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Home My WebLink AboutO 075 • 1 INDEX Waste Inquiry 1. December 7, 2011 Letter from Harold Heinze to AOGCC re: propane recovery 2. December 21, 2011 Letter from BPXA to Lt. Governor re: subject matter 3. January 3, 2012 Letter to BPXA from AOGCC re: Notice of inquiry 4. February 1, 2012 Powerpoint from Harold Heinze at Monthly Meeting 5. February 6, 2012 BPXA response 6. Various Emails 7. April 22, 2012 Notice of Hearing, affidavit of mailing, e-mail list, bulk mailing list 8. May 8, 2012 BPXA request to continue hearing 9. May 9, 2012 DNR's request for documents 10. May 15, 2012 AOGCC's emailing granting continuance 11. May 22, 2012 Transcript of Public Meeting 12. June 1, 2012 Transcript of Public Hearing and Public Written Comments from hearing 13. Written Comments after hearing 14. BPXA's Post Hearing Statement • S STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE PETITION OF Harold C. Heinze ) Docket Number: OTH -11 -51 that the Alaska Oil and Gas Conservation ) Other Order No. 075 Commission investigate, in accordance ) with AS 31.05, whether or not waste of ) Prudhoe Bay Unit propane is occurring at the Prudhoe Bay ) Prudhoe Bay Oil Pool Field ) North Slope Borough, Alaska ) August 17, 2012 NOTICE CLOSING DOCKET BY THE COMMISSION: The Commission has the closed the Docket in the above captioned matter. ENTERED AND EFFECTIVE at Anchorage, Alaska and this 17h day of August, 2012. BY DIRECTION OF THE COMMISSION I &tg;i ii Jod J. Colombie Spe /ial Assistant to the Commission • • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE PETITION OF Harold C. Heinze that ) Docket Number: OTH -11 -51 the Alaska Oil and Gas Conservation ) Other Order No. 075 Commission investigate, in accordance ) with AS 31.05, whether or not waste of ) Prudhoe Bay Unit propane is occurring at the Prudhoe Bay ) Prudhoe Bay Oil Pool Field North Slope Borough, Alaska ) August 17, 2012 IT APPEARING THAT: 1. On December 7, 2011, Petitioner requested the Alaska Oil and Gas Conservation Commission (AOGCC) investigate whether the operator's practice of reinjecting gas containing propane into the gas cap of the Prudhoe Bay Oil Pool (PBOP) instead of making the propane available for sale constitutes waste. 2. Although Petitioner concedes some propane is being beneficially used as a component of miscible injectant (MI) for the PBOP enhanced oil recovery (EOR) projects, he claims that recovery of injected gas in the future is not a certainty and that therefore the large amount being injected into the PBOP constitutes waste. Petitioner seeks to have the AOGCC order BP Exploration (Alaska) (BPXA) to remove some of the propane and offer it for sale. 3. On January 3, 2012, the AOGCC requested BPXA provide information about the gas streams and gas processing and handling facilities at the Prudhoe Bay Field (PBF). 4. On February 6, 2012, BPXA responded to the AOGCC's January 3 request. 5. At the AOGCC's monthly meeting held April 4, 2012, the AOGCC decided to hold a formal hearing on the Petitioner's claims. 6. On April 11, 2012, a notice of public hearing was published on the State of Alaska Online Public Notice website and on the AOGCC website. This notice was published in the ALASKA JOURNAL OF COMMERCE on April 22, 2012. The hearing was scheduled for May 22, 2012. 7. BPXA requested the hearing be continued from May 22 to June 19 2012, due to scheduling conflicts for several key technical personnel. 8. On May 22, 2012, the hearing was recessed to reconvene on June 19, 2012. 9. On June 19, 2012, the AOGCC heard testimony and received evidence regarding Petitioner's claims. 10. At the conclusion of the hearing, the record was held open until July 18, 2012, to allow for submission of additional evidence. 11. On July 5, 2012, the Southwest Alaska Municipal Conference submitted comments. 12. On July 18, 2012, BP Exploration (Alaska) Inc. submitted comments. Other Order 075 • August 17, 2012 Page 2 of 4 FINDINGS: 1. The PBF has substantial reserves of propane. 2. The PBF handles approximately 170 MMCFPD of propane at the Central Gas Facility (CGF). 3. Propane has an energy content of approximately 3.8 million British Thermal Units (BTU) per barrel while crude oil is has an energy content of approximately 5.8 million BTU per barrel. Therefore, on a barrel of oil equivalent (BOE) basis one barrel of propane is equivalent to 0.65 barrels of crude oil. 4. The produced gas that enters the CGF at PBF leaves in two streams, a gas liquids stream and a residue gas stream. The CGF, within operational and safety constraints, produces as much gas liquids as it is physically capable of doing. The gas liquids separation equipment cannot operate at a process temperature below -50° F. The system is operated as close to that temperature as seasonal, operational, and safety conditions will allow, resulting in an annual average processing temperature of -35° F and a peak operating temperature of -42° F. In winter colder ambient temperatures allow a colder processing temperature. 5. Any increase in the amount of gas liquids that could be extracted would require new separation equipment that could be operated at less than -50° F. The estimated cost of such equipment would be substantial. Installation of such equipment would require a six to eight month shutdown. 6. In normal operations the gas liquids stream is further processed into a natural gas liquids stream, which is either sold to the Trans Alaska Pipeline (TAPS) or the Kupuruk River Unit (KRU), and a stream of MI for EOR in the PBF. A small amount of the MI stream is occasionally taken to make high purity propane that is used as a coolant medium in the CGF gas processing systems. The majority of the propane in the gas liquids stream is used in the production of MI. The majority of the residue gas stream is reinjected into the PBOP gas cap to maintain reservoir pressure. Of the gas which is not reinjected, some is sold to the Northstar Unit to meet its fuel and EOR gas needs; the remainder is burned as fuel gas within the PBF. 7. The gas entering the CGF initially contained between 3.3% and 3.5% propane and now contains on average 2.45% propane. 8. The residue gas contains on average 1.65% propane. 9. Selling propane would reduce the amount of MI that could be produced and in turn would reduce the ultimate recovery from the PBOP. 10. The PBF processing systems have a capacity of compressing 600 MMCFPD of MI but currently only an average of 131 MMCFPD is being created. 11. If the separation system was changed to allow for increased gas liquids production the majority of these gas liquids would be used to generate MI. 12. Selling 1 barrel per day of propane would reduce the available MI volume by about 4 MCFPD. The actual cumulative effect, due to MI recapture and reinjection, of selling a barrel of propane is a net loss of 8 MCF of MI. The selling of 1 barrel of propane that could have been used to make MI will result in the lost recovery of about 0.7 barrels of oil. On an equivalent barrel basis this equates to 1.08 barrels of oil lost for every BOE of propane sold. 13. Additionally, approximately 85% of the MI that is injected will eventually be recaptured. 14. On a BOE equivalency basis a total of 1.93 BOE of fluids would be recovered (1.08 BOE of crude oil and 0.85 BOE of recaptured MI) for every BOE of propane injected. Other Order 075 ii• • August 17, 2012 Page 3 of 4 15. Up to 20% of the approximately 1 billion barrels of residual oil in the initial gas cap, and an additional 8% of the 4 to 5 billion barrels of residual oil in the expanded gas cap, are expected to be vaporized and recovered by the residue gas injection. As a result, a total of approximately 500 million barrels of additional oil recovery can be attributed directly to residue gas injection. 16. Richer gas (i.e. gas with a higher concentration of ethane, propane, and butane) has a higher capacity to vaporize and therefore recover more of the residual oil. 17. Conservation Order 458 determined that selling residue gas to the Northstar Unit is projected to raise the ultimate recovery from that field from the 50% achievable by gas cycling alone to approximately 65% of the original oil in place. 18. Conservation Order 198A determined that each barrel of NGL sold from the PBF to the KRU will result in an estimated 1.3 barrels of additional recovery from the Kuparuk River Oil Pool. CONCLUSIONS: 1. Selling one BOE of propane today would result in a net loss of .93 BOE of crude oil and recaptured MI in the future. 2. Utilizing the propane in the gas liquids stream that comes off the CGF to blend MI has clear and substantial benefits to ultimate recovery. 3. The sale of NGLs to the KRU and residue gas to the Northstar Unit provides clear and substantial improvements in ultimate recovery from these units while having a negligible effect on recovery in the PBF. 4. Propane is not being wasted. ACCORDINGLY: Because no waste has occurred, no action by the AOGCC is necessary at this time. The AOGCC hereby closes the inquiry regarding whether propane is being wa -d at the PBF. DONE at Anchorage, Alaska and dated August 17, 2012. C T / �, J Cathy. Foerster IF ! !3' . No • an Chair, Commissioner — o ..i 'oner Jr . ‘fri. Other Order 075 • • August 17, 2012 Page 4 of 4 RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. As provided in AS 31.05.080(b), "[t]he questions reviewed on appeal are limited to the questions presented to the AOGCC by the application for reconsideration." In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. • • Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Friday, August 17, 2012 1:19 PM To: Vazquez, Laney; Harold Heinze; Ballantine, Tab A (LAW); Brooks, Phoebe L (DOA); Colombie, Jody J (DOA); Crisp, John H (DOA); Davies, Stephen F (DOA); Ferguson, Victoria L (DOA); Fisher, Samantha J (DOA); Foerster, Catherine P (DOA); Grimaldi, Louis R (DOA); Johnson, Elaine M (DOA); Jones, Jeffery B (DOA); Laasch, Linda K (DOA); Bender, Makana K (DOA); McIver, Bren (DOA); McMains, Stephen E (DOA); Mumm, Joseph (DOA sponsored); Noble, Robert C (DOA); Norman, John K (DOA); Okland, Howard D (DOA); Paladijczuk, Tracie L (DOA); Pasqua!, Maria (DOA); Regg, James B (DOA); Roby, David S (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA); Wallace, Chris D (DOA); ( michael .j.nelson @conocophillips.com); (Von. L. Hutchins @conocophillips.com); AKDCWelllntegrityCoordinator; alaska @petrocalc.com; Anna Raff; Barbara F Fullmer; bbritch; bbohrer @ap.org; Bill Penrose; Bill Walker; Bowen Roberts; Bruce Webb; caunderwood @marathonoil.com; Claire Caldes; Cliff Posey; Crandall, Krissell; D Lawrence; dapa; Daryl J. Kleppin; Dave Harbour; Dave Matthews; David Boelens; David House; Scott, David (LAA); David Steingreaber; Davide Simeone; ddonkel @cfl.rr.com; Dennis Steffy; Elowe, Kristin; Erika Denman; Francis S. Sommer; Gary Laughlin; schultz, gary (DNR sponsored); ghammons; Gordon Pospisil; Gorney, David L.; Greg Duggin; Gregg Nady; Gregory Geddes; gspfoff; Jdarlington (jarlington @gmail.com); Jeanne McPherren; jeff.jones @alaskajournal.com; Jones, Jeffery B (DOA); Jerry McCutcheon; Jill Womack; Jim White; Jim Winegarner; Joe Lastufka; news @radiokenai.com; Easton, John R (DNR); John Garing; John S. Haworth; John Spain; Jon Goltz; Jones, Jeffrey L (GOV); Judy Stanek; Houle, Julie (DNR); Julie Little; Kari Moriarty; Kaynell Zeman; Keith Wiles; Kelly Sperback; Gregersen, Laura S (DNR); Luke Keller; Marc Kovak; Mark Dalton; Mark Hanley (mark.hanley @anadarko.com); Mark P. Worcester; Kremer, Marguerite C (DNR); Michael Jacobs; Mike Bill; mike @kbbi.org; Mike Morgan; Mikel Schultz; Mindy Lewis; MJ Loveland; mjnelson; mkm7200; knelson @petroleumnews.com; Nick W. Glover; NSK Problem Well Supv; Patty Alfaro; Decker, Paul L (DNR); Paul Figel; Paul Mazzolini; Randall Kanady; Randy L. Skillern; Delbridge, Rena E (LAA); Renan Yanish; Robert Brelsford; Robert Campbell; Ryan Tunseth; Scott Cranswick; Scott Griffith; Seth Holtshouser; Shannon Donnelly; Sharmaine Copeland; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); Sondra Stewman; Stephanie Klemmer; Moothart, Steve R (DNR); Steven R. Rossberg; Suzanne Gibson; sheffield @aoga.org; Taylor, Cammy 0 (DNR); Davidson, Temple (DNR); Teresa Imm; Terrie Hubble; Thor Cutler; Tim Mayers; Tina Grovier; Todd Durkee; Tony Hopfinger; trmjrl; Vicki Irwin; Walter Featherly; Williamson, Mary J (DNR); yjrosen @ak.net; Aaron Gluzman; Aaron Sorrell; Arctic Observer; Bruce Williams; Bruno, Jeff J (DNR); Casey Sullivan; Dale Hoffman; David Lenig; Donna Vukich; Eric Lidji; Erik Opstad; Franger, James M (DNR); Gary Orr; Smith, Graham 0 (PCO); Greg Mattson; Heusser, Heather A (DNR); Jason Bergerson; Jennifer Starck; jilt .a.mcleod @conocophillips.com; Joe Longo; King, Kathleen J (DNR); Lara Coates; Lois Epstein; Marc Kuck; Steele, Marie C (DNR); Mary Aschoff; Matt Gill; OilGas, Division (DNR sponsored); Bettis, Patricia K (DNR); Perrin, Don J (DNR); Peter Contreras; Pexton, Scott R (DNR); Richard Garrard; Ryan Daniel; Sandra Lemke; Talib Syed; Wayne Wooster; Woolf, Wendy C (DNR); William Hutto; William Van Dyke Subject: OTH -11 -51 Attachments: OTH- 11- 51.pdf Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) 1 • • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 I Ft. Worth, TX 76102 -6298 Houston, TX 77056 Richard Neahring Jerry Hodgden Mark Wedman NRG Associates Hodgden Oil Company Halliburton President 408 18 Street 6900 Arctic Blvd. Golden, CO 80401 -2433 P.O. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Bernie Karl CIRI Baker Oil Tools K &K Recycling Inc. Land Department 795 E. 94 Ct. P.O. Box 58055 P.O. Box 93330 Fairbanks, AK 99711 Anchorage, AK 99503 Anchorage, AK 99515 -4295 North Slope Borough Richard Wagner Gordon Severson Planning Department P.O. Box 60868 3201 Westmar Circle P.O. Box 69 Fairbanks, AK 99706 Anchorage, AK 99508 -4336 Barrow, AK 99723 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Penny Vadla 399 West Riverview Avenue Soldotna, AK 99669 -7714 \\. \\\ \ (It() *14 • • ALASKA OIL AND GAS CONSERVATION COMMISSION Before Commissioners: Cathy Foerster, Chair Daniel T. Seamount John K. Norman In the Matter of the Potential Waste ) of Propane in the Operation of the Prudhoe Bay Unit. ) Docket No.: OTH -11 -51 POST - HEARING STATEMENT BP Exploration (Alaska) Inc., as operator of the Prudhoe Bay Unit, submits this statement subsequent to the Public Hearing held in the referenced matter on June 19, 2012. The table below indicates corrections and clarifications to the hearing transcript. Page Line Correction Reason 44 7 Delete "open" insert "opening" Correction 44 11 Delete "wanted" insert "want" Correction 44 15 Add "to date" after recovered Clarification 46 7 Delete "like" Clarification 50 16 Change "Chair Foerster" to "Mr. Bonnecaze" Correction 50 20 Insert "came to" after "originally" Clarification Insert "and" before "worked" 51 4 Change "processor" to "process" Correction Insert "at" before BP 52 17 Change "measured" to "major" Correction 54 20 Delete "Borch" Correction 54 21 Change "PSDs" to "PSV's" Typo 55 13 Change "hard" to "heart" Correction 57 4 Change "sled" to "flood" Correction • • 57 6 Insert "injection" before "compressors" Clarification 57 7 Change "essential" to "central" Correction 57 17 Delete "and" after exchangers Clarification 57 18 Delete "sorts of" Clarification 59 16 Change "trays" to "towers" Correction 59 16 Change "produce" to "produces" Clarification 60 2 Change "really" to "ideal" Correction 60 9 Delete "right" Clarification 60 10 Delete "on" after "6 ", insert "up from" after "6" Clarification 69 18 Change "propane" to "seal oil ", change "chiller" to Clarification "propane" 73 3 Change "as" after "designated" to "for" Clarification Insert "use" after FOR 73 17 Insert "to do so." after "owners" Clarification Capitalize "and" after "to do so." Insert "also" after imagine 73 18 Insert "use of" after changing Clarification 73 20 End sentence after "aware of that." Clarification Capitalize "And" Insert "unit unnecessarily," after "run this" 74 24 Change "you're" to "we're" Correction 76 7 Change "we" to "was" Correction 76 15 End sentence after "components." Clarification Capitalize "All" Delete "the" after "minus" Insert "that which holds propane storage at" after "minus" 76 16 End sentence after "MI." Clarification Delete "in the propane." 78 8 Delete "minus" before 48 Correction 78 9 Delete "minus" Correction • • 78 14 Change "barrel" to "barrels" Correction 78 24 Change "quality" to "quantity" Correction 79 22 Change "propane" to "butane" Correction 80 22 Insert "some of" after "stabilizer and" Clarification 80 23 Insert "swing" after "those" Clarification 80 24 Insert "bottoms" after "rate of" Clarification 81 1 Insert "MI" before "MMP" Clarification 81 2 Insert "and adjust the LTS bottoms temperature." Clarification after "back" 81 6 Change "propane" to "methane" Correction 81 8 Insert "psig" after "3,100" Correction 81 19 Change "your" to "EOR" Correction 83 9 Insert "also" after "would" Clarification Insert "NGL" after "small" 84 14 Change "MRI" to "MI" Correction 85 7 Change "se" to "see" Correction 87 11 Change "leaving" to "removing" Correction 87 12 Insert "as" before "I described" Clarification 88 17 Insert "storage and" before "load" Clarification 89 3 Insert "12" after "slide" Clarification 89 8 Capitalize" Far" Typo 89 9 Capitalize "East" Typo 89 10 Change "in" to "and" Correction 97 5 Delete "phase" insert "state" Correction Change "phased" to "phase" 97 7 Change "Geotex 1" to GHX-1" Correction Change "Geotex 2" to GHX -2" 97 8 Delete "GLMI and" Correction 97 9 Add "From" at beginning of sentence Correction 97 11 Change "Geotex 2" to GHX -2" Correction 98 25 Insert "end" after "west" Correction • • 101 19 Change "PBMGPO" to "PBMGP" Correction 104 8 Change "bush dropping" to "boot strapping" Correction 106 12 Change "not" to "and" Correction 106 13 Change "VGI (ph)" to "WGI" Correction 106 15 Change "clock" to "view" Correction 106 17 Delete "about six" Clarification Delete "was the pooled" 106 18 Change "rate of injection, we inject" to "of" Clarification 107 3 Change "mixed" to "MIX" Correction Change "six (ph)" to "eight" 107 5 Change "that" to "the" Correction IC I Insert "was" before "required" Change "what" to "that" 107 6 Insert "." after "gas" Clarification Delete "and after MI and NGL the residue" 107 7 Delete "gas to be reinjected." Clarification 107 8 Insert "higher volume of" before "residue" Clarification 107 9 Change "inventory (ph)" to "recovery" Correction 107 21 Change "load (ph)" to "phase" Correction 108 8 Change "and" to "in the" Correction Delete "in the" (at end of line) 108 17 Change "TAPS" to "TAX (IRS)" Correction 108 21 Change "thermal" to "thermo -" Correction 109 1 Change "incur" to "increase" Correction 109 4 Change "this" to "these" Correction 109 16 Change "that" to "there" Correction 109 19 Change "at" to "I testified at AOGCC." Correction 109 20 Delete entire line Correction 109 21 Delete entire line Correction 109 22 Delete "Commissioner, you know, and" Correction Capitalize "At" • • 110 11 Change "230" to "200 plus" Clarification 110 19 Change "is" to "was" Correction 111 12 Change "Jay Vardian (ph)" to "Jerry Brady" Typo 111 15 After "completed" insert "Ivishak" Clarification 112 8 Change "bond" to "bourne" Correction 114 17 Change "efficiencies" to "efficiency" Correction 114 23 Change "minimal" to "minimum" Correction 115 8 Change "to 70 (ph) points" to "centipoise" Correction 115 9 Change "points" to "centipoise" Correction 115 12 Change "that very" to "SPE" Correction 118 16 Change "a planner" to "at Plano" Correction Change "surveys" to "research" 120 23 Insert "EOR target" at end of sentence Correction 120 24 Delete "MI" Correction 121 4 After "barrel" insert "of oil." Correction 121 23 Change "pool" to "percent pore" Clarification Delete "you know, percent" Change "that" to "the" 121 24 Change "other" to "oil" Correction 125 19 Delete "bottles" insert "barrels" Correction 126 8 Delete "MCS" insert "MCF" Correction 126 11 Delete "working" insert "unit" Correction 127 6 Delete line and replace with "We did get it right, Correction and that we" 127 7 After "NGLS" add ". ", delete remainder of line Clarification 127 8 Delete line Clarification 127 9 Delete line Clarification 127 10 Delete line Clarification 127 11 Delete line Clarification 128 8 Delete "idea" insert "estimate," Clarification 128 9 Add "estimate" at end of line Correction • • 128 10 Change "information, an idea, as to numbers of Correction Prudhoe's" to "based on Prudhoe's marginal" 128 11 Delete "management" insert "MI ", delete ", that " Correction and insert "which ", add "." after "change ", capitalize Clarification "The ", insert "(0.7 barrel of oil per barrel of propane sold)" after "number" 128 13 Delete "propane" insert "MI" Correction 128 20 Insert "sold" before "down" Correction 128 21 Delete "but its converting that - - not convert - -" Correction and insert "vs. its value as FOR agent on the slope." Clarification 128 22 Insert "." at end of sentence Correction 128 23 Delete "final decision is made.", delete "they're ", Correction and after "not" add "shown on the summary side Clarification here," 128 24 Delete "my - - ", delete "it that ", delete "is the" Clarification 128 25 Delete "velocity" insert "volume" Correction 129 1 Delete "it" Correction 129 4 Delete "if" Clarification 129 5 Delete "anything" Clarification 129 6 Delete "kind of" Clarification 131 9 Change "they's" to "they" Correction 131 21 Change "ANGA" to "ANGDA" Correction 132 4 Change "ANGA" to "ANGDA" Correction 139 1 Change "ANGA" to " ANGDA" Correction Mr. Heinze in his testimony made several comments regarding propane being taken to other North Slope Units, such as Kuparuk and Northstar. While we believe the Commission is likely aware of what these transfers involve, BP would like to ensure that it is understood that the propane referred to is a minor component in NGL and gas streams and is not related to the propane product which CGF manufactures for its own • • refrigeration system recharging purposes. The stream sent to Kuparuk is NGL and contains an average of about 1 to 2 mol % propane. The propane content of the NGL stream is related to the separation efficiency involved within NGL stabilization, oil blending and vapor pressure limitations. The gas which BP transfers to Northstar is CGF residue gas containing on average 1.6 to 1.8 mol % propane. The propane content is therefore what remains in the gas after low temperature processing. The gas sent to Northstar contains propane in similar concentrations as the Prudhoe Field fuel gas and gas injection into the Prudhoe Bay Unit gas cap. Royalties are paid on all hydrocarbons that cross the Prudhoe Bay Unit boundary. Commissioner Norman asked a question, transcribed on page 133 of the hearing transcript, regarding whether the use of propane and other NGLs in the production of miscible injectant is normal lease use for which no royalty payment is made. BP, as operator, confirms that the use of propane and other NGLs in the production of miscible injectant in the Prudhoe Bay Unit is normal lease use for which no royalty payment is made. Commissioner Norman asked an additional question, transcribed on page 134 of the hearing transcript, regarding what would be the response from commercial team members if the State of Alaska indicated that it wished to take a royalty share of propane in kind. BP's response at the hearing regarded the unit operating agreement, to which the State of Alaska is not a party. The Unit Agreement would provide guidance from a contract perspective. As a practical matter, there is not currently a propane stream available to take in kind. • • BP would like to reiterate the points made in its testimony that its activities promote the efficient development of the Prudhoe Bay resource. Propane, in particular, is sold with NGL, used in miscible injectant for enhanced oil recovery and even that portion which goes into the gas cap with the residual gas is enhancing recovery. In short, BP's activities do not waste propane'. Respectfully submitted: BP Exploration (America) Inc., as Operator of the Prudhoe Bay Unit By: L44 H. Vetn Laney M. Vazquez Senior Counsel BP Exploration (America) Inc. 900 East Benson Boulevard Anchorage, Alaska 99508 Direct: 907 - 564 -5768 Facsimile: 907 - 564 -4031 E -mail: laney.vazquez@bp.com Because this matter is not an enforcement action under 20 AAC 25.535 and the hearing was not conducted as an adversarial hearing under 20 AAC 25.540(e), BP has endeavored to provide all relevant factual data refuting the waste allegations, but has not raised legal arguments. 403 Alaska Peninsula 45.wAme Southwest Alaska Municipal Conference Aleutian Chain 3300 Arctic Boulevard, Suite 203 Anchorage, AK 99503 p: 907.562.7380 www.swamc.org Bristol Bay Kodiak Island Pribilof Islands July 5, 2012 Alaska Oil & Gas Conservation Commission 333 W. 7th Ave., Ste. 100 Anchorage, Alaska 99501 Re: North Slope propane test use Dear AOGCC Commissioners, This letter concerns the public hearing the Commission held on June 19 regarding North Slope propane for village Alaska use. The Southwest Alaska Municipal Conference ( SWAMC) recognizes the extremely high costs of energy in rural Alaska, including space heating, electricity, and transportation, and we encourage the exploration of all alternatives for bringing down the cost of energy for all Alaskans. SWAMC is an Alaska Regional Development Organization, an economic development planning body that represents the Aleutian /Pribilofs, Bristol Bay, and Kodiak Island. We will soon be contracting with the Alaska Energy Authority to produce energy plans for each of our three regions, and propane and other "alternative" energy sources will feature heavily in our plans. Along with fishing, energy is the backbone of economic development in Western rural Alaska. In the Southwest, the fish runs have been relatively stable and prices have remained strong in recent years. Energy, however, is a different story. Without stable and affordable energy supplies, folks in many Western Alaska villages will continue to leave their homes and migrate to the urban communities on the Railbelt. Propane distribution could represent one such supply of consistent and economically feasible energy for our coastal communities, but that requires a small bit of the North Slope resource to first test this feasibility. Propane could be a great energy bridge to get us off of high cost diesel in our villages. It could prove to be a conduit between when we eventually displace diesel with renewables and give us time all over Alaska to get ready for the 'Alaska Gas Age', when a large diameter pipeline brings benefits to all Alaskans. Cooking food, heating a home or business, and turning on the lights in rural Alaska is getting more expensive with each passing year. We must find alternative solutions to the status quo. Finding out if propane is part of the solution is a very worthy case study for Alaska's future. We realize that oil and gas issues are a tricky, sometimes complicated and litigious affair, but this is one situation where utilizing a small portion of spare gas could prove to be a big winner. Please take these comments under consideration for the good of Alaska. Sincerely, SOUTHWEST ALASKA MUNICIPAL CONFERENCE /(--4 Andy Varner Executive Director Economic development and advocacy for Southwest Alaska Economic Development District (EDD) and Alaska Regional Development Organization (ARDOR) -t12 TRANSCRIPT OF PROCOING 6/19/2012 • DOCKET No. OTH -11 -51 ALASKA OIL AND GAS CONSERVATION COMMISSION Before Commissioners: Cathy Foerster, Chair Daniel T. Seamount John K. Norman In the Matter of the Potential Waste ) of Propane in the Operation of the Prudhoe Bay Unit. Docket No.: 0TH -11 -51 ALASKA OIL and GAS CONSERVATION COMMISSION Anchorage, Alaska June 19, 2012 9:00 o'clock a.m. PUBLIC HEARING BEFORE: Cathy Foerster, Chair John K. Norman, Commissioner Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 2 1 TABLE OF CONTENTS 2 Opening remarks by Chair Foerster 03 Comments by Harold Heinze 07/142 3 Comments by Janet Weiss 43/135 Comments by Bernie Bonnecaze 50 4 Comments by Bharat Jhaveri 96 Comments by Sherri Gould 130 5 Comments by Nels Anderson 138 Comments by Jerry McCutchin 148 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 3 1 P R O C E E D I N G S 2 (Anchorage, Alaska - 6/19/2012) 3 (On record - 9:01 a.m.) 4 CHAIR FOERSTER: I'd like to call this hearing 5 to order. Today is June 19th, 2012, it's a little 6 after 9:00 a.m. We are located at 333 West Seventh 7 Avenue, Suite 100, Anchorage, Alaska, and these are the 8 offices of the Alaska Oil & Gas Conservation 9 Commission. 