017
Release Date: 11/16/2019
Description
DATA SUBMITTAL COMPLIANCE REPORT
3/20/2020
ie/No. DEEP CK SW4 Operator Hilcorp Alaska LLC API No. 50-231-20061-00-00
Completion Date 10/16/2017 Completion Status INFO Current Status P&A UIC No
11/13/2017 Electronic File: deep_creek_sw4r.mdx
11/13/2017 Electronic File: Deep_Creek_SW4_SCL.DBF
11/13/2017 Electronic File: Deep_Creek_SW4_SCL.MDX
Sample
Interval Set
Start Stop Sent Received Number Comments
30 450 8/22/2018 1673 2 boxes wet samples
Directional / Inclination Data
Mechanical Integrity Test Information Y / NA
Daily Operations Summary t
Date Comments
Mud Logs, Image Files, Digital Data NA
Composite Logs, Image, Data Files
Cuttings Samples DY / NA
Core Chips Y /e)
Core Photographs Y /6P
Laboratory Analyses Y&
Comments:
4�
Compliance Reviewe y: Date:
AOGCC Page 2 of 2 Friday, March 20, 2020
Guhl, Meredith D (CED)
From: Bottrell, Phil M (DNR)
Sent: Wednesday, February 12, 2020 12:51 PM
To: Guhl, Meredith D (CED)
Subject: RE: PTD 217-132 Deep Creek SW 4: Extended Confidential?
Meredith,
I have found no evidence that extended confidentiality has been requested for the Deep Creek SW 4 well.
Phil Bottrell
Petroleum Geologist
State of Alaska — Department of Natural Resources
Division of Oil and Gas
(907) 269-8818
phikbottrell@alaska.gov
From: Guhl, Meredith D (CED)
Sent: Wednesday, February 5, 2020 10:28 AM
To: Bottrell, Phil M (DNR) <phil.bottrell@alaska.gov>
Subject: FW: PTD 217-132 Deep Creek SW 4: Extended Confidential?
Hello Phil,
Has Hilcorp Alaska requested extended confidentiality for Deep Creek SW 4, a stratigraphic test well due for release
after November 16,2019?
Thank you,
Meredith
Meredith Guhl
Petroleum Geology Assistant
Alaska Oil and Gas Conservation Commission
333 W. 7th Ave, Anchorage, AK 99501
meredith.guhl@alaska.gov
Direct: (907) 793-1235
CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation
Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information.
The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail,
please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Meredith Guhl at
907-793-1235 or meredith.guhl@alaska.gov.
From: Guhl, Meredith D (CED)
Sent: Tuesday, December 31, 2019 11:07 AM
To: Frank, Kevin J (DNR) <Kevin.Frank@alaska.gov>
Subject: RE: PTD 217-132 Deep Creek SW 4: Extended Confidential?
Hello Kevin,
Following up on this, has Hilcorp requested extended confidentiality on Deep Creek SW 4?
Thanks, and happy new year!
Meredith
Meredith Guhl
Petroleum Geology Assistant
Alaska Oil and Gas Conservation Commission
333 W. 7th Ave, Anchorage, AK 99501
meredith.guhl@alaska.gov
Direct: (907) 793-1235
CONFIDENTIALITY NOTICE. This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation
Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information.
The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail,
please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Meredith Guhl at
907-793-1235 or meredith.guhl@alaska.gov.
From: Guhl, Meredith D (CED)
Sent: Monday, November 18, 2019 8:24 AM
To: Frank, Kevin J (DNR) <Kevin.Frank@alaska.gov>
Subject: PTD 217-132 Deep Creek SW 4: Extended Confidential?
Hello Kevin,
Has Hilcorp made a request to extend the confidentiality of the stratigraphic test well Deep Creek SW 4, due for release
after November 16, 2019?
Thank you,
Meredith
Meredith Guhl
Petroleum Geology Assistant
Alaska Oil and Gas Conservation Commission
333 W. 7th Ave, Anchorage, AK 99501
meredith.guhl@alaska.gov
Direct: (907) 793-1235
CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas Conservation
Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information.
The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail,
please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Meredith Guhl at
907-793-1235 or meredith.guhl@alaska.gov.
RECEIVED
OCT 3 12017
STATE OF ALASKA
ALASKA OIL AND GAS CONSERVATION COMMISSION A 1190 .
WELL COMPLETION OR RECOMPLETION REPORT AND LOG
1 a. Well Status: Oil ❑ Gas ❑ SPLUG ❑ Other ❑ Abandoned Q ' Suspended ❑
20AAC 25.105 20AAC 25110
GINJ ❑ WINJ ❑ WAG[] WDSPL ❑ No. of Completions:
1 b. Well Class:
Development ❑ Exploratory ❑
Service ❑ Stratigraphic Test 0
2. Operator Name:
Hilcorp Alaska, LLC
6. Date Comp., Susp., or
Aband.: 10/16/2017
14. Permit to Drill Number / Sundry:
217-132
3. Address:
3800 Centerpoint Drive, Suite 1400, Anchorage, AK 99503
7. Date Spudded:
October 9, 2017
15. API Number:
50-231-20061-00-00
4a. Location of Well (Governmental Section):
Surface: 60' FSL, 2500' FWL, Sec 18, T3S, R13W, SM, AK
Top of Productive Interval:
N/A
Total Depth:
60' FSL, 2500' FWL, Sec 18, T3S, R13W, SM, AK
8. Date TD Reached:
October 11, 2017
16. Well Name and Number:
Deep Creek SW4
9. Ref Elevations: KB: N/A
GL: 666.8' BF: N/A
17. Field / Pool(s).
Deep Creek Unit
10. Plug Back Depth MD/TVD:
Surface
18. Property Designation:
CIRI C-061591
4b. Location of Well (State Base Plane Coordinates, NAD 27):
Surface: x- 210187 y- 2162577 Zone- 4
TPI: x- y- Zone-
Total Depth: x- 210187 y- 2162577 Zone- 4
11. Total Depth MD/TVD:
, 453'/453' •
19. DNR Approval Number:
N/A
12. SSSV Depth MD/TVD:
N/A
20. Thickness of Permafrost MD/TVD:
N/A
5. Directional or Inclination Survey: Yes LJ (attached) No 0
Submit electronic and printed information per 20 AAC 25.050
13. Water Depth, if Offshore:
N/A (ft MSL)
21. Re-drill/Lateral Top Window MD/TVD:
N/A
22. Logs Obtained: List all logs run and, pursuant to AS 31.05.030 and 20 AAC 25.071, submit all electronic data and printed logs within 90 days
of completion, suspension, or abandonment, whichever occurs first. Types of logs to be listed include, but are not limited to: mud log, spontaneous potential,
gamma ray, caliper, resistivity, porosity, magnetic resonance, dipmeter, formation tester, temperature, cement evaluation, casing collar locator, jewelry, and
perforation record. Acronyms may be used. Attach a separate page if necessary
GR -CCL 2" MD, Lithology Log 2"/5" MD
23. CASING, LINER AND CEMENTING RECORD
WT. PER GRADE SETTING DEPTH MD SETTING DEPTH TVD AMOUNT
CASING FT TOP BOTTOM TOP BOTTOM HOLE SIZE CEMENTING RECORD PULLED
6-5/8" 17# A53B 20' 200' 20' 200' 6" 37 sx of bentonite grout to P&A
24. Open to production or injection? Yes ❑ No ❑✓
If Yes, list each interval open (MD/TVD of Top and Bottom, Perforation
Size and Number; Date Perfd):
pc6w CIN
[/
LL
25. TUBING RECORD
SIZE DEPTH SET (MD) PACKER SET (MD/TVD)
N/A
26. ACID, FRACTURE, CEMENT SQUEEZE, ETC.
Was hydraulic fracturing used during completion? Yes ❑ No ❑✓
Per 20 AAC 25.283 (i)(2) attach electronic and printed information
DEPTH INTERVAL (MD) AMOUNT AND KIND OF MATERIAL USED
N/A
27. PRODUCTION TEST
Date First Production:
N/A
Method of Operation (Flowing, gas lift, etc.):
N/A
Date of Test:
Hours Tested:
Production for
Test Period
Oil -Bbl:
Gas -MCF:
Water -Bbl:
Choke Size:
Gas -Oil Ratio:
Flow Tubing
Press.
Casing Press:
Calculated
24 -Hour Rate
Oil -Bbl:
Gas -MCF:
Water -Bbl:
Oil Gravity - API (corr):
Form 10-407 Revised 5/2017 11-4-17 CON NUE ON PAGE 2 � fL ? �✓ r Submit ORIGINIAL onll
7� ,w����' � �-12017 �'2�' �'_�j.,
28. CORE DATA Conventional Core(s): Yes ❑ No ❑✓ Sidewall Cores: Yes ❑ No Q
If Yes, list formations and intervals cored (MD/TVD, From/To), and summarize lithology and presence of oil, gas or water (submit separate pages with this form,
if needed). Submit detailed descriptions, core chips, photographs, and all subsequent laboratory analytical results per 20 AAC 25.071.
29. GEOLOGIC MARKERS (List all formations and markers encountered):
30. FORMATION TESTS
NAME
MD
TVD
Well tested? Yes ❑ No ❑✓
If yes, list intervals and formations tested, briefly summarizing test results.
Permafrost - Top
Permafrost - Base
Attach separate pages to this form, if needed, and submit detailed test
Top of Productive Interval
N/A
information, including reports, per 20 AAC 25.071.
Formation at total depth:
31. List of Attachments: Wellbore Schematic, Drilling Reports, P&A Photos, As Built Drawing
Information to be attached includes, but is not limited to: summary of daily operations, wellbore schematic, directional or inclination survey, core analysis,
paleontological report, production or well test results, per 20 AAC 25.070.
32. 1 hereby certify that the foregoing is true and correct to the best of my knowledge.
Authorized Name: Paul Mazzolini Contact Name: Cody Dinger
Authorized Title: Drilling Manager Contact Email: cdingerCLDhilcorp.com
Authorized�1 Contact Phone: 777.8389
Signature: / � l3!
Date:" D1
INSTRUCTIONS
General: This form and the required attachments provide a complete and concise record for each well drilled in Alaska. Submit a well schematic diagram
with each 10-407 well completion report and 10-404 well sundry report when the downhole well design is changed. All laboratory analytical
reports regarding samples or tests from a well must be submitted to the AOGCC, no matter when the analyses are conducted.
Item 1 a: Multiple completion is defined as a well producing from more than one pool with production from each pool completely segregated. Each
segregated pool is a completion.
Item 1 b: Well Class - Service wells: Gas Injection, Water Injection, Water -Alternating -Gas Injection, Salt Water Disposal, Water Supply for Injection,
Observation, or Other.
Item 4b: TPI (Top of Producing Interval).
Item 9: The Kelly Bushing, Ground Level, and Base Flange elevations in feet above Mean Sea Level. Use same as reference for depth measurements
given in other spaces on this form and in any attachments.
Item 15: The API number reported to AOGCC must be 14 digits (ex: 50-029-20123-00-00).
Item 19: Report the Division of Oil & Gas / Division of Mining Land and Water: Plan of Operations (LO/Region YY -123), Land Use Permit (LAS 12345),
and/or Easement (ADL 123456) number.
Item 20: Report measured depth and true vertical thickness of permafrost. Provide MD and TVD for the top and base of permafrost in Box 29.
Item 22: Review the reporting requirements of 20 AAC 25.071 and, pursuant to AS 31.05.030, submit all electronic data and printed logs within 90 days of
completion, suspension, or abandonment, whichever occurs first.
Item 23: Attached supplemental records should show the details of any multiple stage cementing and the location of the cementing tool.
Item 24: If this well is completed for separate production from more than one interval (multiple completion), so state in item 1, and in item 23 show the
producing intervals for only the interval reported in item 26. (Submit a separate form for each additional interval to be separately produced,
showing the data pertinent to such interval).
Item 27: Method of Operation: Flowing, Gas Lift, Rod Pump, Hydraulic Pump, Submersible, Water Injection, Gas Injection, Shut-in, or Other (explain).
Item 28: Provide a listing of intervals cored and the corresponding formations, and a brief description in this box. Pursuant to 20 AAC 25.071, submit
detailed descriptions, core chips, photographs, and all subsequent laboratory analytical results, including, but not limited to: porosity,
permeability, fluid saturation, fluid composition, fluid fluorescence, vitrinite reflectance, geochemical, or paleontology.
Item 30: Provide a listing of intervals tested and the corresponding formation, and a brief summary in this box. Submit detailed test and analytical
laboratory information required by 20 AAC 25.071.
Item 31: Pursuant to 20 AAC 25.070, attach to this form: well schematic diagram, summary of daily well operations, directional or inclination survey, and
other tests as required including, but not limited to: core analysis, paleontological report, production or well test results.
Form 10-407 Revised 5/2017 Submit ORIGINAL Only
Deep Creek SW #4, Stratigraphic Test Well
CONFIDENTIAL TOPS
API 50-231-20061-0000
Elevation
667' GL
Glacial Drift Unconformity
129' MD 129' TVD
Sterling Upper Upper
313' MD 313' TVD
Sterling Middle Upper
412' MD 412' TVD
Formation at TD — Sterling Middle Upper
liilcorp Alaska, LLC
AMEX
Awn
200'
TD = 453'/ TVD = 453'
P&A WELLBORE
Casing Detail
Location: Happy Valley
Well: Deep Creek SW4
PTD: 217-132
API: 50-231-20061-00-00
Size
Type
Wt
Grade
Conn.
ID Top
Btm
6-5/8"
Surf Csg
17
A-53
Weld
6-1/8" 20'
200'
Drilling Info
Hole Section Casing
6" 6-5/8" x OH
Updated by CJD 10/17/2017
Hilcorp Energy Company Composite Report
Well Name: Stratigraphic Test Wells
Field: Ninilchik
County/State: , Alaska
(LAT/LONG):
avation (RKB):
API #:
Spud Date:
Job Name: 1740368 Deep Creek SW4
Contractor
AFE #: 1740368
AFE $:
Activlly Date
0" Summary',
10/9/2017
MIRU, spot pipe truck, post permit and well sign.,Drill and drive 6-5/8" to 200'. Drill 6" hole to 220', SDFN.
10/10/2017
MIRU, spot pipe truck.; Drill F/ 220' to 440', SDFN.
10/11/2017
MIRU, resume Drlg 6" hole F/ 440' to 453' TD. RDMO
10/14/2017
MIRU Pollard Eline. RIH w/ GR and CBL tools. Log well to TD @ 453'.
Well overview:
6-5/8" Casing @ 200'
TD @ 453'
Samples eve 30'.
10/16/2017
MIRU Kraxberger, RIH w/ 1" tubing to 453' and pump 37 sx of bentonite grout. Cut and pull 20' of casing. Well P A'd. Cement to
surface casing cut 20' below ground level.
AS -BUILT: DEEP SW4
1
NOTES:
1. COORDINATES SHOWN ARE BASED UPON
DIFFERENTIALLY CORRECTED GPS OBSERVATIONS.
2. AS -BUILT SURVEY CONDUCTED OCTOBER 16, 2017. 14
3. ALL DISTANCES ARE IN U.S. SURVEY FEET.
4. SURVEYED NAVD88 (G12B) GROUND ELEVATION OF
DEEP SW4 = 666.8'
LEGEND:
® AS -BUILT WELL CASING,
2.5' ABOVE GROUND
AS -BUILT DEEP SW4:
LOCATED WITHIN SECTION 18,
T3S, R13W, SM, AK
SPCS NAD27 AK Z4N:
LAT= 59'54'36.908172"N
LONG= 151'34'44.35644"W
N= 2,162,577.69' - N -
E= 210,187.27'
SECTION 18 LINE APPROXIMATE
OFFSETS (REFERENCE ONLY):
60' F.S.L. 2,500' F.W.L
0 1,000 2,000
FEET
SCALE
23
PROJECT LOCATED IN SEC. 18, T 3 S, R 13 W, S.M.
12 T3S 7 1'8
�-" CREEKrs
13 17
ti V
DEEP SW4
3 3
V M
24 19 20
J
T3S
VICINITY MAP: 1" = 1 Mile
SEC. 13
SEC. 18
SEC. 17
SW4
®DEEP
If5
SEC. 24
SEC. 20
3
(SEC.d19
r2
rY
o'
of Al SURVEYOR'S CERTIFICATE:
��P� OF A�gsl1 HEREBY CERTIFY THAT I AM REGISTERED AND LICENSED TO PRACTICE
LAND SURVEYING IN THE STATE OF ALASKA AND THAT THIS AS -BUILT
MY
49 TH *��� SUPIERVISION ESENTS DIMENSIONSRVEY AND OTHHERMADEBDETIAILOSRAREDER CORR CDIRECTT O THE
BEST OF MY KNOWLEDGE.
MICHAEL R. EWI
!�+ �s LS 11794
�� l``9FpP' ' ' • • • ' '
'Y_ AW 1
RRECON, LLC
1 01V 481 W. RECON CIR.
ill�R�fESSIONA�`�+' �U PALMER, AK 99645
NNS\\1~
DATE: 10/18/2017 DRAWING: HilcorpDeepAsBuilt Dee SHEET: 1 OF 1 REV: 0
e
Seth Nolan Hilcorp Alaska, LLC
GeoTech II 3800 Centerpoint Drive
Anchorage, AK 99503
Tele: 907 777-8308
tfilei,Tts A ap-La. i.t.0 Fax: 907 777-8510
E-mail: snolan@hilcorp.com
DATE 08/22/2018 C 0 NFID ENTIAI
To: Alaska Oil & Gas Conservation Commission
Meredith Guhl
Petroleum Geology Assistant
333 W 7th Ave Ste 100
Anchorage, AK
99501
WELL SAMPLE INTERVAL
Deep Creek SW4 30'— 450' (30 total samples) Y✓ -T
Please include current contact information if different from above.
