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CO 566
e e 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. C. () \..l:) (P V> Order File Identifier Organizing (done) ~wo-Sided 111111111111111111I o Rescan Needed 1IIIIII111111111111 RESCAN ¢olor Items: o Greyscale Items: DIGITAL DATA OVERSIZED (Scannable) o Maps: o Other Items Scannable by a Large Scanner o Diskettes, No. D Other, No/Type: D Poor Quality Originals: OVERSIZED (Non-Scannable) D Other: D Logs of various kinds: NOTES: o Other:: BY: ~ Date: c¡ /7/ /)(0 Isl MP Date cr,7 JOb 1111111111111111111 Project Proofing BY: (~ Mariy - . /s/ ~,p Scanning Preparation BY: ~ x 30 = + = TOTAL PAGES ~15' if (Count does not i~~~ude cover sheet) lA1P 1111111111111111111 ' Date: q /7/ Ob Production Scanning Stage 1 Page Count from Scanned File: ~ g S (Count does include cover sheet) Page Count Matches Number in Scanning Preparation: V YES BY: ~ Date: ~/7/D" Stage 1 If NO in stage 1, page(s) discrepancies were found: YES NO /s/ VV1 P NO BY: Maria Date: Isl 1111111111111111111 Scanning is complete at this point unless rescanning is required, ReScanned 1111111111111111111 BY: Maria Date: /s/ Comments about this file: Quality Checked 1111111111111111111 10/6/2005 Orders File Cover Page.doc • • CONSERVATION ORDER 566 Kustatan #1 Well Spacing Exception and Enforcement Action 1. February 23, 2006 AOGCC Notice of Violation to Forest Oil 2. February 23, 2006 E -mail from Forest to AOGCC requesting a informal review with AOGCC's response 3. February 24, 2006 Forest Oil's submittal for informal review (enclosures are Confidential) 4. February 24, 2006 Forest Oil's requests and conclusions request for a spacing exception 5. February 24, 2006 Sign in sheet 6. February 24, 2006 Notice of Hearing, Affidavit of Publication, email and mailing list 7. February 24, 2006 Email from Forest to AOGCC with AOGCC's response 8. February 24, 2006 Forest Oil's verification of facts and affidavit of Jim Arlington 9. February 28, 2006 Copy of Forest Oil's letters and Waiver Election Options the surface owners 10. February 28, 2006 Email from AOGCC to Forest re: total compressibility (Confidential Proprietary) 11. March 2, 2006 Forest Oil's request for an informal review 12. March 2, 2006 DNR's letter of Non - Objection for Kustatan Field #1 Well 13. March 2, 2006 Russian Orthodox Church's letter of Non - Objection for Kustatan Field #1 Well 14. March 3, 2006 Ciri's letter of Non - Objection for Kustatan Field #1 Well 15. March 3, 2006 Sign in Sheet 16. March 10, 2006 Email re: due date of Forest's response to enforcement action 17. March 13, 2006 Guess & Rudd NOV response 18. March 16, 2006 Email re: Informal conference request 19. March 17, 2006 Email re: KF #1 water level 20. March 17, 2006 Email comments form Rob Mintz 21. March 17, 2006 Response letter to Guess & Rudd re: NOV 22. March 17, 2006 Interim order 23. March 18, 2006 Email with Attachments from Forest Oil regarding interim order 24. March 28, 2006 Forest Oil Corp., Pre - hearing Brief 25. March 28, 2006 Email re: Distances at KF1 26. March 28, 2006 Forest Oil Corp., Transcript w /attach (Confidential) 27. March 28, 2006 Sign in sheet for Hearing 28. March 28, 2006 Transcript w /attch 29. April 3, 2006 Notice of Hearing, Affidavit of Publication, email and mailing list 30. April 3, 2006 Notice of Hearing, Affidavit of Service 31. April 6, 2006 Email request from AOGCC to Forest re: point of contact 32. April 9, 2006 Petroleum News Article 33. May 31, 2006 Initial Lease Plan of Development & Operations 34. June 2, 2006 Forest Oil Corp. response to AOGCC Questions of 4/6/06 35. June 2, 2006 AOGCC ltr to Forest re: Lack of Response Concerning Commissions Questions and Data Requests 36. June 8, 2006 Email from AOGCC to Forest re: review of basemap and seismic information 37. June 16, 2006 1 Plan of Development for the Kustatan Field #1 Well 38. June 19, 2006 Sign in Sheet for Public Hearing 39. June 19, 2006 Transcript 40. June 20, 2006 Forest Oil's Seismic Plat Map 41. Annual Reservoir Review CONSERVATION ORDER 566 . . STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICATION OF FOREST OIL CORPORATION for an order granting an exception to the spacing requirements of20 AAC 25.055(a)(2) and 25.055(b) for Kustatan Field No. 1 Well and THE MOTION OF THE COMMISSION to classify the pool as a gas pool and to establish a drilling unit for the Kustatan Field No.1 Well. IT APPEARING THAT: ) Conservation Order No. 566 ) ) Kustatan Field # 1 Gas Pool ) Kustatan Field ) August 24, 2006 ) ) ) ) ) 1. By certified letter dated February 23, 2006, the Alaska Oil and Gas Conservation Commission ("Commission") notified Forest Oil Corporation ("Forest"), as the designated operator, that the Kustatan Field No. 1 ("KF #1") gas well was producing in violation of the well spacing requirements of 20 AAC 25.055(a)(2) and the drilling unit requirements of 20 AAC 25.055(b). The Commission informed Forest that the regulations required the KF #1 well to be shut in immediately. 2. By application dated February 24, 2006, Forest requested an order from the Commission to exempt the KF # 1 well from the well spacing requirements of 20 AAC 25.055(a)(2) and the drilling unit requirements of 20 AAC 25.055(b). Concurrently, Forest requested an order from the Commission for a stay of its directive to shut in the KF #1 well immediately. 3. Notice of public hearing was published in the Anchorage Daily News on February 25, 2006. 4. The Commission requested additional information from Forest on February 27, 2006, and received additional information from Forest on February 24, and 28, 2006, March 3, 17, and 28, 2006. 5. The Commission received letters from all potentially affected landowners stating that they did not object to Forest's application. 6. The Commission issued an Interim Order, Conservation Order 566, on March 17, 2006, granting a temporary spacing exception to allow Forest to return the well to production. 7. The Commission held a public hearing March 28, 2006, at 1 :30 PM at the Conservation Order 566. August 24, 2006 . Page 2 Commission's Office at 333 West 7th Avenue, Suite 100, Anchorage, Alaska. The Commission continued the hearing to June 19, 2006 at 1 :30 pm. 8. Notice of the continued hearing and the motion of the Commission to classify the pool as a gas pool and to prescribe rules to govern the proposed development and operation of the pool, specifically including establishing a drilling unit for the Kustatan Field #1 well that is coincident with the productive limits of the pool, was published in the Anchorage Daily News on April 3, 2006. 9. The Commission requested additional information from Forest on April 6, and June 2, 2006 and received additional information from Forest on June 2 and 20, 2006. 10. The Commission held a public hearing June 19, 2006 at 1 :30 pm at the Commission's Office at 333 West 7th Avenue, Suite 100, Anchorage, Alaska. FINDINGS: 1. Operator: Forest is the Operator of lease ADL 390368 upon which the KF #1 well was drilled. 2. Development Area: The proposed Kustatan Field #1 Gas Pool lies within State of Alaska Lease ADL 390368 on the western shore of the Cook Inlet of Alaska. KF #1 is the only well planned for development of this gas pool. 3. Owners and Landowners: All lands encompassing the proposed gas pool are owned and operated by Forest. The potentially affected landowners, those within a 3,000' radius of the well, are the State of Alaska, Cook Inlet Region, Inc., the Diocese of Sitka and Alaska, Orthodox Russian Church in America, Inc., First National Bank of Alaska, and the U.S. Department ofthe Interior, Bureau of Land Management. Forest sent notice of its application to these entities by certified mail on February 24, 2006. 4. Delineation History: Forcenergy, Inc., the predecessor of Forest, drilled the KF #1 as an exploratory oil well in 2000. This is the only well drilled in the proposed Kustatan Field #1 Gas Pool. Geologic structure and reservoir distribution have been established using two-dimensional seismic, well, pressure and production data. Production tests, pressure transient tests, well log data, and Repeat Formation Tester data have been used to establish reservoir properties. 5. Well History: KF # 1 did not encounter commercial quantities of oil, and it was completed as a Class II waste disposal well in 2003. Injection into the well began during April 2003 and ended in November 2004. The well was subsequently re- completed as a gas well and began regular production on November 14,2005. KF #1 lies within 1,500' of a property line where ownership changes. Recompletion of KF #1 as a gas well without a spacing exception violated regulation 20 AAC 25.055(2). Regular production from KF #1 without a poling agreement in place violated regulation 20 AAC 25.055(b). On February 24, 2006, the Commission provided a notice of violation of well spacing and pooling requirements to Forest. On that same day, Forest shut the well in pursuant to the Commission's Notice of Conservation Order 566. August 24, 2006 . Page 3 Violation. On March 17, 2006, the Commission issued Conservation Order No. 566 granting interim relief to Forest and allowing KF #1 to resume production to avoid potential damage to the reservoir and loss of reserves. 6. Pool Identification: The proposed Kustatan Field #1 Gas Pool is the accumulation of hydrocarbons common to, and correlating with, the interval between 5,352' and 5,385' measured depth ("MD") in the KF #1 well. 7. Stratigraphy/Reservoir Properties: Stratigraphy: Cuttings samples recovered from the Kustatan Field #1 Gas Pool consist of fine to medium-grained, quartz-rich sandstone assigned to the Tertiary- aged Tyonek formation. Clay matrix material and calcite fragments are common. Well log data recorded from KF #1 show that the pool can be divided into two intervals: the lower, primary reservoir interval, which lies between 5,385' and 5,367' MD, and the upper, secondary reservoir interval from 5,367' to 5,352' MD. The best quality reservoir rock occurs in the lower, primary reservoir interval, which is 18' thick. Gamma ray measurements show that the sediments of this interval clearly coarsen upward. The coarsest sediments, occurring between 5,371' and 5,367' MD, appear to be cemented with calcite. Density and neutron measurements and mud log descriptions for the remainder of this interval, between 5,385' and 5,371' MD, suggest the reservoir sediments consist of interbedded sandstone, siltstone and claystone. For this interval, the operator estimates 24% porosity, an average water saturation of 40%, and net pay thickness ranging between about 10' and 14'. The upper, secondary interval is 15' thick, but is of much poorer reservoir quality. Gamma ray measurements suggest that the rock in this interval is layered, and generally consists of much finer sized grains than the primary reservoir interval. The secondary interval decreases in grain size upward and is layered. The lower 7'of this interval appears to be silty sandstone interbedded with siltstone, which grades upward into 8' of interbedded siltstone and claystone. The operator considers this interval to be shaley, and a poor contributor to production from the pool. 8. Structure and Trap: The Kustatan Field # 1 Gas Pool structure consists of a closure against a north- bounding fault. The operator estimates the area under the closure to be about 50 acres. The proposed gas pool is bounded below by a 5-foot thick coal bed that is in turn underlain by 26' of tuffaceous claystone. The pool is bounded above by 16' of tuffaceous claystone. 9. In-Place and Recoverable Gas Volume Estimates: Conservation Order 566. August 24,2006 . Page 4 Static and flowing material balance analyses yield original gas in place estimates of 0.55 and 0.56 billion standard cubic feet ("BSCF"), respectively, in this normally pressured reservoir. Volumetric calculations by Forest yield an original gas in place estimate of about 0.75 BSCF, assuming a gas expansion factor of 171 standard cubic feet per reservoir cubic foot. However, Forest believes the volumetric calculation method to be less accurate than either the static or flowing material balance methods. Based on the gas in place estimates above and Forest's recovery factor of 80%, recoverable gas is expected to range between 0.45 and 0.6 BSCF. Based on seismic, well log, and production data Forest believes that the entire gas accumulation lies fully within the boundaries of lease ADL 390368; specifically those portions of ADL390368 lying within the following portions of Section 4: S/2 of NW/4, NI2 of SW/4, N/2 of S/2 of SW/4, WI2 ofNW/4 of SE/4, NW/4 of the SW/4 ofSE/4, T7N, R14W. 10. Production History: The peak production rate from the pool was approximately 1.85 million standard cubic feet of gas per day, and the cumulative production through June 12, 2006, was 183.3 million standard cubic feet. 11. Reservoir Development Drilling Plan: KF #1 is the only development well planned for the Kustatan Field # 1 Gas Pool. 12. Reservoir Management: Forest is developing this gas pool through blowdown. No additional wells are planned for the development of the Kustatan Field #1 Gas Pool. No pressure maintenance or enhanced recovery operations are planned. 13. Reservoir surveillance plans: Forest has proposed no reservoir surveillance plans other than those required by Commission regulations. 14. Wellbore Construction: KF #1 was drilled and completed in accordance with Commission regulations with regard to wellbore construction. 15. Waivers: Forest requests the Commission grant waivers for: a. Well Spacing: allowing regular production of a gas well within 1,500' of a property line. b. Drilling Unit: allowing regular production of a gas well from a property that is smaller than the governmental section upon which the well is located. 16. Sustained Casing Pressure Rules: The Commission has adopted a series of orders addressing sustained casing pressures for all active wells in Alaska. The KF #1 well will be operated under similar conditions and similar rules are appropriate for this development. Conservation Order 566. August 24, 2006 CONCLUSIONS: 1. The KF # 1 well was originally permitted and drilled as an oil well and complied with Commission spacing and pooling requirements. Subsequent re-completion of the well as a gas well caused the well to fall out of compliance with statewide spacing regulations. . Page 5 2. Seismic, well log, pressure transient and production data indicate that the Kustatan Field # 1 Gas Pool is a very small accumulation that does not extend beyond the boundaries of lease ADL 390368. Therefore, under AS 31.05.100 and 20 AAC 25.055, it is appropriate to establish a pool-specific drilling unit for the Kustatan Field # 1 Gas Pool. 3. Establishing a drilling unit size smaller than one governmental section for the Kustatan Field #1 Gas Pool will not promote waste nor jeopardize correlative rights. 4. Pool Rules for the development of the Kustatan Field #1 Gas Pool within the Kustatan Field are appropriate at this time. 5. Waiver of the property line set-back requirements of 20 AAC 25.055(a)(2) will not promote waste nor jeopardize correlative rights. 6. Monitoring reservoir performance will ensure proper management of the pool. Annual reports and technical review meetings will keep the Commission apprised of reservoir performance and will ensure that future development plans promote greater ultimate recovery. NOW, THEREFORE, IT IS ORDERED: The development and operation of the Kustatan Field #1 Gas Pool, within the affected area, is subject to the following rules and the statewide requirements under 20 AAC 25 to the extent not superseded by these rules: Affected Area: Seward Meridian Township I Range T7N, R14W Sections Those portions of ADL390368 lying within the following portions of Section 4: S/20fNW/4 N/2 ofSW/4 N/2 ofS/2 ofSW/4 W/2 ofNW/4 of SE/4 NW/4 of the SW/4 ofSE/41 Conservation Order 566. August 24, 2006 . Page 6 Rule 1 Field and Pool Name The field is the Kustatan Field. Hydrocarbons underlying the affected area and within the herein defined interval of the Tyonek formation constitute the Kustatan Field # 1 Gas Pool. Rule 2 Pool Definition The Kustatan Field #1 Gas Pool is the accumulation of hydrocarbons common to, and correlating with, the interval between 5,352' and 5,385' measured depth in the KF #1 well. Rule 3 Drilling Unit Extent. Well Spacing and Gas Pooling The drilling unit for the Kustatan Field #1 Gas Pool shall correspond to the affected area of this order, which totals approximately 210 acres. Not more than one well may be completed in the Kustatan Field #1 Gas Pool. If additional information is obtained that indicates the Kustatan Field #1 Gas Pool may extend beyond the affected area described above, the operator must notify the Commission by the close of the following business day. The Commission will take the necessary steps to ensure that resources are not being wasted and correlative rights are being protected. Rule 4 Common Production Facilities and Surface Commingling Production from the Kustatan Field # 1 Gas Pool shall be metered by a dedicated custody transfer metering system prior to entering the gas gathering system on the west side of Cook Inlet. Rule 5 Reservoir Pressure Monitoring a. The Operator shall obtain pressure surveys as needed to effectively manage hydrocarbon recovery processes subject to an annual plan outlined in paragraph (d) of this rule. b. The reservoir pressure datum will be 5,353' MD in the KF #1 well for the Kustatan Field # 1 Gas Pool. c. Pressure surveys may consist of stabilized static pressure measurements at bottomhole, pressure fall-off, pressure buildup, multi-rate tests, or other appropriate technical pressure transient or static tests. d. Data from the surveys required in this rule shall be filed with the Commission by April 1 of the year following the year in which the surveys are conducted. Along with the survey submittal, the operator will provide a proposed survey plan for the upcoming year. The proposed plan shall be deemed accepted if the operator has not received written correspondence from the Commission within 45 days. e. Reservoir Pressure Report, Form 10-412, shall be utilized for all surveys Conservation Order 566. August 24, 2006 . Page 7 with attachments for complete additional data. Data submitted shall include, but are not limited to, rate, pressure, depth, fluid gradient, temperature, and other well conditions necessary for complete analysis of each survey being conducted. f. Results and data from special reservoir pressure monitoring tests or surveys shall also be submitted in accordance with paragraph (d) of this rule. Rule 6 Annual Reservoir Review Forest must provide a report from start-of-production to April 1, 2006. An annual report must be filed on or before April 1 of each year. The report shall include an overview of reservoir performance, future development and reservoir depletion plans, and surveillance information for the prior calendar year, including: a. Reservoir pressure maps at datum; b. Summary and analysis of reservoir pressure surveys; c. Estimates of reservoir pressure; d. Results and, where appropriate, analysis of production, temperature, tracer surveys, observation well surveys, and any other special monitoring surveys; e. Estimates of yearly production; f. Progress of plans and tests to expand the productive limits of the pool; and g. Results of surface safety valve testing. Rule 7 Well Mechanical Integrity and Annulus Pressures a. At the time of installation or replacement, the operator shall conduct and document a pressure test of tubulars and completion equipment in each development well that is sufficient to demonstrate that planned well operations will not result in failure of well integrity, uncontrolled release of fluid or pressure, or threat to human safety. b. The operator shall monitor each development well daily to check for sustained pressure, except if prevented by extreme weather conditions, emergency situations, or similar unavoidable circumstances. Monitoring results shall be made available for Commission inspection. c. The operator shall notify the Commission within three working days after the operator identifies a well as having (1) sustained inner annulus pressure that exceeds 2,000 psig, or (2) sustained outer annulus pressure that exceeds 1,000 psig. Conservation Order 566. August 24, 2006 . Page 8 d. The Commission may require the operator to submit in an Application for Sundry Approvals (Form 10-403) a proposal for corrective action or increased surveillance for any development well having sustained pressure that exceeds a limit set out in paragraph (c) of this rule. The Commission may approve the operator's proposal or may require other corrective action or surveillance. The Commission may require that corrective action be verified by mechanical integrity testing or other Commission approved diagnostic tests. The operator shall give the Commission sufficient notice of the testing schedule to allow the Commission to witness the tests. e. If the operator identifies sustained pressure in the inner annulus of a development well that exceeds 45% of the burst pressure rating of the well's production casing for inner annulus pressure, or sustained pressure in the outer annulus that exceeds 45% of the burst pressure rating of the well's surface casing for outer annulus pressure, the operator shall notify the Commission within three working days and take corrective action. Unless well conditions require the operator to take emergency corrective action before Commission approval can be obtained, the operator shall submit in an Application for Sundry Approvals (Form 10-403) a proposal for corrective action. The Commission may approve the operator's proposal or may require other corrective action. The Commission may also require that corrective action be verified by mechanical integrity testing or other Commission approved diagnostic tests. The operator shall give the Commission sufficient notice of the testing schedule to allow the Commission to witness the tests. f. Except as otherwise approved by the Commission under (d) or (e) of this rule, before a shut-in well is placed in service, any annulus pressure must be relieved to a sufficient degree (1) that the inner annulus pressure at operating temperature will be below 2000 psig, and (2) that the outer annulus pressure at operating temperature will be below 1000 psig. However, a well that is subject to (c) but not (e) of this rule may reach an annulus pressure at operating temperature that is described in the operator's notification to the Commission under (c) of this rule, unless the Commission prescribes a different limit. g. For purposes of this rule, (1) "inner annulus" means the space in a well between tubing and production casing; (2) "outer annulus" means the space in a well between production casing and surface casing; (3) "sustained pressure" means pressure that (A) is measurable at the casing head of an annulus, (B) is not caused solely by temperature fluctuations, and (C) is not pressure that has been applied intentionally. Conservation Order 566. August 24, 2006 Rule 8 Administrative Action . Page 9 Unless notice and public hearing are otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change does not promote waste or jeopardize correlative rights, is based upon sound engineering and geoscience principles, and win not result in an increased risk of fluid movement into freshwater. DONE at Anchorage, Alaska and dated August ~ Daniel T. Seamount, Jr., Commissioner Alaska Oil and Gas Conservation Commission CailiyP. ¿~ il and Gas Conservation Commission AS 31.05.080 provides that within 20 days afterreceipt 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 lO-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 ofthe Commission, the 23day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., 101h day after the application for rehearing was filed). CO 566 Kustatan Field #1 Gas Pool . . Subject: CO 566 Kustatan Field #1 Gas Pool From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Thu, 24 Aug 2006 16:26:22 -0800 To: undisclosed-recipients:; BCC: Cynthia B Mciver <bren_mciver@admi .ak.us>, Robert E Mintz <robert_mintz@law.state.ak.us>, Christine Hansen <c.hansen@iogcc.state.ok.us>, Terrie Hubble <hubblet1@bp.com>, Sondra Stewman <StewmaSD@BP.com>, stanekj ekj@unocal.com>, ecolaw <ecolaw@trustees.org>, trmjr 1 <trmjr l@aol.com>, jdarlington <jdarlingt forestoil.com>, nelson <knelson@petroleurnnews.com>, cboddy <c y@usibelli.c >, Mar ton <mark.dalton@hdrinc.com>, Shannon D annon.d lly@co phillips.com>, "Mark P. Worcester" <mark.p.worcester@conoco >, Bob inlet er.org>, wdv <wdv@dnr.state.ak.us>, tjr <tjr@dnr.state. britch <b h al .net>, mjnelson <mjnelson@purvingertz.com>, Charles O'Donnell <charles.o'do l@veco.com>, "Randy L. Skillern" <SkilleRL@BP.com>, "Deborah J. Jones" <JonesD6@BP.com>, "Steven R. Rossberg" <RossbeRS@BP.com>, Lois <lois@inletkeeper.org>, Dan Bross <kuacnews@kuac.org>, rdon Pospisil <PospisG@BP.com>, "Francis S. Sommer" erFS@BP.com>, Mikel Schultz <Mikel.Schultz@BP.com>, "Nick W. "<Glov .com>, "Daryl J. Kleppin" <KleppiDE@BP.com>, "Janet D. Platt" P.com sanne Jacobsen" <JacobsRM@BP.com>, ddonkel <ddonkel@ >, mc ck gci.net>, Barbara F Fullmer <barbara.f.fullmer@conocophillips.com>, Charles Barker <barker@ gov>, doug_schultze <doug_schultze@xtoenergy.com>, Hank Alford <hank.alford@ex bil.com>, Mark Kovac <yesno l@gci.net>, gspfoff <gspfoff@aurorapower.com>, Gregg Nady <gregg.nady@shell.com>, Fred Steece <fred.steece@state.sd.us>, rcro <rcrotty@ch2m.com>, es <jejones@aurorapower.com>, dapa <dapa@alaska.net>,jroderick <jro ·ck@gci.net>, eyancy ancy@seal-tite.net>, "James M. Ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>, jah <jah@dnr.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hanley <mark_hanley@anadarko.com>, loren_leman <loren_leman@gov.state.ak.us>, Julie Houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, tablerk <tablerk@unocal.com>, Brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonrnobil.com>, marty <m @rkindustrial.com>, ghamrnons <ghammons@aol.com>, rmclean <rmc1ean@pobox.alaska.net>, 200 <mkm7200@aol.com>, Brian Gillespie <ifbmg@uaa.alaska.edu>, David L Boelens <dboel aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Sch <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Brandon Gag <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoil.com>, Sharmaine <cope bp.co >, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zem eman tho om>, John T <John.Tower@eia.doe.gov>, Bill Fowler <Bill_ er@anadarko.CO , Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mc bs@BP.com>, St Lambe <lambes@unocal.com>,jack newell <jack.newell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, n 1617@conocophillips.com, Tim Lawlor <Tim _ Lawlor@ak.blm.gov>, Lynnda Kahn <Lynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry.C.Dethlefs@conocophillips~com>, crockett@aoga.org, Tamera Sheffield <sheffield@aoga.org>, Jon Goltz <Jon.Goltz@conocophillips.com>, Roger Belman <roger.belman@conoc hillips.com>, Mindy Lewis <mlewis@brenalaw.com>, Kari Moriarty <moriarty@aoga.org>, Patty 0 <palfaro@yahoo.com>, Jeff <smetankaj@unocal.com>, Todd Kratz <ToddKratz@chevron.com>, Gary Rogers <garyJogers@revenue.state.ak.us>, Arthur Copoulos <Arthur_Copoulos@dnr.state.ak.us>, Ken <ken@secorp-inc.com>, Steve Lambert <salambert@unocal.com>, Joe Nicks <news@radiokenai.com>, Jerry McCutcheon <susitnahydronow@yahoo.com>, Bill Walker <bill-wwa@ak.net>, Iris Matthews 10f2 8/24/20064:26 PM CO 566 Kustatan Field #1 Gas Pool . . <lris_Matthews@legis.state.ak.us>, Paul Decker <paul_decker@ state.ak.us>, Rob Dragnich <rob.g.dragnich@exxonmobi1.com>, Aleutians East Borough <a in@aleutianseast.org>, Marquerite kremer <marguerite_kremer@dnr.state.ak.us>, Alicia Konsor <alicia_konsor@dnr.state.ak.us>, Mike Mason <mike@kbbi.org>, Garland Robinson <gbrobinson@marathonoi1.com>, Cammy Taylor <Camille_Taylor@law.state.ak.us>, Winton GAubert <winton_aubert@admin.state.ak.us>, Thomas E Maunder <tom_maunder@admin.state.ak.us>, Stephen F Davies <steve_davies@admin.state.ak.us>, Keith Wiles <kwiles@marathonoi1.com>, Deanna Gamble <dgamble akivik.com>, James B Regg <jim_regg@admin.state.ak.us>, Catherine P Foerster <cathy_foerster dmin.state.ak.us>, Bob <Bob@fairweather.com>, gregory micallef <micallef@clearwire.ne aura Silliphant <laura _ silliphant@dnr.state.ak.us>, David Steingreaber <david.e.ste reaber@exxonmobi1.com> ., Content-Type: co566 final. pdf . . Content-Encodmg: 20f2 8/24/20064:26 PM . Mary Jones XTO Energy, Inc, Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise, ID 83702 Mark Wedman Halliburton 6900 Arctic Blvd, Anchorage, AK 99502 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 North Slope Borough PO Box 69 Barrow, AK 99723 David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 . Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 41 • • Cook inlet Energy_ March 29, 2012 Ms. Cathy Foerster, Chair Alaska Oil and Gas Conservation Commission 333 West 7 Avenue, Suite 100 Anchorage, AK 99501 Re: Kustatan Field #1 Gas Pool — 2011 Annual Reservoir Review Conservation Order No. 566 Dear Commissioner Foerster: Pursuant to Conservation Order No. 566 (issued August 24, 2006) Cook Inlet Energy, LLC (CIE) is submitting the 2011 reservoir review on the Kustatan Field #1 Gas Pool. The only producing well in the gas pool is the KF #1 well. It was shut in all year except for a three day production test on the lower Tyonek zone. The status of activities involved preparations to evaluate the well and do a rig workover in the near future. To date the status of the gas pool is exactly as reported in last year's 2010 report to the Commission. That report is included here as an addendum to this year's annual review. Detailed activities that did occur are listed by day in the attachment to this letter. Key events in 2011 involved KF #1 and can be summarized as follows. More detail is included in the detailed attachment. ® Coil tubing evaluation work was started on 4 -5 -11 and completed on 4- 24 -11. • Between 5 -19 -11 and 5 -21 -11 production testing was run on the Tyonek formation. Testing during the three days amounted to about 42 Mcf. • From 6 -12 -11 through 12 -6 -11 evaluation of utility of the well involved laboratory and engineering design for a rig re- completion. The well surface safety valves are checked regularly. ® On 12 -23 -11 a drilling rig was mobilized to re- complete KF# 1 in the Tyonek zone and evaluate the Beluga formation. Rig work has been waiting on AOGCC certification and weather. Please let me know if you have any questions regarding the above or attached. If the Commission requires any further information, please contact me at 433 -3804. Sincerely, , 7-� David Hall Chief Executive Officer Attachments 601 West 5 Avenue, Suite 310, Anchorage, Alaska 99501 Phone (907) 677 -6799 or 317 -8239 4 • • Timeline of Actual nd }Proposed Operations Kustatan Field (KF #1 Well) — A ILL 390368 Date Activity 6/23/2010 KF #1 well brought into sustained production 12/28/2010 KF #1 shut -in for planned well work 1/3/11 CIE contracts with SolstenXP and BJ along with others to evaluate the sand intrusion problem and develop sand control measures for implementation. 1/24/11 Application for Coil Tubing Cleanout Sundry submitted to AOGCC 2/1/11 AOGCC issued Sundry Number 311 -022 for KF #1 Coil Tubing Cleanout 4/5/11 CIE started work on Sundry Number 311 -022 for KF #1 well work 4/11/11 KF #1 Coil Tubing Cleanout completed under AOGCC Sundry #311 -022 4/11/11 Application for Sundry to reenter KF #1 submitted to AOGCC 4/12/11 AOGCC issued Sundry Number #311 -121 for KF #1 well work 4/19/11 KF #1 well work under AOGCC Sundry Number #311 -121 started 4/24/11 KF #1 well work under AOGCC Sundry Number #311 -121 completed 5/19 - 21/2011 KF #1 test production following well work 5/19/11 CIE had samples of sand analyzed by Baker Hughes 5/22/11 KF #1 shut -in due to sand intrusion into wellbore 6/12/11 CIE dropped soap sticks in KF# 1 well 8/30/11 Application for Sundry to reenter KF #1 submitted to AOGCC 9/2/11 AOGCC issued Sundry Number #311 -267 for KF #1 well work 9/12/11 CIE based on lab results from sand samples worked with SolstenXP and Weatherford to find sand screens for KF# 1 12/6/11 CIE finalized WO screen procedure for KF #1 well 12/23/11 Miller Rig #34 mobilized to KF #1 to await AOGCC inspection and certification 12/27/11 Additional zones within the Beluga identified for perforation and testing • • Cook Inlet Energy_ April 1, 2011 Mr. Dan Seamount, Chair Alaska Oil and Gas Conservation Commission 333 West 7 Avenue, Suite 100 Anchorage, AK 99501 Re: Kustatan Field #1 Gas Pool — 2010 Annual Reservoir Review Conservation Order No. 566 Dear Commissioner Seamount: Pursuant to Conservation Order No. 566 (issued on August 24, 2006), Cook Inlet Energy, LLC ( "CIE ") is submitting the 2010 reservoir review of the Kustatan Field #1 Gas Pool. Overview of Reservoir Performance: The Kustatan Field #1 (KF #1) wellbore was re- completed from a Class II disposal well to a Tyonek gas production well in November, 2005. Two gas - bearing Tyonek zones were present: the upper zone (5,204' — 5,260' MD) and the lower zone (5,370' — 5,380' MD). The two zones were isolated by a packer, and the top zone was equipped with sliding sleeve. The upper zone was briefly tested but it was only the lower Tyonek zone that was brought into production. A multi -rate flow test (followed by a pressure buildup) was conducted on the lower zone November 14, 2005, and the well was first put on production on November 21, 2005. KF #1 produced gas continuously until February 24, 2006, at which point it was shut -in at the request of the AOGCC. After obtaining an injunction from the AOGCC, the well was returned to production on March 18, 2006. Attachment 1 shows the KF #1 production history (gas flow rate and flowing tubing pressure) from first production, through December 31, 2010. The flow rate declined steadily through 2009 until the well was shut -in on July 19, 2009 by the operator at that time, Pacific Energy Resources, Ltd. ( "Pacific Energy "). KF #1 began the year with an average production rate of 26 Mcf /d in January and was flowing at 14 Mcf /d before it was shut -in. The flowing tubing pressure (FTP) prior to the well being shut -in was 54 psig. Pacific Energy abandoned its operated assets, including KF #1 in Delaware bankruptcy court effective September 10, 2009. The State of Alaska Department of Natural Resources occupied Pacific Energy's facilities and took measures to secure the facilities. That included closing, chaining and padlocking all valves on the KF #1 wellhead. That was accomplished September 19, 2009. FTP was unable to be monitored after the closure of the valves. Immediately prior to that, the FTP had increased to 105 psig. 601 W 5th Ave., Suite 310, Anchorage, AK 99501 • CIE restarted production from this well on June 23, 2010, and had produced 5.7 MMscf by December 31, 2010. FTP was at 45 psi on June 23, had increased to 165 psi by July 16, and then declined, reaching 27 psi by year -end. Future Development and Depletion Plans: A reservoir pressure divided by Z factor (P /Z) versus cumulative gas production analysis of the KF #1 data calculated in 2006 (Attachment 2) yielded an original gas in place (OGIP) of 550 MMscf in the lower zone. The lower zone has produced a total of 345 MMscf of gas since startup in 2005. A linear regression of flowing pressure vs. cumulative production (Attachment 3), shows that production has declined more rapidly than indicated by the initial decline rate, possibly due to accumulation of water within the wellbore as flow rate declined. Cumulative production of 345 MMscf represents a recovery factor of only 63 %, leaving approximately 205 MMscf of gas in place. CIE will be mobilizing a coil tubing unit in 2Q11 to work over KF 1. This work will include: • a coil tubing cleanout to remove solids • removal of completion restrictions in the lower zone (X/XN- nipples) • a production test of the upper Tyonek gas zone • a nitrogen lift for stimulation Existing completion restrictions in the lower zone make it impossible to remove liquids below 5024' MD. By removing these, it is expected CIE will be able to improve production from this zone by conducting periodic dewatering of the well. CIE expects that the production rate from this well will be greatly improved as the result of the workover, either because we will be able to bring the undrained upper zone into production or because we will improved the ability of the well to flow gas from the lower zone. Even if production rates cannot be raised, production from the KF #1 well may be able produce for several more years at very low production rates. The well continues to remain economic because it is directly adjacent to the Kustatan Production Facility ( "KPF "). The gas flows directly into KPF's low pressure fuel gas system without any additional compression, keeping operating expense and overhead for the KF #1 well extremely low. However, the well may be of more economic value if converted to another purpose, e.g. as a Class II disposal well, a gas storage well, or recompleted into a different gas- bearing sand. 2010 Surveillance Information: 1. Structure map — Attachment 4 2. Summary and analysis of reservoir pressure surveys a. AOGCC Reservoir Pressure Report Form 10 -412 — Attachment 5 b. PBU (2/24/06) — Attachment 6 • c. Static BHP Survey (3/5/06) — Attachment 7 3. FTP was 1,101 psi at the time of the most recent static reservoir pressure test (3/18/06), which indicated a static reservoir pressure of 1,793 psia. At the end of 2010 FTP was 27 psi, so current estimated reservoir pressure is 719 psia. 4. Results of all 2010 surface safety valve testing (Attachment 8): The KF #1 surface safety valve is checked monthly. If the commission requires any further information, please contact me at 433 -3806. Please let me know if you have any questions regarding the above or attached. Very truly yours, /c/%12 David David Hall Chief Executive Officer Attachments • ! Attachment 1 — Production History Daily Gas Production (Mcf) 0 0 0 0 0 0 0 0 0 0 Nov -05 -4 rT . . . , .. , . , , , .. , Feb -06 7 �;,.) May -06 s Aug -06 • Nov -06 • Feb -07 s May -07 i C cn Aug -07 rw• •' • ' • �. . Cr w•� . r.. CD m Nov -07 ..i• cD Feb -08 . . . ' Q • May -08 • r... • 17 A) Aug -08 ... N �: . TJ Nov -08 e a • � •... • . c c . Feb -09 • .. o . May -09 = .•.I. cr • Aug -09 "'• w w Nov -09 1 - n m 4t tk Feb -1 w -I ° CO May -10 `` G) Aug -10 • • Nov -10 ''• • • • O oo O O 0 0 0 0 0 Flowing Tubing Pressure (psig) • . • • Attachment 2 — P/Z Analysis Kustatan Field #1 P/Z vs Cumulative Gas Production 3,000 Initial Reservoir Pressure = 2,316 psia • KF #1 (5,353' - 5,380') 2,500 SI Reservoir Pressure (3- 18 -06) = 1,793 psia • 2,000 •N - a 1,500 N CL y = - 4.9679x + 2723 l 1,000 R2= 1 • 500 OGIP = 0.55 Bcf 0 100 200 300 400 500 600 700 800 900 1,000 Cumulative Gas Production (MMcf) • • Attachment 3 — FTP vs. Production Kustatan Field #1 Flowing WHP vs Cumulative Gas Production 2,000 - 1,800 • KF #1 (5,353' - 5,380') 1,600 • 1,400 as - a 1,200 A f/1 Ir. 1,000 • • • w _ 800 • a) c - ° Br. 600 - S • 400 ' . I -EUR = 0.55 Bcf 200 • 0 100 200 300 400 500 600 700 Cumulative Gas Production (MMscf) • • Attachment 4 — Structure Map e . . -. \ \ . -• "IN • .." e 4 ,..... , \ i \ \ \ \ s. .'..‘ 1. / / .••• 4 , ,.." -. • 4. 0 4. 4. ar -t, \ S4.. N. 1 \ .- . ...e .,„ .. ,.. :‘,./... .....f ../ cr .-* ..., 2," 0 .4 ... ' . •... .P.' ".., ,j.• A .1/ • ' ../ e• •• ...." '044tekt ......." "I ••••• ■7 c, ' • ""*•••••■••••• •••••• ••,"'" "V. ''. c •"*Y. • .. ... / ?C ji•PVildi./A . 4 :(6," -' \ .• ., , '...' ‘,..‘'. .9111,111*,50, \ -"•:), I ../ / / / ...,..1/4 - cs, 5 ‘ ,00 .... . ... • \ „,,,,..„ C° \ .. _ -.... ... .:, / f 0 0 5. ,..- _,.. ' a Field No. 1 t ..../., . ., eiP' ., \ N... 4 ti • , , i 4 , -., 41 ., / • „ 1 - 2 '''' i ..-. $ sr; . • . - ..• , \ d .,, • • ag 411 , . %* % , • \ - ' (A ' 4‘ ... _ 5 • .... rt .,.• .: . . .. • . t •. ‘ , :. .1 .., - 1. 1. 116, Ai . • a i 6". .,,-• \ N : / - lor 4 ' „o r 4 1111-itliiii. "'I \ .6..,), 0 f; gc, . A. 4 1 . •- / . (7. \\I \\\ ‘... •M 4 211 4 41 .1 .4 . - - ' ..- . r : ; . ••• • .d.' ••• . - / • — •. • • Attachment 5 — Form 10 -412 STATE OF ALASKA . ALASKA OIL AND GAS CONSERVATION COMMISSION RESERVOIR PRESSURE REPORT 1. Operator: 2. Address: Cook Inlet Energy, LLC 601 W 5th Ave., Suite 310 Anchorage AK 99501 3. Unit or Lease Name: 4. Field and Pool: 5. Datum Reference: 6. Oil Gravity: 7. Gas Gravity: Lease ADL 390368 Kustatan Field / KF #1 Gas Pool 5,3 N / A 0.5 8. Well Name and 9. API Number 10. Oil (0) 11. AOGCC 12. Final Test 13. Shut -In 14. Press. 15. B.H. 16. Depth 17. Final 18. Datum TVDss 19. Pressure 20. Number: 50- XXX- XXXXX -XX -XX or Gas (G) Pool Code Date Time, Hours Surv. Type Temp. Tool TVDss Observed (input) Gradient, Pressure at (see Pressure at psi /ft. Datum (cal) instructions for Tool Depth codes) KF #1 50- 133 - 20496 -00 -00 G 494500 11/14/05 45.6 PBU 104 5,353 2,316 KF #1 50- 133 - 20496 -00 -00 G 494500 03/05/06 223 SBHP 104 5,339 1,762 5,353 0.426 1,768 • KF #1 50- 133 - 20496 -00 -00 G 494500 03/18/06 532 OTHER 104 Surface 1,430 5,353 1,793 _ Lf 3/5/2006 SI WHP = 1,405 25 psi increase 3/18/2006 SI WHP = 1,430 21. All tests reported herein were made in accordance with the applicable rules, regulations and instructions of the Alaska Oil and Gas Conservation Commission. I hereby certify that the foregoing is true and correct to the bes of my knowledge. Signature ✓ A Title Chief Executive Officer Printed Name- avid Hall Date � 54l9 `l Form 10 -412 Rev. 9/2003 INSTRUCTIONS ON REVERSE SIDE Submit in Duplicate . • • Attachment 6 — PBU . ^ ! Kustatan Field #1 PBU 2-24-06 1380.00 - ------'- -' - - -, ------ --- - -- --' - -_ ' '___ | L M^ PBU Data ' . II | 1370l0 ' i ------ -'--- | | u�N� �� `�� 1360.00 ------ ---- - - - � - '- FA �. 135Ol] — ' -- - - __-_- _- _' -_-_-_- ' _ _ __ to to | IL' o- 1340]}0 �------ --- '- ----' '-- ------ ----- -- - - ---' to = | � 1330.00 --, ;------- --- - | � | | ���� -- | 1320.00 - mw -- --_ __ ____ __ _ ___ ,____ / ! ' 1310{}0 --' -- '------+- ---' ------+ -'- ---- � - | ----- ----- ' 1 ----- + ------- ----- 0.0 5.0 10.0 15.0 20D 25.0 30.0 Time (hours) Forest Oil Corporation KF #1 Kustatan Field #1 Diagnostic Analysis 1 3-2-06 PBU 2-24-06 Radial 208 x k 4.131 and 207 kb 57,83 md.ft - 1555 a' -2.246 206 pi 1581.8 psi —1550 205 —1545 • 204 203 -- — — —1540 • 202 — — —1535 a. 201 - a —1530 c 200 -- - 0 _. —1525 199 — 198 . —1520 197 —1515 • 196 —. —._ • —1510 195 ---1505 194 193 —1500 • Wdata • I X Pi 192 ■ 1 9 8 7 6 5 4 3 2 9 8 7 6 5 4 3 2 10 10 1.0 Superposition Radial Pseudo -Time (L t,) , h Fas t WeUT esg2 °1 Ver 5 �l �.