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Home My WebLink AboutCO 450 A ) ) Image Project Order File Cover Page XHVZE This page identifies those items that were not scanned during the initial production scanning phase. They are available in the original file, may be scanned during a special rescan activity or are viewable by direct inspection of the file. e 0 lfS() A Order File Identifier Production Scanning Stage 1 Page Count from Scanned File: J 7 q (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: V YES ~ria ) Date:3 II / O(p If NO in stage 1, page(s) discrepancies were found: Organizing (done) 1111111111111111111 o Two-sided RESCAN DIGITAL DATA o Color Items: o Greyscale Items: o Diskettes, No. D Other, NolType: o Poor Quality Originals: o Other: NOTES: BY: ( Mari3-) 'Ii:. Date: 23/, IV b Date: 3/1/00 -.. ~ X 30 = / 52J Date: 3/' /ñb Project Proofing BY: C Mari;J ¡¡: Scanning Preparation BY: ç Maria)_ BY: Stage 1 BY: Maria Date: Scanning is complete at this point unless rescanning is required. ReScanned BY: Maria Date: Comments about this file: o Rescan Needed 1111111111111111111 OVERSIZED (Scannable) o Maps: o Other Items Scannable by a Large Scanner OVERSIZED (Non-Scannable) o Logs of various kinds: o Other:: VV1~ 1111111111111111111 rvtL) /s/ /s/ + ~f{_ = TOTAL PAGES J 7<6 (¥õunt does not include cover sheet) 1111, , f1 /s/ IVI'~ 1111111111111111111 NO 1st Vlff YES NO /s/ 1IIIII11I111111111 I" 1111111111111111 /5/ Quality Checked 1111111111111111111 1 0/6/2005 Orders File Cover Page. doc ) ) INDEX CONSERVATION ORDER NO. 450A West Foreland Field 1. November 30, 2000 2. December 6,2000 3. January 8, 2001 4. January 9, 2001 5. January 24, 2001 6. Apri123, 2001 7. Apri125,2001 Letter from J. Arlington, requesting a hearing with AOGCC for the purpose of amending CO 450. Notice of Public Hearing for a hearing on January 9, 2001, mailing list, and affidavit of public hearing Entry of Appearance from James Linzwiler Public Hearing Transcript, sign in sheet from hearing Letter from Commissioners Conservation Order 450A Forcenergy filed "Notice of Compliance" CONSERVATION ORDER NO. 450A l STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: APPLICATION OF FOREST OIL CO. ) (successor to Forcenergy, Inc.) for an order ) amending Conservation Order No. 450, granting) an exception to the spacing requirements of ) 20 AAC 25.055 to allow for production from ) the West Foreland # 1 gas well. ) Conservation Order No. 450-A West Foreland Field April 23, 2001 IT APPEARING THAT: 1. The Commission issued Conservation Order No. 450 on July 24, 2000, granting Forcenergy, Inc. ("F orcenergy") a temporary spacing exception to allow for gas production from the West Foreland # 1 well from the 9336'to 9352' (measured depth) interval, subject to the tenns and conditions set out in that order. 2. Forcenergy submitted an application dated November 30, 2000, for an order amending Conservation Order No. 450 to, among other things, revise the date by which Forcenergy must deposit funds in an escrow account. Notice of hearing on this application was published in the Anchorage Daily News on December 6, 2000, pursuant to 20 AAC 25.540. Actual notice was also given to the Department of Natural Resources ("DNR") and the Bureau of Land Management ("BLM"). 3. No protests to the application were received. 4. Forest Oil Co. ("Forest") has succeeded to Forcenergy's interest in this matter. 5. A hearing was held on January 9,2001, at which representatives of Forest appeared.. FINDINGS: 1. Lease A-035017 and Lease ADL 359112 (collectively referred to below as the "Leases") provide for royalties to be paid to the respective lessors by the last day of the month that follows the month of production. It will be administratively more practicable to use the same deadline, rather than the 10th day of the month following the month of production, for deposits into an escrow account pursuant to the provisions of Conservation Order No. 450. 2. Data gathered from gas production for a period of at least two years is likely to allow a more accurate allocation between the Leases than production for the shorter period contemplated in Conservation Order No. 450. DNR and BLM are amenable to deferring an allocation detennination until after such additional data are available. 3. Forest will consider producing gas from one or more additional intervals beyond the interval described in Conservation Order No. 450. 4. Contrary to the infonnation previously provided to the Commission, Forest is not the sole working interest owner of the Leases. Phillips Petroleum Co. or an affiliate has an interest in zones below a certain depth. That depth is not less than 9,527 feet (measured depth) in the West Foreland #1 well. J Conservation Order 450-A " Page 2 Apri1232001 CONCLUSIONS: 1. The spacing exception granted under Conservation Order No. 450 should be extended until July 1, 2003, and should cover gas production from any interval not deeper than 9,527 feet measured depth in the West Foreland # 1 well. 2. Forest should be allowed until the last day of the month to deposit funds based on the previous month's production under the escrow provisions of Conservation Order No. 450. NOW, THEREFORE, IT IS ORDERED: 1. Conservation Order No. 450 is amended consistent with the foregoing. 2. The spacing exception granted by Conservation Order No. 450, as amended, expires July 1, 2003. 3. The spacing exception granted by Conservation Order No. 450, as amended, covers gas production from any interval not deeper than 9,527 feet measured depth in the West Foreland #1 well. Forest shall conduct appropriate production testing and provide the Commission with geologic and geophysical data and the results of the production testing to support a reasonable inference as to what proportions of the gas reserves producible from each accumulation down to that depth underlie Lease A-0350 17 and Lease ADL 359111. 4. The deadline for escrow deposits under Conservation Order No. 450 is changed from the loth day to the last day of each month for production during the previous month. DONE at Anchorage, Alaska and dated April 23, 2001. " "-~""" è..-.t ~ OIt Ah :;) ~f;-¡~""\~~~/V~, ''./) ~\~i) \. \ I' II ~/~^ \ It¡,1 I I Vo~ , ~ J::;.:\\ ~".:., I/./~~..i:{p '~ f:t!:~:"}~~~fE~f~ ~ . ~~~ "."..1 ;'.""~ '"'.":"';""""~""".~ ~o ~."" .~. ,'. ....i"':TI;·. ~. ....,.\". . 't ~ : : '; h ,.L . '., ~.", ~ V. ~:..j:" . ~;,íJI' .. ~ <11'16Ft¿~~ ~;Q~.../.....#A'II:Ir.ttJII c~,~ Alaska Oil and Gas Con~~rvation Commission DanIel T. Se t, Commissioner Alaska Oil and Gas Conservation Commission ~M.~ Julie M. Heusser, Commissioner Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it may file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 PM on the 23rd day following the date of the order, or next working day if a holiday or weekend, to be timely filed. The Commission shall grant or refuse the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. An affected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court, Where a request for rehearing is denied by nonaction of the Commission, the 30 day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., 10th day after the application for rehearing was filed). ") ) STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: APPLICATION OF FOREST OIL CO. ) (successor to Forcenergy, Inc.) for an order ) amending Conservation Order No. 450, granting) an exception to the spacing requirements of ) 20 AAC 25.055 to allow for production from ) the West Foreland # 1 gas well. ) Conservation Order No. 450-A West Foreland Field April 26, 2001 CERTIFICATE OF SERVI CE I certify that on the 26th day of April, 2001 a copy of Conservation Order No. 450-A was mailed to: James Linxwiler Quess and Rudd, P.C. 510 L Street 7th Floor Anchorage,AJ( 99501 Peter Ditton Bureau of Land Management Department of Interior 6881 Abbott Loop Rd Anchorage AJ( 99507 Mark Meyers, Director Division of Oil and Gas Department of Natural Resources 550 West ih Ave., Suite 800 Anchorage,AJ( 99501 Robert Mintz Attorney General Office 1031 West 4th Avenue Anchorage AJ( 99501 rJ ' mJ~ Jod Q)l<~bie Ex c ive Secretary PIRA ENERGY GROUP, LIBRARY 3 PARK AVENUE (34th & PARK) NEW YORK, NY 10016 WASHINGTON SO BLDG ARENT FOX KINTNER PLOTKIN KAHN, LIBRARY 1050 CONNECTICUT A V NW WASHINGTON, DC 20036-5339 PHYLLIS MARTIN MS EI823 U S DEPT OF ENERGY, 1000 INDEPENDENCE SW WASHINGTON, DC 20585 DANIEL DONKEL DPC, 1420 NORTH ATLANTIC AVE, STE 204 DAYTON BEACH, FL 32118 469 NATURAL RESOURCES BLDG ILLINOIS STATE GEOL SURV, LIBRARY 615 E PEABODY DR CHAMPAIGN, IL 61820 ROBERT F SAWYER MURPHY E&P CO, POBOX 61780 NEW ORLEANS, LA 70161 IOGCC, POBOX 53127 OKLAHOMA CITY, OK 73152-3127 GAFFNEY, CLINE & ASSOC., INC., LIBRARY 16775 ADDISON RD, STE 400 ADDISON, TX 75001 ONE ENERGY SO, STE 400 DEGOL YER & MACNAUGHTON, MIDCONTINENT DIVISION 4925 GREENVILLE AVE DALLAS, TX 75206-4083 G.S. NADY SHELL WESTERN E&P INC, POBOX 576 HOUSTON, TX 77001-0574 ) NY PUBLIC LIBRARY DIV E, GRAND CENTRAL STATION POBOX 2221 NEW YORK, NY 10163-2221 JOHN KATZ STE 518 ALASKA OFC OF THE GOVERNOR, 444 N CAPITOL NW WASHINGTON, DC 20001 US MIN MGMT SERV, CHIEF OCS STATS & INFO 381 ELDEN ST MS 4022 HERNDON, VA 20170-4817 EXCH & GIFT DIV LIBRARY OF CONGRESS, STATE DOCUMENT SECTION 10 FIRST ST SE WASHINGTON, DC 20540 BRANDY KERNS TECHSYS CORP, PO BOX 8485 GATHERSBURG, MD 20898 US GEOLOGICAL SURVEY, LIBRARY NATIONAL CTR MS 950 RESTON VA 22092 SD DEPT OF ENV & NATRL RESOURCES, OIL & GAS PROGRAM 2050 W MAIN STE #1 RAPID CITY, SD 57702 AMOCO CORP 2002A, LIBRARY/INFO CTR POBOX 87703 CHICAGO, IL 60680-0703 LINDA HALL LIBRARY, SERIALS DEPT 5109 CHERRY ST KANSAS CITY, MO 64110-2498 ALFRED JAMES III 107 N MARKET STE 1000 WICHITA, KS 67202-1811 UNIV OF ARKANSAS, SERIALS DEPT UNIV LIBRARIES FAYETTEVILLE, AR 72701 SUSAN LILLY CROSS TIMBERS OPERATIONS, 210 PARK AVE STE 2350 OKLAHOMA CITY, OK 73102-5605 R E MCMILLEN CONSULT GEOL LAURA BELL OIL & GAS JOURNAL, POBOX 1260 TULSA, OK 74101 202 E 16TH ST OWASSO, OK 74055-4905 BAPIRAJU MIR YOUSUFUDDIN US DEPT OF ENERGY, ENERGY INFORMATION ADMINISTRATION 1999 BRYAN STREET STE 1110 DALLAS, TX 75201-6801 335 PINYON LN COPPELL, TX 75019 AL GRIFFITH STANDARD AMERICAN OIL CO, POBOX 370 GRANBURY, TX 76048 MARY JONES CROSS TIMBERS OIL COMPANY, 810 HOUSTON ST STE 2000 FORT WORTH, TX 76102-6298 ATTN: ROBERT RASOR H J GRUY, 1200 SMITH STREET STE 3040 HOUSTON, TX 77002 MARTY LINGNER ENERGY GRAPHICS, 1600 SMITH ST, STE 4900 HOUSTON, TX 77002 2150 TEXAS COMMERCE TWR PURVIN & GERTZ INC, LIBRARY 600 TRAVIS ST HOUSTON, TX 77002-2979 BOB WILLIAMS OIL & GAS JOURNAL, 1700 W LOOP SOUTH STE 1000 HOUSTON, TX 77027 GEORGE ROTHSCHILD JR RM 2537 MARATHON OIL CO, POBOX 4813 HOUSTON, TX 77210 T E ALFORD EXXON EXPLORATION CO., POBOX 4778 HOUSTON, TX 77210-4778 ALASKA LAND MGR PHILLIPS PETR CO, POBOX 1967 HOUSTON, TX 77251-1967 GARY M ROBERTS RM 3039 EXXONMOBIL PRODUCTION COMPANY, POBOX 2180 HOUSTON, TX 77252-2180 CHEVRON CHEM CO, LIBRARY & INFO CTR POBOX 2100 HOUSTON, TX 77252-9987 JIM JOHNSON PHILLIPS PETR CO, PARTNERSHIP OPRNS 6330 W LOOP S RM 1132 BELLAIRE, TX 77401 WATTY STRICKLAND 2803 SANCTUARY CV KATY, TX 77450-8510 ROBERT G GRAVELY 7681 S KIT CARSON DR LITTLETON, CO 80122 .~ RAY TYSON 2016 MAIN #1415 HOUSTON, TX 77002-8844 DANIEL L LIPPE PETRAL CONSULTING CO, 9800 RICHMOND STE 505 HOUSTON, TX 77042 UNOCAL, REVENUE ACCOUNTING POBOX 4531 HOUSTON, TX 77210-4531 ATTN: CORRY WOOLlNGTON CHEVRON USA INC., ALASKA DIVISION POBOX 1635 HOUSTON, TX 77251 W ALLEN HUCKABAY PHILLIPS PETROLEUM COMPANY, PO BOX 1967 HOUSTON, TX 77251-1967 J W KIKER ROOM 2086 EXXONMOBIL PRODUCTION COMPANY, POBOX 2180 HOUSTON, TX 77252-2180 MS. NORMA CALVERT MARATHON, POBOX 3128, Ste 3915 HOUSTON, TX 77253-3128 JOE VOELKER PHILLIPS PETR CO, 6330 W LP S RM 492 BELLAIRE, TX 77401 LOIS DOWNS TESORO PETR CORP, 300 CONCORD PLAZA DRIVE SAN ANTONIO, TX 78216-6999 DIANE SUCHOMEL 10507D W MAPLEWOOD DR LITTLETON, CO 80127 PAUL WALKER CHEVRON, 1301 MCKINNEY RM 1750 HOUSTON, TX 77010 MARK ALEXANDER 7502 ALCOMITA HOUSTON, TX 77083 EXXON EXPLOR CO, LAND/REGULATORY AFFAIRS RM 301 POBOX 4778 HOUSTON, TX 77210-4778 DAVID PHILLIPS PETR INFO, POBOX 1702 HOUSTON, TX 77251-1702 DONNA WILLIAMS WORLD OIL, POBOX 2608 HOUSTON, TX 77252 WILL D MCCROCKLIN PENNZOIL E&P, POBOX 2967 HOUSTON, TX 77252-2967 ANDREW C CLIFFORD ACE PETROLEUM COMPANY, PO BOX 79593 HOUSTON, TX 77279-9593 R EWING CLEMONS TEXACO INC, PO BOX 430 BELLAIRE, TX 77402-0430 MASON MAP SERV INC INTL OIL SCOUTS, POBOX 338 AUSTIN, TX 78767 GEORGE G VAUGHT JR POBOX 13557 DENVER, CO 80201 JULIE WEBER BABCOCK & BROWN ENERGY, INC., STE. 2630 SOUTH TOWER DENVER, CO 80210 JERRY HODGDEN GEOL 408 18TH ST GOLDEN, CO 80401 JOHN A LEVORSEN 200 N 3RD ST #1202 BOISE, 10 83702 MUNGER OIL INFOR SERV INC, POBOX 45738 LOS ANGELES, CA 90045-0738 ANTONIO MADRID POBOX 94625 PASADENA, CA 91109 KEN BIRD US GEOLOGICAL SURVEY, 345 MIDDLEFIELD RD MS 999 MENLO PARK, CA 94025 SAM VAN V ACTOR ECONOMIC INSIGHT INC, PO BOX 683 PORTLAND, OR 97207 JESSE MOHRBACHER FAIRWEATHER E&P SERV INC, 7151ST #4 ANCHORAGE, AK 99501 GEORGE LYLE GUESS & RUDD, 510 L ST, STE 700 ANCHORAGE, AK 99501 DAN DICKINSON, DIRECTOR DEPT OF REVENUE, 550 W 7TH AVE, SUITE 500 ANCHORAGE, AK 99501 ) US GEOLOGICAL SURVEY, LIBRARY BOX 25046 MS 914 DENVER, CO 80225-0046 KURT SAL TSGAVER C & R INDUSTRIES, INC... 7500 W MISSISSIPPI AVE STE C4 LAKEWOOD, CO 80226-4541 RICHARD NEHRING NRG ASSOC, POBOX 1655 COLORADO SPRINGS, CO 80901- 1655 BRUCE I CLARDY RUBICON PETROLEUM, LLC, SIX PINE ROAD COLORADO SPRINGS, CO 80906 GARY PLAYER TAHOMA RESOURCES, 1671 WEST 546 S CEDER CITY, UT 84720 US GEOLOGICAL SURVEY, LIBRARY 2255 N GEMINI DR FLAGSTAFF, AZ 86001-1698 LA PUBLIC LIBRARY, SERIALS DIV 630 W 5TH ST LOS ANGELES, CA 90071 JOHN F BERGQUIST BABSON & SHEPPARD, POBOX 8279 VIKING STN LONG BEACH, CA 90808-0279 ORO NEGRO, INC., 9321 MELVIN AVE NORTHRIDGE, CA 91324-2410 R W HILL TEXACO INC, PORTFOLIO TEAM MANAGER POBOX 5197x Bakersfield, CA 93388 UNIV OF CALIFORNIA SHIELDS LIBRARY, GOVT DOCS DEPT DAVIS, CA 95616 H L WANGENHEIM 5430 SAWMILL RD SP 11 PARADISE, CA 95969-5969 THOR CUTLER OW-137 US EPA REGION 10, 1200 SIXTH AVE SEATTLE, WA 98101 MICHAEL J PARKS MARPLES BUSINESS NEWSLETTER, 117 W MERCER ST STE 200 SEATTLE, WA 98119-3960 TRUSTEES FOR ALASKA, 1026 W. 4th Ave, Ste 201 ANCHORAGE, AK 99501 DUSTY RHODES 229 WHITNEY RD ANCHORAGE, AK 99501 DENISE HAWES DEPT OF REVENUE, OIL & GAS AUDIT 550 W 7TH A V STE 570 ANCHORAGE, AK 99501 BEVERLY MARQUART DEPT OF REVENUE, 550 W 7TH A V STE 570 ANCHORAGE, AK 99501 CHUCK LOGSTON DEPT OF REVENUE, 550 W 7TH AVE, SUITE 500 ANCHORAGE, AK 99501 JIM ARLINGTON FORCENERGY INC., 310 K STREET STE 700 ANCHORAGE, AK 99501 KATE MUNSON STATE PIPELINE OFFICE, LIBRARY 411 W 4TH AVE, STE 2 ANCHORAGE, AK 99501 ROBERT E MINTZ ASST ATTY GEN ALASKA DEPT OF LAW, 1031 W 4TH AV STE 200 ANCHORAGE, AK 99501-1994 FRANK PARR DEPT OF REVENUE, OIL & GAS AUDIT 550 W 7TH AVE STE 570 ANCHORAGE, AK 99501-3540 WILLIAM VAN DYKE DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 DEPT OF NATURAL RESOURCES, PUBLIC INFORMATION CTR 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 BAKER OIL TOOLS, ALASKA AREA MGR 4710 BUS PK BLVD STE 36 ANCHORAGE, AK 99503 MARK HANLEY ANADARKO, 3201 C STREET STE 603 ANCHORAGE, AK 99503 THOMAS FINK, PHD FINK ENVIRONMENTAL CONSULTING, INC., 6359 COLGATE DR. ANCHORAGE, AK 99504-3305 RON BROCKWAY AMERICA/CANADIAN STRATIGRPH CO, 4800 KUPREANOF ANCHORAGE, AK 99507 ART BONET US BLM AK DIST OFC, RESOURCE EVAL GRP 6881 ABBOTT LOOP RD ANCHORAGE, AK 99507-2899 JOHN HORN VICE CHM YUKON PACIFIC CORP, 1049 W 5TH AV ANCHORAGE, AK 99501-1930 PRESTON GATES ELLIS LLP, LIBRARY 420 L ST STE 400 ANCHORAGE, AK 99501-1937 PAMELA MILLER GAFO,GREENPEACE 125 CHRISTENSEN DR. #2 ANCHORAGE, AK 99501-2101 TIM RYHERD DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7th AVE STE 800 ANCHORAGE, AK 99501-3510 JIM STOUFFER DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 BRUCE WEBB DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 JULIE HOULE DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 JAMES B HAYNES DEPT OF NATURAL RESOURCES, DIV OF OIL & GAS 550 W 7TH AVE, SUITE 800 ANCHORAGE, AK 99501-3560 ROSE RAGSDALE AK JOURNAL OF COMMERCE, OIL & INDUSTRY NEWS 4220 B Street Ste #210 ANCHORAGE, AK 99501-3560 JIM MUNTER BRISTOL ENVIR SERVICES, 2000 W. INT'L AIRPORT RD #C-1 ANCHORAGE, AK 99502-1116 MARK DALTON HDRALASKA INC, 2525 C ST STE 305 ANCHORAGE, AK 99503 N-I TUBULARS INC, 3301 C Street Ste 209 ANCHORAGE, AK 99503 JUDY BRADY ALASKA OIL & GAS ASSOC, 121 W FIREWEED LN STE 207 ANCHORAGE, AK 99503-2035 ANADRILL-SCHLUMBERGER, 3940 ARCTIC BLVD #300 ANCHORAGE, AK 99503-5711 ARLEN EHM GEOL CONSL TNT JAMES E EASON 2420 FOXHALL DR ANCHORAGE, AK 99504-3342 8611 LEEPER CIRCLE ANCHORAGE, AK 99504-4209 PETER J DITTON US BUREAU OF LAND MNGMNT, ANCHORAGE DIST OFC 6881 ABBOTT LOOP ROAD ANCHORAGE, AK 99507 DICK FOLAND US BUREAU OF LAND MNGMNT, ANCHORAGE DIST OFC 6881 ABBOTT LOOP RD ANCHORAGE, AK 99507 PAUL CRAIG TRADING BAY ENERGY CORP, 5432 NORTHERN LIGHTS BLVD ANCHORAGE, AK 99508 TERESA HULL UOA/ ANCHORAGE, INST OF SOCIAL & ECON RESEARCH 3211 PROVIDENCE DR ANCHORAGE, AK 99508 THOMAS R MARSHALL JR 1569 BIRCHWOOD ST ANCHORAGE, AK 99508 KIRK W SHERWOOD US MIN MGMT SERV, RESOURCE STUDIES AK OCS REGN 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4302 US MIN MGMT SERV, LIBRARY 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4363 JOHN MILLER 3445 FORDHAM DR ANCHORAGE, AK 99508-4555 BERT TARRANT ANCHORAGE TIMES, POBOX 100040 ANCHORAGE, AK 99510-0040 STEVE BENZLER ATO 1404 PHILLIPS ALASKA, POBOX 100360 ANCHORAGE, AK 99510-0360 JAMES WINEGARNER PHILLIPS ALASKA, LAND DEPT POBOX 10036 ANCHORAGE, AK 99510-0360 CHUCK O'DONNELL AL YESKA PIPELINE SERV CO, 1835 S BRAGAW - MS 530B ANCHORAGE, AK 99512 J A DYGAS US BUREAU OF LAND MGMT, OIL & GAS OPRNS (984) 222 W 7TH AV #13 ANCHORAGE, AK 99513-7599 JEFF LIPSCOMB JWL ENGINEERING, 9921 MAIN TREE DR. ANCHORAGE, AK 99516-6510 ) RICHARD PRENTKI US MIN MGMT SERV, 949 E 36TH AV ANCHORAGE, AK 99508-4302 GORDONJ.SEVERSON 3201 WESTMAR CIR ANCHORAGE, AK 99508-4336 JIM SCHERR US MIN MGMT SERV, RESOURCE EVAL 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4363 USGS - ALASKA SECTION, LIBRARY 4200 UNIVERSITY DR ANCHORAGE, AK 99508-4667 JOANN GRUBER ATO 712 PHILLIPS ALASKA, POBOX 100360 ANCHORAGE, AK 99510-0360 PHILLIPS ALASKA, LIBRARY POBOX 100360 ANCHORAGE, AK 99510-0360 KRISTEN NELSON PETROLEUM INFO CORP, POBOX 102278 ANCHORAGE, AK 99510-2278 PERRY A MARKLEY AL YESKA PIPELINE SERV CO, 1835 S BRAGAW - MS 575 ANCHORAGE, AK 99512 MICHAEL CAREY ANCHORAGE DAILY NEWS, EDITORIAL PG EDTR POBOX 149001 ANCHORAGE, AK 99514 ROBERT BRITCH, P.E. NORTHERN CONSULTING GROUP, 2454 TELEQUANA DR. ANCHORAGE, AK 99517 ) US MIN MGMT SERV, AK OCS REGIONAL DIR 949 E 36TH AV RM 110 ANCHORAGE, AK 99508-4302 ALASKA OCS REGION REGIONAL SUPRVISOR, FIELD OPERATNS, MMS 949 E 36TH A V STE 308 ANCHORAGE, AK 99508-4363 FRANK MILLER US MIN MGMT SERV, 949 E 36TH A V STE 603 ANCHORAGE, AK 99508-4363 CIRI, LAND DEPT POBOX 93330 ANCHORAGE, AK 99509-3330 MARK P WORCESTER PHILLIPS ALASKA, LEGAL DEPT POBOX 100360 ANCHORAGE, AK 99510-0360 MARK MAJOR A TO 1968 PHILLIPS ALASKA, POBOX 100360 ANCHORAGE, AK 99510-0360 WELL ENG TECH NSK 69 PHILLIPS ALASKA, KUP CENTRAL WELLS ST TSTNG POBOX 196105 ANCHORAGE, AK 99510-6105 AL YESKA PIPELINE SERV CO, LEGAL DEPT 1835 S BRAGAW ANCHORAGE, AK 99512-0099 DAVID W. JOHNSTON 320 MARINER DR. ANCHORAGE, AK 99515 GERALD GANOPOLE CONSULT GEOL 2536 ARLINGTON ANCHORAGE, AK 99517-1303 DAVID CUSATO 600 W 76TH A V #508 ANCHORAGE, AK 99518 MARK WEDMAN HALLIBURTON ENERGY SERV, 6900 ARCTIC BLVD ANCHORAGE, AK 99518-2146 BARRETT HATCHES ENSTAR NATURAL GAS CO, POBOX 190288 ANCHORAGE, AK 99519-0288 KEVIN TABLER UNOCAL, POBOX 196247 ANCHORAGE, AK 99519-6247 MARK BERLINGER MB 8-1 BP EXPLORATION (ALASKA), INC., PO BOX 196612 ANCHORAGE, AK 99519-6612 SUE MILLER BP EXPLORATION (ALASKA) INC, POBOX 196612 MIS LR2-3 ANCHORAGE, AK 99519-6612 L G POST O&G LAND MGMT CONSULT 10510 Constitution Circle EAGLE RIVER, AK 99577 JAMES RODERICK PO BOX 770471 EAGLE RIVER, AK 99577-0471 J W KONST PHILLIPS PETR, ALASKA OPERATIONS MANAGER P 0 DRAWER 66 KENAI, AK 99611 STAN STEADMAN KENAI PENINSULA BOROUGH, ECONOMIC DEVEL DISTR POBOX 3029 KENAI, AK 99611-3029 "-, " CONRAD BAGNE ASRC, 301 ARCTIC SLOPE AV STE 300 ANCHORAGE, AK 99518 ERIKA OPSTAD PROF GEOL OPST AD & ASSOC, POBOX 190754 ANCHORAGE, AK 99519 MARATHON OIL CO, OPERATIONS SUPT POBOX 196168 ANCHORAGE, AK 99519-6168 UNOCAL, POBOX 196247 ANCHORAGE, AK 99519-6247 PETE ZSELECZKY LAND MGR BP EXPLORATION (ALASKA) INC, POBOX 196612 ANCHORAGE, AK 99519-6612 MR. DAVIS, ESQ BP EXPLORATION (ALASKA) INC, POBOX 196612 MB 13-5 ANCHORAGE, AK 99519-6612 STEVE TYLER PINNACLE, 20231 REVERE CIRCLE EAGLE RIVER, AK 99577 JOHN REEDER DEPT OF NATURAL RESOURCES, DGGS POBOX 772805 EAGLE RIVER, AK 99577-2805 RON DOLCHOK PO BOX 83 KENAI, AK 99611 NANCY LORD PO BOX 558 HOMER, AK 99623 ) ARMAND SPIELMAN 651 HILANDER CIRCLE ANCHORAGE, AK 99518 JACK 0 HAKKILA POBOX 190083 ANCHORAGE, AK 99519-0083 BRAD PENN MARATHON OIL CO, POBOX 196168 ANCHORAGE, AK 99519-6168 MARK P EVANS EXXONMOBIL PRODUCTION COMPANY, PO BOX 196601 ANCHORAGE, AK 99519-6601 BP EXPLORATION (ALASKA) INC, INFO RESOURCE CTR MB 3-2 POBOX 196612 ANCHORAGE, AK 99519-6612 WILLIAM 0 VALLEE PRES AMSINALLEE CO INC, PO BOX 243086 ANCHORAGE, AK 99524-3086 D A PLATT & ASSOC, 9852 LITTLE DIOMEDE CIR EAGLE RIVER, AK 99577 BOB SHA VELSON COOK INLET KEEPER, PO BOX 3269 HOMER, AK 99603 JOHN PARKER DOCUMENT SERVICE CO, POBOX 1468 KENAI, AK 99611-1468 PENNY V ADLA PO BOX 467 NINILCHIK, AK 99639 MICHAEL A BELOWICH BELOWICH. 1125 SNOW HILL AVE WASILLA, AK 99654-5751 KENAI NATL WILDLIFE REFUGE, REFUGE MGR POBOX 2139 SOLDOTNA, AK 99669-2139 VALDEZ VANGUARD, EDITOR POBOX 98 VALDEZ, AK 99686-0098 RICK WAGNER POBOX 60868 FAIRBANKS, AK 99706 FRED PRATT POBOX 72981 FAIRBANKS, AK 99707-2981 BILL THOMAS ASRC, POBOX 129 BARROW, AK 99723 DR AKANNI LAWAL UNIVERSITY OF ALASKA FBKS, PETR DEVEL LAB POBOX 755880 FAIRBANKS, AK 99775-5880 ) SHEILA DICKSON PACE, POBOX 2018 SOLDOTNA, AK 99669 JAMES GIBBS POBOX 1597 SOLDOTNA, AK 99669 SANDY MCCLINTOCK AL YESKA PIPELINE SERVICE CO, VALDEZ CORP AFFAIRS POBOX 300 MS/701 VALDEZ, AK 99686 VALDEZ PIONEER, POBOX 367 VALDEZ, AK 99686 NICK STEPOVICH DR V A KAMATH UNIV OF ALASKA FAIRBANKS, PETR DEVEL LAB 427 DUCKERING FAIRBANKS, AK 99701 543 2ND AVE FAIRBANKS, AK 99701 KATE RIPLEY FAIRBANKS DAILY NEWS-MINER, POBOX 70710 FAIRBANKS, AK 99707 C BURGLlN POBOX 131 FAIRBANKS, AK 99707 REG MGR NORTHERN REGION DEPT OF NATURAL RESOURCES, DIV OF LAND 3700 AIRPORT WAY FAIRBANKS, AK 99709-4699 K&K RECYCL INC, POBOX 58055 FAIRBANKS, AK 99711 RICHARD FINEBERG SHIRISH PATIL UNIV OF ALASKA FBX, PETR DEVEL LAB 437 DICKERING FAIRBANKS, AK 99775 PO BOX416 ESTER, AK 99725 SENATOR LOREN LEMAN CHRIS PACE DEPT OF ENVIRON CONSERV SPAR, 410 WILLOUGHBY AV STE 105 JUNEAU, AK 99801-1795 STATE CAPITOL RM 113 JUNEAU, AK 99801-1182 #7 LAW OFFICES OF Guess&Rudd P.c, 510 L STREET SEVENTH FLOOR \JCHORAGE, ALASKA 99501 ELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 ) ) RECEIVED APH 25 2001 STATE OF ALASKA ,'!\/n$ka 011 & G2\~~ Cons. Commission Þ.ncl!on~nø ALASKA OIL AND GAS CONSERVATION COMMISSION 333 W. 7th Ave., Suite 100 Anchorage, Alaska 99501 Re: APPLICATION OF FORCENERGY,) INC. for an order granting an ) exception to the spacing ) requirements of 20 MC 25.055 ) to allow for production from ) the West Foreland #1 gas well ) ) Conservation Order No. 450 West Foreland Field NOTICE OF COMPLIANCE Forest Oil Corporation ("Forest") hereby gives notice that on Friday, April 20, 2001, it complied with Conservation Order 450 by filing with the Alaska Oil & Gas Conservation Commission ("the Commission") a copy of a Compensatory Royalty Agreement and an Escrow Agreement, fully executed by the United States, Department of the Interior, Bureau of Land Management ("BLM"), the State of Alaska, Department of Natural Resources, Division of Oil and Gas ("DOG"), and Forest Oil Corporation, which comply with the requirements of Conservation Order No. 450. Forest therefore intends to initiate production of natural gas from West Foreland #1 on Wednesday, April 25, 2001. For the convenience of the parties, Forest herewith files another complete executed copy of the Compensatory Royalty Agreement and its exhibits, including the Escrow Agreement. LAW OFFICES OF Guess&Rudd P,C 510 L STREET SEVENTH FLOOR ~CHORAGE, ALASKA 99501 ELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 ) ) Conservation Order 450 contains the following sentence: The Escrow Account shall be subject to the condition that no funds may be disbursed from the account except by written order of this Commission. BLM declined to sign a Compensatory Royalty Agreement or Escrow Agreement containing the condition referenced above, because the position of the BLM is that this Commission does not possess jurisdiction over gas production from Federal lands, or over the payments of royalty resulting therefrom. DNR also stated its preference not to sign such a provision based upon the terms of its lease and unit agreement and statutes. Thus, the Compensatory Royalty Agreement and the Escrow Agreement do not directly require this Commission's approval of releases of escrowed funds representing royalties due to the United States or to the State of Alaska.1 However, the Compensatory Royalty agreement and the Escrow Agreement are still ".. . subject to the condition that no funds may be disbursed from the account except by written order of this Commission..." because Conservation Order 450 orders Forest to obtain the approval and order of the Commission, and Forest will comply with that requirement. Conservation Order 450 states as follows: 1 Paragraph I.E. of the Compensatory Royalty Agreement does require the approval of the Commission to the release of escrowed funds to the holders of overriding royalty interest owners ("ORRI's"). - 2 - LAW OFFICES OF Guess&Rudd PC, 510 L STREET SEVENTH FLOOR ~CHORAGE. ALASKA 99501 ELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 ) ) If at any time the Commission is provided with a CRA or other agreement specifying how gas production from the WF#l well is to be allocated between Lease A-035017 and Lease ADL 359111, the Commission will order the funds in the Escrow Account to be disbursed in accordance with such agreement and will terminate Forcenergy's obligation to maintain and pay into the Escrow Account. However, if such agreement is executed by fewer than all royalty owners in both leases, the Commission will first provide royalty owners with an opportunity to be heard (after personal notice served by Forcenergy) on the disposition of the escrowed funds as between the two leases and on the termination of Forcenergy's escrow obligation. Thus, under Conservation Order 450, Forest is obligated to provide to the Commission the Final Allocation of gas production to the Federal and State leases (the allocation of gas production agreed by the BLM, the State, and Forest), and the Commission will extend to the ORRI's the opportunity to be heard on the allocation of production of gas between the two leases, and on the disposition of the escrowed funds, and no funds will be released until the Commission has so ordered. Forest will