RECEWED
AUG 2 2 2018
AOGCC
Please acknowledge receipt by signing and returning one copy of this transmittal or FAX to 907 777.8510
Receive4�—Yll) n ( L) Q �2_ 1
Date: 1�3 r -,-? ? i IA
Seth Nolan
GeoTech II
Ifiloirp Ala4m, LI,t: "VI 'K
NOE 3 2017
GC
DATE 11/10/2017
Hilcorp Alaska, LLC
3800 Centerpoint Drive
Anchorage, AK 99503
Tele: 907 777-8308
Fax: 907 777-8510
E-mail: snolan@hilcorp.com
To: Alaska Oil & Gas Conservation Commission
Makana Bender
Natural Resource Technician
333 W 7th Ave Ste 100
Anchorage, AK
99501
DATA TRANSMITTAL
DEEP CREEK STRATIGRAPHIC TESTS
Log prints and data
DATA LOGGED
\k AAA/201-1
M K. BENDER
Prints:
DEEP CREEK SW3: GR -CCL 2" MD, Lithology Log 2"/5" MD 2 1 7 1 3 28 7 8 4 28
7 8 `
DEEP CREEK SW4: GR -CCL 2" MD, Lithology Log 2"/5" MD 21 7 13 2 2 8 7/ 8 6 28 78 7
CD: 1 Mudlogs
Deep Creek SW3
Deep Creek SW4
CD: 2 Electric Logs
Deep Creek SW3 Final.pdf
` Deep Creek SW3 Final.tif
Deep Creek SW3 Main. las
1 Deep Creek SW4 Fnal.pdf
Deep Creek SW4 Final. of
Deep Creek SW4 Main. las
10/1912017 10:26 AM File folder
10/19/201710:26 AM File folder
10/15/2017 2:35 PM
11/10/2017 9:44 AM
10/16/2017 7:57 AM
10/15/2017 2:35 PM
11/10/2017 9:44 AM
10/16/2017 7:57 AM
Please include current contact information if different from above.
Adobe Acrobat Doc...
928 KB
TIF File
5,003 KB
LAS File
41 KB
Adobe Acrobat Doc...
981 KB
TIF File
5,315 KB
LAS File
46 KB
Please acknowledge receipt by signing and returning one copy of this transmittal or FAX to 907 777.8510
Received Bey Date:
� � 1✓cI-E�v
THE STATE
GOVERNOR BILL WALKER
Paul Mazzolini
Drilling Manager
Hilcorp Alaska, LLC
3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503
333 West Seventh Avenue
Anchorage, Alaska 99501-3572
Main: 907.279.1433
Fax: 907.276.7542
www.aogcc.alaska.gov
Re: Deep Creek Field, Deep Creek SW4
Hilcorp Alaska, LLC
Permit to Drill Number: 217-132
Surface Location: 50' FSL, 2500' FWL, SEC. 18, T3 S, RI 3W, SM, AK
Bottomhole Location: 50' FSL, 2500' FWL, SEC. 18, T3S, R13W, SM, AK
Dear Mr. Mazzolini:
Enclosed is the approved application for permit to drill the above referenced stratigraphic well.
Hilcorp Alaska, LLC (Hilcorp) requests the following variances:
1. Hilcorp's request to waive wellbore surveys is APPROVED. The well depth is very
shallow (600 feet) and intent is to drill vertically.
2. Hilcorp's request to use standard water well drilling equipment that is commonly used in
the area is APPROVED under 20 AAC 25.037. The drilling rig will also use air instead of
drilling mud to remove cuttings which is also common. Due to shallow depth and nature
of the area conventional well control equipment is not needed or practical. Rig will use a
rotating head and large hose to direct returns to a tank.
3. Use of a diverter is WAIVED due to the shallow depth of the wellbore. As stated above a
rotating head system will be used as an alternate method of directing returns safely during
drilling operations.
4. Requirement under 20 AAC 25.120 to place a well abandonment marker on the casing stub
is WAIVED.
5. Hilcorp's request to use grout instead of cement to P&A wells is APPROVED. Grout is
commonly used to abandon water wells.
Additional Conditions of Approval:
1. Portable gas detection monitor (LEL) to be used on site (minimum of 2 handheld meters).
2. Well may not be drilled any deeper than 600 feet measured depth without written approval
from the AOGCC.
3. Photo document P&A operations: including casing cutoff, grout top and site clearance.
PTD 217-132
Page 2 of 2
4. Transfer of wellbore to landowner for use as water well must be approved by AOGCC as
per 20 AAC 25.140
All dry ditch sample sets submitted to the AOGCC must be in no greater than 30' sample intervals.
Regulation 20 AAC 25.071(a) authorizes the AOGCC to specify types of well logs to be run. In
addition to the well logging program proposed by Hilcorp in the attached application, the following
well logs are also required for this well:
Lithology log required in lieu of mud log. Gamma ray, SP, and resistivity logs must be
recorded from base of conductor pipe to total depth of the well.
Per Statute AS 31.05.030(d)(2)(B) and Regulation 20 AAC 25.071, composite curves for well logs
run must be submitted to the AOGCC within 90 days after completion, suspension or abandonment
of this well.
This permit to drill does not exempt you from obtaining additional permits or approvals required
by law from other governmental agencies, and does not authorize conducting drilling operations
until all other required permits and approvals have been issued. In addition, the AOGCC reserves
the right to withdraw the permit in the event it was erroneously issued. A weekly status report is
required from the time the well is spudded until it is suspended or plugged and abandoned. The
report should be a generalized synopsis of the week's activities and is exclusively for the AOGCC's
internal use.
Operations must be conducted in accordance with AS 31.05 and Title 20, Chapter 25 of the Alaska
Administrative Code unless the AOGCC specifically authorizes a variance. Failure to comply
with an applicable provision of AS 31.05, Title 20, Chapter 25 of the Alaska Administrative Code,
or an AOGCC order, or the terms and conditions of this permit may result in the revocation or
suspension of the permit.
Sincerely,
Hollis S. French
Chair
DATED this Z day of October, 2017.
STATE OF ALASKA
ALA.. .A OIL AND GAS CONSERVATION COMMIS. -)N
PERMIT TO DRILL
20 AAC 25.005
ECEIVhU
SEP 19 2017
.c.
1 a. Type of Work:
1b. Proposed Well Class: Exploratory - Gas ❑ Service - WAG ❑ Service - Disp ❑
1c. Specify if well is proposed for:
Drill 0 • Lateral ❑
Stratigraphic Test 21 - Development - Oil ❑ Service - Winj ❑ Single Zone ❑
Coalbed Gas ❑ Gas Hydrates ❑
Redrill ❑ Reentry ❑
Exploratory - Oil ❑ Development - Gas ❑ Service - Supply ❑ Multiple Zone ❑
Geothermal ❑ Shale Gas ❑
2. Operator Name:
5. Bond: Blanket Q . Single Well ❑
11. Well Name and Number:
Hilcorp Alaska, LLC
Bond No. 022035244 •
Deep Creek SW4
3. Address:
6. Proposed Depth:
12. Field/Pool(s):
3800 Centerpoint Drive Anchorage, AK 99503
MD: 600 . TVD: 600
Deep Creek Unit
4a. Location of Well (Governmental Section):
7. Property Designation:
Surface: 50' FSL, 2500' FWL, Sec 18, T3S, R13W, SM, AK
CIRI (C-061591) '
Top of Productive Horizon:
8. DNR Approval Number:
13. Approximate Spud Date:
N/A
10/1/2017 '
9. Acres in Property:
14. Distance to Nearest Property:
Total Depth:
50' FSL, 2500' FWL, Sec 18, T3S, R13W, SM, AK
3,332 acres
32 ft N
4b. Location of Well (State Base Plane Coordinates - NAD 27):
10. KB Elevation above MSL (ft): 670.7'
15. Distance to Nearest Well Open
Surface: x-210191 • y- 2162576 • Zone -4
GL / BF Elevation above MSL (ft): 666.7'
to Same Pool: N/A
16. Deviated wells: Kickoff depth: N/A feet
17. Maximum Potential Pressures in psig (see 20 AAC 25.035)
Maximum Hole Angle: degrees
Downhole: 0-15 Surface: 0-15
18. Casing Program: Specifications
Top - Setting Depth - Bottom Cement Quantity, c.f. or sacks
Hole Casing Weight Grade Coupling I Length
MD TVD MD TVD (including stage data)
6" 6-5/8" 17# A-53 Weld 160'
Surface Surface 160' 160'
19. PRESENT WELL CONDITION SUMMARY (To be completed for Redrill and Re -Entry Operations)
Total Depth MD (ft): Total Depth TVD (ft): Plugs (measured): Effect. Depth MD (ft): Effect. Depth TVD (ft): Junk (measured):
Casing Length Size Cement Volume MD TVD
Conductor/Structural
Surface
Intermediate
Production
Liner
Perforation Depth MD (ft): Perforation Depth TVD (ft):
Hydraulic Fracture planned? Yes ❑ No Q
20. Attachments: Property Plat ❑ BOP Sketch
Drilling Program
❑
Time v. Depth Plot Shallow Hazard Analysis
❑ ❑ ❑
Diverter Sketch
Seabed Report
Drilling Fluid Program 20 AAC 25.050 requirements
21. Verbal Approval: Commission Representative: Date
22. 1 hereby certify that the foregoing is true and the procedure approved herein will not be
deviated from without prior written approval. Contact Name: Paul Mazzolini
Authorized Name: Paul Mazzolini Contact Email: mazzolini hllcor .com
Authorized Title: Drilling Manager Contact Phone: 777-8369
Authorized Signature: "" ' Date: 19 70 1
Commission Use Only
Permit to Drill
�` �
API Number:
Permit Approval
See cover letter for other
Number:
50-�� ( ❑� f' —C ��
Date: ����
requirements.
Conditions of approval : If box is checked, well may not be used to explore for, test, or produce coalbed methane, gas hydrates, or gas contained in shales:
Other:`�
� S� C�� � e{�--�- Samples req'd: Yes ['�No❑ Mud log req'd: Yes El No
measures: Yes ❑ No [�J/ Directional svy req'd: Yes [:]No Z
((11H2S
61 C; .,L, o.-5 c.r Alopl,e � t+ Spacing exception req'd: Yes ❑ No� Inclination -only svy req'd: Yes E] No [�
{T
u_
JJ �� • / Post initial injection MIT req'd: Yes ❑ No ❑
Zi 1kc, i -)JJ l � 7Lz„ .
APPROVED BY
LU��
Approved by: COMMISSIONER THE COMMISSION Date:
® RJB l , Submit Form and
Form 10-401 Revised 5/2017 T t f 2 months from the date of approval per 20 AAC 25.005(g) Att��ac��hments in Duplicate
Paul Mazzolini Hilcorp Alaska, LLC
Drilling Manager P.O. Box 244027
Anchorage, AK 99524-4027
Tel 907 777 8369
Email pmazzolini@hilcorp.com
I ilrmrP Alaska, LLC.
09/19/2017
Commissioner
Alaska Oil & Gas Conservation Commission
333 W. 71h Avenue
Anchorage, Alaska 99501
Re: Kenai Peninsula Shallow Stratigraphic Test Well Program
Dear Commissioner,
RECEIVED
SEP 19 2017
Enclosed for review and approval is the Permit to Drill for the Deep Creek SW4 shallow stratigraphic test well located
near Happy Valley, AK. Deep Creek SW4 is one of 16 - 20 shallow vertical stratigraphic test wells to be drilled and
evaluated in the area between Ninilchik and Anchor Point on the southern Kenai Peninsula. The plan is to begin
drilling operations during the week of Oct. 1, 2017.
The goal of the shallow stratigraphic test well program is to penetrate 1-3 shallow coal seams and evaluate this
shallow wellbore with gamma ray and resistivity logs. A dipmeter log could also be run if requested by Geology to aid
in the evaluation of the stratigraphic test well.
Hilcorp will utilize a very experienced water well contractor on the Kenai Peninsula that will utilize best practices for
the drilling of the shallow stratigraphic test wells.
Hilcorp Alaska, LLC requests a variance from 20 AAC 25.035 (d) for utilizing diverter while drilling the shallow wells
required for the stratigraphic test well program. The basis for this variance is information gathered by Hilcorp Sr.
Geologist, David Buthman containing the shallowest gas shows and well test information from offset wells in the three
areas to be targeted by the stratigraphic well test program.
Hilcorp Alaska, LLC also requests a variance from 20 AAC 25.050 for obtaining wellbore surveys due to the very -
shallow wells being drilled for the stratigraphic test program. A sign will be posted at each drilling location with the
well information required by AOGCC.
The shallow stratigraphic test wells will be drilled with air and the cuttings will be captured in a tank as per AAC 20
25.047. Samples of these cuttings will be obtained every 30' for analysis. The cuttings will be sent to Kenai Gas Field
for disposal at G&I or to the Kenai Peninsula Borough landfill (authorization to do so has been obtained). Once drilled
and evaluated the wells will be plugged utilizing grout and cut off 10' below GL to complete the P&A. It is possible that
some of the landowners may want to complete wells as a water source, in which case 20 AAC 25.140 requirements
will be followed.
Approvals from surface landowners have been obtained prior to surveying, staking and preparation of the site for
each stratigraphic test well. These approvals are included as an attachment with each PTD application. Care has
been taken to place drilling locations near access roads and to minimize location site preparation by utilizing a 35' x
70' footprint.
If you have any questions, please don't hesitate to contact me at 777-8369 (office) or 317-1275 (mobile).
Sincerely, _
Paul Mazzolini ps.,�
Drilling Manager
Hilcorp Alaska, LLC Page i of 1
Location: Happy Valley
PROPOSED Well: Deep Creek SW4
PTD: TBD
Hilcorp Alaska, LLC WELLBORE API: TBD
Casing Detail
Size
Type
Wt
Grade
Conn.
ID
Top
Btm
6-5/8"
Surf Csg
17
A-53
Weld
6"
Surf
1 160'
6-5/8°' A b ±160'
6" Hole
TD = 600'/ TVD = 600'
u
�,
Drilling Info
Hole Section Casing
6" 6-5/8" x OH
Updated by CJD 06/22/2017
A
S STAKED PROJECT LOCATED IN SEC. 18, T 3 S, R 13 W, S.M.
1 1 12 T3S 7 ��
.,h
INATES SHOWN ARE BASED UPON oREEKh
ENTIALLY CORRECTED GPS OBSERVATIONS. 1 18 s
AKED SURVEY CONDUCTED MARCH 16, 2017. 14 13 �� 17
STANCES ARE IN U.S. SURVEY FEET. 1. /r~�
NAVD88 (G12) GROUND ELEVATION OFSW4 = 666.7' hQ DEEP SW4
r —
�
23 24 19 20
LEGEND: `
T3S
SET BRASS CAP MONUMENT ON
5/8" X 30" REBAR VICINITY MAP: 1" = 1 Mile
AS—STAKED DEEP SW4:
LOCATED WITHIN SECTION 18,
T3S, R1 3W, SM, AK
SPCS NAD27 AK Z4N:
LAT= 59'54'36.89544"N
LONG= 151'34'44.26376"W
N= 2,162,576.28'
E= 210,191.97'
SPCS NAD83 AK Z4N:
LAT= 59'54'34.71596"N
LONG= 151.34'52.10022"W
N= 2,162,332.67'-
E= 1,350,215.13''
SECTION 18 LINE APPROXIMATE
OFFSETS (REFERENCE ONLY):
50' F.S.L. 2,500' F.W.L
0 1,000 2,000
FEET
SCALE
North
SURVEYOR'S CERTIFICATE:
i•�P'� °F' A�q�S'�ll 1 HEREBY CERTIFY THAT I AM REGISTERED AND LICENSED TO PRACTICE
jj LAND SURVEYING IN THE STATE OF ALASKA AND THAT THIS AS -STAKED
REPRECT
49 TH *�`I SUPIERVISION.BIT DIMENSIONSENTS ARVEY AND OTHERMDEBDETAILSRAREDER CORRECTITO THE
BEST OF MY KNOWLEDGE.
r '• MICHAEL R. EWL 1�4K��/
��+�s•. LS-11794RECON, LLC
.•� r
p 481 W. RECON CIR.
�illFD ROfESSIONp�`P�oS� 11
DIECON ��
l�\\"``11� PALMER, AK 99645
DATE: 6/8/2017 DRAWING: Hilcor Dee AsStaked_Rev1 SHEET: 1 OF 1 REV: 1
Shallow Stratigraphic Test Well Plan
Deep Creek SW4
1. MIRU truck mounted drilling unit with support equipment onto 35' x 70' location.
2. Drive 6 5/8" casing through upper 100'-150' due to unstable hole conditions
3. Drill 6" vertical hole until one of 3 distinct coal seams is penetrated 500'- 600'. Base case is to air drill
hole to TD.
a. Samples to be gathered every 30' for geological review.
b. A lithology log will be generated.
4. Once 6" hole drilled to TD, fill with freshwater or viscosified water to keep hole full for logging, approx.
21 bbis for gauge hole to 600' (.035 bbl/ft).