� ��r..xne r_ Na oat I 7_1 JIAt4( 14 fu m_1Pa..na • • Attachment 7 — Static BHP Survey (Forest Oil Well: KF # 1 Field: Kustatan DATE: 03/05/2006 2000 - - - 110 1800 — 100 1600 — 90 1400 • 1200 Gauge at depth — 80 LL p Going in Hole 5338' RKB Ch '0 Well Shut -In 0 _ D Q Pulling out of hole making stops d 1000 I I Well Shut -In 70 " z N +r _ to N 0 m a a 800 E — 60 d I- 600 — 50 400 • — 40 200 0 r , 30 13 14 15 16 17 18 19 20 Time (hrs) -Pressure -Temperature Report date: 5/5/2010 Forest Oil RI: �KF # 1 I Field:�usaan : I � Ktt DATE03/05/2006 I Pressure (psia) 1300 1400 1500 1600 1700 1800 0 _ 11 11 Pressure- Temperature Profile ` 1. Going in hole to 5338' RKB — 2. Well Shut -In 1000 1■■ .111 2000 -III MIN& d k, 3000 a) 4000 5000 6000 30 40 50 60 70 80 90 100 110 Temperature (Deg. F) —Pressure - Details — Temperature Report date: 5/5/2010 Forest Oil T !Ieu:IKF # 1 I Field: I Kuttan 03/05/2006 Pressure (psia) 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 0 I I 1 i L_- i I - mum • Pressure - Temperature Profile __, • 1. Pulling out of hole from 5338' RKB - __m_ � • 2. Well Shut -In 1111.M1=■71M 1000 _11111 _L IL . 2000 d - ■ 3000 6.... __ a) II= IIIIIIMq CI MU 1111111mmi 11211 -„ 4000 _1 �_� 111 MIN= ELI= 5000 Ei 6000 I 1 i ' i I I I 30 40 50 60 70 80 90 100 110 Temperature (Deg. F) -- Pressure – Details —Temperature Report date: 5/5/2010 • • 'Forest Oil I Well:1KF # 1 1 Field:IKustatan 103/0512006 I Pressure (psia) 1300 1400 1500 1600 1700 1800 0 ' aQ \ ••` Pressure- Temperature Profile \ 1. Pulling out of hole from 5338' MD 2. Making stops \ 3. Well Shut -In \ \ 1000 RKB Pressure Temp P -Grad T -Grad \ (feet) (psia) (Deg.F) (psifft) Deg.Flft \ • \• 10.8 1400.11 43.79 - - \ 4 8 9 9.8 1578.54 100.08 0.0365 1.15 \ '•\ 5000.9 1616.49 100.82 0.3754 0.73 \ N 5100.2 1659.11 101.85 0.4292 1.04 2000 \ 5200.3 1701.96 103.18 0.4281 1.33 - v____ 5299.9 1744.60 103.91 0.4281 0.73 V 5338.9 1761.68 103.82 0.4379 -0.23 � • 4-1 as \ 3000 \ - Q. \ w CI \ •\ \ • \• \ 4000 \ • A \L- - \ -+\ -- \ 5000 6.----9--- ' 1�� Q � • 6000 , i i i 1 i i I , 30 40 50 60 70 80 90 100 110 Temperature (Deg. F) r Pressure - Details - --9- -- Temperature Report date: 5/5/2010 • • Attachment 8 — SSV Inspections • 4 e ' a _ a 0� E $ B i 8 1,1 AAAAAAAAAAAA �$� < �g AA AAAAAAAAAAAAs�_ s r AA AAAAAAAAAAAAW rq = P 3 33 aa 3 aaaa5aaaaaaa t Y � 5 H H" I qqqRqqqgqqqqqqq . #5§ g �MHMHHHH i i2i2E2fQTRREQRM2E2R Pl -I cox co o p2 E io io io m m m io io Oa co Oa io in c , a 0N t I ? m r r c 4 M m o 9 U 2 g v c g v s c 3 3 m Y t m = ) o tLfL��m 3 ,(3 , c 5 Y c� u c Q 1_y N h N 0 O - N m Y O O� O O N N R E2 p a f (yl a s ua a ua u a cj d c v, v, f -* L\-O @ . . Forest Oil Corporation 310KStreet, Suite 700 RECEIVED Anchorage, Alaska 99501 (907) 258-8600 Fax: (907) 258-8601 JUN 2 0 2006 Alaska Oil & Gas Cons. Comnission Anchorage ,.. June 20, 2006 John Norman, Chairman State of Alaska Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, AK 99501 Re: Kustatan Field #1 - Seismic Plat Map Dear Chairman Norman: Attached is the plat map that the Commissioners requested at the Kustatan Field #1 Spacing Exception Hearing on June 19,2006. Shown on the map are the five (5) seismic lines within a two mile radius of Section 4, T7N, R14W SM, that were used by Forest Oil personnel for the structural interpretation of the Kustatan Field Tyonek gas sand. Note that the 97RB and 98RB lines are proprietary to Forest Oil Corporation and the 279S lines are licensed trom Shell Exploration and Production Company. If you or Commissioners Seamount or Foerster have any questions regarding the attached map, please contact me at 868-2131. Sincerely, \?~11. ù;L Paul M. Winslow Reservoir Engineer Forest Oil Corporation cc: Leonard C. Gurule, Senior V.P. - Forest Oil Corporation I '''i Kustatan Field 20 Seismic Location Map *3q . . 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: John K. Norman, Chairman Daniel T. Seamount Cathy Foerster 3 4 In the Matter of the Application of 5 Forest Oil Corporation for a well spacing exemption and exception to 6 the provisions pertaining to Drilling Units and Well Spacing 7 pursuant to 20 AAC 25.055 pertaining to the Kustatan Field #1 Well. 8 9 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska 10 11 June 19, 2006 1:30 o'clock p.m. 12 VOLUME II PUBLIC HEARING 13 BEFORE: John K. Norman, Chairman Daniel T. Seamount, Commissioner Cathy Foerster, Commissioner 14 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 . . 1 TABLE OF CONTENTS 2 Opening remarks by Chairman Norman Testimony by Leonard C. Gurule Testimony by Paul M. Winslow 62 63 67 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 . . 1 PRO C E E DIN G S 2 Tape 1 3 0015 4 (On record - 1:30 p.m.) 5 CHAIRMAN NORMAN: I'll call this hearing to order. This 6 matter comes before the Commission upon an original application 7 of Forest Oil Corporation for a spacing exception to allow 8 production from the Kustatan Field number 1 well and on the initiative of the Commission to establish field rules - - correction, pool rules for the applicable pool. Notice of the hearing was originally published in the 9 10 11 12 Anchorage Daily News on February 25th, 2006. And then there 13 was a supplemental notice of today's hearing that was sent out 14 and published in the Anchorage Daily News on March 30, 2006 and 15 published on April 3rd, 2006. 16 The record reflects that actual service of the original 17 hearing was made upon the State of Alaska Department of Natural 18 Resources, the United States Department of Interior, Cook Inlet 19 Region, Inc., First National Bank of Alaska and the Diocese of 20 Sitka in Alaska Orthodox Church in America, otherwise known as 21 the Russian Orthodox Church. 22 The original hearing was commenced on March 28th, 2006. 23 There was a presentation by the applicant, questions asked. 24 The Commission requested some additional information to be 25 provided and most of that information has been provided. There R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 62 . . 1 are certain items that I think the Commission still has some 2 questions on and we will hear from the applicant Forest Oil 3 today. 4 So if Forest is ready to proceed I'll need you to state 5 your name for the record. Will you be -- Mr. Gurule, will you 6 be the first one to testify? 7 MR. GURULE: Right. 8 CHAIRMAN NORMAN: All right. Would you, please, raise 9 your right hand. 10 (Oath Administered) 11 MR. GURULE: I do. 12 CHAIRMAN NORMAN: And would you state your name for the 13 record, please, your title and your affiliation with your 14 company? 15 MR. GURULE: Leonard Charles Gurule. Affiliated with 16 Forest Oil Corporation, senior vice president. 17 CHAIR NORMAN: Very good, please proceed. 18 TESTIMONY BY LEONARD CHARLES GURULE 19 MR. GURULE: Commissioners, thank you very much for the 20 opportunity to come and, kind of, follow up the original 21 hearing. 22 We provided additional information at your request with 23 the exception of some seismic information in an interpretation 24 that extends over a rather large area and so we've withheld 25 providing that information pending the determination by the R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 63 · e 1 Commission that it can be held confidential. 2 So what we'd like to do today is maybe proceed through all 3 of the information that's non-confidential and then reserve 4 that additional information to the end for the Commission's 5 consideration to hold that data confidential. If it's deemed 6 that it can be, then we can go through that information as 7 well. 8 CHAIRMAN NORMAN: Very well. Commissioner Seamount, do 9 you have any comment on that or questions about that request? 10 COMMISSIONER SEAMOUNT: No, not at the moment. 11 COMMISSIONER FOERSTER: No. 12 CHAIRMAN NORMAN: Then why don't you proceed as you have 13 outlined. 14 MR. GURULE: Okay. Well, while we have copies of all this 15 information it does have the confidential information attached 16 to the back of it so we'll just, with the Commission's 17 approval, reserve that till we get to that point, make that 18 determination and then distribute whatever copies are 19 appropriate. As the discretion of the Commission, would you 20 like to have the non-confidential information now? 21 COMMISSIONER FOERSTER: If we're going to be learning 22 about it, it would be good to see it at least in some format. 23 MR. GURULE: Yeah, we're going to be showing it on the 24 slide, but I didn't know whether you wanted a hard copy as 25 well. R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 64 . . 1 COMMISSIONER FOERSTER: I'll just put my glasses on. 2 MR. GURULE: It's up to you. We can pull the confidential 3 information out of this distri-.. ... 4 CHAIRMAN NORMAN: Well, I think what I'm hearing from the 5 Commissioners is, is that we'll go ahead and follow the slides 6 and then you'll be able to submit everything in one batch. 7 MR. GURULE: Okay. 8 COMMISSIONER SEAMOUNT: I would -- excuse me, Mr. 9 Chairman, I'd pull the non-confidential stuff off for the 10 Reporter, please, ..... 11 MR. WINSLOW: I can do that. I've got it. 12 COMMISSIONER SEAMOUNT: .... .so that she can follow along. 13 COURT REPORTER: I can't see the slides very well. Thank 14 you. 15 MR. GURULE: Okay. Starting with this slide just a quick 16 review of the issue at hand here. The KF1 well located as 17 indicated on the slide. To the west -- the lease to the west 18 that's indicated in white there is held by the State of Alaska. 19 To the north CIRI holds that, the mineral rights there. We 20 have that under lease. And then the one entity, this track B 21 under USS 363 which is held by the Russian Orthodox Church. So 22 those are the three parties affected in this spacing exception 23 request and pooling requirement request. 24 CHAIRMAN NORMAN: I have a question, Mr. Gurule, if I'm 25 not breaking your train of thought, on the plat there to the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 65 . . 1 west of Section 4 there is that sliver, and I will indicate it 2 yes, okay. 3 MR. GURULE: This here. 4 CHAIRMAN NORMAN: Yes, urn-huh. Could you address the 5 ownership of that particular sliver I'll call it a sliver of 6 land that's to the west of Section 4? 7 MR. GURULE: Yes, the land that's west of Section 4 8 indicated in the white is the State of Alaska's. 9 CHAIRMAN NORMAN: And then -- and that's the eastern most 10 or the northeastern most part of Section 5. And then is the 11 remainder of Section 5 also owned by the State of Alaska? 12 MR. GURULE: I believe that's correct, Commissioner. 13 COMMISSIONER FOERSTER: Except for the small part that's 14 CIRI? 15 MR. GURULE: Right. 16 CHAIRMAN NORMAN: Yes. 17 MR. GURULE: Obviously this -- this part is not,..... 18 CHAIRMAN NORMAN: Yeah, CIRI (indiscernible), yeah. 19 MR. GURULE: .....but you were talking about the rest of 20 this here? 21 CHAIRMAN NORMAN: Yes, yes, thank you. 22 MR. GURULE: Okay. 23 MR. WINSLOW: If I might interject, I believe that's the 24 shoreline so the offshore will be federal, will it not? 25 CHAIRMAN NORMAN: It would be State of Alaska. R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 66 . . 1 MR. GURULE: Would still be state. 2 MR. WINSLOW: Is it state, okay. 3 MR. GURULE: Okay. Next slide. Just a quick review here. 4 The issue at hand is that the location of the bottom hole 5 location of the well to the lease line is 1,468 feet, 32 feet 6 shy of the required 1,500 foot statute for not requiring a 7 spacing exception or pooling requirement exception. 8 MR. WINSLOW: And I'm going to go over volumetrics and 9 material balance, so if you want to swear me in? 10 CHAIRMAN NORMAN: All right. Then, do you want to raise 11 your right hand, please? 12 MR. WINSLOW: I can do that. 13 (Oath Administered) 14 MR. WINSLOW: Yes, it will be. 15 CHAIRMAN NORMAN: And please, state your full name, title 16 and your company affiliation? 17 MR. WINSLOW: Paul Michael Winslow. I'm with Forest Oil 18 Corporation, reservoir engineer. 19 CHAIRMAN NORMAN: And you'll be testifying as a reservoir 20 engineer? 21 MR. WINSLOW: Yes, I will. 22 TESTIMONY OF PAUL M. WINSLOW 23 CHAIRMAN NORMAN: So, Mr. Winslow then could you, please, 24 give a brief summary of your educational background and your 25 experience so we can qualify you as an expert witness? R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 67 . . 1 MR. WINSLOW: Okay. I hold a Bachelor of Science Degree 2 and a Master of Science in petroleum engineering from the 3 Colorado School of Mines. I've worked for the past roughly 20 4 years in the oil business. Ten years with Halliburton as a 5 reservoir engineer. The last five years with Forest Oil. I 6 consulted in Dallas for about three years¡ again¡ as a 7 reservoir engineer. 8 CHAIRMAN NORMAN: And how long have you been working in 9 this area of Cook Inlet? 10 MR. WINSLOW: I've been working in Cook Inlet for the last 11 five years. 12 CHAIRMAN NORMAN: For the last five years¡ thank you. 13 Commissioner Seamount¡ questions? 14 COMMISSIONER SEAMOUNT: No questions. 15 COMMISSIONER FOERSTER: No. 16 CHAIRMAN NORMAN: Okay. We except your qualifications as 17 an expert..... 18 MR. WINSLOW: Thank you. 19 CHAIRMAN NORMAN: .... .so¡ please¡ proceed with your 20 testimony. 21 TESTIMONY BY PAUL MICHAEL WINSLOW 22 MR. WINSLOW: Okay. I'm going to go over material balance 23 and volumetrics for the Kustatan Field number 1 well. Slide 24 number 5 I'm going to start with material balance and static 25 material balance. When we first recompleted the well as a gas R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 68 . . 1 well we had a pressure build up and got an initial reservoir 2 pressure of 2,316 psia. 3 On March 3rd we ran a shut-in pressure gradient survey and 4 got a downhole pressure extrapolated to the top perforation of 5 about 1,768. The bottom hole maximum depth we could get to 6 with our gauge was 5,339 feet which was just shy of top 7 perforation. Recorded a maximum pressure of 1,762 extrapolated 8 to top perf of 1,768. This data was mentioned before at the 9 previous hearing. This was one of the questions that we 10 provided you subsequent to that hearing. 11 One thing that is new the well was shut-in on February 12 24th by AOGCC order. This gradient survey was taken on March 13 3rd. The well was not opened back up until March 18th. 14 Pressure continued to build up until the last, about four 15 days of that shut-in period. There was another 25 psi of 16 wellhead pressure build up, so this new pressure 1,793 is that 17 extrapolated pressure plus an additional 25 psi. So using that 18 pressure and cum production at that point in time is 128 19 million cubic feet. Yields and original gas in place of 0.55 20 BCF. 21 Figure 6 is the plot of P over Z versus cum, cumulative 22 gas production. This was the plot that was presented at the 23 hearing on March 28th. Updating that pressure the original gas 24 in place goes from 0.52 to 0.55 with that 25 psi difference in 25 pressure. This is my best estimate of original gas in place at R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 69 . . 1 this point in time. 2 Any questions about static material balance? 3 CHAIRMAN NORMAN: Commissioner Seamount? 4 COMMISSIONER SEAMOUNT: What was the original pressure 5 gradient, Mr. Winslow? 6 MR. WINSLOW: The fluid in the hole? 7 COMMISSIONER SEAMOUNT: Yes. Well, the original reservoir 8 pressure gradient? 9 MR. WINSLOW: Oh, I'd have to calculate it. It's about 10 .43 or .45. 11 COMMISSIONER SEAMOUNT: So it's just hydrostatic? 12 MR. WINSLOW: Yeah, yeah, typical gradient in this part of 13 the Cook Inlet is about .45 psi per foot and this falls right 14 in there so it was normally pressured. 15 CHAIRMAN NORMAN: Anything..... 16 COMMISSIONER SEAMOUNT: Nothing more. 17 CHAIRMAN NORMAN: Commissioner Foerster? 18 COMMISSIONER FOERSTER: In an earlier testimony you guys 19 mentioned a change in slope in your p over Z plot and that it 20 was a downward slope, opposite of what you get with a water 21 (indiscernible). And I hate to beat a dead horse, but can we 22 visit that data for just a minute? 23 MR. WINSLOW: I believe what you're referring to is the 24 flowing material balance and I'll get to that in subsequent 25 slides. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 70 . . 1 COMMISSIONER FOERSTER: And the reason that I'm concerned 2 about that is 'cause when you have that kind of change in slope 3 it means one of three things. You've got a highly over 4 pressure reservoir that's compacted which isn't the case here 5 or you've got -- you're not using the best data which I 6 expected is the case or there's one other case and that could 7 be that there's gas offtake that's not being accounted for 8 which could mean, one, another offtake point, two, a mechanical 9 integrity issue in the well or, three, bad metering. 10 So since those are our concerns I just want to get on the 11 record to make sure that it's not a mechanical integrity issue 12 or bad metering. 13 MR. WINSLOW: Okay. We can go over that.. ... 14 COMMISSIONER FOERSTER: Okay. 15 MR. WINSLOW: .....in subsequent slides. 16 Flowing material balance, extrapolating the plot that I'll 17 be showing on the next slide down to a flowing tubing pressure 18 of 180 psi which is the bottom limit of our compression system 19 out there. Recoverable we're looking at about .45 BCF. And if 20 I use a 80 percent recovery factor that equates to original gas 21 in place of about .56. Again, pretty good match with what the 22 static material balance is showing. 23 This is the -- slide 9 is the production data that was 24 presented at the March 28th hearing. Updating the production 25 data slide 10. Again here is where we shut the well in. This R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 71 . . 1 is what I was referring to earlier. March 3rd is about the 2 middle of this shut-in period. You see your flow in tubing 3 pressure continued to build. The last four days stabilized at 4 1,429 so that's why I adjusted that pressure on the P over Z 5 for 25 psi. 6 Plotting the flowing tubing pressure versus cumulative gas 7 production. This is the data that was presented on March 28th. 8 Updating it through June 12th is this red data. Again, 9 pointing toward about the same recoverable gas. Now, again, 10 with compression we can take it down to a flowing tubing 11 pressure of about 180 psi which is going to be roughly in here 12 at about a .45 BCF recoverable gas. 13 Any questions on flowing material balance? 14 CHAIRMAN NORMAN: Commissioner Seamount? 15 COMMISSIONER SEAMOUNT: None. 16 CHAIRMAN NORMAN: Commissioner Foerster? 17 COMMISSIONER FOERSTER: I'm good. 18 MR. WINSLOW: Now, I think -- Commissioner Foerster, I 19 think what you were referring to was maybe this data that had 20 the different projections. Early on depending on where you 21 extrapolate -- I mean, you can extrapolate as high as maybe .65 22 and as low as, you know, some of this data may be even -- even 23 down here at .4 BCF. Obviously the more data we have the 24 better your estimate as you're running out of gas to produce, 25 but for the last two-thirds of the production the indications R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 72 . . 1 are around .45 recoverable in my opinion. 2 Volumetric data we discussed previously. The area under 3 closure up against the north bounding fault, the fault on the 4 north side of the field is about 50 acres. In our wellbore we 5 identified a net pay thickness of 14 feet, porosity of 24 6 percent and a water saturation of 40 percent. 7 Based on initial reservoir pressure and temperature the 8 expansion factor is about 171 standard cubic feet per reservoir 9 cubic feet. So calculating just a theoretical volumetric 10 original gas in place I get 0.75 BCF. Again, same ball park as 11 the others, maybe a little bit higher which probably say the 12 actual -- you know, if we have fairly homogeneous reservoir 14 13 foot thick, the area is probably a little bit less. It's about 14 44 acres is what would calculate out. 15 CHAIRMAN NORMAN: So the different numbers we had .55, .56 16 and now .75, but that's the range of. .... 17 MR. WINSLOW: Yes, sir. And the .75 is definitely the 18 least accurate. The static material balance would be the most 19 accurate in my opinion. Here..... 20 COMMISSIONER SEAMOUNT: What was the gross thickness of 21 the sand? I don't have a log (ph) ..... 22 MR. WINSLOW: There were 23 COMMISSIONER SEAMOUNT: .... .in front of me (ph). 24 MR. WINSLOW: .,. ..there were two lenses that were 25 perforated. The upper lens was pretty shaley, pretty dirty. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 73 . . 1 In our opinion in my opinion I don't think we're getting 2 much contribution from that. The lower sand, the 14 foot, was 3 pretty close to the gross. 4 COMMISSIONER SEAMOUNT: And did you use any kind of 5 porosity cut off or was it pretty sharp? 6 MR. WINSLOW: It was pretty sharp. 7 MR. GURULE: It was pretty sharp on that lower sand. MR. WINSLOW: Yeah. I mean, we perforated 10 feet in that 8 9 lower sand. I calculated -- or I used 14 foot of net and 10 gross, but the actual perforation was 10 feet in that lower 11 sand. 12 COMMISSIONER FOERSTER: So the real variables here are the 13 A and the H, the area and the height? You got.. ... 14 MR. WINSLOW: Yeah. 15 COMMISSIONER FOERSTER: .....pretty good material balance 16 so your height your thickness (indiscernible) are the real 17 variables? 18 MR. WINSLOW: Yeah. I mean, you may get a little variance 19 in porosity. I would think water saturation not as..... 20 COMMISSIONER FOERSTER: Yeah, not as much. 21 MR. WINSLOW: .....much, but mainly your thickness will 22 thin on the edges and maybe a little thicker in the middle, who 23 knows, but -- and the shape of the reservoir obviously. 24 COMMISSIONER FOERSTER: Would you say your 14 feet of net 25 pay was conservative or generous? R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 74 . . 1 MR. WINSLOW: It was..... 2 COMMISSIONER FOERSTER: Or accurate? 3 MR. WINSLOW: Right on. I would say fairly generous. I 4 mean, it was the entire sand lens. 5 COMMISSIONER FOERSTER: Yeah, that's the way it looked to 6 me, too, that it was generous. 7 MR. WINSLOW: Yeah. It was that lower sand lens, the 8 entire lens. 9 COMMISSIONER FOERSTER: So if you're going to be -- have a 10 conservative net thickness what would -- what would you say 11 would be a more conservative net thickness? 12 MR. WINSLOW: Well, we perforated 10 feet in that lower 13 zone so I wouldn't probably go any less than 10 feet. 14 COMMISSIONER FOERSTER: So you have 100 percent net to 15 gross in that whole 10 feet? 16 MR. WINSLOW: (Inaudible response) . . . . . 17 COMMISSIONER FOERSTER: Thank you. 18 MR. WINSLOW: Urn-hum. (Affirmative) Slide 14 is the 19 summary that you were alluding to, Chairman. Static material 20 balance shows about 0.55 BCF. Flowing material balance around 21 .56 BCF. And then again the least accurate of the three 22 volumetrics somewhere in the .75 BCF. 23 COMMISSIONER FOERSTER: And your aerial (ph) extent was 24 based on a map that a geologist or geophysicists do for you 25 based on seismic 'cause the only well control you have is R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 75 . . 1 the. . . . . 2 MR. WINSLOW: That -- that's correct. 3 COMMISSIONER FOERSTER: . . . . . Kustatan number I? So in 4 order to feel comfortable with that area you have to look at 5 the seismic? 6 MR. WINSLOW: That's correct. Slide 15 is comparing the 7 data that was presented on March 28th and the data we're 8 presenting today. 9 Static material balance changed from .52 BCF to .55. And 10 the flowing material balance remained the same. I'm just 11 trying to clarify some of this. I think there was some 12 misconceptions with the different techniques over the last 13 three hearings, so..... 14 Conclusions, from the volumetrics, the structural mapping 15 would indicate that the entire gas accumulation is fully within 16 lease ADL 390368. 17 The static material balance indicates a smaller original 18 gas in place than the volumetric calculation which again would 19 lead us to believe that the entire gas accumulation is within 20 our lease. 21 Flowing material balance matches the static material 22 balance very closely which again leads us to believe that the 23 entire gas accumulation is within our lease. 24 In general all the data that we have volumetrics, seismic 25 mapping, material balance indicates it's a very small gas field R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 76 . . 1 and all indications are that it's fully contained within our 2 lease. 3 What we've requested previously and are still requesting 4 are two exceptions. The 1,500 foot well spacing exception and 5 also the pooling requirements. 6 Supporting documents, we've got minimal offset variance, 7 32 feet shy of the 1,500 foot. All data indicates that the gas 8 is fully contained within our lease. We don't feel like 9 there's been any damage to the correlative rights staying to 10 the (ph) offset owners. 11 I think that's about it and that's the end of basically my 12 presentation unless we go through the confidential material 13 which is mapping and the seismic data. 14 MR. GURULE: So the only other thing I'd like to add to 15 that would be that we've been through all of this data with all 16 the property owners that are affected. We've answered all the 17 questions that they have. We haven't had any additional 18 questions that would indicate that there's outstanding data 19 that they're looking for. So as Paul says, you know, the data 20 indicates that it's all contained within this lease. 21 The next step would be whether you want to consider 22 holding the seismic and mapping, interpretive data confidential 23 for your viewing. 24 CHAIRMAN NORMAN: Let me note for the record, I did note 25 the original parties noticed and for this supplemental hearing R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 77 . . 1 actual notice in addition to published notice was given again 2 to the State of Alaska Department of Natural Resources and Cook 3 Inlet Region which are the principal landowners to the west. 4 Additionally the United States Department of Interior, First 5 National Bank and the Russian Orthodox Church, so all have 6 notice of this hearing. 7 Also for the record I would note, without reading it, that 8 the Commission has received a copy of the letter directed to 9 Forest Oil Corporation by William Van Dyke, Acting Director of 10 the Division of Oil and Gas and in rough summary it indicates 11 that Forest has filed a plan of development and that that plan 12 of development has been approved for this particular lease. 13 And from that I am noting again that based upon our 14 understanding of the land ownership, the immediate affected 15 owners have been notified. They would have the opportunity to 16 be here today. 17 And, perhaps, before we address the question which we will 18 very quickly on this, I will ask if there are representatives 19 of any of those affected landowners present that wish to be 20 heard on this question today? It's been represented that 21 information has been provided to all of the landowners so if 22 that's the case you need not testify, but again, for the 23 record, the Chair is asking if there are any persons who do 24 wish to be heard on this question? 25 Very well, then we move on next then. The Commission must R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 78 . . 1 itself be satisfied that this structure is as where it is in 2 order to -- as it's been interpreted in order to adopt pool 3 rules. And it might be -- let me suggest this, it might save a 4 little time if we took a five minute recess and then let us 5 come back on the record and then we'll indicate what more, if 6 anything, you need to put in the record to satisfy the 7 Commission. 8 Commissioner Seamount. 9 COMMISSIONER SEAMOUNT: I would like to ask a question if 10 you could go back to your land map? And I'm going to ask a 11 question, if you feel that the answer should remain 12 confidential just go ahead and tell me that and then we'll take 13 the recess. 14 MR. WINSLOW: That one or the next one? 15 COMMISSIONER SEAMOUNT: This one is good enough. 16 MR. WINSLOW: Okay. 17 COMMISSIONER SEAMOUNT: The original interpretation that 18 you showed us showed a couple of seismic lines that ran 19 generally in that area. I understand that you're not going to 20 show any 3D seismic today, no new seismic, only seismic that 21 you've had all along. Would any of those seismic lines lie on 22 that map, any of the ones that we haven't seen yet? 23 MR. GURULE: Yes, the seismic lines, the 2D seismic lines 24 that were used to map this would lie on this map here and so 25 that would be the question before the Commission to determine R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 79 . . 1 whether that..... 2 CHAIRMAN NORMAN: Okay. For the record we're looking at a 3 slide of State of Alaska lease ADL 390368 identified as 4 lease/property plat. And Mr. Gurule has indicated one 5 generally north/south seismic line that cuts down from Section 6 4 into Section 9. 7 And then the other, the second section line when you were 8 waving that is how..... 9 MR. WINSLOW: Previously, if I might interject, on the map 10 that we presented which was deemed to be held confidential 11 there were two north/northeast trending seismic lines. The 12 first one coming almost through the wellbore so 13 north/northeast, ..... 14 CHAIRMAN NORMAN: Urn-hum. (Affirmative) 15 MR. WINSLOW: ... ..south/southwest and then a parallel 16 line that cuts through the eastern portion of Section 4. 17 CHAIRMAN NORMAN: Okay, good, thank you. MR. WINSLOW: So there are two north/northeast, 18 19 south/southwest trending seismic lines. 20 In addition there are two other cross lines that are off 21 this map that..... 22 COMMISSIONER SEAMOUNT: They are off the map. Are there 23 any on the map besides those two that have already..... 24 MR. GURULE: No. 25 MR. WINSLOW: No. Well,.. ... R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 80 . . 1 COMMISSIONER SEAMOUNT: Okay. So are there any seismic 2 lines that parallel the two that we observed the last time? 3 MR. GURULE: No. MR. WINSLOW: No. MR. GURULE: No additional lines, Commissioner. 4 5 6 COMMISSIONER SEAMOUNT: They're perpendicular. 7 MR. GURULE: Right. 8 COMMISSIONER SEAMOUNT: And do any of those perpendicular 9 lines go through the Section 3 or 5? What sections are those, 10 3, 4 or 5? 11 MR. WINSLOW: No. 12 MR. GURULE: The perpendicular lines, no (ph). 13 MR. WINSLOW: Those two lines go through 4. There is a 14 what, east/northeast trending line that go- -- cuts through 15 Section 9..... 16 COMMISSIONER SEAMOUNT: And that is down dip? 17 MR. WINSLOW: .... .across there. That's down dip. 18 COMMISSIONER SEAMOUNT: And that is down dip. 19 MR. WINSLOW: That's correct. 20 MR. GURULE: Right. 21 COMMISSIONER SEAMOUNT: Okay. So any new seismic control 22 we would -- that you might show us would be outside of the 23 section in which the well is located in? 24 MR. WINSLOW: That's correct. 25 MR. GURULE: That's correct. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 81 . . 1 COMMISSIONER SEAMOUNT: Okay. I have no further question. 2 CHAIRMAN NORMAN: Well, just in terms of feet, how -- as I 3 understand it there is a seismic line. The closest other 4 seismic line is to the southwest, am I correct? And how far 5 would that be from the corner of Section 4 there? 6 MR. GURULE: I'm going to say a mile and a half to the 7 west. 8 CHAIRMAN NORMAN: From the cor- -- from the southwest 9 corner of Section 4? 10 MR. GURULE: That's correct, yes. 11 CHAIRMAN NORMAN: It's a mile and a half. So it's out 12 beyond Section 5 then? 13 MR. GURULE: Right, right. 14 CHAIRMAN NORMAN: Okay. Well, very well. If there's no 15 objection from the Commissioner will take not more than a five 16 minute recess, come right back on the record. We're off the 17 record. 18 (Off record - 2:06 p.m.) 19 (On record - 2:26 p.m.) 20 CHAIRMAN NORMAN: I'll call the hearing back to order. 21 The time is approximately 2:26 p.m. on the afternoon of June 22 19th, 2006. 23 The Commissioners have taken about approximately a 10 24 minute recess to consider the request of Forest to receive and 25 treat confidentially information on additional line of seismic. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 82 . . 1 The Commission has considered that and we have determined 2 that rather than reach the question of confidentiality, it's 3 the opinion of the Commission that based on what's been 4 represented to us that would really not add appreciably to our 5 information and so we will not require that. 6 What we will require and ask that it be filed within one 7 working week is a plat showing the lines just where the 8 location of the seismic lines and that can be a land plat 9 showing the lines. And we'd like to see the lines of seismic 10 that Forest has that are within two miles of Section 4 in all 11 directions, but we will not require the seismic information 12 itself. 13 Let's see, finally as noted at our original hearing in 14 this matter that was held in March, on March 28th, the 15 Commission at that time reserved the right upon conclusion of 16 this an issuance of an order to then consider whether any 17 notice of violation might be in order as a result of spacing 18 violations. And I just mention that as a footnote to this so 19 that if the Commission does do that you're aware of it. 20 I believe that the Commission is satisfied with the 21 information that's been provided to us and we think we have 22 enough to rule upon. 23 Commissioner Seamount, do you have anything to add? 24 COMMISSIONER SEAMOUNT: Just one question of 25 clarification. The confidential information that could have R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 83 . . 1 been shown today, is that interpretation any different than the 2 interpretation that we have on file that's under 3 confidentiality right now that you showed us previously? 4 MR. WINSLOW: No. 5 COMMISSIONER SEAMOUNT: Okay, that's it. 6 CHAIRMAN NORMAN: Commissioner Foerster..... 7 MR. WINSLOW: There were -- there were additional -- there 8 were a total of five lines that were in the three mile radius 9 that we had cross sections on those lines, but the structural 10 interpretation is identical to what was presented before. 11 COMMISSIONER SEAMOUNT: Okay. 12 COMMISSIONER FOERSTER: I'm good. 13 CHAIRMAN NORMAN: Commissioner Foerster? So then we would 14 like to ask as soon as it's appropriate, but within five 15 working days if you could provide that one additional item and 16 then the Commission will be prepared to rule on this. And we 17 thank you very much for your testimony and your attendance 18 today. 19 I'll ask if there is anything further from any persons 20 present at this hearing? The Chair sees no one asking to be 21 recognized so for the record the Chair will then ask if there 22 is a motion to adjourn? 23 COMMISSIONER SEAMOUNT: I make a motion to adjourn. 24 COMMISSIONER FOERSTER: I second it. 25 CHAIRMAN NORMAN: Without objection we are adjourned at R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 84 . . 1 the hour of 2:30. 2 MR. GURULE: Thank you. 3 (Recessed - 2:30 p.m.) 4 (END OF PROCEEDINGS) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 85 . . 1 C E R T I F I CAT E 2 UNITED STATES OF AMERICA ) )ss. 3 STATE OF ALASKA ) 4 I, Rebecca Nelms, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and Reporter for R & R 5 Court Reporters, Inc., do hereby certify: 6 THAT the annexed and foregoing continuation of the Public Hearing In the Matter of the Application of Forest Oil 7 Corporation for a well spacing exemption and exception to the provisions pertaining to Drilling Units and Well Spacing 8 pursuant to 20 AAC 25.055 pertaining to the Kustatan Field #1 Well, was taken by Suzan Olson on the 19th day of June, 2006, 9 commencing at the hour of 1:30 p.m., at the Alaska Oil and Gas Conservation Commission, Anchorage, Alaska; 10 THAT this Hearing Transcript, as heretofore annexed, is a 11 true and correct transcription of the proceedings taken and transcribed by Suzan Olson; 12 13 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 21st day of June, 2006. 14 ~~~~ Notary Public in and for Alaska My Commission Expires: 10/10/06 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 Kustatan Field #1 Drilling Unit and Spacing Exception Hearing . Alaska Oil & Gas Conservation Commission - June 19, 2006 2 3 1. Static Material Balance (P/Z vs. Cumulative Gas Production): . 2. Flowing Material Balance: 3. Structural Volumetrics: - 4 I j ¡I:: ~/:' 1. Static Material Balance: · Initial Reservoir Pressure = 2,316 psia · Average Reservoir Pressure (3-18-06) = 1,793 psia · 3-3-06 - Shut-in Pressure Gradient Survey · Fluid level at 4,910' (443' above top perf) · BHP = 1,762 psia at max depth of 5,338.9' MD · Extrapolated reservoir pressure = 1,768 psia (at a datum of 5,353' MD) · Tubing WHP = 1,405 psia · 3-18-06 - WHP stabilized at 1 ,430 psia (last 4 days prior to opening the well back up) · 25 psi higher than on 3-3-06 · Static Reservoir Pressure = 1,793 psia · Cumulative production (3-3-06) = 128 MMcf . e ~ OGIP = 0.55 BCF 5 KUSTATAN FIELD #1 P/Z vs CUMULATIVE GAS 3,000 500 I I I Initial Reservoir Pressure = 2,316 psia I . KF #1 (5,353' - 5,380') 2,500 . I 51 Reservoir Pressure (3-3-06) = 1,768 psi a I / 2,000 - ïii .s 1 ,500 ~ c.. y = -5.2202x + 2726.6 R2 = 1 1,000 e IOGIP = 0.52 Bef / o o , I . , 100 200 300 400 500 600 CUM GAS (MMcf) 700 800 900 1,000 6 3,000 2,500 2,000 - ¡¡ .!!: 1,500 ~ D. 1,000 KUSTATAN FIELD #1 PIZ vs CUMULATIVE GAS I I I I Initial Reservoir Pressure = 2,316 psia I . KF #1 (5,353' - 5,380') 500 IOGIP = 0.55 Befl / I 51 Reservoir Pressure (3-18-06) = 1,793 psia I / y = -4.9765x + 2726.6 R2 = 1 o o . , . , 100 200 300 400 500 600 CUM GAS (MMcf) 700 800 900 ~t ·';~,;¡~·,:1::: . e 1,000 7 2. Flowing Material Balance: ~ Recovery (wI compression down to -180 psi FTP) = - 0.45 BCF ~ OGIP = ~ 0.56 BCF · Assuming a Recovery Factor of 80% {.:~<~;;"'"7J~i~~ '~,(', ~"~::': :"..t, '0'.'" {~> . ,J': >:,"~ ,~)'. :~~~!)r~<;' . . 8 3,000 KF#1 Gas I I I Production (thru 3/26/06) :::: 136 MMCF I I 2,000 -j,- #1 1,900 ~~---~-~.. 1,800 .~ c 1,700 - CD .¡ 1,600 S: f j u 1,500 !ß !I) ... Q. 1 ,400 2,000 1,500 æ- II) II:! C) 1,300 500 ~ ~... t,¡ \r----'''"'' \........ .... '" I --, 1,200 1,000 1,100 1,000 c_ 900 o """ """"""\' """ ","'\ ""'. ""'.'. "",' """ ,,'," "'\.\' "",' """¡"".' t""" , .' 800 9 3,000 2,000 1,500 !( C) 1,000 500 GAS KF#1 -6- KF #1 FTP Ii Cumulative G i (thru 6/12/06) ~s Production I - 183.3 MMCF ì I Gas ~ 'f:1:;;1õ ,\,')'l>- 2,000 1,900 1,800 1,700 1,600 ~ - 1,500 ¡¡ II) ~ 1 ,400 c.. - 1,300 1,200 - - 1,1 00 1,000 900 10 2,000 1 ,800 _ , 1,600 'ê) 1,400 ïñ Q. - G) ~ 1 ,200 In In G) ... 11. C) 1 ,000 c :ã :J I- 800 C) c .~ u: 600 400 200 KUSTATAN FIELD #1 Flowing Tubing Pressure vs Cumulative Gas Production . KF #1 (5,353' - 5,380') ~ . . . , o o ,------- .....,'.... ...'......" ... '... "...,...,...... ......... ...... .................. ... ...... '... .........,......... "............... "', ... ...... ..........., ...... . 100 200 300 400 500 600 700 Cumulative Gas (MMcf) 11 2,000 1 ,800 ~ 1,600 .. 1 400 ~-------. , 1,200 1,000 800 600 400 vs /, ..KF #1 e- o 3. Volumetrics: · Volumetric parameters & assumptions · Net Pay Thickness = 14 ft · Area = 50 Acres (from structural closure) · Porosity = 240/0 · Water Saturation = 40% · Gas Expansion Factor = 171 SCF/RCF · Initial Reservoir Pressure = 2,316 psia · Reservoir Temperature = 104 deg F . ~ OGIP = 0.75 BCF . 13 1. Static Material Balance: > OGIP = 0.55 BCF 2. Flowing Material Balance: > OGIP = -0.56 BCF . 3. Structural Volumetrics: > OGIP = 0.75 BCF wI · Area = 50 Ac · Net Pay Thickness = 14' · Porosity = 24% · Water Saturation = 400k · Gas Expansion Factor = 171 SCF/RCF e 14 I' ;' , Kustatan Field #1 - Material Balance Summary . Static Material Balance: OGIP Presented to AOGCC 3/28/2006 0.52 BCF OGIP Presented to AOGCC 6/19/2006 0.55 BCF Flowing Material Balance: 0.56 BCF 0.56 BCF wI updated production data e 15 1. Volumetrics: );> Structural mapping down to the spill-point of the North bounding fault is fully contained within ADL-390368 . 2. Static Material Balance: );> Static material balance indicates a smaller original gas-in- place volume than volumetric calculations );> This gives further support that the gas accumulation is fully contained within ADL -390368 . 16 3. Flowing Material Balance: ~ Flowing material balance matches the static material balance very closely ~ It indicates a smaller original gas volume than volumetric calculations þ;> Once again this suggests that the gas accumulation is fully contained within ADL-390368 All volumetric and material balance calculations indicate that the entire gas accumulation is fully contained within ADL-390368 . . 17 Forest Requests AOGCC: · Issue order for two (2) exceptions: . 20 MC 25.055 (a) (2) - 1,500' Well Spacing . 20 MC 25.055 (b) - Pooling Requirement Support for Requests: · Minimal offset variance (32') · Gas pool completely contained within ADL-390368 · No drainage from any adjacent land owners · Technical data supports all of the above >..Ø;"'"'7f,;;:;e. "1' st.'" '''',::;. ({~,\ ~¡:~,. :' '~''';'f .. ,þ\ I, . ';'¡~~:<~^,~ . . 18 #38 . . STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Kustatan State #1 June 19, 2006 at 1 :30 pm NAME - AFFILIATION ADDRESS/PHONE NUMBER TESTIFY (Yes or No) (PLEASE PRINT) Pc.vJ rt). l...),~s tl.0 F~5r).. D; (~f. ),ePNa,d C 6u;at(/~ (l ,~ I, e,nCA.t'\ \.\o..\Je.\oc...~ A'D~ (AtftYjl ~I.( OOL .6fd;~~vi'" Ao9CL- 310 Ii. S~. 5"k 70c) ~,r~213' V~s c( It ( I( 8"8")-<'/5-0 ~ Nt) :uc¡ -5.;( 5b NtJ ?f.3--Iz.zý ~ ~37 · ~ FRANK H. MURKOWSKI GOVERNOR DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS 550 WEST 7TH A VENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3560 PHONE: (907) 269-8800 FAX: (907) 269-8938 CERTIFIED MAIL RETURN RECEIPT REQUESTED RECEIVED JUN 2 0 2006 Alaska Oil & Gas Cons. Commission Anchorage June 16,2006 Jim Arlington Forest Oil Corporation 310 K Street, Suite 700 Anchorage, AK 99501 RE: ADL 390368 First Lease Plan of Development Approved Dear Jim, The Division of Oil and Gas (Division) issued oil and gas lease ADL 390368 on September 29, 2003 to Forest Oil Corporation (Forest). In June 2005, Forest converted the Kustatan Field No.1 (KF#I) well, located on this lease, ftom a waste disposal well to a gas producer.1 On October 21, 2005, Forest requested approval ftom the Division for an extended test of the KF#1 well. The Division approved the test under the condition that should Forest plan to commence sustained or regular production, it must obtain Division approval of a Plan of Development and Plan of Operations for this lease? Forest began sustained production ftom the KF#1 well on November 21,2005. On February 28,2006, Forest presented well results and its interpretation of the Kustatan Field gas reservoir extents to the Division and representatives of adjacent property owners. On March 2, 2006, the Division requested certain data and information be provided by April 3 to support the geologic interpretation and estimated drainage area ofKF#1 well, and requested that Forest submit a formal Plan of Development and Plan of Operations for the lease no later than May 25, 2006. Forest provided information on March 28 and June 6, 2006, requesting that it be held confidential under AS 38.05.035(a)(9)(C) and 11 AAC 96.220. 