10 We are the Commissioners -- two - thirds of the 11 Commissioners of the Oil & Gas Conservation Commission. 12 To my right is Commissioner John Norman and I'm Cathy 13 Foerster. 14 Computer Matrix Court Reporters will be 15 recording the proceedings and you can get a copy of the 16 transcript from Computer Matrix Reporters. 17 The Commissioners would like to remind those of 18 you who are testifying when you get up to speak to 19 speak into the microphones so that the person or 20 persons -- so that people in the back of the room can 21 hear and so that the court reporter can capture what 22 you say as well. 23 Today's public hearing is concerning whether 24 propane is being wasted in operation of the Prudhoe Bay 25 Unit. This hearing is being held in accordance with 20 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 4 1 AAC 25.540 of the Alaska Administrative Code. This is 2 a continuation of a hearing that was held on May 22nd, 3 2012 and it was continued because some of the key 4 people testifying were unable to make that date. 5 A letter dated December 7th, 2011 from a 6 concerned citizen of the state of Alaska requested that 7 the AOGCC consider and investigate whether propane is 8 being wasted in the operation of the Prudhoe Bay Unit. 9 Under AS 31.05.030(b), the AOGCC is required to 10 investigate whether or not waste is occurring or is 11 imminent. In accordance with this statute on January 12 3rd, 2012 the AOGCC sent a letter to BP Exploration 13 Alaska as operator of the Prudhoe Bay Unit requesting 14 information on the volume and composition of the 15 various gas streams in the Prudhoe Bay Unit and about 16 the propane miscible injection processes used within 17 the unit. BP responded to our request by a letter 18 dated and received February 6th, 2012. 19 At the April 4th, 2012 AOGCC public meeting and 20 after a briefing by AOGCC staff and comments from 21 members of the public, the AOGCC decided to hold a 22 public hearing in this matter. The AOGCC has received 23 three written comments in June by Nels Anderson, Jr., 24 former Alaska Energy Advisor to Governor Murkowski; 25 Michael Harper, former Deputy Director of the Alaska Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEING 6/19/2012 • DOCKET No. OTH -11 -51 Page 5 1 Energy Authority; and Marsha Davis, General Counsel for 2 Calista Corporation. 3 Notice of this hearing was published on April 4 22nd, 2012 in the Journal of Commerce as well as the 5 state of Alaska online notices and the AOGCC website on 6 April 11th, 2012. 7 As I said before the hearing is being held in 8 accordance with 20 AAC 25.540 of the Alaska 9 Administrative Code and it is being recorded. 10 Now before we start taking testimony today we 11 just want to remind those who testify that the purpose 12 of today's hearing is to gather information and make a 13 record regarding Mr. Harold Heinze's request that we 14 investigate the potential for waste concerning propane 15 at the Prudhoe Bay Unit. We reserve the right to bring 16 testifiers back to the topic under discussion if we 17 feel that you're in the technical terms, wandering off 18 to the broccoli. And for those of you who may not be 19 familiar with this type of hearing, it's not an 20 adversarial hearing, no one but the Commissioners has 21 the right to question witnesses, however if you feel 22 that there's a question that should be asked but hasn't 23 been asked, please submit that question in writing to 24 our Special Assistant who's doing the float wave right 25 now and she will see that we get it. If the Commission Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 S DOCKET No. OTH -11 -51 Page 6 1 agrees that it is a relevant and appropriate question 2 then we will ask it. 3 All right. What we typically do in this sort 4 of hearing is let the applicant testify first. And, 5 Mr. Heinze, you're the person who requested this 6 hearing so you get to go first. 7 We'll just recess for a few minutes while Mr. 8 Heinze gets himself set. 9 10 (Off record - 9:09 a.m.) 11 (On record - 9:12 a.m.) 12 CHAIR FOERSTER: Okay. Back on the record and 13 before you start, Commissioner Norman, do you have any 14 comments before the hearing begins? 15 COMMISSIONER NORMAN: Yes, thank you, Chair 16 Foerster. Just one general comment. Many of you are 17 well known to the Commission, but each hearing record 18 stands on its own and so when you come before the 19 Commission you have to talk as if you're talking to 20 people that may be reading the record three or four or 21 five years from now and may not know. So if we ask you 22 to identify or state your credentials, it doesn't mean 23 that we don't recall you from seeing you many times, 24 it's simply that in a record to be complete it has to 25 say more than I recall. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 7 1 Thank you. 2 CHAIR FOERSTER: Thank you. All right. Mr. 3 Heinze, first I'll swear you in. 4 (Oath administered) 5 MR. HEINZE: Yes, I do. 6 HAROLD HEINZE 7 called as a witness on his own behalf, stated on 8 follows on: 9 DIRECT EXAMINATION 10 CHAIR FOERSTER: Okay. Would you give us your 11 name for the record. 12 MR. HEINZE: Commissioner Foerster, my name is 13 Harold Heinze, I reside at 1336 Staubbach Circle, 14 Anchorage, Alaska. 15 CHAIR FOERSTER: Okay. And who do you 16 represent today? 17 MR. HEINZE: I am here representing myself 18 today. 19 CHAIR FOERSTER: Okay. And no one better to do 20 that. 21 MR. HEINZE: I do have a consulting business if 22 you'd like to hire me for that I'd be happy, but I am 23 here representing myself today. 24 CHAIR FOERSTER: We have a drilling engineering 25 vacancy, are you a drilling engineer? Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 8 1 MR. HEINZE: Well, I could be. 2 CHAIR FOERSTER: Okay. We'll talk after the 3 hearing then. 4 Mr. Heinze, would you like to be considered an 5 expert witness? 6 MR. HEINZE: Madam Chair, again I don't portend 7 to be an expert witness. I am highly qualified to talk 8 about the matter before the Commission and that's what 9 I'd like to illustrate to you with a short resume here 10 of my experiences that are extremely relevant to this. 11 CHAIR FOERSTER: But you don't want to be 12 MR. HEINZE: I don't see any reason to be. 13 CHAIR FOERSTER: Okay. 14 MR. HEINZE: I -- I'm sorry, I'm not in a 15 position 16 CHAIR FOERSTER: Okay. 17 MR. HEINZE: to have the knowledge of -- 18 the intimate knowledge of the day to day and I do not 19 have available to me the engineering tools I might have 20 had in my past. 21 CHAIR FOERSTER: Okay. 22 MR. HEINZE: Okay. 23 CHAIR FOERSTER: Well, proceed. 24 MR. HEINZE: Okay. Thank you, number 1, for 25 the opportunity to appear before the Commission. This Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 9 1 started a number of months back and frankly the quest 2 that I'm on here started frankly a few years ago. And 3 I appreciate being -- to achieve a little bit of a 4 climax today on getting this out there on the table and 5 getting things in front of the Commission. 6 I am a petroleum engineer, I came to Alaska in 7 1969, I was involved in the early testing of Prudhoe 8 Bay wells, I was a reservoir engineer for a number of 9 years including being the reservoir engineering manager 10 for then ARCO, operator of the Eastern Operating Area. 11 I did some of the earliest reservoir simulation work on 12 Prudhoe Bay. I was the engineering manager for ARCO 13 when we brought the field on in 1977, I was intimately 14 involved in the negotiation of the Prudhoe Bay Unit 15 Operating Agreement as part of those duties. I 16 returned in 1984 to serve as President of ARCO, Alaska 17 so as ARCO's chief executive in the state I presided 18 over the Eastern Operating Area, I was also ARCO's 19 representative to the Prudhoe Bay Unit Owners 20 Committee, so a great deal of the unit stuff is not a 21 total mystery to me, at times I get a little confused 22 as to how things have changed, but 23 CHAIR FOERSTER: Don't we all. 24 MR. HEINZE: Yeah. I left Alaska in 1987, but 25 I was still involved with Alaska in that I served as Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 1 I DOCKET No. OTH -11 -51 Page 10 1 President of ARCO Transportation Company, an ARCO 2 branch that had both the TAPS Pipeline and I was the 3 TAPS owner representative for ARCO and also the tankers 4 that called at the Port of Valdez. I left ARCO in late 5 1990 following the election of then Governor Hickle, I 6 was appointed Commissioner of Natural Resources for the 7 state of Alaska and I served in that capacity with the 8 Hickle Administration. In 19 or excuse me, in 2003 I 9 rejoined state service and headed up the Alaska Natural 10 Gas Development Authority and I did so until basically 11 the first of this year. I am now no longer a state 12 employee, I am self - employed in a consulting business, 13 I have a number of different clients, one of them 14 happens to be Matanuska Electric Association. 15 I don't know if you have any questions on my 16 background, if not I'll proceed to the regular 17 testimony. 18 COMMISSIONER NORMAN: I have no questions. 19 CHAIR FOERSTER: Nor do I. Please proceed. 20 MR. HEINZE: Madam Chair, I do have copies of 21 this presentation I'm prepared to distribute to the 22 audience or I can do it at the end or however you wish 23 to do this, it's about eight, nine slides. 24 CHAIR FOERSTER: Well, what we do need is for 25 you to give one copy to the court reporter Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 0 I DOCKET No. OTH -11 -51 Page 11 1 MR. HEINZE: Okay. I will do that. 2 CHAIR FOERSTER: and -- before we leave 3 today. And I would just say make them available to 4 people who want them. 5 MR. HEINZE: Okay. Thank you. 6 CHAIR FOERSTER: And if we don't have 7 sufficient copies then we can work it through our 8 MR. HEINZE: Sure. 9 CHAIR FOERSTER: Special Assistant. 10 MR. HEINZE: Thank you for the opportunity to 11 appear. Basically on December 7th I raised with the 12 Commission what I consider to be three issues related 13 to propane at Prudhoe Bay. And this slide simply 14 restates them in as focused a way as I could. Number 15 1, there is a local market for Prudhoe Bay propane, 16 there may not have been five years ago or 10 years or 17 30 years ago, but there is today a market. It is a 18 market that serves Alaskans, it is simply a matter of 19 trucking propane from Prudhoe Bay to rural and interior 20 communities. Secondly it is my contention that that 21 local propane market could be supplied by the existing 22 propane recovery facility located as part of the 23 central gas facility. That facility is operated only 24 infrequently and the them I'm going to strike is that 25 basically instead of turning the switch off every month Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 • DOCKET No. OTH -11 -51 Page 12 1 after a day and a half that it should be left on and 2 that propane can be made available and people will -- 3 are available to make some things happen. And then the 4 third point is that the failure to make that propane 5 commercially available for this local beneficial use 6 will result in lost recovery and it constitutes waste 7 within the meaning of the Alaska Oil and Gas 8 Conservation Act. So those are the three ideas that 9 I'd like to develop with you. I have had a chance to 10 review BP's letter response to you. I have prepared 11 some analysis of it, again it's spreadsheet stuff, I 12 wish it was more sophisticated, but I do still remember 13 how to do division and percentages and kind of check 14 where things go and don't go. As part of that I will 15 also provide you with my interpretation of the 16 information they have provided you. And let me start 17 that by simply saying when I raised this issue in 18 December last year and when I -- I didn't raise those 19 issues 12/07/12, it was '11, thank you. I'm sorry, 20 it's a mistake on the chart. When I raised those 21 issues and subsequent to it I presented my own view of 22 what a simplified process diagram looked like for 23 Prudhoe Bay and all that, that information is already 24 part of the record, I'm not going to go back through it 25 other than to tell you that I will identify to you Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 • Page 13 1 where I got it wrong and I got some of the estimates 2 and things I made wrong. On the other hand the new 3 information only fortified my belief that there is a 4 problem here that the Commission needs to deal with. 5 Starting with the local market then, and I 6 intend to kind of go through each of the points and 7 just delve further into them. And again I don't 8 necessary need to go into every one of these in great 9 detail unless you wish, but basically for the last 10 couple years private sector companies have approached 11 BP, have worked to provide an opportunity to both 12 market, store, load, work the logistics of and about 13 everything else you can think of. And these are 14 legitimate Alaskan companies, they have legitimate 15 interests in trying to be part of this process. Some 16 are already in the propane business, some this would be 17 a new venture, some are more native based, some are 18 pure entrepreneurs. The waters have been tested not 19 only with these commun -- or with the companies, but 20 with communities all around the state. And there is an 21 incredible pull because of the high cost of energy 22 especially in rural Alaska for an alternative energy 23 which is propane. And the availability of a local, 24 secure supply for that is very important in the 25 conversion and the introduction of that type of thing Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 14 1 because people literally in terms of heating in the 2 winter are betting their lives on this energy supply. 3 So again this is not taken lightly, in particular I'll 4 draw attention to the Northwest Arctic Borough, they 5 have looked at this extensively with their dozen or so 6 villages along the river. 7 There's been a lot written about this, there's 8 a lot in the public record at times, I think I've 9 shared some of those with you, if you wish I have a 10 fairly complete bibliography now of articles written in 11 a number of publications around the state, a number of 12 letters to the editor, blog comments, you name it, on 13 this stuff. And it's attracted a fair amount of 14 attention because again propane, the idea of energy 15 needs, of energy alternatives, is very powerful. 16 One of the things that has changed as far as 17 propane and why it is much more intense on the propane 18 market situation is that a company called Roush 19 developed a new technology for utilization of propane 20 as an automotive fuel. In the past we've looked at 21 propane as something you vaporize and then burned as a 22 gas. Roush's technique actually works with the liquid 23 propane as in an injection sense puts it to the engine. 24 That eliminates one of the biggest problems propane has 25 in extremely cold temperatures, it also opens up a Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 15 1 tremendous of possibility in this digital age for the 2 control and efficiency of engines and everything like 3 that. To the extent that a number of fleet operators 4 in Alaska have looked at this and there is potentially 5 a lot of attraction including frankly the state of 6 Alaska if there was a locally available propane supply. 7 So that's the market pull I see, I think 8 there's players prepared to stand up and -- very 9 Alaskan players stand up and be part of whatever it 10 takes to store, load, truck, whatever the logistical 11 chain requires to move propane from Prudhoe Bay. None 12 of the ask here puts any of that burden on the Prudhoe 13 Bay Unit owners or the Prudhoe Bay Unit operator. 14 Secondly, I'm going to bounce back and forth 15 between this slide and the one after, I wanted to take 16 a little bit of time and just go over some of my 17 analysis of the BP response letter and in particular 18 looking at the operation of the central gas facility. 19 And let me start with this calculation slide and this 20 is kind of the -- my sort of technical talk of it, 21 hopefully it's not too bad. But rather than look at 22 all the data and all the information that was included 23 in that letter, and there was almost a mind boggling 24 array I will tell you in reading it, of information. I 25 have focused down here simply on propane, I basically Computer Matrix, LLC Phone: 907 -243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 16 1 have just taken the propane related information out of 2 that letter and tried to focus on it. 3 Number 1, what this slide 4 CHAIR FOERSTER: Mr. Heinze, we -- I'm so sorry 5 to interrupt you, I should have said something earlier. 6 We are creating a public record 7 MR. HEINZE: Okay. 8 CHAIR FOERSTER: and when we refer to this 9 slide 10 MR. HEINZE: Oh, I'm sorry. 11 CHAIR FOERSTER: you know, for the people 12 that read this 20 years from now, the slide titled 13 or 14 MR. HEINZE: Yeah. 15 CHAIR FOERSTER: the slide numbered 16 MR. HEINZE: Right. This slide is titled 17 Propane Streams at PBU Central Gas Facility. And it 18 illustrates two different streams related to the 19 central gas facility, basically the stream coming in 20 and what's called the residual stream going out, that 21 is the stream that goes to fuel and to be reinjected. 22 Okay. There are a number of other streams which we'll 23 look at in a minute that relate to miscible injectant, 24 NGLs to TAPS and so on, but in terms of the fundamental 25 performance of this gas facility this is the stream in Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 • DOCKET No. OTH -11 -51 Page 17 1 and the stream out. And all I've done here is 2 calculate for the mole percents, the concentration of 3 C3 specified in the letter and the gas flows indicated 4 in the letter, I've converted that to barrels per day 5 of propane. And basically what it illustrates if that 6 the CGF is recovering from over 100,000 barrels of 7 propane a day something approaching 40,000 barrels a 8 day. Now both those numbers are staggering. The issue 9 and point here I'll just make clear to you, is about 10 500 barrels a day would take all this issue a long way 11 down the road. I don't know if that's the right answer 12 in the ultimate, but it's certainly a more than big 13 enough answer to start with. So 500 barrels a day 14 compared to any of these numbers is number 1, very 15 small. 16 Second of all those are staggering amounts, 17 again take even the 40,000 barrels a day of propane 18 that is recovered as part of the CGF operation, 19 multiply that by 40 and you're well in excess of a 20 million gallons a day of propane. And again in terms 21 of any rational look at the needs here in Alaska that's 22 a huge number. 23 Now the other bad news on this chart though is 24 that the recovery here is only 35 percent. And for 25 those of you familiar with gas plant operations Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 18 1 generally around the world and the United States, 35 2 percent recovery is fairly low if not extremely low. 3 And the reason is that propane is quite easy to recover 4 in the temperature range of about minus 45 degrees 5 which is not hard to achieve through a number of 6 different ways, you can drop out probably twice that 7 percent recovery. And so again the analysis number 8 indicates that there is a volume being recovered, but 9 two - thirds of the propane that is being brought to the 10 surface is not being recovered, it is not being 11 utilized and it is being returned to the ground in the 12 residue. 13 So here's again kind of my statement of these 14 things. First of all number 1, when I started this I 15 looked back at the literature and what's available in 16 terms of public information and it describes the gas 17 capability of Prudhoe Bay as 8.7 billion cubic feet a 18 day, I went back and checked. In this case the 19 reported number's only 6.8, I'm unable to explain the 20 discrepancy, but I would consider that to be a fairly 21 serious information discrepancy. The 35 percent 22 recovery is very low, clearly the plant as you'll see 23 later on is operations maximize the butane portion of 24 NGL for blending in TAPS and the off lease use in the 25 Kuparuk. But obviously they're not achieving very good Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 19 1 recovery on the propane in that same facility. 2 And again the point here I guess I would make 3 is that in kind of looking at how the CGF plant -- and 4 it is a huge plant, I mean, it's processing a huge 5 amount of gas on the world scale, but very frankly a efficiency would 6 very slight change in its recovery e y Y g g Y 7 more than cover the amount of propane that is at issue 8 here in terms of being made available. And I really 9 believe that that can be done without impacting the 10 miscible injection operation or the miscibility 11 pressure specifications or anything else. 12 As I've indicated to you my past I have been 13 associated with this facility, basically the gas 14 operations at Prudhoe Bay since the design days. And I 15 have infinite faith in the operating people who turn 16 the valves and rotate the dials and turn the switches 17 on and off to run these facilities extremely well. And 18 my sense is that they have not been challenged on the 19 propane issue. My sense is that this facility works to 20 maximize butane, but it is not trying to make propane 21 available. 22 I'd also like to examine the sort of propane 23 manufacturing capability that is embedded in the 24 facility. And again better probably to start with this 25 table and then I'll come back to the conclusions or the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 20 1 observations I've made. 2 CHAIR FOERSTER: Mr. Heinze 3 MR. HEINZE: This one is titled Propane in Gas 4 Uses Supplied by the CGF. This is the other side of 5 the coin. I previously showed you sort of the in and 6 out and the differences, recovery, this is where it all 7 kind of goes. If you're recovering something in the 8 range of 40,000 barrels a day of propane where does it 9 go. And as you can see on this chart the very large 10 volume of it, almost -- over 85 percent of it, does go 11 indeed into the miscible injectant. So the plant is 12 definitely being utilized to make miscible injectant 13 and that is consistent with its very primary use. You 14 will notice on the scale of this that the same stream 15 that is the miscible injectant is where the refrigerant 16 recovery of propane occurs and I've indicated that as 17 something that has a very minor flow because it's a 18 facility that maybe has a capability of about 500 19 barrels a day, but it's only on for a day and a half a 20 month. So its actual recovery in this case of the 21 propane is less than a tenth of a percent. The 22 facility also produces NGLs that are routed to both 23 TAPS for blending at Skid 50 and to the Kuparuk for a 24 number of uses including blending FOR and maybe even 25 fuel. I'm not aware of all the pathways it takes other Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEMIL 6/19/2012 410 DOCKET No. OTH -11 -51 Page 21 1 than the reported volume in this case going to the 2 Kuparuk. There is propane in both of those streams, 3 the Kuparuk of course is an off Prudhoe Bay Unit use 4 and so again the propane is leaving the Prudhoe Bay 5 Unit and that raises a number of questions which I'll 6 get to here in a little bit. 7 Additionally the other big use of propane or 8 where a majority of the propane stream that is 9 recovered, again remembering two - thirds is not 10 recovered, the one -third is recovered is what we're 11 talking about here, that one - third, a portion of that 12 goes for fuel and its being burned as just a BTU 13 source and the fact that propane is mixed in with the 14 methane is just -- adds caloric value, it has no 15 special value to it. Additionally there is propane 16 sent to Northstar which as you know is a separate unit, 17 not the Prudhoe Bay Unit. So again here's another 18 example of both the Kuparuk and the Northstar that at 19 least based on my calculations there's 750 barrels of 20 propane leaving the Prudhoe Bay Unit. 21 So to go back and kind of mull back through 22 this thing. What I've suggested here is that if you 23 turn down the propane recovery facility and instead of 24 limiting it to one and a half days per month you put it 25 at its 500 barrel a day capacity, it dwarfs all the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEIG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 22 1 other propane things that are going on on the bigger 2 scale and again it certainly as I've indicated is well 3 within the scale of the amount of propane just 4 currently leaving the Prudhoe Bay Unit. So the first 5 bullet point here refers to the fact that the propane 6 being reinjected as a miscible injectant that's great, 7 but the residue gas, the two - thirds of the gas where 8 most of the propane is being reinjected is not in any 9 sense the same as the miscible injectant, it is being 10 injected into the gas cap area and it is not in contact 11 with the oil, I'm not aware of any claim that that two - 12 thirds propane has any special property other than the 13 molecules occupying space as a gas. 14 Additionally I did go ahead also and look at 15 what was going on in butane because -- I have here a 16 slide that says Butane Volume, PB Unit CGF. Again I 17 took the numbers from the letter, did the calculation 18 converting the mole percents and gas flows to butane 19 volumes in terms of barrels per day. And again in this 20 case there's about 32,000 barrels a day coming into the 21 plant and a little over 10,500 going out, so that's a 22 recovery of over 20,000 barrels a day, about two - thirds 23 of the butane is being recovered. And again that 24 strikes me as within reason especially recognizing a 25 number of the issues related to the transport of Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 23 1 butane. If you kind of look at where that butane goes 2 you see again very little of it has anything to do with 3 miscible injectant, only a very small fraction of it is 4 in that. The miscible injectant is dominantly the CO2, 5 the methane, ethane, propane components, it's not 6 butane in any large degree. But there is a large 7 amount of butane being sent to both TAPS which was 8 again the stated purpose of this facility originally 9 and a number of barrels of it are sent to the Kuparuk 10 River Unit. And again as I'll draw your attention to 11 here, this is 7,500 barrels a day plus leaving the 12 Prudhoe Bay Unit in the form of butane. Now again the 13 call here is about propane, the only reason for raising 14 it to you is that in normal spec for a propane product 15 that would be used as a fuel, up to 10 percent butane 16 would be very acceptable in it. So again there is a 17 volume here that again kind of helps with the whole 18 story on it. 19 So going back and just finishing up then, over 20 750,000 barrels a day of propane, 7,500 barrels a day 21 of butane currently leaving the Prudhoe Bay Unit 22 without being made available for the state of Alaska to 23 take royalty in -kind, again remembering the state is a 24 royalty owner on this and when things leave the unit 25 they are subject to royalty considerations and in Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEPNG 6/19/2012 • I DOCKET No. 0TH -11 -51 Page 24 1 particular in Alaska the Commissioner of Natural 2 Resources is tasked with the good of the citizens 3 making royalty in -kind available if there are unmet 4 energy needs. So again it's not mine to rule on, but I 5 certainly would commend to DNR that there is something I 6 going on here that needs to be better understood and 7 there may be an opportunity for the state to assert 8 itself in terms of these streams leaving the unit to 9 see if at least 500 barrels a day of propane could be 10 made available. 