5. Remove cuttings from cuttings tank and haul to G&I in Kenai Gas Field for disposal or to Kenai Borough
Landfill. (21 bbls /hole)
6. RDMO truck mounted drilling unit and support equipment. Move to next strat test well location.
7. Rig up logging unit and log 6" hole with Gamma / Resistivity. Geologist may request a dipmeter be run.
8. Rig down logging unit and move to next strat well.
9. MIRU truck mounted drilling unit with support equipment.
10. RIH with tubing and spot grout / bentonite plug from TD to surface.
11. Set surface grout / bentonite plug within 10' of surface, cut and remove 10' of 6 5/8" casing. Fill in
t, hole. No welded cap on 6 5/8" casing as per waiver from AOGCC.
12. RDMO truck mounted drilling unit and support equipment.
13. No welded cap is required on 6-5/8" surface casing per waiver from AOGCC.
14. Portable gas detectors will be placed at the Drillers console and at the cuttings tank.
Stratigraphic Test Well Program
Project Description
The Hilcorp Alaska, LLC stratigraphic test well program will be performed from June -December of 2017, and
possibly into Q1 of 2018 depending on the ability to build packed snow and ice roads into the locations
located in swampy areas. Hilcorp anticipates drilling 16-20 stratigraphic test wells, each up to 600' deep that
will be drilled and evaluated on the southern end of the Kenai Peninsula between Ninilchik and Anchor Point.
The areas have been named Seaview (near Anchor Point), Pearl (near Ninilchik) and Deep Creek (for the inland
locations about 5 miles south of the Happy Valley gas field). These stratigraphic test wells intend to penetrate
1-3 shallow coal seams within 500'-600' from surface. Once these coal seams have been penetrated each
stratigraphic hole will be filled with freshwater and logged with gamma ray and resistivity tools on a single run.
Hilcorp geologists may determine that a dipmeter log also be obtained in some of the stratigraphic test wells.
The chosen contractor is very experienced in drilling wells within this shallow hole section on the Kenai
Peninsula and will use air drilling to drill the stratigraphic test wells to depth. Best practices will be utilized to
drill and abandon these shallow stratigraphic test wells. Casing will be required in the top 100' —150' of hole
due to formation instability issues and will be drilled into place. The cuttings generated from the air drilling
operations will be captured in a tank and samples will be obtained approximately every 30'. These cuttings
will be hauled to the G&I Facility in the Kenai Gas Field for disposal or taken to the Kenai Peninsula Borough
landfill.
After each test well has been evaluated, it will be plugged with grout/bentonite mixture as required to meet
regulatory requirements. Once a grout plug has been set to within 10' of surface, the casing will be cut off
and the hole buried to complete the P&A of each stratigraphic test well. Once all drilling and data evaluation
work has been completed, all locations will be cleaned up to the individual land owners satisfaction.
Permission will be obtained from each land owner for all activities on their property to include surveying, site
preparation, drilling activities, and data collection/evaluation of each stratigraphic test well.
The stratigraphic test well locations were chosen to minimize impact to the surface owners. The area required
for each stratigraphic test well is approximately 35' x 70'. Should soil conditions require, rig mats will be set in
place to provide the drill rig unit and support equipment a firm and stable work surface. The locations have
been placed near established roads and right of ways to minimize the length of any additionally needed access
roads.
Four locations in the Deep Creek area will require packed snow and ice roads to access swampy areas so that
drilling and evaluation work will be completed in Q4 2017 or Q1 2018, once the ground has sufficiently frozen.
Work for the Q4 2017 / Q1 2018 stratigraphic test wells will be completed in the same manner as those drilled
and evaluated during the summer.
Stratigraphic Test Well Program
Project Description
The Hilcorp Alaska, LLC stratigraphic test well program will be performed from June -December of 2017, and
possibly into Q1 of 2018 depending on the ability to build packed snow and ice roads into the locations
located in swampy areas. Hilcorp anticipates drilling 16-20 stratigraphic test wells, each up to 600' deep that
will be drilled and evaluated on the southern end of the Kenai Peninsula between Ninilchik and Anchor Point.
The areas have been named Seaview (near Anchor Point), Pearl (near Ninilchik) and Deep Creek (for the inland
locations about 5 miles south of the Happy Valley gas field). These stratigraphic test wells intend to penetrate
1-3 shallow coal seams within 500'-600' from surface. Once these coal seams have been penetrated each
stratigraphic hole will be filled with freshwater and logged with gamma ray and resistivity tools on a single run.
Hilcorp geologists may determine that a dipmeter log also be obtained in some of the stratigraphic test wells.
The chosen contractor is very experienced in drilling wells within this shallow hole section on the Kenai
Peninsula and will use air drilling to drill the stratigraphic test wells to depth. Best practices will be utilized to
drill and abandon these shallow stratigraphic test wells. Casing will be required in the top 100' —150' of hole
due to formation instability issues and will be drilled into place. The cuttings generated from the air drilling
operations will be captured in a tank and samples will be obtained approximately every 30'. These cuttings
will be hauled to the G&I Facility in the Kenai Gas Field for disposal or taken to the Kenai Peninsula Borough
landfill.
After each test well has been evaluated, it will be plugged with grout/bentonite mixture as required to meet
regulatory requirements. Once a grout plug has been set to within 10' of surface, the casing will be cut off
and the hole buried to complete the P&A of each stratigraphic test well. Once all drilling and data evaluation
work has been completed, all locations will be cleaned up to the individual land owners satisfaction.
Permission will be obtained from each land owner for all activities on their property to include surveying, site
preparation, drilling activities, and data collection/evaluation of each stratigraphic test well.
The stratigraphic test well locations were chosen to minimize impact to the surface owners. The area required
for each stratigraphic test well is approximately 35' x 70'. Should soil conditions require, rig mats will be set in
place to provide the drill rig unit and support equipment a firm and stable work surface. The locations have
been placed near established roads and right of ways to minimize the length of any additionally needed access
roads.
35'
Shallow Strat Well Drilling Site Plan
Drill Cuttings Tank
—20'x8'x6'
Pipe Truck - 32'x8' 35,000 lbs
Drill Rig - 40'x8' 62,000 lbs
8 May 2017
Alaska Oil and Gas Commission
ATTN: Steve Davies
Hilcorp Alaska, LLC
ATTN: Paul Mazzolini
RE: Shallow Stratigraphic Test Well Program Geologic Hazard Analysis
Hilcorp Alaska, LLC has analyzed nearby oil and gas test wells, water wells, nearby gas producing wells,
and seismic data on the southern Kenai Peninsula and do not anticipate any shallow gas at depths
between 500' and 850' for the Stratigraphic Test Well Program. Therefore a waiver is requested for
utilizing a diverter that is typical on deeper drilling oil and gas operations. The information that follows
was utilized to determine the need for the diverter to drill the shallow stratigraphic test wells.
Hilcorp Alaska, LLC is planning on drilling shallow stratigraphic test wells in three areas: Ninilchik, Deep
Creek Unit, and Anchor Point. For each of these areas, geotechnical evidence indicates no shallow
hazards.
M. Guhl 10/29/2019
Davies, Stephen F (DOA)
From: Cody Terrell <cterrell@hilcorp.com>
Sent: Thursday, September 21, 2017 3:11 PM
To: Davies, Stephen F (DOA)
Subject: RE: Deep Creek SW4 (PTD 217-132) - Owner Approval Needed
Attachments: C-061591 Lease.pdf
Steve.
Deep SW4 is located on C I R I lands and on a CIRI of and gas lease (C -06159I).
Regards,
Cody T. Terrell
Landman
Hilcorp Alaska, I.LC
Direct: 907-777-8432
Cell: 713-870-4532
From: Davies, Stephen F (DOA) [mailto:steve.davies@alaska.gov]
Sent: Thursday, September 21, 2017 1:39 PM
To: Cody Terrell <cterrell@hilcorp.com>
Subject: Deep Creek SW4 (PTD 217-132) - Owner Approval Needed
Cody,
Owner approval was not included with this application. Could you please provide it?
Thanks,
Steve Davies
AOGCC
CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas
Conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential
and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If
you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware
of the mistake in sending it to you, contact Steve Davies at 907-793-1224 or steve.davies@alaska.gov.
COOK INLET REGION, INC.
OIL AND GAS LEASE
C-061591
THIS LEASE ("Lease") is entered into this � day of December, 1999 between
COOK INLET REGION, INC. ("Lessor"), an Alaska corporation, whose business address is 2525
C Street, Suite 500, Anchorage, Alaska 99509-3330, and UNION OIL COMPANY OF CALIFORNIA
("Lessee"), a California corporation, whose business address is 909 West 91h Avenue, P. O. Box
196247, Anchorage, AK 99519-6247.
In consideration of Lessee's covenants and agreements hereinafter contained and of
the faithful performance of each of them by Lessee, and subject to the provisions of this Lease,
Lessor and Lessee agree as follows:
GRANT.
a. Subject to the terms and conditions of this Oil & Gas Lease, Lessor grants and
leases to Lessee, without warranty, the exclusive right to drill for, extract, remove, clean,
process, and dispose of Oil, Gas, and Associated Substances (each as defined in Section 40,
below) in or under the following described tract of land:
Township 3 South, Range 13 West, Seward Meridian
Section 5: Lots 1 to 4 inclusive, S1/2NI12, SE1/4, SW1/4;
Section 8: All,-
Section
ll,Section 18: All. %
Township 3 South, Range 14 West, Seward Meridian
Section 24: All.
containing approximately 2,546.00 acres, more or less (such tract referred to in this Lease as
the "Leased Area"); the non-exclusive right to conduct within the Leased Area geological and
geophysical exploration for Oil, Gas, and Associated Substances; and the non-exclusive right to
install pipelines and build structures on the Leased Area to find, produce, save, store, treat,
process (but not refine), transport, take care of, and market all Oil, Gas, and Associated
Substances; excepting, however, coal (in all forms other than coalbed methane that can be
produced by in situ extraction methods), sand, gravel and other minerals which are mined and
geothermal steam and associated geothermal resources. The rights granted by this Lease are
to be exercised in a manner which will not unreasonably interfere with the rights of any other
permittee, lessee or grantee of the Lessor.
b. If the Leased Area is described by protracted legal subdivisions and, after the
Effective Date of this Lease, the Leased Area is surveyed under the public land rectangular
system, the boundaries of the Leased Area are those established by that survey, when
approved, subject, however, to the provisions of applicable regulations relating to those
surveys,
C. If Lessor's ownership interest in the Oil, Gas, and Associated Substances in the
Leased Area is less than an entire and undivided interest, the grant under this Lease is effective
only as to the Lessor's interest in Oil, Gas, and Associated Substances, and the rentals, Shut -In
Oil and Gas Lease C-061591 Page 1 of 29 12/06/99
Royalties, Minimum Royalties and royalties provided in this Lease shall be paid to Lessor in the
proportion that Lessor's interest bears to the entire undivided interest.
d. If after the Effective Date of this Lease the acreage of the Leased Area is
determined to be greater or lesser than the acreage stated in this Section 1, the future rentals
and Shut -In Royalties provided to be paid to Lessor under this Lease shall reflect any such
adjustment.
e. Lessor makes no representations or warranties, express or implied, as to title, or
access to, or quiet enjoyment of, the Leased Area, and Lessor is not liable to Lessee for any
deficiency in title to the Leased Area, nor is Lessee or any successor in interest to Lessee
entitled to any refund due to deficiency in title for any bonuses, rentals or royalties paid under
this Lease.
EFFECTIVE DATE.
This Lease takes effect on December % _? , 1999 ("Effective Date")
3. TERM.
This Lease shall have an initial primary term which shall commence at the Effective Date
specified in Section 2, and shall extend for four (4) years thereafter unless this Lease is sooner
terminated as provided herein ("Primary Term"). This Lease shall automatically terminate at the
end of the Primary Term unless extended in accordance with this Section or Section 8 below.
4. RESERVED RIGHTS.
a. Lessor, for itself and others, reserves all rights not expressly granted to Lessee
by this Lease. These reserved rights include, but are not limited to:
(1) the right to explore for Oil, Gas, and Associated Substances by
geological and geophysical means;
(2) the right to explore for, develop, and remove natural resources other than
Oil, Gas, and Associated Substances on or from the Leased Area;
(3) the right to establish or grant easements and rights of way for any lawful
purpose, including, but not limited to, shafts and tunnels necessary or appropriate for the
working of the Leased Area or other lands for natural resources other than Oil, Gas, and
Associated Substances;
(4) the right to dispose of land within the Leased Area for well sites and well
bores of wells drilled from or through the Leased Area to explore for or produce Oil, Gas, and
Associated Substances in and from lands not within the Leased Area or lands as to which the
Lease has lapsed, been surrendered, or otherwise terminated; and
(5) the right otherwise to manage and dispose of the surface of the Leased
Area or interests in that land by grant, lease, permit, or otherwise to third parties.
Oil and Gas Lease C-061591 Page 2 of 29 12/06/99
b. The rights reserved may be exercised by Lessor, or by any other person or entity
acting under authority of Lessor, in any manner that does not unreasonably interfere with or
endanger Lessee's operations under this Lease.
5. NON-REFUNDABLE BONUS.
Lessee will pay to Lessor, concurrently with the execution of this Lease, a non-
refundable bonus of ten dollars ($10.00) per acre. This bonus shall not be refunded, reduced,
prorated, or otherwise diminished for any reason. Unless this Lease is earlier terminated in
accordance with its terms, if Lessee does not drill a well capable of producing in paying
quantities on the Leased Area before the third Anniversary Date of this Lease, Lessee shall pay
to Lessor a non-refundable bonus equal to ten dollars ($10) per acre. The bonus shall not be
refunded, reduced, prorated, or otherwise diminished for any reason.
RENTALS, MINIMUM ROYALTIES, AND SHUT-IN ROYALTIES.
a. During the Primary Term of this Lease, if no Oil, Gas or Associated Substances
are being produced on any Anniversary Date of this Lease, this Lease shall automatically
terminate at 11:59 p.m., Alaska Standard Time, on such Anniversary Date as defined in Section
40, unless Lessee has paid Lessor, by check delivered to Lessor's office, on or before such
Anniversary Date a rental of three dollars ($3.00) per acre then covered by this Lease. First
year rentals shall be payable on the Effective Date of this Lease. If on any Anniversary Date of
this Lease, production in Paying Quantities is being obtained from the Leased Area, or if Shut -
In Royalties or Minimum Royalties are paid under this Section 6, Lessee shall be excused from
paying the rental for the annual period covered by such rental for this Lease.
b. After the commencement of production (excluding reasonable production tests)
from a well capable of producing in Paying Quantities on the Leased Area (or, if this Lease or a
portion thereof is committed to a unit pursuant to Section 19, within the unit) this Lease shall
automatically terminate unless Lessee has paid Lessor, within thirty (30) calendar days
following any Anniversary Date of this Lease, a royalty equal to twenty dollars ($20.00) per acre
then covered by this Lease ("Minimum Royalty"), or the difference between the actual royalty
paid on production from or allocated to this Lease during the year, if less than twenty dollars
($20 00) per acre, and the prescribed Minimum Royalty. Lessee shall not be required to pay a
Minimum Royalty in any year in which Lessee pays a Shut -In Royalty pursuant to Subsection
6_c below.
C. If a well or wells (including Pre -Existing Wells) capable of production in Paying
Quantities exist in the Leased Area on any Anniversary Date of this Lease during the term of
this Lease, but no Oil, Gas or Associated Substances are being produced on such Anniversary
Date and have not been produced for the preceding thirty (30) days, then this Lease shall
automatically terminate at 11:59 p.m., Alaska Standard Time, on such Anniversary Date, unless
Lessee has paid Lessor on or before such Anniversary Date a Shut -In Royalty of twenty dollars
($20 00) per acre then covered by this Lease ("Shut -In Royalty"); provided, that if Lessee shall,
during the first three (3) years of the Primary Term of this Lease make a discovery and
completes a well capable of producing in Paying Quantities, then Lessor agrees to waive the
Shut -In Royalty of twenty dollars ($20.00) per acre for a period of two (2) years, commencing
on the Anniversary Date of the Lease first occurring -after the determinalon fs made, by suitable
production test, that the discovery well is capable of producing in Paying Quantities, and
provided that during that period Lessee diligently pursues construction of production facilities
serving this Lease. Shut -In Royalties shall continue until actual royalties are paid to Lessor for
Oil and Gas Lease C-061591 Page 3 of 29 12/06/99
Oil, Gas and Associated Substances produced. Shut -In Royalty payments may be deducted
(without interest) out of one-half of Lessor's share of any production royalties which thereafter
become due and payable to Lessor each month pursuant to Section 25. The payment of Shut -
In Royalties shall not excuse Lessee from any of its obligations under this Lease, including,
without limitation, its obligation under Section 23 to produce and market Oil, Gas and/or
Associated Substances, and Lessee shall diligently take all needful steps to discharge its
obligations under this Lease, including, without limitation, arrangement for prompt
commencement of production and marketing of Oil, Gas and/or Associated Substances from
the Leased Area.
d. Lessee shall pay the annual rental, Minimum Royalty or Shut -In Royalties (if any)
to Lessor (or any depository designated by Lessor with at least sixty (60) days notice to
Lessee) in advance, on or before the dates indicated in this Section 6. Lessor is not required to
give notice that rentals, Minimum Royalties, or Shut -In Royalties are due by billing Lessee. If
Lessor's (or depository's) office is not open for business on the Anniversary Date of this Lease,
the time for payment is extended to include the next day on which that office is open for
business. If the annual rental, Minimum Royalty, or Shut -In Royalty payable to Lessor is not
paid timely, this Lease shall automatically terminate at 11:59 p.m. Alaska Standard Time on the
date by which the payment was due.