comply with these lawful requirements of the Commission. Forest will not pay royalty to the ORRI's on an allocation formula different from that under which it pays the - 3 - LAW OFFICES OF Guess&Rudd P,C 510 L STREET SEVENTH FLOO R ~CHORAGE. ALASKA 99501 ELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 State of Alaska and the BLM, and the foregoing procedures will ensure that resul t cannot occur 0 2 GUESS & RUDD, PoCo Attorneys for Forest Oil Corporation DATED: '-( ~'( é) I f)~~ ùa es Do Linxwiler By: F:\data\S672\10\pleading\noticeofcompliance3.doc CERTIFICATE OF SERVICE I hereby certify that on the ~ S ð- day of April, 2001, a true and correct copy of the foregoing document was mailed to the follow- ing counsel of record: Peter Ditton Bureau of Land Management Department of the Interior 6881 Abbott Loop Rd. Anchorage, AK 99507-2599 Mark Myers, Director Division of Oil & Gas Department of Natural Resources 550 W. 7th Ave., Suite 800 Anchorage, AK 99501-3510 2 The adequacy of funds available to pay to the ORRI's is ensured because the escrow not only will contain the maximum amount of royalty to be paid under the two leases, it will actually contain a surplus of funds equal to a 5% royalty on production allocated to the State lease ADL 359112, to the extent such gas is used in the West McArthur River Unit for fuel gas. These funds are escrowed to ensure payment to the State of Alaska, but no royalty will be due the State of Alaska on gas production allocated to ADL 359112 and used for fuel gas to assist production in the West McArthur River Unit. Furthermore, in the extremely unlikely event that there remains any balance due the ORRI's left unpaid solely because the escrowed funds were not sufficient, Forest will pay any deficiency to the ORRI's directly. - 4 - LAW OFFICES OF Guess&Rudd P,C, 510 L STREET SEVENTH FLOO R \lCHORAGE, ALASKA 99501 ELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 , '\ ) f Bonnie Robson Assistant Attorney General Department of Law 1031 W. 4th Ave. Anchorage, AK 99501 GUESS & RUDD , By: ~ 6~ 5 ) WEST FORELAND #l-WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT This WEST FORELAND #l-WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT ("this Agreement") is made this 20th day of April, 2001, but is effective as of April I, 2001 ("Effective Date"), by and between the following parties: The United States of America, through the Secretary of the Interior, or his designated representative (hereinafter called "United States"), acting on its own behalf, and on behalf of Cook Inlet Region, Inc. ("CIRI") . The execution of this Agreement on behalf of the United States binds the Bureau of Land Management to its terms; The State of Alaska, through the Commissioner, Department of Natural Resources, or his designated representative (hereinafter called "the State"); Forest Oil Corporation (hereinafter called "Lessee"). Collectively, all of the foregoing are hereinafter referred to as the "Parties." Page 1 of 25 } R E C I TAL S A. Federal oil and gas lease A-035017 (the "Federal Lease") became effective September 29, 1958. In the Federal Lease, the Uni ted States leased to predecessors in interest of Lessee the oil and gas interests in a certain 857 acres, more or less, located in Sections 16, 21, 27, and 28, T8N, R14W, SM, Alaska as depicted in Exhibit A hereto and made a part hereof. Forest. Oil cCorporation, as successor, is the lessee of the Federal Lease; B. Pursuant to Section 14(g) of the Alaska Native Claims Settlement Act ("ANCSA"), 43 USC § 1613(g), on October 26, 1982, Cook Inlet Region, Inc. ("CIRI") acquired 802 acres of the Federal Lease located in Sections 16, 21, 27, and 28, T8N, R14W, SM, Alaska (the "CIRI Acreage"), as depicted in Exhibit A hereto. The remainder of the Federal Lease is in federal ownership, and consists of U.S. Survey 4522, U.S.Survey 4523, and Lot 1 of U.S. Survey 4524 and consists of 55 acres, more or less ( "Federal Acreage") , as depicted in Exhibit A hereto. The CIRI Acreage remains subject to the Federal Lease, and administration of the CIRI Acreage was retained by the United States pursuant to ANCSA § 14(g), 43 use § 1613(g). Pursuant to a letter dated March 2, 1983 from the United States Page 2 of 25 ) to Amoco Production Company (Amoco) as predecessor of Lessee, the United States directed Amoco to pay funds due under the Federal Lease as follows: "All monies, including .. .minimum royalty accruing under this lease should be split with 93.5823 percent paid directly to Cook Inlet Region, Incorporated (CIRI) and 6.4177 percent made payable to Minerals Management Service, Royalty Management Program...." attached hereto as Exhibit B. A copy of this letter is C. State of Alaska oil and gas lease ADL 359112 (the "State Lease") became effective December I, 1983. In the State Lease, the State of Alaska leased to predecessors in interest of Lessee oil and gas interests in a certain 2,155.00 acres, more or less, located in Sections 21, 22, 23, 27, and 34, T8N, R14W, SM, Alaska as depicted in Exhibit C and made a part hereof. Forest Oil Corporation as successor is the lessee of the State Lease. The State Lease was committed to the West McArthur River Unit ("WMRU") effective June 27, 1990. D. Certain part ies (collect i vely, the "Federal ORRI s" ) hold overriding royalty interests in production from the Federal Lease which were acquired from the predecessors in interest of the Lessee. The Federal ORRIs are not parties to this Agreement; Page 3 of 25 ) ) E. Certain parties (collectively, the "State ORRIs") hold overriding royalty interests in production from the State Lease, which were acquired from the predecessors in interest of the Lessee. The State ORRIs are not parties to this Agreement; F. The West Foreland #1 Well ("WF #1") was drilled on Federal Lease A-035017 in Section 21, Township 8 North, Range 14 West, Seward Meridian, Cook Inlet Basin and completed on March 29, 1962 by Pan American Petroleum Corporation. The WF #1 was drilled to a total depth of 13,500' MD & TVD. During the completion, several zones were tested and two productive sands were found in the well in the lower tertiary; one at 9502'-9527' and one at 9336'-9352'. The two gas-bearing zones as encountered in WF #1 at 9502'-9527' and 9336'-9352' and all gas-bearing strata in communication therewith are jointly referred to hereinafter as "the Reservoir. II For purposes of determining the state royalty, the Parties agree that the Reservoir is included in and is a part of the West Foreland Field identified in AS 38.05.180 (f) (5) (F) . G. Lessee intends to produce natural gas from WF #1 and potentially from additional wells drilled into the Reservoir with a bottornhole location on the Federal Lease or the State Page 4 of 25 ) ') Lease. Gas and associated hydrocarbon liquids produced by WF #1 and by any other well with a bottomhole location in the Reservoir and on the State Lease or the Federal Lease is referred to herein as "Subject Gas. " Lessee intends at the present time to use the Subject Gas to provide fuel gas to the WMRU production facility for purposes of producing oil from the WMRU. However, Lessee reserves its rights to use Subj ect Gas for other purposes or to sell Subject Gas. H. The purpose of this Agreement is to provide a procedure to establish a final allocation of production of Subject Gas to the Federal Lease and the State Lease which shall be applicable during the term of this Agreement as defined in Paragraph 5 infra by establishing the relative percentages of Subj ect Gas located within the boundaries of the Federal Lease and the State Lease and applying such percentages to such production (the "Final Allocation"). The Parties disagree on whether sufficient data exists to enable them to make a Final Allocation at ·this time, but the Parties will make such a Final Allocation after 2 years from the time when production of Subj ect Gas from the Reservoir is initiated through WF-1 or other well by Lessee for use as fuel gas or for purposes of sale (the "Start of \ Production") pursuant to Paragraph 1. c. infra, or sooner upon agreement of all Parties. If the Parties are unable to agree Page 5 of 25 ) ) upon a Final Allocation within 6 months after said two year period, then the Parties shall have the right to initiate litigation seeking to establish the Final Allocation, pursuant to Paragraph I.D. infra. I. The Parties intend that all royalty payments which would otherwise be due on production of Subject Gas shall be escrowed until Final Allocation is established. Upon establishing Final Allocation, the parties shall release the funds they have placed in escrow in compl iance wi th the Final Allocation. When the Parties agree to release such funds, the Parties will first calculate and cause to be paid the royalty amount due to the United States and to the State for production of Subject Gas occurring during the period from the Effective Date until release of such funds. The calculation of such royalties and interest shall be pursuant to the Final Allocation, and the applicable terms of the Federal Lease, the State Lease, the WMRU as it applies to the State Lease, and the applicable State and Federal laws and regulations (the "Leases and Regulations"). Such calculation shall not be final, but instead shall be subject to subsequent audit and correction pursuant to the Leases and Regulations. Subj ect to the further terms of thi s Agreement, Lessee shall also calculate all royalty on such production due the Federal ORRIs and the State ORRIs, and the Page 6 of 25 ) Parties agree, pursuant to the further terms of this Agreement, to cause to be released Escrowed Funds for such purpose. All remaining Escrowed Funds shall be released to Lessee. THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, the United States (on its own behalf and on behalf of CIRI), the State, and Lessee hereby agree as follows: 1. Allocation of Subj ect Gas to Federal Lease and to State Lease. The Parties agree that production of Subj ect Gas shall be allocated between the Federal Lease and the State Lease and royalties shall be paid on production of Subject Gas as follows: A. Escrow of Funds Until Final Allocation is Determined. Lessee shall establish an interest-bearing account ("Escrow Account") in The First National Bank of Anchorage pursuant to an Escrow Agreement containing form escrow instructions for release of funds from said Escrow Account. The Escrow Agreement is at tached hereto as Exhibi t D. Lessee shall pay all fees and costs associated wi th the Escrow Account. The Escrow Account shall be subject to the condition that no funds may be disbursed from the Escrow Account until the Final Allocation is Page 7 of 25 ) ) established, pursuant to Paragràph 1.C. or Paragraph 1.D. infra, and further until the Parties have executed the escrow instructions pursuant to Paragraph I.E., infra. No later than the last day of the month following the month in which production of Subj ect Gas occurs (" Production Month"), Lessee shall deposi t in the Escrow Account an amount equal to seventeen and one-half per cent (17 1/2%) of the total production of Subject Gas for the Production Month, multiplied by the prevailing value for Cook Inlet gas (or associated hydrocarbon liquids as appropriate) published for that Production Month's quarter by the Alaska Department of Revenue under 15 AAC 55.l73(b) (gas) or 15 AAC 55.l7l(i) (1 iquids) whichever is applicable ("Escrowed Funds") . Simultaneously with the monthly deposits of Escrowed funds, Lessee shall provide the State and the United States with monthly operator reports as required by the Leases and the Regulations which indicate the gross volume and distribution of Subj ect Gas produced, and a separate report that lists the dollar amounts placed in the Escrow Account. An example of the State Operator Report, 01, is attached hereto as Exhibit E. An example of the Listing of Escrow Deposit is attached hereto as Exhibit F. Account Code WMOl, assigned to production from the WF#l well, should be referenced on the Operator Report submitted to the State. Page 8 of 25 ) This valuation of Subject Gas is only made for purposes of establishing the amount of Escrowed Funds to be deposited into the Escrow Account. The actual royalty value on royalty due from Lessee to the State and/or to the United States may be more or less than this value, and shall be determined exclusively by application of the Leases and Regulations, and shall be calculated at the time the Final Allocation is determined pursuant to Paragraph I.C. and/or I.D. below. Royalties due and paid by Lessee to the State and the United States will be subject to audit and adjustment by the State and/or the United States, as provided in the Leases and Regulations. Timely payments of Escrowed Funds into the escrow account in accordance with this Agreement shall constitute timely payment of royal ty pursuant to the Leases and Regulations, so long as all royalty and interest obligations are paid in full following Final Allocation, as provided for in this Agreement. Interest obligations shall be determined pursuant to Paragraph 1 . E ., infra. B. Data Distribution. Page 9 of 25 ,) ) In order to assist in determining the Final Allocation and in order to verify payment of royalty, Lessee shall provide the United States and the State the following data and information: (i) Continuing Data Distribution by Lessee Shall Be Made in Compliance with the Leases and Regulations. Lessee shall install an orifice meter to measure production of Subj ect Gas from the WF #1 well and any other well drilled into the Reservoir to measure the volume of Subject Gas produced from the Reservoir net of Subject Gas used as fuel gas for the product ion of Subj ect Gas. During the term of this Agreement, Lessee agrees to furnish all Parties with all well logs and production data from WF #1 well or any other well drilled into the Reservoir. This subparagraph (i) shall not be construed to create any obligation of Lessee to acquire any additional data, nor to waive any obligation of the United States or the State to maintain such data as confidential. (ii) One-time Data Distribution to Assist Final Allocation. Within sixty days after the conclusion of the two year period following Start of production of Subject Gas, Lessee shall gather and provide to the Uni ted States and to the State on a confidential basis existing, if any, well data, Page 10 of 25 ) ) production data, and seismic data directly relating to the Federal Lease and the State Lease and concerning WF #1 and any additional wells drilled into the Reservoir to a bottomhole location 'on the State Lease or the Federal Lease and any interpretation of such data then in its possession, not previously distributed, including without limitation reservoir zonation and net pay maps, reservoir pressure, compressibility analysis, static bottomhole pressure, production data, and P/Z data and analysis. Except as required in the foregoing sentence, Lessee shall not be obligated to create or record any data for the State and the United States pursuant to this Agreement, except where Lessee is already obligated to do so pursuant to the Leases and the Regulations. This subparagraph (ii) shall not be construed to create any continuing obligation of Lessee to provide any data beyond the term of this Agreement, except as required in the Leases and Regulations, nor to waive any obligation of the United· States or the State to maintain such data as confidential. C. Final Allocation of Production of Subj ect Gas to Federal Lease and State Lease. At the conclusion of two years after Start of Production plus the sixty day period set forth in Paragraph 1.B. (ii) (or Page 11 of 25 } sooner, upon agreement of all the Parties), the Uni ted States, the State and the Lessee shall meet and attempt to agree on the Final Allocation using all data then available to them. D. Conflict Resolution. In the event the Uni ted States, the State, and the Lessee are unable to agree on a Final Allocation within six (6) months after the conclusion 9f two years from the Start of Production, any Party hereto may initiate litigation in a court having jurisdiction over all the Parties to this Agreement seeking to establish the Final Allocation pursuant to this Agreement using the information available to the Parties pursuant to this Agreement, and to further establish the other rights and obligations of the Parties pursuant to this Agreement. E. Release of Escrowed Funds. The Parties agree to release Escrowed Funds to the United States, the State and the Lessee in accordance with the Final Allocation. Upon Final Allocation, and after the release of Escrowed Funds to the United States and/or the State in full payment of all royalty obligations under the Federal Lease and the State Lease, the Parties further agree to release all or a portion of Page 12 of 25 ) Escrowed Funds to the Federal ORRIs and to the State ORRIs, pursuant to: (i) a lawful final order of an agency or court having jurisdiction which approves this Agreement or the Final Allocation; or (ii) if there is no such order and no pending proceeding to obtain such an order, then pursuant to the request of Lessee (A) upon receipt by Lessee of a Division Order signed by all the Federal ORRIs or State ORRIs, or (B) upon receipt of other proof of entitlement satisfactory to Lessee. The State and the United States shall have no responsibility or liability for the release of Escrowed Funds to the Federal ORRIs or State ORRIs pursuant to the request of Lessee. Regarding the State Lease, interest shall accrue on Escrowed Funds subsequently paid to the State as royalty on Subject Gas at the rate specified in Paragraph 37 of the State Lease from the last day of the calendar month following the month in which the Subj ect Gas was produced until the date on which funds are distributed from the Escrow Account to the State. Except as to the State Lease, interest earned on the portion of the Escrowed Funds released to each Party or to the Federal ORRIs and State ORRIs shall be distributed in the same percentage as the Escrowed Funds, and no further interest shall be due on any of the Escrowed Funds or the royalty payments Page 13 of 25 ) ) represented thereby paid to any of such Parties or the Federal ORRIs or the State ORRIs. Lessee shall be enti tIed to the remainder of the Escrowed Funds, if any. The Parties shall execute escrow instructions releasing the Escrowed Funds in accordance with this Paragraph 1. E. and the Final Allocation as determined pursuant to the terms of this Agreement. The final obligation of Lessee to pay royalties and interest to the United States and the State shall be consistent with the Leases and Regulations, including all allowable deductions thereunder, and shall not be limited to the Escrowed Funds, or by the release of all or a portion thereof. F. Revised Production Allocation. and Royalty Reports After Final Upon Final Allocation, the Lessee shall file with the State and/or the United States, respectively, revised State operator reports and State royal ty reports and/ or Federal statements of gas production runs and royalties and shall pay royalties, all in compliance with the Leases and Regulations for all Subject Page 14 of 25 ) Gas produced prior to Final Allocation. The State Payment Summary Report, Sl and the State Royalty Report, Al are attached hereto as Exhibi ts G and H respectively. The Lessee is only required to submit Payment Summary and Royalty Reports if royal ties are due to the State. The Lessee shall reference Account Code WMOl on all Operator, Payment Summary and Royalty Reports submitted to the State. G. Sales of Subject Gas. Subj ect Gas which is sold will be allocated between the State Lease and the Federal Lease in accordance wi th the Final Allocation. H. Obligations Relative to Drainage and Compensatory Royalty. This Agreement, and the Final Allocation of Subj ect Gas pursuant to this Agreement, satisfies, resolves and settles any and all obligations of the Lessee arising with respect to the Federal Lease or th~ State Lease or the WMRU relative to / drainage of Subject Gas from the Reservoir through wells on the Federal Lease or the State Lease, including without limitation, any obligation Lessee might otherwise have to pay compensatory royal ties or drill offset wells on the Federal Lease or the State Lease to protect such lease from drainage occurring as a result of production from the Federal Lease or the State Lease. Page 15 of 25 ) } 2. Federal Lease. A. Terms of Payment of Royal ty for- Subj ect Gas Allocated to the Federal Lease. Prior to the Final Allocation, all royalty payments on production of Subject Gas from the Federal Lease shall be made into the Escrow Account, pursuant to the terms of Paragraph 1.A. above. The royal ty obligations for production of Subj ect Gas prior to the Final Allocation shall be determined, and the Escrowed Funds released, using the allocation of production established by the Final Allocation, subject to subsequent audit pursuant to the Leases and Regulations. Beginning with Final Allocation and the release of the Escrowed Funds, royal ty on production of Subject Gas shall be calculated and paid pursuant to the Final Allocation and the Leases and Regulations. B. Allocation by United States of Subject Gas and Royalty Between Federal Acreage and CIRI Acreage. The Uni ted States administers all of the Federal Lease, a portion of which is the Federal Acreage and a portion of which is the CIRI Acreage. This Agreement establishes a process to determine Final Allocation of Subj ect Gas and thereby allocate production of Subj ect Gas to the Federal Lease, but does not further establish a procedure to allocate production of Subject Page 16 of 25 J ) Gas between the Federal Acreage and the CIRI Acreage. The further allocation of production of Subject Gas between the Federal Acreage and to the CIRI Acreage within the Federal Lease, and the payments of Escrowed Funds due to such allocation, is exclusively within the control of the United States, and the means of determining such further allocation and payments are not further addressed by this Agreement. The United States shall bear sole responsibility for the allocation of production of Subject Gas between the Federal ~creage and the CIRI Acreage and the allocation of such payments. Lessee and the State of Alaska shall have no responsibility or liability for such allocation, or for the allocation of such payments thereunder. Unless and until the Lessee and the State of Alaska are further notified by the United States, all Subject Gas allocated to the Federal Lease pursuant to the terms hereof shall be allocated by the direction of the United States 93.5823 percent to the CIRI Acreage, and 6.4177 percent to the Federal Acreage, and Escrowed Funds shall be released pursuant to the directive of the United States contained in Exhibit B, namely II 93.5823 percent [shall be] paid directly to Cook Inlet Region, Incorporated (CIRI) and 6.41 77 percent [shall be] made payable to Mineral s Management Servi ce , Royal t y Management Program...." The United States shall defend, indemnify and hold Lessee harmless from any costs, damages, or attorney's fees resulting Page 17 of 25 ) ) from its allocation of Subject Gas to the crRr Acreage and resulting payments made on the basis of this allocation. c. Operations on Federal Lease. Operations in said Federal Lease will be conducted in accordance with the Federal Lease, and applicable laws and regulations governing the removal of oil and gas from lands owned by the United States or crRr. Nothing contained in this Agreement shall be deemed to give the State authority it does not already have (if any) to order that any well on Federal lands or on the Federal Lease be shut in. 3 . Terms of Payment of Royal ty for Subj ect Gas Allocated ~ to the State Lease. Prior to the Final Allocation, all royalty payments on production of Subj ect Gas from the State Lease shall be made into the Escrow Account, pursuant to the terms of Paragraph 1.A. above. The royalty obligations of Lessee for production of Subj ect Gas prior to the Final Allocation shall be determined, and the Escrowed Funds released, using the allocation of production established by the Final Allocation, subject to subsequent audit and revision pursuant to the Leases and Regulations. Beginning with Final Allocation and the release of the Escrowed Funds, royal ty on production of Subj ect Gas shall Page 18 of 25 ) ') be calculated and paid pursuant to the Final Allocation and the Leases and Regulations. 4. Default for Non-Payment. Should Lessee fail to make any depqsit of Escrowed Funds required herein pursuant to Paragraphs I, 2, or 3 above, and remain in defaul t for 30 days after receiving wri t ten demand therefore from the United States and/or the State, then: A. Default Proceedings Related to the Federal Lease. Wi th respect to the Federal Lease ( the Uni ted States shall have available to it the defaul t provisions contained in the Federal Lease and applicable federal laws and regulations. B. Default Proceedings Related to the State Lease. With respect to the State Lease, the State shall have available to it the default provisions contained in the State Lease, the WMRU Unit Agreement, and applicable State laws and regulations. 5. Term and Modification of Final Allocation. This Agreement shall become effective when it is fully executed by the United States (in a manner binding the Bureau of Land Management), the State of Alaska, and Lessee, and shall Page 19 of 25 ') ) apply to all production of Subject Gas from the State Lease and the Federal Lease beginning on the Effective Date. This Agreement shall continue in full force and effect until: (1) all Escrowed Funds have been paid out of the Escrow Account pursuant to the Final Allocation and the terms of this Agreement; (2) the Federal and the State Leases have terminated; and (3) all wells producing Subject Gas from the Reservoir are plugged and abandoned. 6. No Benefit to Members of Congress or Federal Agents or Employees. It is also further agreed that no member of, or delegate to Congress, or Resident Commissioner after his election or appointment, or either before or after he has qualified and during his continuance in office, and that no officer, agent or employee of the Department of the Interior shall be admitted to any share or part in this Agreement derive any benefit that may arise therefrom and the provisions of Section 3741 of the Revised Statues of the United States, as amended (41 U.S.C. 22), and Sections 431, 432, and 433, Title 18, U.S. Code, relating to contracts, enter into and form a part of this Agreement so far as the same may be applicable. 7. Nondiscrimination. Page 20 of 25 ) ) In connection with the performance or work under this Agreement, Operator agrees to comply with all of the provisions of Section 202 (1) to (7) inclusive, of Executive Order 11246 (30 F.R. 12319), which are hereby incorporated by reference herein. 