1 Forcenergy, Inc. drilled the KF#1 well (Tomcat) in an unsuccessful search for oil in October 2000. Forest Oil Corporation completed the well as a Class II Waste Disposal well in April 2003. 2 Under Paragraph lO(a) of the oil and gas lease, ''No development of the leased area may occur until a plan of development has been approved by the state." A Plan of Operations may be required by the Division under 11 AAC 83.158 and Paragraph 9 of the lease. "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " . ADL 390368 Lease POD June 16,2006 Page 2 . .. On June 12, 2006, Forest submitted to the Division for approval the proposed fuitial Plan of Development (1 st POD) for ADL 390368. Forest plans to optimize recovery of the producing Tyonek sand gas reservoir, and then convert the KF#1 well back to a disposal well. Depletion of the producing horizons is expected by Mayor June of 2007. Production from the well is allocated appropriately under accounting code RE03, and the KF#1 well drainage area lies completely within the boundaries of ADL 390368. The Division finds the 1 st POD protects the public interest. I approve the proposed 1 st POD for ADL 390368 for the period November 21,2005 through November 20,2006. Under the lease, the Second POD will be due in this office on or before November 20, 2006. If no changes from an approved plan are contemplated for_the following year, the lessee shall file a statement to that effect for approval in lieu of the required revision and update. This approval does riot relieve Forest's obligation to obtain the Plan of operations approval from this office for ADL 390368. The decision takes effect immediately. An eligible person affected by this decision may file an appeal, which must be made in accordance with 11 AAC 02 before any appeal can be filed in the superior court. Any appeal received by the commissioner's office must be received within 20 calendar days after the date of "issuance" of this decision, as defined in 11 AAC 02.040 (c) and (d), and may be mailed or delivered to Michael L. Menge Commissioner, Department of Natural Resources, 550 W. 7th Avenue, Suite 1400, Anchorage, Alaska 99501; faxed to 1-907-269-8918; or sent by electronic mail to dnr_appeals@dnr.state.ak.us. A copy of 11 AAC 02 may be obtained from any regional information office of the Department of Natural Resources. ~ cc: Leonard Gurule, Forest Oil Corporation John K. Norman, AOGCC 'IJ T 11 TlAOGCC Jeff Landry, DOL ~31o · . Subject: Kustatan Field 1 Information From: Stephen Davies <steve _ davies@admin.state.ak.us> Date: Thu, 08 Jun 2006 13 :41: 13 -0800 To: JDArlington@forestoil.com BCC: John Nonnan <john_norman@admin.state.ak.us>, Daniel Seamount <dan_seamount@admin.state.ak.us>, Cathy P Foerster <cathy Joerster@admin.state.ak.us>, David Roby <daveJoby@admin.state.ak.us> Jim, I appreciate Forest's invitation to review basemap and seismic information regarding the Kustatan Reid 1 well in your office. However, since you have indicated that Forest will not be submitting that information as evidence in the Kustatan Reid 1 hearing, I must decline your invitation. The Commission is required to base its decisions solely on evidence that is in the record, which may include confidential information. Commission technical staff advise the Commissioners and do not serve as independent witnesses at a hearing. I cannot advise the Commissioners based on information that has not been entered into a hearing record or is not part of the public record. So, my viewing of the confidential Kustatan Field 1 information would serve no practical purpose. Thank you for the invitation, Steve Davies Alaska Oil and Gas Conservation Commission Steve Davies #35" e -~ FRANK H. MURKOWSKI, GOVERNOR A.liA~1iA. OILAlQ) GAS CONSERVATION COMltlISSION June 2, 2006 333 W. 7'" AVENUE. SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 Certified Mail Return Receipt Requested Mr. Leonard Gurule Senior Vice President Forest Oil Corporation 310 K Street, Suite 700 Anchorage, AK 99501 Re: Lack of Response Concerning Commission Questions and Data Requests Kustatan Field NO.1 Dear Mr. Gurule: On April 6, April 26 and May 26, 2006, the Alaska Oil and Gas Conservation Commission ("Commission") forwarded by email the attached list of requested information concerning Forest Oil Corporation's ("Forest") Kustatan Field No. 1 gas production well ("KF #1"). Following the Commission's April 26th email.Mr. Steve Davies of our technical staff received a telephone message from Mr. Jim Arlington of your staff stating that Forest would provide the information soon. The requested information has yet to arrive. The public hearing on Forest's application for spacing exceptions for KF #1 is scheduled to reconvene on June 19, 2006. Unless the Commission receives the requested information at least 8 working days prior to the hearing, the Commission will reconvene the hearing and order KF # 1 to be shut-in until such time as the information is provided to the Commission and another hearing can be scheduled. Attachment: Email (dated 4/6/06) cc: Mr. Leonard, Gurule, Forest via facsimile Ms. Cammy Taylor, AG Mr. Daniel Seamount, Commissioner Ms. Cathy Foerster, Commission File Lack of Response to Co.sion Information Request Kustatan Field No. 1 June 1, 2006 Page 2 of2 e ------- Original Message -------- Subject: Kustatan Field 1: Questions and Requests Date: Thu, 06 Apr 2006 16:43:21 -0800 From: Stephen Davies <steve _ davies@admin.state.ak.us> Organization: State of Alaska To: JDArlington@forestoil.com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical statfwho can help us? 1) How did Forest determine the reservoir pressure of March 3, 2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses ITom Kustatan Field L 4) Accurate mapping of the structure on the west side of Kustatan Field I is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three- mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 e e tf. ?~ JOB STATUS REPORT ~P?,u.f- ðtL ~ ¥. DATE, TIME FAX NO./NAME DURATION PAGE(S) RESULT MODE e 06/02 14:19 2588601 00:00:43 03 OK STANDARD ECM TIME NAME FAX!! TEL!! SER.# e 06/02/2006 14:20 AOGCC 9072767542 BR02J2502370 Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, AK 99501-3539 Phone: (907) 279-1433 Fax: (907) 276-7542 Fax Transmission The information contained in this fax is confidential and/or privileged. This fax is intended to be reviewed initially by only the individual named below. If the reader of this transmittal page is not the intended recipient or a representative of the intended recipient, you are hereby notified that any review, dissemination or copying of this fax or the information contained herein is prohibited. If you have received this fax in error, please immediately notify the sender by telephone and return this fax to the sender at the above address. Thank you. To: J, /J1VJ.-ý1j G UfU,tJ 1 Fax#: ólbe -~lJlOl From: r..Þ. S fVli~ Date: Co { ~ \ () lQ Phone #: - Pages (including ¥\ u ~:t(ìÁ4lYV fW. ~ ~~ Subject: cover sheet): Message: If you do not receive all the pages or have any prOblemS~ith . this fax, please call for assistance at (907) 793-1223. e #34 e Subject: RE: [Fwd: Kustatan Field 1: Questions and Requests] ì4'rom: Jim Arlington <JDArlington@forestoil.com> Date: Fri, 02 Jun 2006 18:34:39 -0600 To: 'Stephen Davies' <steve_davies@admin.state.ak.us> cc: David Roby <daveJoby@admin.state.ak.us>, "seamount» Daniel Seamount" <dan_seamount@admin.state.ak.us>, Leonard Gurule <LCGurule@forestoil.com>, John Nonnan <john _ norman@admin.state.ak.us>, Brian Havelock <brian _ havelock@dnr.state.ak.us> e Dear Mr. Davies, On April 6, 2006 you sent me an email message requesting that Forest Oil Corporation ("Forest") provide the Alaska Oil and Gas Conservation Commission ("AOGCC") infonnation and responses to technical questions relating to the Kustatan Field 1 well. Forest provides you with this email the infonnation/responses you requested. Each of your questions or requests is reprinted below, followed by Forest's response. 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? On March 3, 2006, a pressure gauge was run in the hole on slickline to record bottom-hole pressures. The pressure gauge was run down hole to a total depth of 5,338.9' MD. The recorded pressure at this depth was 1,762.05 psia. The average pressure gradient recorded from the fluid level down to 5,338.9' was 0.426 psi/ft. Considering that the hole inclination at this depth is less than 1 degree, the extrapolated reservoir pressure at the top perforation (5,353' MD) is 1,768.1 psia. 2) What was the liquid level (or volume ofliquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? A review of the data indicates that the pressure gauge encountered the top of the liquid column at approximately 4,910' MD. This was first evidenced by the weight indicator on the slickline unit showing a decrease in line weight at approximately this depth while running in the hole. Secondly, the pressure gradient interpreted from the pressure and depth data shows a change in gradient from -0.033 psi/ft to -0.426 psi/ft at 4,910' MD. This is a very clear indication of fluid level. 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses trom Kustatan Field 1. Water samples were gathered on April 9, 2006 and sent in to BJ Chemical Services for analysis. A copy of their Production Water Analysis is attached hereto. 4) Accurate mapping of the structure on the west side ofKustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within on 6/13/2006 2: 16 PM the three-mile radius tha~ain to mapping of the Kustatan Field_ructure. The primary r,eason Fon9st has delayed responding to your request was to wait for the results of the State of Alaska 2006 Cook Inlet Areawide Lease Sale held on May 25, 2006, since Forest bid on one of the lease sale tracts being offered (tract #204) adjacent to the lease on which the KF #1 well is producing. Since Forest was not the apparent high bidder on that tract (Forest only bid slightly more than the minimum required bid) Forest respectfully declines to submit to the AOGCC the map displaying tl16 location of all wells and seismic data within a radius or three miles of Kustatan Field 1 well. However, Forest will be more than pleased to allow any AOGCC p,ersonnel to come view the data on Forest's work stations in our office here in A..îchorage and demonstrate to you hovv the structure maps were constructed using that data. If you would like to schedule a time for our personnel, workstations and data to be available to you or other AOGCC personnel please let me know. On a related matter, you had also suggested that Forest may want to draft the field rules for the Kustatan Field #1 well that will be the subject of the AOGCC hearing on June 19,2006. Please be advised that Forest personnel will not have the opportunity to draft the proposed field rules and will instead rely on the AOGCC staff to do so. Should you have any questions regarding the infonnation provided with this transmittal, or require any additional information regarding this matter, please let me know. Sincerely yours, Jim Arlington Land Manager ----Original Message--- From: Stephen Davies [mailto:steve_davies@admin.state.ak.us] Sent: Friday, May 26, 2006 12:28 PM To: JDArlington@forestoil.com Cc: David Roby; seamount> > Daniel Seamount Subject: [Fwd: Kustatan Field 1: Questions and Requests] fun, On April 6. 2006 the Commission requested additional information relating to the Kustatan Field 1 well. To date, I have not received any of the requested information. Could Forest please provide it? Sincerely, Steve Davies AOGCC 793-1224 on 6/13/20062:16 PM e e -------- Original Message -------- Subject:Kustatan Field 1: Questions and Requests Date:Thu, 06 Apr 2006 16:43:21 -0800 From: Stephen Davies <steve daviescmadmin. state. ak. us> Organization:State of Alaska To:JD Arlingtoncmtor estoiL com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume ofliquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17,2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses ITom Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 KF#1 I at· 4 09 2006 df Content-Type: application/octet-stream water samp e an YSl5 - - .p - Content-Encoding: base64 of3 6/13/20062:16 PM e e Subject: RE: [Fwd: Kustatan Field 1: Questions and Requests] From: Jim Arlington <JDArlington@forestoil.com> Date: Fri, 02 Iun 2006 18:34:39 -0600 To: 'Stephen Davies' <steve_davies@admin.state.ak.us> CC: David Roby <daveJoby@admin.state.ak.us>, "seamount» Daniel Seamount II <dan _seamount@admin.state.ak.us>, Leonard Gurule <LCGurule@forestoil.com>, John Nonnan <john _ nonnan@admin.state.ak.us>, Brian Havelock <brian _ havelock@dnr.state.ak.us> Dear Mr. Davies, On April 6, 2006 you sent me an email message requesting that Forest Oil Corporation ("Forest") provide the Alaska Oil and Gas Conservation Commission ("AOGCC") infonnation and responses to technical questions relating to the Kustatan Field 1 well. Forest provides you with this email the infonnation/responses you requested. Each of your questions or requests is reprinted below, followed by Forest's response. 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? On March 3, 2006, a pressure gauge was run in the hole on slickline to record bottom-hole pressures. The pressure gauge was run down hole to a total depth of 5,338.9' MD. The recorded pressure at this depth was 1,762.05 psia. T¡'1e average pressure gradient recorded from the fluid level down to 5,338.9' was 0.426 psi/ft. Considering that the hole inclination at this depth is less than 1 degree, the extrapolated reservoir pressure at the top perforation (5,353' MD) is 1,768.1 psia. 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17,2006 and how was this level determined? A review of the data indicates that the pressure gauge encountered the top of the liquid column at approximately 4,910' 1\110. This was first evidenced by the weight indicator on the slickline unit showing a decrease in line weight at approximately this depth while running in the hole. Secondly, the pressure gradient interpreted from the pressure and depth data shows a change in gradient from -0.033 psi/ft to -0.426 psilft at 4,910' MD. This is a very clear indication of fluid level. 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses trom Kustatan Field 1. Water samples were gathered on April 9, 2006 and sent in to BJ Chemical Services for analysis. A copy of their Production Water Analysis is attached hereto. 4) Accurate mapping of the structure on the west side ofKustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within on 6/13/20062:13 PM the three-mile radius tha4trtain to mapping of the Kustatan Field.ructure. The primary reason Forest has delayed responding to your request was to wait for the results o'r the State of Alaska 2006 Cook Inlet Areawid,e L;ease Sale h,eld on !vlay 25, 2006, since Forest bid on one of the lease sale tracts being offered (tract #204) adjacent to the lease on which the KF #'1 well is producing. Since Forest was not the apparent high bidder on that tract (Forest only bid slightly more than the minimum required bid) Forest respectfully declines to submit to AOGCC tile map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field '1 well. However, Forest \Nil! be more than pleased to allow any AOGCC personnel to come view the data on FOîest's work stations in our office here in Pillchorage and demonstrate to YOll how the structure maps were constmcted using that data. If you would like to schedule a time for our personnel, workstations and data to be available to you or other AOGCC personnel please let me know, On a related matter, you had also suggested that Forest may want to draft the field rules for the Kustatan Field #1 well that will be the subject of the AOGCC hearing on June 19, 2006. Please be advised that Forest personnel will not have the opportunity to draft the proposed field rules and will instead rely on the AOGCC staff to do so. Should you have any questions regarding the information provided with this transmittal, or require any additional information regarding this matter, please let me know. Sincerely yours, Jim Arlington Land Manager -----Original Message---- From: Stephen Davies [mailto:steve_davies@admin.state.ak.us] Sent: Friday, May 26, 2006 12:28 PM To: JDArlington@forestoil.com Cc: David Roby; seamount> > Daniel Seamount Subject: [Fwd: Kustatan Field 1: Questions and Requests] Jim, On April 6, 2006 the Commission requested additional information relating to the Kustatan Field 1 well. To date, I have not received any ofthe requested information. Could Forest please provide it? Sincerely, Steve Davies AOGCC 793-1224 00 6/13/2006 2: 13 PM e e -------- Original Message -------- Subject:Kustatan Field 1: Questions and Requests Date:Thu, 06 Apr 2006 16:43:21 -0800 From:Stephen Davies <steve davies(a),admin.state.ak.us> Organization: State of Alaska To:JD Arlin,gton(a),forestoi!. com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses ITom Kustatan Field 1. 4) Accurate mapping ofthe structure on the west side ofKustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies ofall seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 KF#l I at· 4 09 2006 de Content-Type: application/octet-stream water samp e an YSIS - - .p - . Content-Encoding: base64 of3 6/13/20062:13 PM :U=33 Subject: RE: Kustatan Field No.1 I of Development supporting data e From: Jim Arlington <JDArlington@forestoi1.com> Date: Mon, 12 Jun 2006 09:17:06 -0600 To: "'brian _ havelock@dnr.state.ak.us'" <brian _ havelock@dnr.state.ak.us>, Jim Arlington <JDArlington@forestoilcom> CC: Steve Davies <steve_davies@admin.state.ak.us>, "'Ken P. Helmold'" <ken_helmold@dnr.state.ak.us>, jack _ hartz@dnr.state.ak.us, Paul Winslow <PMWinslow@forestoil.com> Brian, Attached is the final Initial Plan of Development ("POD") for ADL 390368. As indicated in your email below, it is identical to the Draft previously submitted for your review, as you requested. With the submittal last week of the information requested in your email below it is my understating that the Division of Oil & Gas has received all of the information it deems is necessary to approve the Initial POD for ADL 390368 and is satisfied that the KF #1 wen is not draining any acreage beyond the boundaries of oil and gas lease ADL 390368. I will be out of the country beginning tomorrow for a two week vacation so please send the approval for the POD to the attention of Leonard Gurule at our office in Anchorage in my absence (LCGurule@forestoil.com) . Likewise, if you have any questions regarding the KF #1 well until I return please direct your questions to Leonard by email with a copy to me please. If you have any questions or concerns with this transmittal, please call me today at 868-2112. Sincerely, Jim Arlington -----Original Message---- From: Brian Havelock [mailto:brian_havelock@dnr.state.ak.us] Sent: Wednesday, May 31, 20064:41 PM To: 'Jim Arlington' Cc: Steve Davies; 'Ken P. Helmold'; jack_hartz@dnr.state.ak.us Subject: Kustatan Field NO.1 Plan of Development supporting data Jim Thanks for meeting with us today on the proposed Plan of Development for ADL 390368. Bill Van Dyke's March 2 letter requested data items and a POD by May 25,2006 and the draft you sent over looks fine. You could submit that now. Most of the data items have been satisfied, except for the following as discussed with you today. I will reference the item number indicated on your Data Transmittal of March 28,2006. #4 Structural Contour Maps: needs a proper legend that labels faults, seismic lines, projection information, etc. Be sure to show the most recent seismic acquisition 2005-2006 lines or 3D coverage over the area, not just old lines. #4 There is no (four page) explanation of the structure maps. #5 Cross-Section Map: needs proper legend labeling correlation markers. Increase the resolution of the logs on the printout so that one could actually see the markers in the wells. lof2 6/13/20062:15 PM #7 Updated reservoir teAssure data to validate the OGIP. Currently & stops at February 28, 2006. Is daily flowing tubing pressure available? Were there any tests since February 24, 2006? #10 Any changes to the calculated OGIP. The last estimate was 0.39 BcfOGIP, but the one before that was 0.75. We will ask that you cc the Division on all correspondence with the AOGCC including emails (email me and putAattention Brian Havelock on letters) from now on regarding the KF#l well. This request will be reiterated in the POD approval letter. Finally, if you planned to produce the well at the 20 MMCF/month rate for the duration of the plan period. that would deplete the reservoir in about 10 months assuming .39 Bcfis recoverable and 0 psi abandonment pressure. Is this a reasonable assessment? How much gas do you plan to recover from the OGIP? Thanks Brian Brian Havelock Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 99501 http:lAvww.dog.dnr,state.ak.us Content-Type' application/octet-stream ADL-390368 Initial POD FINAL 5-25-2006.pdf . - - Content-Encoding: base64 20f2 6/13/20062:15 PM e e e e Forest Oil Corporation 310 K Street, Suite 700 Anchorage, Alaska 99501 (907) 258-8600 Fax: (907) 258-8601 ADL No. 390368 Initial Lease Plan of Development & Operations Submitted to: State of Alaska Department of Natural Resources, Division of Oil and Gas; and State of Alaska Oil and Gas Conservation Commission Prepared by: Jim Arlington, Land Manager, Alaska Business Unit Forest Oil Corporation May 25, 2006 ADL-390368 Initial POD Page 1 of 5 May 25, 2006 e e e e ADL No. 390368 Initial Lease Plan of Development and Operations Table of Contents Abstract Purpose Initial Lease Plan of Reservoir Development and Operations ADL-390368 Initial POD May25,2006 Page 2 of 5 e e e e ADL No. 390368 Initial Lease Plan of Development and Operations Abstract This Initial Plan of Development (" POD") is submitted to satisfy requirements of the State of Alaska Department of Natural Resources, Division of Oil & Gas ("DO&G") and 20 AAC 25.517 pertaining to development and operation of State of Alaska oil and gas lease ADL-390368. During the term of this Initial POD, Forest Oil Corporation ("Forest Oil") plans to continue to produce gas from the Kustatan Field #1 well and monitor the production data to maintain a production rate that will optimize recovery from the limited gas reservoir. Purpose The purpose of this report is to describe development and reservoir management activities and tasks proposed to be conducted by Forest Oil, as the lease operator, during the term of the lease. This report is submitted to the State of Alaska Department of Natural Resources, Division of Oil and Gas and the Alaska Oil and Gas Conservation Commission to satisfy each of the following requirements: ADL-390368, Artide 10(a) 20 AAC 25.517 Initial Plan of Development Plan of Reservoir Development and Operation ADL-390368 Initial POD May 25.2006 Page 3 of5 e e e e ADL No. 390368 The Initial Plan of Development and Plan of Reservoir Development and Operation This Initial Plan of Development ("POD") for State of Alaska oil and gas lease ADL No. 390368 describes the following plans and activities, to the extent available information exists: (1) Long-range proposed development activities for the lease, including plans to delineate all underlying oil or gas reservoirs, bring the reservoirs into production, and maintain and enhance production once established. Kustatan Field #1 Injection Well. The Kustatan Field ("KF") #1 Class II disposal well, permitted under MLUP/CI 03-03, LAS 24199, was re-completed as a Tyonek gas production well in October 2005. Gas production commenced on 11/21/05 and will continue during this Initial POD. Lona-RanQe Proposed Development Activities The focus for the future gas production is to ensure the most effective economic depletion of gas from the reservoir. No additional wells are planned to be drilled during the period covered by this Initial POD. (2) Plans for the exploration or delineation of any land not included in a participating area. All lands reasonably expected to contribute to the production of hydrocarbons from the KF #1 well are completely contained within the boundaries of ADL-390368. Therefore, production from the KF #1 well is on a lease basis and no participating area is required or contemplated. There are no plans for any exploration or delineation drilling within the lease boundaries. (3) Details of the proposed operations for at least one year following submission of this Initial Plan of Development. The Kustatan Field #1 gas well will probably be converted back to a Class II waste disposal well during the term of the Initial Plan of Development due to the apparent small gas accumulation. ADL-390368 Initial POD May 25. 2006 Page 4 of5 e e e . (4) The surface location of proposed facilities, drill pads, roads, docks, causeways, material sites, base camps, waste disposal sites, water supplies, airstrips, and any other operation or facility necessary for lease operations. Kustatan Field #1 Well. The KF #1 well is located on USS 12121 Lot 2. The surface estate of USS 12121, Lot 2 is owned in fee 100% by Forest Oil (see attached Lease/Property Plat). Forest Oil also owns in fee 100% of the surface estate of USS 4567, Lot 1 and Lot 2, and USS 1999, all of which are contained the boundaries of ADL-390368. The KF #1 well pad is located on the same gravel pad on which the Kustatan Production Facility ("KPF") is located. The KPF is also owned entirely by Forest Oil and is used to process production from the Redoubt Unit (see attached Updated Kustatan Production Facility Plot Plan and Facility List for KF #1). The gas production from the KF #1 well goes directly into the KPF where it is used as fuel gas for the KPF or elsewhere in Forest Oil's West Foreland pipeline infrastructure (see the attached Updated Facility and Pipeline Schematic - West Forelands Operations). No facility additions are planned for the KF #1 well during the period of this Initial POD. Future Development and Exploration PlanninQ within the lease boundaries As discussed above the future development will be limited to monitoring the existing KF #1 gas well with an emphasis on production optimization. There are no additional wells planned to be drilled within the lease boundaries nor additional completions within the KF #1 wellbore. ADL·390368 Initial POD May 25. 2006 Page 5 of 5 e - 'it 3~ 8 . COOK INLET PETROLEUM NEWS · WEEK OF APRil 9. 2006 AOGCC allows gas production at Kustatan Commission ordered shutdown until spacing exception approved; Forest says that a shutdown would result in loss oj gas reserves By ALAN BAILEY in because Forest did not have a required dated from the commission to Forest. The The history of Kustatan Fieid No. well Spacing exception. we\1 is on a State of Alaska lease. b 2000 Petroleum News fil d h S d 1 goes back to Octo er , Commission regulations require gas "When Forest let e un ry I· KF #1 when Forcenergy Inc. Spudded the we\1s to be at least 1,500 feet from the Application for recomp etmg as a nearest property line, unless the landown- gas we\1, Forest failed to notify the well as an oil exploration well er is the same on both sides of the proper- Commission that this recompletion targeting the company:S Tom Cat ty line. The Kustatan Field No. 1 is 1,468 required a spacing exception because of prospect near West Foreland. feet from the west line of section 4, town- the adjacent, unleased acreage," the letter ship 7 north, range 14 west, Seward said. meridian, according to a Feb. 23 letter Need for pooling The Alaska Oil and Gas Conse~ati~n Commission has Issued an mtenm order allowing gas production at ~ Forest Oil's Kustatan Field No. 1 ~\1 near West Foreland on the west side of Alaska's Cook Inlet. The commission had originally ordered the wen to be shut JUNEAU - Alaska intervenes with feds over NPR-A The State of Alaska has intervened on behalf of the federal government in the latest lawsuit over oil and gas development in the National Petroleum Reserve-Alaska. Seven environmental groups are challenging plans by the U.S. Department of Interior to develop the northeast area of the 23.5 million acre reserve along the Arctic Coast. The groups contend that oil development in the wetlands surrounding Lake ~hekpuk in the northeast comer of the NPR-A would harm wildlife ~here. . ~e lake region includes one of the. most important m~lting areas III the ArctJc for wild geese and areas sought out by canbou herds for calvmg. The plan calls for opening seven leasing areas, from 45,000 acres to 60,000 acres, north of the lake and other acreage south of the lake to oil and gas development. Mark Morones, spokesman for the Alaska Department of Law, said the state opted to join the lawsuit because it has important economic and non-economic interes~s in the reserve, including 50 percent of the royalty interests from oil and gas productton and wildlife habitat and subsistence issues. The government estimates that the areas surrounding Lake Teshekpuk contain about 2 billion barrels of economically recoverable oil and 3.5 tri\1ion cubic feet of natural gas. . ConocoPhillips and Anadarko are also seeking to intervene in the lawsUit. Another lawsuit challenging the department's environmental impact statement for the area is currently pending in a Washington, D.C., court. -THE ASSOCIATED PRESS The commission also said that the Kustatan No. 1 well does not comply with commission regulations prohibiting "reg- ular production" of gas from a property that is smaller than the government sec- tion upon which the gas well is located, "ul1less the interests of the persons own- ing the drilling rights in and the right to share in the production from the ... sec- tion ... have been pooled under AS 31.05.100." "The northern one-third of Section 4 is depicted on AKDNR status plats (as) hav- ing Cook Inlet Region Corporation as the landowner," the commission letter says. "It is our understanding that Forest does not have a pooling agreement in place for this section." Forest could face fines as a result of non-compliance with the regulations. On March 28 the commission held a public hearing on Forest's subsequent application for spacing exceptions for the well. The commission has also scheduled a public hearing on June 19 to consolidate Forest's spacing exception application with the commission's proposed pool rules and proposed establishment of a 12 300 feet but failed to find oil. Forest OiÌ Corp. bought out Forcenergy at about the time that the well was being complet- ed. In March 2003 Forest recompleted the well as a disposal well for disposing pro- duced water from the nearby Kustatan Production Facility that processes the out- put from the offshore Redoubt Shoal oil field, according to documentation in com- mission files. The disposed fluids went into penneable sands of the middle Tyonek fonnation. The files also contain documentation indicating that in the summer of 2005 Forest decided to convert the well from a disposal well to a gas well by sealing the disposal perforations and perforating for gas production from upper Tyonek sands. Well tests betweén Nov. 14 and Nov. 15, 2005, ';flowed gas as high as 2.7 million cubic feet per day" from the lower test zone in the Tyonek A formation, accord- ing to a Forest report. The depths in this zone range from 5,353 to 5,380 feet. The commission's Feb. 23 letter says that, following these initial tests, Forest produced gas from the well over a contin- uous period during November, December and January, producing in excess of 90 ""altn" "n~;,. l'""".. ,...,r .......... ....._,.1 ~~,.;_ _ ...L - --- vUIJUI,;UrlllllJpð <1I1U ~1J<1U<1IKU <11t: <1lðU ðt:t:KIII~ LU 1J1Lt:1 Vt:IJC III LlIC Ii:tW"UIL. Another lawsuit challenging the department's environmental impact statement for the area is currently pending in a Washington, D.C., court. -THE ASSOCIATED PRESS Shipping freight to Arctic communities for 70 years Northern Transportation Company Limited is a member of the NorTerra group of companies, owned by the Inuvialuit Development Corporation and Nunasi Coproration. FOR MORE INFORMATION, CONTACT: Northern Transportation Company Limited 42003 Mackenzie Highway Hay River, NT XOE OR9 Tel: (867) 874-5100 Fax: 1867) 874-5179 Toll Free: 1-877-77'7-NTCL (68251 Web: www.ntd.com " nC;CL® a '\. \~\ -.. J:~ :-- ,. ."_<";".1...",--- .' OJ!J well. The commission has also scheduled a public hearing on June 19 to consolidate Forest's spacing exception application with the commission's proposed pool rules and proposed establishment of a dri1ling unit. However, in response to a statement from Forest that keeping the well shut in could result in a permanent loss of gas reserves, the commission issued its inter- im order granting a temporary spacing exception and allowing the well to resume production. The commission's order rec- ognized that "all affected property owners have expressed in writing their non-objec- tion to the requested spacing exception . and the commission has received no objections to the application." Drilled in 2000 The history of Kustatan Field No. I goes back to October 2000, when Forcenergy Inc. spudded the well as an oil exploration well targeting the company's Tom Cat prospect near West Foreland. The well reached a true vertical depth of that, following these initial tests, Forest produced gas from the well over a contin- uous period during November, December and January, producing in excess of 90 million cubic feet of gas and using the gas "as a fuel gas for a turbine or turbines in Forest's Kustatan Facility." The commission said that Forest char- acterized the produced gas to the Alaska Department of Natural Resources as test production rather than regular production. However, the commission asserts that the production of more than 90 million cubic feet of gas over a two-month period con- stitutes more than short-tenn testing or evaluation, and that "use of that gas to supplant fuel obtained from other sources constitutes market use rather than flow testing of the well for reservoir evalua- tion." ';Therefore, the Commission considers KF #1 to be in 'regular production' of gas," the commission letter says. And "regular production" triggers the need for pool rules, according to the commission's regulations. . I ECONOMICAL HIGH QUALITY CONSTRUCTION AUTHORIZED INDEPENDENT VP STEEL BUILDING DEALER CONSIDER THE MANY BENEFITS OF A VP STEEL BUilDING · Fabric Covered Steel Buildings . Cost Saving Solutions . Fully Engineered · Insulation Packages Heating Options VP Steel Buildings 4f31 ..fwd: Kustatan Field ~estions and Requests] . Stephen Davies <steve _ davies@admin.state.ak.us> ..,e: Fri, 26 May 2006 12:27:56 -0800 1'0: JDArlington@forestoil.com CC: David Roby <daveJoby@admin.state.ak.us>, "seamount» Daniel Seamount" <dan _seamount@admin.state.ak.us> e Jim, On April 6, 2006 the Commission requested additional information relating to the Kustatan Field 1 well. To date, I have not received any of the requested information. Could Forest please provide it? Sincerely, Steve Davies AOGCC 793-1224 -------- Original Message -------- Subject:Kustatan Field I: Questions and Requests Date:Thu, 06 Apr 200616:43:21 -0800 From:Stephen Davies <steve davies(aJadmin.state.ak.us> Organization:State of Alaska T o:JD Arlin14ton(aJforestoil. com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field I. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3, 2006 that was used in the p/z analysis? 2) What was the liquid level (or volume ofliquid) in the wellbore when Kustatan Field I was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses fÌ'om Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field I is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field I that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field I structure. Thank you, Steve Davies AOGCC 793-1224 of2 5/26/2006 12:29 PM Subject: [Fwd: Kustatan Field I: Istions and Requests] From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Wed, 26 Apr 200616:47:45 -0800 To: JDArlington@forestoil.com BCC: daveJoby@admin.state.ak.us e Jim, I sent the attached email to you a couple of weeks ago and haven't heard anything. I just want to make sure that you received it. Thanks, Steve Davies AOGCC -------- Original Message -------- Subject:Kustatan Field I: Questions and Requests Date:Thu, 06 Apr 200616:43:21 -0800 From:Stephen Davies <steve davies(a}admin.state.ak.us> Organization:State of Alaska To:JD Arlington(a)forestoil. com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staffwho can help us? I) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field I resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses fÌ'om Kustatan Field I. 4) Accurate mapping of the structure on the west side of Kustatan Field I is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field I that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field I structure. Thank you, Steve Davies AOGCC 793-1224 1 of 1 5/26/2006 12:29 PM Subject: Kustatan Field 1: Questi! and Requests From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Thu, 06 Apr 2006 16:43:21 -0800 To: JDArlington@forestoil.com BCC: David S Roby <daveJoby@admin.state.ak.us> e Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses from Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 e e -------- Original Message -------- Subject:Kustatan Field 1: Questions and Requests Date:Thu, 06 Apr 2006 16:43:21 -0800 From: Stephen Davies <steve davies~admin. state. ak. us> Organization: State of Alaska To:JD Arlington(ã?fore:stoil. com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses ftom Kustatan Field 1. 4) Accurate mapping of the structure on the west side ofKustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 . Content-Type: application/octet-stream KF#1 water sample analysIs 4-09-2006.pdf - Content-Encoding: base64 of3 6/13/20062:06 PM tFwd: Kustatan Field ~estions and Requests] . Stephen Davies <steve _ davies@admin.state.ak.us> .te: Fri, 26 May 2006 12:27:56 -0800 .fo: JDArlington@forestoil.com CC: David Roby <daveJoby@admin.state.ak.us>, "seamount» Daniel Seamount" <dan _ seamount@admin.state.ak.us> e Jim, On April 6, 2006 the Commission requested additional information relating to the Kustatan Field 1 well. To date, r have not received any of the requested information. Could Forest please provide it? Sincerely, Steve Davies AOGCC 793-1224 -------- Original Message -------- Subject:Kustatan Field I: Questions and Requests Date:Thu, 06 Apr 200616:43:21 -0800 From:Stephen Davies <steve davies@admin.state,akus> Organization:State of Alaska To:JDArlington@forestoil.com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3, 2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses :trom Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field 1 is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 of2 5/26/2006 12:29 PM Subject: [Fwd: Kustatan Field 1: Istions and Requests] From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Wed, 26 Apr 2006 16:47:45 ~0800 To: JDArlington@forestoil.com BCC: dave _roby@admin.state.ak.us e Jim, I sent the attached email to you a couple of weeks ago and haven't heard anything. I just want to make sure that you received it. Thanks, Steve Davies AOGCC -------- Original Message -------- Subject:Kustatan Field 1: Questions and Requests Date:Thu, 06 Apr 200616:43:21 -0800 From:Stephen Davies <steve davies(tl)admin.state.ak.us> Organization:State of Alaska To :JD Arlington(tì)forestoil.com Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure of March 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses from Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field I is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 1 of! 5/2612006 12:29 PM Subject: Kustatan Field 1: Questi' and Requests From: Stephen Davies <steve_davies@admin.state.ak.us> Date: Thu, 06 Apr 2006 16:43:21 -0800 To: JDArlington@forestoil.com BCC: David S Roby <dave_roby@admin.state.ak.us> e Jim, I would like to use you as a single point of contact for all correspondence relating to Kustatan Field 1. The Commission has several technical questions and requests concerning this well. Could you please forward this email to those on Forest's technical staff who can help us? I) How did Forest determine the reservoir pressure of March 3, 2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, March 17,2006 and how was this level determined? 3) As Kustatan Field I resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results along with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses from Kustatan Field 1. 4) Accurate mapping of the structure on the west side of Kustatan Field I is crucial to understanding the extent of the accumulation. Please provide a map displaying the location of all wells and seismic data within a radius of three miles of Kustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mapping of the Kustatan Field 1 structure. Thank you, Steve Davies AOGCC 793-1224 e e -------- C>ri~al lVressa~e -------- Subject:Kustatan Field 1: Questions and Requests Date:Thu, 06 Apr 2006 16:43:21 -0800 From: Stephen Davies <steve davies~admin. state. ak. us> Organization: State of Alaska To:JD Arlington~foresto¡l. com Jim, I would like to use you as a sin~le point of contact for all correspondence relatin~ to Kustatan Field 1. The Commission has several technical questions and requests concernin~ this well. Could you please forward this email to those on Forest's technical staff who can help us? 1) How did Forest determine the reservoir pressure oflVrarch 3,2006 that was used in the p/z analysis? 2) What was the liquid level (or volume of liquid) in the wellbore when Kustatan Field 1 was brought back onto production on, or shortly after, lVrarch 17, 2006 and how was this level determined? 3) As Kustatan Field 1 resumed operations, did Forest acquire and analyze a sample of the fluid within the wellbore? Please provide a copy of the laboratory analytical results alon~ with any resistivity and temperature data acquired on the fluid. Please provide copies of any water analyses from Kustatan Field 1. 