ROYALTY ON PRODUCTION.
Lessee shall pay to Lessor as a royalty eighteen percent (18%) in amount or value of
the Oil, Gas, and Associated Substances saved, removed, or sold from the Leased Area (with
royalty in value being determined in accordance with Sections 24 and 25 of this Lease), and of
the Oil, Gas, and Associated Substances from the Leased Area used on the Leased Area for
extraction of natural gasoline or other products. Lessee shall not be required to pay Lessor a
royalty for Oil, Gas, and Associated Substances (i) used on the Leased area, or, if the Lease is
included in a unit, within the unit area, for development and production, or unavoidably lost, or
(ii) used off the Leased Area for the purpose of putting Oil, Gas, and Associated Substances
from the Leased Area in good and merchantable condition and of pipeline quality.
8. EXTENSION OF THE TERM.
a. The term of this Lease will be extended automatically if and for so long as Oil,
Gas or Associated Substances are produced in Paying Quantities, as defined in Section 40,
from the Leased Area. Further, this Lease shall automatically be extended beyond its Primary
Term if upon or prior to the expiration date of the Primary Term, the Lease is committed to a
unit agreement approved by Lessor and production of Oil, Gas, or Associated Substances is
had in Paying Quantities under the unit agreement, and a portion of unit production is allocated
to this Lease. This Lease shall thereafter continue in effect so long as it remains subject to the
unit agreement and a portion of the actual production under the unit agreement is allocated to
this Lease.
b. (1) If Lessee, as of the date on which this Lease otherwise would expire, has
commenced Drilling or Reworking Operations, as defined in Section 40 below, of a well whose
bottom hole location is in the Leased Area, and is continuing such Drilling or Reworking
Operations with reasonable diligence, this Lease will continue in effect until ninety (90) days
after cessation of such Drilling or Reworking Operations, and for so long as Oil, Gas or
Associated Substances is produced in Paying Quantities from the Leased Area.
Oil and Gas Lease C-061591 Page 4 of 29 12/06/99
(2) If the production of Oil, Gas or Associated Substances in Paying
Quantities ceases at any time, and Lessee commences and pursues Drilling or Reworking
Operations with reasonable diligence within one hundred eighty (180) days after cessation of
production, this Lease will continue in effect until ninety (90) days after cessation of Drilling or
Reworking Operations, and for so long as Oil, Gas or Associated Substances are produced in
Paying Quantities,
C. The term of this Lease may be extended by the payment of Shut -In Royalties in
accordance with Subsection 6.c only if all of the following conditions are met:
(1) Lessee has Drilled a well or wells capable of production in Paying
Quantities; and
(2) No Oil, Gas or Associated Substances are being produced either
because: (i) Lessee has commenced and is diligently proceeding under Section 17 to build the
facilities, pipelines, and the like necessary to commence production, but has not yet completed
building such necessary facilities; or (ii) there is no market for Oil, Gas or Associated
Substances at a price sufficient for the resulting production revenues to be in excess of
Lessee's actual operating costs; and
(3) Lessee has paid Shut-in Royalty within 90 days of cessation of Drilling
Operations if Drilling Operations were conducted under the provisions of Subsection 8.b.0)
above.
If the requirements of Subsections 8.c(1) and 8.c(2) are not met, the presence of a shut-
in Pre -Existing Well (as defined in Section 40, below) shall not alone constitute grounds for
extension of the term, and the payment of Shut -In Royalties shall not extend the term of this
Lease.
d. If Lessor in its sole discretion, reasonably exercised, determines that Lessee has
been prevented by Force Majeure, as defined in Section 40 below, after efforts made in good
faith from performing any act that would extend the term of this Lease beyond the Primary
Term, this Lease will not expire during the period of Force Majeure; provided, however, that a
period of Force Majeure shall in no event be longer than two (2) consecutive years. If the Force
Majeure occurs before the expiration of the Primary Term, the Primary Term will be extended at
the end of the period of Force Majeure by adding to the Primary Term the lesser of two (2)
years or the actual period of time under the Primary Term during which the Force Majeure
existed. If the Force Majeure occurs during an extension of the Primary Term under this
Section, this Lease will be extended for the lesser of two (2) years or the period of Force
Majeure. Nothing in this Subsection 8.d suspends the obligation to pay royalties to Lessor from
operations on the Leased Area that are not affected by any Force Majeure, or suspends the
obligation to pay rentals, Minimum Royalties, or Shut -In Royalties.
9. ASSIGNMENT.
Lessee may not transfer, convey, or assign this Lease or any interest therein without
Lessor's prior written consent, which consent shall not be unreasonably withheld by Lessor;
provided, however, that Lessor shall not be required to consent to assignment of a divided
interest in this Lease. Unless otherwise expressly agreed in writing between Lessor and
Lessee, such transfer, conveyance or assignment shall not relieve Lessee of its duties and
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obligations hereunder. Lessor may at any time assign all or any part of its interest in this Lease
and shall give written notice of such assignment to Lessee.
10. SURRENDER.
Lessee at any time may deliver to Lessor a written surrender of all rights under this
Lease or any portion of the Leased Area comprised of one or more 160 -acre legal subdivisions,
or, with the consent of Lessor (except as provided in Section 21), any separate and distinct
Zone or geological structure underlying the Leased Area; provided, however, that the lands
relinquished must be in contiguous blocks and the Leased Area may not be fragmented within
any quarter section. Lessee may also surrender a tract if the entire tract is less than 160 acres
ands non-contiguous with other acreage in this Lease. A surrender will be effective as of the
date the written notification is received by Lessor subject to the continued obligations of Lessee
to pay all accrued rentals, royalties, Minimum Royalties, and Shut -In Royalties, and to place all
wells and surface facilities on the surrendered land or in the surrendered Zones or geological
structures in a condition that is reasonably satisfactory to Lessor for suspension or
abandonment, and in a condition which complies with the provisions of Subsection 31.g. After
that, the lands or the Zone or Zones, as the case may be, so surrendered shall cease to be
subject to this Lease, and all rights, obligations and liabilities of Lessee hereunder shall cease
and terminate with respect thereto; except however, obligations or liabilities theretofore accrued
including, without limitation obligations under the provisions identified in Section 44 of this
Lease, including Lessee's obligations pursuant to Section 32 relating to acts or omissions of
Lessee or its independent contractors occurring or arising prior to the date the surrender
became effective, and Lessee's obligations pursuant to Section 31), shall survive any surrender
pursuant to this Section
Lessor shall have the option, without obligation, to acquire and take over any well, along
with all related facilities, gathering lines, pipelines, and the like associated with such well, that
Lessee intends to abandon, which option shall be exercised as follows:
a, At least thirty (30) days prior to plugging and abandoning any well (except in the
event of emergency, in which case, within a reasonable time under the circumstances), Lessee
shall deliver written notice to Lessor of its intent to plug and abandon said well. Within thirty
(30) days of receiving such notice (or forty-eight (48) hours if a rig is on location), Lessor may,
at its option, notify Lessee of its intent to acquire and take over said well and its related
facilities, gathering lines, pipelines, and the like. Upon delivering such notice to Lessee, Lessor
shall assume the rights and obligations of Lessee with respect to the operation of the well and
related facilities, etc., including the obligation to properly plug and abandon said well and
related facilities. Lessor shall defend, indemnify, and hold harmless Lessee for any and all
damages, causes of action, losses, liabilities, and judgments arising out of Lessor's operation of
the well and related facilities that occur after the effective date of Lessor's acquisition. Prior to
Lessor's assumption of rights and obligations under this subsection, an Environmental
Assessment pursuant to Subsection 31.c shall be performed on the well and surrounding area.
b. Within thirty (30) days of notifying Lessee of its intent to exercise its option
pursuant to this Section, Lessor and Lessee shall reasonably and mutually estimate the salvage
value of the well and related facilities and the cost of properly plugging and abandoning the
well. If the reasonably estimated salvage value of the well and related facilities is greater than
the estimated cost of properly plugging and abandoning the well and related facilities, Lessor
shall pay to Lessee the difference between said salvage value and said cost. If said salvage
value is less than said cost, Lessee shall pay to Lessor the difference between said salvage
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value and said cost. Payments required under this Section shall be made within ten (10) days
of the date of the determination of the estimates of the salvage value and of the cost to plug
and abandon the well and related facilities.
C. If a well acquired and taken over by Lessor pursuant to this Section 10 is served
by facilities, gathering lines, pipelines and the like that also serve other wells retained by
Lessee, Lessee and Lessor agree to negotiate in good faith an equitable basis for sharing in the
use, maintenance and replacement costs of such common facilities.
If Lessor does not notify Lessee of its intent to acquire and take over said well pursuant
to this Section 10, Lessor shall assume no liability or responsibility for such well, and Lessee
shall securely plug such well in accordance with all applicable laws and regulations and the
standards of a prudent oil and gas operator.
11. DEFAULT AND TERMINATION; CANCELLATION.
The failure of Lessee to perform timely its obligations under this Lease, or the failure of
Lessee otherwise to abide by all express and implied provisions of this Lease, shall be a default
of Lessee's obligations under this Lease. In the event of a default by Lessee, Lessor may
pursue any remedies that may be available at law or in equity and each such right and remedy
shall be cumulative and shall be in addition to every other right or remedy provided for in this
Lease, whether now or hereafter existing at law or equity or by statute or otherwise. In addition
to all other rights and remedies of Lessor under this Lease or otherwise, whenever Lessee: (i)
fails to comply with any provision of this Lease (other than a provision which, by its terms,
provides for automatic termination) and fails to begin and diligently prosecute operations to
remedy that default within thirty (30) days after receiving written notice thereof; or (ii) fails to
comply with any provision of this Lease requiring the payment of money, (other than a provision
which, by its terms, provides for automatic termination) and Lessee fails to cure such failure
within five (5) working days after receiving written notice thereof, Lessor may terminate this
Lease.
12. RIGHTS UPON TERMINATION.
Upon termination of this Lease as to all or any portion.of the Leased Area, Lessee may
not remove from the Leased Area or portion of the Leased Area any machinery, equipment,
tools, and materials (the "Equipment") without Lessor's prior written consent, which consent
shall not be unreasonably withheld; provided, however, Lessee shall have the obligation to
remove any or all such Equipment at Lessor's request. Any Equipment not removed within one
(1) year after Lessee receives Lessor's consent to such removal (or, if Lessee did not request
such consent, within one (1) year after the expiration or earlier termination of this Lease) shall
become the property of Lessor or may be removed by Lessor at Lessee's expense. At the
option of Lessor, all improvements such as roads, pads, and wells must either be abandoned in
whole or in part and the sites rehabilitated by Lessee to the reasonable satisfaction of Lessor or
left intact, in which case Lessor may use said improvements. Subject to the above conditions,
Lessee shall deliver the Leased Area or those portions of the Leased Area in good condition.
13. INTEREST IN REAL PROPERTY.
It is the intention of the Parties that the rights granted to Lessee by this Lease constitute
an interest in real property in the Leased Area.
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14. SURFACE USE.
a. It is expressly acknowledged that Lessor may or may not own some or all of the
surface estate of the Leased Area and that Lessor makes no warrantees of any kind regarding
such ownership; Lessee has the obligation to determine surface ownership. To the extent that
Lessor owns the surface estate of the Leased Area and has a right to confer such rights to
Lessee, and to the extent that such activities have been included in the final plan of operations
(Section 16) or plan of development (Section 17), the following shall apply: (i) Lessee shall have
the right to use the Leased Area to the extent reasonably necessary and convenient to carry
out those operations authorized by the terms of this Lease; and (ii) Lessee shall have the right
to construct, use, maintain, erect, repair and replace thereon such wells, power lines, pipelines,
tanks, production facilities (but not refineries), communication lines, roads, bridges, work camps
and similar facilities which are necessary and convenient to carry out the operations authorized
by the terms of this Lease. Prior to construction of any processing plants or converting facility,
Lessee must obtain the written approval of Lessor and necessary third party or governmental
approvals.
b. Lessee shall have such rights of ingress and egress and such pipeline rights for
Oil and Gas and Associated Substances to the extent that Lessor, as owner of the subsurface
estate, has the right to confer such rights to Lessee. Lessor agrees that it shall make
reasonable efforts to assist Lessee in obtaining any required access and permits to and across
the Leased Area without any obligation to make expenditures or incur costs on Lessor's part
other than de minimis expenditures or costs.
C. Notwithstanding the foregoing Subsections 14.a and 14.b, Lessee agrees that it
will conduct all activities in such a manner as to reasonably minimize temporary and permanent
harm to the Leased Area. Without limiting the generality of the foregoing, Lessee agrees that:
(i) it will conduct all operations so as to reasonably minimize temporary and permanent harm to
the fish and wildlife habitat; (ii) it will conduct all operations in compliance with Section 31 and
will take all reasonable precautions not to pollute or permit the pollution of soil, surface water, or
groundwater and not to permit the release, discharge, or disposal of any Hazardous Substance
into the environment in violation of any Environmental Law; and (iii) it will take all steps
reasonably necessary to protect environmental, cultural, archaeological and other surface and
subsurface values; (iv) for all Leases located within the boundaries of the Kenai National
Wildlife Refuge, Lessee shall be bound by and comply with the terms of that certain General
Surface Use Plan for the Cook Inlet Region, Inc. Subsurface Entitlement in the Kenai National
Moose Range, dated March 27, 1980.
d. Except where it would render development economically infeasible, Lessee shall
place all utilities and roads and similar facilities in shared rights of way.
e. Lessee shall keep drill pads to a minimum consistent with optimum development
and maximum drainage of a pool or pools.
f. Lessee shall group its wells together in drill site areas so that, so far as
reasonably practicable, optimum drainage can be obtained from the smallest possible number
of surface locations.
g. Lessee shall avoid unnecessary scattering of buildings and structures and
unnecessary occupancy of the Leased Area. Lessee shall have the right to pass through the
subsurface of the Leased Area or to directionally drill through or under any such subsurface to
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complete any well capable of producing Oil or Gas or Associated Substances in Paying
Quantities on adjacent or contiguous areas covered by a lease issued by Lessor or by another
party whose lands are unitized with the Leased Area.
h. Notwithstanding anything herein to the contrary, the location on the Leased Area
of all surface uses and facilities, including but not limited to utility corridors, drill sites, tank farms
and work camps, shall first be submitted to Lessor in writing, prior to and as a condition to the
installation, construction or use as a part of the plan of operations specified in Section 16 or
plan of development specified in Section 17. Lessor reserves the right. to require modification
or changes if any contemplated facility or surface use is unreasonable or would create a
conflict, nuisance or hazard.
i. Upon the request of Lessor, Lessee shall relocate or cause to be relocated to a
location approved by Lessor, roads, wells, pipelines, utility lines, tanks and other machinery,
equipment, supplies, materials and structures placed by Lessee on the Leased Area. Lessor
shall reimburse Lessee for all direct and indirect expenses incurred by Lessee in so relocating
the same or equivalent facilities.
j. Lessor hereby reserves, free of cost, the right to use or grant to others the right
to use the Leased Area for any and all purposes not herein expressly given to Lessee and
which would not materially conflict with Lessee's rights hereunder.
k. All roads utilized by Lessee within the Leased Area shall be maintained by
Lessee during the period of such utilization, except where otherwise regularly maintained by a
public agency. Lessor and its agents, representatives, employees and invitees may make
reasonable use of roads within the Leased Area, in any manner that does not unreasonably
interfere with or endanger Lessee's operations under this Lease. Absent negligence on
Lessee's part, Lessor shall be responsible for all damages to roads caused by Lessor's
activities and shall hold Lessee free from any liability from said use by Lessor.
15. SEVERABILITY.
If it is finally determined in a judicial proceeding that any provision of this Lease is
invalid, Lessor and Lessee may jointly agree by a written amendment to this Lease that, in
consideration of the provisions in that written amendment, the invalid portion will be treated as
severed from this Lease and that the remainder of this Lease, as amended, will remain in
effect. In the event no such agreement is reached, the parties shall have such rights and
remedies as are available under applicable law.
16. PLAN OF OPERATIONS.
a. Except as provided in Subsection 16.b below, no significant Lease operations
may be undertaken on the Leased Area until a final plan of operations has been prepared by
Lessee and submitted to Lessor. Lessee shall submit a draft plan of operations to Lessor which
shall contain, at a minimum, the information set forth in Subsection 16.c below.
b. A plan of operations will not be required by Lessor for Lease operations
undertaken under an approved unit plan of operations.
C. A draft plan of operations submitted by Lessee to Lessor must contain sufficient
information based on data reasonably available at the time the plan is submitted to Lessor for
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Lessor to determine the surface use requirements and impacts directly associated with the
proposed operations. The draft plan of operations must include statements and maps or
drawings setting out the following:
(1) the sequence and schedule of the operations to be conducted on the
Leased Area, including the date operations are proposed to begin and their proposed duration;
(2) projected surface use requirements directly associated with the proposed
operations, including but not limited to the location and design of well sites, material sites, water
supplies, solid waste sites, sumps, buildings, roads, utilities, airstrips, and all other facilities and
major equipment necessary to conduct the proposed operations;
(3) plans for rehabilitation of the affected Leased Area after completion of
operations or phases of those operations;
(4) a proposal for meeting the requirements of Section 35, below.