8. Effect of Agreement. This Agreement applies only to production of Subj ect Gas occurring on or following the Effective Date, and affects only the Federal Lease, the State Lease, and any other lease that becomes subj ect to thi s Agreement as provided in Paragraph 5 above. This Agreement is not to be construed as affecting in any manner any right, title or. interest owned or claimed by the United States, the State of Alaska or Lessee in and to any other land, and is not intended to affect any rights of any person or entity not a party hereto. 9. GENERAL PROVISIONS A. Waiver. The failure of any party to insist upon the strict performance of any provision of this Agreement or to exercise any right, power or remedy consequent upon a breach thereof shall not constitute a waiver by said party of any such Page 21 of 25 ) ) provision, breach or subsequent breach of the same or any other provision. B. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute a single agreement. This Agreement shall not become binding upon any party unless and until all parties have executed at least one counterpart of this Agreement. C. Further Actions. The parties hereby agree to take any and all actions and execute, acknowledge and deliver any and all documents reasonably necessary to effect the purposes of this Agreement. D. Modification of Agreement. This Agreement may be modified only by an instrument in writing duly executed by and delivered to all of the parties hereto. E. Severability. If any provision of this Agreement or any application thereof shall be found to be invalid or unenforceable by a court Page 22 of 25 ) )1 of competent jurisdiction, the remainder of this Agreement and any other application of such provision shall not be affected thereby. F. Binding Effect. The rights, obligations and liabilities set forth in or arising under this Agreement shall extend to, be binding upon, and inure to the benefit of the parties and their respective successors and assigns. G. Interpretation of the Agreement. All Parties to this Agreement have consulted their counsel and had a full and unrestricted right to examine this Agreement prior to executing it and accordingly this Agreement shall not be construed against the drafting party. H. Savings Clause. Except as expressly set forth in this Agreement, nothing in this Agreement shall affect the rights or obligations of the Parties pursuant to the Leases and the Regulations. I. No Third Party Beneficiaries. This Agreement is intended to inure to the sole and exclusive benefit of the Parties, and is not intended to, and Page 23 of 25 ) . ) shall not be construed to, confer upon any third party not a Party hereto, any rights or remedies, including without limitation any right to enforce any of its terms. UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF AND MANAGEMENT By: Peter J. Ditton Field Manager, Anchorage Field Office, Bureau of Land Management United States Department of the Interior Date: April 20 , 2001 STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES By~Q #- Mark D. Myers Director, Division of Oil and Gas Department of Natural Resources State of Alaska Date: April 20 , 2001 Page 24 of 25 ) ) FOREST OIL CORPORATION By: ~~ Gary E. Carlson Senior Vice President Date: April 20 , 2001 EXHIBITS: A. MAP OF FEDERAL LEASE, SHOWING CIRI ACREAGE AND FEDERAL ACREAGE B. LETTER DATED MARCH 2, 1983 FROM UNITED STATES TO AMOCO PRODUTION COMPANY CONCERNING PAYMENT OF MONIES PURSUANT TO FEDERAL LEASE C. MAP OF STATE LEASE D. ESCROW AGREEMENT, WITH FORM ESCROW INSTRUCTIONS E. STATE OF ALASKA ROYALTY OPERATOR REPORT (01) F. ESCROW DEPOSIT MONTHLY REPORT FORM G. STATE OF ALASKA ROYALTY PAYMENT SUMMARY REPORT (Sl) H. STATE OF ALASKA ROYALTY VALUATION REPORT (AI) Page 25 of 25 wr r FORELAND #1 - WEST FORELAN[' "':')ELD COMPENSATORY ROYALTY AGREEMtNT EXHIBIT "A" le"Sl!I8 lees"" 192388 FORES~ OIL CORPOR~TION ALASKA BUSINESS UNIT 24821!1B8 - .\ WEST FORELAND 'l-WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT EXHIBIT R 247BBBB - ! 21 22 l USS 11865 RØ35Ø17~ FORELRND #1 1- II. JE....EII' l-ø-fPIt-nli I I I I 28 2"7"1888 - 27 CIRI ACREAGE WITHIN A035017 EXCLUDES US SURVEYS Q522. Q523. AND 11865 Z"7BBBB PAGE 1 OF 2 If YQ\'\ should hnvß a:(\,y -q'(.H!9tj.Q1"S i~ ra£eT'C!nc~ t;O t:b~ a~V1!, pl~3~e do no!: h¡!~:t~~tc: t:o ~o1':~3c:i our Lè'!.9C Ad~irl1str:a.t1o~ U~1~ e.1: (303) ~31-)110. Defore ~ ~11 te nbl~ ~O ~$~1sn yo~~ AiD ~~bcr, it ~11 be ncc~ss~ry !:~~t yo~ ~o~~la[ø the enclog~d 117 (Payor InfotrN.l~lon VQ~). Iust~}c~ton$ f~T co~plQti~~ tbis fo~ are a1~o en~lò3e~ fØT y~~r aselst~nce., please co~plete nnd rÐtu~ ~hc PIr in oT.~et ~1~~ it ~ay be ~eceived 1~ tb15 offi~e QØ or before Y~rch 14, J983. ~pon r~ë~lpt of t~~ cOÑplaLed ~IF> 'O~I AI0 p~~er llil1 þ~ ~&sig~d ~nð ~ileð to YQU ~ith a s$oll BU9ply of For~ 9~Ol~. . tb~ ~l~va raf~tcnçGð 1~3a~ c~ntûini~g 857a~~e~ ~o~e O~ 1~3s iu in \~nL~uQ rö:>}'alty &t3t:.t.~ ñt ~l.Ot) pa'f à~'t''! pe.T y~"'C' as it 'cDù~f!1.n.ß l! sh.nt.-in gas ,:~11.. A1 t rnop:!.cs» iuclt,;.dinz ~hi$ \"jn{~~"\lr~ 'I;'~7;;1.1ty ~c(:.~\i~g un:hu" t:b.1." 1eá$~ should 00 t:;p11t 't-,"'1.1:'h C;.3.S~23 þel't:.~n.t ~Ul\t ~1t~ct:lyt:o Ct;¡~~ Inle't ~et1on.J Inc"r}·u~r~tp.d (CIRt), 1:.1td 6.4177 pe:tcent ~oo(")de pàYl1'bli2! to N:t~-9r~l$ ~J:\~~c.meilt 5~rJ"ice, Jt,.óY~l t:y ~¡ailage1Jient. hqgr~Q, P:"o. i!D~< 5811), Þe1I"'1er. CQlt.Jr~.do 802~ 1. Sl~ce O(.\'t' Acc.ountir.g C~;1t.er. 1rt Lakt~~cd. Coløt'~dO;¡r n.e.s ress:a~f;ibl1tty for p~~~5G1t!g r~nt:als ~ roya.lty rèi.11ttn:')~è~ cov¢:i:irv~t:hc"X'cf~rE;T¡c:ed Ilts3e ~~~ount~ea~h com~4Pyvill ~3e a ,un1q~~ AIP(^~èO~~in8 Ide~t1f!cö~1Qn) number to 1ðe¡rrl fy ~Qeb (tcrpQ.x-t Qf. S~tlès. an4: Roý~l~Y ~.~~.ttt::2.1:u:'l'!s»)' c:o:-re.sfundi:nce, d1v:1.51Qn o~ðeT's" ~¡.J.le$ qon1:X'.;\ct$~ c~c;. Cèl'\tl~!!.\an.r 'Reo: t04QnS~ ?~Q. A-03.5017 CA!D ~o.. 002~]50J.1-Q) ~oco 1'¡:o..iuet1otl Co:r,~ì1Y Attwn!:.;lo~u 011 ..o.~coU.:1t1':1$ Section P.O.. Uox 591 !~1s~~ Oklaho~~ 14101 MAn 2 19a3 AO 'D ~U'~"1 lea\. - L,\D EXHIBIT IIBII W~1T FORELAND #1 - WEST FORELANr'\IELD . LiOMPENSATORY ROYALTY AGREEI\:::NT ) ) WEST FORELAND #1 - WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT 2 UJ.1.dtaX" 1:h~g SYlJl~.. 1:h~ pl!.T.ty ~.~þc) p~y:; 'toyalt:iPrs 1",~~t 31~Q r~port s91(!~ Q~t3 011 wh.i~h thQn~ r<1Y.31'tlèS ;;\X'e bL\:j~d. ~Q paY:!'J!)T1t. f':u#t. bet .;tcCoi(lt:'ð·[~,:l~ð by 'Chß rær.c:h'ly lorn 9-?Ol.~, å .~o~ñ"tt~at1on of p3st rt:po:rt1ng [0;:·:15. r!t)(! ~~cse~/Op~~~t~4 ~~11 b~ l~bl~ for Qsùurin$ t~_~t tb~ ~ð~~hly rcport~ ~~d t"c~I'it¡::1n¿~s or roy:tlty l!.rc:; 3u.1>:;d t.~p.ð eOX''r~c~J y and in .a t:izr.~ly Vi.i\n'l)C!fZ'. InC¡'li"tie£: t:egot'dint: )~M:rQl 't'QyaJ:ty ~epoJ:l:in~. ~'O.ð P;)y\:I¢1Jt; TP-t!\drctnf)nts .p.~('h11d be aèrtre$~G~ ~o tþc Le~~~~ Cönt~c~ S~etion a~ (3Q3) 231-238$ D~(tcll ft~6) tiOO~57..5-?,327 . S!nc.er~lyþ Y' J'~'103 a. t~tkÐlsorJ:s Chief payoc A~~o~tt1~g B~rolcb 'EClc:loL.u¡:e ~,:; Coo!c. Inlet: r.og!ò~, loc:ö~ par&! tcd ~\ttçH\tlo": t·~tl:r€.àrc:t S;tI~~rsQr P. o. 3c~ 4~N . 1\ "c' .,t'''''·~'~': ~ A"-) c;!'....~ nnf:.:'\1} 1..1.. fV"''''.,t-.;., _.. ..If'..... ':I-,;;;J~.I., PAGE 2 OF 2 Section 21, Section 22, 'Section, 23, Section 27, , Section 34, W<:ST FORELAND 111 - WEST FORELANn{iELD )COMPENSATORY ROYAL TV AGREE:,YlcNT EXHIBIT "C" ADL-359112 T. 8 N., R. 14 W., Sð-Iard M=ridian, Alaska Lhsurveyed, All tide and subrergéd 1 ands, 125.00 acres; lhsurveyed, All tide and subnerged lands, 635.00 acres; Protracted, All, 640.00 aœes; lhsurveyed, All tide and subnerged lands, 495.00 acres; Lhsurveyed, All tide and subærged 1 ands, 260.00 °acres. Thts tract 'contains 2155.00 acres more or less. ii¡ii¡¡¡¡¡¡¡¡¡¡¡I¡¡i¡~jf¡¡li"¡I¡¡¡!¡i:¡'¡I¡¡~¡¡¡!I~¡¡¡¡¡¡¡i¡¡¡¡¡i! '('" . 'i~j~;«("""" f························· .. i ............ 40-112 1+ . ':::::::::::::::::::::: I ¡ ·::;;::;.::.:.::.:¡:~x 2155 -0 0- I{ ~ - -¡ ':@i¥~ .. t"'.; '::::':':':':~ I .::::::::::~ WEST FORELAND #1 - WEST FORELANO FIELD )COMPENSATORY ROYALTY AGREE:.. _ .1NT EXHIBIT "0" WEST FORELANDS #1 INVESTED ESCROW AGREEMENT April 20. 2001 Account No. 80-8250-00 1. The parties to this WEST FORELANDS #1 INVESTED ESCROW AGREEMENT (this "Agreement") are Forest Oil Corporation ("Lessee"), the Bureau of Land Management, United States Department of the Interior, on its own behalf and on behalf of Cook Inlet Region, Inc., and the Division of Oil and Gas, Department of Natural Resources, State of Alaska ("Lessors"), and First National Bank of Anchorage ("Invested Escrow Agent"). The parties hereby appoint First National Bank of Anchorage, acting through its Trust Department, as the Invested Escrow Agent for the investment and disbursement of the funds in accordance with this Agreement. The First National Bank of Anchorage agrees to serve as Invested Escrow Agent, pursuant to the tenns set forth in this Agreement. 2. The Lessee and the Lessors (the "Parties") have entered into that certain Compensatory Royalty Agreement (the "Royalty Agreement") dated April 20, 2001. All capitalized tenns not defined in this Agreement shall have the meaning assigned in the Royalty Agreement. The Royalty Agreement governs the payment into the Escrow Account of royalties due from Lessee to Lessors, and to the holders of certain royalty interests in the Federal Lease ("Federal ORRI's") and the State Lease ("State ORRl'S"), which royalties are due on the production of Subject Gas produced from the Federal Lease and the State Lease. These payments of royalty are to be made into the Escrow Account until the Parties have detennined the Final Allocation of production of Subject Gas to the Federal Lease and the State Lease. Upon Final Allocation, the Royalty Agreement provides for the payment of all royalties then due to the Lessors under the Leases and the Regulations, and thereafter for the further payment of certain overriding royalties to the Federal ORRI's and the State ORRI's, with the remainder of the Escrowed Funds to be released to the Lessee. This Agreement creates the Escrow Account contemplated in the Royalty Agreement, and implements the tenns of the Royalty Agreement relative to such Escrow Account. 3. The Lessee shall deposit funds at the time and in the manner required by the Royalty Agreement, with the Invested Escrow Agent, to be administered in accordance with the tenns of this Agreement. The funds shall be deposited into the Escrow Account, which shall be an interest-bearing account of the Invested Escrow Agent's Trust Department. All cash held by the Invested Escrow Agent, together with all interest accrued thereon, shall constitute a fund to be known as the West Forelands #1 Invested Escrow. The fund is the property of the Parties in the proportions set forth in the Final Allocation set forth in the Royalty Agreement. The undisbursed amounts in the account may be returned to Lessee at any time upon receipt by the Invested Escrow Agent of a written request from Lessee and Lessors for return of those funds. 4. Upon receipt of the funds from Lessee, Invested Escrow Agent agrees to invest the funds in short-tenn U.S. Treasuries, U.S. Agencies or in shares of such U.S. Treasury based money market funds as the Escrow Agent may in its discretion elect fÌom time to time. It is contemplated by the parties that this account may be closed as early as the spring of 2004. - 1 - ) "- " 5. The interest earned on the account shall accrue for the benefit of and shall be paid to the Lessors, the Lessee and the State ORRI's and the Federal ORRI's in accordance with the Royalty Agreement at the rate set forth in Exhibits A and B hereto. Pending release of Escrowed Funds from the Escrow Account, the Parties agree that Invested Escrow Agent will file 1099 fonns with the Internal Revenue Service initially allocating 100% of the interest earned on the account to Lessee, and the Parties shall take steps necessary to make amendatory filings when such funds are released in order to correctly allocate liability for taxes for such interest actually paid to each Party. 6. (a). When the Parties have agreed upon Final Allocation, they shall give notice to the fuvested Escrow Agent of their joint directions concerning release of the Escrowed Funds to the Lessors in accordance with the Final Allocation by completing and executing the Escrow Instructions in the form attached hereto as Exhibit A. Upon receipt of such written instructions, the fuvested Escrow Agent shall disburse payment to Lessors in the manner specified in Exhibit A. (b). Thereafter, the Parties shall give notice to the Invested Escrow Agent of their joint directions concerning release of the Escrowed Funds to the State ORRI's and the Federal ORRI's in accordance with the Final Allocation by completing and executing the Escrow Instructions in the fonn attached hereto as Exhibit B. Upon receipt of such written instructions, the fuvested Escrow Agent shall disburse payment to the State ORRI's and the Federal ORRI's in the manner specified in Exhibit B. The State and the United States shall have no responsibility or liability for the release (or failure to release) of Escrowed Funds to the Federal ORRIs or State ORRIs pursuant to a request issued pursuant to this Agreement. (c). Thereafter, the Parties shall give notice to the Invested Escrow Agent of their joint directions concerning release of the remaining Escrowed Funds to Lessee in the fonn attached hereto as Exhibit c. 7. The compensation payable to the fuvested Escrow Agent shall be borne by Lessee. The Invested Escrow Agent's fees and expenses of administration are payable as follows in accordance with its published fee schedule: A minimum annual fee of $500. The actual fee will be calculated as follows: On the market value of account assets: 0.40% per year, with $500 minimum annual fee. Annual fees are payable monthly, in arrears, valued at the market on the last day of each month. There will be a set up fee of$125 and a closing fee of $125. In addition, there will be a $10 charge for each receipt and a $20 charge for each disbursement other than fee payments or reimbursements to the banle - 2 - ) 8. The Invested Escrow Agent shall have no duties not expressly provided for herein, and will not incur liability if it substantially complies with the instructions contemplated herein, using reasonable care in executing transactions, and in safekeeping the funds. FIRST NATIONAL BANK OF ANCHORAGE TRUST DEPARTMENT James D. Sourant Senior Trust Officer Date FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President Taxpayer ill #: 250484900 Address: 310 "K" Street. Suite 700 Anchorage. Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: - 3 - } ) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Date By: Its: Address: EXHIBITS: A. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO UNITED STATES AND STATE OF ALASKA B. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO STATE ORRI'S AND FEDERAL ORRI'S C. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO FOREST OIL CORPORATION - 4 - ) , EXHIBIT A ESCROW INSTRUCTIONS RELEASE TO THE UNITED STATES AND TO THE STATE OF ALASKA FIRST NATIONAL BANK OF ANCHORAGE. WEST FORELANDS #1 INVESTED ESCROW AGREEMENT ,200 Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release funds from the above-described escrow account in the amount of $ ( dollars and cents ),and interest accrued thereon at the rate received by the escrow account, to the United States Department of the Interior, and further release funds from the above-described escrow account in the amount of $ ( dollars and cents), and interest accrued thereon at a variable annual rate equal to 1.25 percent plus the prime rate as announced from time to time by the Bank of America, San Francisco, California, calculated from the date of this request to the date of release, to the State of Alaska, Department of Natural Resources. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President Taxpayer ID #: 250484900 Address: 310 "K" Street. Suite 700 Anchorage. Alaska 9950f UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: - 5 - ) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES By: Its: Address: - 6 - Date EXHJBIT B ESCROW INSTRUCTIONS RELEASE TO WE STATE ORRl'S AND THE FEDERAL ORRl'S FIRST NATIONAL BANK OF ANCHORAGE WEST FORELANDS #1 INVESTED ESCROW AGREEMENT , 200_ Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release funds from the above-described escrow account in the amounts indicated on the schedule attached hereto, together with interest accrued thereon at the rate received by the escrow account, to the Federal ORRI's and to the State ORRl's identified in the schedule attached hereto. The State and the United States shall have no responsibility or liability for the release (or non-release) of Escrowed Funds to the Federal ORRIs or State ORRls pursuant to this request or to the Escrow Agreement to which it is attached. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President TaxpayerID#: 250484900 Address: 310 "K" Street, Suite 700 Anchorage, Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: - 7 - ) STATE OF ALASKA DEP ARTMENT OF NATURAL RESOURCES By: Its: . Address: - 8 - Date ) ) ) EXHIBIT C ESCROW INSTRUCTIONS RELEASE TO FOREST OIL CORPORATION FIRST NATIONAL BANK. OF ANCHORAGE WEST FORELANDS #1 INVESTED ESCROW AGREEMENT ,200_ Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release all remaining funds from the above-described escrow account, together with all interest accrued thereon at the rate received by the escrow account, to Forest Oil Corporation. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President TaxpayerID#: 250484900 Address: 310 "K" Street, Suite 700 Anchorage, Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Date By: Its: Address: - 9 - WEST FORELAND #1 - WEST FORELAND FIELD tOM PEN SA TORY ROYALTY AGREEI"._~T EXHIBIT "E" State of Alaska Department of Natural Resources Division of Oil and Gas (a) Operator Name: Forest Oil I (b) Address: 1600 Broadway, Suite 2200 I I I I City, State, Zip: Denver, CO 8Q202 (c) Prepared By: Nancy Reinhardt (d) Phone Number: (303) 812-1541 (e) Fax Number: (303) 812-1515 (f) Authorized Signature: I (g) Authorized Signature (Printed): (h) Phone Number: (i) Fax Number: (j) Authorized Date: mmddyyyy State of Alaska Royalty Operator Report (01) (k) Customer ID Number: 000004134 I I (I) Production Month: mmyyyy (0) Accounting Unit: West Foreland Field (m) Report Type: 01 (p) Accounting Unit Code: WM01 (n) Report Code: GC (q) Revision No. 00 (r) (s) (t) (u) (v) (w) (x) (y) Line Product Disposition Allocation Lessee Selling No. Code Code Code Name Percent Quantity Arrangement 1 D 0006 NPT Total 0.0000000% 0.00 0000000000 2 D 0006 WIO FOREST 0.0000000% 0.00 0000000000 3 D 0110 NPT Total 0.0000000% 0.00 0000000000 4 D 0110 WIO FOREST 0.0000000% 0.00 0000000000 5 D 0042 NPT Total 0.0000000% 0.00 0000000000 6 D 0042 WIO FOREST ·0.0000000% 0.00 0000000000 7 D 0100 NPT Total 0.0000000% 0.00 0000000000 8 D 0100 WIO FOREST 0.0000000% 0.00 0000000000 9 D 0090 NPT Total 0.0000000% 0.00 0000000000 10 D 0090 WIO FOREST 0.0000000% 0.00 0000000000 11 D 0080 NPT Total 0.0000000% 0.00 0000000000 12 D 0080 WIO FOREST 0.0000000% 0.00 0000000000 13 D 0060 NPT Total 0.0000000% 0.00 0000000000 14 D 0060 WIO FOREST 0.0000000% 0.00 0000000000 15 D 0008 NPT Total 0.0000000% 0.00 0000000000 16 D 0008 WIO FOREST 0.0000000% 0.00 0000000000 17 D 0009 NPT Total 0.0000000% 0.00 0000000000 18 D. 0009 WIO FOREST 0.0000000% 0.00 0000000000 19 D 0300 NPT Total 0.0000000% 0.00 0000000000 20 D 0300 WIO FOREST 0.0000000% 0.00 0000000000 21 D 2300 TROY Total 0.00 0000000000 PAGE 1 OF 2 ) ) vvEST FORELAND #1 - WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT EXHIBIT "E" State of Alaska Royalty Operator Report (01) (k) Customer ID Number: 000004134 I I (I) Production Month: mmyyyy (0) Accounting Unit: West Foreland Field (m) Report Type: 01 (p) Accounting Unit Code: WM01 (n) Report Code: GC (q) Revision No. 00 (r) (s) (t) (u) (v) Line Product Disposition Allocation Lessee No. Code Code Code Name 22 D 2300 ROY FOREST 23 D 2300 TRIV Total 24 D 2300 RIV FOREST 25 D 2300 TRIK Total 26 D 2300 RIK FOREST 27 D 0008 OWT Total 28 D 0008 LT FOREST 29 D 0008 LPT Total 30 D 0008 SO FOREST 31 D 0008 . FO FOREST 32 D 0008 00 FOREST 33 D 0008 CIT Total 34 D 0008 LCI FOREST 35 D 0008 PIT Total 36 D 0008 LPI FOREST 37 D 0008 OULT Total 38 D 0008 LOU FOREST (w) Percent 0.0000000% 0.0000000% 0.0000000% 0.0000000% 0.0000000% 0.0000000% (x) Quantity 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (y) Selling Arrangement 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 0000000000 Notes: 1. This Operator Report is an example for Dry Gas production. In any events where Wet Gas, or Condensate, or Oil is produced additional Operator Reports will be provided as examples. 2. Line 29-32, Disposition Code 0008, in this example for Dry Gas will be zero until such time when allocation is made. I I 0006 = Gross Production 0110 = Other (Gas Disposition) 0042 = Lease Usage (Unspecified) 0100 = Pilot and purge I 0090 = Flared or Vented greater than 1 hour 0080 = Flared or Vented less than 1 hour 0060 = Reinjected 0008 = Offta ke 0009 = Gross Pipeline Deliveries 0300 = Pipeline Sales I 2300 = Pipeline Sales Royalty Base PAGE 2 OF 2 r ) WEST FORELANDS #1 INVESTED ESCROW AGREEMENT April 20. 2001 Account No. 80-8250-00 1. The parties to this WEST FORELANDS #1 INVESTED ESCROW AGREEMENT (this "Agreement") are Forest Oil Corporation ("Lessee"), the Bureau of Land Management, United States Department of the Interior, on its own behalf and on behalf of Cook Inlet Region, Inc., and the Division of Oil and Gas, Department of Natural Resources, State of Alaska ("Lessors"), and First National Bank: of Anchorage ("Invested Escrow Agent"). The parties hereby appoint First National Bank: of Anchorage, acting through its Trust Department, as the Invested Escrow Agent for the investment and disbursement of the funds in accordanc~ with this Agreement. The First National Bank of Anchorage agrees to serve as Invested Escrow Agent, pursuant to the tenns set forth in this Agreement. 2. The Lessee and the Lessors (the "Parties") have entered into that certain Compensatory Royalty Agreement (the "Royalty Agreement") dated April 20, 2001. All capitalized tenns not defined in this Agreement shall have the meaning assigned in the Royalty Agreement. The Royalty Agreement governs the payment into the Escrow Account of royalties due from Lessee to Lessors, and to the holders of certain royalty interests in the Federal Lease ("Federal ORRI's") and the State Lease ("State ORRI's"), which royalties are due on the production of Subject Gas produced from the Federal Lease and the State Lease. These payments of royalty are to be made into the Escrow Account until the Parties have detennined the Final Allocation of production of Subject Gas to the Federal Lease and the State Lease. Upon Final Allocation, the Royalty Agreement provides for the payment of all royalties then due to the Lessors under the Leases and the Regulations, and thereafter for the further payment of certain overriding royalties to the Federal ORRI's and the State ORRI's, with the remainder of the Escrowed Funds to be released to the Lessee. This Agreement creates the Escrow Account contemplated in the Royalty Agreement, and implements the tenns of the Royalty Agreement relative to such Escrow Account. 3. The Lessee shall deposit funds at the time and in the manner required by the Royalty Agreement, with the Invested Escrow Agent, to be administered in accordance with the tenns of this Agreement. The funds shall be deposited into the Escrow Account, which shall be an interest-bearing account of the Invested Escrow Agent's Trust Department. All cash held by the Invested Escrow Agent, together with all interest accrued thereon, shall constitute a fund to be known as the West Forelands #1 Invested Escrow. The fund is the property of the Parties in the proportions set forth in the Final Allocation set forth in the Royalty Agreement. The undisbursed amounts in the account may be returned to Lessee at any time upon receipt by the Invested Escrow Agent of a written request from Lessee and Lessors for return of those funds. 4. Upon receipt of the funds from Lessee, Invested Escrow Agent agrees to invest the funds in short-tenn U.S. Treasuries, U.S. Agencies or in shares of such U.S. Treasury based money market funds as the Escrow Agent may in its discretion elect from time to time. It is contemplated by the parties that this account may be closed as early as the spring of 2004. - 1 - ') ) 5. The interest earned on the account shall accrue for the benefit of and shall be paid to the Lessors, the Lessee and the State ORRl's and the Federal ORRI's in accordance with the Royalty Agreement at the rate set forth in Exhibits A and B hereto. Pending release of Escrowed Funds from the Escrow Account, the Parties agree that Invested Escrow Agent will file 1099 forms with the Internal Revenue Service initially allocating 100% of the interest earned on the account to Lessee, and the Parties shall take steps necessary to make amendatory filings when such funds are released in order to correctly allocate liability for taxes for such interest actually paid to each Party. 6. (a). When the Parties have agreed upon Final Allocation, they shall give notice to the Invested Escrow Agent of their joint directions concerning release of the Escrowed Funds to the Lessors in accordance with the Final Allocation by completing and executing the Escrow Instructions in the form attached hereto as Exhibit A. Upon receipt of such written instructions, the Invested Escrow Agent shall disburse payment to Lessors in the manner specified in Exhibit A. (b). Thereafter, the Parties shall give notice to the Invested Escrow Agent of their joint directions concerning release of the Escrowed Funds to the State ORRI's and the Federal ORRI's in accordance with the Final Allocation by completing and executing the Escrow Instructions in the form attached hereto as Exhibit B. Upon receipt of such written instructions, the Invested Escrow Agent shall disburse payment to the State ORRI's and the Federal ORRI's in the manner specified in Exhibit B. The State and the United States shall have no responsibility or liability for the release (or failure to release) of Escrowed Funds to the Federal ORRIs or State ORRIs pursuant to a request issued pursuant to this Agreement. (c). Thereafter, the Parties shall give notice to the Invested Escrow Agent of their joint directions concerning release of the remaining Escrowed Funds to Lessee in the form attached hereto as Exhibit C. 7. The compensation payable to the Invested Escrow Agent shall be borne by Lessee. The Invested Escrow Agent's fees and expenses of administration are payable as follows in accordance with its published fee schedule: A minimum annual fee of$500. The actual fee will be calculated as follows: On the market value of account assets: 0.40% per year, with $500 minimum annual fee. Annual fees are payable monthly, in arrears, valued at the market on the last day of each month. There will be a set up fee of$125 and a closing fee of $125. In addition, there will be a $10 charge for each receipt and a $20 charge for each disbursement other than fee payments or reimbursements to the ban1e - 2 - ) ) 8. The Invested Escrow Agent shall have no duties not expressly provided for herein, and will not incur liability if it substantially complies with the instructions contemplated herein, using reasonable care in executing transactions, and in safekeeping the funds. FIRST NATIONAL BANK OF ANCHORAGE TRUST DEPARTMENT ?