11 COMMISSIONER NORMAN: Have you raised that 12 point with DNR, the point you just made? 13 MR. HEINZE: Commissioner, I have since 14 December 7th copied the Commissioner of Natural 15 Resources and the Director of Division of Oil & Gas on 16 every bit of correspondence and every claim and 17 everything I've ever done on this. I have not had any 18 conversation with them, I have never had any feedback 19 or correspondence from them, but they have been 20 informed of the issues. 21 And finally let me just sort of get to this 22 last point here and I brought with me my -- again I'm 23 not a lawyer, but I do kindly have the oil and gas 24 statutes with, somebody was kid enough to send them to 25 me a number of years ago. I think there's three pieces Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEING 6/19/2012 • DOCKET No. OTH -11 -51 Page 25 1 to this puzzle, it seems extremely clear to me that if 2 one brings something to the surface and you have an 3 opportunity to capture it, to market, sell it, 4 whatever, use it, and you don't and you put it back in 5 the ground, even putting it back in the ground, you are 6 always behind, you are always going to recover less 7 than if you had just simply grabbed ahold of it while 8 you had it, even if you don't get all of it take a 9 little piece of it. And however small the volume is 10 you basically are always behind the curve. And 11 unfortunately in the case of Prudhoe Bay there is not 12 an absolute recovery point, there is a time limit, 13 there is a moment at which things will stop. And 14 whether we captured the propane or not will not change 15 that time, the time will be forced on by other 16 considerations as to whether we maximize that propane 17 recovery or not. So again failure to grab it while 18 it's there sets the stage for lost production. 19 I also in this case, and again this is 20 something I do not have the sophistication in terms of 21 information of the reservoir modeling, but it concerns 22 me profoundly that the residue gas containing two - 23 thirds of the propane that we could have been working 24 on is going back into an area of the gas cap that is 25 adjacent to or associated with the water injection into Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 26 1 the gas cap which I know to have some elements of risk 2 in it from the earliest days we evaluate it. Now maybe 3 people have a much better understanding now, maybe my 4 fears are unfounded, but it may very well be that the 5 residual injection of propane is going into an area 6 that will achieve below average recovery. And again I 7 can't answer that question, I can only raise the 8 concern. 9 And then finally I'm just going to observe to 10 you there is -- as a matter of fact one of the reasons 11 I believe we really delayed the hearing from May was 12 that there was an arbitration that started that day and 13 that arbitration was between the state of Alaska and BP 14 Exploration. It was in settlement of a lawsuit the 15 state had filed against BP for the lost production 16 during the pipeline replacements for corrosion. And 17 that arbitration is going on, it's a confidential 18 arbitration, I have no knowledge of that, but I do 19 certainly understand the issues raised by the state in 20 that. And I think you would find that the state in 21 that arbitration is raising almost identical issues if 22 not highly similar issues to what I am raising with you 23 here today in terms of lost production and the 24 significance or failure to capture something when there 25 was an opportunity and getting behind the curve. So Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net 2012 19 6 • TRANSCRIPT OF PROCEE�G 6/19/2012 DOCKET No. OTH -11 -51 Page 27 1 again there may be some point at which the state of 2 Alaska or somebody else may be able to share those 3 thoughts with us, but I -- it's my belief that the 4 state of Alaska has taken a position in that 5 arbitration not dissimilar to what I am presenting to 6 you today. Doesn't make me right, but I'd rather have 7 the state on my -- agreeing with me than not. 8 9 And then finally I -- you know, to the bottom 10 line of all this what am I asking really from the 11 Commission. Well, you really did one of the biggest 12 things I wanted which was you got some information 13 because when I started through this process very 14 frankly I encountered talk to the hand, I -- it was 15 very hard to find out anything, I had a lot of concerns 16 as to why even minimal volumes of propane could not be 17 available and I had a hard time finding out anything. 18 Fortunately I had enough recollections of the past and 19 I'm a pretty good guesser, estimator in other things 20 and I kind of put together a set of numbers that I 21 think at least demonstrated to you the possibility that 22 some of this was right. In any case I think the 23 changed conditions and in particular I'm going to draw 24 attention to the decline of TAPS flow rate that 25 dramatically affects the blending of the NGLs. The Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEMG 6/19/2012 1 DOCKET No. OTH -11 -51 Page 28 1 facility -- central gas facility was basically put in 2 to put NGLs into TAPS, it's clearly limited by how much 3 oil there is and the characteristics of that oil that 4 has dramatically changed since this facility was 5 installed. I couldn't find the exact date that you 6 approved the Prudhoe Bay miscible injection project, 7 but I suspect it is more than two decades ago. And 8 again I'm not quick enough at searching your records to 9 find out if there's been a full public hearing on it 10 since then, but I seriously doubt it. I would argue 11 that for informational reasons, for change in TAPS 12 characteristics, NGLs, and very frankly just the 13 performance of the MI project, you may want to look at 14 what the whole miscible injectant situation is. And 15 again I harken back to my early days when we first 16 started to talk about miscible injectant, there is no 17 exact formula for what a miscible injectant looks like 18 and how to make it more effective or whatever. In many 19 ways it's a witches brew and you work with what you got 20 and if you got 2CO2 I -cubes or something you work with 21 those and you put it together in a proper way. It may 22 be time to reexamine some of those issues, the 23 reservoir pressure today is lower than it was when you 24 started this project. 25 Secondly it seems unfortunate to me that we had Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 29 1 to go down this route to get what I consider to be some 2 very basic CGF performance data. And again I'll just 3 point out to you for instance the letter you received 4 was an annual average of a number of things for the 5 year 2011. Now wow, what if I had had 20 years by 6 month of that same information, I might have been able 7 to figure out some things in terms of trends, I might 8 have been able to see where some of the issues were and 9 I might frankly have felt better about the fact that I 10 was told to go away. So again I don't see any reason 11 that the CGF performance data needs to be confidential 12 or proprietary or anything else, it looks to me just 13 like well production reporting data and that as you 14 well know in Alaska is a monthly event, it is not -- I 15 mean, it's generally available online frankly in data 16 bases and I think you need to seriously look at some of 17 this facility performance data being reported on a 18 similar basis to the well data. 19 And then finally I don't know what's going to 20 get said or not said later, you got me up here first, 21 but I have this sinking feeling that I'm not going to 22 be entirely satisfied, it's going to be like eating 23 Chinese, I'm going to probably wake up a few hours from 24 now and still be hungry for more no matter what BPX 25 today says. So I again would ask you to consider in a Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 30 1 timely sort of way, not urgent, but in a timely sort of ( 2 way asking the Prudhoe Bay Unit operator to present to 3 you a plan, a study, anything that shows they are 4 thinking about how to improve the propane recovery. 5 I've seen a lot of effort put into explaining to me why 6 they couldn't recover more propane and I guess in the 7 old days I would have kind of asked some folks to kind 8 of think about how we do improve the propane recovery,I 9 think that's the challenge here. And I don't have any 10 reason to believe that the companies and the operating 11 personnel aren't up to that, but I just haven't seen 12 it. So again if there's some way for this start we've 13 made here today to lead to things over a period of 14 time, I -- that my, I guess, bottom line suggestion to 15 you. 16 And that's all I really had to say today. 17 CHAIR FOERSTER: Thank you, Mr. Heinze. Would 18 you like to take a recess to talk briefly before we ask 19 questions or are you prepared to ask questions? 20 COMMISSIONER NORMAN: I think that's a good 21 suggestion, it may save a bit today 22 CHAIR FOERSTER: Okay. 23 COMMISSIONER NORMAN: if we consolidate 24 some questions. If any members of the audience also 25 have -- public have some questions you might give them Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEED'NG 6/19/2012 • DOCKET No. OTH -11 -51 Page 31 1 to Ms. Colombie and then we can distill them down 2 and 3 CHAIR FOERSTER: Yeah. 4 MR. HEINZE: And I can take that opportunity to 5 pass out some copies of the presentation. 6 CHAIR FOERSTER: Good idea. And so at this 7 time we'll take a brief recess and readjourn [sic] in 8 20 minutes so at 10 after 10:00. 9 (Off record - 9:48 a.m.) 10 (On record - 10:10 a.m.) 11 CHAIR FOERSTER: All right. It's 10 after 12 10:00 and we'll go back on the record. And when we 13 recessed Mr. Heinze had just finished his testimony and 14 now we'll see if there are any questions. 15 Is it -- can people in the back of the room 16 hear me? 17 (No comments) 18 CHAIR FOERSTER: Okay. Commissioner Norman, do 19 you have any questions for Mr. Heinze? 20 COMMISSIONER NORMAN: I just have a couple 21 areas that are on my mind on points you've raised, Mr. 22 Heinze. First of all the basic question of waste, that 23 really is our jurisdiction. Other agencies, of course, 24 exist to supply energy to the state of Alaska and 25 they're doing a good job at that, but our jurisdiction Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahiie @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 1 DOCKET No. OTH -11 -51 Page 32 1 rests on finding if there is waste or waste is 2 imminent. So could you again go over the points you 3 made about waste. As I understand it to help out, I 4 guess, expedite it, I understand that your point is 5 that the mere act of cycling a resource, I think it's 6 sort of obvious that if you did that long enough you're 7 going to have nothing left, there's a certain amount of 8 attrition every cycle. And if I've misstated that tell 9 me. And the second point I heard you made was that 10 some injection into the gas cap might be stranded 11 behind water and are there any other points, can you 12 put a little sharper focus on exactly how you see waste 13 occurring? 14 MR. HEINZE: Thank you, ank Commissioner Norman. , 15 The basic thesis I guess I have is that the context of 16 waste in the Conservation Act includes the concept that 17 if an operator is proceeding under a plan of operation 18 that misses an opportunity to recover something that 19 that operator, I think, is burdened with demonstrating 20 that they can make up for that in the future, that they 21 can recoup it. Because if they can't then I believe 22 it's just de facto that you're behind and whatever it 23 is you think you're going to do other than recoup 24 somehow, you can't catch up, you can't catch up in 25 something that has a 30 year life or a 50 year life or Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 0 I DOCKET No. OTH -11 -51 Page 33 1 a 100 year life. And I think all the work that's ever 2 been done on Prudhoe Bay looking at its end game and 3 all those type of things looks forward to the fact that 4 there will come a moment where there's just an 5 inability to support the cost structure and you stop. 6 And very frankly at that point there will be things, 7 good and valuable hydrocarbon molecules left in the 8 reservoir. 9 On a perspective basis I think the Commission 10 clearly looks at all the different aspects of that to 11 ensure that planning, for instance, is occurring right 12 now for future gas sales so that that possibility is 13 accommodated in today's operations and steps taken to 14 maximize that recovery. Again 10 years ago I wouldn't 15 be sitting here talking to you about propane this way, 16 but I am sitting here today because there is a 17 legitimate opportunity however small on the scale of 18 Prudhoe Bay, and I don't care if it's 1 percent of 19 Prudhoe Bay at stake here, there is an opportunity to 20 do something. So I believe the statute is blind as to 21 the amount of waste. I believe it's waste, if it's a 22 little waste that's just as bad if it's big waste. I 23 think the failure to produce looks a lot like me -- to 24 me like just sort of burning it or throwing it on the 25 ground and all those things are clearly prohibited by Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 34 1 the statute. I mean, I can't tell you the difference 2 between failing to capture something and just 3 incinerating it, for instance. You know, it looks kind 4 of the same to me because it's all going to be gone and 5 I'll never see it again and all those type of things. 6 And you're right, things do cycle around, but again 7 unfortunately it's not 100 percent process, you're 8 capturing a piece of it every time you get a crack at 9 it. And how much you capture is not influenced by what 10 you missed before. Okay. And so you end up in this 11 thing again of being behind I guess is the easiest 12 concept I can use to explain. 13 The other idea is that again I have not been 14 involved with the super sophisticated reservoir models 15 of Prudhoe Bay and I know there are technical papers 16 written about a lot of the things and there's a lot of 17 new technologies related to sensing how water will 18 migrate as injected into the gas cap area. But the 19 fundamental issue of putting water into a gas reservoir 20 last time I looked for basic reservoir engineering is 21 pretty scary. And the reason is simple, there's a huge 22 contrast in the flow characteristics of water and gas. 23 And basically when you put water into oil you have some 24 ability to kind of push things around, if you have 25 something to push against, if I can put it that way. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 1 DOCKET No. OTH -11 -51 Page 35 1 In gas that's not the case and it can slump, it can run 2 around on you, it can do a lot of other things. The 3 force of gravity on the water is much more significant 4 than the force of gravity on the gas. And all those 5 things can lead to control issues in terms of the 6 ultimate recovery. And again if we were in an area of 7 the gas cap where there was largely either a very low 8 value product or an inert product or something else, 9 fine, but in this case the two - thirds of the propane 10 that you're getting a crack at is being put back in the 11 ground. And so I guess what I'm trying to suggest is 12 that as part of maybe a revisiting just simply because 13 of the passage of time of some things it might be 14 appropriate to look at whether there's a plan that 15 improves upon the recovery of propane as part of this 16 whole issue. And again how much improvement, I think 17 that's something to be kind of worked out in the 18 details. 19 COMMISSIONER NORMAN: Thank you again. So then 20 what I'm getting from you just to be sure I've got it 21 right is that there is a concern about 22 (Off record comments - microphones) 23 COMMISSIONER NORMAN: Mr. Heinze, then on the 24 focus subject of waste which is in our jurisdiction 25 there's the concern that eventually we will come to end Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 36 1 of life for the field and whatever remains in the 2 ground at that point is likely just to remain there. 3 And your point is that if it's at the surface now why 4 not capture it and put it to some good use rather than 5 allowing it to be cycled and reaching that end of field 6 life. The second point that I took away which is 7 somewhat related is that in the act of cycling itself, 8 even if you never reached and end of field life, you 9 may eventually have some attrition and loss of the 10 resource. A third -- and then the third point of 11 potential waste was a concern you raised about having 12 an injection into the gas cap and where that resource 13 might wind up. Are there any other areas? 14 MR. HEINZE: No, Commissioner Norman, but I 15 guess just to be clear on the two pieces of what you g just p Y 16 said there, one is the context of reservoir management 17 and again your duties are difficult because there's 18 oil, there's gas, there's propane, there's lots of 19 different hydrocarbon recoveries to be balanced in all 20 this. And it may be that the facilities that are there 21 are being operated, it may be that the plan of 22 operation needs some tweaking and again that tweaking 23 is certainly yours to consider, you know. I mean, 24 again I don't know what -- how often one ought to 25 revisit these things, but it seems that it may be time Computer Matrix, LLC Phone: 907 - 243 - 0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH-11-51 Page 37 1 in my mind at least. And so that is the prevention of 2 waste when you do that. Okay. I think at the same 3 time you have a responsibility under the statute to 4 challenge the operators to undertake good activities to 5 improve recovery and that is also the prevention of 6 waste. And again it's not your decision, it's you're 7 encouraging them to do things. And I guess I'm trying 8 to strike both those tones at the same time and because 9 I do feel that the owners and the operators of Prudhoe 10 Bay have a responsibility not only in their own 11 economic sense to maximize the recovery, I believe that 12 is their responsibility as leaseholders and more 13 importantly under the state statute for conservation. 14 And there's no wiggling out from under that one as far 15 as I'm concerned, they are responsible to do that. And 16 if something is not a good idea or can't be done, it is 17 their roblem to p prove that to you, not the other way 18 around. And again that's why I feel kind of funny in 19 these proceedings is that yes, I am raising some 20 challenges, but I'm sorry, it's not my -- it's not my 21 -- I don't have to prove something, I just have to 22 raise some very legitimate concerns and I think the 23 operator owes you a very full public explanation. 24 COMMISSIONER NORMAN: Thank you, Madam Chair. 25 CHAIR FOERSTER: Mr. Heinze, how long has the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 38 1 Prudhoe Bay reservoir been producing propane? 2 MR. HEINZE: As far as? 3 CHAIR FOERSTER: Since it began producing. 4 MR. HEINZE: The gas stream has always had a 5 reasonable propane content. My recollection is 6 approaching 3 percent in the earlier days. It is not 7 as much as it was at one point in time. 8 CHAIR FOERSTER: And has the propane ever been 9 used for anything other than its current uses? 10 MR. HEINZE: To my knowledge the propane used 11 as a refrigerant at the central gas facility, the 12 refrigerator, the propane manufacturing facility there 13 that has this 500 barrel a day capacity, that has been 14 there a long time. It's my recollection that at one 15 point not only was there a storage tank which the 16 operator referenced in their letter that contained, I 17 don't know, something like 3,000 -- over 3,000 barrels 18 of propane as sort of a standby, but there was actually 19 a pipe that ran from that to a loading rack and there 20 was an ability to truck propane within the field for 21 other facilities to use propane as a refrigerant. To 22 my knowledge there has not been any other propane 23 market or other things done. Again the context of the 24 propane uses other than miscible injectant normally 25 would be in terms of lease use, in the case here though Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDZIVG 6/19/2012 DOCKET No. OTH -11 -51 Page 39 1 I'll also flag to you that it's very clear in the 2 response from BP that a certain amount of propane is 3 leaving the unit and I don't fully understand all those 4 circumstances. And so being told that it's not 5 available at the same time that the propane is leaving 6 the unit leaves me in a quandary as to what's going on. 7 CHAIR FOERSTER: And the propane is produced at 8 the CGF? 9 MR. HEINZE: Basically in this case the -- the 10 CGF acts 11 CHAIR FOERSTER: Extracts it. 12 MR. HEINZE: Well, the CGF acts to produce an 13 NGL product that is basically butane and heavier 14 components that can be blended into TAPS. Because of 15 vapor pressure considerations on TAPS that becomes a 16 very limited amount that can be done. Again not 17 insignificant, that's 25, even maybe 3,000 barrels a 18 day of additional hydrocarbon molecules going down TAPS 19 that are a result of this facility. 20 The second purpose of the facility is to 21 produce miscible injectant and again miscible injectant 22 in this case as shown in the composition they've 23 presented to you is CO2, methane, ethane and propane. 24 It has very little to know of butane or anything 25 heavier. And that witches brew of composition has the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 40 1 characteristics of the reservoir of being -- dissolving 2 into the oil, miscible, in the same way that soap and 3 water kind of mix with oil. It's a similar type idea, 4 miscibility. 5 Those are legitimate uses or that is a 6 legitimate use of the propane to enhance oil recovery I 7 think all of us agree with. I know the Commission's 8 approved that process and everything else. So I'm not 9 questioning that. I am questioning whether it's time 10 to revisit that because I believe that initial decision 11 was two decades ago. And it may be time because of 12 changed circumstances and other things to revisit 13 whether that's the right use or whatever. On the other 14 hand it seems to me that that very facility that is 15 producing the miscible injectant has the capability to 16 yield additional propane for fuel, for use outside of 17 the unit. And that capability is there, I just think 18 it's way under utilized. 19 CHAIR FOERSTER: So what has changed that makes 20 an issue now that wasn't an issue -- it wasn't waste 10 21 years ago, but it is now. I'm not following you 22 MR. HEINZE: Okay. 23 CHAIR FOERSTER: on exactly why it's 24 MR. HEINZE: Yeah. Ten years ago if you said 25 what are you going to do about propane and I was the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE• 6/19/2012 • I DOCKET No. OTH -11 -51 Page 41 1 Prudhoe Bay Unit operator I would simply tell you that 2 boy, when we get that gas sales going I'm going to put 3 all of it I can in that gas pipeline. And that would 4 have been exactly how I looked at it. As a matter of 5 fact I have in my background slides, I'll show you 6 calculations of that over and over again and it's big, 7 big numbers. You have a pipeline two and a half, four 8 and a half, 6 billion cubic feet a day, you're moving 9 hundreds of thousands of barrels a day of ethane and 10 propane and large volumes of butane. And that was the 11 attitude that was taken, that other than using the 12 propane for miscible injectant we'll just sort of leave 13 it there and let her sit until we have a big gas 14 pipeline. 15 CHAIR FOERSTER: So was that a wasteful 16 approach or was that 17 MR. HEINZE: I 18 CHAIR FOERSTER: the right approach? 