(5) a description of operating procedures designed to comply with the
requirements of Section 31 below, and to prevent or minimize adverse effects on other
environmental values, other uses of the Leased Area (such as fish and wildlife habitats and
public use areas), other cultural and archaeological values (such as historic and archaeological
sites?, and any other surface or subsurface values;
6) a list of all permits, whether federal, state, local, or private, that have
been or are anticipated to be obtained by Lessee to allow the proposed operations to be
accomplished; and
(7) any plan or proposal for disposal or storage of any hazardous waste or
other waste product (including Class II wastes) on or in the Leased Area.
d. Lessor may notify Lessee of its comments on the draft plan of operations (or any
amendment thereto) within sixty (60) days after receiving such plan or amendment from
Lessee. Lessor may require Lessee to supplement the draft plan of operations if it does not
provide sufficient information or otherwise does not meet the requirements of Subsection 16.c
above in form or substance. Lessor may make comments and request reasonable revisions it
deems necessary to protect Lessor's interest, including its interest in protecting the
environmental, cultural, archaeological, or other surface or subsurface values. If Lessor fails by
the end of the sixty (60) day period to provide Lessee with a response or a reasonable request
for additional time to review the draft plan of operations, the Lessor shall be deemed to have
decided not to provide Lessee with any comments, and Lessee may submit to Lessor the final
plan of operations.
e. Lessee must in good faith consider Lessor's comments, and requests and must
either revise the draft plan of operations in response to Lessor's comments or provide a
detailed reasonable explanation as to why specific comments and suggestions were not
accepted. Within thirty (30) days after receiving Lessor's comments, Lessee shall submit to
Lessor the final plan of operations which shall include the revisions requested by Lessee or
responses to Lessor's comments.
f. If an amendment to the plan of operations is necessary in order to protect
environmental, cultural, archaeological, or other surface or subsurface values, Lessee shall,
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either at its own initiative or at the request of Lessor, submit to Lessor a draft amendment to the
plan of operations that will reasonably protect such values. Lessor shall have an opportunity to
comment on such draft amendment and Lessee shall respond to such comments after the
pattern of Subsections 16.d and 16.e above.
g. Lessor's review of and comments on a plan of operations or any amendments to
a plan of operations does not relieve Lessee of its obligation to obtain approvals and permits
required by governmental agencies having regulatory authority over those operations.
h. All of Lessee's operations on the Leased Area must be in material conformance
with the final plan of operations.
i. Upon completion of operations, Lessee shall conduct an inspection of the area of
operations reasonably calculated to assess Lessee's compliance with the plan of operations.
Lessee shall thereafter submit a report indicating the completion date of operations and
describing any non-compliance revealed in the inspection or otherwise known to Lessee, and a
plan to remediate the non-compliance, if appropriate.
17. PLAN OF DEVELOPMENT.
a. Except as provided in Subsection 17.e below, within twelve (12) months after
completion of a well capable of producing Oil, Gas, or Associated Substances in Paying
Quantities, Lessee shall submit to Lessor a draft plan of development which must describe
Lessee's plans for developing the Leased Area. The draft plan of development shall, at a
minimum, include provisions for proper development of the Leased Area, including, without
limitation, provisions for diligence and the prevention of waste, pursuant to Section 23 below.
No development of the Leased Area may occur until a draft plan of development has been
submitted to Lessor, and Lessor has had an opportunity to comment on said draft plan of
development.
b. Lessor may notify Lessee of its comments on the draft plan of development (or
any amendment thereto) within sixty (60) days after receiving such plan or amendment from
Lessee. Lessor may require Lessee to supplement the draft plan of development if it does not
provide sufficient information or otherwise does not meet the requirements of Subsection 17.a
above in form or substance. In addition, Lessor may make comments and request revisions it
deems necessary to protect Lessor's interest. If Lessor fails within the sixty (60) day period to
provide Lessee with a response to the draft plan of development, Lessor shall be deemed to
have decided not to provide Lessee with any comments, and Lessee may submit to Lessor the
final plan of development.
C. Lessee must in good faith consider Lessor's comments and must either revise
the draft plan of development in response to Lessor's comments or provide a detailed,
reasonable explanation as to why specific comments and suggestions were not accepted.
Within thirty (30) days after receiving Lessor's comments, Lessee shall submit to Lessor the
final plan of development which shall include such revisions or responses to Lessor's
comments.
d. A revised and updated draft plan of development must be submitted to Lessor
annually before or on the Anniversary Date of the previously submitted plan. Lessor shall have
an opportunity to comment on such revised and updated draft plan of development and Lessee
shall respond to such comments after the pattern of Subsections 17.b and 17.c above. If no
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changes from the final plan are contemplated for the following year, a statement to that effect
must be submitted in lieu of the required revision and update.
e. If the Leased Area is included in an approved unit, Lessee will not be required to
submit a separate Lease plan of development for unit activities.
f. Development of the Leased Area must be in material conformance with the plan
of development.
18. DATAXONFIDENTIALITY.
a. Lessee shall keep and shall provide to Lessor (in the manner set forth below), all
Data, as defined in Section 40, below, that directly affects the Leased Area and the lands
unitized therewith, and that is in the possession or control of Lessee during the term of this
Lease.
b. Lessee shall, on an annual basis, provide Lessor with a current inventory of all
Data relating to the Leased Area. Upon Lessor's written request, Lessee shall promptly provide
Lessor with a copy of any or all such Data at Lessee's sole cost and expense. Lessor
understands and hereby acknowledges that Lessee disclaims any and all liability for the
information contained in the Data, and makes no warranty as to the completeness, quality,
reliability or accuracy of the Data.
C. Lessor and Lessee agree that Data shall be kept confidential and not disclosed
to others, except that Lessor and Lessee: (i) may provide Data to their employees or
contractors for the purpose of obtaining technical evaluations of such Data, provided, however,
that the party to whom such Data is disclosed shall agree to keep the same confidential; (ii)
may disclose, without restrictions of confidentiality, such Data that is already in the public
domain at the time furnished or that subsequently becomes part of the public domain through
no fault of the disclosing party, and Data that the disclosing party can demonstrate was in its
possession at the time of disclosure; (iii) may disclose to a governmental authority any Data
that is required by law to be disclosed, provided that the disclosing party shall, before producing
any Data to any governmental authority pursuant to this subsection, first provide reasonable
advance notice to the non -disclosing party of its intention to produce such Data and allow the
non -disclosing party the opportunity to object thereto; (iv) may disclose Data to an Affiliate, as
defined in Section 40, any of the Data for any purpose, provided such Affiliate agrees to be
bound by the terms of this Section 18; and (v) may disclose Data to a third party when soliciting
to explore or develop on the Subject Lands jointly with such third party, or for the purposes of a
sale of interests in the Subject Lands to a third party, provided Lessor receives written notice of
intent to disclose to such third party at least thirty (30) days in advance of disclosure and the
third party agrees in writing to keep the Data confidential as provided herein. Lessor agrees to
hold such notice of intent to disclose strictly confidential.
d. In addition to its right to disclose Data pursuant to this Section 18, Lessor shall
be entitled to disclose, without restrictions of confidentiality, such Data that was acquired upon
lands that are released by Lessee and are no longer part of the Leased Area.
e. As to portions of the Leased Area that are no longer subject to the terms of this
Lease, any Data divulged or made available to Lessor, or which should have been divulged or
made available to Lessor, shall become the sole property of Lessor immediately upon the
termination, expiration, or cancellation of this Lease, provided that Lessee shall have the right
Oil and Gas Lease C-061591 Page 12 of 29 12/06/99
to use such Data for internal purposes, subject to the same obligations of confidentiality
described in this Section 18.
f. Notwithstanding the foregoing provisions of this Section 18, Lessee may disclose
any well data to a third party in exchange for a contribution or support for exploratory or
development activities, whether in cash or acreage or data, provided such third party agrees in
writing to keep the Data confidential as provided herein. Lessor shall receive written notice of
intent to disclose to such third party thirty (30) days in advance of disclosure. In the event the
30 -day prior notice is impossible or impracticable, then Lessee shall provide such notice as is
reasonable under the circumstances, but in no event shall such prior notice be less than ten
X10) days. Lessor agrees to hold such notice of intent to disclose strictly confidential.
g. Lessee shall also disclose to Lessor on an annual basis, for its internal use only, a set of
maps or displays that, in Lessee's sole opinion, accurately depicts Lessee's current
interpretations of the Leased Area, While Lessee shall make available these maps to Lessor,
these maps shall remain the property of Lessee and Lessor shall not be allowed to disclose
these maps to any third party without Lessee's prior written approval.
h. Upon termination or surrender of this Lease, Lessee shall furnish upon request of
Lessor, to the maximum extent of Lessee's contractual ability, free of charge, under the terms
of a standard licensing agreement, all Data possessed, acquired, or generated on this Lease
prior to 1980.
19. UNITIZATION.
a. Lessor and Lessee may unite with others, jointly or separately, in collectively
adopting and operating under a unit agreement for the exploration, development, or operation
of the pool, field, or like area or part of the pool, field, or like area that includes or underlies the
Leased Area or any part of the Leased Area whenever Lessor and the apposite state or federal
agency approve the unit agreement.
b. Drilling and producing requirements of this Lease may be altered or changed by
a unit agreement mutually agreed by and binding upon Lessor and Lessee applicable to the
Leased Area. Lessor will respond promptly to Lessee's request to approve a proposed unit
agreement, and will not withhold in bad faith its consent to any such proposed unit agreement.
Nothing in this subsection shall be construed to waive or limit Lessor's or Lessee's rights under
applicable law to seek involuntary unitization.
C. Except as otherwise provided in this Section 19, where only a portion of the
Leased Area is committed to a unit agreement approved by Lessor, that commitment
constitutes a severance of this Lease as to the unitized and nonunitized portions of the Leased
Area The portion of the Leased Area not committed to the unit will be treated as a separate
and distinct Lease having the same Effective Date and term as this Lease and may be
maintained only in accordance with the terms and conditions of this Lease. Any portion of the
Leased Area not committed to the unit agreement will not be affected by the unitization or
pooling of any other portion of the Leased Area, by operations in the unit, or by suspension
approved or ordered for the unit.
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20. DIRECTIONAL DRILLING.
This Lease may be maintained in effect by directional wells whose bottom hole location
is within the Leased Area but that are drilled by Lessee from locations on other lands not
covered by this Lease. In those circumstances, Drilling will be considered to have commenced
on the Leased Area when Lessee has commenced actual Drilling on those other lands for the
purpose of directionally drilling into the Leased Area. Production of Oil or Gas from the Leased
Area through any directional well surfaced on those other lands, or Drilling or Reworking
Operations on that directional well, will be considered production or Drilling or Reworking
Operations on the Leased Area for all purposes of this Lease. Nothing contained in this Section
20 is intended or will be construed as granting to Lessee any interest, license, easement, or
other right in or with respect to those other lands in addition to any interest, license, easement,
or other right that Lessee may have lawfully acquired from Lessor or from others.
21. OFFSET WELLS.
Lessee shall drill such wells as a reasonable and prudent operator would drill to protect
Lessor from loss by reason of drainage resulting from production on other land not owned by
Lessor. Without limiting the generality of the foregoing sentence, if Oil, Gas or Associated
Substances are produced in a well on other land not owned by Lessor or with respect to which
Lessor receives a lower rate of royalty than under this Lease, and that well is within 500 feet in
the case of an oil well or 1,500 feet in the case of a gas well of lands then subject to this Lease,
and that well produces Oil or Gas for a period of thirty (30) consecutive days in quantities that
would appear to a reasonable and prudent operator to be sufficient to recover the ordinary
costs of Drilling, completing, and producing an additional well on the Lease in the same
geological structure at an offset location with a reasonable profit to the operator, Lessee shall
within thirty (30) days after written demand by Lessor begin in good faith and diligently
prosecute Drilling operations for an offset well on the Leased Area, and shall thereafter
diligently and in good faith take all actions necessary to commence production and shall
thereafter commence production from the Leased Area, or, at Lessee's option, surrender the
applicable spacing units on which offset wells would be required by this Section.
22. USE OF EXISTING WELLS AND PADS.
All roads, pads, drill sites, or wells located upon the Leased Area which are owned by
Lessor, if any, shall be made available to Lessee for uses permitted by this Lease without
charge. In the event Lessee utilizes any such facilities, it shall notify Lessor in writing of its
intended use. Lessee shall assume the responsibility to plug and abandon any existing well
bore that it utilizes and shall restore the surface facilities directly associated with such well (i.e.,
reserve pits, drill site pads, etc.), and shall be responsible for all maintenance, remediation, and
restoration costs relating to or arising from its use of any facilities hereunder and shall assume
all liabilities therefor.
23. DILIGENCE AND PREVENTION OF WASTE.
a. Lessee shall exercise reasonable diligence in Drilling, producing, and operating
wells on the Leased Area.
b. Upon discovery of Oil or Gas or Associated Substances on the Leased Area in
quantities that would appear to a reasonable and prudent operator to be sufficient to recover
ordinary costs of Drilling, completing, and producing an additional well in the same geologic
Oil and Gas Lease C-061591 Page 14 of 29 12/06/99
structure at another location and to yield a reasonable profit to such operator, Lessee must drill
such wells as a reasonable and prudent operator would drill, having due regard for the interest
of Lessor as well as the interest of Lessee. Lessee may drill on the Leased Area to Zones
remaining subject to this Lease as many wells as it may desire to drill in addition to those
required by the provisions of this Lease.
C. Lessee shall perform all operations under this Lease in compliance with all
applicable federal, state and local laws and regulations and with due care in a good and
workmanlike manner in accordance with accepted industry methods and practices and the final
plan of operations and plan of development, and in accordance with the requirements of
Section 31, with due regard for the prevention of waste of Oil, Gas, and Associated Substances
and the entrance of water into the oil and gas -bearing sands or strata to the destruction or
injury of those sands or strata, and to the preservation and conservation of the Leased Area for
future productive operations.
d. Lessee shall promptly and diligently take all actions that would be taken by a
prudent operator to market production obtained from or allocated to the Leased Area.
e. Prior to plugging and abandoning any well that has produced Oil and Gas or
Associated Substances in Paying Quantities, Lessee shall follow the procedures described in
Section 10 and shall securely plug in an approved manner any well before abandoning it.
Lessee shall obtain appropriate regulatory approval and shall provide Lessor with copies of the
said approvals for any well, location, or solid waste disposal abandonments. Except as
otherwise expressly provided in Section 10, Lessee shall be fully responsible for all claims,
losses or liabilities arising out of or relating to such well in accordance with Section 32.
24. VALUE.
a. The value of royalty Oil, Gas, or Associated Substances shall be the
highest of,
(i) the field price received by Lessee for Oil, Gas, or Associated
Substances from the Leased Area; or
(ii) for Gas, the average of: (a) the prevailing value for Gas delivered
in the Cook Inlet Area, pursuant to 15 AAC 55.173(b) (as it may be amended from time
to time), and (b) the value of Gas as calculated pursuant to 15 AAC 55.173(e) (as it may
be amended from time to time); provided that, in no event shall the value of Gas
calculated under this subsection be less than the value of Gas calculated pursuant to 15
AAC 55.173(e); or
(iii) for Oil, the closing spot price (on the date of sale or delivery of Oil,
Gas, or Associated Substances from the Leased Area or unit area) of Alaska North
Slope crude on the West Coast as published in Platt's Oilgram Price Report, (or, if
Platt's Oilgram Price Report is unavailable, such other sources as are reasonably and
customarily relied on by the oil and gas industry as a source for such prices) less the
reasonable cost of transportation from the Leased Area to the Tesoro refinery in Nikiski,
Alaska calculated in the manner described in Section 25.
b. For purposes of Subsection 24.a:
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(i) For Oil, Gas, or Associated Substances sold by Lessee in Arms -
Length Transactions as defined in Section 40, "field price received" by Lessee shall
mean the cash value of all direct or indirect consideration or value received by Lessee
from a purchaser for the sale of such Oil, Gas, or Associated Substances; provided that,
where Oil, Gas, or Associated Substances are sold off the Leased Area (or, if
applicable, the unit area), Lessee may deduct from the "field price received" the
reasonable actual costs of transportation pursuant to Section 25.
(ii) For Oil, Gas, or Associated Substances not sold in Arms -Length
Transactions, "field price received" shall mean the highest price or value received by any
producer in the same field or area for Oil of like grade and gravity, Gas of like kind and
quality (and of comparable quantity) or Associated Substances of like kind and quality at
the time the Oil, Gas, or Associated Substances are produced from the Leased Area or
unit area; provided, that where Oil, Gas, or Associated Substances are sold off the
Leased Area (or, if applicable, the unit area), Lessee may deduct from the "field price"
the reasonable cost of transportation pursuant to Section 25.
C. Subject to Subsection 36.e, if Lessee sells or delivers Gas from the
Leased Area to the Unocal ammonia/urea fertilizer plant at Nikiski, Alaska ("Fertilizer
Plant"), the value of such Gas shall be the value calculated under Subsection 24(a)(ii),
above.
d. If Gas from the Leased Area is commingled in a pipeline with Gas from
Lessee's other leases, then a pro rata share of each sale, delivery, or disposition of
Lessee's Gas delivered from such pipeline shall be allocated to the Lease, and the value
of the Gas so allocated to each sale, delivery, or disposition shall be determined in
accordance with Subsections 24.a, 24.b, and 24.c, above. Sales, deliveries, or
dispositions to the same purchaser under multiple contracts, or sales at different prices
or values under the same contract, shall be treated as separate sales or dispositions for
purposes of determining a pro rata share under this Subsection.