~~ks -. Trust Officer ~¿~ OFÇiC-~ ~i:zc ft / Dat7~ ¡ FOREST OIL CORPORATION /Þ¡d~ 7'- ~CJ- éJ/ Date By: Gary E. Carlson Its: Senior Vice President Taxpayer ill #: 250484900 Address: 310 "K" Street. Suite 700 Anchorage. Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREA OF LAND MANAGEMENT AJM ~ ?n 200 L Date. By: '#J.~ r ::r T)i+t-nr1 Its: F;"Q.lJ ~M~~lr Address: [PARt ~hbn+t- Looe "Rei. At1c.hðr4~PJ A\.< q,\~o'1 - 3 - ) ) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES _~9~,- By: ~/f/2." <J. ~~~A..J" Its: 'h\ru.1-øY". ))ìv","(,J4, of ð,·' a.,.,J t'rtLS Address: bt¡f:.ri",,"t'4..t {Nð..4ä"Á.{ Rrsnur<t:5 -7'50 t,.ù. 7 -I Avt..:þ Sfc'. ~()O .. It", kov4je, A.la..sk,,- C¡Cle:;()! ý- ZO -c:> ( Date EXHIBITS: A. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO UNITED STATES AND STATE OF ALASKA B. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO STATE ORRI'S AND FEDERAL ORRI'S C. ESCROW INSTRUCTIONS FOR RELEASE OF ESCROWED FUNDS TO FOREST OIL CORPORATION - 4 - ) ) EXHIBIT A ESCROW INSTRUCTIONS RELEASE TO THE UNITED STATES AND TO THE STATE OF ALASKA FIRST NATIONAL BANK OF ANCHORAGE WEST FORELANDS #1 INVESTED ESCROW AGREEMENT ,200 Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release funds from the above-described escrow account in the amount of $ ( dollars and cents ),and interest accrued thereon at the rate received by the escrow account, to the United States Department of the Interior, and further release funds from the above-described escrow account in the amount of $ ( dollars and cents), and interest accrued thereon at a variable annual rate equal to 1.25 percent plus the prime rate as announced from time to time by the Bank of America, San Francisco, California, calculated from the date of this request to the date of release, to the State of Alaska, Department of Natural Resources. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President Taxpayer ID #: 250484900 Address: 310 "K" Street. Suite 700 Anchorage. Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: - 5 - ') STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES By: Its: Address: - 6 - Date ) ') EXHIDIT B ESCROW INSTRUCTIONS RELEASE TO THE STATE ORRI'S AND THE FEDERAL ORRI'S FIRST NATIONAL BANK OF ANCHORAGE WEST FORELANDS #1 INVESTED ESCROW AGREEMENT ,200 Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release funds from the above-described escrow account in the amounts indicated on the schedule attached hereto, together with interest accrued thereon at the rate received by the escrow account, to the Federal ORRI's and to the State ORRI's identified in the schedule attached hereto. The State and the United States shall have no responsibility or liability for the release (or non-release) of Escrowed Funds to the Federal ORRIs or State ORRIs pursuant to this request or to the Escrow Agreement to which it is attached. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President Taxpayer ID #: 250484900 Address: 310 "K" Street, Suite 700 Anchorage, Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: - 7 - STATE OF ALASKA DEP ARTMENT OF NATURAL RESOURCES By: Its: Address: ) - 8 - ') Date ) ) EXHIBIT C ESCROW INSTRUCTIONS RELEASE TO FOREST OIL CORPORATION FIRST NATIONAL BANK OF ANCHORAGE WEST FORELANDS #1 INVESTED ESCROW AGREEMENT , 200_ Account No. 80-8250-00 TO: First National Bank of Anchorage Trust Department Please release all remaining funds from the above-described escrow account, together with all interest accrued thereon at the rate received by the escrow account, to Forest Oil Corporation. FOREST OIL CORPORATION Date By: Gary E. Carlson Its: Senior Vice President TaxpayerID#: 250484900 Address: 310 "K" Street, Suite 700 Anchorage, Alaska 99501 UNITED STATES DEPARTMENT OF THE INTERIOR ON ITS OWN BEHALF AND ON BEHALF OF THE BUREAU OF LAND MANAGEMENT Date By: Its: Address: STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES Date By: Its: Address: - 9 - A 1 2 3 4 5 6 7 8 9 2 10 3 11 4 12 5 13 6 14 7 15 8 16 9 17 10 18 11 19 12 20 13 21 14 22 15 23 16 24 17 25 18 26 19 27 20 28 21 29 22 30 23 B PRODUCTION MONTH DEPOSIT DATE WEST FORELAND #1 - WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT EXHIBIT "Fit C D I E F ESCROW ACCOUNT FOREST OIL WEST FORELAND FIELD DEPOSIT INTEREST ENDING AMOUNT CREDITED BALANCE -~ - WEST FORELAND #1 - WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT EXHIBIT "G" A B C D E I F G H 1 State of Alaska - 2 Department of Natural Resources - 3 Division of Oil and Gas - 4 (a) Company Name: Forest Oil I (h) Authorized Signature: 5 (b) Address: 1600 Broadway, Suite 2200 (i) Authorized Signature (Printed): 6 I I U) Phone Number: (303) 812-1541 7 City, State, Zip: Denver, CO 80202 (k) Fax Number: (303) 812 - 1541 8 (c) Prepared By: Nancy Reinhardt U) Authorized Date: mmddyyyy 9 (d) Phone Number: (303) 812-1541 I 10 (e) Fax Number: (303) 812-1515 (m) Payment Method: WTN 11 (f) Bank Name: (n) Payment Settlement Date: mmddyyyy 12 (g) Bank Location: (0) Amount Electronically Transferred: $ 13 I I 14 State of Alaska Royalty Payment Summary Report (81) 15 (p) Customer ID Number: 000004134 (s) Revision No.: 00 I 16 (q) Report Type: 81 (s) Report Month: mmyyyy 17 (I) Production Month: mmyyyy (k) Control Number: 000004134PmmyyyyOO -- 18 19 (v) (w) (x) (y) (z) (aa) (ab) 20 Line No. Accting Unit Code Report Code Allocation Code Lease Number Payment Date Payment 21 1 WM01 OR PRIN $0.00 22 2 WM01 OR INTR 23 3 WM01 OR TPMT $0.00 24 4 ALLL P GT $0.00 WEST FORELAND #1 - WEST FORELAND FIELD COMPENSATORY ROYALTY AGREEMENT EXHIBIT "H" A I B I c 0 E I F G H I I J 1 (a) Lessee name: Forest Oil State of Alaska (f) Authorized Signature: 2 (b) Address: 1600 ~roadway, Ste 2200 Department of ~atural Resources (g) Authorized Signature (Printed): Nancy Reinharr" 3 I I I Division of Oil and Gas (h) Phone Number: (303) 812-1541 ~ 4 City, State, Zip: Denver, CQ 80202 I (i) Fax Number: (303) 812·1515 5 (c) Prepared By: Nancy Reinhardt (D Authorized Date: mmddyyyy I 6 (d) Phone Number: (303) 812·1541 (k) Control Number: 000004134PmmyyyyOO 7 (e) Fax Number: (303) 812-1515 8 9 State of Alaska Royalty Valuation Report (AI) 10 (I) Customer 10 Number: 000004134 (p) Accounting Unit: West Foreland Field ..l:!... (m) Production Month: mm/yyyy (q) Accounting Unit Code: WMOl 12 (n) Report Type: Al (r) Revision No. 00 13 (0) Report Code: GC (s) Report Month: mmyyyy 14 15 (t) (u) (v) (w) (x) (y) (z) (aa) (ab) (ac) 16 Alloca- Selling Quality 17 Line Product Disp Lease tion Value Amount Arr Measu reo 18 No. Code Code Type Code Quantity Bbl/Mcf Code ment 19 1 D 0300 STAN WIO 0.00 1210000000 - 20 2 0 2300 STAN ROY 0.00 1210000000 21 3 0 2300 STAN RIV 0.00 1210000000 22 4 0 2300 STAN RIK 0.00 1210000000 23 5 0 2300 STAN SV $0.00000 1210000000 24 6 D 2300 STAN BTU $0.00000 1210000000 25 7 0 2300 STAN TADJ $0.00000 1210000000 26 8 0 2300 STAN TRB $0.00000 1210000000 27 9 0 2300 STAN CT $0.00000 1210000000 28 10 D 2300 STAN RV $0.00000 1210000000 29 11 0 2300 STAN FC $0.00000 1210000000 30 12 0 2300 STAN WH $0.00000 1210000000 31 13 0 2300 STAN RIVO $0.00 1210000000 32 14 0 2300 STAN RIKFC $0.00 1210000000 33 15 0 2300 STAN TAD $0.00 1210000000 #6 @1F[fl\E:?c l~) U Lru L1 ~ ) Í !Æ~!Æ~~~!Æ ) ~ TONY KNOWLES, GOVERNOR ALASIiA OIL AND GAS CONSERVATION COMMISSION 333 w. ¡m AVENUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 January 24,2001 Mr. Peter Ditton U. S. Department of the Interior Bureau of Land Management 6881 Abbott Loop Road Anchorage, AK 99507 Mr. Mark Myers, Director Department of Natural Resources Division of Oil and Gas 550 W. 7th, Ste. 800 Plnchorage,AJe 99501-3560 Re: Application of Forest Oil Co. for an order amending Conservation Order No. 450 Dear Messrs. Myers and Ditton: Your agencies were previously notified of a request by Forcenergy, Inc. (succeeded by Forest Oil Co.) to amend Conservation Order No. 450, which granted a temporary spacing exception for gas production from the West Foreland #1 well. A hearing was held on this request on January 9,2001. The Commission is considering amending Conservation Order No. 450 as set out in the enclosed draft order. Because your agencies did not have representatives at the January 9 hearing, we are providing you with an opportunity to review the enclosed draft and to inform the Commission if you have any objections. A copy of the hearing transcript is also enclosed. If you wish to respond, please make sure that any response is received by the Commission no later than February 5, 2001. amount, Jr. Commissioner ~ AA, F0.~ Julie M. Heusser Commissioner ~~~ Cammy Oechsli Taylor Commissioner Enclosure cc: Forest Oil Co. ) ") STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: APPLICATION OF FOREST OIL CO. ) (successor to Forcenergy, Inc.) for an order ) amending Conservation Order No. 450, granting) an exception to the spacing requirements of ) 20 AAC 25.055 to allow for production from ) the West Foreland #1 gas well. ) Conservation Order No. 450-A West Foreland Field January , 2001 IT APPEARING THAT: 1. The Commission issued Conservation Order No. 450 on July 24, 2000, granting Forcenergy, Inc. ("Forcenergy") a temporary spacing exception to allow for gas production from the West Foreland #1 well from the 9336'to 9352' (measured depth) interval, subject to the terms and conditions set out in that order. 2. Forcenergy submitted an application dated November 30,2000, for an order amending Conservation Order No. 450 to, among other things, revise the date by which Forcenergy must deposit funds in an escrow account. Notice of hearing on this application was published in the Anchorage Daily News on December 6,2000, pursuant to 20 AAC 25.540. Actual notice was also given to the Department of Natural Resources ("DNR") and the Bureau of Land Management ("BLM"). 3. No protests to the application were received. 4. Forest Oil Co. ("Forest") has succeeded to Forcenergy's interest in this matter. 5. A hearing was held on January 9,2001, at which representatives of Forest appeared.. FINDINGS: 1. Lease A-035017 and Lease ADL 359112 (collectively referred to below as the "Leases") provide for royalties to be paid to the respective lessors by the last day of the month that follows the month of production. It will be administratively more practicable to use the same deadline, rather than the 10th day of the month following the month of production, for deposits into an escrow account pursuant to the provisions of Conservation Order No. 450. 2. Data gathered from gas production for a period of at least two years is likely to allow a more accurate allocation between the Leases than production for the shorter period contemplated in Conservation Order No. 450. DNR and BLM are amenable to deferring an allocation determination until after such additional data are available. 3. Forest will consider producing gas from one or more additional intervals beyond the interval described in Conservation Order No. 450. 4. Contrary to the information previously provided to the Commission, Forest is not the sole working interest owner of the Leases. Phillips Petroleum Co. or an affiliate has an interest in zones below a certain depth. That depth is not less than 9,527 feet (measured depth) in the West Foreland #1 well. Consêrvation Order 450-A ) Page 2 ',buary ***, 2001 CONCLUSIONS: 1. The spacing exception granted under Conservation Order No. 450 should be extended until July 1,2003, and should cover gas production from any interval not deeper than 9,527 feet measured depth in the West Foreland #1 well. 2. Forest should be allowed until the last day of the month to deposit funds based on the previous month's production under the escrow provisions of Conservation Order No. 450. NOW, THEREFORE, IT IS ORDERED: 1. Conservation Order No. 450 is amended consistent with the foregoing. 2. The spacing exception granted by Conservation Order No. 450, as amended, expires July 1,2003. 3. The spacing exception granted by Conservation Order No. 450, as amended, covers gas production from any interval not deeper than 9,527 feet measured depth in the West Foreland #1 well. Forest shall conduct appropriate production testing and provide the Commission with geologic and geophysical data and the results of the production testing to support a reasonable inference as to what proportions of the gas reserves producible from each accumulation down to that depth underlie Lease A-035017 and Lease ADL 359111. 4. The deadline for escrow deposits under Conservation Order No. 450 is changed from the 10th day to the last day of each month for production during the previous month. DONE at Anchorage, Alaska and dated January _,2001. ---, Commissioner Alaska Oil and Gas Conservation Commission ---, Commissioner Alaska Oil and Gas Conservation Commission ---, Commissioner Alaska Oil and Gas Conservation Commission AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it may file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 PM on the 23rd day following the date of the order, or next working day if a holiday or weekend, to be timely filed. The Commission shall grant or refuse the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. An affected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court. Where a request for rehearing is denied by nonaction of the Commission, the 30 day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., 10th day after the application for rehearing was filed). #5 ,) ) 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 PUBLIC HEARING 3 In Re: 4 West Foreland Field 5 6 7 8 9 APPEARANCES: 10 Commissioners: 11 TRANSCRIPT OF PROCEEDINGS Anchorage, Alaska January 9, 2001 9:12 o'clock a.m. MR. DANIEL T. SEAMOUNT, JR. MS. CAMILLE OECHSLI TAYLOR MS. JULIE HUESSER 12 Attorney General's Office: MR. ROBERT E. MINTZ 13 Forest Oil Corporation: MR. JAMES D. LINXWILER 14 * * * * * * 15 16 17 18 19 24 ORIGINAL RECEIVED A JAN 1 1 2001 laska Oil & Gas AnCho~' COfTJrniSSion 20 21 22 23 25 MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) ') ) 1 PRO C E E DIN G S 2 (On record - 9:12 a.m.) 3 COMMISSIONER SEAMOUNT: I would like to call 4 this hearing to order. It's the first hearing we've had in 5 this new building, so we're breaking it in on this important 6 issue here. The date is January 9, 2001. We're located at 333 7 West Seventh Avenue, Anchorage, Alaska. These are the offices 8 of the AOGCC. 9 I will introduce the head table for you guys that don't 10 know us. I'm Dan Seamount, one of the Commissioners, and on my 11 left is Julie Huesser, Commissioner, and on my right is Cammy 12 Taylor, the other Commissioner. 13 Laura Ferro of Metro Court Reporting is making a ) 14 transcript of the proceedings. You can get a copy from Metro 15 16 17 18 19 20 21 22 23 24 25 ') Court Reporting. The purpose of this hearing today is to consider an application from Forest Oil Company, previously, Forcenergy well, this application was previously or the original Conservation Order application was previously requested by Forcenergy Corporation, now doing business as Forest oil Corporation. MR. ARLINGTON: Correct. COMMISSIONER SEAMOUNT: This is to amend Conservation Order 450, which is the spacing exception to provisions of 20 AAC 25.055 for the West Foreland #1 well, and MET ROC 0 U R T R E P 0 R TIN G, INC. RECEiVED 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 JAN 11 2001 2 Alaska Oil & Gas Cons. Commission Anchorage ) ) ) 1 that's by either establishing a permanent spacing exception, or 2 terminating the obligation for opening an -- well, the original 3 one was for establishing a spacing exception. Today, I 4 understand the request is for either terminating the obligation 5 for opening an escrow account by coming up with a compensatory 6 royalty agreement, or revising the date by which Forest is to 7 deposit funds into the Escrow Account. 8 Notice of the hearing was published on December 6, 9 2000, in the Anchorage Daily News. 10 Proceedings of the hearing will be held in accordance 11 with 20 AAC 25.540. Those are regulations which govern public 12 hearings. The hearing will be recorded. No off the record the 13 conversation except among applicants themselves, during recess, ) 14 or in camera which is a confidential session. We provide for 15 sworn testimony or unsworn statements. Of course, greater 16 weight is given to sworn testimony. If you wish to be 17 considered an expert witness, you must state your 18 qualifications. The Commission will rule whether to consider 19 you as an expert. We will hear from the Applicant first, and 20 then we will allow the opportunity for other interested parties 21 to ask questions. And I don't -- the other two parties or the 22 other party is not in attendance. Should we make note of that? 23 So, if the other parties do show up, then those wishing to 24 cross examine will be considered by the Commissioners. And the 25 way to do that would be to write questions, forward to the head MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 3 :) ) ) 1 table. The Commission will ask the question, in most cases. 2 We also allow 3 examination. 4 So, we 5 themselves. 6 for other testimony, protest, or cross would like the Applicant to introduce MR. ARLINGTON: Thank you, Mr. Seamount. I 7 hope we do honor to this auspicious occasion and break in the 8 hearing room in appropriate fashion. My name is Jim Arlington. 9 I'm Land Manager for Forest Oil Corporation Alaska Business 10 Unit, and on my right is counsel for Forest Oil Corporation in 11 this matter, James Linxwiler, with the firm of Guess and Rudd 12 here in Anchorage. I'm hoping this can be somewhat informal. 13 ,) 14 request 15 time. There are basically three areas that I would like to action and input I guess from the Commission at this As the notice indicated, we had originally requested 16 conversion of the Conservation Order 450, which is a temporary 17 spacing exception, to a permanent spacing exception as 18 contemplated and indicated in the Order 450. 19 The second was to, in lieu of that, request amendment 20 of the temporary spacing exception order in so far as deposit 21 of funds were concerned. 22 Thirdly, I have information to present to the 23 Commission that was requested in item 1.e of the Order 450, and 24 would like to present that to the Commission today. And I 25 guess to elaborate on the request for amendment, in reviewing ) ,I' MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 4 ') ) 1 the Order, there were a couple of other areas that we would 2 like to request a clarification or amendment to, that weren't 3 specifically included in the request for this hearing. And at 4 this time, I would like to ask some direction from the 5 Commission as to whether the Commission has leeway to act upon 6 that additional request for amendment, or if we have to go to a 7 additional hearing for that? 8 I guess before you act on that, let me indicate the two 9 additional areas, one was to ask for a revision of the zones 10 from which the spacing order applies, and two would be to 11 request an extension of the time frame for the temporary 12 spacing exception order in lieu of the compensatory royalty 13 agreement being executed. And I guess to elaborate on that and ) 14 the reason for that, the parties that you alluded to earlier in 15 your opening statement being Forest Oil Corporation, the 16 Department of Natural Resources with the State of Alaska, and 17 the Bureau of Land Management are currently in the process of 18 finalizing the compensatory royalty agreement. The parties 19 have been reviewing several drafts. I spoke with Carol Lee who 20 is the unit manager for the Division of Oil and Gas as recently 21 as last night, and she indicates that in her opinion from the 22 State's side that they believe that we can come to agreement on 23 a compensatory royalty agreement by the end of this month. The 24 terms that we're looking at in that compensatory royalty 25 agreement that would dictate an extension for the temporary MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 5 6 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ..~. MET ROC 0 U R T R E P 0 R TIN G, INC. requesting now? 25 MR. MINTZ: No. But that's what you're 24 23 in the public notice. MR. ARLINGTON: That wasn't specifically listed 22 21 is that right? 20 to extend the duration of the spacing exception to two years, MR. MINTZ: One of the request for changes is 19 18 original public notice? 17 to ask our attorney if we can do that since it wasn't in the COMMISSIONER SEAMOUNT: Well, first, I'd like 16 15 at this time. Let me..... MR. ARLINGTON: Yes. And I guess I can do that 14 " 13 prepared to show some technical back-up? 12 to consider the two without the other parties? Are you COMMISSIONER SEAMOUNT: Firstly, are we allowed 11 10 time and request an amendment for those additional two items. 9 request your direction as to whether we can go forward at this 8 So, with that background, I -- again I guess would 7 production between the Federal lease and the State lease. 6 with the degree of certainty they would like allocate the 5 feel that there is not enough data at this point in time to 4 was requested by the Bureau of Land Management because they 3 in Conservation Order 450 for a period of two years, and that 2 funds into the Escrow Account as indicated by this Commission 1 spacing exception would have us deposit -- continue to deposit ) ) ) 7 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) / MET ROC 0 U R T R E P 0 R TIN G, INC. 21 to be a lesser change than a permanent one, so I guess that 22 would probably be within the scope of the notice. 23 As to the second one, I would have to go back and look 24 some more in the record on that before I could give an opinion 25 as to whether that could be considered. Well, an extension of a temporary spacing exception would seem 20 spacing exception, that I guess that would be adequate notice. 19 since the notice described a request to establish permanent 18 15 there is the foreseeability that that could be open to 16 production within the time frame that we're looking at. 17 MR. MINTZ: Well, I think for the first one 13 there was another zone that is capable of production, but it's ) 14 closed at this time. And in talking with our technical people, 12 the potential for oil production in the deeper zones, and then 11 the zone is currently open to production. There are -- there's 10 Item one here was limited to just the one zone. That's the -- 9 listed, but for all production from the West Foreland #1 well. 8 production, not just from the zones listed, the interval MR. ARLINGTON: Would be to include the 7 MR. MINTZ: And the other one? 6 MR. LINXWILER: Two years and six months, Rob. MR. ARLINGTON: Yeah, two years and six months. MR. LINXWILER: Until July I, 2003. 5 4 3 MR. MINTZ: And the other one? 2 MR. ARLINGTON: Correct. 1 ) ) ') 8 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. zones that were completed when the well was drilled. Commission, likewise, should be aware when we filed the West Foreland field plan. We had indicated -- and I can give you that information here - - in the history of the field or identification of the field, we indicated that there were two information, so they're certainly aware, and actually the 17 What I'm going to be presenting to you is a copy of a letter 18 and the exhibits that were presented to DNR. Let's see, the 19 initial was in August, and BLM was copied with this MR. ARLINGTON: Well, I don't know to that. 15 already agreed to these multiple zones? 14 whether DNR or the BLM have any objections, or have they COMMISSIONER OECHSLI TAYLOR: Do we know MR. ARLINGTON: Sure. 11 question real quickly? Can I ask you a question? COMMISSIONER OECHSLI TAYLOR: Can I ask a 9 guess..... MR. ARLINGTON: Right. COMMISSIONER SEAMOUNT: Would you -- I 6 some geological technical stuff that you ought to discuss? 5 me like if you're going to change the zones, there would be COMMISSIONER SEAMOUNT: Okay. Now, it looks to 20 21 22 23 24 25 I) 16 ) 13 12 10 8 7 4 ) 1 COMMISSIONER SEAMOUNT: Well, should we proceed 2 as if it would be okay? 3 MR. MINTZ: Yeah. ) J ') ) ) 1 COMMISSIONER SEAMOUNT: Would you like to give 2 sworn testimony or. . . . . 3 MR. ARLINGTON: I would happy to give sworn 4 testimony. 5 COMMISSIONER SEAMOUNT: Okay. We will give 6 greater weight to that. Please stand. 7 (Oath administered) 8 MR. ARLINGTON: I do. Raise your right hand. 9 10 Arlington. 11 12 13 represent? ) 14 15 Corporation. 16 17 COMMISSIONER SEAMOUNT: Thank you, Mr. Please state your name. MR. ARLINGTON: My name again is Jim Arlington. COMMISSIONER SEAMOUNT: And who do you MR. ARLINGTON: I represent Forest Oil COMMISSIONER SEAMOUNT: Please proceed. MR. ARLINGTON: Thank you, Mr. Seamount. As I 18 indicated earlier, I would like to present a copy of 19 information that I think was just an oversight in not being 20 presented to the Commission at the time. We had given copies 21 to the Division of Oil and Gas, and to the Bureau of Land 22 Management. I have a copy of a letter dated August 14, 2000, 23 addressed to Carol Lee at the Division of Oil and Gas, signed 24 by Ken Griffin, who is our reservoir evaluation engineer. 25 There's a list of 13 documents that were attached to that ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 9 10 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. 25 why we are requesting at this time that the temporary spacing 24 allocation indicated here in the P over Z analysis{ which is percentage 23 would be very little variation in the allocation 22 well is produced{ they have both indicated to me that there 21 for the change in allocation{ depending on which zone in this 20 our in-house geologists{ Art Saltmarsh{ regarding the potential 19 with our reservoir engineer{ Ken Griffin{ and likewise one of COMMISSIONER SEAMOUNT: Further{ in conferring 18 MR. ARLINGTON: Yes. 17 16 by material balance P over Z? COMMISSIONER SEAMOUNT: And these were analyzed 15 14 reservoir limit defined by the West Foreland #1 well. ,) 13 with the PZ analysis{ and the 9200 Sand as identified as a MR. ARLINGTON: Well{ let's see{ the 9200 Sand 12 92, 94, and..... COMMISSIONER SEAMOUNT: Okay. 11 MR. ARLINGTON: Yes{ there is. 10 9 allocation for each Sand? COMMISSIONER SEAMOUNT: Okay. So, is there an 8 7 Sand with a reservoir limit defined. 6 three intervals{ the 9200 Sand, the 9400 Sand, and the 9200 5 volumetrics and allocation percentages. And it focuses on 4 corrects Attachment 13 that summarizes the West Foreland 3 likewise{ to Carol Lee with the Division of Oil and Gas, which 2 There's a subsequent clarification letter dated September 19{ 1 letter, which I have here as well to present to the Commission. ) ) ') 11 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. 25 in this spacing exception order to include all Sands in the 24 that's the request for including the potential for production 23 than having to come back to the Commission at some later time, 22 produce those lower Sands at this point in time, but rather 21 have any plans at this time either near term or long term to 20 rights in this well as far as the oil is concerned, so we don't 19 Phillips Petroleum, that has a working interest in the deep 18 not already indicated in your records, that there is a party, 17 time. I should bring to the Commission's attention, if it's MR. ARLINGTON: None -- just those two at this 16 15 just those two Sands? 