19 MR. HEINZE: again I -- you would have to 20 judge, you're the ones who set the rules, but in my 21 mind there was no other market alternative defined at 22 that point. Unfortunately a few years ago defined to 23 BP, the operator, and the Prudhoe Bay Unit owners was a 24 market opportunity and I believe that is the game 25 changer however small that market is for them not to Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEE 1NG 6/19/2012 I DOCKET No. OTH -11 -51 Page 42 1 pursue it did push it into the category of waste. 2 CHAIR FOERSTER: Okay. But -- all right. I 3 don't have any other questions. 4 Mr. Heinze, would you please stay around for 5 the rest of the hearing and we may need to call on you 6 for follow -up questions after we hear others testify. 7 And if we do so we'll -- I'll remind you of this, you 8 will still be under oath. Is that acceptable to you? 9 MR. HEINZE: Yes, it is. I'll go pay my 10 traffic fines, parking ticket. 11 CHAIR FOERSTER: Okay. Well, it's 10:30 I 12 think that if you're done, Mr. Heinze, then 13 MR. HEINZE: Yes. 14 CHAIR FOERSTER: I think we have time for 15 BP to at least start their -- I don't know how long 16 your testimony is scheduled to last, but we have time 17 for at least an hour, maybe an hour and a half of 18 testimony if that's acceptable to you guys. 19 MS. VAZQUEZ: Yes. 20 CHAIR FOERSTER: Okay. So why don't we take a 21 very, very brief recess just to allow Mr. Heinze to un- 22 setup and -- he can demob and you can mob. So we're 23 recessed at 10:30 for just a few minutes. 24 (Off record - 10:30 a.m.) 25 (On record - 10:31 a.m.) Computer Matrix, LLC Phone: 907 -243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 1 DOCKET No. OTH -11 -51 Page 43 1 CHAIR FOERSTER: All right. We're back on the 2 record. And so, Ms. Weiss, are you going to be the one 3 testifying first? 4 MS. WEISS: I am. 5 CHAIR FOERSTER: All right. So let's get 6 going. 7 (Oath administered) 8 MS. WEISS: I affirm. 9 JANET WEISS 10 called as a witness on behalf of BP Alaska, stated as 11 follows on: 12 DIRECT EXAMINATION 13 CHAIR FOERSTER: And for the record state your 14 full name or what you want to be called. 15 MS. WEISS: Okay. I'm Janet Weiss and I'm 16 currently serving as Vice President of Resources at BP 17 Alaska. My address is 6064 Kalmia Drive, Anchorage 18 99507. 19 CHAIR FOERSTER: And would you like to be 20 considered an expert witness today? 21 MS. WEISS: No, not today. 22 CHAIR FOERSTER: Okay. Then you may proceed. 23 Oh, before you go, as I told Mr. Heinze just remember 24 that we are creating a public record and five years 25 from now this slide show won't be explanatory. I Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 44 1 notice that your slides are numbered so if you can try 2 to remember to identify the slide by its number as you 3 talk to it. 4 MS. WEISS: Certainly will. Thank you. Well, 5 good morning, Commissioners Norman and Foerster, it's a 6 privilege to talk to you today. I'd like to really 7 cover an open today and then we have a slate of expert 8 witnesses to give you more information. 9 I want to cover some main points before we dive 10 into a lot more of a description of the whole process. 11 And I wanted to first start off with making a statement 12 that BP is the operator of Prudhoe Bay and we hold a 26 13 percent working interest. Also would like to state 14 that over the years of operating Prudhoe Bay we've 15 recovered more than 2 billion barrels more than the 16 original estimates and we've done that through various 17 techniques of drilling and EOR and pressure 18 maintenance. EOR you'll hear a lot about, careful 19 chemistry of constructing miscible injectant and what 20 that might do in a reservoir to enhance recovery and 21 pressure maintenance, how valuable those molecules 22 actually are to ensure that we have energized 23 reservoirs. 24 Also want to state that Prudhoe Bay Unit is 25 committed to working with the AOGCC and ensuring that Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 45 1 we are upholding what we need to uphold and minimizing 2 waste. 3 Prudhoe Bay's propane use really maximizes the 4 economic recovery of Alaska's oil and it maximizes the 5 economic recovery from what we know today and the 6 limitations of the facilities that we have and the unit 7 operating agreement about producing NGLs and then 8 producing MI and what we do with that miscible 9 injectant. 10 I'd like to also make a statement that the 11 removal of propane would have a direct and negative 12 impact on the number of EOR barrels we'd recover 13 through enhanced oil recovery processes and that 14 propane remaining in the reservoir could be sold with 15 an economic gas sale. 16 COMMISSIONER NORMAN: Commissioner Foerster, 17 may I ask one question. 18 CHAIR FOERSTER: Go for it. 19 COMMISSIONER NORMAN: I'll ask a question right 20 now while you're on this slide and then you mentioned 21 there may be others so it's more appropriate, but it 22 seems to me some of the bullet points there, I'm 23 looking at bullet point number 4, removal of propane 24 would have a direct and negative impact on the number 25 of barrels of oil in the EOR. So I'm understanding Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 46 1 what you're saying right now is that all the propane is 2 currently being beneficially used and there's none that 3 could be removed to meet the need that Mr. Heinze has 4 identified? 5 MS. WEISS: So the -- with the current 6 limitations of the process if we removed more propane 7 it would remove its ability to be used for like 8 miscible injectant in the process. Now economically if 9 there was a market that you could sell that propane 10 for, yes, the unit owners could make more money, but 11 you would make less oil because you wouldn't have that 12 propane to be used as miscible injectant with the 13 current configuration of the central gas facility. 14 Does that make sense, Commissioner? 15 COMMISSIONER NORMAN: Yeah, it makes a lot of 16 sense. 17 MS. WEISS: Okay. 18 COMMISSIONER NORMAN: Then as I'm understanding 19 and I assume this will be addressed later, in order to 20 expand the ability to remove propane the cost right now 21 is not economic in the judgment of your company; is 22 that correct? 23 MS. WEISS: At this point we do investigate 24 various opportunities to expand that and at this point 25 we haven't found a project that's economic enough that Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEt 6/19/2012 DOCKET No. OTH -11 -51 Page 47 1 all of the unit owners want to proceed with that. So 2 we don't have an expansion option that's economic 3 enough. 4 COMMISSIONER NORMAN: Okay. And my last 5 question at this point is let's just assume, and this 6 is just an assumption, let's assume that there were a 7 very lucrative market for propane right now that would 8 justify that then would the owners be willing to do 9 that? 10 MS. WEISS: The owners would certainly consider 11 something like that if there was a market there. And 12 the trade -off is potentially less barrels that you 13 would get from an FOR process potential. 14 CHAIR FOERSTER: And how would -- how would you 15 make your decision as to a dollar today versus a dollar 16 tomorrow? 17 MS. WEISS: Through standard economics, really 18 understanding net present value of such an investment, 19 rate of return of such an investment. 20 CHAIR FOERSTER: Is it possible that such a 21 decision would have to come before this Commission for 22 approval 23 MS. WEISS: I actually 24 CHAIR FOERSTER: because its potential of 25 waste of ultimate recovery? Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 48 1 MS. WEISS: Given the kinds of decisions that 2 come before the AOGCC I would anticipate that, but I'm 3 not an expert in that area. 4 CHAIR FOERSTER: Okay. 5 COMMISSIONER NORMAN: Commissioner Foerster, if 6 I may. Just again on this point in your mind removal 7 of any additional quantity of propane from the stream 8 right now would have an offsetting negative affect on 9 the ability for EOR, is that an accurate statement? 10 MS. WEISS: So it's within the current 11 abilities of our facilities right now. And you'll have 12 experts that'll go through what does that mean. That 13 particular plant that Mr. Heinze talked about that can 14 take a split stream of propane to recharge the 15 refrigeration, any propane that you would take via that 16 process removes it from your miscible injectant stream. 17 So therefore you can't really get that additional 18 benefit from that miscible process. 19 CHAIR FOERSTER: Okay. 20 MS. WEISS: One last statement and I do want to 21 say that this is slide two of the packet, yes, I just 22 want to remind everybody that as we do seek as 23 operators to really maximize recovery out there, that 24 maximum recovery is really a source of revenue for the 25 state, it's a source of revenue that every citizen of Computer Matrix, LLC Phone: 907 -243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDIN• • G 6/19/2012 I DOCKET No. OTH -11 -51 Page 49 1 Alaska benefits from, helps fund schools, services and 2 helps to fund the permanent fund dividend. 3 CHAIR FOERSTER: Thank you. 4 MS. WEISS: At this point I'd like to introduce 5 our team. So can I just introduce and then they'll 6 come up one at a time, would that be the way to go 7 CHAIR FOERSTER: That's perfect. 8 MS. WEISS: about it? Okay. Our first 9 member of our team is a Senior Staff Process Engineer 10 and that's Bernie Bonnecaze. We also have Bharat 11 Jhaveri who is a Senior Advisor that specializes in FOR 12 and phase behavior. And then we also have a commercial 13 negotiator, Sherri Gould. And they'll go in that 14 order. 15 Thank you. 16 CHAIR FOERSTER: Thank you, Ms. Weiss. 17 MR. BONNECAZE: Good morning. 18 CHAIR FOERSTER: Good morning, Mr. Bonnecaze. 19 Are you prepared to begin? 20 MR. BONNECAZE: Yes, I am. 21 CHAIR FOERSTER: All right. 22 (Oath administered) 23 MR. BONNECAZE: Yes, I do. 24 BERNIE BONNECAZE 25 called as a witness on behalf of BP Alaska, stated as Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCE NG 6/19/2012 DOCKET No. OTH -11 -51 Page 50 1 follows on: 2 DIRECT EXAMINATION 3 CHAIR FOERSTER: Would you -- and you 4 represent 5 MR. BONNECAZE: Yes, I'll introduce myself. 6 I'm Bernie Bonnecaze, I work for BP. And since I am 7 going to testify as an expert at least on the subject 8 of the CGF and its operation. eration. p 9 CHAIR FOERSTER: So we need your qualifications 10 so that we 11 MR. BONNECAZE: Yes. 12 CHAIR FOERSTER: whether to accept 13 you 14 MR. BONNECAZE: Yes. 15 CHAIR FOERSTER: as an expert witness. 16 CHAIR FOERSTER: Briefly I am a chemical 17 engineer and I have 37 years experience in the oil and 18 gas business as well as working for other energy 19 companies. I've been in Alaska for 28 years. I 20 originally in Alaska worked for ARCO Alaska until the 21 merger in 2000. I was involved with the start up of 22 CGF in 1986, I continued in that plant for three years 23 as its engineer and I also was a supervisor of the 24 facility and engineering organization at Prudhoe Bay 25 for a couple years. After that I was involved with Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • 1 TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 51 1 quite a number of gas studies, major gas sales studies 2 for ARCO and then since with BP. I've continued to 3 work CGF issues for just about my entire career. I am 4 the primary modeler for the CGF processor, BP, and for 5 the operator of the unit. So I do have a lot of 6 familiarity with CGF. 7 CHAIR FOERSTER: Commissioner Norman. 8 MR. BONNECAZE: Oh, can I add one other thing 9 at the beginning here so you know. The technical 10 answers that were in BP's response to you earlier this 11 year were prepared primarily by myself so I'm prepared 12 to answer any questions along those lines. 13 CHAIR FOERSTER: Commissioner Norman, do you 14 have any questions to help you in determining whether 15 we can accept Mr. Bonnecaze as an expert? 16 COMMISSIONER NORMAN: I don't. My only 17 question relates to you referred to the responses and 18 that's as I recall the February 6th letter, does that 19 (indiscernible - simultaneous speech) 20 MR. BONNECAZE: I have it right here. We used 21 -- yes, it is the February 6th letter and I have it 22 here. 23 CHAIR FOERSTER: So 24 COMMISSIONER NORMAN: I have no questions. 25 CHAIR FOERSTER: Okay. Nor do I. Commissioner Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCENG 6/19/2012 I DOCKET No. OTH -11 -51 Page 52 1 Norman, are you willing to accept Mr. Bonnecaze as an 2 expert witness? 3 COMMISSIONER NORMAN: Yes, I move to accept him 4 as an expert witness. 5 CHAIR FOERSTER: Okay. I second that. All in 6 favor. 7 IN UNISON: Aye. 8 CHAIR FOERSTER: All right, expert. 9 MR. BONNECAZE: My presentation to you this 10 morning, Commissioners, will be focused in three main 11 areas. One, the CGF design and operation, basically 12 how the plant operates. I thought a little bit of 13 background might be appropriate to this case. That's 14 going to dovetail into some discussion about the 15 limitations concerning product recovery and especially 16 propane. And I also will make a few comments about 17 propane in measured gas sales. I am involved with the 18 LNG project that is currently being studied by the 19 producers and APP, the Alaska Pipeline Project. And so 20 I'm involved with that and I can comment about some of 21 the non - proprietary issues concerning that. 22 Okay. On the first slide and I -- actually for 23 the record this slide is labeled slide number 4 in our 24 presentation. Just as an orientation to the CGF 25 itself, I've included this very simplified block flow Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • 0 TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 53 1 diagram. The gas from the three flow stations and 2 three gathering centers and by this I mean the produced 3 gas from the well production, gas lift is an upstream 4 process so that's taken off separately, but the total 5 gas production minus local fuel and there's about 70 6 million cubic feet a day that is taken off upstream 7 primarily at the GCs for fuel purposes, but all of that 8 gas enters into the CGF, goes to an inlet section and 9 goes into booster compressors. We've got three trains 10 there, the pressure's about 560 pounds on average and 11 I'll speak in averages here, there is variation at 12 Prudhoe. The gas rate, I'll just mention this 13 because it did -- it was mentioned earlier by Mr. 14 Heinze, the stated rate that we had in our reply was 15 6.8 -- a little bit over 6.8 billion. That's an 16 average number, it includes down time. So as an 17 example if we had major facilities out of service 18 that's included in that number. The 8.7 number that 19 was mentioned earlier, that represents a peak rate that 20 would exist at maximum capacity, everything online at a 21 minus 20 degree or colder operating condition. 22 Normally at Prudhoe Bay we see around six -- about a 23 6.0, 6.2, 6.3 billion cubic foot a day rate during the 24 warmest part of the summer, we see about 8.7 peak in 25 the wintertime. I will comment though that over the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 54 1 last few years because of integrity issues at Prudhoe 2 we've had a lot of facility outages that have brought 3 our overall production rate down about 500 million a 4 day on average down because of those extensive 5 turnarounds. And also we have as an example reduced MI 6 production so on a -- on the same ambient conditions we 7 will have roughly about 150 million less MI produced 8 than we did say during our peak production which was in 9 2004. We used to make 450 million a day, we now 10 struggle to make 300 on the best days. And as I go 11 through the presentation I'll mention some of the 12 reasons for that. 13 We also -- we used to sell -- BP used to sell a 14 stream of gas from the unit to Northstar in a rate of 15 about 120 million a day and it -- in the -- during 16 those peak offtake days. And today we're only on 17 average selling about 20 to -- maybe 15 to 20 million a 18 day. So there's about 100 million offtake difference 19 due to that. And we also have a problem with one of 20 our GCs, it has a vibration issue concerning some Borch 21 (ph) PSDs that we have to deliberately hold rate in 22 that plant back about 200 million a day. So you add 23 those three factors together and at our coldest ambient 24 conditions we're down last year and for the last 25 several years we're down on average about 450 million a Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • 2012 19 TRANSCRIPT OF PROCEEDING 6/19/2012 / I DOCKET No. OTH -11 -51 Page 55 1 to da less than what we previously had been able Y p Y 2 handle. 3 So let's get back to the process unless you 4 the rate. have questions around that, 5 The booster compressors will raise the pressure 6 to roughly about 700 pounds, peak is about 720. And 7 that is good for MI and good for recovery because the 8 higher the pressure in the low temperature operation at 9 that temperature that we have there, the greater the 10 recovery of the components. So after compression the 11 gas is cooled to about 70 degrees on average and then 12 it enters into the low temperature section of the plant 13 where the real hard 14 CHAIR FOERSTER: Mr. Bonnecaze. 15 MR. BONNECAZE: Yeah, you don't want that much 16 detail? 17 CHAIR FOERSTER: No, no, no. I want you to 18 take a cleansing breath and then slow down a little bit 19 because I can't tell 20 MR. BONNECAZE: Okay. 21 CHAIR FOERSTER: what you're saying, did 22 you say 7 degrees or 70? 23 MR. BONNECAZE: Seventy degrees. I'm sorry, my 24 cajun accent sometimes gets in the way also. Also am I 25 speaking in the microphone directly enough here? Okay. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDIN• • G 6/19/2012 I DOCKET No. OTH -11 -51 Page 56 1 The real heart of the low temperature 2 separation and when we talk about low temperature 3 separation there's really two things here. We're 4 talking about a vessel that's called a low temperature 5 separator and there's three of those in the plant and 6 then we talk about low temperature separation as a 7 train which involves a whole bunch of different 8 equipment and I'll show you an example of some of the 9 key equipment there, there's three trains of low 10 temperature separation. The real heart of the process 11 is this propane refrigeration that we use, without that 12 this plant would not operate. The gases that flow into 13 the low temperature separators, of course, the whole 14 heart of the process is chilling it down and condensing 15 liquid from the gas, that is what makes our product 16 recovery possible. The low temperature separator, its 17 primary purpose is to separate those liquids from the 18 gas, it also has another purpose which I'll talk about 19 in a later time in a subsequent slide, but the primary 20 purpose is to separate those liquids. Those liquids as 21 shown on the slide are the basis for separating the 22 components into an MI stream and an NGL stream. The 23 NGL is -- about two- thirds of that NGL is currently 24 being used for blending with oil at Skid 50 and for 25 subsequent transport through TAPS. Some of the owners Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 57 1 at Prudhoe do take some of the NGL in -kind and take it 2 through the Oliktok pipe into Kuparuk for FOR purposes 3 there. The MI is compressed up to about 37 to 3,800 4 pounds and is injected in the sled area at Prudhoe Bay. 5 The gas that leaves the low temperature separators does 6 go to our compressors that are located at both CGF and 7 CCP, the essential compression plant, and there is 8 about 5 to 6 percent of that gas that's used for fuel 9 to run the field. 10 On slide number 5 we have a diagram that shows 11 in a little greater detail the low temperature 12 separation and stabilizer process. I won't go through 13 every detail, there's a lot of information on these 14 slides and -- but I will hit some of the high points. 15 The gas entering into the low temperature separator 16 train from the left side of the drawing, it goes 17 through a series of cross exchangers and there's some 18 very large sorts of cross exchangers that it passes 19 through. And the purpose of these cross exchangers is 20 to simply prechill the gas before it goes into the 21 actual propane chilling system itself. The propane 22 system is a closed loop and it operates via a large 23 compression system, there are two trains there that 24 service the three low temperature separator trains. I 25 have a slide that will talk about that system Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING • 4110 6/19/2012 I DOCKET No. OTH -11 -51 Page 58 1 individually. But for now it suffices just to simply 2 say the gas is passed through the tube side of the 3 chillers and normally the gas is chilled down to the 4 lowest possible temperature that we can safely operate 5 on any given day. It somewhat depends on the feed rate 6 passing through the facility in terms of how low of a 7 gas temperature we can achieve. It does depend -- when 8 I mentioned safety, if we have as an example issues 9 concerning in the summertime vibration which we do 10 sometimes run into vibrations at certain operating 11 regions, the operators have to back that refrigeration 12 operation off a little bit. We also have issues with 13 hydrates on occasion that can come up. And so if they 14 have that situation they'll have to back off a little 15 bit. We do use methanol injection to overcome that, 16 but sometimes we still have to lower that or rather 17 raise that temperature slightly. But under most 18 conditions we -- running at a ideal condition we are 19 limited by the ability of being able to run the propane 20 system below minus 50 degrees. And I'll get into that 21 a little bit more when I show you the system. There's 22 a metallurgical limit on the propane system that does 23 not allow us to go colder than minus 50. 24 Now let's just continue with this so you 25 understand the flow of the material, where the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net 1 0 TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 59 1 components go. The liquids from the low temperature 2 separator are also reboiled. As the feed gas enters 3 into the low temperature separator on the top tray 4 there's six fractionation trays in that tower and as 5 that liquid flows down through the column the bottoms 6 liquid which has been warmed by reboiler heat and we do 7 use some of the gas that's actually feeding the unit to 8 provide that heat, we have a supplemental heating 9 system also, we'll raise that temperature because that 10 is basically -- what it's doing is it's stripping out 11 some of the methane content. If we did not do that we 12 would not be able to make the MMP, the minimum 13 miscibility pressure in the MI. Is that clear? 14 (No comments) 15 MR. BONNECAZE: The liquid feed that leaves the 16 LTS goes into two trays or fractionators called NGL 17 stabilizers and that's a -- those are towers with 24 18 trays apiece and the feed that enters into that tower 19 is -- it produce -- the towers run to produce an 20 overhead product which is of course the MI. There's an 21 overhead condenser, a very large overhead condenser, 22 you try to run that as cold as possible, but not so 23 cold as to flood the tower. If you run it too cold you 24 will flood the tower and it will not operate properly. 25 So the stream that we're showing on slide five that Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 60 1 shows reflux, that reflux rate is about 120,000 barrels 2 a day at our really optimal point. And that is 3 absolutely crucial to get good separation in this -- in 4 this system. Without that reflux operating at optimal 5 conditions we don't get the best split between 6 primarily propane, butane and some of the C5 +. 7 The control that we use to -- that will affect 8 the rate that's drawn off the tower is the bottoms 9 temperature control point in the column which is right 10 not on the bottom, but is on tray number 6 on the 11 bottom. That point determines how much liquid and also 12 determines the composition of the NGL that leaves that 13 system. 14 Now I've shown on this slide the ranges of 15 typical streams and you may wonder well, why is there 16 such a variation. Well, it depends on really how much 17 feed is coming into the plant, it depends on how much 18 oil is available to blend NGL into, it depends on the 19 ambient conditions. You notice that the stream that 20 I've shown or the composition I've shown on the slide 21 that shows the composition of MI, it also varies. And 22 as was mentioned earlier the MMP can be controlled by a 23 variation of composition. The reality is that since 24 the Prudhoe Bay Unit is required to maximize the NGLs 25 per the unit agreement, when you operate the low Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 61 1 temperature separator at its lowest possible operating 2 temperature you produce maximum liquids for the amount 3 of feed rate we have on that particular day. You make 4 maximum NGLs, what's left over becomes the MI and that 5 MI is basically fixed at that point. It must meet the 6 MMP requirements. So is that clear, I danced a little 7 bit around some of these points on the slide, but I 8 want to give you an understanding of how the process 9 works and perhaps maybe overdid that a bit too. 10 COMMISSIONER NORMAN: Before you leave the 11 slide I have a question. 12 MR. BONNECAZE: Okay. One other point that I'd 13 like to at least notify people that on this slide 14 you'll notice there is a dotted line. If you look at 15 the stream called reflux there's a little dotted line 16 that I put on here where I have NNF which is normally 17 no flow. That is where the slip stream that's taken to 18 propane manufacturing is taken off, it comes off that 19 reflux stream. And normally when we do run propane 20 manufacturing and we do try to minimize the operation 21 of that and I'll explain in a minute why, it's normally 22 about 1 to 2 percent of that reflux is taken to propane 23 manufacturing. The material we do not produce as 24 propane, all of that -- I will show you a diagram of 25 that system, all of that comes back and enters into the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 62 1 stabilizers so there's no waste of any extraneous 2 material other than the propane we draw from the 3 system. Okay. And I would just simply say I'll 4 explain this a little bit further by -- when you draw 5 you can -- I think you can see if you draw something 6 off this system, from this reflux system, you are 7 taking material as Janet Weiss mentioned earlier, if 8 you draw that off the system you -- external to our 9 operations that will decrease the MI and so we'll have 10 less MI produced. 11 You had a question, Commissioner? 