4) Accurate mappin~ of the structure on the west side ofKustatan Field 1 is crucial to understandin~ the extent of the accumulation. Please provide a map displayin~ the location of all wells and seismic data within a radius of three miles ofKustatan Field 1 that were used to construct the structure map Forest presented to the Commission. Please provide copies of all seismic data within the three-mile radius that pertain to mappin~ of the Kustatan Field 1 structure. Thank you, Steve Davies AC>GCC 793-1224 KF#1 I I· 4 09 2006 df Content-Type: application/octet-stream water samp e ana YSlS - - .p - Content-Encoding: base64 of3 6/13/2006 2:06 PM ~30 e e Supplemental Notice of Public Hearing ST A TE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Forest Oil Corporation Kustatan Field No.1 well spacing exception and pool rules, including drilling unit A public hearing on an application by Forest Oil Corporation for spacing exceptions for the Kustatan Field No. 1 well was held on March 28, 2006 at 1 :30 pm at the offices of the Alaska Oil and Gas Conservation Commission at 333 West th Avenue, Suite 100, Anchorage, Alaska 99501. The subject well is a vertical well with surface and bottom hole locations 1468 feet from the West Line and 3443 feet from the North Line of Section 4, T7N, RI4W, Seward Meridian. The hearing has been continued and will reconvene on June 19,2006 at 1 :30 pm. Under 20 AAC 25.520, the Commission proposes to classify the pool as a gas pool and to prescribe rules to govern the proposed development and operation of the pool, specifically including establishing a drilling unit for the Kustatan Field No. 1 well that is coincident with the productive limits of the pool and that is smaller than the drilling unit which is otherwise established under statewide rules. The June 19, 2006, hearing will be a consolidated hearing on both Forest Oil Corporation's application and the Commission's proposal to classify and establish rules for this pool. In addition to participating in the hearing, a person may submit a written protest or written comments regarding the application and the proposal to the Alaska Oil and Gas Conservation Commission at 333 West th Avenue, Suite 100, Anchorage, Alaska 99501. Written protest or comments must be received no later than the conclusion of the June 19, 2006 hearing. If you are a person with a disabil' who may need special modifications in order to comment or to attend the public ari g, please contact the Commission's Special Assistant Jody Colombie 22 efo e June 1, 2006. Published 4/3/06 AO# 02614032 "-- .-- e . STATE OF ALASKA ALASKA OIL AND GAS CONSERV A nON COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICA nON OF Forest Oil Corporation for an order granting an exception to the spacing requirements of20 AAC 25.055(a) (2) and 25.055(b) for Kustatan Field No. I Well ) ) Conservation Order No. 566 ) ) Kustatan Field No. I ) Gas Well ) ) April 3, 2006 AFFIF A VIT OF SERVICE I, Jody 1. Colombie, hereby certify that a true and correct copy of this Supplemental Notice of Hearing has been mailed to the following on April 3, 2006. DNR, Division of Oil & Gas Attn: Brian Havelock 550 West ih, Ste. 800 Anchorage, AK 99501-3560 U.S. DOl, BLM Attn: Greg Noble 6881 Abbott Loop Rd. Anchorage, AK 99507-2591 Cook Inlet Region, Inc. Attn: Keith Sanders 2525 C Street, Ste. 500 Anchorage, AK 99509 First National Bank of Alaska Attn: Bernard Jackson 1821 Gambell Street Anchorage, AK 99501 Diocese of Sitka and Alaska Orthodox Church of America, Inc. Aka The Russian Orthodox Church Attn: Jim Gorski C/O Hughes, Bauman, et at 3900 C Street, Ste. 1001 Anchorage, AK 99503 Leonard Gurule, Senior Vice President Forest Oil Corporation 3 10 K Street Suite 700 Anchorage, AK 99501 /", ;' .~'\ í / ' i.f \ ¡ . . , _,A\. : (~()w~A_// Joay}J. Colombie Spe¢ial Staff Assistant J :\tJ 9 STATE OF ALASKA NOTICE TO PUBLISHER e INVO,luST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COpy OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE ADVERTISING ORDER NO. ADVERTISING ORDER SEE BOTTOM FOR INVOICE ADDRESS AO-02614032 F AOGCC AGENCY CONTACT DATE OF A.O. R 333 W 7th Ave, Ste 100 o Anchorage, AK 99501 Jody Colombie PHONE March 30, 2006 PCN M (907) 793 -1 :n 1 DATES ADVERTISEMENT REQUIRED: ~ Anchorage Daily News PO box 149001 Anchorage, AK 99514 April 3, 2006 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Advertisement to be published was e-mailed Type of Advertisement LegallZ! o Display Classified DOther (Specify) SEE ATTACHED SENDINYOICE IN TRI~L.ICÄTE..I AOGCC, 333 W. 7th Ave., Suite 100 TO ..... A nchoral!e. A K 99501 REF TYPE NUMBER AMOUNT DATE 1 VEN I TOTALOF I PAGE 1 OF ALL PAGES$ 2 PAGES COMMENTS 2 ARD 3 4 02910 ~IN AMnllNT !;V ('(' Pr.:M 1(' A(,(,T ~v NMR DIST UQ 05 02 I 40100 73451 2 3 4 REQUISITIONED BY: ¡DIVISION APPROVAL: e . Supplemental Notice of Public Hearing ST A TE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Forest Oil Corporation Kustatan Field No.1 well spacing exception and pool rules, including drilling unit A public hearing on an application by Forest Oil Corporation for spacing exceptions for the Kustatan Field No.1 well was held on March 28, 2006 at 1 :30 pm at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. The subject well is a vertical well with surface and bottom hole locations 1468 feet from the West Line and 3443 feet from the North Line of Section 4, T7N, RI4W, Seward Meridian. The hearing has been continued and will reconvene on June 19,2006 at 1 :30 pm. Under 20 AAC 25.520, the Commission proposes to classify the pool as a gas pool and to prescribe rules to govern the proposed development and operation of the pool, specifically including establishing a drilling unit for the Kustatan Field No.1 well that is coincident with the productive limits of the pool and that is smaller than the drilling unit which is otherwise established under statewide rules. The June 19, 2006, hearing will be a consolidated hearing on both Forest Oil Corporation's application and the Commission's proposal to classify and establish rules for this pool. In addition to participating in the hearing, a person may submit a written protest or written comments regarding the application and the proposal to the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska 99501. Written protest or comments must be received no later than the conclusion of the June 19, 2006 hearing. If you are a person with a disabil' who may need special modifications in order to comment or to attend the public ari g, please contact the Commission's Special Assistant Jody Colombie 22 efo e June 1,2006. .---- Published 4/3/06 AO# 02614032 Ke: t'UbI1Ç NOtiCe e e Subject: Re: Public Notice From: "Ads, Legal" <legalads@adn.com> Date: Fri, 31 Mar 2006 10:35 :22 -0900 To: Jody Colombie <jody_colombie@admin.state.ak.us> Hello Jody: Following is the confirmation information on your legal notice. Please review and let me know if you have any questions or need additional information. Account Number: STOF 0330 Legal Ad Number: 757994 Publication Date(s): April 3, 2006 Your Reference or PO#: 02614032 Cost of Legal Notice: $173.80 Thank You, Kim Kirby Anchorage Daily News Legal Classified Representative E-Mail: legalads@adn.com Phone: (907) 257-4296 Fax: (907) 279-8170 On 3/31/06 8:57 AM, "Jody Colombie" <jody colornbie@admin.state.ak.us> wrote: Please publish on Monday. Jody Colombie of I 3/31/2006 1:27 PM C 02-902 (Rev. 3/94) PUbliShereinal Copies: Department Fiscal, Departm.eceiVing Ao.FRM STATE OF ALASKA ADVERTISING ORDER SEE BOTTOM FOR INVOICE ADDRESS NOTICE TO PUBLISHER ADVERTISING ORDER NO. INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AO 02614032 AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF - ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE F AOGCC 333 West ih Avenue. Suite 100 A nr.hm~uf" A K qC)'i() 1 907-793-1221 AGENCY CONTACT DATE OF A.O, R o M Jodv Colombie M~rch 30. ?006 PHONE PCN (907) 793 -12) 1 DATES ADVERTISEMENT REQUIRED: T o Anchorage Daily News PO box 149001 Anchorage, AK 99514 April 3, 2006 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Account # STOF0330 United states of America AFFIDAVIT OF PUBLICATION REMINDER State of ss INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. division. Before me, the undersigned, a notary public this day personally appeared who, being first duly sworn, according to law, says that he/she is the of Published at in said division and state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2005, and thereafter for _ consecutive days, the last publication appearing on the _ day of , 2005, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This _ day of 2005, Notary public for state of My commission expires Mary Jones XTÓ Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street, #1202 Boise, 10 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle. WA 98119-3960 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks. AK 99711 e David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Mark Wedman Halliburton 6900 Arctic Blvd, Anchorage, AK 99502 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage, AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 Soldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 North Slope Borough PO Box 69 Barrow, AK 99723 e Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage. AK 99507 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 ~ ~\~ ~\~ DU variOUS Uraers ana NotIces e e Subject: Various Orders and Notices From: Jody Colombie <j ody _ colombie@admin.state.ak.us> Date: Fri, 31 Mar 2006 14:58:39 -0900 To: undisclosed-recipients:; BCC: Robert E Mintz <robert_mintz@law.state.ak.us>, Christine Hansen <c.hansen@iogcc.state.okus>, Terrie Hubble <hubbletl@bp.com>, Sondra Stewman <StewmaSD@BP.com>, stanekj <stanekj@unocal.com>, ecolaw <ecolaw@trustees.org>, trmjr 1 <trmjrl@aol.com>, shaneg <shaneg@evergreengas.com>, jdarlington <jdarlington@forestoil.com>, nelson <knelson@petroleumnews.com>, cboddy <cboddy@usibelli.com>, Mark Dalton <markdalton@hdrinc.com>, Shannon Donnelly <shannon.donnelly@conocophillips.com>, "Mark P. Worcester" <markp.worcester@conocophillips.com>, Bob <bob@inletkeeper.org>, wdv <wdv@dnr.state.ak.us>, tjr <tjr@dnr.state.ak.us>, bbritch <bbritch@alaska.net>, mjnelson <mjnelson@purvingertz.com>, Charles O'Donnell <charles.o'donnell@veco.com>, "Randy L. Skillern" <SkilleRL@BP.com>, "Deborah J. Jones" <JonesD6@BP.com>, "Steven R. Rossberg" <RossbeRS@BP.com>, Lois <lois@inletkeeper.org>, Dan Bross <kuacnews@kuac.org>, Gordon Pospisil <PospisG@BP.com>, "Francis S. Sommer" <SommerFS@BP.com>, Mikel Schultz <Mikel.Schultz@BP.com>, "Nick W. Glover" <GloverNW@BP.com>, "Daryl J. Kleppin" <K1eppiDE@BP.com>, "Janet D. Platt" <PlattJD@BP.com>, "Rosanne M. Jacobsen" <JacobsRM@BP.com>, ddonkel <ddonkel@cfl.rr.com>, mckay <mckay@gci.net>, Barbara F Fullmer <barbara.f.fullmer@conocophillips.com>, bocastwf <bocastwf@bp.com>, Charles Barker <barker@usgs.gov>, doug_schultze <doug_schultze@xtoenergy.com>, Hank Alford <hank.alford@exxonmobil.com>, Mark Kovac <yesnol@gci.net>, gspfoff <gspfoff@aurorapower.com>, Gregg Nady <gregg.nady@shell.com>, Fred Steece <fred.steece@state.sd.us>, rcrotty <rcrotty@ch2m.com>, j ej ones <j ej ones@aurorapower.com>, dapa <dapa@alaska.net>,jroderick <jroderick@gci.net>, eyancy <eyancy@seal-tite.net>, "James M. Ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>, jah <jah@dnr.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hanley <mark_hanley@anadarko.com>, loren_leman <lorenJeman@gov.state.ak.us>, Julie Houle <julie_houle@dnr.state.akus>, John W Katz <jwkatz@sso.org>, Suzan J Hill <suzan_hill@dec.state.ak.us>, tablerk <tablerk@unocal.com>, Brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonmobil.com>, marty <marty@rkindustrial.com>, ghammons <ghammons@aol.com>, rmclean <rmclean@pobox.alaska.net>, mkm7200 <mkm7200@aol.com>, Brian Gillespie <itbmg@uaa.alaska.edu>, David L Boelens <dboelens@aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Schultz <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoil.com>, Sharrnaine Copeland <copelasv@bp.com>, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoil.com>, John Tower <John.Tower@eia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe <lambes@unocal.com>,jack newell <jack.newell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, n1617@conocophillips.com, Tim Lawlor <Tim_Lawlor@ak.blm.gov>, Lynnda Kahn <Lynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry. C.Dethlefs@conocophillips.com>, crockett@aoga.org, T amera Sheffield <sheffield@aoga.org>, Jon Goltz <Jon.Goltz@conocophillips.com>, Roger Belman <roger.belman@conocophillips.com>, Mindy Lewis <mlewis@brenalaw.com>, Kari Moriarty <moriarty@aoga.org>, Patty Alfaro <palfaro@yahoo.com>, Jeff <smetankaj@unocal.com>, Todd Kratz <ToddKratz@chevron.com>, Gary Rogers <gary_rogers@revenue.state.ak.us>, Arthur Copoulos <Arthur_Copoulos@dnr.state.ak.us>, Ken <ken@secorp-inc.com>, Steve Lambert <salambert@unocal.com>, Joe Nicks <news@radiokenai.com>, of2 3/31120062:59 PM vaJ.J.VU;) VJ.UCJ.;) aHU l'1Ul1\,..-C:::' Jerry McCutcheon <susitnahY~Ow@Yahoo.com>, Paul Todd <paulto!csalaska.net>, Bill Walker <bill-wwa@ak.net>, Iris Matthews <Iris _ Matthews@legis.state.ak.us>, Paul Decker <paul_decker@dnr.state.ak.us>, Rob Dragnich <rob.g.dragnich@exxonmobil.com>, Aleutians East Borough <admin@aleutianseast.org>, Marquerite kremer <marguerite_kremer@dnr.state.ak.us>, Robert Brelsford <Robert.Brelsford@argusmediagroup.com>, Alicia Konsor <alicia _ konsor@dnr.state.ak.us>, Mike Mason <mike@kbbi.org>, Garland Robinson <gbrobinson@marathonoil.com>, Cammy Taylor <Camille _ Taylor@law.state.ak.us> Content-Type: applicationlpdf C0566.pdf Content-Encoding: base64 Content-Type: applicationlpdf aio4C-15.pdf Content-Encoding: base64 Content-Type: applicationlpdf aio3-7.pdf Content-Encoding: base64 Content-Type: applicationlpdf Public_Meetings May June July August 2006.pdf C E d· b 64 - - - - ontent- nco mg: ase Content-Type: applicationlpdf Continuation Kustatan ; Content-Encoding: base64 ~ of2 3/31/2006 2:59 PM tnchOrage Daily News Affidavit of Publication e 1001 Northway Drive. Anchorage. AK 99508 PRICE OTHER OTHER OTHER OTHER OTHER GRAND AD# DATE PO ACCOUNT PER DAY CHARGES CHARGES #2 CHARGES #3 CHARGES #4 CHARGES #5 TOTAL 757994 04/03/2006 02614032 STOF0330 $173.80 $173.80 $0.00 $0.00 $0.00 $0.00 $0.00 $173.80 ST A TE OF ALASKA THIRD JUDICIAL DISTRICT Supplemental Notiêeóf Public Hearing I)r~P /D( ,JOO~ STATE OF ALASKA Alaska Oil and Gas Conservation Commissi Re: Forest OiLCorporation ~ '> Kustatan Field No.1 well spaéing exc and pool rules, including drilling unit A public hearing on an applicatian bY Forest Oil f"o:~~~~~i~o~~r ;~~c~~~ ~~~~~~o~~~~~ t2~~ ~~~t~t 1: 30 pm at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100. Anchorage, Alaska 99501. The su~biect well is a vertical well with surface and bottom hole locations 1468 feet from the West Line and 3443 feet from the Narth L:rne ofSectia>n 4, T7N, R14W; Se- ~naJ~mer~i~~~én;~~ ~j~;i1~~ ~~~ ~;i~38~r;:.~nued Under 20 AAC 25,520', the Commi~sion proposes to classify the pool as >a gas pool and to prescribe rules to goyern Jhe praposed development and op- eration of the pool, specificallY inc'luding·establish- ing a drilling unit,for the Kustatan Field NO.1 well that is coincident with the produCtive limits of tM pool and that is»smaller than the drilling unit which is otherwise established under~statewide rules. The June 19,2006, hearing will be a co~nsolidated hearing on both Forest OiLCarporation's applica- tion and the Commission's propasaf t(rclassify and establish rules far this pool. . In addifian to >participating in the hearing, a per- son may submit a written protest or written com- ~et~t: ~~~~~~i~~1 t~~da~~I~c~~~Os~~$:tt~; t~~~~~~ sion at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Written protest or comments must be received no later than the conclusion of the June 19, 2006 hearing. . If YOU are a person with a disability who may need special modifications in order to comment or to at- tend the public hearing, please contact the ;9~~~\S~~~~: ~~~;if,12~~!stant JodY Colombie at John K. Norman Chairman Christine Clark, 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 place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on 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. /? ../;; / /,. ,/ / j' Si /~ / // / ~ ~\ .' /' / '" Subscribed an~n to me before this date: Notary Public in and for the State of Alaska. Third Division. Anchorage, Alaska MY C~MMISSIO~ EXPmES, {!j;~:,// ¡j/iY¡~¿fy ß; "~~:I~.~~:o ~ i'Þ....""f..·=. ~ .~..... "" -~ ....... . .. ~ ::~ ~ tP. -: - ",;:;z-~ ~0 "~~:~?~.. ~Q~ s~~~\~~:~ -' ~, .. ~. (",. '" \,.:,". ..' k ~ -:~'::~~'i:~fi ¿.:;~;,' ;~~{'\~)"\ .rj/jjiJ}j~~')· AO# 02614032 Published April 3, 2006 ~;l.g e . 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: John K. Norman, Chairman Daniel T. Seamount Cathy Foerster 3 4 In the Matter of the Application of 5 Forest Oil Corporation for a well spacing exemption and exception to 6 the provisions pertaining to Drilling Units and Well Spacing 7 pursuant to 20 AAC 25.055 pertaining to the Kustatan Field #1 Well. 8 9 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska 10 11 March 28, 2006 1:30 o'clock p.m. 12 VOLUME I PUBLIC HEARING (EXCERPT) 13 BEFORE: John K. Norman, Chairman Daniel T. Seamount, Commissioner Cathy Foerster, Commissioner 14 15 16 17 18 19 20 21 22 23 24 25 R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 e e 1 TABLE OF CONTENTS 2 Opening remarks by Chairman Norman Testimony by Jim Arlington Testimony by Paul Winslow Testimony by Patrick Pront 03 05 16 38 3 4 NOTE: CONFIDENTIAL EXCERPT Begins on page 42 Line 20 5 and ends on Page 52 Line 9 - In Separate Document 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 e e 1 PRO C E E DIN G S 2 Tape 1 3 0015 4 (On record - 1:30 p.m.) 5 CHAIRMAN NORMAN: We're on the record. This matter comes 6 before the Commission upon an application by Forest Oil 7 Corporation for a spacing exception pertaining to the Kustatan 8 Field #1 gas well. The date is Tuesday, March 28th. The time 9 is approximately 1:30 p.m. This is a hearing being held at the 10 Commission's offices at 333 West Seventh Avenue, Suite 100, 11 Anchorage, Alaska. 12 Seated to my right is Commissioner Dan Seamount, to my 13 left Commissioner Cathy Forester. I'm John Norman. A quorum 14 of the Commissioners is present and we are duly constituted to 15 conduct legal business. 16 A notice of this hearing was published in the Anchorage 17 Daily News. The publication occurred on February 25th, 2006. 18 And any persons desiring to receive a copy of either the notice 19 or the affidavit of publication can see the Commission's 20 Special Assistant Jody Colombie who is in the rear of the room. 21 I would also like to introduce with us today Assistant 22 Attorney General Cammy Taylor who's in the rear of the room who 23 acts as legal counsel and advisor to the Commission. And I 24 believe you know Commission engineers David Roby, Winton Aubert 25 and our senior geologist Steve Davies. R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 3 e e 1 The basic exception was set for hearing today. We did 2 have filed with us statements of non-objection from various 3 parties in interest. Those statements of non-objection I'll 4 address the wording of those in greater detail in the course 5 of these proceedings. 6 An Affidavit of Service was also sent to the State of 7 Alaska Department of Natural Resources, the U. S. Department of 8 Interior Bureau of Land Management, Cook Inlet Region, Inc., 9 First National Bank of Alaska and the Diocese of Sitka in 10 Alaska Orthodox Church in America also known as the Russian 11 Orthodox Church, those being parties identified within the 640 12 acre spacing area as well as those within the area prescribed 13 by the regulations to receive notice of a spacing hearing. 14 The hearing today will be recorded. Witnesses we'll asked 15 to be sworn and we will ask you to state your qualifications if 16 you intend to testify as an expert witness and the Commission 17 will then make a ruling upon whether to accept the 18 qualifications. 19 We do not anticipate any cross examination today. We-- 20 if there are questions of any persons who are present in the 21 room today you may write them down and give them to the 22 Commission's Special Assistant. She will get them to us and we 23 will do our best to address any questions asked. 24 Because this is a proceeding that may effect correlative 25 rights if there are any persons present representing interest R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 4 e e 1 owners who may potentially be affected by the spacing exception 2 we will allow them to be heard today and if they wish to do so 3 and ask questions we'll try to create a forum for doing that. 4 I want to make one point clear that in issuing an interim 5 order which was dated March 17th concerning putting the well 6 back into production the Commission has made it clear that we 7 have not yet addressed the subject of a violation of Commission 8 regulations and that will occur in subsequent proceedings. 9 Today we're here to hear from the applicant Forest, to 10 receive the evidence and to address the application for a 11 spacing exception. 12 Mr. Gurule, will you be the first witness or Mr. 13 Arlington? Who would. . . . . 14 MR. ARLINGTON: I will be, Mr. Chairman. 15 CHAIRMAN NORMAN: All right. Mr. Arlington, do you intend 16 to testify as an expert witness? 17 MR. ARLINGTON: Yes, I do. 18 CHAIRMAN NORMAN: Would you raise your right hand, please? 19 State your name, please? 20 MR. ARLINGTON: My name is Jim Arlington. 21 CHAIRMAN NORMAN: And your position and affiliation? 22 MR. ARLINGTON: I'm the land manager for the Alaska 23 Business Unit of Forest Oil Corporation. 24 CHAIRMAN NORMAN: Thank you. Proceed. 25 MR. ARLINGTON: Do I need to be sworn, that the testimony R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 5 e e 1 I'm about to give..... 2 CHAIRMAN NORMAN: I'm sorry? Right your right hand, 3 please. 4 (Oath Administered) 5 MR. ARLINGTON: I do. 6 CHAIRMAN NORMAN: Thank you. Please proceed. 7 TESTIMONY BY JIM ARLINGTON 8 MR. ARLINGTON: Thank you, Mr. Chairman and fellow 9 Commissioners. As Commissioner Norman indicated we're here to 10 address our application for an exception of two provisions of 11 the Commission's regulations..... 12 CHAIRMAN NORMAN: Excuse me, Mr. Arlington, I'll have to 13 interrupt you one more time. Do you wish to be qualified as an 14 expert or are you simply here speaking for Forest? 15 MR. ARLINGTON: I'll qualify as an expert in the land 16 matters, the matter. . . . . 17 CHAIRMAN NORMAN: And would you state your qualifications? 18 MR. ARLINGTON: I'm land manager for Forest Oil. I've 19 served in that capacity for Forest or its' predecessor in 20 interest since 1998. I have prior experience working for ARCO 21 Alaska and also for Chevron USA in that capacity as well and 22 also as a legal representative for Chevron USA in Alaska. 23 CHAIRMAN NORMAN: All right. Any questions of the 24 Commission? 25 COMMISSIONER SEAMOUNT: No questions, no objections. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 6 e e 1 COMMISSIONER FORESTER: (Shakes head in the negative) 2 CHAIRMAN NORMAN: Okay. Then without objection your 3 qualifications are accepted. Please proceed, Mr. Arlington. 4 MR. ARLINGTON: Thank you. Again, we're applying for an 5 exception to two provisions of the Commission's regulations. 6 One regarding the well spacing which is 20 AAC 25.055(a) (2) and 7 then for the drilling unit exceptions which is 20 AAC 8 25.055(b). 9 I'd like to also mention and include in the record the 10 Prehearing Brief that the Commission should have received 11 earlier this morning. I won't be reading this, but would like 12 this as part of the record and if you'd like I can refer to 13 provisions of this later if you have any questions. 14 CHAIRMAN NORMAN: Yes. 15 COMMISSIONER FORESTER: Thank you for not reading it. 16 MR. ARLINGTON: Yes. 17 CHAIRMAN NORMAN: Do you have a copy you could file with 18 the Court Reporter now and. . . . . 19 MR. ARLINGTON: Yes, I do. 20 CHAIRMAN NORMAN: .... .we'll attach it and then if you 21 refer to it you could simply indicate page and paragraph. 22 MR. ARLINGTON: Okay. At this time I'd like to briefly go 23 into the well history for the Kustatan Field #1 well because it 24 does have quite a lengthy history. 25 Forest Oil originally drilled the Kustatan Field #1 well, R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 7 e e 1 commonly referred to as the KF #1 well, as an exploratory oil 2 well in 2000 under a plan of operation approval from the 3 Department of Natural Resources LO/CI 00-04. And was drilled 4 on oil and gas lease, ADL-387023 and was drilled on a surface 5 estate that was owned by Forest Oil Corporation that we had 6 acquired from a native allottee in 1998. The well, as an oil 7 well, was unsuccessful. Forest ceased operations on the KF #1 8 wellbore in December 2000. 9 The oil and gas lease, 387023 expired of its' own terms on 10 February I, 2003. 11 Forest requested the Department of Natural Resources, 12 which they subsequently approved on April II, 2003 a suspension 13 of the abandonment requirements that were in the oil and gas 14 lease for the KF #1 well. 15 Forest, prior to that approval, but contemporaneously with 16 this application to DNR, also requested of AOGCC to convert the 17 KF #1 well into a Class II waste disposal well to be used for 18 waste fluids. The AOGCC approved that with Disposal Injection 19 Order No. 26 and allowed Forest to inject waste fluids in the 20 KF #1 well. 21 Forest also contemporaneously with that application 22 requested the Department of Natural Resources to designate 23 Forest as the operator of the KF #1 well as a Class II disposal 24 well which they subsequently did with miscellaneous land use 25 permit MLUP/CI 03-03. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 8 e e 1 Subsequent to those activities Forest acquired a new oil 2 and gas lease from the Department of Natural Resources which is 3 ADL-390368 with an effective date of October I, 2003. Pursuant 4 to the terms of that oil and gas lease Forest planned to 5 recompleted KF #1 well as a gas well. It made application to 6 the AOGCC with a sundry notice which the Commission approved to 7 recomplete that well. It was recompleted in October of 2005 as 8 a gas well. And the DNR, Department of Natural Resources 9 authorized Forest to conduct an extended production test for u 10 to one year on the KF #1 well. 11 With that if you'd like do you have the first slide up, 12 Paul? The first slide that we've prepared to show you is the 13 boundary of the oil and gas lease that I indicated that Forest 14 acquired with an effective date of October 21, 2003, that's ADL 15 390368. This is the boundary here of that lease. It comes 16 around here, here, here. The lease is contained in portions of 17 Section 3, Section 4, Section 9 and Section 10. 18 The orange outlines are outlines of the other properties 19 that have separate surface ownership. This is the well 20 location of the KF #1 well. The black outline around it is the 21 outline of the Kustatan production facility which is adjacent 22 to the Kustatan Field #1 well. 23 Here are indications of pipelines. There are two 24 pipelines here and there. Additional pipelines located in this 25 area here. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 9 e e 1 The U.S. Survey 12121, Lot 2 is the property on which the 2 KF #1 well is located, the surface location. The boundary 3 comes down here as you can see and the property line extends 4 beyond the section line boundary between Section 4 and Section 5 5. This is the property boundary here to the west of U. S. 6 Survey 12121, Lot 2. 7 Forest does not own the property here in 12121, Lot 1, but 8 as you can see the oil and gas lease encompasses the mineral 9 estate under that property as it does in this property here. 10 Forest also owns the surface estate here in U. S. Survey 4527, 11 Lot 1. We own the surface estate in this U. S. Survey, U. S. 12 Survey 4527, Lot 2 and also in U. S. Survey 4527 -- I'm sorry, 13 U. S. Survey 1999. 14 We do not own the property in 4527, Lot 3, nor this 15 property here the U. S. Survey 363, Track B. This Track B is 16 owned by the Russian Orthodox Church. They own it in fee. They own the surface and the mineral estate. This little triangle area here, the U. S . Survey 4527, Lot 3 is owned in 17 18 19 fee by the State of Alaska. They own the surface and the 20 subsurface estate on that property. 21 We also have the oil and gas lease on the adjacent 22 property in Section 10, ADL-389504 and that boundary is between 23 Section 9 and Section 10. 24 Next slide. This slide provides a little more clearer 25 information as far as the property that Forest also has under R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 10 e e 1 lease adjacent to the oil and gas lease that I just mentioned. 2 Here is the indication of the section number, this is Section 3 4. Section 4 goes up here, here and down here. 4 Forest Oil entered into an oil and gas lease with Cook 5 Inlet Region, Incorporated or CIRI for short. That's indicated 6 in this blue hatch marked area as you can see which includes 7 this area, as well as this area up here, so all of this hatched 8 area is covered by the oil and gas lease that Forest has with 9 CIRI that was entered into in November of 2005. 10 This diagram, again, indicates the situation regarding the 11 setback with the well spacing. Here is, again, the Kustatan 12 Field #1 well. This indicates the distance from the wellbore 13 that's open to the gas producing interval to the lease boundary 14 and as you can see it's 1,468 feet shy of the 1,500 foot 15 setback requirement by 32 feet. 16 In measuring it to the property that Forest owns which is 17 the U. S. Survey 12121, Lot 2, you can see the distance from 18 the wellbore to that property is 1,634 feet beyond the 1,500 19 foot radius. As you can see the KF #1 gas sand interval that 20 we're producing from is this interval here, 5,098 feet, 5,353 21 feet measured depth. 22 CHAIRMAN NORMAN: And all of the testimony just given 23 relates to what is referred to as slide number 3 in the lower 24 right hand corner just for the record reference? Your slides 25 are numbered. . . . . R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 11 1 e e MR. WINSLOW: Slide 2 and slide 3. MR. ARLINGTON: Slide 2 and 3. 2 3 CHAIRMAN NORMAN: . ... . and the one you have just finished 4 testifying to is slide 3. 5 MR. ARLINGTON: Correct, that is correct, Mr. Chairman. 6 COMMISSIONER FORESTER: If you could name the slide as you 7 talk about it just for the record that will be good. 8 MR. ARLINGTON: I'll do that. 9 COMMISSIONER FORESTER: And a quick question, these 10 exhibits we're looking at right now are okay for public record? 11 MR. ARLINGTON: Yes, Commissioner Forester, and that 12 brings me to the next point. The information that we've 13 discussed and the slides we've presented we have no objections 14 to being made public. The next three slides that we'll be 15 discussing likewise we have no objections to being made public 16 and we'll proceed with our discussion on our presentation with 17 Paul Winslow who is our reservoir engineer. And I would ask 18 that the Commission swear him in at this time as an expert 19 witness. 20 CHAIRMAN NORMAN: Yes. Would you..... 21 COMMISSIONER SEAMOUNT: Could I ask you one. .. . . 22 CHAIRMAN NORMAN: Please. 23 COMMISSIONER SEAMOUNT: Excuse me, Mr. Chairman. After 24 you drilled -- I guess it was Forest Energy, right? 25 MR. ARLINGTON: Yes. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 12 e e 1 COMMISSIONER SEAMOUNT: Drilled through the well in 2000, 2 did anybody at Forest Energy notice that this zone that's 3 producing now was a zone of interest? 4 MR. ARLINGTON: Yes. 5 COMMISSIONER SEAMOUNT: Okay. You were just saving it for 6 now and you're..... 7 MR. ARLINGTON: The..... 8 COMMISSIONER SEAMOUNT: I mean, why did you turn it to a 9 disposal well right away? 10 MR. ARLINGTON: I'm sorry, why didn't we? 11 COMMISSIONER SEAMOUNT: Why did you turn it to a disposal 12 well? 13 MR. ARLINGTON: Well, I can't speak to the reasons that 14 management had at the time. It was identified as a zone of 15 interest. I think that the management at Forest Energy at that 16 time didn't feel that the hydrocarbons that had been identified 17 as potential zone bearing hydrocarbons in the gas zone may not 18 have been economic at that time to pursue, that was my 19 understanding at the time. 20 COMMISSIONER SEAMOUNT: So it had more value as a disposal 21 well? 22 MR. ARLINGTON: At that time because, again, it was being used or being sought as a disposal well for the Redoubt unit and the Kustatan production facility which is adjacent to it 23 24 25 handles the production from the Redoubt unit which is offshore. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 13 e e 1 COMMISSIONER SEAMOUNT: Okay, thank you. 2 COMMISSIONER FORESTER: I (indiscernible - voice lowers) . 3 I apologize I haven't looked at the well file in a while. Is 4 the disposal interval deeper than the production unit? 5 MR. ARLINGTON: Yes. 6 COMMISSIONER FORESTER: That would be another potential 7 reason, you know, just working your way up the well (ph). If 8 you needed both and you needed one a little bit worse and it 9 was down deeper, it's..... 10 MR. ARLINGTON: Yes. 11 COMMISSIONER FORESTER: . . . . . always eaSler to 12 (indiscernible) shallower than deeper..... 13 MR. ARLINGTON: Yeah. 14 COMMISSIONER FORESTER: .... .so that might be part of it. 15 MR. ARLINGTON: And, again, as I mentioned the Commission 16 had issued the DIO, Disposal Injection Order, 26 which includes 17 I'm sure if you review the files all that information..... 18 COMMISSIONER FORESTER: Did Forest have any other Class II 19 wells in the Inlet at the time? 20 MR. ARLINGTON: Yes, we had one at the West McArthur River 21 unit which was the West McArthur River unit WD-4 well which was 22 a Class II well. 23 CHAIRMAN NORMAN: I see Mr. Gurule asking to be 24 recognized. Yes, Mr. Gurule. 25 MR. GURULE: Yes, Leonard Gurule with Forest Oil. I'd R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 14 e e 1 like to further the comments in response to Commissioner 2 Seamount's question if I might. 3 CHAIRMAN NORMAN: All right and then we'll return and 4 swear the witness. Please proceed. 5 MR. GURULE: Just a little bit of a clarification there, I 6 don't think any of us knew that the interval was productive 7 until we tested it. So just to be absolutely accurate in 8 response to the question while it may have been an interval of 9 interest we didn't -- we didn't know..... 10 COMMISSIONER SEAMOUNT: Right. 11 MR. GURULE: .... .until after it was tested so remember 12 going back through the history that Jim went through the well 13 was drilled originally for Hemlock oil target which was 14 unsuccessful and then it was subsequently converted to a 15 disposal well. And --..... 16 COMMISSIONER SEAMOUNT: So -- yeah. 17 MR. GURULE: . . . . . and the work and the prospecting, if you 18 go back in the history in 2000 there wasn't a huge need even in 19 2000 for gas at that time so it was not a specific target and 20 it wasn't until subsequent work was done that certainly in the 21 last two years that we identified it as a potential, but didn't 22 know for sure. 23 COMMISSIONER SEAMOUNT: Right. I believe that's why I 24 called it a zone of interest. 25 MR. GURULE: Right, good. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 15 e e 1 MR.' ARLINGTON: Right. 2 COMMISSIONER SEAMOUNT: Having perforated quite a few of 3 those non-productive, zone of interests it's understood. 4 MR. GURULE: Exactly. 5 COMMISSIONER FORESTER: Quit bragging. 6 COMMISSIONER SEAMOUNT: I found water this weekend. 7 MR. GURULE: Thank you, Mr. Chairman. 8 CHAIRMAN NORMAN: Did that complete your statement, Mr. 9 Gurule? 10 MR. GURULE: Yes. 11 CHAIRMAN NORMAN: Would you raise your right hand, please? 12 (Oath Administered) 13 MR. WINSLOW: I do. 14 CHAIRMAN NORMAN: State your name, please? 15 MR. WINSLOW: Paul Winslow. 16 CHAIRMAN NORMAN: And your affiliation? 17 MR. WINSLOW: I'm a reservoir engineer with Forest Oil 18 Corporation. 19 CHAIRMAN NORMAN: And you may drop your hand now. Is it 20 your intention to testify as an expert witness today..... 21 MR. WINSLOW: Yes, it is. 22 CHAIRMAN NORMAN: . . . . .on reservoir engineering? And 23 would you please state your qualifications including your 24 educational background. 25 COMMISSIONER FORESTER: Stop for a second. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 16 e e 1 COURT REPORTER: I can't hear him at all and I'm not sure 2 why, if those mics are working. 3 (Off record comments) 4 CHAIRMAN NORMAN: Would you, please, then state your 5 qualifications beginning with educational background and then 6 your experience. 7 MR. WINSLOW: I have a degree ln petroleum engineering, 8 Bachelor of Science and a Master's of Science, again, from the 9 Colorado School of Mines in petroleum engineering. I've worked 10 in the engineering field for the last 19 years for various 11 operators and contractors. Been working in the Cook Inlet for 12 Forest Oil for the last four and a half years. 13 CHAIRMAN NORMAN: Prior to Cook Inlet your experience was 14 where again? 15 MR. WINSLOW: Worked in Southeast Asia for four and a half 16 years, worked in Texas Gulf Coast for two years, DJ Basin in 17 the Rocky Mountains for about six years. 18 CHAIRMAN NORMAN: Doing what? 19 MR. WINSLOW: Reservoir engineering. 20 CHAIRMAN NORMAN: In all locations? 21 MR. WINSLOW: Yes, sir. 22 CHAIRMAN NORMAN: Okay. Commissioner Seamount, questions? 23 COMMISSIONER SEAMOUNT: No questions, no objection. 24 CHAIRMAN NORMAN: Commissioner Forester. 25 COMMISSIONER FORESTER: None. R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 17 e e 1 CHAIRMAN NORMAN: Very well. Without objection the 2 Commission qualifies you as an expert witness, please proceed. 3 TESTIMONY BY PAUL WINSLOW 4 MR. WINSLOW: Okay. I'm going to go over just conclusions 5 from volumetrics and the material balance for the Kustatan 6 Field #1 well. Current structural mapping based on the seismic 7 data that we have over this area shows if we -- if we take the 8 volumetrics down to the spill point from the north bounding 9 fault the area mapped within that spill point is about 50 acres 10 and is fully contained within our lease ADL 390368. 11 Flowing material balance indicates a smaller reservoir 12 volumetrically than the volumetric calculations which, again, 13 further supports that the entire gas accumulation is within our 14 lease. 15 After the well was shut-in by order of the State we ran a 16 bottom hole pressure, a gradient survey and got a static bottom 17 hole pressure looking at material balance with that static 18 pressure and the initial reservoir pressure. Again, this 19 matches the flowing material balance indicating a very small 20 accumulation. 21 The volume from that material balance is smaller than the 22 previously calculated volumetrics from the structural picture 23 which, again, supports the accumulation as fully within lease 24 ADL 390368. 25 The final conclusion there all the volumetrics that I've R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 18 e e 1 performed on this gas accumulation as well as the material 2 balance all indicates that it's fully within lease ADL 390368. 3 I've got -- we have technical data to present to back this 4 up and we're going to go through the conclusions and 5 recommendations first and then get a ruling from the 6 Commissioners as far as keep that data confidential, so after 7 that ruling we can proceed with technical backup. 8 I'll refer back to Jim Arlington on this slide. These are 9 requests from the Commission. 10 MR. ARLINGTON: Thank you, Paul. Again, our requests are 11 twofold. As I mentioned before we're requesting an exception 12 from the well spacing requirements. The exception is minimal, 13 32 feet from the wellbore that's opened to the gas producing 14 interval to the western boundary of the oil and gas lease. And 15 from the exception of the pooling requirement in 25.055(b). 16 The support for both of those request as I just alluded to 17 is it's a minimal variance. The gas pool is completely 18 contained within the oil and gas lease boundary as indicated. 19 The technical data which we have previously discussed with the 20 Commission on the 24th of February, information that we had 21 submitted and requested be kept confidential supports our 22 conclusion. 23 We, likewise, had a meeting with the land owners within 24 Section 4, the governmental township in which the well is 25 located. We had that meeting on February 28th. On or before R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 19 e e 1 that date the land owners who attended that meeting being Cook 2 Inlet Region Incorporated, the Russian Orthodox Church signed 3 confidentiality agreements with Forest Oil Corporation agreeing 4 to keep the information that we gave them confidential which is 5 the same information that had been provided to the Commission 6 in our informal meetings. 7 It was as a result of that meeting that the land owners 8 were asked by Forest to support Forest's application for the 9 exemptions which we're speaking to here. They signed letters 10 of non-objection or waivers, depending on how it's 11 characterized, but the Commission has copies of those letters 12 from the land owners, DNR, the Russian Orthodox Church and 13 CIRI. 14 The landowners just mentioned are not being drained by the production from the KF #1 well at this time, nor were they ever drained from the accumulation that we had mapped through our selsmlC data and the area that we had calculated as a result of 15 16 17 18 the information just discussed by Paul Winslow. None of that 19 accumulation had gone beyond the 1,500 foot boundary. 20 So with that I'd like to just mention, again, that we had 21 submitted a letter to the land owners on March 17th. I've got 22 the cards here indicating that the certified letter was 23 received by all those land owners clarifying the impact of the 24 Conservation Order No. 566 that the Chairman mentioned earlier 25 had been issued. Confirmed with the land owners in that letter R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 20 e e 1 that they had the opportunity to be here present to discuss our 2 application. 3 At this time I would like to request and move that we 4 present slides numbered 7 through..... 5 MR. WINSLOW: They're not in the packet that I gave you. 6 We've got separate packets. 7 COMMISSIONER FORESTER: Before we move into that could I 8 ask you a question about what you've already talked about? 9 MR. ARLINGTON: Yes. 10 COMMISSIONER FORESTER: The offsetting land owners what 11 expectations, if any, do they have of being included in 12 whatever inevitable unit is formed and receiving any revenue 13 from this production? 14 MR. ARLINGTON: My understanding is that there's no 15 expectations that there would -- they'd be included in any unit 16 whatsoever. As I had mentioned the -- it was explained to them 17 and as we've testified here the accumulation does not extend 18 beyond the oil and gas lease in which Forest Oil is 100 percent 19 Working Interest Owner. 20 COMMISSIONER FORESTER: Okay. So there hasn't been any 21 discussions of, you know, a regular gas unit that would 22 eventually encompass them and they could share the 23 (indiscernible - voice lowers) . . . . . 24 MR. ARLINGTON: There was no questions on their part and 25 there was no indications that there would be any need for a R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 21 e e 1 unit. As I said the accumulation doesn't extend beyond the 2 single lease. 3 COMMISSIONER FORESTER: I apologize for being redundant, 4 but I just want to be sure that everybody that needs to be in 5 this knows what all's going. So they -- they saw what your 6 interpretation of the area extent (ph) was. They were 7 comfortable with your interpretation and they didn't feel, as 8 far as you can tell, any -- or they didn't have a disagreement 9 or they didn't feel that they were entitled to more than they 10 were getting (simultaneous speech)..... 