25. ROYALTY IN VALUE.
Unless Lessor elects to receive all or a portion of its royalty in kind as provided in
Section 26 below, Lessee shall pay to Lessor the value of all royalty Oil, Gas, and Associated
Substances as determined under Section 24 above. Royalty paid in value will be free and clear
of all Lease Expenses and free of any lien from them. The cost to Lessor for transportation
costs beyond the boundaries of the Leased Area or unit area shall not exceed: (i) the
reasonable cost to Lessee when the transportation is by means of facilities owned by third
parties; or (ii) when transportation is by Lessee's facilities, the lesser of a) the reasonable actual
cost to Lessee; or b) a cost equal to the lowest amount Lessee charges any third party for use
of such facilities. All royalty that may become payable in money to Lessor must be paid on or
before the end of each calendar month following the month in which the Oil, Gas, or Associated
Substances are produced. The amount of all royalty in value payments which are not paid
when due under this Lease or which are subsequently determined to be due as the result of a
redetermination will bear interest from the date the obligation accrued, until it is paid in full, at
the Default Rate. Royalty payments must be accompanied by a statement showing gross
production of Oil, Gas, or Associated Substances, volume -weighted average sales price,
amounts payable to Lessor, number of well days, and production taxes paid on Lessor's royalty
share of production. Lessor may request in writing other information which may include, but is
not limited to, evidence of sales, shipments, or run tickets.
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26. ROYALTY IN KIND.
a. At Lessor's option, which may be exercised from time to time upon not less than
ninety (90) days prior written notice to Lessee, Lessee shall deliver all or a designated portion
of Lessor's royalty Oil, Gas, or Associated Substances produced from the Leased Area in kind.
Any such taking in kind shall be effective as of 7:00 a.m. Alaska Standard Time on the first day
of the calendar month next ensuing after said three (3) month period. Delivery will be on the
Leased Area, unit area, or at a place mutually agreed to by Lessor and Lessee, and must be
delivered to Lessor or to any individual, firm, or corporation designated by Lessor.
b. Royalty Oil, Gas, or Associated Substances delivered in kind must be delivered
in good and merchantable condition, and be of pipeline quality, and must be free and clear of all
Lease Expenses and free of any lien from them. Lessor, at its option, shall have the right to
use Lessee's pipelines or other transportation facilities available to Lessee to transport Lessor's
royalty Oil, Gas, and Associated Substances to the point of sale or point of delivery to a royalty
purchaser. (For purposes of this subsection, "other transportation facilities available to Lessee"
shall include third party transportation facilities to which Lessee has access, except where
transportation of such Oil, Gas, and Associated Substances is prohibited by Lessee's
transportation agreements with such third parties, and transportation under such agreements
cannot be secured or accomplished without unreasonable burden on Lessee.) The cost to
Lessor for transportation costs beyond the boundaries of the Leased Area or unit area shall not
exceed: (i) the actual cost to Lessee when the transportation is by means of facilities owned by
third parties, or (ii) when transportation is by Lessee's facilities, the lesser of a) the reasonable
cost to Lessee, or b) a cost equal to the lowest amount Lessee charges any third party for use
of such facilities.
C. Lessee shall furnish storage for royalty Oil and natural gas liquids and
Associated Substances produced from the Leased Area or unit area to the same extent that
Lessee provides storage for Lessee's share of Oil and natural gas liquids and Associated
Substances. Lessee shall not be liable for the loss or destruction of stored royalty Oil and
natural gas liquids and Associated Substances from causes beyond Lessee's reasonable
control.
d. If a royalty purchaser refuses or for any reason fails to take delivery of Oil and
Gas, or Associated Substances, or in an emergency, and with as much notice to Lessee as is
practical or reasonable under the circumstances, Lessor may elect without penalty to underlift
for up to six (6) months all or the designated portion of Lessor's royalty on Oil, Gas, or
Associated Substances produced from the Leased Area or unit area and taken in kind.
Lessor's right to underlift is limited to the portion of royalty Oil, Gas, or Associated Substances
that the royalty purchaser refused or failed to take delivery of, or the portion necessary to meet
the emergency condition. Underlifted Oil, Gas, or Associated Substances may be recovered by
Lessor at a daily rate not to exceed ten percent (10%) of Lessee's working interest share of
daily production at the time of the underlift recovery; provided, however, that nothing in this
Subsection 26.d shall relieve Lessee of its obligation to deliver to Lessor all or a designated
portion of Lessor's royalty Oil, Gas or Associated Substances pursuant to Subsection 26.a in
addition to the underlifted Oil, Gas or Associated Substances recovered by Lessor pursuant to
this Section 26.
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27. APPORTIONMENT OF ROYALTY FROM APPROVED UNIT.
Lessor's royalty share of any unit production allocated to the Leased Area will be
regarded as royalty to be distributed to, or the proceeds of it paid to, Lessor, free and clear of
all unit expenses (and any portion of those expenses incurred away from the unit area),
including, but not limited to, expenses for separating, cleaning, dehydration, gathering,
saltwater disposal, preparing the Oil, Gas, or Associated Substances for transportation, and
transporting Oil, Gas, or Associated Substances within the boundaries of the unit area, and free
of any lien on them.
28. PAYMENTS AND INTEREST.
All payments to Lessor under this Lease other than Lease rentals, Shut -In Royalties,
and Minimum Royalties must be made by wiring said payments in immediately available funds
to a depository designated by Lessor, in accordance with wiring instructions provided by
Lessor, unless otherwise specified by Lessor. All amounts payable by Lessee to Lessor under
any of the provisions of this Lease if not paid when due shall bear interest from the due date
until paid at the Default Rate, as defined in Section 40. Lease rentals, Shut -In Royalties and
Minimum Royalties shall be paid in accordance with Section 6.
29. INSPECTION.
Lessee shall, at all reasonable times, make available for inspection by any duly
authorized representative of Lessor (including, without limitation, by Lessor's environmental
consultant for the purpose of preparing an Environmental Assessment pursuant to Section 31)
the Leased Area, all wells, improvements, machinery, and fixtures on the Leased Area, and all
reports and records relative to operations and surveys or investigations on or with regard to the
Leased Area or under this Lease. Upon request, Lessee shall furnish Lessor with copies of and
extracts from any such reports and records.
30. CONSULTATION.
Lessor and Lessee shall meet at least annually to review operations under this Lease.
Such a meeting shall consist of a review presented by Lessee of operations in the preceding
year, including the status of shareholder hire, and a presentation of proposed operations for the
succeeding year.
31. ENVIRONMENTAL PROVISIONS.
a. General Prohibition. Lessee shall not cause or permit any Hazardous
Substances to be generated, produced, brought upon, used, stored, treated, discharged,
released, spilled or disposed of on, in, under or about the Leased Area by Lessee, its Affiliates,
agents, employees, contractors, subleases, assignees or invitees except in accordance with
applicable Environmental Laws and prudent business practices, and as reasonably necessary
for Lessee's operations hereunder.
b. Compliance with Environmental Laws.
respects conduct its operations in compliance with all
prudent industry practices relating to industrial hygiene,
analysis, generation, manufacture, storage, presence
Hazardous Substances.
Lessee shall at all times and in all
applicable Environmental Laws and
environmental protection or the use,
disposal or transportation of any
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C. Environmental Assessment. If at any time Lessor should have a reasonable
belief that a potential Environmental Claim may exist, then Lessor shall have the right, at
Lessee's sole cost and expense, to require Lessee to undertake a Phase I Environmental Site
Assessment (as described in the American Society for Testing and Materials Annual Book of
ASTM Standards) or its equivalent ("Environmental Assessment"), under direction of Lessor,
prepared by an independent, competent, and qualified engineer or other qualified
environmental assessor or expert satisfactory to Lessor (the "Environmental Consultant"). The
Environmental Assessment shall not require subsurface inspection, testing, or sampling, and
shall be limited to such investigation as is reasonably necessary to determine whether such
subsurface investigation is necessary or advisable. In the event the Environmental Consultant
recommends additional testing or investigation, such additional testing or investigation shall be
at Lessee's expense. If the Environmental Consultant does not recommend such additional
testing or investigation, additional testing or investigation may be undertaken at Lessor's option
and at Lessor's sole expense. An Environmental Assessment on the same terms and
conditions as set forth above in this Subsection 31.c shall also be conducted at Lessee's sole
cost and expense, in connection with Lessee's surrender of the Leased Area. Lessee shall in
each instance promptly comply with all reasonable suggestions or recommendations of such
Environmental Assessment at Lessee's sole cost and expense. Lessee also agrees to comply
with Lessor's reasonable request for additional information including questionnaires, necessary
to assure Lessor of Lessee's compliance with the provisions of this Section 31. If the
Environmental Assessment or any other reliable information received by Lessee discloses that,
due to any act or failure to act by Lessee or Lessee's employees, agents or contractors, the
Leased Area is in violation of any Environmental Laws or that conditions on the Leased Area
present a material risk of liability under Environmental Laws, or that would require any remedial
action pursuant to any Environmental Laws, rules or regulations of a governmental authority,
Lessee shall promptly cure all matters raised therein at Lessee's sole cost and expense. If
Lessor has required Lessee, pursuant to the terms of this Subsection 31.c, to perform two (2)
Environmental Assessments (other than an Environmental Assessment performed upon
surrender of the Leased Area) which have both resulted in no suggestions or recommendations
by the Environmental Consultant, then any additional Environmental Assessments (other than
an Environmental Assessment performed upon surrender of the Leased Area) which results in
no suggestions or recommendations by the Environmental Consultant shall be paid for by
Lessor.
d. Hazardous Substance Handling. Lessee shall, at its own expense, procure,
maintain in effect and comply with all conditions of any and all permits, licenses and other
governmental and regulatory approvals required for Lessee's use of the Leased Area, including,
without limitation, discharge of (appropriately treated) materials or wastes, and Lessee, upon
written request by Lessor, shall promptly deliver to Lessor copies of all permits, licenses,
approvals, filings, and reports reflecting the legal and proper generation, production, use,
storage, treatment or disposal of all Hazardous Substances generated, used, stored, treated or
removed from the Leased Area. Lessee shall cause any and all Hazardous Substances that
are removed from the Leased Area to be removed and transported solely by duly licensed
haulers to duly licensed facilities for lawful use, reuse, recycling, treatment, or final disposal of
such materials and wastes. All reporting obligations imposed by Environmental Laws are
strictly the responsibility of Lessee. For purposes of this Subsection 31.d, any Oil, Gas or
Associated Substances that are in a state in which they are usable as useful products and that
are not released, discharged, disposed of, or transported from, or otherwise present at, in or
under the Leased Area in violation of any Environmental Law or in a manner that may give rise
to an Environmental Claim, shall not be deemed to be Hazardous Substances.
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e. Notification. Lessee immediately shall notify Lessor in writing of: (i) any material
spill, release, discharge or disposal of any Hazardous Substance in, on, or under the Leased
Area in violation of Environmental Law or that may give rise to an Environmental Claim
("material" being defined as any spill, release, discharge, or disposal otherwise required to be
reported to any state or federal governmental agency); (ii) any enforcement, cleanup, removal
or other governmental or regulatory action instituted, contemplated or threatened (if Lessee has
notice thereof) pursuant to Environmental Law; (iii) any claim made or threatened by any
person against Lessee, the Leased Area relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from or claimed to result from any Hazardous Substance;
and (iv) any reports made to any governmental agency or entity arising out of or in connection
with any Hazardous Substances in, on, under or about or removed from the Leased Area
pursuant to Environmental Laws, including any complaints, notices, warnings, reports or
asserted violations in connection therewith.
f. Remediation Duties. Lessee shall be responsible for undertaking and performing
any Remedial Work that is required due to the presence in, on, under or adjacent to the Leased
Area of any Lessee Related Substances. As used herein, the "Remedial Work" means any
investigation, monitoring, clean-up, containment, remediation, removal, response cost, or
restoration work and the preparation and implementation of any closure, remedial or other
required plans that are. (i) required or performed by any governmental agency or entity having
jurisdiction over the Leased Area, or (ii) required to return the Leased Area (or any area
adjacent to the Leased Area affected by Lessee's operations or activities on the Leased Area,
unless Lessee has first obtained a release sufficient to eliminate Lessor's liability for claims
relating thereto), to an environmental condition which is in compliance with all Environmental
Laws. As used herein, "Lessee Related Substances" means Hazardous Substances that
Lessee causes or permits to be generated, produced, brought upon, used, stored, treated,
discharged, released, spilled or disposed of on, in, under or about the Leased Area.
Notwithstanding the foregoing, Lessee shall not perform any Remedial Work in or about the
Leased Area, nor enter into any settlement agreement, consent decree or other compromise
with respect to any Environmental Claims in any way connected with the Leased Area without
first notifying Lessor of Lessee's intention to do so and affording Lessor the opportunity to
appear, intervene or otherwise appropriately assert and protect Lessor's interest with respect
thereto.
g. Termination of Lease. Upon termination of this Lease, Lessee shall complete
any Remedial Work that is required due to the presence of any Lessee Related Substances in,
on, under, or adjacent to the Leased Area. After completing the Remedial Work, Lessee shall
provide Lessor with an Environmental Assessment that shall establish that there are no Lessee
Related Substances in the soil, groundwater or air in, on, under or adjacent to the Leased Area
in violation of any Environmental Law or prudent business practices.
32. DAMAGES AND INDEMNIFICATION.
a. General Indemnity. Lessee shall defend and indemnify Lessor, and each of
Lessor's shareholders, officers, directors, employees, agents, attorneys, successors and
assigns for, and hold it harmless from and against any claims, demands, causes of action or
liabilities of any nature, including claims for loss or damage to property or injury to any person,
and including reasonable attorneys' fees and expenses, arising out of or resulting from any act
or omission committed by or on behalf of Lessee or its agents, employees or contractors
relating to this Lease or operations connected therewith, Lessee is not responsible to Lessor
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under this Subsection 32.a for any loss, damage or injury caused by or resulting from the sole
negligence of Lessor, its agents, licensees, employees, invitees or representatives.
b. Environmental Indemnity. Lessee shall defend and indemnify and hold Lessor,
and each of Lessor's shareholders, officers, directors, employees, agents, attorneys,
successors and assigns harmless from and against any and all Environmental Claims, as
defined in Section 40, arising from or caused in whole or in part, directly or indirectly, by (i)
Lessee's use, analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Substances, as defined in Section 40, to, in, on, under,
about or from the Leased Area; or (ii) Lessee's use of the Leased Area or Lessee's operations
or activities or activities on or relating to the Leased Area; or (iii) Lessee's failure to comply with
any Environmental Law whether knowingly or unknowingly, the standard herein being one of
strict liability, or (iv) any breach of any of the obligations of Lessee contained in Section 31.
Lessee shall have no obligation to indemnify Lessor for any condition that existed on the
Leased Area prior to the Effective Date of this Lease, nor any condition not arising from or
caused, in whole or in part, directly or indirectly by the matters described in clauses (i), (ii), (iii)
or (iv) of this Subsection 32.b, except to the extent Lessee has exacerbated such pre-existing
condition.
C. Lessee expressly agrees to assume responsibility for all actions or omissions of
its independent contractors or others acting for or on behalf of Lessee (whether or not they are
negligent, intentional, willful or unlawful). Lessee expressly waives any defense to an action for
breach of a provision of this Lease or for damages resulting from the breach of any of the
obligations of Lessee contained in Section 31, including, without limitation, any damages
resulting from a spill or seepage of Oil, Gas or Associated Substances, or other harm to the
environment, on the ground that it is based on an act or omission committed by an independent
contractor retained by Lessee.
33. WAIVER OF CONDITIONS.
Each Party reserves the right to waive any breach of a provision of this Lease, but any
such waiver extends only to the particular breach so waived and does not limit the rights of
either Party with respect to any future breach; nor will the waiver of a particular breach prevent
cancellation of this Lease for any other cause or for the same cause occurring at another time.
Notwithstanding the foregoing, neither Party will be deemed to have waived a provision of this
Lease unless it does so in writing.
34. RECORDS.
a. Lessee shall keep and maintain full, true and correct records and accounts in
accordance with sound oil and gas industry practices, and make such records and accounts
available (at the location at which such records are customarily maintained by Lessee) to
Lessor, its agents or representatives, upon reasonable notice, for inspection on a confidential
basis during regular business hours, of its exploratory Drilling, development operations,
producing operations, and Reworking Operations on the Leased Area having to do with wells,
the character of the strata penetrated by such wells, and the production obtained therefrom,
including logs and cores, directional drilling reports, well histories, production and pressure
records, notices and reports to public authorities, and replies thereto. Upon request, Lessee
shall provide to Lessor analyses in its possession of the Oil, Gas or Associated Substances
produced. All production records shall be compiled to show individual well production and the
total production from this Lease for each month during the report period. Such production
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records, as well as all Lease Automatic Custody Transfer ("LACT") shipment statements, shall
be made available to Lessor on or before the end of each calendar month for the preceding
calendar month.
b. Lessee's records and accounts shall contain all data necessary or proper for the
settlement of the accounts between the parties hereto and the adjustment of their rights
hereunder. Lessor, or its agents or representatives, at its sole expense, shall have the right at
all times during regular business hours to inspect and take copies of such records and
accounts. On or before the end of each calendar month, Lessee shall deliver to Lessor an
itemized written statement showing the total production from the Leased Area for the preceding
calendar month, the royalties payable with respect thereto and the date upon which the amount
of such royalties was computed.