12 COMMISSIONER NORMAN: I think that might be a 13 pointer right there to your right. And I wanted you to 14 identify the -- I believe I understand it right there 15 on your dotted line, but I wanted to se the point at 16 which propane is taken off on the days that you do 17 that, could you 18 MR. BONNECAZE: I -- I'm not sure I have 19 the 20 COMMISSIONER NORMAN: Then maybe if you 21 wouldn't mind 22 MR. BONNECAZE: Could I stand up. 23 COMMISSIONER NORMAN: if you could just 24 approach the slide and just point to it. 25 MR. BONNECAZE: This is the draw point here. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 I DOCKET No. OTH -11 -51 Page 63 COMMISSIONER NORMAN: Right. 2 MR. BONNECAZE: This is the location where the 3 material that is not produced as propane from 4 COMMISSIONER NORMAN: Okay. 5 MR. BONNECAZE: propane manufacturing 6 comes back. And I'll 7 COMMISSIONER NORMAN: Back to your dotted line 8 then with my question. 9 MR. BONNECAZE: Yes. 10 COMMISSIONER NORMAN: On an average how often 11 is that operated? 12 MR. BONNECAZE: Yeah. In my response I 13 prepared earlier this year, looking at last year we 14 were looking at an average and the statistics on that 15 are a little difficult to get at times, but the best I 16 could determine based on historical knowledge of this 17 was we were operating about once a month for a day or 18 two. And I think I mentioned an average of 25 barrels 19 of day if you consider, you know, spreading that out 20 over each day of the year. However I've gone back in 21 preparation for this hearing and I've looked at the 22 last 18 months and we have only operated that plant 23 about two days of an average of two to three months. I 24 think over 18 months we've operated only six times. 25 And the average consumption per day has been 18 barrels Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 DOCKET No. OTH -11 -51 Page 64 1 a day of propane. And we deliberately try to keep that 2 to the minimum because even extracting propane for 3 refrigeration which we absolutely need, it is by far 4 our most economic way to do so, to recharge that 5 system, we minimize that because that will also impact 6 MI, it's a very small impact, but it's still a real 7 impact when we reduce MI. So we want to run that as 8 least as possible and make the highest purity propane 9 because that will reduce the need to operate that 10 propane manufacturing system and I'll explain that in a 11 minute also. 12 CHAIR FOERSTER: Go ahead. 13 COMMISSIONER NORMAN: So it's your testimony 14 then that drawing propane off at that point is at the 15 expense of MI used in Prudhoe? 16 MR. BONNECAZE: Absolutely. There's no 17 question. 18 COMMISSIONER NORMAN: Thank you, Commissioner. 19 CHAIR FOERSTER: I have a question. So you 20 draw off propane and you use it for what, when you draw 21 off propane what is its use? 22 MR. BONNECAZE: Madam Chair, if you'd be 23 patient perhaps and let me go to the slide on propane, 24 on our propane system, I can explain exactly what 25 that's -- why we need to recharge the system. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 410 I DOCKET No. OTH -11 -51 Page 65 1 COMMISSIONER NORMAN: That's asking a lot of 2 our Chair, she's rarely patient. 3 CHAIR FOERSTER: Patience is a virtue, it's not 4 one of mine. 5 MR. BONNECAZE: But it is fully answered in the 6 slide. 7 CHAIR FOERSTER: Okay. 8 MR. BONNECAZE: Would that be acceptable. 9 CHAIR FOERSTER: And Commissioner Norman will 10 slap me if I 11 MR. BONNECAZE: Okay. 12 CHAIR FOERSTER: Carry on. 13 MR. BONNECAZE: So to answer your question 14 we'll go to this slide, but if you'll just wait a 15 moment here. Let me just also introduce how the 16 propane system works and that way you'll I think better 17 appreciate my answer. 18 If we go back to sort of the heart of the 19 process 20 CHAIR FOERSTER: Slide number 6. 21 MR. BONNECAZE: Yes, slide number 6. The 22 process gas enters through the -- into the chillers and 23 goes to the tubes and comes out the other end of the 24 exchanger. On the shell (ph) side this -- the blue 25 color I've shown here represents the propane and it's Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCESG 6/19/2012 DOCKET No. OTH -11 -51 Page 66 1 actually sitting in this kettle reboiler or chiller, 2 it's a kettle heat exchanger design and that level is 3 controlled by the -- this level control valve, this 4 represent -- representation of a level control valve. 5 It maintains a level of propane just above the top of 6 the tubes. And the compressor itself is actually 7 drawing vapors that are literally boiling off of the -- 8 off the bath of propane. The heat source is, of 9 course, the relatively warm gas, the gas coming in is 10 around minus 15 or so, that's relatively warm compared 11 to the minus 45 to minus 50 degree propane temperature 12 that is present. And the -- we try to maintain this 13 pressure at about negative two pounds, two pounds below 14 atmospheric. At that condition propane will boil at 15 about minus 50 degrees. And as I mentioned earlier the 16 metallurgical limits, these are very large systems, 17 they have 60 inch suction lines, they have -- these are 18 very, very large pieces of equipment. We do have the 19 world's largest gas plant and there's a huge investment 20 in this equipment. 21 CHAIR FOERSTER: You like saying that, don't 22 you? 23 MR. BONNECAZE: I do because I helped start 24 this up. 25 CHAIR FOERSTER: I know. I know. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net i TRANSCRIPT OF PROCEAG 6/19/2012 I 4 DOCKET No. OTH -11 -51 Page 67 1 MR. BONNECAZE: So the point being, I guess, is 2 that we have looked at the possibility of modifying 3 this system to run at a colder temperature, you know, 4 uprating these systems and the fact of the matter is 5 there is no way to do it without a major shutdown, we'd 6 have a six month or eight month shutdown to replace 7 these items and hundreds of millions of dollars in 8 expense. So we've decided that it doesn't make sense. 9 10 The system itself and I will very quickly say 11 that the vapors that are drawn in the compressor, you 12 have a three stage compressor, there's two trains here 13 driven by large gas turbines. And the propane -- 14 gaseous propane is pressured up to about 140 pounds in 15 the wintertime and as high as 180 to 190 pounds in the 16 summer and flows into very large sets of condensers, 17 air cooled condensers and that's why the pressure 18 required to condense this propane back to a liquid, of 19 course, depends on the temperature at which these 20 condensers operate. And so as your air temperature 21 rises in the summer this whole system begins to have to 22 work at a higher discharge pressure. And also the gas 23 turbines lose power as, of course, we know that gas 24 turbines in warmer conditions will produce a lot less 25 power. So the combination of less power together with Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 68 1 higher pressures in the summer means that in the warmer 2 conditions of summer as an example today, Prudhoe is 3 operating around -- well, Prudhoe's about 60 degrees 4 today and so I expect the propane refrigeration system 5 will be operating probably around minus 35 or so in 6 terms of the out gas operation and that's the best they 7 can do with the existing equipment. 8 The liquid propane comes back and is dropped 9 down in pressure in two stages, there's an HP 10 economizer, a high pressure economizer, there's an LP 11 economizer. And so basically what's happening here is 12 the propane is being let down in stages to allow the 13 pressure to be released and allow the temperature to 14 drop. That forces -- there's an automatic flashing of 15 propane which is represented by this line that's coming 16 back and it's tied in, it floats on the third stage 17 suction. And so about 14 percent of the propane as 18 it's coming back around will flash off and go into the 19 third stage. The LP economizer, low pressure 20 economizer, runs close to 20 pounds and so the vapor 21 that flashes off here goes to the second stage, the 22 liquids that drop out the bottom of the LP economizer 23 is what feeds into the chiller again and the whole 24 process just continues over and over again. 25 The -- these chillers are -- because they are Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 69 1 operated under vacuum there's a certain amount of air 2 that that will be sucked in, it can be very small 3 amounts over a short time period, but over -- because 4 this is a closed loop, over time there'll be an 5 accumulation of air in the system and -- because of 6 that vacuum. Because of that we monitor the oxygen 7 level in that system and we run a unit called a light 8 end purge unit or vent system and what that does is it 9 basically separates most of the light ends out of the 10 system, unfortunately some of the propane will carry 11 out with that and that goes to the LP flare at CGF. 12 Also we need to use seal oil in this as most 13 compressors do in order to again prevent the amount of 14 air infiltrating through the seals. And that seal oil 15 will eventually -- some of that will get into the 16 process. And so we have a heavy end purge unit that we 17 also use and run that on occasion when we need to 18 remove propane from the chiller. You could actually 19 resent in the see sometimes seal oil which will be present very bottom of the chiller, that's where it 21 accumulates, and we run a special unit called the heavy 22 end purge unit that we remove that. When we remove 23 that some of the propane will, of course, be dissolved 24 in the oil and it will be a loss also. Any time 25 COMMISSIONER NORMAN: Excuse me. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net 1 TRANSCRIPT OF PROCEf�G 6/19/2012 • DOCKET No. OTH -11 -51 Page 70 1 MR. BONNECAZE: Yes. 2 COMMISSIONER NORMAN: Mr. Bonnecaze, since 3 you're in Alaska 4 CHAIR FOERSTER: I know what's coming. 5 COMMISSIONER NORMAN: could you define the 6 -- clarify the term seal oil 7 MR. BONNECAZE: Oh, seal -- oh, I'm sorry. 8 COMMISSIONER NORMAN: so there's no 9 confusion years from now in the record. 10 MR. BONNECAZE: Okay. 11 CHAIR FOERSTER: And it is getting close to 12 lunch time too. 13 MR. BONNECAZE: It's a -- it's similar to an 14 automotive oil or any sort of heavy hydrocarbon oil 15 that is injected in the seals to provide a barrier for 16 gas flow through those seals. 17 CHAIR FOERSTER: It's a sad day in Alaska when 18 we have a similar sense of humor, the two of us. 19 MR. BONNECAZE: Okay. And it's not seal oil -- 20 seal oil, by the way, it's -- okay. 21 Oh, also I was going to say any time we do 22 maintenance work in the system, of course, we have to 23 de- pressure parts of that. As an example if we have to 24 work on a level transmitter or we have to work on a 25 flow meter or any part of this system needs to be Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEIG 6/19/2012 DOCKET No. OTH -11 -51 Page 71 1 shutdown, we oftentimes can isolate that and de- 2 pressure that and send that to the LP flare because it 3 does need to be totally de- pressured before it can be 4 opened up. 5 So those three factors are what is the reason 6 behind the makeup that is required on occasion. Like I 7 say, it's only occasional. We really try very hard to 8 minimize seepage into the system and seal oil 9 intrusions by doing, you know, regular seal jobs on the 10 compressors, but the reality is you will always get 11 wear on the seals so there's a certain amount of 12 contamination. 13 Another final point before I leave this slide 14 is when the gas is flowing through the chillers, when 15 you're limited in terms of your operating temperature, 16 there's an approach temperature as this gas is 17 continually flowing at a pretty high velocity through 18 these tubes, you approach that propane temperature, but 19 you can never really get it there. These chillers are 20 extraordinary in their design, they have special 21 features that allow a very high heat transfer, but even 22 with that we have at best about an eight degree 23 approach to the propane temperature on the LTS 1 and 2. 24 The LTS 3 is a little bit different design, it's got a 25 little bit greater back pressure and because of that we Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907-243-1473 Email: sahile@gci.net TRANSCRIPT OF PROCEG 6/19/2012 0 I DOCKET No. OTH -11 -51 Page 72 1 seldom operate below minus 40, but we absolutely have 2 the operators run this as cold as possible. BP and 3 other unit owners have every incentive to run this unit 4 as hard as possible every day and but we do have to 5 respond to the conditions of the day and recognize the 6 safety limitations in this plant. 7 CHAIR FOERSTER: Mr. Bonnecaze 8 MR. BONNECAZE: Yes. 9 CHAIR FOERSTER: can I ask my question? 10 MR. BONNECAZE: Yeah, absolutely. 11 CHAIR FOERSTER: Okay. Let's go back to slide 12 5 13 MR. BONNECAZE: Okay. 14 CHAIR FOERSTER: for just a second. So is 15 it -- am I correct in understanding you to say that you 16 only take propane off when you need it, when you've 17 lost some and you need to refurbish your supply? 18 MR. BONNECAZE: Yeah, when we need to recharge 19 the propane system, that's the only time that we're 20 running propane manufacturing. Let me just make a 21 point that within the Prudhoe Unit there is a 22 restriction in terms of the owners' ability -- the 23 owners can take gas in -kind, they can take NGL in -kind, 24 but they cannot take, I'm sure you're familiar with 25 this, they cannot take stabilizer overhead which is Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEG 6/19/2012 110 I DOCKET No. OTH -11 -51 Page 73 1 really the MI system itself. If you take reflux and 2 you draw it off and produce propane you are basically 3 taking in -kind fluids that are designated as EOR for 4 Prudhoe Bay. And so there would have to be a change in 5 the operating agreement to have all the owners agree 6 that that fluid could be taken and removed from the 7 system. Now this propane makeup system has been there 8 since day one, it was part of the design, it was part 9 of the original approved package of design that went 10 forward with the NGL /EOR agreement within the unit. So 11 there have been desires by some individuals to remove 12 propane from this system for use in other fields or to 13 maybe recharge other systems, for instance Endicott or 14 someplace like that when they had a turnaround, but we 15 have not done that and it's because the Prudhoe Unit 16 number 1 is supposed to have authority granted by the 17 owners and I would imagine by the Commission for 18 changing the fluids that are used in EOR. Number 2, it 19 does impact our EOR operations so we always have to be 20 aware of that and so we very diligently do not run this 21 because I would maintain not running this unit is 22 important for not wasting our resource. 23 CHAIR FOERSTER: So, Mr. Bonnecaze, is there 24 any other place from which you could secure your supply 25 of propane? Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEMkG 6/19/2012 • DOCKET No. OTH -11 -51 Page 74 1 MR. BONNECAZE: Are you speaking outside of 2 Prudhoe Unit or within? 3 CHAIR FOERSTER: Take -- outside of taking it 4 where -- from where you -- you know, from this system 5 from which you take it. I don't mean take it at a 6 different point in the system, I mean is there outside 7 of this system, outside of the Prudhoe Bay produced 8 propane, is there any other source of propane? 9 MR. BONNECAZE: Other than taking it from 10 another unit that -- for instance, Lisburne that has 11 the capability of making some propane 12 CHAIR FOERSTER: Okay. 13 MR. BONNECAZE: or to import it from -- 14 you know, when this plant started up we had to import 15 propane for the initial charge and so we bought that 16 from a supplier, a propane supplier. 17 CHAIR FOERSTER: So what does Lisburne do with 18 its propane? 19 MR. BONNECAZE: Well, Lisburne, of course, 20 operates in a similar fashion in that the they don't 21 call it a stabilizer, but the de- propanizer unit there 22 takes the propane that is recovered in the form of 23 liquid and it uses that for MI. They have some issues 24 around the compressor operation there and you're 25 looking at the possibility of maybe bringing Lisburne Computer Matrix, LLC Phone: 907 -243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 75 1 MI to the Prudhoe Unit for compression. But in terms 2 of propane they have a similar system that will 3 recharge their system as necessary. 4 CHAIR FOERSTER: Thank you. 5 MR. BONNECAZE: Okay. Let me just briefly 6 explain how we make propane in its pure state and we do 7 seek -- I'm showing on the slide a 98.5 plus percent 8 purity. 9 CHAIR FOERSTER: That's slide 7. 10 MR. BONNECAZE: Yeah, slide 7. Thank you. And 11 we do try to and generally are successful in making a 12 better than 99 percent pure propane most of the time. 13 This slip stream that comes from the stabilizer 14 reflux comes into a de- ethanizer which is an 18 tray 15 fractionator, it's a very small column, it's only three 16 foot in diameter so it tends to get lost if you walk 17 around CGF, you may not even know you're standing next 18 to a fractionator, it's a relatively small unit. And 19 what its purpose is is to remove the ethane and lighter 20 components as well as some propane as an overhead 21 stream. And that goes right back to the stabilizers to 22 be used as MI. The bottoms from the de- ethanizer goes 23 to the de- ethanizer and that system has an overhead 24 condenser and a reflux stream and to make high purity 25 propane you need to run a very high level of reflux. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 76 1 It's similar to the stabilizer in the -- in an 2 analogous sense in that without reflux you could not 3 get sharp separation, you could not make high purity 4 propane. But a draw stream, you can see here this draw 5 taking the side stream, that is where the product 6 distillate, the propane at 99 percent purity is sent -- 7 normally sent to our storage tank that we referred to 8 earlier in Mr. Heinze's presentation. We -- what we 9 basically do is we try to maintain that refrigeration 10 storage tank at an 80 percent level which is considered 11 full, a full inventory. And if we drop let's say maybe 12 5 percent we'll run propane manufacturing to recharge 13 that, it's as simple as that. 14 The bottoms from the de- propanizer are the 15 butane and heavier components, all of those minus the 16 80 percent, go -- ends up in the MI -- in the propane. 17 And also there's quite a bit of propane that also ends 18 up in that bottom stream and that goes right back to 19 the stabilizer feed and is recovered as MI. 20 COMMISSIONER NORMAN: What is that 80 percent 21 of, you say you try -- you try to maintain 80 percent 22 of what? 23 MR. BONNECAZE: 80 percent of 104 -- the drum 24 itself or the storage tank is -- pressure vessel, is 25 140,000 gallons of propane and so we maintain about 80 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEJG 6/19/2012 4 li I DOCKET No. OTH -11 -51 Page 77 1 percent so that's about 110,000 gallons of propane. 2 And by the way that -- you say why that amount, it's -- 3 that is the quantity if for some reason we had to 4 completely due to a blowdown or an emergency, if we de- 5 pressured the entire propane system, these two trains, 6 that is sufficient to recharge the system, that is the 7 reason that was designed that way. 8 Any other questions? 9 (No comments) 10 MR. BONNECAZE: Okay. The next slide is slide 11 number 8. And this speaks to the component recovery 12 and distribution of those components to the products. 13 And what this shows here is of the feed gas that enters 14 into the low temperature separators, and this is sort 15 of on an average and it does depend on the feed 16 composition as well as the rate and the operating 17 conditions on the day and I'm giving you sort of a 18 typical range. If you look at the -- I'll use my 19 pointer here, if you look at this area here, this 20 table, it shows the percentage of the components in the 21 feed that are recovered in the LTS bottoms, so in that 22 liquid that comes out of the low temperature 23 separators. So as an example let's just take propane, 24 propane recovery would be in the order of 32 percent on 25 the -- in the warmest condition to up as high as 41 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 78 1 percent in a -- about a minus 42 operation. That level 2 is -- let me just comment that that level is quite a 3 bit lower than it used to be when our concentrations 4 were much higher. When we -- when I was at the plant 5 in '87 through 1990 we typically saw propane inlet to 6 the plant 3.5 percent, 3.3 percent and today we're 7 around 2 and a half percent. We used to see recoveries 8 when we'd run minus 42 in the range of minus 48 9 percent, minus 49, so the leaner the gas, and the gas 10 at Prudhoe has really leaned a great deal. What's 11 really leaned a tremendous amount is butane. Butane is 12 half the composition or concentration that it was, it's 13 very small to start with and sometimes that small 14 concentration distorts the barrel somewhat. But the 15 butane composition has leaned out to a point where it's 16 about half of what it was in about 1990. 17 CHAIR FOERSTER: Mr. Bonnecaze, for the comfort 18 of the public why has the gas leaned out? 19 MR. BONNECAZE: It's a combination of several 20 things, but obviously if you'll recall as we go through 21 the low temperature separation operation remember the 22 residue gas is considerably leaner, we basically strip 23 most as you see here with respect to -- and this is 24 today, it was even a greater quality in the past, 25 butane is being recovered at around 70 plus percent and Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • I DOCKET No. OTH -11 -51 Page 79 1 C5+ is also less than half of what it was years ago. 2 We have removed that with NGL sales and so it's a drain 3 on the system. The fact is also we have substantially 4 moved MI to wider and wider locations to greater target 5 areas in the field and that MI is slower to come back 6 into the plant. But the primary reason is that the 7 lean gas as it cycles and eventually makes its way, 8 gets -- enters into the producing zones, that gas is 9 much leaner than the original gas that was in the 10 middle part of the field. 11 CHAIR FOERSTER: So the point I'm getting at is 12 the gas hasn't become leaner because of some bad 13 operating practice of BP's, but it has become leaner 14 because the heavier ends have been extracted 15 MR. BONNECAZE: Absolutely. 16 CHAIR FOERSTER: sold, commercialized, 17 reused. So it's not that -- that's what I was 18 really 19 MR. BONNECAZE: Yes, the -- really the heart of 20 the leaning has to do with our operation of CGF and the 21 fact that these components are leaving the system in 22 terms of NGLs, particularly propane and C5+ 23 CHAIR FOERSTER: So its something you'd 24 expect 25 MR. BONNECAZE: being depleted. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 I DOCKET No. OTH -11 -51 Page 80 CHAIR FOERSTER: and it's a good thing? 2 MR. BONNECAZE: It's fully expected and it will 3 continue. 4 The stabilizer operation here, one point that 5 I'd like to make is that of the bottoms fluid that we 6 have on any given day -- of the bottom fluid that 7 enters the stabilizers, the methane, the CO2 and the 8 C2, all of that except for a few molecules, there's no such thin as erf g p ect separation, but all of that will 10 end up in the MI. The C5+ in general except for just 11 very small traces, all that will end up in the NGL. 12 propane, obu normal The swing components are istane and 13 9 c butane. And I've shown here roughly where most of 14 these barrels end up. 15 What happens at Prudhoe is when we operate this 16 plant if we increase as an example let's say Kuparuk, 17 part of the NGL goes to Kuparuk or part of the NGL will 18 be taken to Kuparuk. If Kuparuk has operational 19 difficulty that causes us to cut back on NGL and then 20 they restore that, we need to increase rate and the way 21 we do that is by taking some of these swing components 22 and lowering the temperature in the stabilizer and 23 those components will drop to the bottom and will 24 increase the rate of propane, that will change the 25 composition some. When we do that, that loss of Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 81 1 propane and butane means the MMP is no longer at spec 2 and we have to go back. If you'll remember my earlier 3 slide where I talked about this reboiler in the bottom 4 of the LTS, that has to be adjusted and that 5 temperature changed, in this case it would be -- it 6 would have to be raised in order to strip more propane 7 from the bottom of the LTS fluids in order for the MMP 8 to be restored back to its 3,100 target that we 9 normally run. 10 So that process of the adjustment of NGL 11 affects the MI rate, you make more NGL, you make less 12 MI because for any given day there is a fixed quantity 13 of liquids that can be produced from the gas stream 14 that we have to deal with. And I think you can also 15 see if you were to remove propane from the system that 16 propane is reducing the quantity of MI that can be 17 produced. And so there's a competitive situation that 18 gets set up here where that MI has a certain value in 19 your oil. That is -- that's one use, the alternative 20 would be to sell that propane, okay, so that economic 21 situation gets set up there. 22 Okay. Any questions around this slide? 23 COMMISSIONER NORMAN: One question. What would 24 be involved in reconfiguring the system in terms of 25 work and also expense so that you didn't have this Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 82 1 tension between MI and NGL? 2 MR. BONNECAZE: Commissioner, that's a good 3 question. And let me -- can I switch to the next slide 4 and I'll speak to that question directly. If you drop 5 down on slide number -- for the record this is -- I'm 6 speaking to slide number 9. If you go to the bottom 7 bullet it says greater recovery of liquids from the 8 same quantity and quality of gas requires going to a 9 lower temperature operation than current design allows 10 or employing a new type of recovery process and I threw 11 as an example cold oil absorption. The fact of the 12 matter is we could make a greater amount of recovery 13 with our current feed gas if we went to a different 14 operation, primarily lower temperature. However 15 remember that our MI volumes have decreased 16 substantially over the years, in the last decade it's 17 been a huge amount of decrease. And we have great 18 interest in restoring MI to a larger number, that means 19 more FOR barrels. So we could indeed recover more 20 liquids and I won't say just propane, but we could 21 recover more propane, more ethane, more of everything 22 really and make more MI. So there's always going to be 23 some tension with respect to the balance between NGLs, 24 MI and a third stream, whether it be ethane, propane or 25 another component. It really gets down to economics, Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE *G 6/19/2012 • I DOCKET No. OTH -11 -51 Page 83 1 its you can't satisfy everything, you have to weigh 2 the value of that propane extracted from the system 3 against the value of oil that will be produced with it. 4 Even in an expansion case if I'm getting my message 5 through to you. 6 CHAIR FOERSTER: Mr. Bonnecaze, if you could 7 make more liquids what would you do with them? 8 MR. BONNECAZE: Well, the liquids would be used 9 to produce more MI primarily, there would be a small 10 increase. Remember on the previous slide our C5+ 11 recovery was in the range of 95 percent. If we go to a 12 lower temperature operation as an example we would 13 squeeze out more barrels of NGL, we're currently 14 recovering about 50,000 barrels a day of NGL and so we 15 could squeeze another couple of thousand barrels of 16 NGL. We would primarily make additional MI, we could 17 make a larger amount of MI. 18 CHAIR FOERSTER: So you -- you're MI limited in 19 your production operations? 