11 MR. ARLINGTON: No, there was.. .. . 12 COMMISSIONER FORESTER: Nothing. 13 MR. ARLINGTON: .... .no questions or concerns expressed at 14 the meeting that we had with them on the 28th or with the 15 information we provided them at that meeting. I've had no 16 subsequent calls or requests for additional information or 17 questions of clarification. I'm not aware anyone within Forest 18 Oil has received calls of similar nature from any of those land 19 owners. 20 COMMISSIONER FORESTER: Have I asked that as many ways as 21 I possibly could? 22 MR. WINSLOW: I might add that in addition to the 23 information that you -- that we previously presented to you, we 24 went over all that information with them. Their expert 25 geophysicist also sat down with Pat Prout and then both from R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 22 e e 1 DNR and from a representative from CIRI to look at the 2 seismic data so they have looked at the data and have not 3 voiced any objection. 4 COMMISSIONER FORESTER: Okay, okay, thank you. 5 MR. WINSLOW: Yes. 6 CHAIRMAN NORMAN: Yeah, thank you. And ask the witnesses 7 just to aid the Court Reporter as you -- if you feel the need 8 to jump in try to state your name first and also ask the 9 witnesses that have been sworn in thus far to remember that you 10 remain under Oath as you're testifying. If anyone disagrees 11 with that, please, say so now otherwise it will be understood 12 that you remain under Oath during this entire proceedings. 13 As a follow up to Commissioner Forester's question, Mr. 14 Arlington, I'll leave this for you to consider, but it may be 15 that if the picture presented here of this particular reservoir 16 pool is as it is presented, then it -- and it's entirely 17 contained within this -- this unit -- or this lease, it may be 18 the most efficient thing for the Commission to do at the 19 conclusion of these proceedings would be to established a pool 20 rule. And identifying this as a separate pool to obviate the 21 necessity of continuing to consider a pooling agreement for the 22 larger 640 acres, so that is something. 23 And if you wish to speak to that at any time in the course 24 of this, our citation on that is 20 AAC 25.520 which is simply 25 the general regulation that states that upon motion of the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 23 e e 1 Commission or at the request of an affected party after 2 discovery of oil or gas the Commission may hold a hearing and 3 then issue an order defining a particular pool and establishing 4 rules for the production of that pool. And that might be where 5 we will want to wind up if the evidence supports that. 6 MR. ARLINGTON: Very good, thank you, Mr. Chairman. 7 CHAIRMAN NORMAN: Now, where would you like to continue? 8 MR. ARLINGTON: At this time we'd like to submit for 9 consideration for the Commissioners to rule on our request that 10 slides 7 -- they'll be numbered 7 through 16 be treated as 11 confidential data and information for us to present and support 12 our application. 13 If the Commission after reviewing this, again, in camera 14 or without showing it to the public, concludes that some or all 15 of this information cannot be held confidential our request and 16 motion is that it not be made public at all as part of these 17 proceedings. So at this point I'd like to present the slides 18 to the Commissioners for that consideration. 19 CHAIRMAN NORMAN: Are they numbered in the lower right 20 hand corner? 21 MR. ARLINGTON: Yes, they are, . . . . . 22 CHAIRMAN NORMAN: All right. 23 MR. ARLINGTON: .... .lower right hand corner. I can go 24 through the title of them if that would be helpful as well. 25 CHAIRMAN NORMAN: It would for the benefit of the record R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 24 e e 1 so that for the benefit of keeping our record straight. 2 Just so that the record is clear on what we will be 3 considering, if you could give a brief description without 4 getting into confidential information..... 5 MR. ARLINGTON: Sure. 6 CHAIRMAN NORMAN: . .,. .of each of slides 7 through 16, 7 please. 8 MR. ARLINGTON: Okay. Slide number 7 is titled KF #1 9 Depth Structure Map Top of Tyonek B. Slide number 8 or on page 10 number 8, I should say, is titled KF #1 Seismic Cross Section. 11 Slide on page 9 is titled KF #1 Lower Perforations (FT #2) : 12 5,353 feet - 5,380 feet. Slide on page 10 is titled KF #1 - 13 Volumetric. The slide on number 11 is titled KF #1 Pressure 14 Transient Analysis..... 15 CHAIRMAN NORMAN: Slide back to slide number 10 is it 16 all of slide number 10 that you are claiming as confidential? 17 MR. WINSLOW: That slide doesn't have to be confidential. 18 COMMISSIONER FORESTER: They could probably take (ph)..... 19 CHAIRMAN NORMAN: Pardon? 20 COMMISSIONER FORESTER: .... .that risk (ph). 21 MR. WINSLOW: That slide does not have to be confidential. 22 CHAIRMAN NORMAN: All right. 23 MR. ARLINGTON: Okay. 24 CHAIRMAN NORMAN: So can we. ... . 25 MR. ARLINGTON: Okay. So I'll delete that request R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 25 e e 1 then. . . . . 2 CHAIRMAN NORMAN: All right. 3 MR. ARLINGTON: .... .on slide number 10. 4 CHAIRMAN NORMAN: Okay. Please proceed. 5 MR. ARLINGTON: The slide on page 11 -- and I guess to -- 6 yes, page 11 -- slide 11, it's titled KF #1 Pressure Transient 7 Analysis Summary. Slide on page 12 titled KF #1 - 5,353 feet 8 Sand Volumetric. The slide on page 13 titled KF #1 Production 9 Data. The slide on number 14 titled KF #1 Flowing Tubing 10 Pressure versus Cumulative Gas. The slide on page 15 titled KF 11 #1 - Material Balance. And the slide on number -- or page 16 12 titled KF #1 - 5,353 foot Sand OGIP, which stands for original 13 gas ln place, Comparison. 14 CHAIRMAN NORMAN: And there are then slides 17 and 18. 15 It's not your intention to assert confidentiality as to those, 16 am I correct? 17 MR. ARLINGTON: That is correct. 18 CHAIRMAN NORMAN: Okay. 19 MR. WINSLOW: For the record, Commissioner, slides 1 20 through 6 are the same as what was -- we just went through, 21 what was presented. Slide 17 and 18 are duplicates of slides 5 22 and 6 just for..... 23 CHAIRMAN NORMAN: Five and 6. 24 MR. WINSLOW: . . . . .purposes of discussion. 25 CHAIRMAN NORMAN: Very well. And, Mr. Arlington, to the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 26 e e 1 extent that you care to, can you characterize what you believe 2 is the legal basis why the Commission should treat this as 3 confidential? 4 MR. ARLINGTON: Yes, thank you, Commissioner. The reason 5 for the request for confidentiality is that the data and 6 information that we're providing is proprietary in nature to 7 Forest Oil. We've expended considerable sums and expertise, 8 in-house expertise to develop the information. 9 There's unleased acreage to the west as I indicated in the 10 slide showing the lease and property plat that would expose us 11 to unfair competitive advantage to our competitors given that 12 we have an upcoming oil and gas lease sale this coming May 13 that's going to be offered by the Department of Natural 14 Resources offering this unleased acreage. 15 COMMISSIONER FORESTER: Would it give them an unfair 16 advantage or would it just unfairly eliminate your fair 17 advantage? 18 MR. ARLINGTON: Either way. It would be unfair to Forest 19 to provide them this information free of charge. 20 CHAIRMAN NORMAN: Commissioner Seamount. 2·1 COMMISSIONER SEAMOUNT: Mr. Arlington, on slide number 9 22 or page 9 could you explain what's confidential? What would 23 you like to keep confidential without divulging, you know, the 24 specifics? The log data are in the public domain right now, 25 correct? R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 27 e e 1 MR. ARLINGTON: That -- that is..... 2 COMMISSIONER SEAMOUNT: And you've already divulged the 3 perforation depth so would it be the assumptions -- okay. The 4 assumptions put into the volumetric model? 5 MR. ARLINGTON: Correct. And what we've identified as net 6 pay and how we've -- you know, the calculations that we have 7 made regarding porosity and water saturation. 8 COMMISSIONER FORESTER: But the perforations and the logs 9 since they're already out in the public domain are fine? 10 MR. ARLINGTON: Correct. 11 COMMISSIONER FORESTER: I've got a question on page 13. 12 What are you asking for confidentiality on, on this page since 13 regular production data is public record and. . . . . 14 MR. ARLINGTON: Operational parameters are not which are 15 included. . . . . 16 COMMISSIONER FORESTER: (Simultaneous speech) . . . . . 17 MR. ARLINGTON: Right. 18 COMMISSIONER FORESTER: Okay, fair enough. 19 CHAIRMAN NORMAN: Commissioner Seamount. Mr. Arlington, 20 while Commissioner Seamount is looking I want to go back to an 21 initial question that he asked which pertains to this 22 particular zone and the history of the well and the fact that 23 it was apparently completed as a Class II injection well and so 24 forth. 25 There are some time limits on the ability to hold R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 28 e e 1 information confidential and the Legislature has presumably 2 determined that everybody benefits, the entire industry, with 3 open disclosure so there is a presumption against holding a lot 4 of information confidential beyond the time limits that one 5 would ordinarily do. 6 Now, why given the history of this well and the passage of 7 time what is it that is new here? I think Commissioner 8 Seamount asked were you simply holding this in inventory 9 waiting for the gas price to hit the right level and then enter 10 it and if so there is some risk in doing that. 11 MR. ARLINGTON: Well, again, I don't want to speculate on 12 what the management's reasoning was. Obviously as you're aware 13 we were in the process of developing the Redoubt unit offshore. 14 There were expectations that there would be gas accumulations 15 there as well. 16 I'm only speculating that they felt that the opportunity 17 for gas production and -- both for the natural gas and for the 18 associated gas from the Redoubt production would be sufficient 19 for the fuel gas needs, which is primarily what this gas 20 accumulation of the KF #1 well is being used for, would be 21 sufficient for the Kustatan production facility. And that the 22 -- because of that, that it wasn't prudent at the time to put 23 capital into developing this accumulation, this gas 24 accumulation since we already were putting capital in for the 25 other production from Redoubt. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 29 e e 1 CHAIRMAN NORMAN: I think Mr. Gurule had a comment on that 2 before and did you want to add anything on that -- on this 3 subject that..... 4 MR. GURULE: Mr. Chairman, if I could if I could just ask 5 for clarification around your question 'cause..... 6 CHAIRMAN NORMAN: Yes. 7 MR. GURULE: .... .I'm not sure I understood, kind of, your 8 question and what direction you were headed... . . 9 CHAIRMAN NORMAN: Sure, of course. 10 MR. GURULE: .. .. .with the question. I want to make sure 11 we understand. 12 CHAIRMAN NORMAN: Sure. And there's nothing hidden within 13 that question. The question is intended to be a pretty simple 14 one, that a well is drilled and there's a period of 15 confidentiality for data related to a well and with the passage 16 that period of confidentiality falls away and then there is a 17 procedure in the statute for extending that where there is 18 unleased acreage in an area by going through certain procedures 19 and I'm trying to fit this in with this. 20 If this was a brand new well it would be -- I might, 21 perhaps, look at it differently, but..... 22 MR. GURULE: Yes. 23 CHAIRMAN NORMAN: .... .I'm trying to fit this within that 24 history. 25 MR. GURULE: Okay. If I could respond to that, . .. . . R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 30 e e 1 CHAIRMAN NORMAN: Please. 2 MR. GURULE: .... .perhaps, add to it. Again, the request 3 for confidentiality is not to -- at this time is not to extend 4 any of the data that's out there, but it's to hold this data in 5 confidence. And the reason for that is as you go through the 6 analysis of these different zones that might be speculative in 7 nature -- and a little bit of history here, we tested two zones 8 in this well. One of them was unsuccessful and one of them was 9 successful. 10 You begin to develop your understanding and the 11 interpretation of these zones through that, kind of, testing, 12 trial and error process. We think we're coming a long ways in 13 understanding that and it's that kind of interpretive data that 14 we do not want released to the public. 15 CHAIRMAN NORMAN: Thank you, that's helpful. 16 MR. GURULE: And, Mr. Chairman, if I may just.... . 17 CHAIRMAN NORMAN: Please. 18 MR. GURULE: .... . further elaborate? I'm presuming that 19 you're referring to the provisions in 20 AAC 25.537(d) that 20 refer to the 24 months following the 30 day filing period. 21 And, again, that would have been relevant for the information 22 that was provided for the oil well that was drilled. 23 And, again, this recompletion in the gas interval I would 24 indicate does not fall within this 24 month period that has 25 lapsed that we've recompleted this essentially as a new well R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 31 e e 1 which is in essence why we're in this proceeding to begin with 2 because as pointed out when the well was originally drilled, it 3 was drilled pursuant to and was compliant with a spacing 4 exceptions and drilling unit requirements of the Commission at 5 that time. 6 CHAIRMAN NORMAN: Yes, thank you. And that's helpful and 7 that, I think, frames your position. 8 Commissioner Forester, anything else? 9 COMMISSIONER FORESTER: Not at this time. 10 CHAIRMAN NORMAN: And if there's no objection what I'm 11 going to suggest, I think it might be most efficient if the 12 Commission took a recess. I would say, perhaps, 10 minutes. 13 Let us consider your request and then come back on the record 14 and that may save everyone's time. 15 MR. ARLINGTON: If I may, Mr. Chairman, just to elaborate 16 on your deliberations, if the Commission determines that the 17 information we've requested be held confidential we would also 18 request that any testimony that we make to support that also be 19 held confidential and that members of the audience that have 20 not signed a confidentiality agreement with Forest relative to 21 this well be excused from the proceedings. 22 CHAIRMAN NORMAN: Very well. Thank you. We'll take a 10 23 minute recess. 24 (Off record - 2:23 p.m.) 25 (On record - 2:31 p.m.) R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 32 e e 1 CHAIRMAN NORMAN: The Commission has taken a brief recess 2 to consider a request for confidentiality for certain slides as 3 put forth by Forest and the slides for which confidentiality 5 was requested are slides yet to be presented and they will be identified in the lower right hand corner at slides 7 through 9 and slides 11 through 16. 4 6 7 The Commission has considered the request. The Commission 8 finds the request to be proper and the Commission will extend 9 confidential treatment to the slides. 10 Mr. Arlington, you will proceed. 11 MR. ARLINGTON: Thank you very much, Mr. Chairman. At 12 this time I'd like to ask Paul Winslow to begin the discussion 13 then on slides number 7. 14 CHAIRMAN NORMAN: Mr. Arlington,..... 15 MR. ARLINGTON: I think it's actually Pat Prout and..... 16 CHAIRMAN NORMAN: .... .one point that I believe is 17 understood, but I just want to make clear on the record any 18 potentially affected parties though will have access to these 19 slides. I believe you indicated that you had already made the 20 information available to them. If you could work out a 21 confidentiality agreement, if you can't than the Commission 22 will work with you to try to work within a framework, but 23 potentially affected parties, holders of correlative rights 24 would need to have access to this information. 25 MR. ARLINGTON: Let me make sure I understand how the R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 33 e e 1 Commission is defining potentially affected parties. Are they 2 the parties as your indicated that have drilling rights within 3 the governmental section number 4? 4 CHAIRMAN NORMAN: Yes. 5 MR. ARLINGTON: Okay. Let's just quote those parties 6 specifically and that way we're clear as to what parties will 7 have access. We can --..... 8 CHAIRMAN NORMAN: Those would be..... 9 MR. ARLINGTON: .... .we can do that. 10 COMMISSIONER FORESTER: Yeah. 11 CHAIRMAN NORMAN: Those would be the parties that might 12 potentially experience drainage by virtue of the production 13 from this well. And insofar as I can discern right now that 14 would be Cook Inlet Region, the State of Alaska, the Russian 15 Orthodox Church. I believe those are the three parties. They 16 and, perhaps, I can complete this, they did file Statements 17 of Non-objection. In the Statements of Non-objection they 18 requested, each one of them in different wording, the right to 19 get reconsideration of any Commission ruling by June 1. 20 The Commissioner right now is tentatively considering 21 finishing hearing what you present today and extending 22 confidentiality as you have requested it and recessing to 23 reconvene at a time after June 1 so that we can then make a 24 final ruling. 25 The Commission is also considering issuing a supplemental R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 34 e e 1 notice that will state that ln addition to recessing and 2 reconvening for the purpose of considering the spacing unit, 3 the Commission on its own motion will also consider designating 4 a pool here which will make this a smaller, more contained 5 unit. 6 We would send -- we would publish that notice and send a 7 copy to each of these potentially affected parties and our 8 intention would be that they have the time to consider what's 9 said here today, that they also can decide whether they wish to 10 I participate in this final hearing and then the Commission will 11 consider its decision ready to be made and the matter can be 12 concluded. 13 MR. ARLINGTON: Okay. 14 MR. GURULE: Let's us confer one second. MR. ARLINGTON: Right. And, Mr. Chairman, we just wanted to clarify that the parties that would have access to this 15 16 17 confidential information that the Commission's rule will be 18 treated as confidential are the three parties that you just 19 named, CIRr, Department of Natural Resources and the Russian 20 Orthodox Church, is that correct? 21 CHAIRMAN NORMAN: That is correct, those are the three 22 that were identified within this particular 640 acre spacing 23 unit and you have looked at it and you've filed -- and I'm 24, addressing my question to you, Mr. Arlington, in your affidavit 25 those were the parties that were identified as potentially have R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 35 e e 1 the right to participate within this 640 acres. 2 MR. ARLINGTON: I didn't identify it as such. Just to 3 clarify the meeting that we had as far as the parties that 4 would be within the governmental section, the Section 4, are 5 the parties that we just identified. And just to be clear, I 6 there are other parties within a 3,000 foot..... 7 CHAIRMAN NORMAN: Yes. 8 MR. ARLINGTON: .... .distance of the well..... 9 CHAIRMAN NORMAN: Yes. 10 MR. ARLINGTON: .... .that are in addition to the three 11 parties we just named to wit the Bureau of Land Management 12 we've not have a separate meeting with them although they've 13 been given notice of the hearing as you're aware. First 14 National Bank of Alaska as well, they've been given notice of 15 the hearing, but again, we've not presented any of this 16 confidential information to them. 17 And then there may be others that may claim that they're a 18 potentially affected party, but to our knowledge and 19 understanding there is no one other than those three within 20 that we've just named that have correlative rights within 21 Section 4. 22 CHAIRMAN NORMAN: Yes, we understand. Then we'll go 23 forward in this manner, we will send out a subsequent notice 24 following today's recess along the lines I discussed. A copy 25 will go to all of the identified parties. If any of the three R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 36 e e 1 parties that we have mentioned should contact the Commission 2 and request the right to review information we will let Forest 3 know, but we do want it clear that the Commission feels like 4 they need to have access to that information in order to make 5 an intelligent decision. 6 If any other parties should appear before the conclusion 7 of these proceedings and also assert some right to see this, 8 the Commission would notify Forest. We will hear from Forest 9 and one remedy would be we'll -- we'll address this before we 10 recess today, but one remedy would if someone comes as a 11 surprise to forest then I believe Forest might have the right 12 to withdraw before it would be made available to some other 13 party. 14 The record must stand on its own though, so if Forest 15 pulled back some exhibit, you must understand that the 16 Commission's decision will be made on what's within the record. 17 Have I stated that clearly or do you need any 18 clarification on that? Since we don't know what some of these 19 other parties might do, I think it's probably best to proceed 20 as we've discussed and then deal with a request to see 21 information from them when and if it is asserted. 22 MR. ARLINGTON: If I understand what you're suggesting and 23 just to reiterate, Forest would have no objection to the three 24 parties you've identified and, in fact, would encourage if they 25 make a request that the information be given to them which is R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 37 e e 1 consistent with what we had committed to the parties when we 2 met with them on February 28th. 3 However, if there are other parties besides those three, 4 I if I understand what the Chairman was saying, that come and I 5 request to see this confidential information, that you would 6 allow Forest the opportunity to enter into a confidentiality 7 agreement with those parties that would allow them to see the 8 data. 9 And if we're unsuccessful in entering into such a 10 confidentiality agreement we would be able to notify the 11 Commission and withdraw any or all of the information that 12 we've requested confidentiality, is that my understanding? 13 CHAIRMAN NORMAN: Yes. What I might do is I know you 14 probably -- before we get into this, you want a ruling so let 15 us take another brief recess because I want to make sure that 16 the thinking of Commissioners Seamount and Forester is in line 17 with what I've said here. And I also want to get advice from 18 our Assistant AG and rather than have a back and forth I think 19 efficiency, if we could take about another two or three minute 20 recess. 21 MR. ARLINGTON: Thank you, Mr. Chairman. 22 (Off record - 2:41 p.m.) 23 (On record - 2:45 p.m.) 24 CHAIRMAN NORMAN: We're back on the record at 25 approximately 2:45 after a brief recess. The Commission is of R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 38 e e lone mind on what I said, but I will go over it again just so 2 it's clear. 3 The request for confidentiality as to these slides and the 4 data represented in any subsequent discussion is granted. The 5 parties who were within the 640 acre spacing unit will, 6 however, have an opportunity to see this information if they 7 choose to do so. If they contact the Commission and request 8 it, the Commission will notify Forest so Forest knows what's 9 going on. 10 Those parties are the State of Alaska, Department of 11 Natural Resources, Division of Oil and Gas, the Cook Inlet 12 Region, Inc. Native Corporation and the Diocese of Sitka in 13 Alaska Orthodox Church in America, Inc., also known as the 14 Russian Orthodox Church. Those are the parties that we're 15 referring to that would have the right. We would notify you, 16 but they would have the right to see this information subject 17 to confidentiality. 18 If any other parties should, before these proceedings are 19 concluded, contact the Commission and also ask to see the 20 information, again, Forest would be notified and the Commission 21 would work to try to conclude and structure an arrangement 22 whereby confidentiality could be protected. If in Forest's 23 opinion we're not able to achieve that, than Forest would have 24 the option to withdraw the exhibit, and this is as to other 25 parties. R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 39 e e 1 And then the final point to that is if an exhibit is 2 withdrawn, however, and it is something that is critical to the 3 decision making of the Commission, Forest would have to accept 4 the fact that we may be left with an incomplete record, but 5 these are points that we can address if and when they arise as 6 long as Forest is clear on this. 7 MR. ARLINGTON: I understand. 8 COMMISSIONER FORESTER: And if we're left with an 9 incomplete record anything that's taken out cannot be included 10 in our deliberations. If it can't be put into the record we 11 can't use it to make our determination. 12 And one other thing that probably goes without saying, 13 this isn't a step so that just anyone can come in and assert, 14 you know, a right to look at you aIls stuff. It's in case 15 there's somebody that you missed who has a legal claim. 16 MR. ARLINGTON: Right, I understand. 17 CHAIRMAN NORMAN: Okay. So with that out of the way why 18 don't you proceed. Let's identify then within this room we 19 have the representatives of Forest, we have our legal counsel, 20 Assistant Attorney General Cammy Taylor, Mr. David Roby 21 reservoir engineer, Steve Davies a geologist, our Count 22 Reporter and the Commissioners, so I believe right now you can 23 proceed and all of these persons are under an obligation to 24 honor confidentiality. 25 MR. ARLINGTON: Thank you, Mr. Chairman. At this time I R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 40 e e 1 would ask to swear Mr. Pat Prout who is our geophysicist who 2 will begin discussion of slide number 7. 3 CHAIRMAN NORMAN: Would you raise your right hand, please? 4 (Oath Administered) 5 MR. PROUT: I do. 6 CHAIRMAN NORMAN: Please, state your name? 7 MR. PROUT: Patrick Prout. 8 CHAIRMAN NORMAN: And could you spell your last name, 9 please, for the record? 10 MR. PROUT: P-r-o-u-t. 11 CHAIRMAN NORMAN: And your position? 12 MR. PROUT: I'm a geophysicist with Forest Oil. 13 CHAIRMAN NORMAN: And will you be offering testify as an 14 expert witness? 15 MR. PROUT: Yes, I will. 16 CHAIRMAN NORMAN: Then I'd ask you in your own words to 17 state your qualifications including educational background? 18 MR. PROUT: Okay. In 1976 I graduated from San Diego 19 State University with a Bachelor of Science Degree in Geology 20 with emphasis on geophysics. I then worked in the oil 21 industry, first in the field with a seismic crew for a year and 22 a half, two years in a process with a processing company in 23 Houston. Then I secured a job with Gulf Oil as an interpreter, 24 seismic interpreter. Left them in '81. 25 Joined Unocal in Ventura as a seismic R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 41 e e 1 interpreter/geophysicist. Worked there for two years, 2 transferred to Alaska and worked the Cook Inlet, the Bering 3 Sea, Beaufort. In '97 I left Unocal when I was overseas for 4 three years in Thailand working the gas fields. Worked for 5 Forest Energy since then which started out as Forest 6 (indiscernible - voice lowers). Well, now it's Forest Oil. 7 CHAIRMAN NORMAN: Very well. Questions concerning 8 qualifications? 9 COMMISSIONER SEAMOUNT: I have no questions. I have no 10 objections, but I have heard that you could qualify as an 11 expert fishermen, too. 12 MR. PROUT: Not Sunday. 13 CHAIRMAN NORMAN: Very well. Commissioner Forester. 14 COMMISSIONER FORESTER: I have one question. Is it true 15 when an auger doesn't work he uses a pistol? 16 MR. ARLINGTON: Don't answer that question. 17 MR. PROUT: No comment. 18 CHAIRMAN NORMAN: Okay. Mr. Prout, your qualifications 19 are accepted, please proceed with your testimony. 20 (CONFIDENTIAL EXCERPT BEGINS ON PAGE 42 LINE 20 21 THROUGH PAGE 52 LINE 9) 22 23 24 25 R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 42 e e 1 2 3 4 5 6 7 8 9 10 MR. WINSLOW: Slide 17 I've discussed previously. These 11 were just the conclusions. Again, we went over I believe in 12 slides 4 and 5. I'm just going to skip to slide 18 and again 13 state that the material balance calculations both from flowing 14 material balance and static both point to a small reservoir 15 somewhere in the half a bcf range. 16 Volumetrics assuming a 50 acre structural interpretation 17 point toward, again, a small reservoir. All three of these 18 techniques are looking at a small reservoir fully contained 19 within our lease. 20 If you have any questions I'll field 'em. That was it. 21 COMMISSIONER SEAMOUNT: I have no questions. 22 COMMISSIONER FORESTER: Good job. 23 CHAIRMAN NORMAN: I don't believe there are any and I 24 think that was a very thorough and complete presentation. Do 25 you have any summary that you'd like to offer? You need not, R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 52 e e 1 but..... 2 MR. ARLINGTON: Right. Mr. Chairman, I don't. That 3 concludes our presentation of the technical information that 4 supports our applications. I think it does support a 5 conclusion that the exception should be granted. 6 To follow up on your suggestion earlier regarding the pool 7 rules as you've indicated the Commission on its own motion can 8 issue pool rules or schedule a hearing to establish pool rules. 9 I guess we would support that and request pursuant to the 10 regulations that the Commission does hold a hearing pursuant to 11 25.540 and issue an order classifying the Kustatan Field Gas 12 Pool and prescribe rules to govern operation of that pool. 13 CHAIRMAN NORMAN: Okay. 14 COMMISSIONER FORESTER: The smart people in the room other 15 than Forest people have some questions? On page 8 what is the 16 estimated distance from the western boundary of the reservoir 17 to the section line? 18 MR. ARLINGTON: Page 8? CHAIRMAN NORMAN: Or slide 8. 19 20 COMMISSIONER FORESTER: The cross section. 21 MR. WINSLOW: Seven. 22 CHAIRMAN NORMAN: Seven. Seven, slide seven. 23 MR. PROUT: The distance from -- excuse me, from where? 24 COMMISSIONER FORESTER: From the western boundary of the 25 reservoir to the section line? R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 53 e e 1 MR. PROUT: To tell you the truth I haven't measured that 2 distance, but.. ... 3 COMMISSIONER FORESTER: That's something you could 4 probably just follow up with an e-mail to the folks you've been 5 working with. 6 MR. PROUT: Okay. 7 COMMISSIONER FORESTER: And on that same slide what's the 8 estimated distance from the completion to the fault? You can 9 follow that up with an e-mail. 10 MR. PROUT: Okay. 11 COMMISSIONER FORESTER: And the last question is for the 12 engineer, is the production currently being chocked back? 13 MR. WINSLOW: No. 14 COMMISSIONER FORESTER: So that's the best it can do? 15 MR. WINSLOW: That's the best it can do. 16 MR. GURULE: I'm sorry, I didn't hear the question? 17 COMMISSIONER FORESTER: Are you chocking back the well. 18 MR. WINSLOW: I mean, in the sense that we have a line 19 pressure, we can't open it wide open. We are bucking a line 20 pressure of about 1,050 pounds. We have to have that to get it 21 into the line. 22 COMMISSIONER FORESTER: Okay. And the line pressure is 23 about the same as it was before you shut it in? 24 MR. WINSLOW: Yes. 25 COMMISSIONER FORESTER: Okay. R & Reo U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 54 e e MR. GURULE: Yeah, just a further response on that, if you 2 refer again to page 13 and looking at the flowing tubing 1 3 pressure there and note that it's -- the flowing tubing 4 pressure is about 1,060 pounds or thereabouts and the CIGGS 5 line is currently operating pretty close to that, so, no, we do 6 not have the well chocked back. 7 COMMISSIONER FORESTER: Okay, thanks. 8 MR. GURULE: The other -- if I could offer one other 9 comment, Commissioner, to a question you raised in terms of 1S 10 there evidence or an indication that there's a water drive. I 11 think the data right now is ambiguous on whether there is a 12 water drive or not. 13 I mean, if you look at that same -- I'll refer you back to 14 that slide or page number 13 and you note that at the same 15 flowing tubing pressure there is a lower productivity of the 16 well. And then also note that previous data submitted based on 17 a flowing material balance was indicating a higher gas in place 18 close to the volumetric volume and now with the new one after 19 the well was brought on production you see a lower OI -- OGIP 20 and so that could be because gas is no longer a continuous 21 phase with the water drive or it could be just simply because 22 you have a different fluid level down hole. 23 COMMISSIONER FORESTER: Well, it's been a long time since 24 I did reservoir management of gas reservoirs, but my 25 recollection of P/Z plots in water drive (ph) reservoirs is R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 55 e e 1 that as you get further into the life of the well the P/Z plot 2 tends to make it look like your reserves are larger because 3 your water drive is acting as a piston and so to have the p/z 4 plot later in life show a smaller reserve is counter intuitive 5 to what I'm used to in a water drive gas reservoir, so could 6 you explain that to me? 7 MR. GURULE: No, I -- I was simply trying to clarify that 8 there is no evidence one way or another. There could be data 9 that would indicate that it's a water drive -- a strong water 10 drive and you have a non-continuous gas phase now because you 11 have trapped (ph) gas because your water is bypassed at the 12 given pressures, but, perhaps, you haven't been shut-in long 13 enough for that pressure to corne up with the water drive or it 14 could be simply because you have a liquid, hydrostatic head in 15 the well that is different from what you had before you shut 16 the well. 17 COMMISSIONER FORESTER: I don't think we're gOlng to 18 increase my knowledge by continuing this..... 19 MR. GURULE: Okay. COMMISSIONER FORESTER: .... .so we'll stop. 20 21 CHAIRMAN NORMAN: Commissioner Seamount? 22 COMMISSIONER SEAMOUNT: I have no questions, thank you. 23 CHAIRMAN NORMAN: Let me put one request -- last request 24 which I was remiss in doing before 'cause we've got some very 25 talented staff and just see if either Mr. Davies or Mr. Roby or R & R C 0 U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 56 e e 1 Assistant Attorney General Taylor have any other questions that 2 you think the Commission has not asked, should have thought to 3 ask, but didn't or that you would like to have asked? 4 MR. DAVIES: I'll follow with (ph) an e-mail myself. I'm 5 Davies. Davies, I will follow up with an e-mail. 6 CHAIRMAN NORMAN: Okay. Then as indicated let's talk 7 about a date. I've tentatively identified because if fits with 8 the Commissioners' schedules June the 15th as the for both 9 reconvening this hearing as well as jointly convening the 10 hearing on the pool itself. And my question is whether that lS 11 convenient. If it is not, of course, then we will work to 12 accommodate your schedules, also. 13 MR. GURULE: Mr. Chairman, I believe that lS a Friday? 14 CHAIRMAN NORMAN: Thursday, Thursday. 15 MR. GURULE: Or Thursday, okay. 16 CHAIRMAN NORMAN: That's a Thursday. 17 MR. GURULE: Thursday. I would simply request that we 18 move it to the next Monday. 19 CHAIRMAN NORMAN: To the following Monday would be the 20 19th. Very well. 21 MR. GURULE: Is that possible? 22 COMMISSIONER FORESTER: It works for me. 23 CHAIRMAN NORMAN: Okay. Then we will set this as well as 24 the time for the hearing on the pool rules for 1:30 p.m. on 25 Monday June 19th. R & R C 0 U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 57 e e 1 And so we thank you for a very good presentation. I think 2 we have a much better understanding of everything now and I 3 think we have a direction that we're going. 4 MR. ARLINGTON: Thank you, Mr. Chairman and other 5 Commissioners. I appreciate the time and the (tape switched 6 over) . . . . . 7 CHAIRMAN NORMAN: . '" .recessed at the hour of 3:15 to 8 reconvene on this matter on Monday, June 19th at the hour of 9 1:30 p.m. Thank you. 10 (Recessed - 3:17 p.m.) 11 3200 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R & Reo U R T R E P 0 R T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 58 e e 1 C E R T I F I CAT E 2 UNITED STATES OF AMERICA ) )ss. 3 STATE OF ALASKA ) 4 I, Rebecca Nelms, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and Reporter for R & R 5 Court Reporters, Inc., do hereby certify: 6 THAT the annexed and foregoing Public Hearing In the Matter of the Application of Forest Oil Corporation for a well 7 spacing exemption and exception to the provisions pertaining to Drilling Units and Well Spacing pursuant to 20 AAC 25.055 8 pertaining to the Kustatan Field #1 Well, was taken by Suzan Olson on the 28th day of March, 2006, commencing at the hour of 9 1:30 p.m., at the Alaska Oil and Gas Conservation Commission, Anchorage, Alaska; 10 THAT this Hearing Transcript, as heretofore annexed, is a 11 true and correct transcription of the proceedings taken and transcribed by Suzan Olson; 12 13 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 7th day of April, 2006. 14 ~~~~~ Notary Public in and for Alaska My Commission Expires: 10/10/06 15 16 17 18 19 20 21 22 23 24 25 R & Reo U R T R E paR T E R S 810 N STREET (907)277-0572/Fax 274-8982 ANCHORAGE, ALASKA 99501 F~est Oil Corporatio~ 310 K Street, Suite 700 Anchorage, Alaska 99501 (907) 258-8600 Fax: (907) 258-8601 Kustatan Field #1 Well History · Forest Oil Corporation (Forest) drilled the KF#1 well as an exploratory oil well drilled in 2000 under planof operation approval LO/CI 00-04 on oil and gas lease ADL-387023 on surface estate owned by Forest. The well was unsuccessful and Forest ceased operations on the KF#1 wellbore in December 2000. · Oil and gas lease ADL-387023 expired on February 1,2003. · Forest requested & DNR approved on April 11, 2003 suspension of the abandonment requirements of the referenced lease relative to the KF #1 well. · Forest requested authorization from AOGCC to inject Class II exempt waste fluids into the middle Tyonek formation in the Kustatan Field #1 (KF#1) well bore in February 2003 to handle the hydrocarbons and water being produced from Redoubt Unit at adjacent Kustatan Production Facility). · AOGCC issued 010 26 to allow Forest to inject waste fluids into the KF #1. · Forest requested & DNR approved Forest as operator of KF #1 well as a Class II waste disposal well pursuant to MLUP/CI 03-03. · Forest acquired oil and gas lease ADL-390368 effective October 1, 2003. · Forest recompleted the Kustatan Field #1 Well as a gas well in October 2005, subject to a sundry notice approved by the Commission. On or about October 21 , 2005, the State Department of Natural Resources ("DNR") authorized Forest to conduct an extended production test for up to one year on the Kustatan Field #1 Well. Page10f 1 Date Modified: 3/28/06 Date Prepared: 3/28/06 e e STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: The Application afForest Oil Corporation ) for a well spacing exemption and exception ) to the provisions pertaining to Drilling Units ) and Well Spacing pursuant to 20 AAC 25.055 ) pertaining to the Kustatan Field #1 Well ) PRE-HEARJNG BRIEF Forest Oil Corporation ("F orest") submits this pre-hearing brief in support of its application for an exception to the drilling unit and well spacing requirements of 20 AAC 25.055(a)(2) and 20 AAC 25.055(b) for the Kustatan Field #1 Well. Forest submits this brief in lieu of pre -filed testimony, in order to identify and summarize the evidence and other materials already provided to the Alaska Oil and Gas Commission ("Commission"), to identify and summarize the timeline of pertinent events, and to avoid the expense and burden of preparing substantial but unnecessary pre-filed testimony. 1. Summary of Events and Evidence Presented to the Commission. Forest entered into a lease with the State of Alaska, ADL No. 390368, effective on October 1,2003. The Kustatan Field #1 Well is located on this lease in Section 4, T. 7 N., R. 14 W., Seward Meridian, Alaska. Forest originally completed' Kustatan Field #1 as an oil well, which complied with all the then-applicable Commission drilling unit and well spacing regulations. Forest has now recompleted the Kustatan Field #1 Well as a gas well subject to a sundry notice approved by the Commission. On or about October 2 1,2005, the State Department of Natural Resources ("DNRn) authorized Forest to test the Kustatan Field #1 Well. Forest Oil's Pre-Hearing Brief Re: Drilling Units and WelI-Spacing Exceptions Page I of7 9ft)- e e On February 24, 2006, Forest received a Notice of Violation of Well Spacing and Pooling Requirements for the Kustatan Field #1 Well from the Commission, which was dated February 23,2006. Forest shut the well in immediately on February 24, 2006 pursuant to the Commission's Notice of Violation. Forest responded by letter dated February 24,2006 and applied for an exception to the drilling unit and well spacing requirements of 20 AAC 25.055(a)(2) and 20 AAC 25.055(b). The Commission scheduled a public hearing on the application for] :30 p.m. on March 28, 2006. Pursuant to Commission procedures and regulations, Forest also participated in an infonnal meeting with the Commission and its staff on February 24, 2006 in order to discuss the situation, including the need and procedure for obtaining an exception to the spacing and pooling regulations and returning the Kustatan Field #1 Well to operation. The Commission's regulations provide for Forest to submit infonnation at this phase. Accordingly, at this meeting, Forest presented a substantial body of information in written and verbal fonn to the Commission regarding the Kustatan Field #1 Well. In addition, Forest provided the Commission at this meeting a significant amount of confidential infonnation, along with Forest's request to keep that information confidential. The Commission has this information, and has Forest's request to keep it confidential under advisement. Not only is this infonnation confidential by nature, there is nearby unleased acreage. Forest does not intend to directly evaluate or directly testify about this information at the public portion of the hearing and looks forward to the Commission ruling on its request to keep it confidential In addition, Forest provided a further significant amount of information verbally to the Commission during this meeting. Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 2 of7 c;r^- e e The information Forest presented to the Commission on February 24, 2006 was also presented by Forest to the adjacent landowners at a meeting on February 28, 2006. DNR, CIRI, and the Russian Orthodox Church had representatives present at this meeting. I At this meeting and by letter of the same date, Forest asked for the support of each ofthe adjacent landowners in its application for an exception to 20 AAC 25.055 and for each such landowner to provide to the Commission a letter of non objection to the issuance to Forest of the exception to the drilling unit and well spacing rules sought herein. The DNR submitted its letter indicating no objection to the exception on March 2, 2006. CIRI submitted a letter supporting Forest's application on March 3, 2006. The Russian Orthodox Church registered its support of Forest's application on March 2, 2006. No adjacent landowner objects to Forest's application for an exception to 20 AAC 25.055(a) (2) and 20 AAC 25.055(b). Forest also participated in a second informal meeting with the Commission held on March 3, 2006, the purpose of which was to request the Commission to issue an immediate ruling on Forest's application for a drilling unit and well spacing exception without a public hearing, because Forest had received non-objections from the adjacent landowners in the governmental section in which the Kustatan Field #1 Well is located. During this meeting, the Commission informed Forest that it would proceed to hold a formal hearing in the matter. Subsequent to these letters, the Commission issued Conservation Order 566 on March 17, . 2006, granting interim relief to Forest and allowing it to re-start production whl1e this matter is pending, in part to avoid any possible harm to the reservoir, and in part in reliance upon the non- objections received from the adjacent landowners and owners. I Individuals present included: Brian Havelock (DNR), Jim Arlington (Forest Oil), Leonard Gurule (Forest Oil), Paul Winslow (Forest Oil), Patrick Prout (Forest Oil), John Meyer (DNR), Don Krouskop (DNR), Vicki O'Brien (Church), Kim Cunningham (CIRI), Bill Grether (CIRI), Jack Hartz (DNR), and Ken Helmold (DNR). Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 3 of7 \) ¿À.. (¡ e e Conservation Order 566 also verified that this matter would be resolved only after holding a formal hearing previously scheduled for March 28, 2006. Because of the terms of Conservation Order 566 and further in response to the Commission's earlier request to do so, Forest has sent letters dated March 17,2006 to the adjacent owners and landowners, DNR, CIRI, and the Russian Orthodox Church, advising them of the status of the matter and of their last day to comment to the Commission, March 28,2006 (the day of the hearing in this matter). Forest has supplied copies of these letters to the Commission. 2. Matters Proved by Information Already Submitted to Commission. The foregoing factual information already presented to the Commission satisfies the technical requirements for the Commission to issue a permanent drilling unit and well spacing exception for the Kustatan Field #1 Well. The foregoing factual evidence establishes that the Kustatan Field # 1 Well penetrates a small, approximately 50 acre reservoir that does not cross any property line or governmental section line, and that the Kustatan Field #1 Well does not drain oil or gas or other hydrocarbons from the property of any adjacent landowner or owner, including that ofDNR, CIRI, or the Russian Orthodox Church, or otherwise affect their correlative rights. The written record in this matter further demonstrates that the adjoinin& landowners and owners do not object to the issuance of such an order by the Commission providing an exception to the drilling unit and well spacing regulations. Therefore, the foregoing factual information already presented to the Commission establishes as a technical matter, and as a legal matter, that the Commission may properly issue an order specifying drilling unit and well spacing requirements for this reservoir that are different Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 4 of7 9-q e . from, and constitute exceptions to, the well spacing and drilling unit requirements set forth in the Commission's regulations, including at 20 AAC 25.055(a) (2) and 20 AAC 25.055(b). 3. Forest Oil Witnesses. Forest Oil intends to rely on the evidence and the information it has already given to the Commission, including at the February 24, 2006 informal meeting. Forest does not intend to add further extensive testimony or exhibits to the record in this matter. However, Forest will provide testimony for the record (to the extent the Commission believes it necessary or appropriate) restating and explaining the information it has already provided in the informal meeting. Forest will make the following witnesses available to testify and answer questions from the Commission at the March 28 hearing: 1. James D. Arlington. Land Manager. Mr. Arlington will be available to testify and answer questions regarding Forest's acquisition of ADL No. 390368, the history of the lease, the history of this matter, and Forest's application for an exception to 20 AAC 25.055. 2. Leonard Gurule. Senior Vice President. Mr. Gurule will be available to testify and answer questions regarding . Forest's acquisition of ADL No. 390368, the history of the lease, the history of this matter, and Forest's application for an exception to 20 AAC 25.055. 3. Paul Winslow, Reservoir Engineer, Forest Oil. Mr. Winslow is an expert in the field of production and drilling and reservoir management and will be available to testify and answer Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 5 of7 ''\'1 \:<J { \. ! i 1/ e e questions regarding the material submitted to the Commission in support of its configuration and size application for an exception, including the nature of the Kustatan Field and its reservoir. 4. Pat Prout, Geophysicist, Forest Oil. Mr. Prout is an expert in the field of natural gas exploration including seismic data acquisition and analysis and will be available to testify and answer questions regarding the material submitted to the Commission in support of its configuration and size application for an exception, including the nature of the Kustatan Field and its reservoir. 4. Forest's Actions Were Not Intentional, Did Not Result in Draina2e, and Were Without Preiudice to the Correlative Ri2hts or Other Interests of Adiacent Owners and Landowners. Forest has respectfully moved that the Commission grant its application for an exception to 20 AAC 25.055(a) (2) and 20 AAC 25.055(b) with respect to the Kustatan Field #1 Well. The information presented by Forest to the Commission, the testimony and answers to be provided by Forest's witnesses at the hearing, and the absence of any objection from adjacent landowners weigh heavily in favor of granting the application and provide legal and technical justification to do so. Because the Commission might be concerned with this issue, Forest also wishes to offer at least a brief explanation of how this unfortunate but unintentional circumstance arose. A series of unfortunate but unintentional events led to Forest inadvertently testing the Kustatan Field #1 Well without first receiving an exception to 20 AAC 25.055. This occurred in part because Forest was recompleting as a gas well an already permitted oil well and was primarily focused on its regulatory efforts to obtain DNR approval for a production test. Forest reserves Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 6 of7 ~(A.... e e the right to offer factual and legal defenses in the future proceedings concerning its obligation to do so. However, simply put, without ever intending to fail to do so, Forest did not re-evaluate the Commission's regulations before it re-completed the prior oil well as a gas producer. Forest offers this infonnation not to excuse its actions here, but rather simply to explain how it happened. Forest recognizes its obligation to comply with the well spacing and drilling unit requirements prior to regular production of gas from the Kustatan Field # I Well. Forest (and its predecessor Forcenergy) has never previously encountered problems with the Commission's drilling units and well-spacing requirements. The infonnation already supplied to the Commission by Forest (including the non- objections of adjacent landowners) also demonstrates that Forest's action resulted in no hann or prejudice of any kind to adjacent landowners. This evidence establishes that the reservoir Forest is testing is quite small -- approximately 50 acres -- and does not extend onto any third party or unleased lands. All adjacent owners and landowners have filed non-objections to Forest's application. There has been no harm caused by Forest's inadvertent action, the adjacent landowners and owners recognize that fact, and there will be no hann to them in granting Forest's requested spacing and setback exceptions. 5. Conclusion. For the foregoing reasons, Forest respectfully requdsts that, at the conclusion of the hearing on March 28, 2006, the Commission summarily grant its application for an exception to the drilling unit and well spacing requirements of20 AAC 25.055(a)(2) and 20 AAC 25.055(b). By: ~dCnµ Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 7 of7 \)éZ (~;.....'.~~~...'.'~'.'....'.....i '..\~.i :, . e Kustatan Field #1 Drilling Unit and Spacing Exception Hearing e Alaska Oil & Gas Conservation Commission March 28,2006 17 e e USS 363 Tract B USS 4527 Lot 2 USS 4527 Lot 3 8 16 15 2 (i)/......~~~........... ............ ......\ \~J/ .11 - e e - - a~'~'~~ .~" ¡,,), Ù ~.:À...'\..... \ '" ~.......... '\'\:) ~~......~~.>;~~~.... ..?2;i-~ ~ ". :;,'.... .<............... ,......>'~ ......'...........:.:-:;. :;,.-.....:,............... ',.,..... :-0;;;/)7/;-,;>/;,://,"/4)));;> fm/,jf7:-'}TN)J >:>i;:. ),\» '/~~ \: ::{;:i;:}:Xí:;;Æ:;fÆ:f;Ø;;¿{%%møø:{:¿::~~:;: '.. .",/','............',/'...."/.,' /.......'.. ..' "/" ...' . "i'.' . ..." ... .. ,/' I .. ~R.1·· ....,/'...... " . .. ,/' ~~%.~I~.jf.ff ..' .' /.' /?~''::~i.''(,'':'7''?'{.~{''L~''''''··1· L l.r. {~.i' .... {.ii.,¡... (.,.. / /.1 / // / (/ / "''.M'/' ///. ~ &..'~~. - "'. ~~ '-, .. .. ~.. ~ , _..... I ." ___of !,,' .iI\,.L . e~, . '..... ./ /.....,.,::::::>::::::;:;~~ ..' /..:t:.:;/' //,.- ~>::;;~:::::;:~ "''''~ "- r o Circle 1500' Radius .-/ Kust¡:r-:a,l¡ 1 . 1468' Fie,'d ~tO ~ ~KF'1 ,// 3 e 1. Volumetrics: ~ Structural mapping down to the spill-point of the North bounding fault is fully contained within ADL-390368 e 2. Flowing Material Balance: ~ Flowing material balance indicates a smaller original gas volume than volumetric calculations ~ This gives further support for the gas accumulation being fully contained within ADL -390368 4 ~. , \.i....... ~~~......... ........ '..\ \~/ .'. . 3. Static Material Balance: ~ Static material balance matches the flowing material e balance very closely ~ It indicates a smaller original gas volume than volumetric calculations ~ This further supports that the gas accumulation is fully contained within ADL-390368 e All volumetric and material balance calculations indicate that the entire gas accumulation is fully contained within ADL-390368 5 e e Forest Requests AOGCC: · Issue order for two (2) exceptions: . 20 MC 25.055 (a) (2) - 1,500' Well Spacing . 20 MC 25.055 (b) - Pooling Requirement Support for Requests: · Minimal offset variance (32') · Gas pool completely contained within ADL-390368 · No drainage from any adjacent land owners · Technical data supports all of the above 6 *~1 e . STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Kustatan # 1 Spacing Exception Hearing March 28, 2006 at 1 :30 pm NAME - AFFILIATION (PLEASE P;r:T) ~.", }¡o "'" l'j;"/{ V- /1 11 (/ lid 1.4 ~I.A' U 1-,\ stu ~~"CkR~1-' ). e6Afa/~J 6 U¡/1 e,J ) {? \Hearing_ Sign-In ADDRESS/PHONE NUMBER TESTIFY (Yes or No) ~~ ø!:: 4.~ 3/0 ..~, ./> d -~ "----- -~ .... , ~7.. J~, 7cJe? Vt<"'5' i' llO ICS~, sJ.c. 7"0 ,,*,J. '1'1 5'"o<jt ?&~-213 I Y t' S 3(0 Þ.;i. :i~ roo ArAJ. :d(C(501 ffGg~Z)t{, 7'0 I( II , I BbS? ,-~/5-0 j~ .:it-~ to . . CONFIDENTIAL MATERIAL LOCATED IN CONFIDENTIAL ROOM ~à5 [Fwd: Distances at KFI] . . Subject: [Fwd: Distances at KFl] From: Dave Roby <dave _ roby@admin.state.ak.us> Date: Tue, 28 Mar 2006 16:06:34 -0900 To: Jody J Colombie <jody_colombie@admin.state.ak.us> Jody, Could you please add this email to the record for the Kustatan Field # 1 spacing exception. Thanks, Dave ____m_ Original Message -------- Subject:Distances at KFl Date:Tue, 28 Mar 2006 17:56:29 -0700 From:Pat Prout <PLProut(G}forestoil.com> To:David Roby (Dave Roby(G}admin.state.ak. us) <dave roby(U}admin.state.ak. us>, steve davies(G}admin.state.ak.us CC:Paul Winslow <PMWinslow(G}forestoil.com>, Jim Arlington <JDArlington(G}forestoi1.com> Dave, The perpendicular distance from the perforations to the fault as mapped (Tyonek 8) is -300 feet. It is approximately 250' at the producing zone horizon. That can change by up to +- 100 feet. The distance from my polygon to the lease line (section line) is 220' at the closest point. Of course the OGIP calculated with this polygon (area) is larger than what we calculated from the engineering data. I would expect the actual reservoir area is much smaller. Regards, Pat I of I 3/29/2006 10:20 AM 4:þ.~ 4 e e STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION Re: The Application of Forest Oil Corporation ) for a well spacing exemption and exception ) to the provisions pertaining to Drilling Units ) and Well Spacing pursuant to 20 AAC 25.055 ) pertaining to the Kustatan Field #1 Well ) PRE-HEARING BRIEF Forest Oil Corporation ("Forest") submits this pre-hearing brief in support of its application for an exception to the drilling unit and well spacing requirements of 20 AAC 25.055(a)(2) and 20 AAC 25.055(b) for the Kustatan Field #1 Well. Forest submits this brief in lieu of pre-filed testimony, in order to identify and summarize the evidence and other materials already provided to the Alaska Oil and Gas Commission ("Commission"), to identify and summarize the timeline of pertinent events, and to avoid the expense and burden of preparing substantial but unnecessary pre-filed testimony. 1. Summary of Events and Evidence Presented to the Commission. Forest entered into a lease with the State of Alaska, ADL No. 390368, effective on October 1, 2003. The Kustatan Field #1 Well is located on this lease in Section 4, T. 7 N., R. 14 W., Seward Meridian, Alaska. Forest originally completed Kustatan Field #1 as an oil well, which complied with all the then-applicable Commission drilling unit and well spacing regulations. Forest has now recompleted the Kustatan Field #1 Well as a gas well subject to a sundry notice approved by the Commission. On or about October 21, 2005, the State Department of Natural Resources ("DNR") authorized Forest to test the Kustatan Field #1 Well. Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 1 of7 Qð- í/ f/ e e On February 24, 2006, Forest received a Notice of Violation of Well Spacing and Pooling Requirements for the Kustatan Field #1 Well from the Commission, which was dated February 23,2006. Forest shut the well in immediately on February 24,2006 pursuant to the Commission's Notice of Violation. Forest responded by letter dated February 24,2006 and applied for an exception to the drilling unit and well spacing requirements of 20 AAC 25.055(a)(2) and 20 AAC 25.055(b). The Commission scheduled a public hearing on the application for 1 :30 p.m. on March 28, 2006. Pursuant to Commission procedures and regulations, Forest also participated in an informal meeting with the Commission and its staff on February 24,2006 in order to discuss the situation, including the need and procedure for obtaining an exception to the spacing and pooling regulations and returning the Kustatan Field #1 Well to operation. The Commission's regulations provide for Forest to submit information at this phase. Accordingly, at this meeting, Forest presented a substantial body of information in written and verbal form to the Commission regarding the Kustatan Field #1 Well. In addition, Forest provided the Commission at this meeting a significant amount of confidential information, along with Forest's request to keep that information confidentiaL The Commission has this information, and has Forest's request to keep it confidential under advisement. Not only is this information confidential by nature, there is nearby unleased acreage. Forest does not intend to directly evaluate or directly testify about this information at the public portion ofthe hearing and looks forward to the Commission ruling on its request to keep it confidentiaL In addition, Forest provided a further significant amount of information verbally to the Commission during this meeting. Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 2 of7 iH,«- \, :" i e e The information Forest presented to the Commission on February 24,2006 was also presented by Forest to the adjacent landowners at a meeting on February 28, 2006. DNR, CIRI, and the Russian Orthodox Church had representatives present at this meeting. 1 At this meeting and by letter of the same date, Forest asked for the support of each of the adjacent landowners in its application for an exception to 20 AAC 25.055 and for each such landowner to provide to the Commission a letter of nonobjection to the issuance to Forest of the exception to the drilling unit and well spacing rules sought herein. The DNR submitted its letter indicating no objection to the exception on March 2, 2006. CIRI submitted a letter supporting Forest's application on March 3, 2006. The Russian Orthodox Church registered its support of Forest's application on March 2, 2006. No adjacent landowner objects to Forest's application for an exception to 20 AAC 25.055(a) (2) and 20 AAC 25.055(b). Forest also participated in a second informal meeting with the Commission held on March 3, 2006, the purpose of which was to request the Commission to issue an immediate ruling on Forest's application for a drilling unit and well spacing exception without a public hearing, because Forest had received non-objections from the adjacent landowners in the governmental section in which the Kustatan Field #1 Well is located. During this meeting, the Commission informed Forest that it would proceed to hold a formal hearing in the matter. Subsequent to these letters, the Commission issued Conservation Order 566 on March 17, 2006, granting interim relief to Forest and allowing it to re-start production while this matter is pending, in part to avoid any possible harm to the reservoir, and in part in reliance upon the non- objections received from the adjacent landowners and owners. 1 Individuals present included: Brian Havelock (DNR), Jim Arlington (Forest Oil), Leonard Gurule (Forest Oil), Paul Winslow (Forest Oil), Patrick Prout (Forest Oil), John Meyer (DNR), Don Krouskop (DNR), Vicki O'Brien (Church), Kim Cunningham (CIRI), Bill Grether (CIRI), Jack Hartz (DNR), and Ken Helmold (DNR). Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 3 of7 (~¿:t il e e Conservation Order 566 also verified that this matter would be resolved only after holding a formal hearing previously scheduled for March 28, 2006. Because of the terms of Conservation Order 566 and further in response to the Commission's earlier request to do so, Forest has sent letters dated March 17,2006 to the adjacent owners and landowners, DNR, CIRI, and the Russian Orthodox Church, advising them of the status of the matter and of their last day to comment to the Commission, March 28, 2006 (the day of the hearing in this matter). Forest has supplied copies of these letters to the Commission. 2. Matters Proved by Information Already Submitted to Commission. The foregoing factual information already presented to the Commission satisfies the technical requirements for the Commission to issue a permanent drilling unit and well spacing exception for the Kustatan Field #1 Well. The foregoing factual evidence establishes that the Kustatan Field #1 Well penetrates a small, approximately 50 acre reservoir that does not cross any property line or governmental section line, and that the Kustatan Field #1 Well does not drain oil or gas or other hydrocarbons from the property of any adjacent landowner or owner, including that of DNR, CIRI, or the Russian Orthodox Church, or otherwise affect their correlative rights. The written record in this matter further demonstrates that the adjoining landowners and owners do not object to the issuance of such an order by the Commission providing an exception to the drilling unit and well spacing regulations. Therefore, the foregoing factual information already presented to the Commission establishes as a technical matter, and as a legal matter, that the Commission may properly issue an order specifying drilling unit and well spacing requirements for this reservoir that are different Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 4 of7 qÞl e e from, and constitute exceptions to, the well spacing and drilling unit requirements set forth in the Commission's regulations, including at 20 AAC 25.055(a) (2) and 20 AAC 25.055(b). 3. Forest Oil Witnesses. Forest Oil intends to rely on the evidence and the information it has already given to the Commission, including at the February 24, 2006 informal meeting. Forest does not intend to add further extensive testimony or exhibits to the record in this matter. However, Forest will provide testimony for the record (to the extent the Commission believes it necessary or appropriate) restating and explaining the information it has already provided in the informal meeting. Forest will make the following witnesses available to testify and answer questions from the Commission at the March 28 hearing: 1. James D. Arlington, Land Manager. Mr. Arlington will be available to testify and answer questions regarding Forest's acquisition of ADL No. 390368, the history of the lease, the history of this matter, and Forest's application for an exception to 20 AAC 25.055. 2. Leonard Gurule, Senior Vice President. Mr. Gurule will be available to testify and answer questions regarding Forest's acquisition of ADL No. 390368, the history of the lease, the history of this matter, and Forest's application for an exception to 20 AAC 25.055. 3. Paul Winslow, Reservoir Engineer, Forest Oil. Mr. Winslow is an expert in the field of production and drilling and reservoir management and will be available to testify and answer Forest Oil's Pre-Hearing Brief Re: Drilling Units and WelI-Spacing Exceptions Page 5 of7 e e questions regarding the material submitted to the Commission in support of its configuration and size application for an exception, including the nature of the Kustatan Field and its reservoir. 4. Pat Prout, Geophysicist, Forest Oil. Mr. Prout is an expert in the field of natural gas exploration including seismic data acquisition and analysis and will be available to testify and answer questions regarding the material submitted to the Commission in support of its configuration and size application for an exception, including the nature of the Kustatan Field and its reservoir. 4. Forest's Actions Were Not Intentional, Did Not Result in Drainage, and Were Without Preiudice to the Correlative Rie;hts or Other Interests of Adiacent Owners and Landowners. Forest has respectfully moved that the Commission grant its application for an exception to 20 AAC 25.055(a) (2) and 20 AAC 25.055(b) with respect to the Kustatan Field #1 Well. The information presented by Forest to the Commission, the testimony and answers to be provided by Forest's witnesses at the hearing, and the absence of any objection from adjacent landowners weigh heavily in favor of granting the application and provide legal and technical justification to do so. Because the Commission might be concerned with this issue, Forest also wishes to offer at least a brief explanation of how this unfortunate but unintentional circumstance arose. A series of unfortunate but unintentional events led to Forest inadvertently testing the Kustatan Field #1 Well without first receiving an exception to 20 AAC 25.055. This occurred in part because Forest was recompleting as a gas well an already permitted oil well and was primarily focused on its regulatory efforts to obtain DNR approval for a production test. Forest reserves Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 6 of7 (:1¿Â... If - . the right to offer factual and legal defenses in the future proceedings concerning its obligation to do so. However, simply put, without ever intending to fail to do so, Forest did not re-evaluate the Commission's regulations before it re-completed the prior oil well as a gas producer. Forest offers this information not to excuse its actions here, but rather simply to explain how it happened. Forest recognizes its obligation to comply with the well spacing and drilling unit requirements prior to regular production of gas from the Kustatan Field #1 Well. Forest (and its predecessor Forcenergy) has never previously encountered problems with the Commission's drilling units and well-spacing requirements. The information already supplied to the Commission by Forest (including the non- objections of adjacent landowners) also demonstrates that Forest's action resulted in no harm or prejudice of any kind to adjacent landowners. This evidence establishes that the reservoir Forest is testing is quite small -- approximately 50 acres -- and does not extend onto any third party or unleased lands. All adjacent owners and landowners have filed non-objections to Forest's application. There has been no harm caused by Forest's inadvertent action, the adjacent landowners and owners recognize that fact, and there will be no harm to them in granting Forest's requested spacing and setback exceptions. 5. Conclusion. F or the foregoing reasons, Forest respectfully requests that, at the conclusion of the hearing on March 28, 2006, the Commission summarily grant its application for an exception to the drilling unit and well spacing requirements of20 AAC 25.055(a)(2) and 20 AAC 25.055(b). ~~Cnµ By: Forest Oil's Pre-Hearing Brief Re: Drilling Units and Well-Spacing Exceptions Page 7 of7 i~C;Z -=1F~ "3 vd: ~Œ: KF #1 Application from Forest Oil_paCing & Pooling... . Subject: [Fwd: RE: KF # 1 Application from Forest Oil for Spacing & Pooling Exce ptions] From: John Norman <john_norman@admin.state.ak.us> Date: Sat, 18 Mar 2006 17:50:58 -0900 To: Ceresa L Tolley <ceresa_tolley@admin.state.ak.us> CC: Dan T Seamount <dan_seamount@admin.state.ak.us>, Cathy P Foerster <cathyjoerster@admin.state.ak.us>, Jody J Colombie <jody _ colombie@admin.state.ak.us> Ceresa-please print a copy of this em ail and the attachments for the file. Thanks, John -------- Original Message ------- Subject:RE: KF #1 Application from Forest Oil for Spacing & Pooling Exce ptions Date:Fri, 17 Mar 2006 21 :44:41 -0700 From :Jim Arlington <JDMillm,.,œ!.1mìJm)~fi!};1£eò,1t©ii!L.\D.(jxlmf> To:'Jody Colombie'<¡~OOy ccl!«JJITIiD.ìb.ñe'~¡j mmfurn.~.!Ul'$> CC:Keith Sanders <K<eñttfu¡:&~\DJ})]]Jffi>, 'Kim Clmningham' <!f(C~.¡£ÌÌœillITID:~œ.~, 'Brian Havelock' <brian haveloclk@l_~m>, "'Vicki I. O'Brien'" <V1J(Q)~~..ITIlffi>, 'Stephen Davies' <steve davies(~~___m>, Leonard Gurule <:[£(]œ1iI1iD!le'~JfiOO"<f$Iìciill..(Dl11J1I1ì>, "Jamie Linxwiler (j1ifl..'{wi]er(æ,~oomm)" <:jj~ñIfar¡¡~w:;~t!.¡¡¡fujLíCX!J.!fffil.>, John Norman <john nonrum:~~..;mik.m> Jody, Please share the attached letters from Forest Oil Corporation with the AOGCC Commissioners that were sent today certified mail, return receipt requested, to the three landowners within Section 4, Township 7 North, Range 14 West, Seward Meridian. I am also copying each ofthem with this email as well so they will also receive the information digitally today. The letters to each of the landowners informs them of the AOGCC Interim Order that was issued today as Conservation Order No. 566 and their rights to be heard at the AOGCC hearing scheduled for March 28th in the above referenced matter. If any of the AOGCC staff or Commissioners have any questions regarding this transmittal, I would appreciate receiving a call directly at 868-2112 as soon as possible. Thank you for your help in this matter. Sincerely, Jim Arlington John K. Norman <Yooo N~¡{ãl;âì1idImm~1U!S>PChairman Alaska Oil & Gas Conservation Commission Content-Type: application/octet-stream Forst Itr to CIRI RE AOGCC CO 566 3-17-2006.pdf - - Content-Encoding: base64 t~'wd: RE: KF #1 Application tram Forest OÌll_aCing & Pooling... e Forst Itr to DO&G_RE AOGCC CO 566_3-17-2006.pdf Content-Type: application/octet-stream Content-Encoding: base64 Forst Itr to Russian Cburch_RE AOGCC CO 566_3-17-2006.pdf Content-Type: application/octeHtream Content-Encoding: base64 AOGCC Interim Order_CO 566_KF #1 well_3-17-2006.pdf Content-Type: application/octet-stream Content-Encoding: base64 ...,"'\1'\/""1"\1"\/1"\.1.... .'Æ e e ~ FOREST OIL CORPORATION .J j(i 0/("'111'",,1 _ (''h"I<> 7(/(J r-C/m/;,10'l<>' ("'/(,nk'f .f),f).;(i / (.')(7) ;'.¡,I-SMd - (9(/7).1.7,1_,\'(;1' I (C'þ~ ,j (Sent via certified mail & email to KeithS(âJ.ciri.com) March 17,2006 Keith Sanders Cook Inlet Region, Inc. 2525 C St #500 Anchorage, AK 99509 RE: Forest Oil Corporation well spacing and drilling unit exception application Kustatan Field #1 ("KF #1") Well; State of Alaska Lease (ADL-390368) Dear Mr. Sanders: Forest Oil Corporation ("Forest") and I thank Cook Inlet Region, Inc. ("CIRI") for the support it has shown for Forest's application to the Alaska Oil and Gas Conservation Commission ("Commission") requesting an exception to the drilling units and spacing requirements of 20 AAC 25.055 for the KF #1 well. We also thank Kim Cunningham for meeting with Forest staff on short notice on February 28th to review the data supporting our application; we truly appreciate the spirit of cooperation you have exhibited. I am pleased to enclose for your review Conservation Order No. 566, issued today by the Commission in this matter. Conservation Order No. 566 temporarily allows production to resume from the Kustatan Field #1 well, effective immediately. The Commission will still hold a hearing on March 28,2006 on the matter, and the Commission will be accepting comments until that time, and then the Commission will make a final disposition of the matter. We were informed unofficially today that the Commission may also recess the hearing to a later time after March 28, and continue to accept comments until that later time; but Conservation Order No. 566 does not say that. Therefore, we cannot be certain that will happen and we should thus assume the matter will close for comment and be finally resolved on March 28, 2006. This is important because in my letter to you dated February 28, 2006 requesting your support and non-objection on the above-referenced subject, Forest offered to support CIRI before the Commission if CIRI wished to file a request for reconsideration by June 1, 2006 of the Commission's approval of Forest's application for a spacing exception. However, Alaska statutes and the Commission's regulations do not allow filing a reconsideration request on June 1, if it acts with finality on March 28 (AS 31.05.080 provides for filing a request for rehearing only within 20 days of a Commission order). - Page 1 of 2 - e e Therefore, if CIRI has concerns with Forest's application for a well spacing and drilling unit exception per 20 AAG 25.055, or with the non-objection previously issued by CIRI on this matter, and GIRl wishes to have its concerns considered by the Commission, GIRl must comment to the Commission on the matter by the close of the hearing on this matter, March 28, 2006. Based on previous discussions with GIRl, I assume GIRl does not have any such concerns, but I want to make sure you were advised of the matter, and that if CIRI does wish to make comments, GIRl's concerns will be considered. Please contact me with any questions or comments you might have on the foregoing. Sincerely yours, FOREST OIL CORPORATION ~_ dd? / ~~~ - Jim Arlington I Enclosure: AOGCG Conservation Order No. 566 - Page 2 of 2 - e e @ FOREST OIL CORPORATION .; 1(' "J(r-';III!('rl . rXul" 7(i(J 0(/;J('It(Or(~r(>. 0C!lrok" .'/.9.')(// (')(!) /ïcl-.lrj'(I · (/1(7) _'.;S_Sú'fc/ (~-/;,,) (Sent via certified mail & email tobrian_havelock@dnr.state.ak.us) March 17, 2006 Brian Havelock Division of Oil & Gas Department of Natural Resources 550 West Seventh Ave. Suite 800 Anchorage, AK 99501 RE: Forest Oil Corporation well spacing and drilling unit exception application Kustatan Field #1 ("KF #1") Well; State of Alaska Lease (ADL-390368) Dear Mr. Havelock: Forest Oil Corporation ("Forest") and I thank the Department of Natural Resources, Division of Oil and Gas ("DO&G") for the support it has shown for Forest's application to the Alaska Oil and Gas Conservation Commission ("Commission") requesting an exception to the drilling units and spacing requirements of 20 AAC 25.055 for the KF #1 well. We also thank the DO&G for meeting with Forest staff on short notice on February 28th to review the data supporting our application; we truly appreciate the spirit of cooperation you have exhibited. I am pleased to enclose for your review Conservation Order No. 566, issued today by the Commission in this matter. Conservation Order No. 566 temporarily allows production to resume from the Kustatan Field #1 well, effective immediately. The Commission will still hold a hearing on March 28, 2006 on the matter, and the Commission will be accepting comments until that time, and then the Commission will make a final disposition of the matter. We were informed unofficially today that the Commission may also recess the hearing to a later time after March 28, and continue to accept comments until that later time; but Conservation Order No. 566 does not say that. Therefore, we cannot be certain that will happen and we should thus assume the matter will close for comment and be finally resolved on March 28, 2006. This is important because in my letter to you dated February 28, 2006 requesting your support and non-objection on the above-referenced subject, Forest offered to support the DO&G before the Commission if the DO&G wished to file a request for reconsideration by June 1, 2006 of the Commission's approval of Forest's application for a spacing exception. However, Alaska statutes and the Commission's regulations do not allow filing a reconsideration request on June 1, if it acts with finality on March 28 (AS 31.05.080 provides for filing a request for rehearing only within 20 days of a Commission order). - Page 1 of2 - e e Therefore, if the DO&G has concerns with Forest's application for a well spacing and drilling unit exception per 20 AAC 25.055, or with the non-objection previously issued by the DO&G on this matter, and the DO&G wishes to have its concerns considered by the Commission, the DO&G must comment to the Commission on the matter by the close of the hearing on this matter, March 28, 2006. Based on previous discussions with the DO&G, I assume the DO&G does not have any such concerns, but I want to make sure you were advised of the matter, and that if the DO&G does wish to make comments, the DO&G's concerns will be considered. Please contact me with any questions or comments you might have on the foregoing. Sincerely yours, FOREST OIL CORPORATION ÇJ~/1/~ a Arlingt~7 Enclosure: AOGCC Conservation Order No. 566 - Page 2 of 2 - e e 8 FOREST OIL CORPORATION .J If/ Dl('rY'¡J'{y,¡ . ,':/,,,1,, 7(;(/ r(~I("¡;"n~,/,', DCf!,.,;/-" JJ!J.jfl I (')(7) :,.;,I-,I'(jN . ((If'7) /.¡S-.\'(/C/ (r'¡;;',j (Sent via certified mail & emai/ toVIO@hbplaw.net) March 17, 2006 Mr. Jim Gorski, Esquire Hughes Bauman et al. 3900 C Street #1001 Anchorage, AK 99503 RE: Forest Oil Corporation well spacing and drilling unit exception application Kustatan Field #1 ("KF #1") Well; State of Alaska Lease (ADL-390368) Dear Mr. Gorski: Forest Oil Corporation ("Forest") and I thank your law firm, representing the Diocese of Sitka and Alaska, Orthodox Church in America, Inc. ("The Russian Orthodox Church") for the support it has shown for Forest's application to the Alaska Oil and Gas Conservation Commission ("Commission") requesting an exception to the drilling units and spacing requirements of 20 MC 25.055 for the KF #1 well. We also thank Vicki O'Brien from your office for meeting with Forest staff on short notice on February 28th to review the data supporting our application; we truly appreciate the spirit of cooperation you have exhibited. I am pleased to enclose for your review Conservation Order No. 566, issued today by the Commission in this matter. Conservation Order No. 566 temporarily allows production to resume from the Kustatan Field #1 well, effective immediately. The Commission will still hold a hearing on March 28, 2006 on the matter, and the Commission will be accepting comments until that time, and then the Commission will make a final disposition of the matter. We were informed unofficially today that the Commission may also recess the hearing to a later time after March 28, and continue to accept comments until that later time; but Conservation Order No. 566 does not say that. Therefore, we cannot be certain that will happen and we should thus assume the matter will close for comment and be finally resolved on March 28, 2006. This is important because in my letter to you dated February 28, 2006 requesting your support and non-objection on the above-referenced subject, Forest offered to support The Russian Orthodox Church before the Commission if The Russian Orthodox Church wished to file a request for reconsideration by June 1, 2006 of the Commission's approval of Forest's application for a spacing exception. However, Alaska statutes and the Commission's regulations do not allow filing a reconsideration request on June 1, if it acts with finality on March 28 (AS 31.05.080 provides for filing a request for rehearing only within 20 days of a Commission order). -Page lof2- e e Therefore, if The Russian Orthodox Church has concerns with Forest's application for a well spacing and drilling unit exception per 20 AAC 25.055, or with the non-objection previously issued by The Russian Orthodox Church on this matter, and The Russian Orthodox Church wishes to have its concerns considered by the Commission, The Russian Orthodox Church must comment to the Commission on the matter by the close of the hearing on this matter, March 28, 2006. Based on previous discussions with Vicki O'Brien, I assume The Russian Orthodox Church does not have any such concerns, but I want to make sure you were advised of the matter, and that if The Russian Orthodox Church does wish to make comments, The Russian Orthodox Church's concerns will be considered. Please contact me with any questions or comments you might have on the foregoing. Enclosure: AOGCC Conservation Order No. 566 - Page 2 of 2 - e e STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICA nON OF Forest Oil Corporation) for an order granting an exception to the ) Conservation Order No. 566 spacing requirements of20 AAC 25.055(a) ) (2) and 25.055(b) for Kustatan ) Kustatan Field No.1 Field No.1 Well ) Gas Well ) ) March 17,2006 INTERIM ORDER A hearing, scheduled for March 28,2006, is pending in this matter. However, the appli- cant, Forest Oil Corporation, has stated that the gas pool penetrated by the Kustatan Field No.1 well may suffer a permanent loss of reserves if the well is kept in a shut-in condi- tion. In light of that and because all affected property owners have expressed in writing their non-objection to the requested spacing exception and the Commission has received no objections to the application, the Commission has determined that a temporary spac- ing exception should be granted to allow the well to resume production. NOW, THEREFORE, IT IS ORDERED: Pending further action by the Commission after hearing, Forest Oil Corporation's appli- cation for a spacing exception is temporarily granted and Forest Oil Corporation may re- sume gas production from the Kustatan Field No. 1 well. DONE at Anchorage, Alaska and date Daniel T. SearnomÍt, Jr., Commissioner ~~~ner . . Conservation Order 565 March I, 2006 Page 2 of2 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 23"' 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 fi'om 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 Coun. Where a request for rehearing is denied by nonachon of the Commission, the JO-day period for appeal to Superior Coun runs from the date on which the request is deemed denied (i.e., 10'" day after the application for rehearing was filed). I HEREBY CERTIFY THAT A TRUE AND CORRECT COpy OF THIS ORDER HAS BEEN MAILED TO THE FOLLOWING: DNR, Division of Oil & Gas Attn: Brian Havelock 550 West tn, Ste. 800 Anchorage, AK 99501-3560 U.S. DOl, BLM Attn: Greg Noble 6881 Abbott Loop Rd. Anchorage, AK 99507-2591 Cook Inlet Region, Inc. Attn: Keith Sanders 2525 C Street. Ste. 500 Anchorage, AK 99509 First National Bank of Alaska Attn: Bernard Jackson 1821 Gambell Street Anchorage, AK 9950 I Diocese of Sitka and Alaska Orthodox Church of America, Inc. Aka The Russian Orthodox Church Attn; Jim Gorski C/o Hughes, Bauman, et al 3900 C Street, Ste. 100 I Anchorage, AK 99503 *~ e e STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue, Suite 100 Anchorage Alaska 99501 Re: THE APPLICATION OF Forest Oil Corporation) for an order granting an exception to the ) Conservation Order No. 566 spacing requirements of20 AAC 25.055(a) ) (2) and 25.055(b) for Kustatan ) Kustatan Field No.1 Field No.1 Well ) Gas Well ) ) March 17, 2006 INTERIM ORDER A hearing, scheduled for March 28, 2006, is pending in this matter. However, the appli- cant, Forest Oil Corporation, has stated that the gas pool penetrated by the Kustatan Field NO.1 well may suffer a permanent loss of reserves if the well is kept in a shut-in condi- tion. In light of that and because all affected property owners have expressed in writing their non-objection to the requested spacing exception and the Commission has received no objections to the application, the Commission has determined that a temporary spac- ing exception should be granted to allow the well to resume production. NOW, THEREFORE, IT IS ORDERED: Pending further action by the Commission after hearing, Forest Oil Corporation's appli- cation for a spacing exception is temporarily granted and Forest Oil Corporation may re- sume gas production from the Kustatan Field No. 1 well. DONE at Anchorage, Alaska and date Daniel T. Seamount, Jr., Commissioner ~~~7sincr Conservation Order 565 March I, 2006 Page 2 of2 e e 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., lOth day after the application for rehearing was filed). I HEREBY CERTIFY THAT A TRUE AND CORRECT COpy OF THIS ORDER HAS BEEN MAILED TO THE FOLLOWING: DNR, Division of Oil & Gas Attn: Brian Havelock 550 West 7'\ Ste. 800 Anchorage, AK 99501-3560 U.S. DOl, BLM Attn: Greg Noble 6881 Abbott Loop Rd. Anchorage, AK 99507-2591 Cook Inlet Region, Inc. Attn: Keith Sanders 2525 C Street, Ste. 500 Anchorage, AK 99509 First National Bank of Alaska Attn: Bernard Jackson 1821 Gambell Street Anchorage, AK 99501 Diocese of Sitka and Alaska Orthodox Church of America, Inc. Aka The Russian Orthodox Church Attn: Jim Gorski C/o Hughes, Bauman, et at 3900 C Street, Ste. 100 I Anchorage, AK 99503 e e A.1a5ka Oil and Gas Conservation Commission 333 \Vest 7th Avenue, Suite 100 Anchorage, AK 99501*3539 Phone: (907) 279-1433 Fax: (907) 276-7542 Fax Transmission The information contained in this fax is confidential andlor privileged. This fax is intended to be reviewed initially by only the individual named below. If the reader of this transmittal page is not the intended recipient or a representative of the intended recipient, you are hereby notified that any review, dissemination or copying of this f<lx or the information contained herein is prohibited. If you have received this fax in eaor, please immediately notify the sender by telephone and return this fax to the sender at the above addr~ss. Thank you. T:J ,-J 11---1 J\ièLl NC1TDN 'Fax #: f 4 3 - d~1 ;;L From: Y-ðlèt=-ST OIL JjVlN SEA-IJC()tll 793- /,9.,:{2·7 11 ¡J Pi .1l.. Pages (including l OI'fS£l2.LJA77D c..)e/jE~ ;:p.,J50:~ cOlier sheet): Date: 8/1'Î/Dlð Phone #: Subject: ,5 Message: If you do not receive all the pages or have any problems with this fax. please call for assistance at (907) 793-1223. Various Orders and Notices e e Subject: Various Orders and Notices From: Jody Colombie <jody_colombie@admin.state.akus> Date: Fri, 31 Mar 2006 14:58:39 -0900 To: undisclosed-recipients:; BCC: Robert E Mintz <robert_mintz@law.state.ak.us>, Christine Hansen <c.hansen@iogcc.state.ok.us>, Terrie Hubble <hubbletl@bp.com>, Sondra Stewman <StewmaSD@BP.com>, stanekj <stanekj@unoca1.com>, ecolaw <ecolaw@trustees.org>, trmjrl <trmjr l@ao1.com>, shaneg <shaneg@evergreengas.com>, jdarlington <jdarlington@forestoi1.com>, nelson <knelson@petroleumnews.com>, cboddy <cboddy@usibelli.com>, Mark Dalton <markdalton@hdrinc.com>, Shannon Donnelly <shannon.donnelly@conocophillips.com>, "Mark P. Worcester" <markp.worcester@conocophillips.com>, Bob <bob@inletkeeper.org>, wdv <wdv@dnr.state.ak.us>, tjr <tjr@dnr.state.ak.us>, bbritch <bbritch@alaska.net>, mjnelson <mjnelson@purvingertz.com>, Charles O'Donnell <charles.o'donnell@veco.com>, "Randy L. Skillern" <SkilleRL@BP.com>, "Deborah J. Jones" <JonesD6@BP.com>, "Steven R. Rossberg" <RossbeRS@BP.com>, Lois <lois@inletkeeper.org>, Dan Bross <kuacnews@kuac.org>, Gordon Pospisil <PospisG@BP.com>, "Francis S. Sommer" <SommerFS@BP.com>, Mikel Schultz <Mike1.Schultz@BP.com>, "Nick W. Glover" <GloverNW@BP.com>, "Daryl J. Kleppin" <KleppiDE@BP.com>, "Janet D. Platt" <PlattJD@BP.com>, "Rosanne M. Jacobsen" <JacobsRM@BP.com>, ddonkel <ddonkel@cfl.rr.com>, mckay <mckay@gci.net>, Barbara F Fullmer <barbara.f.fullmer@conocophillips.com>, bocastwf <bocastwf@bp.com.