14 recognize any other potential Sands in the section? Or is it ') COMMISSIONER SEAMOUNT: Did your technologist 13 MR. ARLINGTON: No, not at this time. 12 COMMISSIONER SEAMOUNT: Okay. 11 MR. ARLINGTON: No, not at this..... 10 9 time? 8 commingling of those Sands then producing them both at the same COMMISSIONER SEAMOUNT: Are you suggesting 7 6 potential production. 5 that that should include all Sands from which we would have any 4 could, refer to the Kenai Formation, our geologist indicates 3 indicated as the 9336 to 9352 interval, but rather, if we 2 the West Foreland #1 well and not be limited to the one zone 1 exception order be amended to just refer to the production from ) " ,) ,) 1 Kenai Formation. 2 COMMISSIONER SEAMOUNT: In the section drilled 3 or the Kenai Formation? 4 MR. ARLINGTON: In the Kenai Formation is what 5 was requested by our geologist. 6 COMMISSIONER SEAMOUNT: Does Phillips have 100 7 percent of the deep rights? 8 MR. ARLINGTON: No, they have 60 percent. I'm 9 sorry, they have 40 percent. We have 60 percent I believe. 10 COMMISSIONER SEAMOUNT: Do the overrides stay 11 the same? 12 MR. ARLINGTON: Yes. 13 COMMISSIONER SEAMOUNT: Is the deep rights ) 14 below the Kenai? 15 MR. ARLINGTON: Without looking at..... 16 COMMISSIONER SEAMOUNT: I'm wondering what the 17 definition of deep rights..... 18 MR. ARLINGTON: I didn't bring a copy of the 19 assignment. I couldn't tell you for sure what the interval is 20 below which they have the deep rights. 21 As Mr. Linxwiler was suggesting, I guess to clarify, 22 we're not asking at this time to ask the Commission to approve 23 the allocation because as I indicated earlier, the compensatory 24 royalty agreement that's being negotiated still has that two 25 year production period after which time all the parties will ~ /' MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 12 13 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. 21 different than how we calculate the value for the State share. 22 Be that as it may, the royalty will be deposited into the 23 banking institution, as I indicated, 17-1/2 percent of the 24 value. We would continue to deposit those funds for a period 25 of two years, after which time the parties would get together how we calculate the value for the Federal share may be 20 16 lease, have specific provisions as to how to determine the 17 value upon which the royalty is to be paid. And rather than 18 going into the detail in the compensatory royalty agreement, we 19 simply refer to those provisions in the lease, recognizing that the terms of both leases, the Federal lease and the State 15 13 that I think is another item that we would request ) 14 clarification to in the temporary Conservation Order in that 12 Conservation Order 17-1/2 percent. The value -- and again, 11 The percentages would be the same as indicated in the 10 the funds into a banking institution in the State of Alaska. 9 in the Conservation Order 450, in that we would be depositing 8 the most part the procedures that this Commission had laid out 7 primary terms of the compensatory royalty agreement follow for I'd be happy to. The MR. ARLINGTON: Uh-hum. 6 5 negotiations with the other two parties? 4 is going to look like? You say you're pretty far along in 3 give us more detail on what the compensatory royalty agreement COMMISSIONER SEAMOUNT: Would you be able to 2 1 agree as to what the allocation would be. ) ') l ) ') 1 and review the recommendations made by the operator or the 2 lessee, Forest Oil, in this case, based upon the pressure 3 testing that we do at that time. The production history, and 4 we had several other items that had been suggested by Peter 5 Ditton with the Bureau of Land Management, that they would like 6 to see. We would provide that information to all the parties, 7 and hopefully come to agreement. Where we are seeming to focus 8 at this particular juncture at this point in time is reviewing 9 an arbitration clause of provision. Apparently, the Bureau of 10 Land Management does not have a standard alternative dispute 11 resolution clause provision that the Department of Interior 12 solicitor can just sign off on and agree to, so we're trying to 13 contemplate if for some reason the parties don't agree to the ) 14 recommendation that the operator or the lessee makes as to what 15 the allocation should be, how we resolve that dispute. 16 I think that that's for the most part the crux of we're 17 trying to make it as simple a document as possible. 18 To that end is the other clarification that we were 19 hoping to receive from the Commission at this point to address 20 the direction given in Conservation Order 450 to allow the 21 royalty owners an opportunity to be heard. If all of the 22 royalty owners do not sign the compensatory royalty agreement, 23 we would request clarification and direction from the 24 Commission that when we present the compensatory royalty 25 agreement to the Commission. And if we have agreement from the MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 14 15 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. possible scenario where a overriding royalty interest owner on where none possibly exist, but foreseeing the -- maybe a worst MR. ARLINGTON: Not wanting to create problems 22 I guess it would depend on what they had to say. 21 hearing and they were an interested party, they would be heard. 20 they came before the Commission at that hearing like any other 19 our list and anybody who is served by the Applicant. And if 18 But normally notice goes out to all the -- anybody who is on 17 agreement was. Unless Mr. Mintz has a different view of that. 16 overriding royalty came in and asked to be heard on what that 15 completed application today for a spacing exception, and an ~.. f 25 24 23 I guess I don't ) 14 see it as being any different than if they came in with a COMMISSIONER OECHSLI TAYLOR: 12 have a right to comment. 11 like to comment on that? I think that all interested parties COMMISSIONER SEAMOUNT: Ms. Taylor, would you royalty interest owners? just based on objections that might be made by the overriding and/or our need to amend the compensatory royalty agreement will that have on our ability to continue to produce the well, objection to the compensatory royalty agreement, what effect owners to come and comment, and for some reason they have for hearing is provided for the overriding royalty interest the -- and the two mineral royalty owners, if the opportunity three principal parties as I'll call it being the lessee, 13 ) 1 2 3 4 5 6 7 8 9 10 10 11 12 13 ) 14 15 16 17 18 19 20 21 22 ) ') ) 1 the Federal lease could object to anything less than 100 2 percent of the production being attributed to the Federal 3 lease¡ and making the claim that the State has not proven 4 drainage¡ or that they don¡t agree to the allocation that we 5 might suggest later after the two years of production¡ what 6 weight¡ if any¡ could or would the Commission give that 7 objection? 8 COMMISSIONER OECHSLI TAYLOR: Under these 9 circumstances that you describe¡ both the BLM¡ the Department of Natural Resources¡ and the company or companies of more than one involved¡ would all be agreeing to a particular course of action based on particular scientific information? MR. ARLINGTON: Uh-hum. Yes. COMMISSIONER SEAMOUNT: The protester would probably have to have quite a bit of back up¡ technical backup¡ if all your technologists had come to the same conclusion. I would think there would be a burden of proof on the protest. COMMISSIONER OECHSLI TAYLOR: Under the circumstances they just described¡ I would expect so. I guess I¡m..... MR. MINTZ: Well¡..... COMMISSIONER SEAMOUNT: I would think they 23 would have to dig up some data that you 24 COMMISSIONER OECHSLI TAYLOR: Mr. Mintz may 25 have some information. MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 16 ') ) ) 1 COMMISSIONER SEAMOUNT: that the 2 parties didn't have access to. 3 MR. ARLINGTON: I would think that would be the 4 case as well, bring in their own technical experts to refute 5 the information that we presented. 6 I guess getting back to the process we're proposing for 7 the compensatory royalty agreement, what we would envision at 8 this point in time is requesting an extension of the hearing or 9 this hearing to the extent that we can provide those overriding 10 royalty interest owners an opportunity to be heard on the 11 compensatory royalty agreement. As I indicated before, we 12 don't have a compensatory royalty agreement to present to you 13 at this time. We hope to have that within the month. Assuming ) 14 that we can do that, and we can request an extension of this 15 hearing to provide the notices I understand the Commission's 16 counsel has indicated that we need to provide, which I 17 understand is the 30 days, from the time that we can present 18 the compensatory royalty agreement to you, the concern would be 19 that the compensatory royalty agreement as contemplated at this 20 time as I indicated would not have a specific percentage 21 allocation dictated in it. What we would have is a procedure 22 spelled out in the compensatory royalty agreement by which the 23 parties in two years would agree to that specific allocation. 24 COMMISSIONER SEAMOUNT: Do you know any details 25 on that? Are we talking about - - okay, you're going to do some MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 17 18 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ~ MET ROC 0 U R T R E P 0 R TIN G, INC. 25 question for Mr. Mintz. If we do that, is there any need for COMMISSIONER OECHSLI TAYLOR: I guess I have a 24 MR. ARLINGTON: Correct. 23 22 order to July 1, '03? 21 was a proposal to extend the exploration date of this temporary COMMISSIONER OECHSLI TAYLOR: And that there 20 MR. ARLINGTON: Correct. 19 18 changing the date for the deposit into the Escrow Account. 17 heard was that today we did want to address the question of 16 couple questions for clarification. I thought that what I 15 that, I guess I'm a little confused, and let me just ask a COMMISSIONER OECHSLI TAYLOR: Before you do 14 ') 13 address that. probably be appropriate to give you the information, the technical information that we've already given to DNR and the BLM, and I think the information in here and the exhibits would 12 11 10 MR. ARLINGTON: I guess at this time it would 9 8 point though. COMMISSIONER SEAMOUNT: I'm not sure at this 7 MR. ARLINGTON: Right. 6 5 on it favorably or not. that may have some impact on whether we look 4 that would have 3 are you just going to draw a circle around the well? I think 2 the shape of the reservoir? Are you going to look at faults or 1 material ballots, and then are you going to try to figure out ) ) ,) ) ) 15 16 17 18 19 20 21 22 23 24 25 ) ) ) 1 another hearing in the mean time? 2 MR. MINTZ: Well, it depends on what the 3 Applicant is trying to accomplish. I mean under the current 4 Conservation Order 450, what the applicant is referring to as a 5 compensatory royalty agreement wouldn't satisfy the 6 Conservation Order's concept of a compensatory royalty 7 agreement because that's defined in Order 1.d as an agreement 8 specifying how gas production from the well is to be allocated. 9 So, basically, if the escrow period were extended, and 10 that's all that we're that's the only amendment made to the 11 Order, we would still be in a position under Order that we 12 wouldn't have a compensatory royalty agreement. And if we got 13 to the end of the extension, whatever this is we're talking 14 about, May 1, 2003. COMMISSIONER OECHSLI TAYLOR: July 1. MR. MINTZ: July 1, 2003, and at that time, if there were an agreement -- if there were a specification of the allocation at that point, then under the Order, there would have to be notice, an opportunity to be heard at that time provided to the overriding royalty owners, or the Commission would determine for itself how to disburse the funds. Now, if that's consistent with what the Applicant is asking for, then there's no need for further at this point. However, if the Applicant wants something else, then there might be a need for a hearing. MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 19 ) ) ) 1 COMMISSIONER OECHSLI TAYLOR: You articulated a 2 lot better than I did, but that's the -- I guess the question I 3 was looking to have answered. Is there something else that you 4 would be looking for in the interim? 5 MR. ARLINGTON: If the Commission would agree 6 to it, I guess what we would request as I indicated earlier, 7 what I thought I did, was that our understanding was that the 8 way 1.d was worded and specified is that the Commission 9 approved the procedure by which the allocation was to be made, 10 and approved the compensatory royalty agreement at the time 11 that we have the hearing, when we hand that to you, that that 12 would, in fact, address the concerns of all the parties and the 13 overriding interest owners, et cetera, and that it wasn't ) 14 necessary to have the specific allocation at this point in 15 time. 16 COMMISSIONER SEAMOUNT: I didn't understand it 17 that way. I understood that there would be a percentage, and I 18 remember in the testimony, Forcenergy, Paul White, stated that 19 there would be a percentage, and there were some percentages 20 given by the other parties mentioned. I mean they weren't 21 exact percentages but the way -- I think the way the Commission 22 understood it that there would be a percentage in the final 23 compensatory royalty agreement, and that's why there was a 12 24 month waiting for the CRA because it would take that long to 25 evaluate the P over Z plots. However, I would think we would ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 20 21 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 } MET ROC 0 U R T R E P 0 R TIN G, INC. later, right. 25 COMMISSIONER SEAMOUNT: Right. That will come 24 23 of the agreement? COMMISSIONER OECHSLI TAYLOR: You mean in terms 22 21 the technical details, or does that come later? 20 the technical details on it. Is today appropriate to look at 19 just going to have to look at it and consider it, and look at 18 the Commission, and it's not as new to Forest Oil, but we're 15 that time, the Bureau of Land Management has retracted from 16 that position, from what we understand, and. . . . . 17 COMMISSIONER SEAMOUNT: Well, this is news to 14 the percentages that Mr. White indicated. Unfortunately, since ) 13 that we were expecting that the parties would be agreeable to 12 the best of his knowledge at that time, and ours as well, was 11 Division of Oil and Gas and the Bureau of Land Management. At 10 negotiations and the discussions that were ongoing between the 9 to the Commission at that time and wasn't privy to the 8 come to answer questions and not necessarily provide testimony 7 much weight to what Paul White was saying at that time. He had I would hope that the Commission wouldn't give too 6 saying. MR. ARLINGTON: Right. I appreciate what you're 5 4 agreement on it. 3 method is pretty much sure fire as far as getting everybody's 2 see some ways where we might not need exact percentages, if the I could 1 have to look at the proposal and see if that works. ) ) ) ) ) ) 1 COMMISSIONER OECHSLI TAYLOR: We don¡t have an 2 agreement in front of us yet. 3 MR. ARLINGTON: Right. As I said¡ to that 4 extent¡ we would as I indicated before request if possible to 5 extend this hearing to provide that opportunity to be heard¡ 6 after which time -- or extend the hearing from when we submit 7 to you the compensatory royalty agreement. 8 COMMISSIONER SEAMOUNT: Is that after all the 9 parties reach agreement then? 10 MR. ARLINGTON: Well¡ when you say¡ all 11 parties¡ the three parties? 12 COMMISSIONER SEAMOUNT: The three parties. 13 MR. ARLINGTON: Correct. ) 14 COMMISSIONER SEAMOUNT: How soon do you think 15 that will be? 16 MR. ARLINGTON: As I said¡ I spoke with Carol 17 Lee last night¡ and I asked her the same question. Her best 18 guess was that she thought at least from the State¡s 19 perspective they should be able to come to agreement within the 20 month. She had tried to contact Peter Ditton with the Bureau 21 of Land Management to discuss their issues¡ comments¡ and has 22 not had an opportunity to get feedback from him¡ neither have 23 I¡ so I don¡t know where we stand as far as concerns from BLM 24 other than just that one issue that I mentioned earlier on the 25 alternative dispute resolution provision¡ which was the } MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 22 ) ) " arbitration clause that we had suggested. ,) 1 2 And so, as far as I know, there aren't any other issues 3 or concerns from the Bureau of Land Management's perspective 4 because the way that we have drafted and proposed the current 5 form of the compensatory royalty agreement, we had addressed 6 all the 7 have. 8 issues that the Bureau of Land Management seemed to COMMISSIONER OECHSLI TAYLOR: Has DNR been 9 provided a copy of the proposed. . . . . 10 MR. ARLINGTON: Yes. 11 COMMISSIONER OECHSLI TAYLOR: . .. . . compensatory 12 royalty agreement? 13 MR. ARLINGTON: Yes. Bonnie Robson with the ) 14 Attorney General's Office has reviewed it and has provided 15 comments to Carol Lee. Carol Lee had suggested that we could 16 meet this week. We're hoping even today, this afternoon, to go 17 over those concerns and move forward on finalizing the CRA, 18 compensatory royalty agreement. 19 COMMISSIONER OECHSLI TAYLOR: I guess just -- I 20 would like to express just a little bit of confusion about the 21 history. You weren't here at the last hearing so what we heard 22 from the BLM appears to be consistent with what you're 23 describing their position is now. They did not want to agree 24 to a specific allocation or arrive at any formula until a 25 sufficient period of time had passed and information was '\ l MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 23 ) ') ) 1 collected that everybody could review and then make that 2 decision on. And as we understood it, DNR had a different 3 position, and their view of the compensatory royalty agreement 4 was that it would include some specific division. So, the 5 expectation was that a compensatory royalty agreement wouldn't 6 be drafted until after a period of time had passed and 7 sufficient information had been reviewed, and they had all 8 all parties had agreed on a particular distribution. Now, it 9 sounds like a compensatory royalty agreement like you're 10 describing sets out a process by which the parties will proceed 11 until they get to that point somewhere down the road, one year, 12 two years, a date to be determined. 13 MR. ARLINGTON: And that's exactly correct. ) 14 And if I may, I can provide some explanation as to how we got 15 to this point. And this predicament, if you will, in my 16 opinion, is due to the making to some extent of the Division of 17 Oil and Gas. If this Commission's not aware, the Division of 18 Oil and Gas had provided to Forcenergy a conditioned approval 19 of its tenth plan and development for the West McArthur River 20 Unit. In our tenth plan and development that we had submitted 21 I want to say back in October. I'm saying it off the top of my 22 head, but it was early fall, in any event. We had indicated 23 that the plans for West McArthur River Unit were to use gas 24 from the West Foreland #1 well for fuel gas for the West 25 McArthur River Unit. And we've made that known to all parties ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 24 )- 9 10 11 12 13 ) 14 15 16 17 18 ) ) ) 1 all along that that's the intended use for this gas from the 2 West Foreland Field or the West Foreland #1 well. In that 3 condition approval that we received from the Division of Oil 4 and Gas, Department of Natural Resources, they conditioned 5 approval of our plan of development on our having a negotiated 6 and executed compensatory royalty agreement regarding 7 production from the West Foreland #1 well. So, we're between a 8 rock and a hard place. The Commission should be aware that we had appealed that decision of the Division of Oil and Gas in part claiming that the State had put themselves in the position of saying that we had to execute an agreement to which they are a party, which puts them in a -- in our position an extremely strong, if not overbearing, negotiating position. Be that as it may, the initial response to the appeal was denied by the Commissioner of the Department of Natural Resources, so where we stand at this point is the Division of Oil and Gas is taking the position that they will not allow us to take gas from the West Foreland #1 well for fuel gas at West McArthur River Unit 19 unless we have an executed compensatory royalty agreement. We 20 had a fuel gas agreement with Unocal that expired the end of 21 December 2000, which puts us in a rather untenable situation. 22 We are able to negotiate an extension, a one month extension 23 with Unocal for that fuel gas agreement for the end of this 24 month, January of 2001, hoping that we would be able to have a 25 compensatory royalty agreement executed. Since the Division of MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 25 26 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. 25 '60s. It was drilled on a Federal lease, has been shut in 24 Foreland field, as you know, it was discovered in the early MR. ARLINGTON: The history of the West 22 implications? 21 BLM, DNR, and also payment to overrides? What's the 20 the implications of fuel gas on the payment of royalties to COMMISSIONER SEAMOUNT: Could you comment on 18 a CRA with specific allocations now. 17 time, and have acknowledged the fact that BLM will not execute 16 process, and not require specific allocation at this point in 15 Lee has indicated that they are willing to agree to that MR. ARLINGTON: That's correct. They -- Carol agree with at least the process that BLM has spelled out? reconsidered, and now they -- you are presenting that they will COMMISSIONER OECHSLI TAYLOR: So, DNR has Gas's earlier position, that we have specific allocations. can't get that, that we have to rely on the Division of Oil and to have this compensatory royalty agreement, and, of course, we percentage allocation recognizing that they had told us we have position that they had taken where they had wanted a specific 5 Division of Oil and Gas I guess retracting from the earlier 4 percentage allocation at this time. That has resulted in the 3 compensatory royalty agreement that sets out a specific 2 that they will not -- the BLM will not execute any form of 1 Oil and Gas is now aware of the strong position that BLM has, ) ) \ 23 19 6 7 8 9 10 11 12 13 ) 14 ) 27 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 } MET ROC 0 U R T R E P 0 R TIN G, INC. to allow the royalty relief for, and as a matter of fact, it's 25 Reduction Act identifying the several fields that it was going 24 State of Alaska in 1998 when it passed the Cook Inlet royalty 23 22 Department of Interior still has the mineral rights to. The 21 are some two small in holdings, Federal in holdings, that the 20 40 some acres. I'm saying off the top of my head. So, there MR. ARLINGTON: A small portion, approximately 19 COMMISSIONER SEAMOUNT: Did BLM? 18 17 Management? MR. ARLINGTON: Did who, Bureau of Land 16 15 part of the lease? COMMISSIONER SEAMOUNT: Did they retain any 14 ) 13 administrative responsibility for the lease. And..... 12 Interior, Bureau of Land Management, still retained the 11 compensatory royalty agreement because the Department of 10 Inlet Region, Inc., is not going to be a party to the 9 to Cook Inlet Region. And that's the reason that CIRI, or Cook 8 Federal lease, even though the mineral rights were transferred 7 Management retained administrative responsibility of the . . . . .we have the Bureau of Land MR. ARLINGTON: 6 COMMISSIONER SEAMOUNT: No, that's good. 5 4 in time, but..... 3 and this may be more background than you wanted at this point 2 were transferred for the most part to Cook Inlet Region, Inc., 1 since that time because of lack of market. The mineral rights ) ) ) 28 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 1\ MET ROC 0 U R T R E P 0 R TIN G, INC. 25 River Unit. So, there's not a discrepancy or concern in that 24 is on the portion -- that southern portion of the West McArthur 23 recognized the fact that accumulation vis-a-vis the State lands 22 was granted that royalty reduction, the Division of Oil and Gas 21 was presented to the Legislature where the West Foreland field 20 the West Mcarthur River Unit. And that the information that 19 Field does encompass as far as the State lands are concerned 18 sure that there wasn't a confusion because the West Foreland 17 requested a clarification with Division of Oil and Gas to make MR. ARLINGTON: And to that end, we had 16 15 sorry. COMMISSIONER SEAMOUNT: West -- okay. I'm COMMISSIONER SEAMOUNT: That's for oil? 8 9 10 11 unit? 12 13 field. It's.... ,) 14 MR. ARLINGTON: It's within the West Foreland COMMISSIONER SEAMOUNT: And that's within the MR. ARLINGTON: That's for all hydrocarbons. 7 limitations and production limitations. 6 percent to 5 percent subject to certain limitations, time 5 the West Foreland Field have their royalty reduced from 12-1/2 4 presentation of a plan to the AOGCC, the State lands underneath 3 It was pursuant to Alaska Statute 31.05.030, where upon 2 that this field plan was drafted and submitted to the AOGCC. 1 identified in the West Foreland field plan, and it's the reason ) ) ) 29 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 } MET ROC 0 U R T R E P 0 R TIN G, INC. overriding interest on the State lease? 25 COMMISSIONER SEAMOUNT: Now how about the 24 23 royalty would be five percent. 22 subject to royalty and vis-a-vis the State portion, that 21 used or transported off the unit, obviously, they would be 20 royalty-free. Now, if we sell them, obviously, and they're 19 are used for West McArthur River Unit operations, they will be 18 as that portion of the gas in this case with the hydrocarbons, 17 for production such as fuel gas are royalty-free. So, as long 16 unitized substances in the West McArthur River Unit if utilized 15 the provisions of the unit agreement, which indicate that 14 the Division of Oil and Gas has indicated that it's subject to ) 13 unitized and part of the West McArthur River Unit, likewise, 12 Likewise, in the -- because those lands, those State lands are MR. ARLINGTON: No. Let me clarify that. 11 10 percent? COMMISSIONER SEAMOUNT: So, fuel gas is five 9 MR. ARLINGTON: Correct. 8 COMMISSIONER SEAMOUNT: Five percent. 7 6 would be subject to that five percent. 5 on the State lands attributed to the West Foreland Field, it 4 indicated that if there were royalty to be paid from production 3 the West McArthur River Unit, the Division of Oil and Gas has 2 The fact that part of that State lease is unitized and called 1 regard. The West Foreland Field is the West Foreland Field. ) ) ) 30 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ~\ MET ROC 0 U R T R E P 0 R TIN G, INC. this hearing other than the public notice, but we have not 25 MR. ARLINGTON: Not specifically. As far as 24 23 been notified of the spacing exception application, have they? MR. MINTZ: But then -- I mean Phillips has not 22 21 Formation. 