C. Lessee hereby authorizes Lessor, its agents and representatives, at Lessor's
expense, to examine all records of public authorities relating to the operations of Lessee on the
Leased Area, including but not limited to all reports, records, including tax records, Data,
notices and statements filed by Lessee.
d. Lessor's obligations of confidentiality set forth in Section 18 above shall also
apply to Data and information disclosed to Lessor hereunder.
35. PREFERENCES AND EMPLOYMENT OF LESSOR SHAREHOLDERS.
a. If Lessor has notified Lessee that it is interested in providing a type of service
relating to Lessee's operations under this Lease, Lessee shall invite Lessor or any Affiliate of
Lessor to make proposals or bids on all contracts relating to such service for Lessee or its
subsidiaries, Affiliates or associates, including joint ventures and operating groups of which it is
a member. Lessee shall give Lessor or an Affiliate of Lessor first and preferential
consideration, to the extent permitted under law, for such service to be performed for Lessee, if
Lessor or an Affiliate of Lessor can reasonably demonstrate that it has the applicable
experience and capability to perform the service in a manner equal to good industry practice,
and if such entity submits a bid that is competitive with other bids received by Lessee.
b. Lessee shall, in hiring or employing new employees in operations on or relating
to the Leased Area, give first and preferential consideration, to the maximum extent permitted
by law, to qualified shareholders of Lessor.
36. TAXES.
a. Lessee shall pay and discharge before delinquency all taxes, assessments and
other governmental charges which, during the term of this Lease, shall be levied upon or
assessed or charged against the improvements and personal property constructed or placed
upon the Leased Area by or for Lessee under this Lease. Lessee shall pay and discharge
before delinquency all taxes, assessments and other governmental charges which, during the
term of this Lease, shall be assessed or charged against any Oil, Gas, or Associated
Substances below the surface of the Leased Area or any part thereof.
Lessor, its successors or assigns or its other lessees or licensees as the case
may be, shall pay such taxes and assessments as may be levied upon or assessed or charged
against Lessor's interest in the Leased Area as such and against Lessor's property thereon,
except that Lessee agrees to reimburse Lessor an amount equal to the increase, if any, in
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Lessor's tax burden caused by the existence of improvements placed upon the Leased Area by
Lessee or due to Lessee's lease of the Leased Area or Lessee's operations on the Leased
Area.
b. Lessee shall pay all taxes, assessments or charges upon the operations of
Lessee on the Leased Area, including, but not limited to, Drilling, production, extraction,
severance or removal of hydrocarbons, storage, use or sale of hydrocarbons, except that
Lessor shall pay its royalty share of all severance taxes for which it is legally obligated, as
provided below. Lessee shall also pay any charge that might become a lien upon or a charge
against the Leased Area due to Lessee's failure to make payments pursuant to this Section 36.
C. Lessor agrees to pay its royalty share under this Lease of all taxes assessed
upon Oil, Gas, or Associated Substances rights in the Leased Area, if any, together with its
royalty share of all severance or other taxes or assessments levied on account of production of
Oil or Gas or Associated Substances on the Leased Area for which it is legally obligated, and
Lessee is hereby authorized to pay all such taxes and assessments on behalf of Lessor.
d. Lessee agrees that it shall indemnify Lessor and hold it harmless from and will at
all times keep the Leased Area and all parts thereof free and clear of any and all liens, claims of
liens, claims or demands based upon or arising out of any tax, assessment or charge
whatsoever which Lessee is obligated to pay hereunder. If Lessee shall fail to pay any tax,
assessment or other charge before the same shall become delinquent, Lessor shall have the
right at its option, but not the obligation, to pay the same together with all penalties and interest
thereon and Lessee shall pay to Lessor forthwith upon demand the amount of all taxes,
assessments, charges, interest and penalties so paid, together with interest upon such amounts
so paid, from the date of the payment thereof by Lessor until repaid, at the Default Rate.
e. Lessee agrees that if the state determines that Lessee erred in determining the
value of the royalty Oil, Gas, or Associated Substances with respect to which Lessor received
royalties and that the correct value of such royalty Oil, Gas or Associated Substances is greater
than the value determined by Lessee, and the state thereupon assesses additional severance
or other taxes or assessments with respect to the redetermined value of such royalty Oil, Gas
or Associated Substances, then, notwithstanding Subsection 36.c, Lessee shall pay all such
additional severance or other taxes and assessments (including Lessor's eighteen percent
18%) share of same), without charge, expense, deduction, or offset against Lessor's royalty
under this Lease and without any other charge or expense to Lessor, and shall additionally pay
all penalties and interest due on Lessor's eighteen percent (18%) share of the additional
severance taxes. Further, Lessee shall defend, indemnify and hold Lessor harmless from and
against any claim, demand, penalties, costs, or causes of action arising out of or related to
Lessee's error in determining value as described in this subsection.
f. Lessee will cooperate in good faith with reasonable requests for information and
other assistance necessary to allow Lessor to establish its tax basis in the Leased Area.
37. INSURANCE/BONDS.
Lessee, at its sole expense, shall secure and maintain in force throughout the term of
this Lease the insurance, and shall provide certification regarding such insurances, as specified
in Schedule A attached hereto and shall obtain and maintain all bonds required by the State of
Alaska for oil and gas activity.
Oil and Gas Lease C-061591 Page 23 of 29 12/06/99
38. COMPLIANCE WITH LAWS.
In all operations under this Lease or on the Leased Area, Lessee shall promptly comply
with any and all laws, ordinances, rules, regulations, requirements and orders, present or
future, of the national, state, Borough or local government which may in any way apply to the
use or occupation of or operations on the Leased Area or the Drilling, maintenance, operation
or abandonment of any wells drilled or to be drilled thereon, or the handling of any product
therefrom.
39. PUBLIC NOTICE.
Except as provided in Section 46 of this Lease, Lessor and Lessee agree not to disclose
any information regarding the content of this Lease or information, intelligence or material
pertaining hereto or operations or results hereunder without the prior written authorization from
the other party, which authorization shall not be unreasonably withheld. Notwithstanding any
failure to obtain such approval, neither Lessor, Lessee, nor an Affiliate of Lessor or Lessee shall
be prohibited from issuing or making an announcement or statement if such entity deems it
necessary to do so in order to comply with applicable laws or regulations. Any further
agreement between the parties and any amendment or supplement of the Lease will be subject
to the same restriction.
40. DEFINITIONS.
The following words have the following meanings unless the context unavoidably
requires otherwise. If such word is capitalized, such capitalization shall be prima facie evidence
that the following definitions are intended to apply:
a. "Affiliate" means any entity in which a party has at least a twenty percent (20%)
equity interest.
b. "Anniversary Date" means the yearly recurring date (month and day) of the
Effective Date specified in Section 2.
C. "Arm's -Length Transaction" means a sale where: (i) the contract price is the sole
consideration for the sale, and (ii) the terms of the sale are not affected by any commercial
relationship (other than that created by the contract itself) between the buyer and the seller or
persons connected with the buyer or the seller, and (iii) neither the seller nor a connected
person has any interest, direct or indirect, in the subsequent resale or disposal of the Oil, Gas,
or Associated Substances, or any product derived therefrom.
d. "Associated Substances" means all substances produced as an incident of
production of Oil or Gas by ordinary production methods and not defined in this Lease as Oil or
Gas
e. "Data" means information in any form (including, without limitation, writings,
recordings, information stored by electronic means, test data, charts, graphs, logs, technical
information, laboratory studies, surveys and maps) and copies of, reproductions of, and work
product derived from or based on such information (including, without limitation, all analytical
and interpretive data), concerning or relevant to the exploration or Drilling for or production of
Oil, Gas and Associated Substances, including, without limitation, all geophysical, geological,
Oil and Gas Lease C-061591 Page 24 of 29 12/06/99
seismographic, engineering, well and well logs and well testing, land, environmental, and
permitting data, but excluding all data that is in the public domain.
f. "Default Rate" means a floating per annum rate equal to two percent (2%) above
the prime rate as announced by the National Bank of Alaska from time to time. However, in no
event shall the Default Rate exceed the maximum interest rate permitted by law.
g. "Drilling" means the act of boring a hole to reach a proposed bottom hole location
through which Oil or Gas may be produced if encountered in Paying Quantities, and includes
redrilling, sidetracking, deepening, or other means necessary to reach the proposed bottom
hole location, testing, logging, plugging, and other operations necessary and incidental to the
actual boring of the hole.
h. "Environmental Claim" means any and all actions (including, without limitation,
remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders
or judgments arising out of or resulting therefrom), costs, claims, damages (including, without
limitation, punitive damages), expenses (including, without limitation, attorneys', consultants'
and experts' fees, court costs and amounts paid in settlement of any claims or actions), fines,
forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or
not based upon personal injury, property damage, or contamination of, or adverse effects upon,
the environment, water tables or natural resources), liabilities or losses which relate to, result
from arise out of, or are based on any environmental matter (including, without limitation, the
presence, use, disposal, storage, or release of Hazardous Substances) or on any
Environmental Law.
i. 'Environmental Laws" means all statutes, ordinances, orders, rules, regulations,
plans, policies or decrees and the like relating to (i) environmental matters, including, without
limitation, those relating to fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the release or threatened release of Hazardous
Substances, (ii) the generation, use, storage, transportation, or disposal of Hazardous
Substances or (iii) occupational safety and health, industrial hygiene, land use or the protection
of human, plant or animal health or welfare, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. § 9601 et
sec.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et sec.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et sem.), the Clean Water Act (33 U.S.C.
§ 1251 et sec.), the Clean Air Act (42 U.S.C. § 7401 et sec'.), the Underground Injection Control
Program of the Safe Drinking Water Act (42 U.S.C, §§ 300f - 300j-9), the Occupational Safety
and Health Act (29 U.S C. § 651 et seg.) and the Emergency Planning and Community Right -
To -Know Act (42 U S.C. § 11001 et sec.), the Oil Pollution Act of 1990 (33 U.S.C. §§ 2701-
2761 et seci.) and any Alaska statutes addressing like or similar concerns, each as amended or
supplemented, and any future or present local, state and federal statutes and regulations
promulgated pursuant thereto.
J. "Force Majeure" means any act of God, strike, lockout or other labor or other
industrial disturbance, acts of the public enemy, war, blockades, insurrections, riots, epidemics,
lightning, earthquakes, tidal waves, volcanic eruptions, heavy seas, fires, storms, washouts,
floods, inclement weather, explosions, governmental restraint, arrests, unavailability of
equipment, material, or labor, breakage or accident to machinery or pipe, sabotage, or any
other cause which renders a party unable, in whole or in part, to carry out its obligations under
this Lease, other than inability to pay money (except insofar as payment may be specifically
Oil and Gas Lease C-061591 Page 25 of 29 12/06/99
prohibited by law), whether of the kind specifically enumerated above or otherwise, and which is
not within the reasonable ability of the party claiming Force Majeure to foresee or control.
k. "Gas" means all natural gas and all other hydrocarbons produced that are not
defined in this Lease as Oil, including, without limitation, methane producible by in situ
extraction methods from coal seams.
I. "Hazardous Substance" means the following: (i) any chemical, compound,
material, mixture or substance that is now or hereafter defined or listed in, or otherwise
classified pursuant to, any Environmental Laws as a "hazardous substance", "hazardous
material", "hazardous waste", "extremely hazardous waste" "acutely hazardous waste",
"radioactive waste", "infectious waste", "biohazardous waste", "toxic substance", "pollutant",
"toxic pollutant", or "contaminant", as well as any other formulation not mentioned herein
intended to define, list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "EP toxicity," or
"TCLP toxicity"; (ii) Oil, Gas and Associated Substances, natural gas liquids, liquefied natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash
produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling
fluids, produced waters and other wastes associated with the exploration, development or
production of crude oil, natural gas, or geothermal resources; (iii) asbestos and any asbestos
containing material; (iv) transformers or other equipment which contain dielectric fluid
containing polychlorinated biphenyls (PCBs); (v) naturally occurring radioactive material; and
(vi) any other chemical, material, or substance that, because of its quantity, concentration, or
physical or chemical characteristics, exposure to which is limited or regulated for health and
safety reasons by any governmental authority, or which poses a significant present or potential
hazard to human health and safety or to the environment if released into the workplace or the
environment.
M. 'Lease Expenses" means all costs required to put Oil, Gas, and Associated
Substances in good and merchantable condition and of pipeline quality at a pipeline connection
or custody transfer point, and shall include, but not be limited to, expenses for separating,
cleaning, dehydrating, gathering, saltwater disposal, preparing the Oil, Gas, or Associated
Substances for transportation, transporting the Oil, Gas, or Associated Substances within the
boundaries of the Leased Area or unit area, transporting the Oil, Gas, or Associated
Substances to a facility off the Leased Area or unit area where such operations are performed,
and the cost of performing such operations at a facility off the Leased Area or unit area.
n. 'Lease Year" means the annually recurring 12 -month period between
Anniversary Dates of this Lease.
o. "Oil" means crude petroleum oil and other hydrocarbons, regardless of gravity,
that are produced in liquid form by ordinary production methods, including liquid hydrocarbons
known as distillate or condensate recovered by separation from Gas other than at a Gas
processing plant.
P, "Paying Quantities" means quantities sufficient to yield a return in excess of
operating costs, even if Drilling and equipment costs may never be repaid and the undertaking
considered as a whole may ultimately result in a loss.
q. "Pre -Existing Well" means a well that existed on the Leased Area prior to the
Effective Date of this Lease.
Oil and Gas Lease C-061591 Page 26 of 29 12/06/99
r. "Reworking Operations" means all operations designed to secure, restore, or
improve production through some use of a well that is producing in Paying Quantities or that
previously produced in Paying Quantities, including, but not limited to, mechanical or chemical
treatment of any Zone, or plugging back to test higher strata.
S. "Zone" means a sand (including fractured shale and any other Oil or Gas bearing
rock) or series of sands separate from other sands or series of sands in such a manner that
good oil field practice would indicate separate development.
41. INTERPRETATION.
The section headings are not part of this Lease and are inserted only for convenience.
Lessor and Lessee expressly agree that the law of the State of Alaska will apply in any judicial
proceeding affecting this Lease.
42. AUTHORIZED REPRESENTATIVES.
The persons executing this Lease on behalf of Lessor and Lessee shall be authorized
representatives for their respective principals for the purposes of administering this Lease.
Lessor or Lessee may change the designation of its authorized representative or the address to
which notices to that representative are to be sent by a notice given in accordance with
Section 43. Where activities pursuant to a plan of operations or a plan of development are
underway, Lessee shall also designate, pursuant to a notice under Section 43, by name, job
title, and address, an agent who will be present in the state during all Lease activities.
43. NOTICES.
a. Any notice required or permitted under this Lease shall be given in writing for
delivery to the pertinent party, in person or by United States mail, telegraph, telecopier or telex,
facsimile, or commercial courier, properly addressed to the party to whom given, with charges
prepaid. Any such notice shall be effective immediately upon being received by the party to
whom such notice is addressed.
b. Each party's proper address for delivery of all notices, payments, reports and
documents hereunder shall be the following until such party specifies another address by
written notice to the other parties:
LESSOR: COOK INLET REGION, INC.
2525 C Street, Suite 500
P. O. Box 93330
Anchorage, AK 99509-3330
Attention: Land Manager
Fax: 907/263-5190
Verify: 907/274-8638
44. SURVIVAL.
LESSEE: UNION OIL COMPANY OF CALIFORNIA
909 West 9`h Avenue
P. O. Box 196247
Anchorage, AK 99519-6247
Attention: Land Manager
Fax: 907/263-7698
Verify: 907/263-7601
The following provisions shall survive the termination or
Sections 10, 12, 18, 31 32, and 36, and the definitions referred
necessary to effectuate the purposes of those Sections.
surrender of this Lease:
to therein to the extent
Oil and Gas Lease C-061591 Page 27 of 29 12/06/99
45. ENTIRE AGREEMENT.
This Agreement contains the entire understanding between Lessee and Lessor with
respect to the Lease granted herein, and all agreements, understandings, representations and
statements, oral or written, prior to the date of this Lease are superseded by this Agreement.
Neither this Lease nor any provisions hereof may be modified or amended except by an
instrument in writing signed by all Parties hereto and then only to the extent set forth in such
instrument.
46. MEMORANDUM OF AGREEMENT.
Concurrently with the execution of this Lease, the parties shall execute and deliver for
recording a memorandum of this Lease, in a form mutually agreed by the parties, so as to
provide constructive notice of the parties' respective rights under this Lease. This Lease shall
not be recorded.
47. LESSEE WARRANTY.
Lessee represents and warrants (for purposes of the Alaska Securities Act, A.S.
45.55.900 (b)(17)) that it has, during the preceding two (2) years, been engaged primarily in the
business of exploring for, mining, producing or refining oil, gas or minerals.
BY SIGNING this Lease, Lessor and Lessee agree to be bound by its provisions.
IN WITNESS WHEREOF, the parties hereto have duly executed this Oil and Gas Lease
as of the day and year first hereinabove written.
LESSOR: COOK INLET REGION, INC,
an Alaska corporation
By: K,:- aL, `_.