20 MR. BONNECAZE: We would like to have more MI, 21 we're certainly not constrained, we have the capacity 22 of compressing as much as 600 million cubic feet of MI 23 in CGF, we're only producing -- like I said on the best 24 days were producing 300 million. So we'd like to -- 25 we'd like to raise that number as high as possible, but Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 84 1 we need an economic project, we can't do these things 2 without economics supporting those. And that's kind of 3 a key point here. And so there's always going to be a 4 tension on what the maximum value for these components 5 really is. And our job as operators is to seek those 6 out and to choose economic projects to offer up to the 7 unit owners. 8 CHAIR FOERSTER: So I'm hearing you say that 9 you have done that evaluation to try to make more 10 liquid and you, you know, figured out the benefits and 11 the cost and you floated to the unit owners and it 12 hasn't passed muster, is that accurate? 13 MR. BONNECAZE: We have explored several 14 different options for increasing MRI. I'll put it this 15 way, the projects have been challenged economically for 16 numerous reasons, obviously high cost is one, probably 17 the tax environment we face now with ACES probably 18 contributes on to that. But the -- you know, I would 19 say we are continuing to evaluate these options and we 20 really would like to see projects move ahead that would 21 produce more MI. 22 CHAIR FOERSTER: Everybody always says it's 23 ACES' fault, so give me a little more detail, what has 24 ACES done to the project? 25 MR. BONNECAZE: Well, what I mean by that is Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEG 6/19/2012 DOCKET No. OTH -11 -51 Page 85 1 fact all of our projects, of course, because of the P J 2 that ACES does take your upside away above a certain 3 price level, I mean, we have in each -- and I -- let me 4 just step back and say I'm here really representing the 5 -- BP as the operator and each owner, of course, 6 evaluates its own economics and we don't see Exxon's 7 economics, we don't see ConocoPhillips, we only se 8 BP's. And so I can only speak for BP in that or I -- 9 really I would just say that the economics are 10 challenged and it's not to say we're giving up on the 11 idea, we are working it, but it is a very expensive 12 proposition to go to low temperature operation. We 13 have several schemes we've looked at and I don't know 14 if I -- if that suffices for now, but 15 CHAIR FOERSTER: That's fine. 16 MR. BONNECAZE: we are -- we have pursued 17 that. On this slide I think perhaps I -- and if, 18 Commissioners, if you would like me to run through 19 these for the record I can do this quickly or 20 CHAIR FOERSTER: Well, your presentation will 21 be entered into the record 22 MR. BONNECAZE: Okay. 23 CHAIR FOERSTER: so, you know, you say the 24 things you desire to say to make your points and 25 anything that you just want left into -- entered into Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCE*G 6/19/2012 I DOCKET No. OTH -11 -51 Page 86 1 the record 2 MR. BONNECAZE: Okay. 3 CHAIR FOERSTER: by its own volition, 4 that's fine. 5 MR. BONNECAZE: Thank you. I would simply say 6 that -- emphasize the point that we do recover as much 7 liquid in the LTS as we can every single day and the 8 operators struggle with this and they work very hard to 9 do this, but do this in a very safe manner. I think 10 the second thing is the leaning out of our feed gas has 11 been a major contributor to our -- both our declining 12 NGL and MI. Our oil rates obviously at Prudhoe being 13 on severe decline in the last decade has reduced the 14 amount of oil we have available to blend in to, that's 15 been a factor with respect to NGLs. But, you know, we 16 really try to operate the best we can under that 17 environment. The ultimate barrier though I want to 18 stress is that the existing plant cannot operate below 19 a certain temperature level, you can't just lower the 20 temperature level, you know, to infinity on the low 21 side, it has restrictions and we have to live with 22 those restrictions. Also in the warmer times of the 23 year our refrigeration capacity is severely hampered by 24 the warm ambient conditions at Prudhoe. 25 That's all I'd probably like to say on that Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 87 1 slide, if you don't mind I'll move to slide number 10. 2 And I'll certainly say since this is in the record that 3 I've covered the issue around NGL being constrained by 4 vapor pressure restraints and the fact that as we 5 adjust NGL particularly if we have to adjust it to an 6 upward volume to maximize that NGL, that the MI 7 composition must be adjusted again to meet the minimum 8 miscibility pressure and that affect also further 9 reduces MI rate whenever you draw some of these 10 components from the MI stream. And just emphasize that 11 leaving a propane stream would have a similar negative 12 impact on MI as the situation that we -- I described 13 for NGL. 14 And so slide number 11, I'll give an example 15 here that a 2,500 barrel a day propane draw from the 16 system reduces MI by about 10 million cubic foot a day 17 and I won't speak to the FOR aspects of that, but 18 Bharat Jhaveri will, he's going to testify next, he 19 will speak to the value of that. I guess the point I'd 20 make also is because various numbers have been 21 discussed in this hearing as well as we've heard 22 numbers proposed from various parties, 2,500 barrels a 23 day was the number at least I've heard personally for a 24 while now, I've heard 500 barrels, I've heard 25 or 25 30,000 barrels of propane. The point being is that any Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEOPNG 6/19/2012 DOCKET No. OTH -11 -51 Page 88 1 propane that we take out of our system will reduce the 2 amount of MI we have available to utilize for EOR 3 purposes. So that balancing between EOR value and 4 propane sales is something that you have to take into 5 account. 6 As well as my last bullet point makes on this 7 slide, it -- there is going to be incremental capital 8 and operating expenses associated with any extraction. 9 We do not have load out facilities at Prudhoe, we do 10 have a storage tank and it's a high purity, 99 percent 11 purity propane stream that would -- I would not think 12 would be desirable from a commercial standpoint, it 13 would be probably more desirable to be around 90 14 percent as most customary commercial propane is sold. 15 I won't say that the plant could not make that purity, 16 we could make commercial grade or at least a lower 17 purity propane, but we need a separate load out system. 18 Remember our system, our plant, has a storage tank that 19 is there for emergency purposes to recharge the propane 20 system. If we lose that refrigeration system and we 21 don't have propane, we lose 50,000 barrels of NGL and a 22 large amount of EOR oil in the future that that MI 23 represents. So we maintain a volume of propane in that 24 tank for that -- such emergency, that's the purpose of 25 that tank and we don't have load out facilities. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEG 6/19/2012 DOCKET No. OTH -11 -51 Page 89 1 I would just close with a comment, a few 2 comments about major gas sales in my last slide which 3 is slide -- and that has to -- has to do with the fact 4 that the LNG markets in particular have a lot of 5 interest in ethane and propane. Ethane and propane 6 will, of course, add to the heating value of LNG, it 7 has a positive affect. And so when anyone is 8 discussing LNG, particularly the customers in the far 9 east, they're always very interested in whether we can 10 raise the ethane in propane. 11 So there is some beneficial aspects to -- in a 12 gas sale of having a higher heating value. It is 13 something that is desired by the markets. It's also -- 14 I've heard comments from individuals who have stated 15 that we would be limited in our ability of moving 16 propane in particular through a major gas sale pipeline 17 and the reality is there is a constraint, but it's 18 much, much higher than the normal concentrations that 19 would be produced leaving the CGF. I mean, our CGF 20 composition, our residue gas leaving CGF is normally a 21 1.6 percent propane and it may be slightly lower in the 22 future, but it would be close to that. And propane 23 could be sold in a major gas sale pipeline at levels as 24 high as maybe 8 percent without affecting the criteria 25 that the pipeline will require. Also ethane could be Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 90 1 sold in a pretty large concentration, much higher than 2 what we naturally produce in our gas. 3 So from my perspective just looking at it as a 4 sale through a pipeline and having been involved with 5 the major gas sale work through the years, I don't see 6 any restriction mechanically or with the physical 7 system in moving propane off the Slope. I would 8 comment though that a consideration by the owners of 9 propane as well as ethane is could we use this propane 10 or ethane to extract more barrels of FOR oil not only 11 in Prudhoe, but other areas on the Slope before we 12 actually decide to de- pressure that reservoir and send 13 these molecules down the line with a gas sale. So that 14 is something that I'm not saying we would sell 15 additional propane or basically accelerate propane and 16 ethane, but it has to be weighed against a master plan 17 that looks at total resource development not just 18 picking and choosing what you want because of a 19 marketing opportunity. 20 Okay. And that's my presentation. 21 CHAIR FOERSTER: Thank you. 22 MR. BONNECAZE: Questions? 23 CHAIR FOERSTER: I think what we'll do is we'll 24 take a five minute recess, we'll get our thoughts 25 together for questions, we'll reconvene and ask you any Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEING 6/19/2012 DOCKET No. OTH -11 -51 Page 91 1 questions we might have remaining. And then after that 2 we'll take a break for lunch 3 MR. BONNECAZE: Thank you, Commissioner. 4 CHAIR FOERSTER: if that's okay with you 5 guys, I hate to mess up your flow, but it doesn't look 6 like you guys are going to be finished before noon. 7 MR. BONNECAZE: Thank you, Commissioner. 8 (Off record - 11:34 a.m.) 9 (On record - 11:40 a.m.) 10 CHAIR FOERSTER: Okay. It is 11:40, we'll go 11 back on the record. We just received some questions 12 from a member of the audience and we will defer those 13 questions until after lunch so that we have a chance to 14 look at them. But what we'll do before we break for 15 lunch is Commissioner Norman and I will ask any 16 questions we might have and then I'd also like to get a 17 gauge from the audience as to how many more 18 presentations BP has, how long you think you'll take 19 and who else in the audience might want to testify so 20 we can see what the day's going to look like. 21 So let's start with questions. Do you have any 22 questions for 23 COMMISSIONER NORMAN: I have none. 24 CHAIR FOERSTER: Nor do I. I really appreciate 25 the thoroughness of your presentation. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEE6ING 6/19/2012 DOCKET No. OTH -11 -51 Page 92 1 MR. BONNECAZE: Thank you. 2 CHAIR FOERSTER: And for those of you in the 3 audience that aren't engineers I commend your ability 4 to just withstand the presentation. 5 So how many more presenters does BP have? 6 MR. BONNECAZE: Bharat Jhaveri will be a 7 presenter and then Sherri Gould -- where's Sherri. And 8 Sherri Gould will be a presenter and then Janet will 9 make her closing comments. 10 CHAIR FOERSTER: Okay. And can you give me an 11 estimate for how long do you think it'll take? 12 MR. JHAVERI: I have about four or five 13 slides 14 CHAIR FOERSTER: Okay. 15 MR. JHAVERI: probably about 15 minutes I 16 would say. 17 CHAIR FOERSTER: Okay. 18 MS. WEISS: So maybe 30 minutes total. 19 CHAIR FOERSTER: Thirty minutes total. Okay. 20 And is there anyone else in the audience that would 21 like to testify? We have on our sign up sheet that 22 there were some folks that would. Is Mr. McCutchin 23 still in the audience? 24 MS. COLOMBIE: He stepped out for a moment. 25 CHAIR FOERSTER: Okay. Because I know he had Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 93 1 wanted -- he said he wanted to testify. Larry Vazquez? 2 MS. VAZQUEZ: That's me, Commissioner, Laney 3 Vazquez. 4 CHAIR FOERSTER: Laney. Oh, okay. 5 MS. VAZQUEZ: I won't be testifying. 6 CHAIR FOERSTER: Okay. Yeah, you decided that 7 -- okay, because it wasn't clear. Let's see, Nels 8 Anderson. 9 MR. ANDERSON: I said maybe. 10 CHAIR FOERSTER: Right. I'm giving you the 11 chance to 12 MR. ANDERSON: I think I'll pass. 13 CHAIR FOERSTER: You think you'll pass. Okay. 14 That sounds good. 15 l ike Jerry Okay. So other than BP sounds y 16 McCutchin is going to be our only other person to 17 testify. So I think that'll take -- it'll -- we'll 18 come back at 1:00 o'clock and probably go for I'd say 19 an hour and a half. I think -- I don't think Mr. 20 McCutchin is here to tell us what he's going to take, 21 but I don't see that we can't get this done this 22 afternoon. 23 COMMISSIONER NORMAN: Yes. Madam Chair, I was 24 just thinking through then, if we do have someone 25 that's brought the petition before the Commission and Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 94 1 it is customary in something like this to allow a 2 petitioner an opportunity to reply to things said if 3 wanted so I think that we ought to extent that 4 courtesy 5 CHAIR FOERSTER: Okay. 6 COMMISSIONER NORMAN: to any petitioner. 7 And then right now I don't know if you're of a frame of 8 mind to decide now, but we may want to leave the record 9 open for let's say 10 days for parties to think about 10 what was said 11 CHAIR FOERSTER: Yeah. 12 COMMISSIONER NORMAN: and respond to 13 things. 14 CHAIR FOERSTER: Okay. And we can prepare 15 COMMISSIONER NORMAN: We can decide that later. 16 CHAIR FOERSTER: Yeah. Okay. So at this time 17 I'm going to recess, put us into recess, and we will 18 reconvene at 1:00 p.m. if -- unless anyone's got a time 19 constraint that requires us to come back later. 20 (No comments) 21 CHAIR FOERSTER: Okay. We're recessed. 22 (Off record - 11:45 a.m.) 23 (On record - 1:01 p.m.) 24 CHAIR FOERSTER: We're back in session. The -- 25 right before lunch we got some questions from a member Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 95 1 of the audience and we've reviewed them and have 2 decided that while they're interesting questions 3 they're not relevant to the subject of waste. So we 4 will enter them into the record and, in fact, I'll read 5 them and to the extent that BP chooses to answer them 6 they're welcome to do so, but it won't be necessary to 7 as part of this hearing. So let me read the questions 8 into the record. The first question, how does BP as 9 operator report NGLs taken in -kind for non -PBU use. 10 And if I misstate any of the questions, please correct 11 me because my ability to read other people's 12 handwriting isn't perfect. Okay. The second question, 13 does BP as owner take NGLs in -kind and do you pay 14 royalties on it. Third question, incremental MI 15 appears to be very valuable, why not recover propane at 16 the flow stations and the gathering centers. And the 17 last question, will we every -- I mean, I think it 18 should be ever, will we ever ship propane off the North 19 Slope in the gas pipeline. 20 So those were the four questions that were 21 asked and for the court reporter I'll give the court 22 reporter the questions and we will proceed. 23 So Mr. Bonnecaze was speaking before we 24 recessed and I'm glad you came back, I failed to 25 request that of you, but I'm glad you came back and I Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEESG 6/19/2012 DOCKET No. OTH -11 -51 Page 96 1 hope you can stick around in case we do have any other 2 questions for you or we adjourn. 3 All right. Mr. Jhaveri, are you ready? 4 MR. JHAVERI: Yes. 5 THE COURT: All right. 6 (Oath administered) 7 MR. JHAVERI: Yes, I do. 8 BHARAT JHAVERI 9 called as a witness on behalf of BP Alaska, stated as 10 follows on: 11 DIRECT EXAMINATION 12 CHAIR FOERSTER: Thank you. So tell us your 13 name and who you work for and if you want to be 14 considered as an expert witness. 15 MR. JHAVERI: Sure. Hi, my name Is Bharat 16 Jhaveri, I currently work for BP here in Anchorage, 17 Alaska. And next I'll give my reasons to be considered 18 as a expert witness. 19 I have a Ph.D. in chemical engineering from 20 Stanford University and then I worked start -- I have 21 31 years experience in the oil company. I started 22 working in 1981 for ARCO Exploration and Production 23 Research Center in Plano, Texas and for the first seven 24 years from '81 to '88 I worked on developing 25 compositional modeling technology specifically for Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • I DOCKET No. OTH -11 -51 Page 97 1 Alaska, actually for Prudhoe Bay. So my initial work 2 was considered -- was actually towards a lot of stuff 3 we are going to talk about today which is developing 4 methods for enhanced oil recovery optimization, 5 equation of phase for phased behavior modeling and also 6 the technology that would let us play a big role in 7 evaluating all the projects such as Geotex 1, Geotex 2 8 and GLMI and miscible gas expansion projects. 9 '88 to 90 because of my expertise I was invited 10 to ARCO Alaska here and I spent two years at the time 11 here specifically working with looking at the Geotex 2 12 and the CGF expansion project, a lot of the stuff you 13 heard Bernie talk about, I was responsible for 14 evaluating the benefits. And one of the things I will 15 show later on, a key part of that was the vaporization 16 by the lean gas injection into the Prudhoe Bay gas cap 17 and expanded gas cap. And it will play a big -- a role 18 later on in terms of the benefits of continued 19 hydrocarbon recovery of components that you don't use 20 for MI still continues to -- we will recover oil. 21 The second -- then in '88 to '90 I went back to 22 ARCO in Plano and worked for another four years pretty 23 much supporting all FOR operations within Alaska and 24 ARCO in Lower 48. And I was a Director of Laboratory 25 Program and Modeling Studies at the time. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahiie @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • I DOCKET No. OTH -11 -51 Page 98 1 In '94 I briefly went for a few months of -- at I 2 Department of Energy in Bartlesville, Oklahoma under 3 NIPER, National Institute for Petroleum and Energy 4 Research and I was there for five months. Once again I 5 was looking at the EOR for viscous oil specifically for 6 Prudhoe Bay at the time. 7 After that I came to work for BP in Alaska in 8 '95 and I have been in Alaska ever since, in Alaska for 9 the last 17 years. I am currently a Senior Advisor of 10 Reservoir Engineering. I work under Janet Weiss, the 11 Vice President of Resource and my responsibility has 12 been to look and evaluate and implement most of the EOR 13 processes in Alaska. So I have been instrumental in 14 the Prudhoe Bay Gas Cap Water Injection Project. You 15 heard about that, little bit in the morning and I was 16 actually responsible for actually working on that 17 project and getting it approved both by the partners 18 and AOGCC, giving the Commissioners basically -- what I 19 meant to say is that we had to come and have a 20 testimony here on the Gas Cap Water Injection Project 21 to get the ruling that we could actually do the project 22 in the field. Anyway so that's -- and since then I've 23 been involved in most of the gas EOR expansion projects 24 not only in Prudhoe Bay, but on other reservoirs in the 25 Slope like west satellites and viscous oil reservoirs. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 99 1 And I was actually the distinguished lecturer in 2006 2 where I went around the world talking about the 3 viscosity reduction FOR processes in Prudhoe Bay 4 actually and rest of the viscous oilfields on the North 5 Slope and how to amend this operation here. So in 6 other words my experience is directly related to the 7 testimony I'm about to give. 8 CHAIR FOERSTER: Thank you. Do you have any 9 questions? 10 COMMISSIONER NORMAN: I have no questions. 11 CHAIR FOERSTER: Nor do I. 12 COMMISSIONER NORMAN: I will move that we 13 accept the witness' credentials as an expert witness. 14 CHAIR FOERSTER: Second. All in favor? 15 IN UNISON: Aye. 16 CHAIR FOERSTER: All right. And I'll remind 17 you as I did Mr. Bonnecaze, and he did a great job, 18 refer to each slide before you start to talk about it 19 by number so that the record is easier to follow in the 20 future. And if you forget 21 MR. JHAVERI: Yeah. 22 CHAIR FOERSTER: I'll remind you. 23 MR. JHAVERI: Sure. Ready? 24 CHAIR FOERSTER: I'm ready. 25 MR. JHAVERI: So I will begin with slide 13 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 100 1 which is the outline of my presentation. I will go 2 through the background on the Prudhoe Bay Miscible Gas 3 Project, where the miscible injectant use began in 4 earlier '80s. Then I will describe some of the MI EOR 5 opportunity on the North Slope which is outside of 6 Prudhoe Bay Miscible Gas Project. I'll also refer to 7 how the miscible injectant is being utilized 8 efficiently both in terms of a component that I made 9 originally from the gas cap and oil components, but 10 later on they are recaptured again and again and 11 reutilized by CGF in a very efficient use of recapture. 12 And I'll show some of the figures that shows how 13 efficient the recapture and reinjection is. Then I 14 will get into some of the benefits of MI on creating 15 EOR barrels and how the barrel of propane is related to 16 the benefits in terms of EOR oil. And finally I will 17 summarize. 18 Now one thing I would mention up front is that 19 although my testimony originally as you see here has 20 been on the MI part of the operation, because of 21 certain discussion early morning on the part of the 22 residue gas and as it is injected into gas cap and some 23 of the reference to the Gas Cap Water Injection Project 24 I will go ahead and on one of the slides make some of 25 the comments because they're very relevant to the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 • DOCKET No. OTH -11 -51 Page 101 1 hearing today. 2 CHAIR FOERSTER: Okay. And if you use exhibits 3 that aren't in the packet we need to get copies of 4 them 5 MR. JHAVERI: Okay. 6 CHAIR FOERSTER: so that we can include 7 them in the record. 8 MR. JHAVERI: Sure. Right now I'm -- I do have 9 an exhibit right in the packet that I will reference. 10 CHAIR FOERSTER: Okay. 11 MR. JHAVERI: The next slide shows and I think 12 some of the -- the things are not coming up on the 13 screen here so I will just mention that what this chart 14 shows is the 2011 operation of the miscible injectant 15 in the Prudhoe Bay initial participating area as we 16 call IPA. What the -- what it said here was that in 17 2011 there was about on average 131 million cubic feet 18 per day of miscible injectant that was injected in 19 PBMGPO, what we call the Prudhoe Bay Miscible Gas 20 Project. The miscible injectant had been injected 21 along with water in what we call the WAG, Water 22 Alternating Gas Project and there were 28 injectors in 23 2011. The color coding here shows the pink color 24 pattern in the water flood area that the patterns have 25 seen miscible injectant through the life of the field. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 102 1 There are certain blue patterns here that has not 2 received any MI for certain reasons. Here mostly 3 because there's a lot of gas invasion from the gas cap 4 and miscible injectant wouldn't have been very 5 efficient, in some of the patterns here it just did not 6 help enough to get for economically limiting some of 7 the structure required. But it is possible that we 8 would continue to look at that as a possible expansion, 9 but everything has to be economic and that goes without 10 saying. 11 I will go to the next slide now. Again the 12 slide actual -- for some reason the slide misses the -- 13 some of the fields that I was going to talk about at 14 the PBU MI. They are in the slide pack, but they're 15 not being projected, this is difficulty -- I guess we 16 wrote the slides on Windows XP and this is what we call 17 Windows 7 and this is all at once an issue, so this is 18 what's happening. But I'll go ahead and say what those 19 fields are. 20 A key part of this slide I want to emphasize is 21 that the use of miscible injectant how efficient it is 22 in terms of being -- not only creating FOR barrels in 23 the reservoir, but also in terms of it being recaptured 24 by CGF. So let me just show you this slide which shows 25 that -- here was original gas cap, there was an Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 103 1 original gas /oil contact. By the way I am refer to 2 slide number 15, Commissioner Cathy, and, you know, the 3 -- because I don't see the slide number here. So there 4 is an expanded gas cap and that has to do with the 5 pressure declines, but the original gas expanded into 6 the residual. 