20 meeting. The deep oil rights would include the Kenai 19 trying to get a clarification from our geologist prior to the MR. ARLINGTON: Yes. As I indicated, I'm 18 17 Kenai Formation? MR. MINTZ: Now, does Phillips have any in the 16 MR. ARLINGTON: Correct. 15 14 amended to apply to any production from the Kenai Formation? ) 13 I understand it, Forest Oil wants the Conservation Order to be MR. MINTZ: Can I ask a couples questions? As 12 MR. ARLINGTON: That's correct. 11 10 is that correct? 9 overrides. The royalty on the Federal lease is 12-1/2 percent, 8 interest owners on the State lease will be paid their 7 McArthur River Unit operations, those overriding royalty 6 of our use of the State allocated hydrocarbons for West 5 the State lease, their share of the production. So, regardless 4 royalty interest owners, whether it's on the Federal lease or 3 the overriding royalty interest owners all the overriding 2 planning regardless of the use of the gas for fuel gas to pay MR. ARLINGTON: The -- we are at this point 1 ) ) ) 31 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. 25 to interest owners. So, that was one question I had. Well, is MR. MINTZ: The reg requires actual mail notice 24 23 notice supplies that? MR. ARLINGTON: You don't think that public 22 21 heard on the spacing exception. MR. MINTZ: Well, they haven't been notified or 20 19 carve out their interest from the order? MR. ARLINGTON: Why would it be necessary to 18 17 spacing exception, wouldn't they? 16 who is notified, or at least carve out their interest from the you have to either get Phillips involved as someone 15 either 14 property. So, it seems to me that that would have to be ) 13 Forcenergy was the only working interest owner in the affected 12 Commission issued its order based -- were assuming that MR. MINTZ: Because the facts that the 11 10 well for the -- all hydrocarbons in the well bore. 9 when I say, we, Forest Oil Corporation remains operator of the 8 the deep rights, that we would not have to come back. We 7 the spacing exception order, such that if we produced oil from 6 production from the West Foreland #1 well would be included in MR. ARLINGTON: Our intention would be that all 5 4 spacing exception? 3 that Phillips's interest would or would not be affected by the MR. MINTZ: Was it your intention that only -- 2 1 given a specific notice to them of that. ) ) ) 32 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. the reason for why you need the two and a half years? 24 asking for two and a half years temporary exception. What was MR. MINTZ: Another question I had, you're Commission's time later. production so we don't have to come back and waste the production, that we get the spacing exception to include all we do have rights, and that we've identified the potential for it seems prudent that while we're here, and we recognize that prospects at this point in time to develop the oil rights, but in the earlier testimony, we have no short term or long term MR. ARLINGTON: No, we don't. As I indicated immediate plans to produce from the oil? MR. MINTZ: Now, is -- does Forest have any 12 the well, for the production. 11 Phillips necessarily. We're requesting a spacing exception for 10 we're here on our own behalf, and we're not requesting for 9 include that zone, the Kenai Formation. You know, because confused because Forest Oil obviously has an interest in the deep oil rights, and I guess just for our interests then if we could go forward with a request for the spacing exception to MR. ARLINGTON: We could do that. I guess I'm 4 spacing exception so as not to include Phillips's interest? 2 Phillips's interest so that at least for the time being that it 3 might be able to better identify the zones covered by the 1 it possible to supply the Commission with a definition of ) ) II )" 25 13 ) 14 i 15 16 17 18 19 20 21 22 23 8 7 6 5 ,) ) ) ) 1 MR. ARLINGTON: That's the period of time that 2 the Bureau of Land Management has requested that we produce the 3 well. They've requested a 24 month or two year production time 4 frame. We've added an additional approximately six months time 5 to allow all the parties to review the data, the production and 6 testing data after that 24 months in order to come to an 7 agreement, and if we can't resolve initially, then to have some 8 sort of alternative dispute resolution procedure to come to 9 conclusion on as to the allocation. 10 MR. MINTZ: And the final question I had was is 11 Forest proposing or hoping to produce -- to start producing gas 12 prior to execution of the compensatory royalty agreement? 13 MR. ARLINGTON: As I indicated earlier, the ) 14 conditioned approval that Division of Oil and Gas has given to 15 our plan and development for West McArthur River Unit precludes 16 us from doing that, and we intend to comply with that approval 17 unless we're directed or get relief otherwise. 18 MR. MINTZ: I had understood that for some 19 reason, administrative reason or otherwise, Forcenergy wanted 20 the deadline for deposits in the escrow to be changed from the 21 10th to a different date. 22 MR. ARLINGTON: Correct. Again, I'd like to 23 refer to the provisions of the lease, which is ADL 359112. In 24 paragraph 37, the language in that lease indicates that all 25 royalty that may become payable in money to the State of Alaska ) ( MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 33 34 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ,) MET ROC 0 U R T R E P 0 R TIN G, INC. COMMISSIONER SEAMOUNT: Yes, it probably would. 25 COMMISSIONER HUESSER: Yes. 24 23 public scrutiny? 22 By presenting it now, would that subject that information to 21 Division of Oil and Gas and BLM when we submitted it to them. 20 that information confidential, which we have requested of the 19 include that as part of the testimony if, in fact, we can keep 18 technical information, if I may, at this time, and I guess MR. ARLINGTON: I would like to present the 17 16 testimony, Mr. Arlington? COMMISSIONER SEAMOUNT: Do you have any more 15 14 production. ) 13 requirement, 30th of the month, following the month of Also, the Federal lease has the same language, same 12 11 here. 10 of th~ lease which has, again, that language in it, 37 right MR. ARLINGTON: Right. I'll give you the copy 9 8 the end of the next month? MR. MINTZ: So, you're requesting to have until 7 6 month is too soon a period for us to have that information. 5 reports in production in that time frame. The 10th of the 4 in the lease. We are set up administratively to make those 3 substances are produced. So, we just defer it to the language 2 following the month in which the oil, gas, or associated 1 must be paid on or before the last day of the calendar month ) ) ) ) ) 1 COMMISSIONER OECHSLI TAYLOR: There are ways we 2 can deal with that but..... 3 MR. MINTZ: Not if the Commission orders 4 otherwise. 5 COMMISSIONER OECHSLI TAYLOR: Right. We can 6 order otherwise. But I just have a question. I want to back 7 up before we finish with the question about the other zones and 8 ownership because I just went back to Forest's application, and 9 Forest's application was very specific about ownership. And I 10 don't see anybody else listed so are there any other parties 11 other than Phillips? Because this is the first time we've 12 heard about Phillips. 13 MR. ARLINGTON: Let's see, the application that ') ) 14 you're referring to is..... 15 COMMISSIONER OECHSLI TAYLOR: Your original 16 application for spacing exception filed in April of this year, 17 for the offsetting tracts. 18 MR. ARLINGTON: Right. I don't have a copy of 19 that. 20 COMMISSIONER OECHSLI TAYLOR: Well, I can tell 21 you who you have listed. You have Forcenergy, DNR, Forcenergy, 22 BLM and CIRI, and those are the only combinations for those 23 four sections, Section 21, 22, 27, and 28. 24 MR. ARLINGTON: Probably was an oversight on my 25 part in not notifying them because they do have the interest as ), MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 35 \~ " ) 1 I indicated in those deep rights 2 COMMISSIONER OECHSLI TAYLOR: But Phillips is 3 the only other party that was. . .. . 4 MR. ARLINGTON: That's correct. 5 COMMISSIONER OECHSLI TAYLOR: Okay. Actually, 6 if Mr. Mintz wouldn't mind, and if you two don't mind, if we 7 could just take a quick break because before we get into the 8 actual specifics of the technical information, I'd like to 9 confer for a minute. 10 COMMISSIONER SEAMOUNT: We'll take a quick 11 recess. 12 (Off record) 13 (On record) ) 14 COMMISSIONER SEAMOUNT: We're back on record at 15 10:32. Before we get to the confidential information, I would 16 like to ask a few questions. Do you know what the depth and 17 definition of the top of the Phillips's interest would be? 18 MR. ARLINGTON: Not without having the 19 assignment right in front of me. 20 COMMISSIONER SEAMOUNT: But you can provide 21 that to us? 22 MR. ARLINGTON: Absolutely. I can -- off the 23 top of my head guesstimate that we're talking about 10,500 feet 24 approximately. It's definitely below the intervals of the gas 25 zones that had been opened and tested. \ MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 36 37 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ')1 MET ROC 0 U R T R E P 0 R TIN G, INC. we can figure that out if we get the depth or 25 that deter- COMMISSIONER SEAMOUNT: Yeah, we could make 24 23 provided. 22 that, I don't have that in the information here that we've 21 that information in your files already. As to whether I've got MR. ARLINGTON: I believe the Commission has 20 19 cased and what's cemented off and what's plugged and abandoned? 18 have a what I call a well bore schematic that shows what's COMMISSIONER HUESSER: So, you don't. Do you Now, when..... 13 rights, yes. \ ) 14 15 point? 16 17 MR. ARLINGTON: You know, I don't know. COMMISSIONER HUESSER: Is it cased to that MR. ARLINGTON: To where they have the deep 12 11 into the Phillips lease? 10 the same one. Does it -- does the well bore physically extend I was just going to ask Did you have a 6 would seem to indicate that it did. 7 COMMISSIONER SEAMOUNT: 8 question, Commissioner? 9 COMMISSIONER HUESSER: ,) 1 COMMISSIONER SEAMOUNT: Does the well extend 2 into the Phillips interest, the bottom of the well? 3 MR. ARLINGTON: Let me take a look. I don't 4 believe so. I don't believe that we've drilled that deep. 5 Well, I take that back. It -- we had a TVD of 13,500 so that ) ) ) ) 1 the definition of the top of the Phillips interest. 2 MR. ARLINGTON: Right. 3 COMMISSIONER SEAMOUNT: The other point we'd 4 like to make is the Kenai section is described differently by 5 different geologists and different operators, so we'd like to 6 get a definition. It's been referred to as a Kenai Group, 7 Kenai Formation, Kenai Section, and the formations or zones 8 that are included within the Kenai are not agreed upon totally 9 throughout industry, so we'd like to know what Forest Oil 10 Corporation's definition of the Kenai Formation is? 11 MR. ARLINGTON: In lieu of that, and I likewise 12 was trying to get a definition from geologists on that, and 13 attempting to make it encompassing for the oil formation or the ) 14 potential oil production, he was indicating the Kenai 15 Formation. And in lieu of that, he had indicated the Lower 16 Tyonek. And if we could just limit it to the Lower Tyonek and 17 not focus on the oil rights or the deep rights at this point 18 and limit our request as far as the revision of the 19 Conservation Order 450 just to the gas Sands. 20 COMMISSIONER SEAMOUNT: So, you're talking 21 about to a base of the Tyonek? 22 MR. ARLINGTON: The Lower Tyonek. 23 COMMISSIONER SEAMOUNT: Base of the Lower 24 Tyonek, and we would need a depth on that. 25 Are there any more comments or questions before we ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 38 39 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 t :þ MET ROC 0 U R T R E P 0 R TIN G, INC. 22 already presented to it, that we'd be happy to request the 23 amendment to go to the 9527. 24 COMMISSIONER SEAMOUNT: 9527. 25 COMMISSIONER HUESSER: So, that's the deepest 21 information. With the information that the Commission has 20 that, I'm suggesting that there's no need for additional MR. ARLINGTON: So, I guess in response to 19 18 submissions within 10 days after the hearing. 17 information is needed, the Commission asks for written MR. MINTZ: Well, typically, if additional 16 15 comments on that, Mr. Mintz? COMMISSIONER SEAMOUNT: Do you have any 14 ) 13 later time, we'd be happy to do so. 12 it to that at this time, and if we need to augment that· at a 11 that I have at this point. I would be comfortable in limiting MR. ARLINGTON: That's the best information 10 9 the definition? COMMISSIONER SEAMOUNT: That would be the base, 8 7 at 9527 for the other Sand that was completed? 6 Foreland field plan where we had indicated the lower interval 5 that by separate letter, or if we could, just refer to the West 4 definition that you're requesting? Would you want us to do 3 request that we augment the record in so far as the depth MR. ARLINGTON: The question was how would you 2 1 consider potential confidential data? ) ) 40 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. MR. ARLINGTON: Yeah. I probably should get 25 24 hearing you say that you want to limit it to 9336 to 9527? 23 began at 9200, and also one that began at 9400, and now I'm 22 carne in here asking for us to expand this to include a Sand but COMMISSIONER HUESSER: I'm confused because you 21 20 within 10 days? 19 or would you like to go back and check it, get us a letter 18 that being the top of the interval to be produced and tested, COMMISSIONER SEAMOUNT: You would be happy with 17 16 9336. MR. ARLINGTON: Looks like that would be the 15 14 highest potential depth? ) COMMISSIONER SEAMOUNT: And what would be your 13 12 producing from at this time would be the 9527'. 11 to which we have completed and that we know that we would be 10 do know, and that is that the lowest interval, the lowest Sand 9 willing to just refer to the information that we have that we 8 and to expedite the consideration by the Commission, I'm 7 what I'm suggesting is that not having that depth comparison, 6 because I don't know how our geologist defines that. Not-- MR. ARLINGTON: No, I'm not suggesting that 5 4 that the Lower Tyonek Sands begin at 9200 and end at 9527? COMMISSIONER HUESSER: And so are you saying 3 MR. ARLINGTON: Correct. 2 1 that you want to go? ) ) ') 41 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 } J' MET ROC 0 U R T R E P 0 R TIN G, INC. 25 that they may be different. The information that I had been MR. ARLINGTON: I don't recall that I indicated 24 23 factors on each sand, and they may be different? 22 previously you had said that you were going to do allocation COMMISSIONER SEAMOUNT: And I believe 21 MR. ARLINGTON: Correct. 20 COMMISSIONER SEAMOUNT: Okay. 19 MR. ARLINGTON: Correct. 18 17 surface to 9527, is that correct? COMMISSIONER SEAMOUNT: So, you're requesting 16 MR. ARLINGTON: Right. The.. ... 15 14 going to -- you would like to present to us? ) COMMISSIONER HUESSER: Is that what you're 13 12 we do have information on the 9200 foot Sand. 11 to certain zones from which we'd be producing, recognizing that 10 from the surface down to the 9527 without getting specific as 9 question, it's possible at this time to request the exception MR. ARLINGTON: But I guess to respond to your 8 COMMISSIONER SEAMOUNT: Okay. 7 6 to 9527. 5 production, are the intervals from 9336 to 9352, and from 9502 4 from which we have tested, and there's -- there has been ) 1 the clarification. What I'm saying is that in referring to the 2 information that was presented to the Commission, the West 3 Foreland field plan, the two zones that have been completed and ) ) 42 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ), / MET ROC 0 U R T R E P 0 R TIN G, INC. 23 Or is that two Sands? Or are you going to show us that? 24 MR. ARLINGTON: Let me get back with you on 25 that. I don't know how our geologists are defining that. I COMMISSIONER SEAMOUNT: And that's one Sand? 22 21 which we expect to be producing is the 9336 to 9352 interval. 20 that in the CRA. At this point in time, the only interval from MR. ARLINGTON: I don't believe we've addressed 19 18 that would be in your CRA agreement. COMMISSIONER SEAMOUNT: Okay. I would assume 17 . . . . . together? COMMISSIONER SEAMOUNT: 13 ) 14 15 16 that. MR. ARLINGTON: I don't know the answer to MR. ARLINGTON: The..... 12 them..... 11 factor that encompasses both Sands? Or are they going to test 10 the Sands individually and then come up with a allocation COMMISSIONER SEAMOUNT: Are they going to test 9 8 minor variation. 7 what they've indicated to me is that there would just be a 6 allocation should be virtually same. If they are different, MR. ARLINGTON: That they should not. That the COMMISSIONER SEAMOUNT: They should not be " 1 given by my 2 different. 3 4 different? 5 technical people indicates that they should not be ) ) 43 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. West Foreland volumetrics of the 9400 foot Sand on the State 25 acreage only, West Foreland volumetrics of the 9400 foot Sand, 24 West Foreland volumetrics of the 9200 foot Sand on the State 23 foot Sand, West Foreland volumetrics of the 9200 foot Sand, 22 the 9200 foot Sand, a West Foreland net pay map of the 9400 21 Foreland #1 area cross section, West Foreland net pay map of 20 9200 foot Sand, a structure map of the 9400 foot Sand, a West 19 a West Foreland #1 annotated well log, a structure map of the 18 MR. ARLINGTON: Certainly. The information is 17 16 confidential information? 15 the information consists of without divulging any of the ) 14 have some confidential information. Could you describe what COMMISSIONER SEAMOUNT: You mentioned that you 13 COMMISSIONER OECHSLI TAYLOR: Okay. 12 MR. ARLINGTON: That's correct. 11 10 not involved at all in this portion? COMMISSIONER OECHSLI TAYLOR: So, Phillips is 9 8 Forest Oil. MR. ARLINGTON: That's correct, 100 percent 7 6 were represented the first application? 5 surface to 9527, are the ownership interests the way that they COMMISSIONER OECHSLI TAYLOR: In this zone from COMMISSIONER SEAMOUNT: Okay. ) 1 believe 2 know. 3 4 that they're referring to it as one Sand but I don't ) ) 44 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. primary reason that we are seeking to keep the information 25 MR. ARLINGTON: That's a possibility. The 24 23 agreement or protective order? 22 subject to a confidentiality order or -- confidentiality 21 you would be willing to share some or all of that information 20 proposed allocation. Would you contemplate that you could -- 19 point an overriding royalty owner does contest or object to a MR. MINTZ: Now -- but let's suppose at some 18 17 to keep it confidential from them. 16 of the information. So, the answer would be it's not necessary MR. ARLINGTON: DNR and BLM already have copies 15 MR. MINTZ: Not DNR or BLM? 14 ) 13 owners and the public, in general. MR. ARLINGTON: The overriding royalty interest 12 11 whom did you wish to keep this material confidential? 8 Mintz if this stuff is shown today, would it have to be shown 9 again with the other parties present? 10 MR. MINTZ: Well, can I ask Mr. Arlington, from I would like to ask Mr. COMMISSIONER SEAMOUNT: 7 6 Sand. 5 allocation percentages on the 9200 foot Sand, the 9400 foot 4 plot, and a summary of the West Foreland volumetrics and 3 foot Sand of the State acreage only matched to a PZ, P over Z, 2 matched to a PZ plot, West Foreland volumetrics of the 9200 1 acreage only, a West Foreland volumetrics of the 9200 foot Sand ) ) ) ) 1 , , 2 3 4 5 6 7 8 9 10 ), ), ') confidential at this time is because it goes to valuation of their interest of which we may be seeking acquisition, and would not want to disturb the bargaining position that we would otherwise have with them in that acquisition. MR. MINTZ: What would be the relevance of the information for your current request? MR. ARLINGTON: The relevation -- or the relevance of the information is that the Commission had requested in the Conservation Order in item 1.e geologic geophysical data, results of production testing to support a 11 reasonable inference as to what proportions of the gas reserves 12 producible from the 9336 foot to 9352 foot measured depth 13 interval underlie each of the leases, and that's what this 14 information shows. 15 MR. MINTZ: But you're not asking the 16 Commission currently to make a determination about allocation? 17 MR. ARLINGTON: No. We're simply at this point 18 in time trying to comply with the terms of the Conservation 19 Order 450, and with that information provide the Commission 20 some comfort that we have reasonable information by which we 21 can come to an agreement with the parties, the BLM and the 22 Division of Oil and Gas, with additional production information 23 to make an allocation. 24 COMMISSIONER SEAMOUNT: So, the purpose of this 25 presentation would be to describe a first pass at allocation, MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 45 46 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. MR. MINTZ: Well, assuming that the Commission 25 24 confidentiality issue? COMMISSIONER SEAMOUNT: Mr. Mintz, 23 22 pressure tests. 21 period is, in fact, the production volumes and the -- and 20 information that we'll have at the end of that production time 19 we're providing here, that -- and basically the only additional 18 again we'll be looking at a lot of the same information that MR. ARLINGTON: We'll have a process where 17 16 have a process? COMMISSIONER SEAMOUNT: But you're going to 15 14 is not going to have any allocation numbers. ) MR. ARLINGTON: The CRA as I mentioned before 13 12 when we would see the CRA agreement and see how it's done. 11 us with some comfort but I would think we would have comfort 10 the reason for looking at this first pass? I guess to provide 9 wondering if you're going to come to an agreement later, what's COMMISSIONER SEAMOUNT: Well, first of all, I'm 8 7 provide that geological and geophysical information. 6 Commission in the Conservation Order 450 in requesting us 5 indicated, it also is to comply with the direction of the 4 provided orally by Mr. White at the earlier hearing, and as I 3 guess to a large degree support the information that was MR. ARLINGTON: Yes. And it also goes to I 2 1 is that correct? :) ) ) ,) ) ) 1 determines that this material deserves confidential treatment, 2 then my only -- all I would say is that if and when the 3 Commission is faced with making a determination, which mayor 4 may not be, but if and when that happens, then it's going to 5 have to confront the question of whether it can rely on the 6 information that you present without having it shared in some 7 fashion with overriding royalty owners, or at least any that 8 object or want to participate. So, that would be the -- kind 9 of the understanding under which it would have to be accepted 10 at this point. The Commission is not right now it's for the 11 Commission's background information. It mayor may not ever 12 have to be used by the Commission to make a determination 13 depending on whether there's ever any objection by an ) 14 overriding royalty owner. And all I'm saying is if in the 15 future that comes up for the Commission, and the Commission 16 decides that it has to that the overriding royalty owner has 17 to be able to be heard on the question, then either you're 18 going to have to work out a way that can happen or the 19 Commission won't be able to rely on the information. 20 MR. ARLINGTON: If -- am I understanding you to 21 say that the Commission is not allowed to rely on confidential 22 information in order -- in making decisions? 23 MR. MINTZ: Well, what I'm saying is if the 24 information is relevant to a determination that affects more 25 than one interested person, and then the -- all the interested '~ !i, MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 47 48 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 MET ROC 0 U R T R E P 0 R TIN G, INC. 25 interested parties, subject to appropriate restrictions on use 24 the information is going to have to be shared with other 23 information in order to make a decision, then it may be that 22 our choice is if you want the Commission to rely on the I mean if you want 21 you would have a choice at some point. MR. MINTZ: No. No, you would have -- I mean 20 19 suggesting? In..... Is that what I'm 18 disadvantage, negotiating disadvantage. 17 asking us to provide info here that would put us at a MR. ARLINGTON: Then it would seem that you're 16 15 order to make a decision. ) 14 can't use evidence that's secret from one of the parties in I mean an agency 13 affected by the decision, then the Commi- 12 typically means have an interest in the property that's 11 I mean if there are two or more interested parties, then that MR. MINTZ: Well, it wouldn't go in that order. 10 9 that confidential information? 8 that would have an interest in that could request access to 7 confidential information in a public hearing, that any party 6 you're saying, that they make a decision relying on any 5 confidential information they've been given, is that what 4 decisions that the Commission has made? If there's any MR. ARLINGTON: That's true for any of the 3 2 the Commission to be able to rely on it. 1 persons have to be given access to the information in order for ) ) ) 49 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 l~ MET ROC 0 U R T R E P 0 R TIN G, INC. COMMISSIONER OECHSLI TAYLOR: Maybe if I could 25 MR. MINTZ: I'm sorry, 1.d. 24 23 reading from? 1.f? MR. ARLINGTON: I'm sorry, where were you 22 21 now. 20 to the Commission. But that's not what's before the Commission 19 how the funds will be dispersed based on information available 18 agreement as to allocation, that the Commission will determine MR. MINTZ: 1.f says that if there's no 17 COMMISSIONER HUESSER: Yeah. 16 MR. MINTZ: That's not what we're saying. 15 14 to provide that information. ) 13 sorry, the Conservation Order 450 such that we not be required 12 I would request an amendment of the compensatory -- or I'm 11 will subject the information to public disclosure, then I guess 10 I'm hearing now that in order for us to comply with that, that 9 the information because it was directed to us to do so, and if I was providing 8 approving the compensatory royalty agreement. 7 the information and asking the Commission to rely on it in MR. ARLINGTON: Clarify. I wasn't presenting 6 5 that choice. 