Its: Vice President
Date December -Z__, 1999
LESSEE: UNION OIL COMPANY OF CALIFORNIA
California corpor ion
By:
Its: -RN1 :y.�Nt-FA _�T
Date: December l0 , 1999
Oil and Gas Lease C-061591 Page 28 of 29 12/06/99
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
ON THIS /7 day of December, 1999, before me the undersigned, a Notary Public in
and for the District and State, personally appeared Kirk S. McGee, known to me to be the
person whose name is subscribed as Vice President for Cook Inlet Region, Inc., and
acknowledged to me that he executed the within instrument as the act of his principal for the
purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year
first above -written
Not ry Fgublic in and for Alaska
My Commission Expires: Of ->L•01
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
OFFICIAL SEAL
State o Alaska
♦
0 HAZEL J. FELTON W
NOTARY PUBLIC i.
r'T T'T Expires
T �• Sept. �•,2001
V TTY'
ON THIS /!day of December, 1999, before7e the undersigned, a Notary Public in
and for the District and State, personally appeared known to me
to be the person whose name is subscribed as for Union Oil Company
of California, and acknowledged to me that he or she 6xecuted the within instrument as the act
of his or her principal for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year
first above -written.
i
Notary Public in and for Alaska
My Commission Expires:
OFFICIAL
♦Stare OfAlaskaHAZEL J. FELTONNOTARY PUBLIC1
•
My commisw-ri Expires Sept. 26, 2001
•
Oil and Gas Lease C-061591 Page 29 of 29 12/06/99
Schedule A
Insurance
A. Self -Insurance Option
Upon reasonable advance written notice to Lessor, the Lessee may, at any time and in its
sole discretion, elect to self -insure in lieu of obtaining the coverages set forth and
described in this schedule, or any portion of them. The parties acknowledge that this self-
nsurance option is based upon Lessor's analysis of certain public financial information
cont erning Lessee available on the effective date of this Lease.
In the event of a material and substantial adverse change in the Lessee's economic
circumstances such that a reasonable Lessor would question Lessee's ability to self -insure
at the levels described in this schedule, Lessor may require Lessee to procure insurance on
the terms and conditions set forth in this schedule or on such other terms and conditions
as the parties may then mutually agree.
B. Insurance Coverage
Lessee, at its sole expense, shall then secure and maintain throughout the remainder of the
terns of the lease, the following, all of which shall be written on an occurrence basis:
1) Commercial general liability insurance with combined bodily injury and
property damage liability limits of $25 million per occurrence or claims made
with separate $25 million general and products/completed operations annual
aggregate limits. Coverage shall be provided for, but not limited to, premise -
operations, independent contractors, products/completed operations, blanket
contractual liability, broad form property damage, personal and advertising
injury, explosion, collapse and underground, incidental errors and omissions
coverage. Coverage shall include an endorsement providing that a claim "in
rem" shall be treated as a claim against Lessee.
General liability insurance requirements shall apply to all Operations of Lessee
and its agents, employees and contractors.
If urnbrella or excess liability policies are required to achieve necessary total
limits, coverage shall be no less broad in scope than the underlying commercial
general liability insurance.
2) Automobile liability insurance with limits
combined single limit for bodily injury
Coverage shall be provided for all owned
vehicles.
t`,Ck L )02oJleaseinsurancesch,d.led
"08,9"
of $25 million per accident
and property damage liability.
, leased, hired and non -owned
Automobile liability insurance requirements shall apply to all Operations of
Lessee and its agents, employees and contractors.
If umbrella or excess liability policies are required to achieve necessary total
limits, coverage shall be no less broad in scope than the underlying commercial
general liability insurance.
(3) Workers' compensation and employers liability insurance shall comply with all
state and federal Workers' Compensation and Occupational Disability laws.
Coverage shall include a broad form all states endorsement. Statutory workers'
compensation limits shall be provided together with the following employers'
liability limits:
$25 million each accident, bodily injury by accident;
$25 million annual aggregate, bodily injury by disease;
$25 million each employer, body injury by disease.
Workers' compensation and employers liability insurance requirements shall
apply to all Operations of Lessee and its agents, employees and contractors.
i4i If aircraft are used in the operations to be performed hereunder, aviation
liability insurance with limits of $25 million per occurrence, combined single
limit for bodily injury and property damage liability. This coverage shall
include all owned, hired and non -owned aircraft. If air strip, air field or other
airport facilities are operated by Lessee in the operations to be performed
hereunder, the coverage shall include airport liability.
5i If watercraft are used in the operations to be performed hereunder, watercraft
liability insurance with limits of $25 million per occurrence, combined single
limit for bodily injury and property damage liability. This coverage shall
include owned and non -owned watercraft.
(6) Time element pollution liability insurance with limits of $25 million combined
single limit for bodily injury and property damage liability. Minimum time
provisions are a twenty (20) day discovery period and a sixty (60) day reporting
period, each from the time of occurrence.
17! Coverage for the cost of bringing a well under control in the event of a blowout
including resultant pollution, seepage or contamination and resultant clean-up,
cost to restore or redrill a well due to blowout, crater or fire, and the cost of
extinguishing an oil and gas well fire, with limits of $200 million for one
hundred percent (100%) interest, such insurance being proportionately reduced
to Lessee's interest in the well.
no< 4, 002 oil lease insurance schedule.coc
2
The amount and coverage of the insurance required pursuant to this Section B (or
Section D, if applicable) shall not limit Lessee's liability nor relieve Lessee of any other
obligation under this Lease.
C. General Insurance Provisions.
(1) Lessee must maintain reasonable deductibles. Lessee shall remain responsible
for all payments falling within deductible levels, and Lessor and Lessor's
insurance shall not be called upon to pay or contribute to any deductible
payments.
2) Lessor shall provide to Lessor thirty (30) days' written notice prior to any
cancellation, material alteration, or non -renewal or any of its insurance
policies.
'3) Lessor shall be an additional insured on all insurance policies required pursuant
to Section B above, provided, however, that to the extent Lessor has
indemnified Lessee under this Lease, Lessor need not be provided coverage
under such policies. Making Lessor an additional insured on all such insurance
policies shall not make Lessor responsible of premium payment or loss
notification under any of Lessee's insurance policies.
I4; Insurance polices maintained by Lessee shall be primary. Policies maintained
bti! Lessor shall be excess and noncontributory to policies maintained by Lessee.
(5) Lessee shall purchase insurance coverage from insurers with good financial
integrity and, if such insurers are rated, they shall be rated no less than B+ VIII
by A.M, Best's insurance rating service at the time Lessee purchases such
insurance coverage.
!6) Certificates of insurance for all of the above policies verifying that the
coverages, limits, and endorsements are in force are to be mailed to Lessor and
must be received prior to the commencement of Operations under this Lease.
Such certificates shall provide that Lessor shall be given thirty (30) days' written
notice prior to any cancellation or non -renewal of the insurance evidence by
such certificates.
(7) All policies shall contain a waiver of insurer's rights to subrogate against Lessor,
provided, however, that to the extent Lessor has indemnified Lessee under this
Lease, the insurer shall not be required to waive its rights to subrogate against
Lessor.
I,sOC." 002 -oil lease u,suiance schedule do(
C.061 5;+'
12,'0819'I
3
1k 8) Lessee shall timely pay all premiums for the insurance policies for which Lessee
is responsible. Prior to the expiration of any such policy, Lessee shall provide
Lessor a renewal certificate showing that the insurance that Lessee is required
to maintain is in full force and effect. Lessor shall be entitled to review the
policies for the insurance which Lessee is required to maintain under this
Lease's offices.
D. Substitute Coverage
If Lessee reasonable determines that, despite Lessee's good faith and diligent efforts to
obtain the insurance coverage required pursuant to Section B. such coverage is not
available on commercially reasonable terms (with the standard of commercial
reasonableness being an objective standard and not one specific to Lessee or any of its
Affiliates), then as many days prior to the expiration of the insurance coverage required
under the Lease as reasonably possible, Lessor and Lessee shall meet and enter into good
faith discussions. Pursuant to such discussions, Lessor and Lessee shall mutually and
reas(mably agree upon the insurance coverage that. shall be substituted for the insurance
coverage required pursuant to Section B, which substitute coverage shall be that coverage
,rvailable on commercially reasonable terms which most closely approximates the
coverage required under Section B. After Lessor and Lessee have agree upon the
substitute coverage, then (without any lapse in coverage occurring), Lessee may secure
and maintain in force such substitute coverage in place of the insurance required pursuant
to Section B.
E. Maintenance of Insurance
It Lessee fails to deliver any policy, certificate or renewal to Lessor required under this
Lease within the prescribed time period or if any such policy is canceled without Lessor's
consent. Lessor may, not less than ten (10) days after delivery to Lessee of notice stating
its intent to do so, obtain such insurance. In which case Lessee shall reimburse Lessor for
the cost of such insurance within thirty (30) days after receipt of a statement stating the
cost 4 such insurance plus interest at the lesser of the prime rate announced from time to
time by the National Bank of Alaska plus five percent (5%), or the maximum interest rate
alto"ed by law, calculated from the date Lessor obtained such insurance to the date of
Lessee's reimbursement.
10CA: )02 u,1 I—e --ranee schedule. ic-c
061591
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Remark:
INPUT
Geographic, NAD27
AOGCC
Permit to Drill
27 September 2017
OUTPUT
State Plane, NAD27
5004 - Alaska 4, U.S. Feet
DEEP CREEK SW4 1/1
Latitude: 59 54 36.89544 Northing/Y: 2162576.281
Longitude: 151 34 44.26376 Easting/X: 210191.966
Convergence: -1 21 58.57326
Scale Factor: 0. 999995589
Corpscon v6.0.1, U.S. Army Corps of Engineers
TRANSMITTAL LETTER CHECKLIST
WELL NAME: 4' e_
PTD: 7-
Development _ Service _ Exploratory - Stratigraphic Test Non -Conventional
FIELD: POOL:
Check Box for Appropriate Letter / Paragraphs to be Included in Transmittal Letter
CHECK
OPTIONS
TEXT FOR APPROVAL LETTER
MULTI
The permit is for a new wellbore segment of existing well PF,rmit
LATERAL
No. , API No. 50--__
(If last two digits
Production should continue to be reported as a function of the original
in API number are
API number stated above.
between 60-69)
In accordance with 20 AAC 25.005(f), all records, data and logs
acquired for the pilot hole must be clearly differentiated in beth well
Pilot Hole
name ( PH) and API number (`50- -
- - ) from records, data and logs acquirFM for well
(name onpermit).
The permit is approved subject to full compliance with 20 AAC 25.055.
Approval to produce/inject is contingent upon issuance of a conservation
Spacing Exception
order approving a spacing exception. (Company Narne) Operator
assumes the liability of any protest to the spacing exception that may
occur.
All dry ditch sample sets submitted to the AOGCC must be in no greater
Dry Ditch Sample
than 30' sample intervals,.frew,-below the perrna#reer-mem Ie
smiles -are- first caught and 10' s le intervals through target zones.
Please note the following special condition of this permit:
production or production testing of coal bed methane is not allowed for
Non -Conventional
(name of well) until after (Company Name) has designed and
Well
implemented a water well testing program to provide baseline data on
water quality and quantity. (Company Name) must contact the AOGCC
to obtain advance approval of such water well testing program.
Regulation 20 AAC 25.071(a) authorizes the AOGCC to specify types of
well logs to be run. In addition to the well logging program proposed by
(Company Name) in the attached application, the following well logs are
Well Logging
also required for this well:/ . `�6/ � ¢
�— 2. /
iac
/
i�
Requirements
Per Statute AS 31.05.030(d)(2)(13) and Regulation 20 AAC 25.071,
composite curves for well logs run must be submitted to the AOGCC
within 90 days after completion, suspension or abandonment of this well.
Revised 2/2015
Well Logging Requirements - Deep Creek SW-4 .txt
Lithology log required in lieu of mud log. Gamma ray, SP, and resistivity logs must
be recorded from base of conductor pipe to total depth of the well.
Page 1
WELL PERMIT CHECKLIST Field & Pool
PTD#: 2171320 Company HILCORP ALASKA LLC _— Initial Class/Type
Well Name: DEEP CK SW4 Program STIR Well bore seg
STIR / PEND GeoArea 820 Unit 50420 On/Off Shore On Annular Disposal
Administration
17
Nonconven. gas conforms to AS31.05.0306.1.A),Q.2.A-D)
Yes
1
Permit- fee attached_ - - - - - - - - - - - - - - -NA
I2
Lease number appropriate_ -
Yes -
- - - Lies wit_hin_CIRI_lea_se ALD 389226, which is committed to -the Deep -Creek Unit._
3
Unique well name and number .
Yes
4
Well located in-a_defined -pool -------- - - - - - -
No
Shallow stratigraphic_test well to reconcile differences between seismic -----------
- -
5-
5
Well located proper distance from drilling unit boundary_ - - - - - - -
Yes
30' from lease_ boundary; adjacent lease is CIRI _property_. Stratigraphic test well -only._
6
Well located proper distance_ from other wells_ - - - - - - - - - - - - - -
Yes -
in
Only well_ in section_; nearest oil/gas well is Star 1,_-1-1/2 miles SW. No registered_drinkingwater wells
7
Sufficient acreage_avail_able in -drilling unit - - - - - - - - - - - - - - - - - - -
---
Yes _
_ - - - - - or other are located within 1-1/2 miles of this proposed location.
p p
8
if deviated, is_we_llbore plat_included
NA_ _
_ Vertical well ------- ------
9
Operator only affected party - -
Yes
- - _ _ - -
10
Operator has appropriate_ bond in force - - - - - - - - -
Yes
Appr Date
11
Permit can be issued without conservation order_ - - - - - - - - -
Yes
- .
112
Permit can be issued -without administrative_approval - - - - - - - - - - - - - -
Yes -
- - - - - - - - - - - - - - - -
SFD 9/27/2017
13
-Can permit be approved before 15 -day wait_
Yes -
. --------------------- - ---------------
14
Well -located within area and -strata authorized by_ Injection Order # (put_ 10# in_comments)-(For _
NA_ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
15
All wells _within_1/4_mile_area_of review identified (For service well only) -
Yes -
- - - - - - -
16
Pre -produced injector; duration -of pre production less_ than 3 months_ (For -service well only) -
Yes
18
Conductor string -provided - _ _
Yes -
- - - - - - 6 5/8" conductor set at 160 ft- - -
Engineering
19
Surface casing. protects all known USDWs . - - - - - - - - - -
NA_ -
- - OH to600ft_md._Freshwater- expected - - - - - - - - - - - - - - - - - - -
20
CMT vol adequate to circulate -on -conductor & surf_csg - - - - - _ - - - - -
N_A-
_
- -
21
CMT vol adequate -to tie-in long string to surf csg_
NA_
-------
22
CMT will coverall known_productive horizons_ - - - - -
-------------------
NA_ -
- - - - - - WHIWHIR& A with Grout to surface to.isolate freshwater..
23
Casing desgns adequate for CJ, B &_ permafrost
NA- -
- - - - - - - - - - - - - - . . . _ .. . . _ . .
24
Adequate tankage -or reserve pit - - - - - - -
Yes -
. - Using rotating -head with line to -tank.
25
If_a_ re -drill, has a- 10-403 for abandonment been approved - _ . - - - -
NA- -
- - - - - - - - - - - - -
26
Adequate wellbore separation -proposed - - - - -
Yes -
- - - - - vertical well._ _
27
If_diverter required, does it meet_ regulations_ _ . _ - - - - -
Yes -
- - - - - _ Using a rotating- head with line to_ tank_ for_returns.-
Appr Date
28
Drilling fluid program schematic-&- equip list_adequat_e_ - - - - - - - - - - -
Yes -
- - - - - - Using air -ford ling fluid,..- standard water well procedures used._ .
GLS 10/2/2017
29
.BOPEs,-do they meet regulation - ---------
NA_
30
BOPE-press rating appropriate; test to -(put psig in comments)- - - - - - - - - - - - - - - - - -
N_A_ -
- . - _ _ - - - ----------------------------------------
31
Choke -manifold complies WAPI_RP-53 (May 84)_ - - - - - - -
NA_
32
Work will occur without operation shutdown_ - - - - - - - - - -------------------------Y
-es
33
Is presence.... gas_ probable _ _ - - - - -----------
N -o_ _
_ _ - _ - _ Gas_ detection_ required on spite... _LEL _meters_
34
-Mechanical-condition of wells within AOR verified (For service well only) - - - - - - - - - - - - - -
NA- _
- - - - - - - - - - - - - -
35
Permit_ can be issued w/o hydrogen- sulfide measures - - - -
Yes -
. _ _ _ _ _ None -expected based on oil/gas expl & dev wells, located -1.5 miles SW and 5_miles NE.
Geology
36
Data resented on potential overpressure zones
p p - - - - - - - - - - -
Yes
- _ - No abnormal pressure encountered at this depth in any wells within this _region - - - - - - - - -
Appr Date
37
Seismic_analysis_ of shallow gas_zones_ - - - --
Yes
- - - Very little gas was encountered between the -surface and 1000' TVD_in any. of the
SFD 9/27/2017
38
Seabed condition survey -(if off_ -shore) - - - - - - - -
N_A_ -
- - - _ wells in this area. No_inidicators observed on seismic data.
39
Contact name/phone for weekly -progress reports_ [exploratory only] - - - - - - ..
Yes -
- - - - _ _ Contact: Paul Mazzolini 777-8369 - - - - - . _ . ... - - - _ - - - _
Geologic Engineering Public If landowner requests possesion of well for use as water well written permission from AOGCC is required. GIs
Commissioner: Date: Commissioner: Date C r Date