7 One of the things that is important for me in 8 this slide that I'm going to mention has to do with the 9 residue gas injection. So the field is producing -- 10 the wells are producing hydrocarbon components as shown 11 by this production well in this carton (ph). And the 12 gas from the production well as Bernie showed earlier 13 gets into the flow station and gathering centers where 14 the oil is going towards the TAPS and the field gas 15 goes into the central gas facility which mix NGL which 16 go to the TAPS, miscible injectant and the residue gas. 17 The miscible injectant is injected into the water flood 18 EOR area as I showed in the earlier slide in the 19 Prudhoe Bay Miscible Gas Project. Now one thing that 20 happens is that you inject MI into this reservoir, MI 21 will initially make a lot of oil and then it will begin 22 to bypass oil and return to the producer well. Doesn't 23 mean the EOR process is over, it just will take more 24 and more, a volume of MI -- a volume of MI to make -- 25 make a barrel of oil. So what we call that return MI Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 104 1 coming back at you is still a very useful product with 2 all the propane and other components in it. And the 3 one of the important part of this CGF is that that 4 return MI will ultimately get back into the CGF and the 5 CGF is able to recapture about 85 percent of the MI 6 which is a very important number since that return MI 7 basically gives you additional MI and thus what we call 8 the bush dropping effect or a number of time an MI is 9 reutilized to make oil. 10 Another thing that's important on this slide is 11 that as I said earlier as you inject more and more MI 12 then it begins to recycle while if you had a new, fresh 13 target you can create a very efficient displacement in 14 those initial utilization of MI. What we began to use 15 in the -- since the late -- since early 2000 is to find 16 other targets on the North Slope which are what we call 17 a new target for FOR recovery. And so we begin to send 18 miscible injectant from some of the patterns that it 19 was cycling MI into the new projects and there in my 20 original slide, in fact, that will come up later on and 21 I'll go through that, fields here should have been like 22 Point McIntyre, Aurora, Borealis and Polaris, Orion and 23 I will refer to that in the next slide. The important 24 thing is to see this dotted line is that even those 25 fields begin to send return MI back to the reservoir Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net R CE•G 6 19 TRANSCRIPT OF P 2012 0 / / DOCKET No. OTH -11 -51 Page 105 1 facility and so the CGF even recaptures the return MI 2 from all over the North Slope. 3 So some of the bullet points here I wan t to say 4 -- which I think I already said that the CGF is whic y 5 recaptures about 85 percent of the returned MI and that 6 MI use is expanded to other FOR opportunities within PB 7 Unit to maximize oil recovery. One of my job over the 8 last 10 plus years has been to oversee an efficient 9 allocation of MI to all the fields in the North Slope 10 so we get maximum amount of oil. It is called MI 11 allocation and optimization which I work with engineers 12 in Alaska. 13 COMMISSIONER NORMAN: One quick question. 1 MR. JHAVERI: Sure. 15 COMMISSIONER NORMAN: I may be a little bit 16 confused on -- but I understood Mr. Heinze's concern to 17 be about water injection into the gas cap and as a part 18 of that residue gas stream going in there that there is 19 entrained propane and that that's where the waste might 20 occur. Do you plan to address that at all or is that 21 another witness? 22 MR. JHAVERI: You know, I am so glad, 23 Commissioner Norman, that you ask me this question 24 because after that one and a half hour lunch break I 25 actually forgot about that I was going to mention that. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • . TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 106 1 So I will -- thank you so much for reminding me of 2 that. 3 Again like originally I was focused on MI, but 4 because of the morning discussion I would like to 5 address two parts of this. One is the residue gas. 6 The residue gas is produced as you have seen the 7 numbers in the morning and reinjected anywhere from 8 6.7, 7 to 8 BTF a day. That residue gas injection 9 happens and I don't have the arrow that -- yes, that 10 goes right here, that's from the CCP it's injected in 11 here. Now originally the residue gas is injected in 12 what we call the apex injectors, AGI and the NGI, not 13 VGI (ph). Then in 2000 and I was responsible for that. 14 In the back of the -- if this is a three dimensional 15 clock then in back of the cap near what we call the 16 east dock we drill eight water injectors and to inject 17 about six -- up to 650,000 barrels a day was the pooled 18 rate of injection, we inject water in the Prudhoe Bay 19 gas cap. That project has been referred to as the Gas 20 Cap Water Injection Project. 21 Before I even get to the Gas Cap Water 22 Injection Project I'd like to go back to 1987 when we 23 had the CGF installed and since then we've had several 24 gas handling expansion projects. Each of those 25 projects successively increased the producing gas Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 107 1 handling capacity anywhere from initially 3 BCF a day 2 to 5 BCF a day to 7 and a half BCF a day. And 3 ultimately with the mixed project we had six (ph) BCF a 4 day. In each scenario the economics of the 5 justification of that project required to handle what 6 that additional gas and after MI and NGL the residue 7 gas to be reinjected. One of the big drivers of this 8 project is the value of residue gas in adding 9 additional vaporization inventory (ph). 1 0 The target for that vaporization is right on 11 this slide. In the original gas cap there is about 7.6 12 percent residue oil in the gas cap. So that is over a 13 billion stock tank barrel of -- billion barrels of oil 14 along with -- and this number's public, you can, you 15 know, get this from other literature. And another 16 thing is the target recall is the residue oil in the 17 expanded gas cap. The primary mechanisms for recovery 18 in the expanded gas cap is what we call the gravity 19 drainage process. When the oil drains it doesn't drain 20 down to zero oil saturation, it leaves behind what we 21 call residue oil to gas load (ph) which typically would 22 have been around 25 percent or so at some point in 23 time. It varies by zone and geology so I'm not going 24 to give you -- quote an exact number, it varies. But 25 the point is that 7.6 percent oil of our billion Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • 1 TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 108 1 barrels in the gas cap and -- well, you know, several 2 billion, four to five, I -- you know, depending on when 3 in the life of the project you are looking at, those 4 targets are with those -- those molecules of oil are 5 the target for the injected residue gas. And as an 6 example, again these are public numbers, the residue 7 oil in the gas cap could be as much as 20 plus percent 8 vaporized by that propane and residue gas in the 9 injection and in the expanded gas cap as much as 8 10 percent. 11 And one of the reason this is very important is 12 that in -- when I came to work for BP in '95 one of my 13 first job was to qualify that the residue gas injection 14 in the gas cap and the expanded gas cap is a qualified 15 enhanced oil recovery process. And for that I actually 16 traveled to Washington, D.C. and had several meetings 17 over a years le of ears with the TAPS Commissioner. And P 18 this is all in the open government document. And they 19 basically qualified the vaporization as a qualified FOR 20 process because of the nature of the ruling relates to 21 the thermal dynamic properties and the mass transfers 22 of the hydrocarbon components from the oil into the 23 vapor phase. And one of the important things about the 24 propane in the residue gas is that if you were to just 25 inject methane here it would still vaporize, but as you Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 109 1 incur the components such as ethane, propane, butane in 2 the residue gas it increase the capacity of this gas to 3 carry liquid. And a very important part of the project 4 economics of all this projects was the vaporization 5 process. 6 Second thing I would talk about is the Gas Cap 7 Water Injection Project. As you heard earlier it is 8 correct that when the water is injected into the gas 9 cap it will trap some of the hydrocarbons and it would 10 actually -- you would from that perspective lose an 11 opportunity for that injected gas to vaporize oil which 12 is trapped by hydrocarbon. But one of the most 13 important things that the Gas Cap Water Injection 14 Project does, it arrests the pressure decline. So when 15 you inject that 4 billion barrels of water into 20 16 billion barrels of gas cap and that is an SPE (ph) 17 paper on this and the subject, but most important 18 something at your fingertips is the AOGCC testimony 19 that I provided here with others. In 2000 I believe at 20 the time when I testified I believe that Ms. Sarah 21 Palin was sitting right there as the AOGCC 22 Commissioner, you know, and at that time we went to 23 whole calculation of why we should get Gas Cap Water 24 Injection Project sanction and the most important thing 25 was while at the declining pressure if you had not put Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • 0 TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 110 1 Gas Cap Water Injection Project pressure would have 2 declined at the rate of something like 25 PSI a year. 3 When you injected water in that part of the field it 4 held the pressure constant, in other words it arrested 5 that pressure decline and injected gas capacity to 6 vaporize oil at higher and higher pressure. So one of 7 the things we showed in the testimony that although you 8 lose about -- the numbers are in the testimony, 9 somewhere of 20, 25 million barrels of oil, you more 10 than makeup because in this pressure vaporize oil 150 11 plus or overall there was like 230 million barrels, 12 whatever that is in the testimony, I don't have numbers 13 on top of my head. But the key point is that the 14 overall project economics was in terms of 100 plus, 150 15 plus million barrels and that more than justified the 16 project. 17 Another concern as you heard in the morning 18 about whether the injection of water in the gas cap was 19 detrimental to the field and that is 2000, so this is 20 like 12 years ago, and one of the things we mentioned 21 at the time that water displacing gas is a lot more 22 stable than water displacing oil. Most of the 23 petroleum engineers are used to oil reservoir and their 24 concept of water movement and water oil behavior. What 25 we showed that water displacing gas is dramatically Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCE.G 6/19/2012 DOCKET No. OTH -11 -51 Page 111 1 slower process, these shots are -- several in the 2 testimony between Exxon, ARCO and at the time I think 3 it was BP, showed that it is a lot slower movement and 4 that there was no danger to the field. 5 The AOGCC at that time required a very vigorous 6 surveillance program to make sure that there is no 7 damage to the reservoir and several precautionary 8 measures at the time required for the implementation of 9 the project. One of that was what we called the 10 gravity surveys, that they actually surveyed the water 11 movement in the field by using gravity. One of our 12 other experts, Jay Vardian (ph), BP, has conducted 13 those surveys over a few years. And another thing was 14 the logging of the wells, Lisburne wells, which are 15 completed to see where the water movement is. Since 16 that time and now it is 2012 we have been monitoring 17 the water movement into the reservoir and it is just as 18 we expected, it is moving very slowly, uniformly, and 19 it still yet has not broken to the production well. So 20 what we are calling in fact is that we have internal 21 reviews internally, they are -- we are calling gas cap 22 water injection to be a tremendous success in the 23 recovery of the hydrocarbon. 24 So two points, one thing is there is a very 25 efficient use of propane along with residue gas that's Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net • 1 TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 112 1 been injected into the gas cap in terms of not only 2 tremendous vaporization benefit in terms of several 3 hundred million barrels of oil, smart implementation of 4 projects such as Gas Cap Water Injection has further 5 allowed us to enhance the vaporization efficiency. In 6 our calculation we called that VBL and it's again in 7 the testimony and the literature which is called vapor 8 bond liquid and that is the vaporization of oil by the 9 lean residue gas with all the propane in it that helps 10 it to get down in the gas cap and production well. 11 That's the -- again like I said that's all related to 12 the residue gas discussion. Next slide I will address 13 the MI further. Any more question on this slide? 14 (No comments) 15 MR. JHAVERI: Okay. What this shows and the 16 slide number, Commissioner Norman, is 15, okay. 17 CHAIR FOERSTER: Sixteen. 18 MR. JHAVERI: Well, for the record 19 CHAIR FOERSTER: This one is 16. 20 MR. JHAVERI: Oh, I'm sorry. I'm looking at 21 15, but that is 16. I have to turn my slide so the -- 22 thank you. 23 CHAIR FOERSTER: Well, you can talk to either 24 one you want, but 25 MR. JHAVERI: Yeah. No, I will now show that Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 113 1 on slide 16 the -- what we call the recapture of the 2 miscible injectant by the CGF. What this slide shows 3 in the bottom is what we call the fresh MI. What that 4 means is that had you never implemented any FOR 5 projects on the North Slope, if you had that limited a 6 CGF, let it make the MI and if you had exported that MI 7 away this is the amount of MI that you would have made 8 and it would have declined. The reason it declines is 9 the result of as you have less and less oil your 10 solution gas production goes down which is providing 11 components of fresh MI. And also one of the reason it 12 also goes down is that even in this scenario when you 13 reinject the lean residue gas into the gas cap 14 ultimately it will get produced back and so that would 15 also decrease the percentage of gas cap gas in the 16 production stream. Both of that is responsible for 17 leaning. The nice thing about the CGF is that it will 18 -- that MI if you inject and that's what we did, put it 19 in the Slope to good use, then it returns, CGF will 20 recapture it, bootstrap it which is what we call to put 21 it back. So as you can see the total miscible 22 injectant is a lot higher than what the fresh MI is. 23 And the total miscible injectant then is going to be 24 put to good use for elsewhere. And the key point in 25 this slide is this, when you take away one molecule of Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net 40 • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 114 1 propane and you take away this fresh MI, you're not 2 just losing this MI, you're losing twice as much 3 because you are missing the opportunity to use it again 4 and again. 5 I'm going to go to slide number 17 unless there 6 is a question. 7 (No comments) 8 MR. JHAVERI: And this slide doesn't really -- 9 for whatever reason none of the words show up so I will 10 just have to talk from the -- and you see it in your 11 handout? 12 COMMISSIONER NORMAN: Yes. 13 MR. JHAVERI: Okay. Thank you to the Windows 14 7. Okay. Prudhoe Bay you need propane use, MI 15 utilization within PBU. And what I wanted to show 16 which I kind of mentioned earlier is that after 17 efficiencies of MI in the same patterns that you inject 18 and it is recycling more and more. One other thing we 19 would like to do is take MI somewhere else and some of 20 the fields that we have taken miscible injectant to is 21 the Point McIntyre field which has a cooler temperature 22 so it has a little -- for Prudhoe MI actually is what 23 we call super miscible, it's way above minimal 24 miscibility pressure. And it has a very good MI 25 efficiency. Another thing the Aurora and Borealis Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 115 1 reservoir, once again they are cooler than Prudhoe Bay 2 and so their minimum miscibility pressure also is lower 3 than the reservoir pressure, but they give you an 4 excellent MI efficiency. And the third one is one of 5 the most important part of our business is that in the 6 viscous oil the Prudhoe Bay miscible y injectant is 7 miscible only for oil with a viscosity which is less 8 than 20 to 70 (ph) points. But what we showed is that 9 for more viscous oil which goes from 20 to 150 points, 10 Prudhoe Bay miscible injectant is going to work as a 11 viscosity reduction agent and that would significantly 12 increase the recovery. And I was actually that very 13 distinguished lecturer in 2006 talking about the use of 14 miscible injectant in a viscous oil reservoir and I 15 actually went around the world talking about that. 16 Today we have been past that and we have been really 17 analyzing the data from some of our projects such as 18 viscosity reduction wag and they show a remarkable 19 efficiency off this injectant to make FOR oil. 20 CHAIR FOERSTER: Do you see other places? 21 MR. JHAVERI: Pardon. 22 CHAIR FOERSTER: Do you see other viscous oil 23 reservoirs on the North Slope that (indiscernible - 24 simultaneous speech) 25 MR. JHAVERI: Oh, actually as you undoubt -- as Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 • DOCKET No. OTH -11 -51 Page 116 1 you already know a lot of viscous oil reservoirs on the 2 North Slope so there is a tremendous opportunity for 3 using -- finding FOR agents. I would say Prudhoe Bay 4 miscible injectant is certainly very efficient in terms 5 of using it for, but any other hydrocarbon gas that 6 would say change its composition with a gas blend to 7 enrich with or even mix with NGL could be used. But 8 once again as you understand this, all of our -- I 9 mean, new viscous oil development is going to be the 10 overall economics of getting the injectant operation 11 what is the benefits. 12 CHAIR FOERSTER: So I'm going to break my own 13 rule and ask an off topic question. So the fact that 14 we've got 20 plus billion barrels of viscous oil on the 15 Slope, much of which is a resource and not a reserve 16 because of the viscosity, what does that say for major 17 gas sales? Do you understand my question? 1 8 MR. JHAVERI: So the -- what if any -- yeah, we 19 know there is, you know, tens of billions of barrels of 20 viscous oil resource on the North Slope. And then I 21 did not understand. 22 CHAIR FOERSTER: Okay. And if you're saying 23 that the Prudhoe Bay gas is a great viscosity reducer 24 for heavy oils, why would we ever sell Prudhoe -- the 25 Prudhoe Bay gas cap when we can use it to get -- to Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 117 1 deviscosify [sic]? That's probably not a word. 2 MR. JHAVERI: No, actually that's a very 3 excellent point and I believe that Bernie also 4 addressed that in one of the last bullet points. In 5 fact, I'll just -- I think that's right to the point 6 actually. So I'll go back to that bullet point on the 7 slide number -- let me just -- and then maybe add 8 something to that. I am going to slide number 12 and 9 the third bullet point, okay. And I would say out 10 loud. Before propane would be sold in a major gas 11 sale, the WIOs need to determine whether selling 12 propane in a major gas sale or continue to use it in 13 EOR process would be the most effective means to 14 maximize the value of the North Slope resource for the 15 state and the producers. That's really the answer to 16 your question. 17 CHAIR FOERSTER: Okay. Thank you. 18 MR. JHAVERI: You're welcome. All right. So I 19 am then moving from slide 17, but before I move I just 20 want to make this point and once again you help me with 21 that, Commissioner Cathy, is that we have a lot of 22 viscous oil resource on the Slope and as, you know, 23 engineers like me and others in the working for the 24 WIOs, is to understand the value of agents particularly 25 for EOR processes and to find effective and economic Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 118 1 way to find those agents for that recovery. And so 2 that's why, you know, I have been here all day today to 3 basically make a point to you that we after 31 years in 4 the industry look for opportunities. I mean, forget 5 about waste, you know, that's the last thing on my 6 mind, it's important to use it as effectively as 7 possible, you know, that's what we -- you know, we have 8 education for is to do a better engineering utilization 9 of, you know, components. And we are continuing to 10 find improved not only ways to use it in the same 11 reservoir, but find ways to improve its contact 12 efficiency within a given reservoir. 13 One of the things I kind of mentioned that is a 14 part of my qualifying, but in 1986 I received an 15 outstanding technical achievement award from ARCO. I 16 was a planner at the time, for my surveys in terms of 17 finding ways to work on Alaska Prudhoe Bay reservoir, 18 projects like vaporization in the Prudhoe Bay gas cap 19 and miscible process and oil recovery. And it was my 20 work in Alaska and I believe Mr. Heinze was the 21 President at the Time of ARCO Alaska. 22 Okay. So moving on to slide 18 now 23 CHAIR FOERSTER: Which is just as lovely as 24 slide 17. 25 MR. JHAVERI: Am I Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEENPG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 119 1 CHAIR FOERSTER: No, you're on the right slide. 2 MR. JHAVERI: Oh. Well, this is another slide 3 that not having 4 (Off record comments) 5 MR. JHAVERI: All right. So this -- let's get 6 back to the MI part again. So we discuss quite a bit 7 about the vaporization part and I'm glad that 8 discussion is to use components for EOR. Bernie talked 9 about 2,500 so I will stick with this number, that if 10 you remove say 2,500 barrels a day of propane sales 11 then it would reduce MI by 10 million cubic feet per 12 day. So one of my goal was to give an idea to the 13 Commission what does it mean in terms of just FOR 14 barrels. And so one other thing is I went back and did 15 some, you know, look at this, and if you took 10 16 million cubic feet per day of MI what does it mean, 17 what is the impact on your oil per barrel of propane 18 sold. So one thing I said instead of 2,000 why don't I 19 just show it in terms of unit, just one barrel. So one 20 of the things that, you know, 10 million divided by 21 2,500 is roughly 4 MCF per barrel, correct, that's a 22 simple algebra or mathematics. Yeah, that's 23 mathematics, I'm sorry. So I said okay, I'm going to 24 take 4 million cubic -- 4 MCF, 4,000 cubic feet of what 25 we call fresh MI and the reason it is called fresh is Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 120 1 when you take that propane and you take it out of the 2 system and put it in somewhere someplace, that 4 MCF is 3 gone forever from and it's not going to be able to now 4 be recycled. And so based on my calculation moving 5 forward, it means that by a factor of two you are 6 losing an overall MI, total MI, about 8 MCF a barrel. 7 The next thing I say is that I'm going to look 8 -- you know, I'm going to try to show you a real 9 picture where marginal use of MI. In fact, the current 10 MI efficiencies, if I take this MI to new target such 11 as new projects such as viscous oil say for example, 12 efficiency of that is very, very good, it's like 6 MCF 13 a barrel. But I'm already doing that by taking some of 14 the MI from Prudhoe conventional pattern so I thought I 15 should be fair and try to use the marginal value. So I 16 use the marginal value of somewhere like 10 to 14 MCF a 17 barrel of MI if I take it into my currently not so 18 great area. But it doesn't mean it's zero, all we are 19 saying is that we are going to take MI from somewhere 20 which is giving 10 to 14. If I take 8 MCF and take 10 21 to 14 it's still about .6 to .8 barrels, so roughly 22 about .7 barrels of FOR oil that I'm not getting today. 23 Let me emphasize if you are to take it out of the fresh 24 MI it would be a lot more, but my point is the 25 following. Today if -- in the system that Bernie Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net • TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 121 1 talked about today, if you take any single barrel of 2 propane you are going to see a loss of, you know, I 3 would say today, about, you know, seven - tenths of a 4 barrel. So my point is this, the value of that propane 5 if you are going to take it elsewhere, it should 6 compensate for that value of FOR oil that you're not 7 going to recover plus any cost modification. As Bernie 8 showed earlier any propane that you want to take out, 9 as you know propane is -- mixes ethane, propane, 10 butane, but it's a hydrocarbon, you know, mixture, will 1 require special processes and that cost of operation 12 plus any large modifications. So that's a major point 13 is that we have to make is that we are effic -- we are 14 continuing to use the value of MI today and we are -- 15 the reason we are taking MI away from Prudhoe Bay is 16 not because Prudhoe is a bad target, you can continue -- 17 see right now our plan in the Prudhoe is to put MI, 18 maybe up to 25, 30 percent hydrocarbon volume, 19 according to the -- what you saw the filing with AOGCC. 20 But if you had more MI you can continue to put as much 21 as long as you want. In the Lower 48 reservoirs you 22 have fields in Texas where they are putting up to 100, 23 200 pool volume, you know, percent so two times that 24 other volume. It will continue to produce more and 25 more as you continue to inject more and more. That's Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 122 1 the bench mark. 2 COMMISSIONER NORMAN: So if I understand your 3 testimony if we're talking about the system as it 4 exists today, right now, all of this? 5 MR. JHAVERI: Yeah. 6 COMMISSIONER NORMAN: If somehow that system 7 were able to be expanded then the output from that 8 expanded system would still go to MI, it's still needed 9 and 10 MR. JHAVERI: Oh, yes. Oh, yes. Oh, yeah. 11 That's what I -- you know, we spend a lot of time 12 thinking about how can I make more miscible injectant 13 because we have more targets today than we have 14 miscible injectant. 15 CHAIR FOERSTER: Let me ask 16 MR. JHAVERI: It has to be considered 17 economically. 18 CHAIR FOERSTER: The .7 barrels of FOR oil 19 lost, is that on one injection of the MI or is that -- 20 of the propane or is that for the life of the use of 21 that barrel of propane? 22 MR. JHAVERI: I use that with a factor of two. 23 So I 24 CHAIR FOERSTER: So that's two 25 MR. JHAVERI: Two times. Computer Matrix, LLC Phone: 907-243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 123 1 CHAIR FOERSTER: two rotations? 2 MR. JHAVERI: Yeah. 3 CHAIR FOERSTER: Okay. 4 MR. JHAVERI: Yeah. That's what I call, you 5 know, a good sense engineering, you know 6 CHAIR FOERSTER: Okay. 7 MR. JHAVERI: based on my previous 8 calculations of use of MI on the Slope. 