4 shared without your consent, but you might just have to face 3 That doesn't mean the information is going to become public or 2 then the Commission may be not be able to use the information. if you can't agree to that, 1 and disclosure. And if that's ) ) ) ) ) ) 1 just rephrase what I think the chronology of events may be 2 given what you've explained today. This may help. I 3 understand that you believe that all the parties that are 4 currently before the Commission, BLM, DNR, and Forest, will 5 reach an agreement about how to figure out what percentage 6 would be allocated to each lease, and that within some period 7 of time before July 1 of '03, you would expect all three to 8 agree as to what that allocation will be, and you would come 9 back to the Commission and say we've all agreed. This is how 10 we're going to do it. Make this spacing exception permanent. 11 MR. ARLINGTON: That would be one scenario. 12 The other scenario would be that we are able to get the 13 Commission as soon as we. get the compensatory royalty agreement ) 14 executed in the next 30 days or 15 days, whatever, get the -- 15 this Commission to make the spacing exception order permanent 16 at that time given that we have executed a compensatory royalty 17 agreement. 18 COMMISSIONER OECHSLI TAYLOR: But what -- the 19 compensatory royalty agreement that you're talking about is not 20 one that decides how much or what percentage of production 21 would be allocated to each lease. It would only spell out the 22 process. 23 MR. ARLINGTON: That's correct. 24 COMMISSIONER OECHSLI TAYLOR: Okay. 25 MR. ARLINGTON: That's correct. And I guess MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 50 ) ) ,) 1 from our perspective, that's all that's necessary at this point 2 for the Commission to have in order to grant or convert to a 3 permanent spacing exception. 4 COMMISSIONER OECHSLI TAYLOR: And I think 5 that's what Mr. Mintz pointed to you earlier in the Order where 6 it actually described compensatory royalty agreement as 7 including a provision for a division. Do you know what section 8 that was, Rob? 9 MR. ARLINGTON: It was l.d, which as I 10 understand it says that the Escrow Account will be disbursed in 11 accordance with such agreement. And, in fact, the CRA will 12 have provisions on how to disburse the funds. 13 MR. MINTZ: Well, I was referring earlier to ) 14 the first part of l.d, which refers to a CRA or other agreement 15 specifying how gas production from the WF#1 well is to be 16 allocated. 17 MR. ARLINGTON: And it will do that. It will 18 specify that it will be allocated in certain percentages, based 19 on the information that will be provided, that this doesn't say 20 that. It says it has to be allo- -- you know, we have -- the 21 CRA has to at this point in time indicate the exact 22 percentages. This just says -- in my opinion, this just says 23 that the CRA will specify how the gas is to be allocated. By 24 our having the procedures in the CRA, it does say how the gas 25 will be allocated. ), MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 51 ) ) ) 1 COMMISSIONER SEAMOUNT: As I said before, we 2 had the understanding that there were specific percentages of 3 allocation, but I think we can consider the process that you're 4 talking about. We just have to see what that process is. 5 COMMISSIONER OECHSLI TAYLOR: And what the 6 agreement actually says. 7 MR. ARLINGTON: And that's exactly why I was 8 hoping to get the Commission to clarify. If we can extend this 9 hearing to convert this to the permanent spacing exception when 10 we have that compensatory royalty agreement, and get, if what 11 I'm hearing is correct, the understanding that with that 12 procedure, that methodology spelled out in there, that that 13 will suffice. ) 14 COMMISSIONER SEAMOUNT: I guess if you have 15 that procedure process spelled out, I'm wondering what the 16 relevance of looking at geology today is, if you come to the 17 agreement. Am I missing something? 18 MR. ARLINGTON: Again, Mr. Seamount, the reason 19 that I'm wanting to give the information is because we were 20 directed to do so in I.e. 21 COMMISSIONER OECHSLI TAYLOR: I think that Mr. 22 Arlington may be at a disadvantage for not having been at the 23 last hearing because I think you may be understanding some of 24 this differently than it was written. I don't think it placed 25 that condition as something that needed to happen before \,; MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 52 ') ) ) 1 anything else was decided. And it sounds like we may be 2 putting the cart in front of the horse if you have plans on 3 getting everything else to come into some form of agreement. 4 But that was also the expectation that a number of parties came 5 to the last hearing with, was that this would all be worked out 6 in the matter of, well, one, by the hearing, and subsequently 7 in a very short period of time. So, I suppose we may be 8 spending a whole lot of time trying to answer hypothetical 9 questions that aren't necessarily before us. 10 MR. ARLINGTON: Then if may ask clarification. 11 If you're not suggesting we need to present this information 12 now, am I understanding that we would need to present this 13 information when have the hearing to present to the Commission ) 14 and all interested parties, including overriding royalty 15 interest owners, that we would need to present this information 16 at that time? 17 COMMISSIONER OECHSLI TAYLOR: And part of the 18 confusion may come from your understanding that the 19 compensatory royalty agreement satisfying our order didn't need 20 to' include a specific percentage allocation. And I think 21 everybody else who was here at the hearing expected that that's 22 what was meant by the compensatory royalty agreement being the 23 trigger to making this spacing exception permanent, because 24 even the BLM and DNR acknowledged that if there was some 25 difficulty between the parties to reaching an agreement about ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 53 ') ) ) 1 how the production would be allocated, that they would be 2 satisfied with having the Commission decide how that would be 3 distributed from the Escrow Account. Now, that doesn't sound 4 like what we're hearing from you folks. It sounds like all the 5 parties will agree, and there won't be any need for the 6 Commission to make a decision about how to distribute that 7 after there's been an opportunity for people to look at that 8 agreement, and everybody acknowledge that they are in agreement 9 with that document. But it sounds like that hasn't been 10 decided yet so we are trying to answer questions about what we 11 do depending on what's included in that CRA. 12 MR. MINTZ: If I could address the question of 13 the timing of providing the information - - with this ) 14 information. I think this refers to conducting appropriate 15 production testing. And I think that what this expresses is 16 the Commission's desire that this one -- that it not be phased 17 at the end of the one year temporary exception with the 18 Applicant coming back and saying, well, we really don't know 19 too much yet so we need some more time. I think what this 20 expresses is that during this one year, that the Applicant 21 would do the production testing and be prepared before the end 22 of that period, providing the Commission with the results of 23 the testing as well as the geological and geophysical data. 24 So, I think that it is true that the Commission expected to get 25 this stuff but not necessarily this early. And since I guess ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Ave1lue, Suite 425 A1lchorage, Alaska 99501 (907) 276-3876 54 ) ) 1 there hasn't been any production testing, since there's no 2 production..... 3 MR. ARLINGTON: Excuse me. Let me clarify. 4 There actually have been several production tests. Production 5 tests were run shortly after the well was drilled in the early 6 '60s. That production test data was used in putting this 7 together, and then more recently, there was a production test 8 conducted in December of 2000, in anticipation of bringing the 9 well on line, and that was done with the knowledge of the BLM. 10 Obviously, it was done pursuant to a sundry notice and also 11 with the knowledge of the Division of Oil and Gas. Obviously, ,) 12 we don't have the well on production as yet, but production 13 test has been conducted. And the results of that production 14 test are in the process of being prepared and submitted to the 15 AOGCC pursuant to your regulations. But I guess in answer to 16 your question, there have been several production tests done on 17 the well. 18 COMMISSIONER OECHSLI TAYLOR: But not 19 sufficient for BLM to be making a decision about how production 20 allocation should be done, right? 21 MR. ARLINGTON: Correct. 22 COMMISSIONER OECHSLI TAYLOR: Okay. 23 MR. ARLINGTON: They aren't satisfied with 24 that. And, you know, they have their own reasons and 25 interpretations which are obviously different than Division of MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 55 ) ) 1 Oil and Gas and to some extent some parties within our own 2 company. 3 Okay. Our counsel was advising that it -- causing 4 concern and confusion. I can request the suggestion or 5 withdraw the suggestion or request to submit the data at this 6 time and do so. I guess get a clarification from the 7 Commission as to when they want the information, but, likewise, 8 we would request a clarification as to at such time as when we 9 do submit it, that it can be kept confidential for the purposes 10 that I mentioned earlier. 11 COMMISSIONER SEAMOUNT: Yeah. My point was 12 that you would be showing us some information that would be 13 modified in the future. And I think when you talk about ) 14 comfort level, our comfort level is pretty much attained when 15 we see an acceptable compensatory royalty agreement. Now, as 16 far as the technical backup at the time you come up with the 17 compensatory royalty agreement, Mr. Mintz has discussed the 18 conditions of confidentiality on that, and I believe it's if we 19 require that information to make a decision, then it has to be 20 made available to certain parties. And those would be the -- 21 any protesting parties, is that correct, Mr. Mintz? 22 MR. MINTZ: Well, any party whose interest is 23 affected by the decision, and obviously if they're not -- if 24 they're going along with what the Applicant proposes, then 25 there's no problem. If they're not going along with it, then MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 56 ) 8 9 10 11 12 13 \ ) 14 15 20 21 22 23 24 25 t - ) ') 1 they would have the right to have access to the information the 2 Commission is using to make the decision. 3 COMMISSIONER SEAMOUNT: Okay. 4 MR. MINTZ: Again, subject to appropriate 5 restrictions on disclosure and use. 6 MR. ARLINGTON: I understand what Mr. Mintz is 7 saying. I guess I still have the concern if we provide the information as you've enumerated it here in .e, there could potentially be affected concerned parties that disagree with the decision the Commission might make, and then we're put at a disadvantage in complying with the Commission's Order. COMMISSIONER OECHSLI TAYLOR: I guess let me just say this for now. It seems to me that the type of information or the specific information you might need to submit under .e may depend greatly on who agrees to what at 16 some step down the road. So, if you're not offering it today, 17 we don't have to worry about what happens as a result of today. 18 As is understand, you need at least the Commission now 19 to address the question of changing the date for the deposit into the Escrow Account, and you would like the Commission to extend the date by which the temporary spacing exception would exp i re. . . . . MR. ARLINGTON: Correct. COMMISSIONER OECHSLI TAYLOR: . . . . .to account for the longest period of time possible before you would come MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourtlz Avenue, Suite 425 Anclzorage, Alaska 99501 (907) 276-3876 57 58 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. 25 saying. At certain points, depending on the circumstances, 24 that with DNR or BLM. And I think that's what Mr. Mintz is 23 production should be allocated, and you asked us not to share 22 consider certain information in making its decision about how 21 But your company comes in here and asks the Commission to 20 information meant and how the production should be allocated. 19 say that neither you nor BLM nor DNR agreed on what this 18 might illustrate for you what you may come up against. Let's 17 talking about in terms of at least how I understand, what I 16 maybe I can give an example in terms of what Mr. Mintz is COMMISSIONER OECHSLI TAYLOR: Well, I think 15 14 presenting that and how it would be treated? ) 13 that you're looking, when you would request or envision us 12 then 1.e and give us some written direction as to that data MR. ARLINGTON: Would it be possible to address 11 10 that might otherwise be confidential. 9 no question about what the Commission does with any information 8 necessary to go along with that at that time, and then there's 7 then we deal with what other additional information may be 6 maybe we should wait until you know what that agreement is, and It seems like COMMISSIONER OECHSLI TAYLOR: 5 MR. ARLINGTON: Correct. 4 3 the Commission some request based on that agreement? 2 other agreement with everybody, and then may want to present to 1 back for an agreement, but in the meantime, you may reach some ) ) ) 14 15 16 17 18 19 20 21 22 23 24 25 ) ) ") 1 other people who have an interest in that, whatever the issue 2 being adjudicated is, would either have a right to see the 3 information, or the Commission couldn't use the information to 4 make that decision. 5 MR. ARLINGTON: I wouldn't have any difficulty 6 in either of the parties you mentioned having that information. 7 The parties, and I use that term loosely, the interested 8 parties as they are defined in State statute, which would 9 include the overriding royalty interest owners, and others 10 listed there, would be other interested parties that we would 11 have a concern in having access to some parts, if not all, of 12 this information, geologic, geophysical information. 13 So, I -- I'm not sure where to go at this point. I understand what you're saying. I'm not sure that I'm making myself understood. COMMISSIONER SEAMOUNT: Well, I'm wondering what would be the -- what do you perceive as a potential damage to Forest Oil if the data were shown to anyone else? Are we talking about competitiveness or..... MR. ARLINGTON: Yes, competitiveness in so far as potential acquisition of other, you know, mineral rights in the vicinity, as well as our negotiating posture and position in acquiring mineral rights, overriding royalty interests in each of the Federal leases, you know, all of the -- all of those items. MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 59 ) ) 1 Further, in providing the information where - - that I 2 would have here, it in spite of what Mr. Mintz has said, I 3 mean we obviously have spent quite a bit of time and effort and 4 money in putting this information together, gathering it and 5 doing the analysis and interpretation, which we're happy to 6 share with the Division of Oil and Gas and BLM because it goes 7 to the end of resolving the issue as far as compensatory 8 royalty agreement, but when we start looking at the potential 9 of the number of overriding royalty interest owners, which we 10 previously provided you a list of, being able to potentially 11 take pot shots and pick apart the information, we're increasing 12 exponentially the possible complexity of the -- coming to an 13 agreement on the compensatory royalty agreement. As I ) 14 mentioned before, we may have one or several of the overriding 15 royalty interest owners on the Federal lease, for example, 16 taking exception to the allocation percentages, likewise, with 17 the State overriding royalty interest owners, you know, in 18 spite of the fact that we're agreeing to pay them, you know, 19 the over (ph) rights regardless of whether it's used for 20 operations at West McArthur River Unit fuel gas, but I am 21 reluctant to provide our information to them to be able to use 22 against us, if you will. 23 And my understanding again, not having been here, 24 but my understanding in the need for the Commission to have 25 this data was to satisfy yourselves that the efforts that we MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 60 61 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 ) MET ROC 0 U R T R E P 0 R TIN G, INC. 25 agreement, it might very well be that the need for presenting 24 the timing of your agreement, assuming that you reached an COMMISSIONER OECHSLI TAYLOR: So, depending on 23 22 I would think that that's probably the case, yes. MR. ARLINGTON: Under the existing regulations, 21 20 available publicly? 19 two years, might some of that production information be COMMISSIONER OECHSLI TAYLOR: After a period of 18 17 at this point. 16 wish I could answer but I -- I'd have to reserve that response 13 MR. ARLINGTON: I don't know at this point ) 14 without going back, consulting with my staff and determining 15 what -- what they would determine to fall in that category. I 12 that information to be confidential? 11 be confidential to support that? Or would you expect all of 10 information, some geologic and geophysical data that would not 9 division, a precise percentage, that there would be some 8 that if all three, say, BLM, DNR and Forest, agree to the COMMISSIONER OECHSLI TAYLOR: Do you envision 7 6 Commission that we were doing that. 5 their own, but rather that, you know, we were satisfying the 4 so that they could make that ascertation (sic) independently on 3 so much that it was going to be shared with all those parties 2 correlative rights or the interest of all the parties, and not 1 were undergoing were in good faith and addressing the ) ') 62 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ,) MET ROC 0 U R T R E P 0 R TIN G, INC. COMMISSIONER SEAMOUNT: Okay. 25 24 you a draft at this point..... MR. ARLINGTON: I wasnlt prepared to present to 23 22 you say you were going to provide that to us? 21 You were -- you do have a copy of the proposed CRA that -- did COMMISSIONER SEAMOUNT: What about the process? 20 19 withdrew the request to present it to us. COMMISSIONER OECHSLI TAYLOR: I think they 18 17 wait on looking at the technical merits at this time? COMMISSIONER SEAMOUNT: SOl are we agreed to 16 MR. ARLINGTON: As would mine. 15 ) 14 be much improved if I saw agreement between the three parties. COMMISSIONER SEAMOUNT: My comfort level would 13 12 process but at the end. COMMISSIONER OECHSLI TAYLOR: Not just the 11 COMMISSIONER SEAMOUNT: Right. 10 9 reached an agreement as to how it would be divided. COMMISSIONER OECHSLI TAYLOR: After they 8 7 would be after the CRA has been negotiatedl unless..... 6 probably the best time to present geologic engineering back up COMMISSIONER SEAMOUNT: WeIll 11m thinking that 5 COMMISSIONER OECHSLI TAYLOR: Okay. 4 MR. ARLINGTON: That could be the easel yes. 3 2 were trying to do that now? 1 confidential information might be less than it would be if you ) ,) ì 63 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ~, ~i~1 MET ROC 0 U R T R E P 0 R TIN G, INC. me that if we go along with these three that you've requested 25 COMMISSIONER OECHSLI TAYLOR: Well, it seems to 24 23 can be heard subject to 1.d of the 450 Order. 22 expedite the procedures to have the hearing whereby all parties 21 agreement. The request is for direction so that we can 20 request for hearing once we have the compensatory royalty 19 discretion to allow that. Otherwise, we can go to a separate 18 if it's within the purview of the Commission's procedures and MR. ARLINGTON: Yeah, the -- if we can do that, 17 16 for an extension of this hearing. COMMISSIONER SEAMOUNT: And then you also asked 15 14 from the surface down to 9527. ) 13 to revise the interval for which the spacing exception applies 12 the temporary spacing order to July I, 2003; and then three was 11 into the Escrow Account. Two was to extend the time frame for 10 was the revise the date by which we need to deposit the funds asking for a decision on two points from today, correct? And those are a change in the escrow payment schedule, and an extension of the testing for 24 months, is that correct? MR. ARLINGTON: I think there are three. One 9 8 7 6 COMMISSIONER SEAMOUNT: So, we need -- you're 5 4 issue. 3 think it would be premature at this point and would confuse the 2 several provisions in there that we're still negotiating. I . . . . .because, again, there are MR. ARLINGTON: 1 ) ) ) ') 3 4 5 6 7 8 9 10 11 12 13 ) 14 15 ~. ') 1 right now, there's nothing that you would need from the 2 Commission to proceed to production and move forward. There wouldn't be anything holding you up from here. If you wanted to do something else, it would depend on what the agreement was that was actually negotiated with the CRA, and timing wouldn't be a pressure if we just left it to you folks to corne back to us when you were ready with whatever you carne up with, unless you know right now that you have a particular date that you would like a subsequent hearing set for. MR. ARLINGTON: I don't because we don't, again, have the CRA signed by the other two primary parties involved. COMMISSIONER SEAMOUNT: But as far as we're concerned, you would meet your obligations to us with the Escrow Account, and then you just -- you would deal with your 16 negotiating with the other two parties. 17 MR. ARLINGTON: Uh-hum. 18 COMMISSIONER OECHSLI TAYLOR: And that could be 19 left to your schedule. It wouldn't impact -- what we did or 20 didn't do wouldn't impact you. You would be all set to go. 21 MR. ARLINGTON: Okay. To follow up on that and 22 get a clarification then as to how we proceed when we do have 23 the CRA executed, do you envision us corning back and requesting 24 a separate hearing for the Commission to approve the CRA, or is 25 the hearing to provide an opportunity for royalty owners to be MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 64 ') " ) 1 heard for the CRA? 2 COMMISSIONER OECHSLI TAYLOR: Well, I think 3 we're using people are using the term CRA to mean different 4 things. And maybe that's what we need to clarify because it 5 was apparent to us at the last hearing that both BLM and DNR 6 expected the temporary nature of this Order to continue until 7 there was an actual specific percentage agreement reached. And 8 what you're suggesting is moving that up based on just an 9 agreement to how you will arrive at that percentage. And I 10 guess absent hearing what DNR and BLM say about that, we 11 couldn't tell you what the final answer would be as to that. 12 So, by not setting another hearing, we're sort of leaving it in 13 your court. And once the three of you agree to whatever it is ) 14 you're agreeing to in the CRA, and then whether or not that is 15 sufficient for them and us to make this convert this from a 16 temporary approval to a final approval, or permanent exception, 17 I think it would be premature of us to answer that without 18 knowing what all the issues are for DNR and BLM. 19 MR. ARLINGTON: If the issues were just as I 20 had indicated before, that the actual allocation would be done 21 after two years of production, and, two, that there be some 22 sort of a arbitration or alternative dispute resolution 23 procedure spelled out in the CRA, as I'm sitting here now, 24 that's all that I've been told by either of the parties that 25 needs to be resolved. If we bring that CRA to you, with that ) ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 65 ) ) ) 1 information, can 2 obligations that 3 time? we have the hearing and meet all of the you have requested or imposed upon us at that 4 COMMISSIONER OECHSLI TAYLOR: The way 5 Conservation Order 450 is written now, no. And it's because 6 when the other two parties were here at the last hearing, they 7 all anticipated that it would not become permanent until a 8 specific percentage had been decided. If they have changed 9 their view on that, we'd be happy to hear that, but I think at 10 this stage, we don't have anything that would -- anything on 11 their behalf that says that they have changed their mind. 12 MR. ARLINGTON: Okay. If they provide 13 testimony at a hearing where we were -- we petitioned to ) 14 convert the temporary spacing exception in 450 to a permanent, 15 and BLM and Division of Oil and Gas are present and present 16 testimony or present testimony otherwise by letter, whatever, 17 to indicate that they support the CRA with that methodology 18 spelled out without necessarily a specific allocation, would 19 that be sufficient for the Commission to convert the temporary 20 spacing exception to a permanent? 21 COMMISSIONER OECHSLI TAYLOR: Would you have 22 provided notice to the overrides of that hearing and that 23 subject? 24 MR. ARLINGTON: Yes. Yes, absolutely. 25 MR. MINTZ: If I could just say something. I MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 66 ) ) 1 don't really think it's appropriate to expect the Commission to 2 make predictions about how it would rule under hypothetical 3 situations. I think it's probably - - I understand you would 4 like to know as much as possible, but I don't think that's 5 really reasonable to expect the Commission do that now. But I 6 7 8 9 10 11 12 13 ) 14 15 16 17 18 19 20 21 22 ) ,I think that basically you're going to have to either persuade the Commission that its -- that the current Order means what you would like it to mean, which is that it encompasses a -- an agreement that just sets up a process, or if you're not able to persuade the Commission of that, that you're going to have to persuade the Commission to amend its Order to allow - - to do something else to give you the remedy you would like, and but I think one of the -- the critical element there is that one way or another, all interested parties have to be protected, and they have to be given an opportunity to be heard as to their protection of their interest. MR. ARLINGTON: I agree with that. I guess since the Conservation Order 450 didn't provide a definition of what was intended by a compensatory royalty agreement, I understand that based upon the testimony that was given at that time, the understanding of the Commission was that CRA meant specific percentage allocation, but since it doesn't 23 necessarily say that, if I'm understanding Mr. Mintz, if -- 24 25 MR. LINXWILER: I think it..... MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 67 68 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 ): MET ROC 0 U R T R E P 0 R TIN G, INC. 25 they would want to see at that time? Or should we come 24 Commission will determine what data, geologic, geophysical, MR. ARLINGTON: And at that point, then the 23 COMMISSIONER SEAMOUNT: That is correct. 22 21 parties an opportunity to be heard. 20 agreement before the Commission, and providing all interested 19 to a permanent spacing exception with the compensatory royalty 18 request to at that time convert the temporary spacing exception 17 Order 450 once we have a compensatory royalty agreement, and 16 point in time and requesting and amendment to the Conservation 15 Conservation Order 450, we then will be coming back at a later for the 14 three items that we're requesting, the amendment to ) 13 I guess just to clarify, or to summarize, that with the 12 that. 11 you know, within the ballpark, and we're allowed to request 10 the feedback I'm getting, which is what I've heard, that we're, MR. ARLINGTON: Okay. Yeah, and I guess that's 9 8 MR. MINTZ: Well, you can request it. 7 identify the methodology. Is that correct? 