>, Charles Barker <barker@usgs.gov>, doug_schultze <doug_schultze@xtoenergy.com>, Hank Alford <hank.alfòrd@exxonmobil.com>, Mark Kovac <yesno 1 @gci.net>, gspfoff <gspfoff@aurorapower.com>, Gregg Nady <gregg.nady@shel1.com>, Fred Steece <fred.steece@state.sd.us>, rcrotty <rcrotty@ch2m.com>, jejones <jejones@aurorapower.com>, dapa <dapa@alaska.net>,jroderick <jroderick@gci.net>, eyancy <eyancy@seal-tite.net>, "James M. Ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>,jah <jah@dnr.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hanley <mark_hanley@anadarko.com>, loren_leman <loren_leman@gov.state.akus>, Julie Houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, Suzan J Hill <suzan_hill@dec.state.ak.us>, tablerk <tablerk@unocal.com>, Brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonmobi1.com>, marty <marty@rkindustrial.com>, ghammons <ghammons@ao1.com>, rmclean <rmc1ean@pobox.alaska.net>, mkm7200 <mkm7200@ao1.com>, Brian Gillespie <itbmg@uaa.alaska.edu>, David L Boelens <dboelens@aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Schultz <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoi1.com>, Sharmaine Copeland <copelasv@bp.com>, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoi1.com>, John Tower <John.Tower@eia.doe.gov>, Bill Fowler <BilLFowler@anadarko.COM>, Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe <lambes@unocal.com>,jack newell <jack.newell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, nI617@conocophillips.com, Tim Lawlor <Tim_Lawlor@ak.blm.gov>, Lynnda Kahn <Lynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry.C.Dethlefs@conocophillips.com>, crockett@aoga.org, Tamera Sheffield <sheffield@aoga.org>, Jon Goltz.<Jon.Goltz@conocophillips.com>, Roger Belman <roger.belman@conocophillips.com>, Mindy Lewis <mlewis@brenalaw.com>, Kari Moriarty <moriarty@aoga.org>, Patty Alfaro <palfaro@yahoo.com>, Jeff <smetankaj@unoca1.com>, Todd Kratz <ToddKratz@chevron.com>, Gary Rogers <garyJogers@revenue.state.ak.us>, Arthur Copoulos <Arthur_Copoulos@dnr.state.ak.us>, Ken <ken@secorp-inc.com>, Steve Lambert <salambert@unocal.com>, Joe Nicks <news@radiokenai.com>, lof2 3/31/2006 2:59 PM Various Orders and Notices e e Jerry McCutcheon <susitnahydronow@yahoo.com>, Paul Todd <paulto@acsalaska.net>, Bill Walker <bill-wwa@ak.net>, Iris Matthews <lris_Matthews@legis.state.ak.us>, Paul Decker <paul_decker@dnr.state.ak.us>, Rob Dragnich <rob.g.dragnich@exxonmobi1.com>, Aleutians East Borough <admin@aleutianseast.org>, Marquerite kremer <marguerite_kremer@dnr.state.ak.us>, Robert Brelsford <Robert.Brelsford@argusmediagroup.com>, Alicia Konsor <alicia _ konsor@dnr.state.ak.us>, Mike Mason <mike@kbbi.org>, Garland Robinson <gbrobinson@marathonoi1.com>, Cammy Taylor <Camille _ Taylor@law.state.ak.us> Content-Type: applicationlpdf C0566. pdf Content-Encoding: base64 Content-Type: applicationlpdf aio4C-15.pdf Content-Encoding: base64 Content- Type: applicationlpdf aio3-7.pdf Content-Encoding: base64 Content-Type: applicationlpdf Public Meetings May June July August 2006.pdf C E d· b 64 - - - - ontent- nco mg: ase Content-Type: applicationlpdf Continuation Kustatan Content-Encoding: base64 20f2 3/31/2006 2:59 PM Mary Jones XTO Energy, Inc. Cartography 810 Houston Street, Ste 2000 Ft. Worth, TX 76102-6298 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street. #1202 Boise, 10 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, W A 98119-3960 Ciri Land Department PO Box 93330 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 DalWin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 e David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Kay Munger Munger Oil Information Service, Inc PO Box 45738 Los Angeles, CA 90045-0738 Mark Wedman Halliburton 6900 Arctic Blvd, Anchorage, AK 99502 Baker Oil Tools 4730 Business Park Blvd., #44 Anchorage. AK 99503 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 James Gibbs PO Box 1597 SOldotna, AK 99669 Richard Wagner PO Box 60868 Fairbanks, AK 99706 North Slope Borough PO Box 69 Barrow, AK 99723 . Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio, TX 78216 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Samuel Van Vactor Economic Insight Inc. 3004 SW First Ave. Portland, OR 97201 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Jack Hakkila PO Box 190083 Anchorage, AK 99519 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 ~~î e e FRANK H. MURKOWSK1, GOVERNOR A 1,i\.filiA. OIL AlWD GAS CONSERVATION COltDllSSION March 17,2006 333 W. 7'" AVENUE. SUITE 100 ANCHORAGE. ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 James D. Linxwiler, Esq. Guess & Rudd P.C. 510 L. Street, Suite 700 Anchorage, AK 99501-1965 Re: Notice of Violation of Well Spacing and Pooling Requirements dated February 23, 2006 Kustatan Field # 1 Well Your File No. 5672.18 Dear Mr. Línxwiler, The extension requested by your letter of March 13,2006 is hereby GRANTED. The Spacing Exception hearing currently set for 1:30 pm on March 28, 2006 will proceed as scheduled. The matter of the violations of well spacing and pooling requirements, for which the Commission reserves the right to access a penalty, will be considered by the Commission after the March 28, 2006 hearing. After the March 28, 2006 hearing has been concluded, a supplemental notice will be sent to Forest Oil Corporation, with a copy to you, setting forth the Commission's proposed action concerning the regulatory violations. Upon receipt of that notification, Forest will have the time provided by regulation in which to request informal review or a hearing with respect to the Commission's proposed actio . cc: Alan J. Birnbaum, Department of Law e e Alaska Oil and Gas ConsenlatÍon Commission 333 \-Ve5t 7th Avenue, Suite 100 Anchorage, AK 99501-3539 Phone: (907) 279-1433 Fax: (907) 276-7542 Fax Transmission The information contained in this fax is confidential and/or privileged. This fax is intended to be reviewed initially by only the individual named below, If the reader of this transmittal page is not the intended recipient or a representative of the intended recipient, you are hereby notified that any review, dissemination or copying of this fax or the information contained herein is prohibited. If you have received this fax in error, please immediately notify the sender by telephone and return this 'ax to the sender at the above address. Thank you. To ~ÅME.~ LII\JX'NILE~. E<~ LiJL0 ()PAŒ/::'S Of: CrOE5S c/ KLlbD Fax #: 7qÔ-~j)~9q From: JÒ4/N K. !JOJ2J.-/fJN r-¡ q 3- /2.31- YDLIR. J-¡ LE No. !Jlt 7.1 I 18 Date: 8/17 /ei~ q :57 (UY/ Phone #: Subject: Pages (including cover sheet): ;L Message: If you do not receive all the pages or have any problems with this fax:, please call for assistance at (907) 793~1223. 1f~O Good comments Rob . We will c!ider these are we continue to work on Ir planned statutory and regulatory amendments. Rob Mintz wrote: This is to follow up my phone discussions with John and Dan yesterday and Cathy this morning. I just want to summarize my thoughts on the correct way to deal with drilling unit problems and how the spacing regulations, 20 AAC 25.055, might be improved by future revision. As I mentioned yesterday, it appears from my reading of AS 31.05.100 that the concept of an "exception" to a spacing rule is not intended to apply to drilling units. Rather, site-specific issues that bear on drilling units are intended to be addressed in either or both of two ways. First, appropriately sized drilling units would be established on a pool-specific basis for a particular pool. Second, if two or more separate tracts of property are found within a drilling unit, the tracts must be pooled voluntarily or involuntarily. Under the regulations, statewide "default" drilling units are created that coincide with governmental sections (for gas) or quarter sections (for oil), but the regulations contemplate that pool-specific drilling units may be established in pool rules. (20 AAC 25.055(a).) Even though 20 AAC 25.055(d) refers to "an exception to the provisions of this section," and "this section" includes default statewide drilling units, I don't think the statute really contemplates "exceptions" being granted to drillilng unit requirements. "Exceptions" are meant to be granted to setback and inter-well distance rules. I~,~~~EP,rgst..;<1i..I..,.si:t!lastIø.IiL,mø,re . t'na;n:Qnesel1?~raÌiecl¥ owned tract of prope'rty exists w±thinthe default statewide drilling unit . However, I just learned from talking with Cathy that in fact, the gas pool in question does not extend beyond the single lease owned by Forest. So the appropriate action here is simply to establish a pool-specific drilling unit, under 20 AAC 25.005(a), that conforms to the size of the pool and - as it happens - does not extend beyond the Forest lease. Then there is no need for pooling of tracts, since there is only one tract in the drilling unit. Now there is a little bit of a procedural complication, in that 20 AAC 25.005(a) refers to pool rules adopted under 20 AAC 25.520, and the public notice in this case just refers to an application for a spacing exception. However, even though the terminology is not quite on point, in substance I think the notice is adequate to support the commission's establishing a pool-specific drilling unit as an outcome of the current proceeding. (I assume a second outcome would be to grant an exception to the property line setback rule.) Also it seems to me that 20 AAC 25.055 should be amended. It assumes that a drilling unit will always be a governmental section or quarter section, but that's not true. Instead of requiring pooling when a property is smaller than "the governmental quarter section," in the case of oil, or smaller than "the governmental section," in the case of gas, the regulation should require poolilng when the property is smaller than "the drilling unit" in which the well is located. of! 3/17/200612:33 PM 1t=19 Subject: [Fwd: KF #1 WaterL!l] e From: Dan Seamount <dan _ seamount@admin.state.ak.us> Date: Fri, 17 Mar 200608:46:54 -0900 To: Cathy <cathy_foerster@admin.state.ak.us>, John K Norman <john_norman@admin.state.ak.us>, Rob Mintz <robert_ mintz@law.state.ak.us> -------- Original Message -------- Subject:KF #1 Water Level Date:Fri, 17 Mar 2006 10: 18:20 -0700 From:Paul Winslow <PMWinslow~forestoil.com> To:' dan seamount(á}admin. state. ak. us' <dan seamount@admin.state. ak. us> CC:Jim Arlington <JDArlington@forestoil.com>, Ted Kramer <TEKramer@forestoil.com>, Larry Casarta <LJCasarta@forestoi1.com> Dan, We ran a pressure gauge into KF #1 on 3/3/06 to measure the water level and the static reservoir pressure. The gauge run showed the water level to be at 4,910' MD, and measured a reservoir pressure of 1,762 psia at 5,338.9' (could not RIH any further). Using the liquid gradient of 0.426 psi/ft (taken from the gradient survey), the extrapolated reservoir pressure at 5,353' (top perf) would be 1,768 psia. The water level has only been measured this one time, so I don't know if it is rising or not. Paul Paul Winslow Reservoir Engineer Forest Oil Corporation 310 K Street, Suite 700 Anchorage, AK 99501 Work: (907) 868-2131 Cell: (907) 317-8193 Fax: (907) 743-2231 pmwinslow@forestoil.com of! 3/17/200612:21 PM *1~ LFwd: Kustatan .FIeld # 1 well ApplIcatIon tor Spacmg ExceptIOnj e e Subject: [Fwd: Kustatan Field #1 well Application for Spacing Exception] From: Stephen Davies <steve _ davies@admin.state.ak.us> Date: Thu, 16 Mar 2006 16:42:29 -0900 To: Daniel Seamount <dan_seamount@admin.state.ak.us>, Cathy P Foerster <cathy _ foerster@admin.state.ak.us> -------- Original Message -------- Subject:Kustatan Field #1 well Application for Spacing Exception Date:Thu, 16 Mar 2006 17:20:33 -0700 From:Jim Arlington <JDArlington(a?forestoil.com> To:John Norman <john norman(a?admin.state.ak.us> CC:'Kim Cunningham' <KCunningham(a?ciri.com>, 'Brian Havelock' <brian havelock(a?dm.state.ak.us>, "'Vicki I. O'Brien'" <VIO@hbplaw.net>, 'Stephen Davies' <steve davies(a?admin.state.ak.us>, Leonard Gurule <LCGurule(a?forestoil.com>, '''James D. Linxwiler'" <i linxwiler(a?guessrudd.com>, Rick Schelin <R WSchelin(a?forestoi1.com> Chairman Norman, The purpose of this email is to request an immediate informal conference with the Commission. The purpose of this informal conference is to evaluate Forest's proposal, as follows: (1) that the Commission not hold a hearing on March 28, 2006; and (2) instead make a decision to resume gas production from the Kustatan Field #1 well now. This decision would be made on the basis of the full written record in this proceeding, including the non-objections received from adjacent landowners, the additional confidential information Forest has already submitted to the Commission in its informal meetings on February 24 and March 3, and the lack of any other public comment. This request is consistent with the procedures spelled out in the Commission's Notice of Hearing dated 2/25/06 and 20 MC 25.540 (a) ("... If a request for hearing is not timely filed, the Commission will, in its discretion, issue an order without a hearing"). The basis for this request is that the Commission has received no request for a hearing, and it has received no public comment on this matter. In addition, as Forest has discussed with the Commission, Forest is concerned that this may be a water drive structure which may encounter difficulty in resuming production. Thus'B-ndl,.leclelay, for the sole purpose of holding a hearing on an uncontested matter, should be avøIded in the Interest of conservation, and of avoiding potential waste. Since I do not have the email addresses for the other Commissioners, I respectfully request that you circulate this email to them as well. As you can see, I have also copied the other landowners within Section 4 with this email who have previously been provided copies of the AOGCC Notice of Public Hearing and with whom we have met and provided the same confidential information provided to the Commission. Respectfully Submitted, Jim Arlington 1 of! 3/16/20064:49 Pl\ */'7 e e GARY A. ZIPKIN LOUIS R. VEERMAN JAMES D, LINXWILER JAMES D. DEWITT JOSEPH J. PERKINS, JR. GEORGE R. LYLE MICHAEL S. MCLAUGHLIN SUSAN M. WEST JOAN E. ROHLF MICHAEL K. NAVE JONATHAN A. WOODMAN AISHA TINKER BRAY NELLEENE A. BOOTHBY MATTHEW COOPER CHRISTINA RANKIN PAMELA D, WEISS JOSEPH BRIAN GROSS MOLLY C. BROWN Gûësš&Rudd P.C. W. EUGENE GUESS 1932-1975 JOSEPH RUDD 1933-1978 FRANCIS E. SMITH. JR. 1941-1991 510 L STREET. SUITE 700 ANCHORAGE. ALASKA 99501-1964 TELEPHONE (907) 793-2200 FACSIMILE (907) 793-2299 OFFICES IN ANCHORAGE & FAIRBANKS OF COUNSEL MARGARET S. JONES GREGORY G, SILVEY March 13, 2006 John K. Norman, Chairman Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue, Suite 100 Anchorage, Alaska 99501-3539 Re: Requests for Extension of Time and Informal Review Notice of Violation of Well Spacing and Pooling Requirements dated February 23,2006 Kustatan Field #1 Well Our File No. 5672.18 Dear Chairman Norman: As a result of the Alaska Oil and Gas Conservation Commission's ("Commission's") Notice of Violation ("NO V") dated February 23, 2006, Forest Oil Corporation ("Forest") has requested a Spacing Exception for the affected well, the Kustatan Field # 1. The Commission has set the matter of the Spacing Exception for hearing on March 28,2006. However, Forest also wishes to respond, separately from that hearing, to the Commission's NOV, to the question of and any penalty to be imposed thereunder. 20 AAC 25.535(c) gives the Commission discretion to grant extensions of time for good cause. The undersigned was retained on Friday afternoon, March 10, 2006 to represent Forest in the matter of the NOV, and requires time to familiarize himself with the issues of this case. In addition, the matters involved in the NOV will be affected (and perhaps in whole or in part resolved) by the Commission's March 28, 2006 hearing on Forest's Spacing Exceptions. Therefore, response to the NOV will be premature until the results of that hearing are known. Forest therefore requests that its time of response to the NOV be extended to a time after the March 28 hearing when the result of that hearing is known, at a time no earlier than March 31, 2006. Forest also wishes to request an informal review of the NOV pursuant to 20 AAC 25.535(c). For the same reasons stated above, Forest requests that the informal review be held at a time after the March 28 hearing when the result of that hearing is known, at a time no earlier than March 31, 2006, wherein Forest will provide additional documentary material and make a written or oral statement pursuant to 20 AAC 25.535(d). e John K. Norman, Chairman Alaska Oil and Gas Conservation Commission March 13,2006 Page 2 e If the Commission is not inclined to grant the extension requested herein, Forest alternatively requests a hearing pursuant to 20 AAC 25.540. JDL:kjm cc: Leonard Gurule Rich Schelin James Arlington F\DATA \56 ì2\18\Corresp\extensíon of time (3-13-06) 2.doc Respectfully submitted, ~ James D. Linxwiler #110 Ke: l<.ustatan ffl e e Subject: Re: Kustatan #1 From: Cathy Foerster <cathy _ foerster@admin.state.ak.us> Date: Fri, 10 Mar 2006 11 :26:48 -0900 To: Jody Colombie <jody _ colombie@adrnin.state.ak.us> yes Jody Colombie wrote: Jim Arlington call me and asked for me to confirm the day that Forest Oil's response is due for the Kustatan #1 Enforcement Action letter. I have counted the days and the 15th day is tomorrow. It is in my opinion that they have until Monday to file their response. They received the notice on 2/24/06, counting 15 days from 2/25 is tomorrow (which is a weekend). Are you in agreement? Jody Cathy Foerster Commissioner Alaska Oil and Gas Conservation Commission 1 of 1 3/10/200612:19 PM */'5 e e STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Kustatan Field #1 Well- Second Informal Review March 3, 2006 at 2:00 pm NAME - AFFILIATION (PLEASE PRINT) o It VE: RoØr -/k(;cc /J-l;i..?¡-( .j'f¡.., I1vh1/~'·· h;ya/ ð./ ~f- fr,pd- I r (r 6:v01 0./\51~ 'I J.etJ;t/al'd 0vtjl1t1J~ Ii O~/J .);eJMt1 vI"\. r ~1£.7W A I ti' >1 ß; rl1 ~0vtAfV¡ ß\( \ o...V'\ ~,¡ e.. \ a c~L- .:iI-e-v··o{ _ ~a v i¿& ADDRESSIPHONE NUMBER 793-1232.. ~ f?-¿>//7 eb'R..2-llf6 Ycf--2 '> I ys¿'~-:< IS-O 7 't'J -/22-1 74f,-/u- ) l6í -5 Zb3 '26'1- ?~ 1 Iq3-/Z2~ TESTIFY (Yes or No) YB./ YCS" Ye-.s v Ie..-S II NO trô t(jè> I'F c I\-'t ~I) úP ð'Ñ dò *14 ~CIRI e e March 3, 2006 VIA: E-mail & Hard Copy Commissioner John K. Norman Alaska Oil and Gas Conservation Commission 333 West ih Avenue, Suite 100 Anchorage, AK 99501 Jim Arlington Forest Oil Corporation 310 K Street, Suite 700 Anchorage, AK 99504 RE: Letter of Non-Objection for Kustatan Field NO.1 Well Dear Sirs: On February 28,2006, Cook Inlet Region, Inc. (ClRI) attended a meeting at the request of Forest Oil Corporation ("Forest") along with representatives from the Division of Oil and Gas, Department of Natural Resources and the Russian Orthodox Church. Forest presented well results and geologic information describing the estimated drainage area of the above-mentioned well and structure information. CIRl received a copy of Forest's letter of application to the Alaska Oil and Gas Conservation Commission dated February 27, 2006 prior to the meeting which requests that certain requirements of 20 AAC 25.055 be waived for the Kustatan Field No.1 Well. CIRl agrees to support the application of Forest Oil Corporation to the AOGCC for an exception to the well spacing and pooling requirements for the above referenced well and agrees that the AOGCC may issue an order without a hearing in exchange for the condition agreed to by Forest during our meeting on February 28th. During that meeting Forest agreed to support the request of CIRl (or other parties present at the meeting) for another informational meeting and/or request for reconsideration of the granting of the exemption(s) if such request is submitted to the AOGCC by June 1, 2006. Sincerely, COOK INLET REGION, INe. ~~ Kim Cunningham Land & Resources Manager cc: Vicki O'Brien, Hughes, Bauman et al. (Russian Orthodox Church) Bill Grether, PRA Geologist Brian Havelock, Alaska DNR, Division of Oil & Gas Greg Noble, US DOl, BLM Bernard Jackson, First National Bank of Alaska 2525 "C" STREET, SUITE 500 P.O. BOX 93330 ANCHORAGE, ALASKA 99509-3330 (907) 274-8638 FAX (907) 279-8836 Web Site: www.ciri.com ~\3 e e TO THE ALASKA OIL AND GAS CONSERV A nON COMMISSION Before the Alaska Oil and Gas Conservation Commission ) In the Matter of the Application of ) Forest Oil Corporation for a well spacing exemption ) And exception to the provisions pertaining to ) Drilling Units and Well Spacing pursuant to ) 20 AAC 25.055 pertaining to the Kustatan Field #1 well ) ) W~ROFHE~GNOTICE WAIVER ELECTION OmONS; EFFECfIVE IF RETURNED TO FOREST BY MARCH 3. %006 í 1:¥- The Russian Orthodox Church agrees to support the application of Forest Oil Corporation to the AOGCC for exemption fÌ"Om the provisions of20 MC 25.055 (a)(2) and 20 MC 25.055 (b) for the Kustatan Field #1 well and agrees to allow the AOGCC to issue an order without a hearing on the referenced matter in exchange for which F~("'ól '.:",..... _...,~bereby, as evidenced by its :~:;..~~i.~~u:i~~!t~~~~·~~~-~_~~~~t~:;~~fW: exemptiòn(s) by the AOGCC pursuant to this agreement for waiver of hearing. FOREST OIL CORPORATION ¥~~C~~ Date: February 28.2006 By: Leonard C. Gurule Title: Senior Vice President OR o The Russian Orthodox Church agrees to waive the 30 day notice requirement for a hearing on the referenced matter and allow the AOGCC to schedule a hearing anytime before March 28, 2006. Diocese ofSitka and Alaska, Orthodox Church in America. Inc. a.k.a. The Russian Orthodox Church ~! n/J . {/V. Jf/ () /~ , V, /~ /; (S¡g;1ature) By: JJ\MES (V\. &o~sÞt Title: ~ ~ Date: 3- - 'f..-o 6 ("" LI \l'VU. 1'\.L. L\;.;LL~J VI J1VJ1-VUJC\"UVU LV pJUUU"-LJVU·q l"\.Tttl W'VllJ e e Subject: [Fwd: RE: Letter of non-objection to production ofKF#l well] From: John Norman <john _ norman@admin.state.ak.us> Date: Fri, 03 Mar 2006 09:31: 13 -0900 To: Jody J Colombie <jody_colombie@admin.state.ak.us> Please print all for file. Grac ias, John -------- Original Message -------- Subject:RE: Letter of non-objection to production ofKF#l well Date:Thu, 02 Mar 200621 :51 :44 -0700 From:Jim Arlington <JDArlin~>1:on(a¿forestoil.com> To:'brian havelock(a¿dnr.state.ak.us' <brian havelock(a¿dnr.state.ak.us> CC:'Steve Davies' <steve davies(a¿admin.state.ak.us>, Jeff landry' <jeff landry(a¿law.state.ak.us>, matt rader(a¿dnr.state.ak.us, '''Pirtle (Pirtle)'" <pirtle bates(a¿dnr.state.ak.us>, bill van dyke(a¿dnr.state.ak.us, John Norman <john norman(a¿admin.state.ak.us>, 'Jody Colombie' <jody colombie(a¿admin.state.ak.us>, Leonard Gurule <LCGurule(a¿forestoil.com> Brian, Thank you for the letter. Forest appreciates the DNR's support in resuming and continuing the KF #1 well production test as soon as possible. As we discussed this afternoon, I am not sure that the AOGCC will view the "letter of non-objection to continued production of the KF#l well" you attached to your email below as either an indication of non-objection to Forest's application "requesting that certain requirements of20 AAC 25.055 be waived for the Kustatan Field No.1 Well" or as an indication of non-objection, if no requests for hearing are timely filed, for the Commission to "consider the issuance of an order without a hearing" as they provided for in their Notice of Public Hearing. Further, the DNR letter of non-objection seems to anticipate that a hearing will be held by indicating that its non-objection is "during the public process prescribed by regulation". I am pleased to hear that you will be at the informal meeting with the AOGCC Commissioners tomorrow at 2:00 to clarifY the DNR position. >From speaking with you today I understand that the DNR does not plan to request a hearing by the AOGCC on Forest's applications and that the DNR does support Forest's AOGCC application and has no objection to the exceptions/exemptions requested. I believe it would be helpful for the AOGCC to hear from the DNR that my understanding, as underlined is correct. While Forest has no objection to providing the DNR with the data that it requested in its separate letter dated today ("RE ADL 390368 Data and Information Request") by April 3, 2006, Forest does not agree to condition the submittal of said information to the DNR's issuance of the "Letter of Non-Objection" attached in your email below. As we discussed, the attached "Letter of Non-Objection" does not provide Forest with a "quid pro quo" as the AOGCC has told Forest that they can not authorize production from the KF #1 well without an order approving the spacing and pooling exception applications. However, if the DNR provides the AOGCC with whatever waivers or non-objections the AOGCC needs from the DNR such that the KF #1 well can commence production without having to wait for the expiration of the waiting periods prescribed in the Notice of Public Hearing (AO# 02614028), then Forest does agree to lof3 3/3/2006 9:39 AM It.wa: Kt: Lener or non-ooJecnon (Q proaucnon Of 1<..1:<¡¡: I wellJ provide the DNR with the data! it requested in its separate letter datetday (!IRE ADL 390368 Data and Information Request") by April 3, 2006 as a condition to the DNR providing the AOGCC such waivers or non-objections. I have attached the scanned copy of the original Waiver of Hearing Notice signed by the outside counsel representing The Russian Orthodox Church (James M. Gorski of Hughes, Bauman, et al) indicating that The Russian Orthodox Church supports Forest's application for the exemptions and agrees to allow the AOGCC to issue an order without a hearing, conditioned on Forest's approval (evidenced by its signature) to support a request to reconsider the granting of the exemption(s) submitted by June 1,2006. I had been told by CIRI to expect their signed Waiver of Hearing Notice today as well, but have not received it as of yet. If you have any questions or concerns regarding this transmittal please call me as soon as possible after receipt. Forest is hopeful that with the DNR's clarification of its non-objection and with CIRI's Waiver of Hearing Notice, the AOGCC wìll see it way clear to immediately issue an order approving Forest's application regarding the KF #1 well. I look forward to seeing you tomOlTOW at 2:00 p.m.. Sincerely, Jim -----Original Message----- From: Brian Havelock [mailto:brian havelock@dnr.state.ak.us] Sent: Thursday, March 02, 2006 12:46 PM To: 'Jim Arlington'; John Norman Cc: 'Steve Davies'; 'jeff landry'; kcunninqham@ciri.com; matt rader@dnr.state.ak.us; VIO@HBPLaw.net; Greq Noble@ak.blm.gov; 'Pirtle (Pirtle)'; bill van dyke@dnr.state.ak.us Subject: Letter of non-objection to production of KF#l well See attached letter of non-objection to continued production of the KF#l well. A certified hard-copy will be sent out in today's mail. The data referenced will be requested in a separate letter to Forest Oil. Call if you have any questions or need additional clarification ofDNR's position on this issue. Brian 269-8807 Brian Havelock Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 99501 http://www.dog.dnr.state.ak.us John K. Norman <John Norman(a¿admin.state.us> Chairman Alaska Oil & Gas Conservation Commission Waiver of Hearing Notice_Russian Orthodox Church.pdf Content-Type: app I ication/ octet-stream ~ on 3/3/2006 9:39 AM 4f/:l [Fwd: Letter of non-objection to production of KF# I well] e e Subject: [Fwd: Letter of non-objection to production ofKF#1 well] From: John Norman <john_norman@admin.state.ak.us> Date: Thu, 02 Mar 200613:13:53 -0900 To: Stephen F Davies <steve_davies@admin.state.ak.us> CC: Cathy P Foerster <cathy_foerster@admin.state.ak.us>, Dan T Seamount <dan_seamount@admin.state.ak.us>, Jody J Colombie <jody_colombie@admin.state.ak.us> Steve, please acknowledge receipt of Brian's letter and let him know whether any clarification is needed. I have reviewed it and tithe letter appears sufficient to me to allow us to lift our Order requiring Forest to shut in the well, following tomorrow's informal review meeting, provided they produce similar letters from the other affected landowners. The hearing on the spacing exception application will need to proceed as scheduled unless they convince the Commissioners otherwise at tomorrow's meeting. John __n____ Original Message -------- Subject:Letter of non-objection to production ofKF#l well Date:Thu, 02 Mar 2006 12:46:25 -0900 From:Brian Havelock <brian havelock(c~dnr.state.ak.us> Reply-To: brian havelockca?dnr.state.ak.us To:'Jim Arlington' <JDArlingtonca?forestoi1.com>, John Norman <john normanca?admin.state.ak. us> CC:'Steve Davies' <steve daviesca?admin.state.ak.us>, 'jefflandry' <ieff landry(ã}law.state.ak.us>, kcunninghamca?ciri.com, matt rader(ã}dnr. state.ak. us, VIO(ã}HBPLaw.net, Greg Noble@¿ak.blm.gov, "'Pirtle (Pirtle)'" <pirtle batesca?dnr.state.ak.us>, bill van dyke@¿dnr.state.ak.us See attached letter of non-objection to continued production of the KF#1 well. A certified hard-copy will be sent out in today's mail. The data referenced will be requested in a separate letter to Forest Oil. Call if you have any questions or need additional clarification ofDNR's position on this issue. Brian 269-8807 Brian Havelock Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 99501 http://www.dog.dnr.state.ak.us John K. Norman <John Norman(ã}admin.state.us> Chairman Alaska Oil & Gas Conservation Commission lof2 3/2/2006 I: 19 PM [Fwd: Letter at non-objection to production of KF#I well] e . KustatanADNR_nonobject_2Mar06.pdf Content-Type: application/pdf Content-Encoding: base64 ~ af2 3/2/2006 I: 19 PM e e FRANK H. MURKOWSKI GOVERNOR DEPARTMENT OF NATURAL RESOURCES DIVISION OF OIL AND GAS 550 WEST 7TH A VENUE, SUITE 800 ANCHORAGE, ALASKA 99501-3560 PHONE: (907) 269-8800 FAX: (907) 269-8938 CERTIFIED MAIL RETURN RECEIPT REQUESTED March 2, 2006 Commissioner John K. Norman Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite. 100 Anchorage, Alaska 99501 ·R, . ~·C· .. ~r\l~D j . '- .. "- ,YI 1....., IV!!'::; .i'.\ ') ')""11' f¡-\!\ V i) cUtJO Jim Arlington Forest Oil Corporation 310 K Street, Suite 700 Anchorage, Alaska 99504 & Gas Cons, RE: Letter of Non-Objection for Kustatan Field No.1 Well Dear Sirs, On February 27, 2006, the Division of Oil and Gas (the Division) received a copy of Forest Oil Corporation's (Forest) letter of application to the Alaska Oil and Gas Conservation Commission requesting that certain requirements of20 AAC 25.055 be waived for the Kustatan Field No.1 Well (KF#1 Well). The Division represents the State of Alaska, landowner ofthe mineral estate beneath the well leased under and oil and gas lease ADL 390368 and owner of acreage to the west of the well. On February 28, 2006, Forest met with Division staff and representatives of adjacent landowners, Cook Inlet Region, Inc. and Russian Orthodox Church, and presented well results and geologic information describing the estimated drainage area of the well. The Division has no objection to Forest continuing the production test of KF#1 Well during the public process prescribed by regulation if Forest agrees to provide certain confidential data and information to the Division on or before April 3, 2006. Sincerely, c:=:?~ ~ ~William Van Dyke - ~/) Acting Director "Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. " Commissioner John K. No.n and Jim Arlington Letter of Non-Objection for Kustatan Field No.1 Well March 2, 2006 Page 2 - cc: Jeff Landry, Alaska Department of Law Kim Cunningham, Cook Inlet Region, Inc. Vicki O'Brien, Hughes, Bauman et al. (Russian Orthodox Church) Greg Noble, USDOI, BLM Bernard Jackson, First National Bank of Alaska Matt Rader, Division of Oil & Gas ~¡ I Ke: Kr If I AppliCatIOn tram rarest Ull tor ~pacmg ðl. poolmg I:xce ptIons e . Subject: Re: KF #1 Application from Forest Oil for Spacing & Pooling Exce ptions From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Thu, 02 Mar 2006 11 :36:50 -0900 To: Jim Arlington <JDArlington@forestoil.com> Jim, Per the Commissioners, I have scheduled the informal review for tomorrow March 3, 2006 at 2:00 pm at the AOGCC offices. Jody Colombie Special Staff Assistant Jim Arlington wrote: Jody, Forest Oil Corporation ("Forest") hereby respectfully requests an informal review with the AOGCC Commissioners either today or tomorrow to discuss the referenced application and the actions the Commission may now take to authorize immediate production from the KF #1 well, since all the landowners within section 4 will have signed, or will sign today, either the Waiver of Hearing Notice that is attached to the letter forwarded to you in the email below or a similar letter of non-objection regarding the application (from DNR) . Further, the DNR, Division of Oil and Gas (the only landowner or property owner impacted by the 1,500' spacing exception) has indicated that they will be pleased to attend the informal review with the AOGCC Commissioners to support a decision that will enable the KF #1 well to begin production immediately. Sincerely yours, Jim Arlington -----Original Message----- From: Jim Arlington Sent: Tuesday, February 28, 2006 6:41 PM To: 'Jody Colombie' Cc: Kim Cunningham; Brian Havelock; Vicki I. O'Brien; Stephen Davies; Leonard Gurule Subject: KF #1 Application from Forest Oil for Spacing & Pooling Exceptions Jody, Please share the attached letters with the AOGCC Commissioners that were hand-delivered today to the three landowners within Section 4, Township 7 North, Range 14 West, Seward Meridian during a meeting held at the DNR offices to discuss the referenced application. I have also attached a sign-up sheet that indicates the persons who attended the meeting today, convened at Forest's request. Forest shared with all attendees at today's meeting the same information that was presented to the AOGCC Commissioners and staff last Friday, February 24, 2006. The information presented to the attendees is subject to confidentiality restrictions pursuant either to state law and regulations or confidentiality agreements between Forest and the landowner. As you will note on the Waiver of Hearing Notice that is attached to each letter, Forest has asked each landowner to reply to Forest by this Friday with their election regarding the Waiver of Hearing Notice. Please inform the Commissioners that Forest verbally agreed at the meeting with the landowners today that if they agreed to the first waiver option Forest would provide them with data and information to update what was presented to them today approximately two weeks before the end of the three month period within lof2 3/2/2006 11 :36 AM Re: Kt # I Application trom Forest 011 tor Spacmg & Poolmg Exce ptlOns which Forest agreed to s~ort any request to reconsider t~ granting of the exception(s) by the AOGCC. The initial feedback from the landowners seems to indicate support for Forest's application and support for Forest's Waiver of Hearing Notice. If Forest does receive an election of the Waiver of Hearing Notice from all three landowners within section 4, agreeing to allow the AOGCC to issue an order without a hearing, Forest is hopeful that the Commissioners can issue an order approving the spacing and pooling exception as soon as possible to allow the KF #1 well to begin production. If any of the AOGCC staff or Commissioners have any questions regarding this transmittal, I would appreciate receiving a call directly at 868-2112 as soon as possible. Thank you for your help in this matter. Sincerely, Jim Arlington ! of2 3/2/2006 11 :36 AM :tID . . CONFIDENTIAL PROPRIETARY E-MAIL #GJ @) e FOR EST OIL e COR PORATIOI'J j / ( ~.. ì,~ ~jíj'",,¡ . ,Jlrn/c, /( (I ,. r /';/,/(7 j'_ "/'-, ~(' flrl );('(1 rJ'},j () / ,))-,ÿ- ~(¡{,~(/ · (Jú'7) _,;))-(r-(~'I)()j / /~-;I) February 28, 2006 Mr. Keith Sanders Cook Inlet Region, Inc. 2525 C Street, Ste. 500 Anchorage, Alaska 99509 RE Forest Oil Corporation well SpaCiJlg and drillmg unit exception application per 20 AAC 25.055 Kustatan Field #1 Well; State of Alaska Lease (ADL-390368) U(.:<.u Mr. Sanders, As you know, Forest Oil Corporation (Forest") has subrrÜtted an appLication to the Alaska Od and Gas Conservation Commission ("i\OGCC") requesting an exception to the drillmg units and spacmg requirements of20 AAC 25.055 (a)(2) and 20 AAC 25,055 (b) for the Kustatan Field #1 ("KF # l") well. As either an owner, izwdowner or operator of a property withirl 3,000 feet of the KF # 1 well you were sent a letter, with enclosures, £Tom Forest infomling you of your oppoItunity to be heard by the AOGCC at a public hearing tentatively scheduled for i\farch 28,2006 at I :30 pm at the offices of the Alaska OIl and Gas Conservation Corrunission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501 Forest has also provided you with the same proprieta.ry geologic, geophysical and other well data that was presented by Forest to the AOGCC in an informal meeting regarding Forest's application. forest believes the data and information it has presented to you and the AOe}CC clearly supports the granting of the requested exceptions and believes that strict compliance with the hearing notice period will result in unnecessary delay of production from the KF # 1 well. Forest would llke to expedite the scheduling of the public hearing, and/or eliminate it aJtogether. Consequently, Forest respectfully requests, based on the information provided to you on the referenced matter, that you agree to support Forest's request to the AOGCC for exemption from the provisions of 20 AAC 25.055 (a)(2) and 20 MC 25.055 (b) for the Kustatan Field # I Well and agree to allow the AOGCC to issue an order without a hearing on the referenced matter or at the least agree to waive the 30 day notice requirement for a hearing and allow the AOGCC to schedule a heanng anytime before March 28,2006. If you agree to waive either of these requirements, please indicate the option you support by checking the aþplOpriate box and signing where indicated on the attached Waiver of Hearing Notice. If you elect an option, please be so kind as to fax me a signed copy of the Waiver of Hearing Notice and mail me the original. If you have any questions regarding Forest's well spacing and pooling exception application for the KJ" #1 well in accordance with 20 AAC 25.055, please feel free to calJ me at (907) 868-2112 or send me an email at i dar lington( ciJ, forest oÛ. com. Respectfully subrnitted, 2?t' ,..,. /? ~' '~- ' Jim Arlington - ¿-/ Land Manager Attachment: Waiver of Hearing Notice Page I of I e e TO TilE ALASKA OIL ,\.'D GAS CONSERV.\fJON COI\li\JISSIO.\' Defore the i\laska Oil and Gas Conservation Comrmssion ) In the Matlu of lilt: :\pplication of ) Forest OilC'of1Jon¡tion for a well spacing exemption ) And exception to the provIsions pertauling to ) DIiI!ing L,¡1its and Well Spacing pursuant to ) 20 ,-\J\C 25055 pertaining to the Kustatan Field c; 1 well ) ) \V.\IVER OF HEARING NOTICE ----.-- W,\JVEn ELECTION OPTIONS; EfFECTIVE IF RETURt'lED TO FOREST BY MARCH 3, 2006 I Cook Inlet Region Ine agrees to support the applicat;on of for::sl Oil CorporatIon to the AOGCC for LxcmptlOn from the provIsions of20 AAC 25.055 (a)(2) and 20 AAC 25055 (b) for L!-¡e Kustatan Fie]d #1 weil and agrees to allow the AOGCC to issue an order wlthout a hearing on the referenced matter tn exchange for which Forest Oil Corporation agrees hereby, as c'v1denced by Its sigrlature below, to support any request submitted to the AOGCC by June 1, 2006, from a party who reœived a certifieci letter trom Forest regarding this matter, to reconsider the granlL'lg of the exemptlon(s) by the AOGCC pursJant to this agreement for waiver of heanng FOREST OfL COI{POR;\TION Date: February 28. 2006 ì3y:. TitJe: Lconard C. Curule Sen.ior Vice P:esident -'---'-~. OR o Cook IrJet RegIOn Ine agrees to waive the 30 day notIce re(jUÍrement for a hearirlg on the referenced matter and allow the AOGCC to schedule a hearing anytime before March 28, 2006. COOK ISLET RJ<:CìON, INC. Date Hy_ -""'-"-"-~'-'- , -.-...----.--.------ Titl,; ~~-_._-,--,_.,--_.- . Page I of I e e @ FOREST OIL CORPORATION ,11 0 Q/{è:!if(?'ed . 09;':~'fI"e 700 aWnCkM¿¡.p, Qç://a;Þa .9.9.;0/ (907) 2.;8-8600 · (907) 1':;,1'-8601 (.