6 are apparently going to be able to agree that it means that it 5 we're suggesting are that all the parties, all three parties 4 can request an amendment of 450 to include the CRA to mean what MR. ARLINGTON: Pardon me? MR. LINXWILER: Go ahead. MR. ARLINGTON: If I understand Mr. Mintz, we 3 2 1 ') ) ) ) ) ) 1 prepared? 2 COMMISSIONER SEAMOUNT: I think that you should 3 come prepared with back -- with supporting documentation. 4 MR. ARLINGTON: Okay. 5 COMMISSIONER SEAMOUNT: Unless someone 6 disagrees with me. 7 MR. ARLINGTON: And I guess to follow up on my 8 earlier concerns, if we come prepared with that supporting 9 documentation at that time, that during that hearing would 10 become public, and my concern is that we would not find 11 ourselves in a box where we're asked to present information. 12 COMMISSIONER SEAMOUNT: Mr. Mintz, isn't it 13 correct that we can go in camera confidential if ) 14 confidentiality is warranted? 15 MR. MINTZ: Yes. 16 COMMISSIONER SEAMOUNT: But a decision we make 17 may require you consenting to us releasing some of that 18 information later, but you don't have to. 19 MR. ARLINGTON: Okay. But we can essentially 20 pick and choose at that time which information we can..... 21 COMMISSIONER SEAMOUNT: Well, it depends on 22 what's relevant. If we have to use that information to make a 23 decision, then that information has to be released to certain 24 parties. But it's possible we wouldn't need that information. 25 MR. ARLINGTON: Okay. ) MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 69 ) ) ) 1 COMMISSIONER SEAMOUNT: And I guess we would 2 come to that fork in the road when we get there. 3 MR. ARLINGTON: Okay. With that, I think that 4 concludes what I'd like to present to the Commission and the 5 requests that we would make at this time. 6 COMMISSIONER SEAMOUNT: Okay. Any other 7 comments, testimony, questions? Then I think it's appropriate 8 to go ahead and close the meeting. 9 (Off record - 11:27 a.m.) 10 END OF PROCEEDINGS 11 12 13 . ) 14 15 16 17 18 19 20 21 22 23 24 25 I~ MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Ave1lue, Suite 425 A1lchorage, Alaska 99501 (907) 276-3876 70 ) 13 ) 14 15 16 17 18 19 20 21 22 23 24 25 ) h ) ') 1 C E R T I FIe ATE 2 UNITED STATES OF AMERICA) )ss. 3 STATE OF ALASKA ) 4 I, Laura Ferro, Notary Public in and for the State of 5 Alaska, and Reporter for Metro Court Reporting, do hereby 6 certify: 7 That the foregoing Alaska Oil & Gas Conservation 8 Commission Public Hearing was taken before myself on the 9th 9 day of January 2001, commencing at the hour of 9:12 o'clock 10 a.m., at the offices of the Alaska Oil & Gas Conservation 11 Commission, 333 West Seventh Avenue, Suite 100, Anchorage, 12 Alaska; That the public hearing was transcribed by myself to the best of my knowledge and ability. IN WITNESS WHEREOF, I have hereto set my hand and affixed my seal this lOth day of January 2001. Notary Public in and for Alaska My commission expires: 05/03/01 MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avellue, Suite 425 Allchorage, Alaska 99501 (907) 276-3876 ) 7 8 9 10 11 12 13 ') 14 15 16 17 18 19 20 21 22 23 24 25 " ~; ') ) 1 C E R T I FIe ATE 2 UNITED STATES OF AMERICA) )ss. 3 STATE OF ALASKA ) 4 I, Laura Ferro, Notary Public in and for the State of 5 Alaska, and Reporter for Metro Court Reporting, do hereby 6 certify: That the foregoing Alaska Oil & Gas Conservation Commission Public Hearing was taken before myself on the 9th day of January 2001, commencing at the hour of 9:12 o'clock a.m., at the offices of the Alaska Oil & Gas Conservation Commission, 333 West Seventh Avenue, Suite 100, Anchorage, Alaska; That the public hearing was transcribed by myself to the best of my knowledge and ability. IN WITNESS WHEREOF, I have hereto set my hand and affixed my seal this 10th day of January 2001. ~~~~ Notary Public in and for Alaska My commission expires: 05/03/01 , ';¡ . ,',' MET ROC 0 U R T R E P 0 R TIN G, INC. 745 West Fourth Avenue, Suite 425 Anchorage, Alaska 99501 (907) 276-3876 #4 } ') ,\ ALASKA OIL AND GAS CONSERV A TION COMMISSION Januarv 9~ 2001 9:00 AM West Foreland Field Public Hearin2 NAME - AFFILIATION TELEPHONE (PLEASE PRINT) 1~.,.\~~ N.(bt~ PNA alf8-'3.<O:\ ~ ~Æ-rt11 ~ I- ( If/{ W(( e.£ G'ttßnr/ zut//f ßzw/ 7 r¡ 3 - 2- 7- ð () ..;:rt'M A vh~~ ;:ðf'1!'5 ~ oil 1b7c1J'«; I/:'M J7ç f- 2//2_ #3 LAW OFFICES OF Guess & Rudd p,C, 510 L STREET SEVENTH FLOOR ICHORAGE. ALASKA 99501 "LEPHONE (907) 793-2200 :ACSIMILE (907) 793-2299 ) STATE OF ALASKA ,,) ALASKA OIL AND GAS CONSERVATION COMMISSION 333 W. 7th Ave., Suite 100 Anchorage, Alaska 99501 Re: APPLICATION OF FORCENERGY,) INC. for an order granting an ) exception to the spacing ) requirements of 20 AAC 25.055 ) to allow for production from ) the West Foreland #1 gas well ) ) Conservation Order No. 450 West Foreland Field ENTRY OF APPEARANCE Guess & Rudd, P.C., attorneys for Forest Oil Corporation, hereby enters its appearance in the above-captioned action and requests that copies of all pleadings and any other documents be sent to its office located at 510 L Street, Suite 700, Anchorage, Alaska 99501. GUESS & RUDD, P.C. Attorneys for Forest Oil Corporation DATED: ~ 1;ò/ RECEIVED JAN 0 8 2a01 Alaska Oil & Gas Cons. Commission Anchorage By: rY~ Linxwiler LAW OFFICES OF Guess & Rudd P.C 510 L STREET SEVENTH FLOOR ICHORAGE, ALASKA 99501 :LEPHONE (907) 793-2200 :ACSIMILE (907) 793-2299 ) F:\data\5672\10\pleading\entry.doc CERTIFICATE OF SERVICE Q'tÅ, I hereby certify that on the 0 day of January, 2001, a true and correct copy of the foregoing document was mailed to the following counsel of record: Peter Ditton Bureau of Land Management Department of the Interior 6881 Abbott Loop Rd. Anchorage, Alaska 99507-2599 Mark Myers, Director Division of oil & Gas Department of Natural Resources 550 W. 7th Ave., Suite 800 Anchorage, AK 99501-3510 GUESS & RUDD By: ~~ l)~ ) - 2 #2 ') ) Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: West Foreland Field Forcenergy, Inc., by letter dated November 30, 2000, has requested an order allowing the amendment of Conservation No. 450 (CO 450) to either establish a permanent spacing exception for the Forcenergy West Foreland #1 well and terminate Forcenergy's escrow obligation, pursuant to paragraph 1.a and l.d of the terms and conditions of CO 450, or revise the date by which Forcenergy shall deposit funds in the Escrow Account. The Commission has set a public hearing on Forcenergy's request for 9:00 AM, January 9, 2001, at 333 West 7th Ave, Suite 100, Anchorage, Alaska 99501. In addition, a person may submit a written protest or comments on the requested amendment prior to 4:00 PM on January 9, 2001. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, please contact Diana Fleck at 793-1221 before January 3, 2001. Daniel T. Seamount, J r. Commissioner Published Deccmber 6,2000 ADN AO-02114008 DRI / McGraw Hill Randall Nottingham 24 Hartwell Lexington, MA 02173 PIRA ENERGY GROUP LIBRARY 3 PARK AVENUE (34th & PARK) NEW YORK, NY 10016 OVERSEAS SHIPHOLDING GRP ECON DEPT 1114 AV OF THE AMERICAS NEW YORK, NY 10036 NY PUBLIC LIBRARY DIV E GRAND CENTRAL STATION POBOX 2221 NEW YORK, NY 10163-2221 ALASKA OFC OF THE GOVERNOR JOHN KATZ STE 518 444 N CAPITOL NW WASHINGTON, DC 20001 ARENT FOX KINTNER PLOTKIN KAHN LIBRARY WASHINGTON sa BLDG 1050 CONNECTICUT AV NW WASHINGTON, DC 20036-5339 US MIN MGMT SERV CHIEF OCS STATS & INFO 381 ELDEN ST MS 4022 HERNDON, VA 20170-4817 LIBRARY OF CONGRESS STATE DOCUMENT SECTION EXCH & GIFT DIV 10 FIRST ST SE WASHINGTON, DC 20540 U S DEPT OF ENERGY PHYLLIS MARTIN MS EI823 1000 INDEPENDENCE SW WASHINGTON, DC 20585 ') ) ) UNIV OF ARKANSAS SERIALS DEPT UNIV LIBRARIES FAYETTEVILLE, AR 72701 MURPHY E&P CO ROBERT F SAWYER POBOX 61780 NEW ORLEANS, LA 70161 ALFRED JAMES III 107 N MARKET STE 1000 WICHITA, KS 67702-1811 LINDA HALL LIBRARY SERIALS DEPT 5109 CHERRY ST KANSAS CITY, MO 64110-2498 ILLINOIS STATE GEOL SURV LIBRARY 469 NATURAL RESOURCES BLDG 615 E PEABODY DR CHAMPAIGN, IL 61820 AMOCO CORP 2002A LIBRARY/INFO CTR POBOX 87703 CHICAGO, IL 60680-0703 SD DEPT OF ENV & NATRL RESOURCES OIL & GAS PROGRAM 2050 W MAIN STE #1 RAPID CITY, SD 57702 DPC DANIEL DONKEL 1420 NORTH ATLANTIC AVE, STE 204 DAYTON BEACH, FL 32118 US GEOLOGICAL SURVEY LIBRARY NATIONAL CTR MS 950 RESTON, VA 22092 ) TECHSYS CORP BRANDY KERNS PO BOX 8485 GATHERSBURG, MD 20898 CROSS TIMBERS OPERATIONS SUSAN LILLY ) 210 PARK AVE STE 2350 OKLAHOMA CITY, OK 73102-5605 DWIGHTS ENERGYDATA INC JERLENE A BRIGHT DIRECTOR PO BOX 26304 OKLAHOMA CITY, OK 73126 IOGCC POBOX 53127 OKLAHOMA CITY, OK 73152-3127 R E MCMILLEN CONSULT GEOL 202 E 16TH ST OWASSO, OK 74055-4905 OIL & GAS JOURNAL LAURA BELL POBOX 1260 TULSA, OK 74101 GAFFNEY, CLINE & ASSOC., INC. LIBRARY 16775 ADDISON RD, STE 400 ADDISON, TX 75001 BAPIRAJU 335 PINYONLN COPPELL, TX 75019 MARK S MALlNOWSKY 15973 VALLEY VW FORNEY, TX 75126-5852 US DEPT OF ENERGY ENERGY INFORMATION ADMINISTRATION MIR YOUSUFUDDIN 1999 BRYAN STREET STE 1110 DALLAS, TX 75201-6801 DEGOL YER & MACNAUGHTON MIDCONTINENT DIVISION ONE ENERGY SQ, STE 400 4925 GREENVILLE AVE DALLAS, TX 75206-4083 JERRY SCHMIDT 4010 SILVERWOOD DR TYLER, TX 75701-9339 STANDARD AMERICAN OIL CO AL GRIFFITH POBOX 370 GRANBURY, TX 76048 CROSS TIMBERS OIL COMPANY MARY JONES 810 HOUSTON ST STE 2000 FORT WORTH, TX 76102-6298 SHELL WESTERN E&P INC G.S. NADY POBOX 576 HOUSTON, TX 77001-0574 ENERGY GRAPHICS MARTY LINGNER 1600 SMITH ST, STE 4900 HOUSTON, TX 77002 H J GRUY A TTN: ROBERT RASOR 1200 SMITH STREET STE 3040 HOUSTON, TX 77002 PURVIN & GERTZ INC LIBRARY 2150 TEXAS COMMERCE TWR 600 TRAVIS ST HOUSTON, TX 77002-2979 RAY TYSON 1617 FANNIN ST APT 2015 HOUSTON, TX 77002-7639 CHEVRON PAUL WALKER 1301 MCKINNEY RM 1750 HOUSTON, TX 77010 BONNER & MOORE LIBRARY H20 2727 ALLEN PKWY STE 1200 HOUSTON, TX 77019 ) ) OIL & GAS JOURNAL BOB WI LLlAMS 1700 W LOOP SOUTH STE 1000 HOUSTON, TX 77027 PETRAL CONSULTING CO DANIEL L LIPPE 9800 RICHMOND STE 505 HOUSTON, TX 77042 MARK ALEXANDER 7502 ALCOMITA HOUSTON, TX 77083 MARATHON OIL CO GEORGE ROTHSCHILD JR RM 2537 POBOX 4813 HOUSTON, TX 77210 UNOCAL REVENUE ACCOUNTING POBOX 4531 HOUSTON, TX 77210-4531 EXXON EXPLOR CO LAND/REGULATORY AFFAIRS RM 301 POBOX 4778 HOUSTON, TX 77210-4778 EXXON EXPLORATION CO. T E ALFORD POBOX 4778 HOUSTON, TX 77210-4778 CHEVRON USA INC. ALASKA DIVISION ATTN: CORRYWOOLlNGTON POBOX 1635 HOUSTON, TX 77251 PETRINFO DAVID PHILLIPS POBOX 1702 HOUSTON, TX 77251-1702 PHILLIPS PETR CO ALASKA LAND MGR POBOX 1967 HOUSTON, TX 77251-1967 ) ) PHILLIPS PETROLEUM COMPANY W ALLEN HUCKABAY PO BOX 1967 HOUSTON, TX 77251-1967 WORLD OIL DONNA WILLIAMS POBOX 2608 HOUSTON, TX 77252 EXXONMOBIL PRODUCTION COMPANY J W KIKER ROOM 2086 POBOX 2180 HOUSTON, TX 77252-2180 EXXONMOBIL PRODUCTION COMPANY GARY M ROBERTS RM 3039 POBOX 2180 HOUSTON, TX 77252-2180 PENNZOIL E&P WILL D MCCROCKLIN POBOX 2967 HOUSTON, TX 77252-2967 CHEVRON CHEM CO LIBRARY & INFO CTR POBOX 2100 HOUSTON, TX 77252-9987 MARATHON Ms. Norma L. Calvert POBOX 3128, Ste 3915 HOUSTON, TX 77253-3128 ACE PETROLEUM COMPANY ANDREW C CLIFFORD PO BOX 79593 HOUSTON, TX 77279-9593 PHILLIPS PETR CO ERICH R. RAMP 6330 W LOOP SOUTH BELLAIRE, TX 77401 PHILLIPS PETR CO PARTNERSHIP OPRNS JIM JOHNSON 6330 W LOOP S RM 1132 BELLAIRE, TX 77401 ) ) PHILLIPS PETR CO JOE VOELKER 6330 W LP S RM 492 BELLAIRE, TX 77401 TEXACOINC R Ewing Clemons POBOX 430 BELLAIRE, TX 77402-0430 WATTY STRICKLAND 2803 SANCTUARY CV KATY, TX 77450-8510 TESORO PETR CORP LOIS DOWNS 300 CONCORD PLAZA DRIVE SAN ANTONIO, TX 78216-6999 INTL OIL SCOUTS MASON MAP SERV INC POBOX 338 AUSTIN, TX 78767 ROBERT G GRAVELY 7681 S KIT CARSON DR LITTLETON, CO 80122 DIANE SUCHOMEL 1 0507D W MAPLEWOOD DR LITTLETON, CO 80127 GEORGE G VAUGHT JR POBOX 13557 DENVER, CO 80201 AMOCO PROD CO LIBRARY RM 1770 JILL MALLY 1670 BROADWAY DENVER, CO 80202 C & R INDUSTRIES, INC. KURT SALTSGAVER 1801 BROADWAY STE 1205 DENVER, CO 80202 ) ') BABCOCK & BROWN ENERGY, INC. JULIE WEBER 600 17TH STREET STE. 2630 SOUTH TOWER DENVER, CO 80210 US GEOLOGICAL SURVEY LIBRARY BOX 25046 MS 914 DENVER, CO 80225-0046 JERRY HODGDEN GEOL 408 18TH ST GOLDEN, CO 80401 NRG ASSOC RICHARD NEHRING POBOX 1655 COLORADO SPRINGS, CO 80901-1655 RUBICON PETROLEUM, LLC BRUCE I CLARDY SIX PINE ROAD COLORADO SPRINGS, CO 80906 JOHN A LEVORSEN 200 N 3RD ST #1202 BOISE, 10 83702 RUI ANALYTICAL JERRY BERGOSH POBOX 58861 SALT LAKE CITY, UT 84158-0861 TAHOMA RESOURCES GARY PLAYER 1671 WEST 546 S CEDER CITY, UT 84720 US GEOLOGICAL SURVEY LIBRARY 2255 N GEMINI DR FLAGSTAFF, AZ 86001-1698 MUNGER OIL INFOR SERV INC POBOX 45738 LOS ANGELES, CA 90045-0738 ) ') LA PUBLIC LIBRARY SERIALS DIV 630 W 5TH ST LOS ANGELES, CA 90071 BABSON & SHEPPARD JOHN F BERGQUIST POBOX 8279 VI KI NG STN LONG BEACH, CA 90808-0279 ANTONIO MADRID POBOX 94625 PASADENA, CA 91109 ORO NEGRO, INC. 9321 MELVIN AVE NORTHRIDGE, CA 91324-2410 76 PRODUCTS COMPANY CHARLES BURRUSS RM 11-767 555 ANTON COSTA MESA, CA 92626 TEXACOINC Portfolio Team Manager R W HILL POBOX 5197x Bakersfield, CA 93388 US GEOLOGICAL SURVEY KEN BIRD 345 MIDDLEFIELD RD MS 999 MENLO PARK, CA 94025 SHIELDS LIBRARY GOVT DOCS DEPT UNIV OF CALIF DAVIS, CA 95616 H L WANGEN HElM 5430 SAWMILL RD SP 11 PARADISE, CA 95969-5969 ECONOMIC INSIGHT INC SAM VAN VACTOR POBOX 683 PORTLAND, OR 97207 ) ) US EPA REGION 10 THOR CUTLER OW-137 1200 SIXTH AVE SEATTLE, WA 98101 MARPLES BUSINESS NEWSLETTER MICHAEL J PARKS 117 W MERCER ST STE 200 SEATTLE, WA 98119-3960 DEPT OF REVENUE OIL & GAS AUDIT DENISE HAWES 550 W 7TH A V STE 570 ANCHORAGE, AK 99501 FAIRWEATHER E&P SERV INC JESSE MOHRBACHER 7151ST #4 ANCHORAGE, AK 99501 GUESS & RUDD GEORGE LYLE 510 L ST, STE 700 ANCHORAGE, AK 99501 STATE PIPELINE OFFICE LIBRARY KATE MUNSON 411 W 4TH AVE, STE 2 ANCHORAGE, AK 99501 TRUSTEES FOR ALASKA 725 CHRISTENSEN DR STE 4 ANCHORAGE, AK 99501 DUSTY RHODES 229 WHITNEY RD ANCHORAGE, AK 99501 FORCENERGY INC. JIM ARLINGTON 310 K STREET STE 700 ANCHORAGE, AK 99501 DEPT OF REVENUE BEVERLY MARQUART 550 W 7TH A V STE 570 ANCHORAGE, AK 99501 ) ) YUKON PACIFIC CORP JOHN HORN VICE CHM 1049 W 5TH AV ANCHORAGE, AK 99501-1930 PRESTON GATES ELLIS LLP LIBRARY 420 L ST STE 400 ANCHORAGE, AK 99501-1937 ALASKA DEPT OF LAW ROBERT E MINTZ ASST ATTY GEN 1031 W 4TH AV STE 200 ANCHORAGE, AK 99501-1994 GAFO GREENPEACE PAMELA MILLER 125 CHRISTENSEN DR. #2 ANCHORAGE, AK 99501-2101 DEPT OF NATURAL RESOURCES DIV OF OIL & GAS TIM RYHERD 550 W 7th AVE STE 800 ANCHORAGE, AK 99501-3510 DEPT OF REVENUE OIL & GAS AUDIT FRANK PARR 550 W 7TH AVE STE 570 ANCHORAGE, AK 99501-3540 BRISTOL ENVIR SERVICES JIM MUNTER 2000 W. INT'L AIRPORT RD #C-1 ANCHORAGE, AK 99502-1116 N-I TUBULARS INC 3301 C Street Ste 209 ANCHORAGE, AK 99503 ANADARKO MARK HANLEY 3201 C STREET STE 603 ANCHORAGE, AK 99503 HDR ALASKA INC MARK DALTON 2525 C ST STE 305 ANCHORAGE, AK 99503 ) ) BAKER OIL TOOLS ALASKA AREA MGR 4710 BUS PK BLVD STE 36 ANCHORAGE, AK 99503 ) ) ALASKA OIL & GAS ASSOC JUDY BRADY 121 W FIREWEED LN STE 207 ANCHORAGE, AK 99503-2035 ANADRILL-SCHLUMBERGER 3940 ARCTIC BLVD #300 ANCHORAGE, AK 99503-5711 AKJOURNALOFCOMMERCE OIL & INDUSTRY NEWS ROSE RAGSDALE 4220 B Street Ste #210 ANCHORAGE, AK 99503-5911 DEPT OF NATURAL RESOURCES DIV OF OIL & GAS JAMES B HAYNES NATURAL RESRCE MGR 3601 C ST STE 1380 ANCHORAGE, AK 99503-5948 DEPT OF NATURAL RESOURCES DIV OF OIL & GAS JULIE HOULE 3601 C ST STE 1380 ANCHORAGE, AK 99503-5948 DEPT OF NATURAL RESOURCES DIV OIL & GAS WILLIAM VAN DYKE 3601 CST STE 1380 ANCHORAGE, AK 99503-5948 DEPT OF NATURAL RESOURCES DIV OF OIL & GAS BRUCE WEBB 3601 CST STE 1380 ANCHORAGE, AK 99503-5948 DEPT OF NATURAL RESOURCES DIV OF OIL & GAS JIM STOUFFER 3601 C STREET STE 1380 ANCHORAGE, AK 99503-5948 DEPT OF NATURAL RESOURCES PUBLIC INFORMATION CTR 3601 C STREET STE 200 ANCHORAGE, AK 99503-5948 FINK ENVIRONMENTAL CONSULTING, INC. THOMAS FINK, PHD ) 6359 COLGATE DR. ANCHORAGE, AK 99504-3305 ') ARLEN EHM GEOL CONSL TNT 2420 FOXHALL DR ANCHORAGE, AK 99504-3342 JAMES E EASON 8611 LEEPER CIRCLE ANCHORAGE, AK 99504-4209 US BUREAU OF LAND MNGMNT ANCHORAGE DIST OFC DICK FOLAND 6881 ABBOTT LOOP RD ANCHORAGE, AK 99507 STU HIRSH 9630 BASHER DR. ANCHORAGE, AK 99507 AMERICA/CANADIAN STRA TIGRPH CO RON BROCKWAY 4800 KUPREANOF ANCHORAGE, AK 99507 RUSSELL DOUGLASS 6750 TESHLAR DR ANCHORAGE, AK 99507 US BUREAU OF LAND MNGMNT ANCHORAGE DIST OFC PETER J DITTON 6881 ABBOD LOOP ROAD ANCHORAGE, AK 99507 US BLM AK DIST OFC RESOURCE EVAL GRP ART BONET 6881 ABSOD LOOP RD ANCHORAGE, AK 99507-2899 TRADING BAY ENERGY CORP PAUL CRAIG 5432 NORTHERN LIGHTS BLVD ANCHORAGE, AK 99508 THOMAS R MARSHALL JR 1569 BIRCHWOOD ST ANCHORAGE, AK 99508 ) ') UNIVERSITY OF ALASKA ANCHORAGE INST OF SOCIAL & ECON RESEARCH TERESA HULL 3211 PROVIDENCE DR ANCHORAGE, AK 99508 US MIN MGMT SERV AK OCS REGIONAL DIR 949 E 36TH AV RM 110 ANCHORAGE, AK 99508-4302 US MIN MGMT SERV RESOURCE STUDIES AK OCS REGN KIRK W SHERWOOD 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4302 US MIN MGMT SERV RICHARD PRENTKI 949 E 36TH AV ANCHORAGE, AK 99508-4302 GORDON J. SEVERSON 3201 WESTMAR CIR ANCHORAGE, AK 99508-4336 US MIN MGMT SERV LIBRARY 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4363 US MI N MGMT SERV RESOURCE EVAL JIM SCHERR 949 E 36TH A V RM 603 ANCHORAGE, AK 99508-4363 US MIN MGMT SERV FRANK MILLER 949 E 36TH A V STE 603 ANCHORAGE, AK 99508-4363 REGIONAL SUPRVISOR, FIELD OPERATNS MINERALS MANAGEMENT SERVICE ALASKA OCS REGION 949 E 36TH A V STE 308 ANCHORAGE, AK 99508-4363 JOHN MILLER 3445 FORDHAM DR ANCHORAGE, AK 99508-4555 ) ) USGS - ALASKA SECTION LIBRARY 4200 UNIVERSITY DR ANCHORAGE, AK 99508-4667 CIRI LAND DEPT POBOX 93330 ANCHORAGE, AK 99509-3330 ANCHORAGE TIMES BERT TARRANT POBOX 100040 ANCHORAGE, AK 99510-0040 ARCO ALASKA INC JOANN GRUBER ATO 712 POBOX 1 00360 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC LEGAL DEPT MARK P WORCESTER POBOX 100360 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC STEVE BENZLER A TO 1404 POBOX 100360 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC LIBRARY POBOX 100360 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC MARK MAJOR A TO 1968 POBOX 100360 ANCHORAGE, AK 99510-0360 ARCO ALASKA I NC LAND DEPT JAMES WINEGARNER POBOX 10036 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC SAM DENNIS ATO 1388 POBOX 100360 ANCHORAGE, AK 99510-0360 ARCO ALASKA INC SHELlAANDREWS ATO 1130 PO BOX 100360 ANCHORAGE, AK 99510-0360 PETROLEUM INFO CORP KRISTEN NELSON POBOX 102278 ANCHORAGE, AK 99510-2278 ARCO ALASKA INC KUP CENTRAL WELLS ST TSTNG WELL ENG TECH NSK 69 POBOX 196105 ANCHORAGE, AK 99510-6105 AL YESKA PIPELINE SERV CO CHUCK O'DONNELL 1835 S BRAGAW - MS 530B ANCHORAGE, AK 99512 AL YESKA PIPELINE SERV CO PERRY A MARKLEY 1835 S BRAGAW - MS 575 ANCHORAGE, AK 99512 AL YESKA PIPELINE SERV CO LEGAL DEPT 1835 S BRAGAW ANCHORAGE, AK 99512-0099 US BUREAU OF LAND MGMT OIL & GAS OPRNS (984) J A DYGAS 222 W 7TH A V #13 ANCHORAGE, AK 99513-7599 ANCHORAGE DAILY NEWS EDITORIAL PG EDTR MICHAEL CAREY POBOX 149001 ANCHORAGE, AK 99514 DAVID W. JOHNSTON 320 MARINER DR. ANCHORAGE, AK 99515 ) ) JWL ENGINEERING JEFF LIPSCOMB 9921 MAIN TREE DR. ANCHORAGE, AK 99516-6510 NORTHERN CONSULTING GROUP ROBERT BRITCH, P.E. 2454 TELEQUANA DR. ANCHORAGE, AK 99517 GERALD GANOPOLE CONSULT GEOL 2536 ARLINGTON ANCHORAGE, AK 99517-1303 ASRC CONRAD BAGNE 301 ARCTIC SLOPE AV STE 300 ANCHORAGE, AK 99518 DAVID CUSATO 600 W 76TH A V #508 ANCHORAGE, AK 99518 ARMAND SPIELMAN 651 HILANDER CIRCLE ANCHORAGE, AK 99518 HALLIBURTON ENERGY SERV MARK WEDMAN 6900 ARCTIC BLVD ANCHORAGE, AK 99518-2146 OPSTAD & ASSOC ERIK A OPSTAD PROF GEOL POBOX 190754 ANCHORAGE, AK 99519 JACK 0 HAKKILA POBOX 190083 ANCHORAGE, AK 99519-0083 ENSTAR NATURAL GAS CO BARRETI HATCHES POBOX 190288 ANCHORAGE, AK 99519-0288 ) ) MARATHON OIL CO BRAD PENN POBOX 196168 ANCHORAGE, AK 99519-6168 MARATHON OIL CO OPERATIONS SUPT POBOX 196168 ANCHORAGE, AK 99519-6168 UNOCAL POBOX 196247 ANCHORAGE, AK 99519-6247 UNOCAL KEVIN TABLER POBOX 196247 ANCHORAGE, AK 99519-6247 EXXONMOBIL PRODUCTION COMPANY MARK P EVANS PO BOX 196601 ANCHORAGE, AK 99519-6601 BP EXPLORATION (ALASKA), INC. MARK BERLINGER MB 8-1 PO BOX 196612 ANCHORAGE, AK 99519-6612 BP EXPLORATION (ALASKA) INC MR. DAVIS, ESQ POBOX 196612 MB 13-5 ANCHORAGE, AK 99519-6612 BP EXPLORATION (ALASKA) INC SUE MILLER POBOX 196612 MIS LR2-3 ANCHORAGE, AK 99519-6612 BP EXPLORATION (ALASKA) INC PETE ZSELECZKY LAND MGR POBOX 196612 ANCHORAGE, AK 99519-6612 BP EXPLORATION (ALASKA) INC INFO RESOURCE CTR MB 3-2 POBOX 196612 ANCHORAGE, AK 99519-6612 ) ., AMSINALLEE CO INC WILLIAM 0 VALLEE PRES PO BOX 243086 ANCHORAGE, AK 99524-3086 PINNACLE STEVE TYLER 20231 REVERE CIRCLE EAGLE RIVER, AK 99577 D A PLATT & ASSOC 9852 LITTLE DIOMEDE CIR EAGLE RIVER, AK 99577 L G POST O&G LAND MGMT CONSULT 10510 Constitution Circle EAGLE RIVER, AK 99577 DIANA FLECK 18112 MEADOW CRK DR EAGLE RIVER, AK 99577 DEPT OF NATURAL RESOURCES DGGS JOHN REEDER POBOX 772805 EAGLE RIVER, AK 99577-2805 COOK INLET VIGIL JAMES RODERICK POBOX 916 HOMER, AK 99603 COOK INLET KEEPER BOB SHA VELSON PO BOX 3269 HOMER, AK 99603 PHILLIPS PETR ALASKA OPERATIONS MANAGER J W KONST PO DRAWER 66 KENAI, AK 99611 RON DOLCHOK POBOX 83 KENAI, AK 99611 ) ) DOCUMENT SERVICE CO JOHN PARKER POBOX 1468 KENAI, AK 99611-1468 KENAI PENINSULA BOROUGH ECONOMIC DEVEL DISTR STAN STEADMAN POBOX 3029 KENAI, AK 99611-3029 NANCY LORD PO BOX 558 HOMER, AK 99623 PENNY VADLA POBOX 467 NINILCHIK, AK 99639 BELOWICH COAL CONSULTING MICHAEL A BELOWICH HC31 BOX 5157 WASILLA, AK 99654 PACE SHEILA DICKSON POBOX 2018 SOLDOTNA, AK 99669 JAMES GIBBS POBOX 1597 SOLDOTNA, AK 99669 KENAI NATL WILDLIFE REFUGE REFUGE MGR POBOX 2139 SOLDOTNA, AK 99669-2139 VALDEZ PIONEER POBOX 367 VALDEZ, AK 99686 AL YESKA PIPELINE SERVICE CO VALDEZ CORP AFFAIRS SANDY MCCLINTOCK POBOX 300 MS/701 VALDEZ, AK 99686 ) ) VALDEZ VANGUARD EDITOR POBOX 98 VALDEZ, AK 99686-0098 NICK STEPOVICH 543 2ND AVE FAIRBANKS, AK 99701 UNIV OF ALASKA FAIRBANKS PETR DEVEL LAB DR V A KAMATH 427 DUCKERING FAIRBANKS, AK 99701 RICK WAGNER POBOX 60868 FAIRBANKS, AK 99706 JACK HAKKILA POBOX 61604 FAIRBANKS, AK 99706-1604 FAIRBANKS DAILY NEWS-MINER KATE RIPLEY POBOX 70710 FAIRBANKS, AK 99707 C BURGLlN POBOX 131 FAIRBANKS, AK 99707 FRED PRATT POBOX 72981 FAIRBANKS, AK 99707-2981 DEPT OF NATURAL RESOURCES DIV OF LAND REG MGR NORTHERN REGION 3700 AIRPORT WAY FAIRBANKS, AK 99709-4699 K&K RECYCL INC POBOX 58055 FAIRBANKS, AK 99711 ) ) ASRC BILL THOMAS POBOX 129 BARROW, AK 99723 RICHARD FINEBERG POBOX 416 ESTER, AK 99725 UNIV OF ALASKA FBX PETR DEVEL LAB SHIRISH PATIL 437 DICKERING FAIRBANKS, AK 99775 UNIVERSITY OF ALASKA FBKS PETR DEVEL LAB DR AKANNI LAWAL POBOX 755880 FAIRBANKS, AK 99775-5880 SENATOR LOREN LEMAN STATE CAPITOL RM 113 JUNEAU, AK 99801-1182 DEPT OF ENVIRON CONSERV SPAR CHRIS PACE 410 WILLOUGHBY AV STE 105 JUNEAU, AK 99801-1795 ') ) ) Ancho'rage-Daily News Affidavit of Publication 1001 Northway Drive, Anchorage, AK 99508 ) ()\- t· AD# DATE PURCHASE ORDER EDITION ACCOUNT PRICE PER DAY 676764 12/6/200 02114008 DN $TOF0330 $69.66 $69.66 STATE OF ALASKA THIRD JUDICIAL DISTRICT Amy Heath, being first duly sworn on oath deposes and says that she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid:elace of publication of said newspaper. That the annexed is a copy of an advertisement as it was pUDlished in regular issues (and- not in supplemental form) of said newspaper on the above dates and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private indIviduals. Signed C~ i¥Po.t4 (::f~~O;:1!~;::"i"( . AI!:I,~k:~ Oil Qnd,Gas'Con- ! ~~ryafi'pn. ço,n1mrssiol'1 I ;-..':' ,I"',,:":I'I"',',I!'¡\, ',.'1 , !'~~'::i!~~st FOr~la;'d ,Field I, Forcenergv"~'í nc;,bY"et~ :. ter dated Noven;1l:>er 30" i 2000, has requested an or. . der allowing the 'omend-' " ment of Conserv.atlC;1n N, Q." 450 (CO 450) to elther'es- ; tablisl1,a,p\!1rmanent s:ac- I in g ex c e~ti o.nfo'r:"t h e' Forcen,er~Y W.estF,ote- land #1 WÈiIl and termi- nate For;ca.ner!1l,y's'es- crow obligation, pursuant toparqgraph La anQ 1 q oftheterms and",col:lc{¡,: tion,sOf ICO ASO, ' or' rev:ise' the dat,~ <by' Wh,¡ICh, Forcenergv shall deposit ' ~~3~:.in:the ,E:~crow.:~c:-,' r ~:",'::'.'.,::~", ~,.\::',l"'. """"';'\.'" ,':'::" I:' ,!,:"";:\,,,"/i,': ,:';.~' ,,"> -r'i1'è···Cö~,ijti~s·t!ift·-ri~~~)·' a p IIb.'1 r::.lre.o· r I.n'g;o n . Forcenery's: req ue-s't' 'for' 9:00 A'v\ Jdnuarv 9 2001 at 333 .IIIIt'sr 'Ih A lie :)UIIE- 100 ð¡nc"ol"ag"':'lo~ka 9~501 In aaa.r ion a eE-r. son ma, "IIDmlr a wrll- ,..r. eror....' or CommE'nl~, I on tne reqllesfea omt'na, , mE-/'II erl(lr '(I J OD PM On ' Januar, 9 2001. I I " ",': I . 'tv.ou. ~rea person with a. ~'~~i:tr.. WMmQ)"n~d a speCla modif,Icationin order to comment or'tci attend, thepu b II chearing; please contac,t Diana Flec.kat 793+122lbefÒre' Januarv3,2Q01. '. .... Danierr. Sèamount, Jr Coml1'1Jssioner " Pub: Dec 6,2000 Subscribed and sworn to me before this date: ~ ~QX",_J,~~ ,,\ '\ o-c:cs-o Notary Public in and for the State of Alaska. Third Division. Anchorage, Alaska MY COMMISSION EXPIRES: à·e9-:;:>- ~~ Q-o(J"f ç---,--y-e~ (D¿~'P--º-- 1 '\ \. ' \.\.\ \ . \~. ' \.. . ::;~ : . \~.'< '-- '- '- . , ".- \~":,!( / '':r,---- ',\~ ~ .-- ,~". l::,· -- ~-\ . . -;:'¡" . ..t::- -,,~~ ~,(~, ~ '. \(. ~ c.~- . 0 \:..... . "" <\.: ," ,,'" ", \ "\\\ : ) I ) \"\ ' ......- ......- ./ ~ /..... . ./'/J) I ./, #1 ) ) ~ Forcenergy Inc November 30,2000 Commissioner Cammie Oechsli Taylor Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage,AJe 99501 Commissioner Daniel C. Seamont, Jr. Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive J\nchorage,AJe 99501 Commissioner Julie M. Heusser Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501 Re: West Foreland Field; Conservation Order No. 450 Dear Commissioners: Pursuant to our teleconference several weeks ago, please accept this letter as the request of F orcenergy Inc ("F orcenergy") to schedule a hearing with the Alaska Oil and Gas Conservation Commission ("AOGCC"), as soon as the law will allow, for the purpose of amending the referenced Conservation Order. The amendment will either establish a permanent spacing exception and terminate Forcenergy's escrow obligation, pursuant to paragraph 1.a and 1.d of the terms and conditions of Conservation Order 450, or revise the date by which Forcenergy shall deposit funds in the Escrow Account. The determination as to which amendment will be requested during the hearing will depend upon the status of negotiations regarding the Compensatory Royalty Agreement. Once a date is established by the AOGCC for the hearing, Forcenergy will provide royalty owners in both leases affected by the gas production from the WF #1 well with personal notice of said hearing, as provided for in paragraph l.d of Conservation Order 450. Forcenergy respectfully requests that the AOGCC immediately prepare a public notice for public hearing regarding the proposed amendment to Conservation Order 450. If you have any questions regarding this letter and request, please feel free to call me at 258-8600. Sincerely, ~lington Land Manager- Alaska Division Cc: Gary Carlson RECEIVED NOV 30 2000 Alaska Oil & Gas Cons. Commission Anchorage