¿y,;,,-) February 28,2006 Mr. Brian Havelock Alaska Department ofNatw"a1 Resources Division of Oil and Gas 3900C StreetC Street, Ste. 1001 Anchorage, Alaska 99503 RE: Forest Oil Corporation well spacing and drilling unit exception application per 20 AAC 25.055 Kustatan Field #1 Well; State of Alaska Lease (ADL-390368) Dear Mr. Havelock, As you know, Forest Oil Corporation ("Forest") has subrrútted an application to the Alaska Oil and Gas Conservation Commission ("AOGCC") requesting an exception to the drilling units and spacing requirements of20 AAC 25.055 (a)(2) and 20 AAC 25.055 (b) for the Kustatan Field #1 ("KF #1") well. As either an owner, landowner or operator ofa property within 3,000 feet of the KF #1 well you were sent a letter, with enclosures, ITom Forest infonning you of your opportunity to be heard by the AOGCC at a public hearing tentatively scheduled for March 28, 2006 at I :30 pm at the offices of the Alaska Oil and Gas Conservation COmIIÙssion at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Forest has also provided you with the same proprietary geologic, geophysical and other well data that was presented by Forest to the AOGCC in an infonnaI meeting regarding Forest's application and by this letter requests that the Alaska Department of Natural Resources, Division of Oil and Gas keep all infonnation provided to you in this matter confidential. Forest believes the data and infonnation it has presented to you and the AOGCC clearly supports the granting of the requested exceptions and believes that strict compliance with the hearing notice period will result in unnecessary delay of production from the KF #1 well. Forest would like to expedite the scheduling of the public hearing, and/or eliminate it altogether. Consequently, Forest respectfully requests, based on the infonnation provided to you on the referenced matter, that you agree to support Forest's request to the AOGCC for exemption from the provisions of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (b) for the Kustatan Field #1 Well and agree to allow the AOGCC to issue an order without a hearing on the referenced matter or at the least agree to waive the 30 day notice requirement for a hearing and allow the AOGCC to schedule a hearing anytime before March 28, 2006. If you agree to waive either of these requirements, please indicate the option you support by checking the appropriate box and sigQing where indicated on the attached Waiver of Hearing Notice. If you elect an option, please be so kind as to fax me a signed copy of the Waiver of Hearing Notice and mail me the original. If you have any questions regarding Forest's well spacing and pooling exception application for the KF #1 well in accordance with 20 AAC 25.055, please feel ITee to call me at (907) 868-2112 or send me an email at jdarlington(ä¿forestoil.com. 6esp~tfullY ~. 'ttoo, 1<..-.-.a4'L. Jim Arlington ð --- Land Manager Attaclunent: Waiver of Hearing Notice Page ( of! e e TO THE ALASKA OIL AND GAS CONSERVATION COMMISSION Before the Alaska Oil and Gas Conservation Comrrùssion ) In the Matter of the Application of ) Forest Oil Corporation for a well spacing exemption ) And exception to the provisions pertaining to ) Drilling Units and Well Spacing pursuant to ) 20 AAC 25.055 pertaining to the Kustatan Field #1 weIl ) ) WAIVER OF HEARING NOTICE WAIVER ELECTION OMlONS; EFFECTIVE IF RETURNED TO FOREST BY MARCH 3. 2006 o The Alaska Department of Natural Resources, Division of Oil and Gas agrees to support the application of Forest Oil Corporation to the AOGCC for exemption from the provisions of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (b) for the Kustatan Field #1 well and agrees to allow the AOGCC to issue an order without a hearing on the referenced matter in exchange for which Forest Oil Corporation agrees hereby, as evidenced by its signature below, to support any request submitted to the AOGCC by June 1, 2006, from a party who received a certified letter tram Forest regarding this matter, to reconsider the granting of the exemption(s) by the AOGCC pursuant to this agreement for waiver of hearing. FOREST oa CORPORATION Date: February 28. 2006 By: Leonard C. Gurule Title: Senior Vice President OR o The Alaska Department of Natural Resources, Division of Oil and Gas agrees to waive the 30 day notice requirement for a hearing on the referenced matter and allow the AOGCC to schedule a hearing anytime before March 28, 2006. ALASKA DEPARTMENT OF NATURAL RESOURECES DMSION OF oa and GAS Date: By: Title: Page J of I @ e FOREST OIL e CORPORATION _ .y/,' a _v . j f 0 lYl C7ln!el - C'c:/ w//I'! 7 () 0 09't,rhßJr<l/r. Q9'/I(vka ,(j,9.5'O/ (IJ07) 2,H-S6'OO · (.907) 2.i!/-,~6'O ¡ (Q~r) February 28, 2006 Mr. Jim Gorski Hughes, Bauman, et at 3900 C Street C Street, Ste. 1001 Anchorage, Alaska 99503 RE: Forest Oil Corporation well spacing and drilling UIÙt exception application per 20 MC 25.055 Kustatan Field #1 Well; State of Alaska Lease (ADL-390368) Dear Mr. Gorski, As you know, Forest Oil Corporation ("Forest") has subrrútted an application to the Alaska Oil and Gas Conservation Commission ("AOGCC") requesting an exception to the drilling UIÙts and spacing requirements "f20 MC 25.055 (a)(2) and 20 MC 25.055 (b) for the Kustatan Field #1 ("KF #1") well, As either an owner, landowner or operator of a property witlún 3,000 feet of the KF # I well you were sent a letter, with enclosures, trom Forest infomùng you of your opporturuty to be heard by the AOGCC at a public hearing tentatively scheduled for March 28,2006 at 1 :30 pm at the offices of the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Forest has also provided you with the same proprietary geologic, geophysical and other well data that was presented by Forest to the AOGCC in an informal meeting regarding Forest's application. Forest believes the data and information it has presented to you and the AOGCC clearly supports the granting of the requested exceptions and believes that strict compliance with the hearing notice period will result in unnecessary delay of production fÌ'om the KF # I well. Forest would like to expedite the scheduling of the public hearing, and/or elinúnate it altogether. Consequently, Forest respectfully requests, based on the information provided to you on the referenced matter, that you agree to support Forest's request to the AOGCC for exemption trom the provisions of20 MC 25.055 (a)(2) and 20 AAC 25.055 (b) for the Kustatan Field #1 Well and agree to allow the AOGCC to issue an order without a hearing on the referenced matter or at the least agree to waive the 30 day notice requirement for a hearing and allow the AOGCC to schedule a hearing anytime before March 28, 2006. If you agree to waive either of these requirements, please indicate the option you support by checking the appropriate box and signing where indicated on the attached Waiver of Hearing Notice. If you elect an option., please be so kind as to fax me a signed copy of the Waiver of Hearing Notice and mail me the original. If you have any questions regarding Forest's well spacing and pooling exception application for the KF # I well in accordance with 20 MC 25.055, please feel tree to call me at (907) 868-2112 or send me an ernail at j darlington(a),forestoil.com. Respectfully submitted, ~~~ ~ Arlington Land Manager Attachment: Waiver of Hearing Notice Page I of I e e TO THE ALASKA OIL AND GAS CONSERVATION COMMISSION Before the Alaska Oil and Gas Conservation Commission ) In the Matter of the Application of ) Forest Oil Corporation for a well spacing exemption ) And exception to the provisions pertaining to ) Drilling Units and Well Spacing pursuant to ) 20 AAC 25.055 pertaining to the Kustatan Field #1 well ) ) WAIVER OF BEARING NOTICE WAIVER ELECTION OPTIONS; EFFECfIVE IF RETURNED TO FOREST BY MARCH 3,2006 o The Russian Orthodox Church agrees to support the application of Forest Oil Corporation to the AOGCC for exemption iTom the provisions of 20 MC 25.055 (a)(2) and 20 MC 25.055 (b) for the Kustatan Field # 1 well and agrees to allow the AOGCC to issue an order without a hearing on the referenced matter in exchange for which Forest Oil Corporation agrees hereby, as evidenced by its ,;ignature below, to support any request submitted to the AOGCC by June 1,2006, iTom a party who received a certified letter iTom Forest regarding this matter, to reconsider the granting of the exemption(s) by the AOGCC pursuant to this agreement for waiver of hearing. FOREST OIL CORPORATION Date: February 28, 2006 By: Leonard C. Gurule Title: Senior Vice President OR o The Russian Orthodox Church agrees to waive the 30 day notice requirement for a hearing on the referenced matter and allow the AOGCC to schedule a hearing anytime before March 28, 2006. Diocese of Sitka and Alaska, Orthodox Church in America, Inc. a.k.a. The Russian Orthodox Church Date: (Signature) By: Title: Page 1 of 1 e e 11:rßt~ 2~ I ¿OOG SIGN UP SHEET Fðlt£?l 6/L I/v~~ Fï E0 -Ii- I 5t~I/\I& ÐCéf771ðN G Æ DNì2.. NAME COMPANY PHONE 13'[lcÞ-V\.~J"€..lDClL.. 4ÞNf2.- I ùði& 2£Cj. g 801 71 WI P4v lIt} .J"..... _ i!' v~, r cJ, I (!, ''1M Vd- >"" M.. .%; (- :;:z / / L J.e",A;i~ J Ii U,wuÞ ~;"'S 'I- tf),'¡ c''-''ø 3~<¡'- ;</60 rt'\'-'\.' i..)." slo¿,.J '" I ., ~9-- 21 ~ , PaJ-n'ck PttJJu-f- I I" 'I e-bf! - z.. Ilf6 ?D1-/-I0 fV7 ~ eYè A- Þ 1v' /è I eo t G/_tO <1- fç 7 Co 7 Vc'N xe 0 it ,.) «. cS ¡; I ' ( . z£ 1- l' 71 ( - -. 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Subject: KF #1 Application from Forest.for Spacing & Pooling Exceptio ns e From: Jim Arlington <JDArlington@forestoil.com> Date: Tue, 28 Feb 2006 20:4 1:25 -0700 To: 'Jody Colombie' <jody _ colombie@admin.state.ak.us> CC: Kim Cunningham <KCunningham@ciri.com>, Brian Havelock <brian_havelock@dnr.state.ak.us>, "Vicki 1. O'Brien" <VIO@hbplaw.net>, Stephen Davies <steve_davies@admin.state.ak.us>, Leonard Gurule <LCGurule@forestoil.com> Jody, Please share the attached letters with the AOGCC Commissioners that were hand-delivered today to the three landowners withirr Section 41 Township 7 North, Range 14 West, Seward Meridian during a meeting held at the DNR offices to discuss the referenced application, I have also attached a sign-up sheet that indicates the persons who attended the meeting today, convened at Forest's request. Forest shared with all attendees at today's meeting the same information that was presented to the AOGCC Commissioners and staff last Friday, February 24, 2006, The information presented to the attendees is subject to confidentiality restrictions pursuant either to state law and regulations or confidentiality agreements between Forest and the landowner. As you will note on the Waiver of Hearing Notice that is attached to each letter, Forest has asked each landowner to reply to Forest by this Friday with their election regarding the Waiver of Hearing Notice. Please inform the Commissioners that Forest verbally agreed at the meeting with the landowners today that if they agreed to the first waiver option Forest would provide them with data and information to update what was presented to them today approximately two weeks before the end of the three month period within which Forest agreed to support any request to reconsider the granting of the exception(s) by the AOGCC. The initial feedback from the landowners seems to indicate support for Forest's application and support for Forest's Waiver of Hearing Notice. If Forest does receive an election of the Waiver of Hearing Notice from all ~hree landowners within section 41 agreeing to allow the AOGCC to issue an order without a hearing, Forest is hopeful that the Commissioners can issue an order approving the spacing and pooling exception as soon as possible to allow the KF #1 well to begin production. If any of the AOGCC staff or Comm~ssioners have any questions regarding this transmittal, I would appreciate receiving a call directly at 868-2112 as soon as possible. Thank you for your help in this matter. Sincerely, Jim Arlington Content-Type: application/octet-stream Forst Itr to CIRI_RE Waiver of AOGCC Hearing Notice_2-28-2006.pdf Content-Encoding: base64 Content-Type: application/octet-stream 'Forst Itr to DNR_RE Waiver of AOGCC Hearing Notice_2-28-2006.pdf Content-Encoding: base64 Content-Type: application/octet-stream Forst Itr to Russian Church_RE Waiver of AOGCC Hearing Notice_2-28-2006.pdf Content-Encoding: base64 Content-Type: application/octet-stream 'Meeting with Land owners_RE AOGCC application_sign up sheet_2-28-2006.pdf Content-Encoding: base64 of I 3/1/20068:37 AM 333 West 7th Avenue, suI 00 Anchorage, AK 99501 Phone (907) 279-1433 Fax (907) 276-7542 Fax To: Alan Birnbaum From: Jody Colombie Fax: 279-8644 Pages: 9 Phone: 269-5100 Date: 3/1/2006 Re: Kustatan #1 cc: o Urgent o For Review o Please Comment 0 Please Reply o Please Recycle . Comments: Alan, John asked me to fax these to you to review. If you have concerns regarding the waiver election options, please call John, Thank you. Jody ~8 e e TO THE ALASKA OIL AND GAS CONSERVATION COMMISSION Before the Alaska Oil and Gas Conservation Commission In the Matter of the Application of Forest Oil Corporation for a well spacing exemption And exception to the provisions pertaining to Drilling Units and Well Spacing pursuant to 20 AAC 25.055 pertaining to the Kustatan Field #1 well ) ) ) ) ) ) ) VERIFICATION OF FACTS AND AFFIDAVIT OF JIM ARLINGTON Jim Arlington, being first duly sworn, upon oath, deposes and states as follows: I. My name is JIM ARLINGTON. I am over 21 years old and have personal knowledge of the matters set forth herein. 2. I am the Land Manager for the operator of State of Alaska oil and gas lease ADL-390368, Forest Oil Corporation (FOREST). 3. I am knowledgeable and fully infonned concerning the facts associated with the application of Forest Oil Corporation for a well spacing exemption and exception to the provisions pertaining to drilling units and well spacing pursuant to 20 AAC 25.055 as they pertain to the recompletion of the Kustatan Field #1 gas well. 4. I have assisted in preparing and have reviewed the completed application submitted by Forest requesting an exemption from several provisions of20 AAC 25.055 for the recompletion of the Kustatan Field #1 gas well located within ADL-390368 and hereby assert that all the facts contained therein are true to the best of my knowledge. 5. I have reviewed the plat and maps enclosed with the application and assert that they correctly portray the pertinent and required data. 6. Forest is the only operator of any wells within 3,000 feet of the well for which the exception contained in the application is sought. 7. On February 24,2006, pursuant to 20 AAC 25.055(d), I caused to have mailed the required notice afForest's application for an exemption from the provisions of20 AAC 25.055 by sending a copy of the Notice of Public Hearing issued by the Alaska Oil & Gas Conservation Commission by certified mail to the names of all owners, landowners and operators of all properties within 3,000 feet of the KF #1 well location and have attached this list as Exhibit "A" to this affidavit. Subscribed and sworn to on February 24,2006, ./ . .. .... . //'-:" 7':: . ._/.:.t.....~. t: ¿¿L?¡//t:.-.--- Jim Arlington/ II STATE OF ALASKA ss. THIRD JUDICIAL DISTRICT On this _ day of February 24,2006, before me, the undersigned, a Notary Public duly commissioned and sworn, appeared Jim Arlington, personally known to me, to be the person whose name is subscribed to within the Verification of Facts and Affidavit. ,'\,\ \\ i I Ii Jill/ ,~':~.' l' H O....l/;th :v ':~ · ·R""'!~~-?:. ';¡¡. ..t Þ. Þ · ':' ~ -;r. n~ _ ~..O ~'O~<t=: ",0·"" .... "~_ .-- '" .,. ~,,$ ~ (1)--.. ..""- . ,." ~~~"\.';.f ........ '-:, i:> j;;}l.J ~ .. ~...... .~ "\10 ~O~{~~ ./, ,~ø...",..., ,,~..... ,..."......... //¡' ~fATË ~~~'\.... 1/lli!;'''; 1'\\ ,\: Ii I ¡, \ Witness my hand and official,seal. Notary Public, State of Alaska My Commission Expires: ':::> ~- '") - e EXHIBIT "A" To VERlFICA nON OF FACTS AND AFFIDAVIT OF JIM ARLINGTON In the Matter of the Application of Forest Oil Corporation for a well spacing exemption and exception to the provisions pertaining to drilling units and well spacing pursuant to 20 AAC 25.055. Kustatan Field #1 well List of names of all owners, landowners and operators of all properties within 3,000 feet Name Attention Address City State Zip DNR, Division of Oil & Gas Brian Havelock 550 West 7th, Ste. 800 Anchorage AK 99501-3500 U. S. DOl, BLM Greg Noble 6881 Abbott Loop Rd. Anchorage AK 99507-2591 Cook Inlet Region, Inc. Keith Sanders 2525 C Street, Ste. 500 Anchorage AK 99509 First National Bank of Alaska Bernard Jackson 1821 Gambell Street Anchorage AK 99501 Diocese of Sitka and Alaska, Jim Gorski Orthodox Church in America, Inc. cIa Hughes, Aka The Russian Orthodox Church Bauman, et at 3900 C Street, Ste. 1001 Anchorage AK 99503 "), f4 ç?~./ 'v'j ~ /~ß~/~ I/~' j *1 J.'-"'. J........v;;..u (,U. L..'J.. " J.'- e e Subject: Re: Feb 28 at DNR From: Jody Colombie <jody _colombie@admin.state.ak.us> Date: Fri, 24 Feb 2006 15:00:26 -0900 To: Jim Arlington <JDArlington@forestoi1.com> Jim, Are you planning on signing the affidavit and mailing it to me? Don't forget to have it notorized. I will also need the green cards when they are returned to Forest. Thanks Jody Jim Arlington wrote: Brian, Thanks. 1 have attached the affidavit I have prepared for the AOGCC with an Exhibit "AI! attached thereto that lists the names and addresses of the adjacent landowners within 3,000 feet of the KF #1 well. Jim -----Original Message----- From: Brian Havelock [mailto:brian havelock@dnr.state.ak.usl Sent: Friday, February 24, 2006 2:48 PM To: 'Jim Arlington' Subject: Feb 28 at DNR Jim The earliest key people can meet is Tuesday afternoon. I have reserved a conference room for 1 :30, February 28. I'll talk to Bill or Pirtle about expediting a letter of non-objection. Let me know if Tuesday does not work. Also, who is your contact person representing Russian Orthodox Church? Brian Brian Havelock Natural Resources Specialist Division of Oil & Gas Alaska Department of Natural Resources 550 West 7th Avenue, Suite 800 Anchorage, Alaska 9950 I http://www.dog.dnr.state.ak.us I of I 2/24/2006 3 :00 PM 4t;./p STATE OF ALASKA e NOTICE TO PUBLISHER e INVOICE MUST BE IN TRIPLICATE SHOWING AOVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATIACHED COPY OF ADVERTISEMENT MUST BE SUBMITIED WITH INVOICE ADVERTISING ORDER NO. ADVERTISING ORDER SEE BOTTOM FOR INVOICE ADDRESS AO-02614028 F AOGCC AGENCY CONTACT DATE OF A.O. R 333W 7th Ave, Ste 100 o Anchorage, AK 99501 M Jody Colombie PHONE February 25, 2006 PCN (907) 793 -12?1 DATES ADVERTISEMENT REQUIRED: ~ Anchorage Daily News PO box 149001 Anchorage, AK 99514 February 26,2006 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Advertisement to be published was e-mailed Type of Advertisement Legal[gJ o Display Classified DOther (Specify) SEE ATTACHED SEND INVOICE IN TRIPLICATE ., AOGCC, 333 W. 7th Ave., Suite 100 TO Anchorage. AK 99<;01 REF TYPE NUMBER AMOUNT DATE 1 VEN I TOTAL OF I PAGE 1 OF ALL PAGES$ 2 PAGES COMMENTS 2 ARD 3 4 02910 ¡::IN .ð.Mnllt.lT ~v f'.(' P~M 1(' .ð.f'.('T ¡::v NMR DIST LID 05 02140100 73451 2 3 R~QUISITIONEDB.: Q~~(; -:'" i "---J -, / \. ~ DIVISION APPROVAL: . . Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: Forest Oil Corporation Application for spacing exception for Kustatan Field # I gas well Forest Oil Corporation, by letter dated and received February 24, 2006 by the Alaska Oil and Gas Conservation Commission ("Commission"), has applied for an exception to the well spacing requirements of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (b) for the Kustatan Field #1 well. The subject well is a vertical well with surface and bottom hole locations 1468 feet from the West Line and 3443 feet from the North Line of Section 4, T7N, RI4W, Seward Meridian. The Commission has tentatively scheduled a public hearing on this application for March 28, 2006 at 1 :30 pm at the offices of the Alaska Oil and Gas Conservation Commission at 333 West th Avenue, Suite 100, Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a written request with the Commission no later than 4:30 pm on March 13,2006. If a request for a hearing is not timely filed, the Commission will consider the issuance of an order without a hearing. To learn if the Commission will hold the public hearing, please call 793-1221 after March 15,2006. In addition, a person may submit written comments regarding this application to the Alaska Oil and Gas Conservation Commission at 333 West ih Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 4:30 pm on March 13, 2006 except that if the Commission decides to hold a public hearing, written protest or comments must be received no later than the conclusion of the March 28, 2006 hearing. If you are a person with a disability who may need special modifications in order to comment or to attend the public he . g, please contact the Commission's Special Assistant Jody Colombie at - 21 fo e March 20, 2006. -'" Published Date: 2/25/06 AO# 026 I 4028 ~nChOrage Daily News Affidavit of Publication e 1001 Northway Drive, Anchorage. AK 99508 PRICE OTHER OTHER OTHER OTHER OTHER GRAND AD# DATE PO ACCOUNT PER DAY CHARGES CHARGES #2 CHARGES #3 CHARGES It4 CHARGES #5 TOTAL 733148 02/25/2006 02914028 STOF0330 $183,28 $183.28 $0.00 $0.00 $0.00 $0.00 $0.00 $183.28 Notièe ilf Public: HeørilÍg STATE OF ALASKA' .' Aløskø Oil and Gas Conse.rvàtion Commission STATE OF ALASKA THIRD JUDICIAL DISTRICT In·.(] ~ne; 0 co!'servolio 'f.e~~tt Avenue, SUite 100, Ancho er than 4:30 ten comments must be.r he Commis- pm on Morch 13, 2006 ex oring written pro· sion decides to hold 0 ~u~;i~èc~i\Íed Ino loter thon ~Wh~rc~~:;.':S~nt~fn;~: Morch}8i2006 heoring. . If you ore 0 person with 0 disobility who~ moy need speciol módific~tions in .order tloe~~~rg~~'t~~~Ot~t~ b~~~i~:io"n~~~~e~i~f';..':sY~tgnt Jody Colombie at 793-1221 before Morch 20. 2006. Is!: John K. Normon Choirmon Christine Clark, 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 3. daily newspaper in Anchorage, Alaska, and it is now and durin~ all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on the above dates and that such newsp"'per 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. Subscribed and sworn to me before this date: '1 ÆcIffi{~ Notary Public in and for the State of Alaska. Third Division. Anchorage, Alaska ¡¿MY ~MM ISSI~.N E,XPIREs.o..·9)./r.(J.....c..:'~:.7,..;..,_ / J1¡/ì j j Ii/, ..H\/·!!·'" ..' L{;YY¡ /I, / ,/ 17 ¡{a~/tJðJ·, ,',"..~';3' :,," >" / ' \ ,JI.- _ _ 0 I ./ \-. ,.::~~~~~;:>;~;~,,:..; /.. (' .. ,~ ",,'4:i'~ . ~ "' '- '- '- ,18'" 0-, 200(g 1';Q#02614( 28 PUblIshed Dote: ""'" Re: Publíc Notice e e Subject: Re: Public Notice From: "Ads, Legal" <legalads@adn.com> Date: Fri, 24 Feb 2006 15:23:23 -0900 To: Jody Colombie <jody_colombie@admin.state.ak.us> Hello Jody: Following is the confirmation information on your legal notice. Please review and let me know if you have any questions or need additional information. Account Number: STOF 0330 Legal Ad Number: 733148 Publication Date(s): February 25, 2006 Your Reference or PO#: 02614028 Cost of Legal Notice: $183.28 Additional Charges: Web Link: E-Mail Link: Bolding: Total Cost To Place Legal Notice: $183.28 Your Legal Notice Will Also Appear On The Web: www.adn.com: XXX Your Legal Notice Will Not Appear On The Web www.adn.com: Thank You, Kim Kirby Anchorage Daily News Legal Classified Representative E-Mail: legalads@adn.com Phone: (907) 257-4296 Fax: (907) 279-8170 On 2/24/06 12:33 PM, "Jody Colombie" <jody colombie@admin.state.ak.us> wrote: Please publish tomorrow. 1 of 1 2/24/2006 3 :31 PM I 02-902 (Rev. 3/94) PUbliSher/.inal Copies: Department Fiscal, Departme_eceiving AO.FR.cV\ STATE OF ALASKA ADVERTISING ORDER SEE BOTTOM FORINVOICE ADDRESS NOTICE TO PUBLISHER ADVERTISING ORDER NO. INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE AO-02614028 F AOGCC 333 West ih Avenue. Suite 100 A nrnmJ:luP A K QQ'i() 1 907-793-1221 AGENCY CONTACT DATE OF A.O. R o M Jodv Colombie Februarv 24. 2006 PHONE PCN (907) 793 -12?1 DATES ADVERTISEMENT REQUIRED: T o Anchorage Daily News PO box 149001 Anchorage, AK 99514 February 25, 2006 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Account # STOF0330 United states of America AFFIDAVIT OF PUBLICATION REMINDER State of SS INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. division, Before me, the undersigned, a notary public this day personally appeared who, being first duly sworn, according to law, says that helshe is the of Published at in said division and state of and that the advertisement, of which the annexed is a true copy, was published in said publication on the day of 2005, and thereafter for _ consecutive days, the last publication appearing on the _ day of , 2005, and that the rate charged thereon is not in excess of the rate charged private individuals. Subscribed and sworn to before me This _ day of 2005, Notary public for state of My commission expires Laser Mailing Labels Jam-Proof Mary Jones XTO Energy, Inc. Cartography 810 Houston Street. Ste 2000 Ft. Worth, TX 76102-6298 George Vaught, Jr. PO Box 13557 Denver, CO 80201-3557 John Levorsen 200 North 3rd Street. #1202 Boise, ID 83702 Michael Parks Marple's Business Newsletter 117 West Mercer St, Ste 200 Seattle, WA 98119-3960 Cirj Land Department PO Box 93330 Anchorage, AK 99503 Jill Schneider US Geological Survey 4200 University Dr. Anchorage, AK 99508 Darwin Waldsmith PO Box 39309 Ninilchick, AK 99639 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669-7714 Bernie Karl K&K Recycling Inc. PO Box 58055 Fairbanks, AK 99711 ~corporate's I G N AT U R E ~ Express~ e use template U:G032U~ e David McCaleb IHS Energy Group GEPS 5333 Westheimer, Ste 100 Houston, TX 77056 Mona Dickens Tesoro Refining and Marketing Co. Supply & Distribution 300 Concord Plaza Drive San Antonio. TX 78216 Jerry Hodgden Hodgden Oil Company 408 18th Street Golden, CO 80401-2433 Richard Neahring NRG Associates President PO Box 1655 Colorado Springs, CO 80901 Kay Munger Munger Oil Information Service. Inc PO Box 45738 Los Angeles, CA 90045-0738 Samuel Van Vactor Economic Insight Inc, 3004 SW First Ave. Portland, OR 97201 Mark Wedman Halliburton 6900 Arctic Blvd. Anchorage, AK 99502 Schlumberger Drilling and Measurements 2525 Gambell Street #400 Anchorage, AK 99503 Baker Oil Tools 4730 Business Park Blvd" #44 Anchorage. AK 99503 Ivan Gillian 9649 Musket Bell Cr.#5 Anchorage, AK 99507 Gordon Severson 3201 Westmar Cr. Anchorage, AK 99508-4336 Jack Hakkila PO B€)x 190083 Anchorage, AK 99519 James Gibbs PO Box 1597 Soldotna, AK 99669 Kenai National Wildlife Refuge Refuge Manager PO Box 2139 Soldotna, AK 99669-2139 Richard Wagner PO Box 60868 Fairbanks, AK 99706 Cliff Burglin PO Box 70131 Fairbanks, AK 99707 North Slope Borough PO Box 69 Barrow, AK 99723 Williams Thomas Arctic Slope Regional Corporation Land Department PO Box 129 Barrow, AK 99723 ~.',//)#'"..,/~"'r,q,,....¡. ' V.......-, /c ~ ",P'"'1?h' .--, ;:;-J-' ,-X' L-/' "" 1.888.CE TODAY (238.6329) IAIIJI.MI (nrnnr~tPF1Inrp~c; rnm ~nrl INW\J\/ PIN~V rnm PubliC Notice e - Subject: Public Notice From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Fri, 24 Feb 2006 12:35:31 -0900 To: undisclosed-recipients:; BeC: Cynthia B Mciver <bren_mciver@admin.state.ak.us>, Robert E Mintz <robert_mintz@law.state.ak.us>, Christine Hansen <c.hansen@iogcc.state.ok.us>, Terrie Hubble <hubblet1@bp.com>, Sondra Stewman <StewmaSD@BP.com>, Scott & Cammy Taylor <staylor@alaska.net>, stanekj <stanekj@unoca1.com>, ecolaw <ecolaw@trustees.org>, trmjrl <trmjr 1 @ao1.com>, jbriddle <jbriddle@marathonoi1.com>, shaneg <shaneg@evergreengas.com>, jdarlington <jdarlington@forestoi1.com>, nelson <knelson@petroleumnews.com>, cboddy <cboddy@usibelli.com>, Mark Dalton <mark.dalton@hdrinc.com>, Shannon Donnelly <shannon.donnelly@conocophillips.com>, "Mark P . Worcester" <mark.p.worcester@conocophillips.com>, Bob <bob@inletkeeper.org>, wdv <wdv@dnr.state.ak.us>, tjr <tjr@dnr.state.ak.us>, bbritch <bbritch@alaska.net>, mjnelson <mjnelson@purvingertz.com>, Charles O'Donnell <charles.o'donnell@veco.com>, "Randy L. Skillern" <SkilleRL@BP.com>, "Deborah J. Jones" <JonesD6@BP.com>, "Steven R. Rossberg" <RossbeRS@BP.com>, Lois <lois@inletkeeper.org>, Dan Bross <kuacnews@kuac.org>, Gordon Pospisil <PospisG@BP.com>, "Francis S. Sommer" <SommerFS@BP.com>, Mikel Schultz <Mike1.Schultz@BP.com>, "Nick W. Glover" <GloverNW@BP.com>, "Daryl J. Kleppin" <KleppiDE@BP.com>, "Janet D. Platt" <PlattJD@BP.com>, "Rosanne M. Jacobsen" <JacobsRM@BP.com>, ddonkel <ddonkel@cfl.rr.com>, mckay <mckay@gci.net>, Barbara F Fullmer <barbara.f.fullmer@conocophillips.com>, bocastwf <bocastwf@bp.com>, Charles Barker <barker@usgs.gov>, doug_schultze <doug_ schultze@xtoenergy.com>, Hank Alford <hank.alford@exxonmobi1.com>, Mark Kovac <yesno 1 @gci.net>, gspfoff <gspfoff@aurorapower.com>, Gregg N ady <gregg.nady@shel1.com>, Fred Steece <fred.steece@state.sd.us>, rcrotty <rcrotty@ch2m.com>,jejones <jejones@aurorapower.com>, dapa <dapa@alaska.net>,jroderick <jroderick@gci.net>, eyancy <eyancy@seal-tite.net>, "James M. Ruud" <james.m.ruud@conocophillips.com>, Brit Lively <mapalaska@ak.net>, jah <jah@dnr.state.ak.us>, buonoje <buonoje@bp.com>, Mark Hanley <mark_hanley@anadarko.com>, loren_leman <loren_leman@gov.state.ak.us>, Julie Houle <julie_houle@dnr.state.ak.us>, John W Katz <jwkatz@sso.org>, Suzan J Hill <suzan_hill@dec.state.ak.us>, tablerk <tablerk@unoca1.com>, Brady <brady@aoga.org>, Brian Havelock <beh@dnr.state.ak.us>, bpopp <bpopp@borough.kenai.ak.us>, Jim White <jimwhite@satx.rr.com>, "John S. Haworth" <john.s.haworth@exxonrnobi1.com>, marty <marty@rkindustria1.com>, ghammons <ghammons@ao1.com>, rmclean <rmclean@pobox.alaska.net>, mkm7200 <mkm7200@ao1.com>, Brian Gillespie <ifbmg@uaa.alaska.edu>, David L Boelens <dboelens@aurorapower.com>, Todd Durkee <TDURKEE@KMG.com>, Gary Schultz <gary_schultz@dnr.state.ak.us>, Wayne Rancier <RANCIER@petro-canada.ca>, Brandon Gagnon <bgagnon@brenalaw.com>, Paul Winslow <pmwinslow@forestoi1.com>, Garry Catron <catrongr@bp.com>, Sharmaine Copeland <copelasv@bp.com>, Kristin Dirks <kristin_dirks@dnr.state.ak.us>, Kaynell Zeman <kjzeman@marathonoi1.com>, John Tower <John.Tower@eia.doe.gov>, Bill Fowler <Bill_Fowler@anadarko.COM>, Scott Cranswick <scott.cranswick@mms.gov>, Brad McKim <mckimbs@BP.com>, Steve Lambe <lambes@unoca1.com>,jack newell <jack.newell@acsalaska.net>, James Scherr <james.scherr@mms.gov>, nI617@conocophillips.com, Tim Lawlor <Tim_Lawlor@ak.blm.gov>, Lynnda Kahn <Lynnda_Kahn@fws.gov>, Jerry Dethlefs <Jerry.C.Dethlefs@conocophillips.com>, crockett@aoga.org, Tamera Sheffield <sheffield@aoga.org>, Jon Goltz <Jon.Goltz@conocophillips.com>, Roger Belman <roger.belman@conocophillips.com>, Mindy Lewis <mlewis@brenalaw.com>, Kari Moriarty <moriarty@aoga.org>, Patty Alfaro <palfaro@yahoo.com>, Jeff <smetankaj@unoca1.com>, Todd Kratz <ToddKratz@chevron.com>, Gary Rogers .of2 2/24/2006 12:35 PM Public Notice e _ <gary Jogers@revenue.state.ak.us>, Arthur Copoulos <Arthur _ Copoulos@dnr.state.ak.us>, Ken <ken@secorp-inc.com>, Steve Lambert <salambert@unocal.com>, Joe Nicks <news@radiokenai.com>, Jerry McCutcheon <susitnahydronow@yahoo.com>, Paul Todd <paulto@acsalaska.net>, Bill Walker <bill-wwa@ak.net>, Iris Matthews <lris_Matthews@legis.state.ak.us>, Paul Decker <paul_decker@dnr.state.ak.us>, Rob Dragnich <rob.g.dragnich@exxonmobil.com>, Aleutians East Borough <admin@aleutianseast.org>, Marquerite kremer <marguerite_kremer@dnr.state.ak.us>, Robert Brelsford <Robert.Brelsford@argusmediagroup.com>, Alicia Konsor <alicia _ konsor@dnr.state.ak.us>, Mike Mason <mike@kbbi.org> Content- Type: application/pdf Kustatan Content-Encoding: base64 20f2 2/24/2006 12:35 PM Public Notice e e Subject: Public Notice From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Fri, 24 Feb 2006 12:33: 13 -0900 To: Legal Ads Anchorage Daily News <legalads@adn.com> Please publish tomorrow. Content-Type: application/msword Kustatan Content-Encoding: base64 1 of 1 2/24/2006 12:35 PM *5 e e STATE OF ALASKA OIL AND GAS CONSERV A TION COMMISSION Kustatan Field #1 Well- Informal Review February 24, 2006 at 9:00 am NAME - AFFILIATION ADDRESS/PHONE NUMBER (PLEASE PRINT) Ala¡/) ß;Cý)0aA4M - Þ?L. 261-$2b~ .;¡¡'~ ,4v¡, H~1rnt .. ;=õ~.s I- 0, ï .e~ ~- .;>/1 L r Jr/ }: ~ fj.(J ;;¡-- , \ ('69 7- / t..f6 Llflttl( CltSlftlv7J- F~~ 865' - ~/'-I2... Õ:\A. \ ÍrJ( /\ S (vW ~J- ti~ ) ~8' - 2/3 \ k();¡/ Cl /II 6d. r II/lei I '8' b 8 - .<./ s-o Oftv5.- !<oß'( I}oGcc ?93 -/2.1:2- ~kve-~~/~ yqOgCG -r:7'3-/22.'-/ TESTIFY (Yes or No) 4J'e> (tp5 Y-€.J V -c, 5> \(es y~ .N; :ft:4 e e CONFIDENTIAL MATERIAL LOCATED IN CONFIDENTIAL ROOM ~/ Forest Requests AOGCC:~;s~V\ . 1. Issue order for two (2t~xceptJºDs: ~/~ ~: ,'., -vf of, e . 20 MC 25.055 (b) - Pooling Requlrement---IJ 2. Issue stay regarding shut-in of KF #1 Support for Requests: . . Minimal offset variance (32') · Gas pool completely contained within ADL-390368 · No drainage from any adjacent land owners · Technical data supports all of the above *3 e FOREST OIL e CORPORATION .NO c{Y{dilhreeí. CC¡¡;rrfp 700 OYÍnCh(MCr1fle, QQ1!aJka ,g,g/sOI (.907)2';8-86'00 · (907) 2S8-S6'0I (ŒÞrn) February 24,2006 Mr. John Nonnan, Chainnan Alaska Oil and Gas Conservation Commission 333 W. i"' Avenue, Suite 100 Anchorage, Alaska 99501-3539 Hand-Delivered Re: Kustatan Field No, 1 well; ADL-390368 Dear Chainnan Nonnan: Forest Oil Corporation ("Forest") appreciates the Alaska Oil and Gas Conservation Commission ("AOGCC") agreeing to meet with Forest today on short notice and discuss concerns raised by the AOGCC regarding the Kustatan Field NO.1 well ("KF #1 "). By this letter, supplemented by our presentation to you today, Forest respectfully requests the AOGCC to issue an order, pursuant to 20 AAC 25.535, exempting the Kustatan Field No.1 well ("KF #1") rrom the drilling wúts and spacing requirements of 20 AAC 25.055 as they pertain to the gas pool within State of Alaska oil and gas lease ADL- 390368 being produced rrom the KF #1 well. In addition, Forest respectfully requests that the AOGCC issue a stay of its directive to "shut the [KF #1] well in immediately". This stay and exception to the statewide drilling units and spacing requirements of 20 AAC 25,055 is necessary to allow Forest to return and continue its long tenn test of the KF #1 to detennine that the well is capable of sustaining commercial production, as authorized by the Department of Natural Resources ("DNR"), and to provide much needed gas for the oil operations on the west side of Cook Inlet. Forest also requests that the infonnation attached hereto, identified below as confidential enclosures, being presented by Forest to the AOGCC in support of this request, be treated as confidential pursuant to AS 31.05.035 and 20 AAC 25.537 for as long as the statute and regulation allow. Forest believes the data clearly and strongly supports Forest's request. Again, Forest appreciates the opportunity you have provided to discuss this unfortunate situation with you and the other commissioners and reaching a just resolution beneficial to all parties concerned. Sincerely yours, F0ro;'T OIL CORPORATION 1., ¿~uOO~c·1~ ~ Senior Vice President Confidential Enclosures: Kustatan Field #1·- Location Map with Offsets KF#I . Depth Structure Map - Top ofTyonek B Sand KF#1 - Seismic Cross Section; 97RB-09 KF#I - Tyonek Flow Test #2 (Lower Zone) KF #1 - Lower Perforations (FT#2): 5,353' - 5,380' KF #1 - Mud Log - Mud Log Gas Shows; Wire-line 5353-5365' & 5370-5380' MD KF #1 - FT#2: Pressureffemperature Plot; Multi-rate Flow Test (11-14-05) KF#I- FT#2: Pressure & Gas Rate Plot; Multi-rate Flow Test (11-14-05) KF #1 - Pressure Transient Analysis Sunnruuy KF#I-5,353' SandVolumetrics KF #1 - Production Data; Gas Production (5,353' - 5,380') KF # I - Flowing Tubing Pressure vs. Cwnulative Gas Page 1 of 1 :#a Ke: K.ustatan /:'lel<1 NO. j well . . Subject: Re: Kustatan Field No.1 well From: Jody Colombie <jody_colombie@admin.state.ak.us> Date: Thu, 23 Feb 2006 15:50:34 -0900 To: Jim Arlington <JDArlington@forestoil.com> The Commissioners have set the informal review for February 24, 2006 at 9:00 am at the offices of the AOGCC. The address is 333 West 7th Avenue Ste 100, Anchorage, Alaska. Jim Arlington wrote: Dear Ms. Colombie, Forest Oil Corporation ("Forest") has become aware that the Alaska Oil and Gas Conservation Commission ("AOGCC") will be serving Forest with a "Notice of Violation of Well Spacing and Pooling Requirements" ("hereinafter the "Notice") concerning the referenced well this week. Forest hereby respectfully requests an informal review as soon as possible with the Commission to discuss the Notice and the actions required therein by the Commission. Sincerely yours, Jim Arlington I of 1 2/23/2006 3 :50 PM ~1 / j")·'tL~-::'-:; (, \ ."\ ~ J. ~~ l,,\" '¡ Iii \ J,Î I, L. rÙ) 11//:\\ I! r; .._~ ...1 ,." ...!, ..::::1 ,i¡'¡'¡ ,\. /n\ ¡"ti ; A\ ! .!.U I: VI j Þ.\. \ I ¡ ,L" II' I' \. '... I' 'i j .' ¡ ,~., . ¡ , '.', ,> \ . i !' '...1, '.' .' \',1)) ¡! ! r\\ l..'~ In\ rU) 11\ \ /r"t\ Ie I I FRANK H. MURKOWSKI, GOVERNOR AI,ASIiA OIL.AND GAS CONSERVATION COMMISSION / / February 23, 2006 333 W. 7'" AVENUE. SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 Certified Mail Return Receipt Requested 70041160000136212400 Mr. Leonard Gurule Senior Vice President Forest Oil Corporation 310 K Street, Suite 700 Anchorage, AK 99501 Re: Notice of Violation of Well Spacing and Pooling Requirements Kustatan Field No. 1 Dear Mr. Gurule: It has come to the attention of the Alaska Oil and Gas Conservation Commission ("Commission") that Forest Oil Corporation's ("Forest") operations at the Kustatan Field No, 1 gas production well ("KF #1") do not comply with state regulations. The regulations require that Forest shut the well in immediately and not return it to production until such time as Forest has submitted a request for a spacing exception and that request has been approved by the Commission. Pertinent regulations and Forest's non-compliance are discllssed below. Regulation 20 AAC 25.055(a)(2) Forest recompleted KF #1 as a gas well on November 14, 2005. Regulation 20 AAC 25.055(a)(2) requires well bores open to test or regular production for gas be located more than 1,500 feet from the nearest property line, unless the owner is the same and the landowner is the same on both sides of the property line. KF#l is a vertical well that is located 1,468 feet from the west line and 3,443 feet from the north line of Section 4, T7N, RI4W, Seward Meridian ("Section 4"). Unleased acreage lies less than 1,500 feet to the west, in adjacent Section 5, T7N, R 14 W, Seward Meridian. When Forest filed the Sundry Application for recompleting KF #1 as a gas well, Forest failed to notify the Commission that this recompletion required a spacing exception because of the adjacent, unleased acreage. Forest, as operator, is responsible for identifying the need for a spacing exception and for requesting such exception. Shut-in and Spacing E Kustatan Field No. 1 February 23, 2006 Page 2 of3 .on Requirement . Regulation 20 AAC 2S.0SS(b) Well KF #1 does not comply with two aspects of this regulation, which states: "a well may not... begin regular production of gas from a property that is smaller than the governmental section upon which the well is located, unless the interests of the persons owning the drilling rights in and the right to share in the production from the... section... have been pooled under AS 31.05.100." 1. Commission records indicate KF # I produced gas for 10 days during November 2005, and then continuously during December 2005 and January 2006. By the end of January 2006, cumulative gas production from KF #1 exceeded 90 million cubic feet. It is our understanding that Forest has characterized this produced gas to the State of Alaska's Department of Natural Resources ("AKDNR") as being test production rather than regular production. It is also our understanding that gas produced from KF #1 is being utilized as fuel gas for a turbine or turbines in Forest's Kustatan Facility. Alaska Statute 31.05.170(14) defines regular production as: ".. .continuing production of oil or gas from a well into production facilities and transpOliation to market, but does not include short term testing, evaluation, or experimental pilot production activities that have been approved by permit or order of the commission." Continuous gas production for more than two months totaling more than 90 million cubic feet surpasses any reasonable notion of short-term testing or evaluation. Transportation of the gas produced from KF # 1 to Forest's Kustatan Facility and use of that gas to supplant turbine fuel obtained from other sources constitutes market use rather than flow testing of the well for reservoir evaluation. Therefore, the Commission considers KF #1 to be in "regular production" of gas. 2. KF #1 is located within State of Alaska Lease ADL 390368, which occupies the southern two-thirds of Section 4. The northern one-third of Section 4 is depicted on AKDNR status plats having Cook Inlet Region Corporation as the landowner. It is our understanding that Forest does not have a pooling agreement in place for this section. Accordingly, Forest's production from KF #1 does not comply with the pooling requirement of Regulation 20 AAC 25.055(b). Because of the number and seriousness of these violations, the Commission may decide to fine Forest up to $5000 per day per violation for every day of non-compliance. Further, since the regulations require that Forest shut the KF # I well in immediately and not return it to production until such time as Forest has submitted a request for a spacing exception and that request has been approved by the Commission, continuing to produce after receipt of this letter may constitute a willful violation of law pursuant to AS 31.05.150(b). Shut-in and Spacing £ .on Requirement Kustatan Field No. I _ February 23, 2006 Page 3 of3 . As provided by 20 AAC 25.535(c), within 15 days after reœipt of this notification Forest may file with the Commission a written response that concurs in whole or in part with the proposed action described herein, requests informal review, or requests a hearing under 20 AAC 25.540. A request for hearing or informal review will not however eliminate the requirement that you immediately suspend the regular production of gas from this well. e SENDER: COMPLETE THIS SECTION · Complete items 1, 2, and 3. Also complete item 4 if Restricted Delivery is desired. · Print your name and address on the reverse so that we can return the card to you. · Attach this card to the back of the mail piece, or on the front if space permits. 1. Article Addressed to: /~.)er;7/?q/d Cu /t./k ~róclwc:h¿Jh 7/7a7é'r hr/6f (/1) 3/éJ ~. ~f- d)ol) #~t- /J £ qr¡7tJ I 2. Article Number (r ransfer from service labeO PS Form 3811, August 2001 . \. ~e Type ~ertified Mail . ~ress Mail o Registered ~turn Receipt for Merchandise o Insured Mail 0 C.O.D. 4. Restricted Delivery? (Extra Fee) DYes 7004 1160 0001 3621 2400 102595-02-M-0835 Domestic Return Receipt . e UNITED STATES POSTAL SERVICE First-Class Mail Postage & Fees Paid USPS Permit No. G-10 · Sender: Please print your name, address, ~G6À~ · IJ. '/J FEB 21 '2005 (! yC C- AIDs" Oi & Gas Coo,", c......snoo 333 w '7r-"):j~~() R rcL /) /C r]9/jtJ! \ t. V .C/GJ'1: / Ii i :: ! ·1' q !! I' : ¡I: 'i' I .. "1 . í) lIit-a '-f-t1 /} J7i1J¡";?ljiΡ'!Ì!!!j!!¡¡J!!Ì:I!Ìd¡!!I'¡'