9 CHAIR FOERSTER: Okay. And I thought I heard 10 in an earlier statement that there was 85 percent 11 recovery of the 12 MR. JHAVERI: All right. Yes. So let's -- do 13 you mind if I go back to the 14 CHAIR FOERSTER: Well, if you get 85 percent of 15 it back each time you use it then there should be more 16 than -- you should get more than two times of -- two 17 round trips of your 18 MR. JHAVERI: Yeah, but when you inject -- when 19 you inject MI some of it is -- and remember when I -- 20 when you are initially making oil, some of the MI is 21 trapped in the reservoir, it stays behind, it's not 22 returned. So I will give you just a general, for 23 example, for Prudhoe Bay some of the patterns on 24 average we are looking at. When you inject about 30 25 percent slug size, for example, when you inject one MCF Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 • DOCKET No. OTH -11 -51 Page 124 1 of MI you will return .7, .3 stay behind. That .7 you 2 could multiply now by .85. So 3 CHAIR FOERSTER: Okay. 4 MR. JHAVERI: .....1.6. 5 CHAIR FOERSTER: Gotcha. 6 MR. JHAVERI: But the thing is you do more than 7 one so ultimately it climbs up the 8 CHAIR FOERSTER: All right. 9 MR. JHAVERI: But there's some trapping behind, 10 of MI that's left behind. 11 COMMISSIONER NORMAN: This raises in my mind a 12 slightly different question though. If more miscible 13 injectant could be utilized and the only limitation is 14 on the system and with the current value of oil today, 15 why isn't the system simply expanded to yield that 16 additional MI that would yield more barrels of oil? 17 MR. JHAVERI: Again that's a very good 18 question. We -- somewhat Bernie kind of addressed this 19 question from the facility's perspective in the morning 20 and I will say he's more qualified 21 COMMISSIONER NORMAN: Okay. 22 MR. JHAVERI: but I'm sitting here so I'll 23 answer. The fact is that to get that miscible 24 injection out of the current system, the current system 25 is limited by what we call the hardware limitations, Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net - - - -- - - - -- TRANSCRIPT OF PROCEEDING 6/19/2012 DOCKET No. OTH -11 -51 Page 125 1 okay. And that's a -- you know, chiller temperature of 2 minus, you know, 35 to 40 degrees that we currently 3 have. So you already in the current system maximize 4 the production of this liquid. But the next question 5 to get beyond the Prudhoe system, what do you do. So 6 some of that, maybe one -- cool it farther, maybe to 7 minus 75, minus 80 degrees Fahrenheit or to use other 8 technology, kind of what Bernie referred to as oil, you 9 know, some sort of absorption through -- absorb the 10 components out. That requires additional investment. 11 So one of the question is say I make 1 MCF a barrel of 12 MI and say I'm going to get .7 barrels of oil, but my 13 investment is greater than .7 barrels of oil. I'm not -- 14 one, I'm spending more money, it's like, you know, 15 some of the things about why don't we use steam to make 16 heavy oil 17 COMMISSIONER NORMAN: Sure. 18 MR. JHAVERI: because it takes more 19 bottles of oil to burn to get the steam to make a 20 barrel of oil today. And that's why some of the steam 21 projects are not economic. 22 COMMISSIONER NORMAN: Okay. 23 MR. JHAVERI: Same principle. 24 CHAIR FOERSTER: Okay. Now if you could use 25 more MI why don't you sell less of it down the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 I DOCKET No. OTH -11 -51 Page 126 1 TransAlaska Pipeline and keep more of it for use for 2 MI? 3 MR. JHAVERI: Again this is a very good 4 question and I'm not going to say anything that once 5 again not have been publicly shared so this is all in 6 public testimony. When we take a barrel of NGL and we 7 put it down the TransAlaska Pipeline that is actually a 8 barrel of NGL and that will convert to some MCS of MI 9 and some ultimately make a barrel of EOR oil. So then 10 we have looked at and that's why the unit owners have a 11 working operating agreement that you will maximize the 12 use of NGLs, as about -- you know, with NGLs it's C5 +, 13 it's not just propane, it's a C5+ barrel. So when you 14 maximize the value of C5+ barrels it has actually 15 somewhat -- you have lesser value in terms of EOR 16 barrels than that barrel of NGL because it is not just 17 propane, it is C5 +. It makes a lot more sense for you 18 to maximize the barrels because ultimately you want to 19 maximize the total barrels on the Slope. So the value 20 of barrel that you can immediately, you know, get in 21 your revenue stream is a barrel of NGL and this is 22 where again I don't want to go there, but you guys go 23 there in '95 there was a MI /NGL testimony with the 24 state, do you remember in the '94/'95. If you open 25 those testimony you'll get all answers to these Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 • I DOCKET No. OTH -11 -51 Page 127 1 questions. 2 CHAIR FOERSTER: Did we get it right in '94? 3 MR. JHAVERI: Pardon? 4 CHAIR FOERSTER: Did we get it right in '94? 5 MR. JHAVERI: Oh, yes. Oh, yes. Yeah, we did. 6 Oh, yes. No, we did get it right, yeah. And that's we 7 are maximizing the NGLs, you know, we have the Skid 50, 8 you know, we -- at that time it was a, you know, for a 9 short period of time it was shutdown and then we open 10 it up and since then we've been -- we've been doing it 11 right. 12 CHAIR FOERSTER: Okay. 13 MR. JHAVERI: Okay. Any other question? 14 (No comments) 15 MR. JHAVERI: I think I have one summary slide 16 then. Can I move onto my last slide which I just want -- 17 okay? 18 CHAIR FOERSTER: Yeah. 19 MR. JHAVERI: All right. So this again I think 20 I -- I'm on the right slide, I'm on slide 18 -- slide 21 19. And I want to leave with this viewpoint, that in 22 addition to the PBMGP project there is significant FOR 23 opportunity on the North Slope for utilizing the 24 Prudhoe Bay MI. We have a lot more opportunity, we 25 need to have MI to meet those resources and we are Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net 1 TRANSCRIPT OF PROCEEOG 6/19/2012 DOCKET No. OTH -11 -51 Page 128 1 looking at that always. You heard that earlier also. 2 Removing propane from the exist system -- 3 existing system directly reduces MI production. 4 Questions have been asked many times today, can you 5 make MI, no. Can you take the propane out without 6 affecting MI. The answer is the same as can you make 7 gold from mercury, you know. No. Every barrel of 8 propane sold incurs about .7, that's just an idea, 9 there is a range, it will -- I wanted to give some 10 information, an idea, as to numbers of Prudhoe's 11 management efficiency, that could change, the number 12 could get higher if there are more efficient places you 13 take propane out of. And last statement, I think that 14 the value of propane sold should compensate for the 15 value of lost FOR oil plus the cost for facility 16 modification and operation. 1 And one point that I did not make here, but 18 since you had asked, Commissioner Norman, I'll 19 reiterate that. That even under the gas sale scenario 20 we are continuing to look at the value of propane down 21 the pipeline, but its converting that -- not convert -- 22 getting it out that will have to be done before that 23 final decision is made. And although they're not here 24 my -- I'll just summarize it that that is the -- the 25 velocity of gas as it's being currently injected into Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDTiVG 6/19/2012 DOCKET No. OTH -11 -51 Page 129 1 the Prudhoe Bay gas cap it continues to make increased 2 barrels of oil from the vaporization of residue oil and 3 oil in the gas cap. And the very last bullet point 4 would be that the gas cap water injection project if 5 anything enhances the value of vaporization. 6 I think that kind of ends my testimony and I'll 7 hang around for any other questions if you 8 CHAIR FOERSTER: Do you have any questions at 9 this time? 10 COMMISSIONER NORMAN: No questions. 11 CHAIR FOERSTER: Thank you. And I've been 12 calling you Mr. Jhaveri, but it's doctor, isn't it? 13 MR. JHAVERI: I've been called other things, 14 mister sounds fine. 15 CHAIR FOERSTER: Well, you're the first one to 16 call me Commissioner Cathy. 1 So BP has another witness? 18 MS. GOULD: One more. 19 CHAIR FOERSTER: And let the record reflect 20 that 15 minute testimony took 55. 21 MS. GOULD: I think my comments will be pretty 22 brief actually, but I won't quote a time just in case. 23 CHAIR FOERSTER: All right. So let me swear 24 you in first. 25 (Oath administered) Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 130 1 MS. GOULD: I do. 2 SHERRI GOULD 3 called as a witness on behalf of BP Alaska, stated as 4 follows on: 5 DIRECT EXAMINATION 6 CHAIR FOERSTER: All right. Give us for the 7 record your name, who you represent, if you choose to 8 be -- if you desire to be recognized as an expert 9 witness what that area of expertise is and then the 10 justification for it. 11 MS. GOULD: Sure. My name is Sherri Gould and 12 I'm a Commercial Negotiator in the Business Development 13 Group for BP. 14 And I -- compared to these two, no, I will not be an 15 expert witness today. 16 CHAIR FOERSTER: And again refer to your slides 17 by number for the record. 18 MS. GOULD: Okay. I will only be speaking -- I 19 guess I should move forward to my slide. I will only 20 be speaking from slide number 20 today and speaking 21 about the commercial consideration of propane. 22 And I guess the important point to make right 23 up front is that so far you've been hearing from BP as 24 the operator working on behalf of and under the 25 direction of the other working interest owners of the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 131 1 Prudhoe Bay Unit to efficiently develop the Prudhoe 2 resource. So I'm putting on my individual working 3 interest owner hat, not speaking as the operator at 4 all. And it's an important distinction because 5 hydrocarbons are not sold by the unit, they're sold by 6 individual owners. And so in the case of the sale of 7 hydrocarbons including propane, each working interest 8 owner would have to independently determine whether or 9 not propane sales are commercially viable, they's have 10 to do their own economic analysis on that point. So 11 any comments I make today from a commercial perspective 12 are just BP's comments in the capacity of a working 13 interest owner at Prudhoe, not as operator. 14 And so what I can say is that BP is committed 15 to the sale of hydrocarbons on commercially equitable 16 terms and we've had a lot of conversation about that 17 today. So what are the commercially -- how does 18 something become economic and that tension there that's 19 between the value of the hydrocarbon and its various 20 uses. And so we've actually explored with Mr. Heinze 21 in his capacity at ANGA for several years and others 22 actually about whether or not a commercially viable 23 opportunity exists for propane. And as you've heard 24 today propane has tremendous value on the North Slope 25 in the form of MI for enhanced oil recovery. And so Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 • I DOCKET No. OTH-11-51. Page 132 1 currently we don't see that it's commercially viable to 2 do anything else with propane at the moment. 3 And in some of our conversations with Mr. 4 Heinze in his capacity at ANGA, I believe the initial 5 proposal actually that was talked about with all the 6 producers was a stand alone plant that would be funded 7 independently, you know, by market investors that would 8 take a split stream from the residue gas stream and 9 strip out the propane and make that propane available 10 to the market. And I believe that project was viewed 11 as uneconomic at the time. And so the economic aspect 12 of making propane available has obviously been 13 challenged -- has been challenging, you know, all 14 along. 15 And so, you know, I think the state and all the 16 stakeholders benefit from maximizing all the resources 17 and so I think what you've heard today is that we see 18 the value of propane in the form of MI to make enhanced 19 oil recovery within the Prudhoe Bay Unit. 20 That's actually all I had. 21 CHAIR FOERSTER: Thank you. 22 MS. GOULD: And there haven't been -- we -- I 23 just think is pretty clear, the commercial comments are 24 pretty brief. I wanted to make the distinction between 25 the owner and the operator and we don't really have any Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 133 1 specific economics to comment on. 2 F FOERSTER: Thank you. Do you have any 0 y y Y 3 questions? 4 COMMISSIONER NORMAN: Just a couple of short 5 questions 6 CHAIR FOERSTER: Sure. 7 COMMISSIONER NORMAN: if you know and if 8 you don't we can pursue it perhaps with another witness 9 or deal with it. But the use of the propane and the 10 other NGLs is normal lease use, used on that reservoir 11 for MI; is that correct? 12 MS. GOULD: Sorry, is 13 COMMISSIONER NORMAN: It's classified as lease 14 use 15 MS. GOULD: Yes. 16 COMMISSIONER NORMAN: you're not paying a 17 royalty or 18 MS. GOULD: I think that that's true 19 COMMISSIONER NORMAN: Okay. 20 MS. GOULD: but I -- I probably am not the 21 right -- you know, don't have the right expertise to 22 answer that definitely. 23 COMMISSIONER NORMAN: Yes. Well, I see certain 24 people in this room that could probably answer that if 25 they want to, but I won't answer [sic] them. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 134 1 MS. GOULD: Okay. 2 COMMISSIONER NORMAN: Another question that's 3 been raised is the possibility of taking -- the state 4 of Alaska taking propane in -kind. And that is a little 5 different concept that what I've known, to take a slice 6 - of the -- a fraction in kind. 7 MS. GOULD: Uh -huh. 8 COMMISSIONER NORMAN: Do you have any opinion 9 on that, if you received -- let me put it this way to 10 you, if you received a notice of taking in - kind from 11 the state of Alaska that said we will take our royalty 12 share of the propane in -kind, what would be the 13 response from the commercial folks? 14 MS. GOULD: You know, I would definitely have 15 to scratch my head on that one and seek some additional 16 expertise. But, I think -- you know, Bernie made the 17 comment that according to our unit agreement we can 18 only take the stabilizer overhead for the -- we can't 19 take it for any other purpose other than MI. So I 20 think at the very least there would have to be an 21 amendment to the unit agreement to even allow that. 22 COMMISSIONER NORMAN: Okay. Thank you. 23 MS. GOULD: Yeah. 24 CHAIR FOERSTER: All right. Stick around in 25 case we have Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 135 1 MS. GOULD: Sure. 2 CHAIR FOERSTER: any questions for you 3 later. 4 MS. GOULD: Sure. Thank you. CHAIR FOERSTER: You batting cleanup? 6 JANET WEISS 7 previously sworn, called as a witness on behalf of BP 8 Alaska, stated as follows on: 9 DIRECT EXAMINATION CONTINUED 10 MS. WEISS: We just wanted to make a few 11 conclusionary comments. I'm Janet Weiss, I'm back and 12 I was sworn in before. And we wanted to discuss just 13 slide 21 in conclusion here. 14 We wanted to make the statement that as a 15 Prudhoe Bay Unit operator our primary objective at 16 Prudhoe Bay is to economically produce hydrocarbons in 17 the reservoir, maximizing the value to the state and 18 all producers. 19 We also wanted to wanted to make the statement 20 clear that production of oil at Prudhoe Bay is greatly 21 enhanced by our MI program. You saw about what fresh 22 MI does, what bootstrapping MI does, what it does at 23 the various horizons that we have an opportunity to 24 inject MI into. 25 MI's distributed in accordance with AOGCC Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 I DOCKET No. OTH -11 -51 Page 136 1 approved pool rules and area injection orders so we 2 feel like we've done a lot of dialogue about the value 3 of MI along the way and have constructed those 4 boundaries in a way that's commensurate with maximizing 5 value and to remove propane for sale would reduce the 6 amount of available MI and therefore reduce oil 7 recovery. 8 And propane is not being wasted in our opinion, 9 it is being used in a way that efficiently develops the 10 Prudhoe Bay resource. 11 And that concludes our comments. 12 CHAIR FOERSTER: Do you have any questions for 13 Ms. Weiss? 14 COMMISSIONER NORMAN: Well, just because you 15 may be our final opportunity to ask a question of BP 16 and you're welcome to turn around and consult with 17 anyone, but my take away from the hearing insofar as 18 the testimony we've heard from the operators is that 19 the propane right now insofar as the system is 20 currently configured, all of the propane is being 21 beneficially used and that there is no surplus propane, 22 is that an accurate statement? 23 MS. WEISS: That is. What we believe according 24 to the current configuration of the system that we are 25 using that propane, there's some that goes into the NGL Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEDING 6/19/2012 • I DOCKET No. OTH -11 -51 Page 137 1 sales, there's some that goes into MI. And even that 2 that goes into the residual gas and to the gas cap is 3 actually enhancing recovery. 4 COMMISSIONER NORMAN: Okay. Thank you. 5 CHAIR FOERSTER: I don't have any questions for 6 you at this time. But if you all would stick around 7 because we do have a few more people that want to 8 testify and they may have something -- they may have 9 something to say that would incite us to have a 10 question for you. 11 Did you get any questions from the public or -- 12 all right. 13 On -- when we came back after the break Mr. 14 Anderson asked if he could change his mind and testify. 15 So if you would like to do that why don't you come on 16 up if you're prepared to. And Mr. McCutchin is -- are 17 you still interested in testifying? 18 MR. McCUTCHIN: I would like to hear again from 19 Mr. Heinze before I testify in response to BP if he'd 20 care to respond to BP. 21 CHAIR FOERSTER: That's fine. That's fine. 22 All right, Mr. Anderson. 23 (Oath administered) 24 MR. ANDERSON: I do. 25 NELS ANDERSON Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 138 1 called as a witness on his own behalf, stated as 2 follows on: 3 DIRECT EXAMINATION 4 CHAIR FOERSTER: All right. For the record 5 state your name and who you represent. 6 MR. ANDERSON: Okay. My name is Nels Anderson, 7 Jr. I'm representing myself as a member of the 8 public 9 CHAIR FOERSTER: Okay. Do you like -- would 10 you desire 11 MR. ANDERSON: and I'd like to make a few 12 comments. 13 CHAIR FOERSTER: Okay. Would you care to be 14 considered to be an expert in any are? 15 MR. ANDERSON: Oh, no. No, ma'am. No. 16 CHAIR FOERSTER: Okay. Proceed. 17 MR. ANDERSON: I am not an expert. I would 18 just like to make a few comments about the conditions 19 that rural Alaska finds itself in in terms of paying 20 for their fuel. I think you both probably know that 21 the cost of diesel has gone up tremendously over the 22 last 10, 15 years and people in rural Alaska have been 23 looking desperately for another alternative and have 24 seen propane as a possible alternative to displace 25 diesel. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 - 1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 I DOCKET No. OTH -11 -51 Page 139 1 I worked on the initiative to develop ANGA and 2 worked with Harold and Scott Hayworth to move in that 3 direction. And we were hoping by this time that gas 4 would have been moving from stranded gas on the North 5 Slope to Tidewater and then have some offtake points to 6 allow gas to be delivered to our villages all across 7 the state of Alaska. 8 In the paper today you probably read that 9 people are having difficulty getting any king salmon 10 for subsistence. Well, one of the fishermen said their 11 paying 6.50 a gallon for gasoline. So that's another 12 -- that's an indicator of what difficulty there's going 13 to be this winter, heating fuel is way up, about six, 14 seven, $8 a gallon in many of our villages. 15 Electricity is 40, 50, some communities 75 cents a 16 kilowatt hour for electricity. My wife showed me our 17 bill for electricity in Anchorage, it was eight cent a 18 kilowatt hour. So the disparity among Alaskans for 19 their energy is huge. And we see propane as a possible 20 energy bridge from diesel to when the state of Alaska 21 finally develops an energy distribution system that can 22 deliver energy equitably to all Alaskans so that we can 23 all benefit as Anchorage does from very low cost 24 energy. 25 So I would -- I have been in contact with the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net F TRANSCRIPT OF PROCEEOG 6/19/2012 • DOCKET No. OTH -11 -51 Page 140 1 Governor and I've asked him to take a g ood, close look 2 at this program. It does -- it really should be 3 pursued aggressively and I really appreciate Mr. Heinze 4 as he moved away from state service into private sector 5 that he decided to keep pushing in this area. 6 I don't think BP's a target here, I think other 7 operators, you know, probably should be in the frame as 8 well as BP. But, you know, the oil industry has been a 9 really good corporate partner over the years I believe, 10 you know, they've made tremendous contributions to 11 charities, hospital development and buildings and 12 scholarships and other very good programs. This is an 13 instance where Alaskans see a resource that they 14 believe belongs to them, the stranded gas on the North 15 Slope right now belongs to Alaskans. And when it's 16 developed we'll own 12 and a half percent under 17 royalty. And we would like the Commission and I'll 18 express as I have in the past to the Governor that we 19 need to make it possible for propane to be made 20 available to reduce the cost of energy in rural Alaska 21 because we are in crisis out there. 22 I was born in Dillingham, I lived there up to 23 2010 and my wife and I both retired and we moved into 24 Anchorage. And believe me the cost of living is so 25 different here than it is out there. People are Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 141 1 suffering, people have to get up in the morning and 2 decide whether or not they're going to pay down their 3 electricity bill or their fuel bill or buy food for the 4 kids. It's getting very desperate out there and we do 5 see the propane -- propane as a solution to helping 6 displace the cost of diesel so that we can bring down 7 the cost of energy in rural Alaska. 8 And that's all I have and thank you very much 9 for allowing me to testify. 10 CHAIR FOERSTER: Well, thank you, Mr. Anderson. 11 Do you have any questions. 12 COMMISSIONER NORMAN: No, I have no questions, 13 but I would note Mr. Anderson's public service to the 14 state of Alaska and we appreciate you coming in today 15 to testify. 16 MR. ANDERSON: Thank you. 17 CHAIR FOERSTER: Thank you, Mr. Anderson. On 18 my mental list all I have left are Mr. Heinze and Mr. 19 McCutchin. Is there anyone else who wishes to go on 20 the record before I ask Mr. Heinze to come back up? 21 (No comments) 22 CHAIR FOERSTER: All right. Come on up. 23 HAROLD HEINZE 24 previously sworn, called as a witness on his own 25 behalf, stated as follows on: Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net r TRANSCRIPT OF PROCEE•G 6/19/2012 • I DOCKET No. OTH -11 -51 Page 142 1 DIRECT EXAMINATION CONTINUED 2 MR. HEINZE: It's some risk letting him follow 3 me, but I will take the chance. 4 I'd like to offer just a few more comments, not 5 in the form of rebuttal, but in the form of maybe 6 reaction to what I've heard. 7 Let me start with the most recent testifier. 8 Nels and I went to visit BP over five years ago, he was 9 in a very official capacity for then Governor 10 Murkowski, as semi energy czar for the state of Alaska. 11 And at that time we went to BP we inquired as to the 12 availability of propane and even 100 barrels a day, I 13 felt like -- somewhat like a beggar with a cup looking 14 for 100 barrels a day of propane. But we went and 15 asked and basically were rebuffed. But that's the way 16 the world goes. 17 I also will comment that it's very clear to me 18 that we've had some very good technical testimony 19 today, I think that helps set a lot on the record which 20 again I don't think was there. Those are explanations 21 I've heard today that I had not heard previously and I 22 appreciate that very much. I'll also note that there's 23 a lot of good people technically that came out of ARCO 24 somehow and I'm very proud of that to have been 25 associated with those people and all that they're Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 143 1 about. 2 CHAIR FOERSTER: I'll second that. 3 MR. HEINZE: Okay. But back to sort of where 4 all this came from and again trying to react to what 5 I've heard today, one of the things that was the motive 6 here was to seek out some local source for propane. 7 And what I've heard is that in terms of now and the ask 8 now for that, no matter how small I seem to make it, 9 that because the existing CGF facility is loaded down 10 that the conundrum that I'm faced with is one of value 11 and economics and all those things because on the one 12 side it seems that what I'm told is if I take away one 13 molecule of propane that hurts MI to the tune of the 14 equivalent of somewhere between gold and platinum 15 molecules. So I -- you know, it's a very, very serious 16 thing and there's a great value associated with taking 17 one away. On the other hand when the Commission has 18 asked those questions of well, why don't you try to 19 find one more molecule for MI, you seem to be hearing 20 or at least what I heard today was that it's just -- 21 MI's just not valuable enough to push for that 22 additional investment or whatever the change is that's 23 involved. And somehow, you know, adding one or taking 24 away one, those two things sound so different to me 25 that I -- I'm just having a really hard time kind of Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 144 1 finding how I really feel about all that. But what is 2 clear is that if the Prudhoe Bay Unit as the owner of a 3 piece of equipment that's already doing something can't 4 figure out a way to even slightly modify that facility 5 to do something more with it, as a third party I have 6 no chance economically of doing anything that works 7 out. I mean, it just seems out of the question. 8 So I will for the moment accept currently the 9 answer is hell no. So and I understand that. 10 The second part of the conundrum though is that 11 the world doesn't live just today, the world does live 12 out there in the future. And what I heard on the one 13 hand is a very technical -- excellent technical case 14 today about MI and its long term value and other 15 expanded uses and I think the Commission has kind of 16 hit a few spots where, you know, what if you had more 17 and all those type of things. And I heard pretty 18 positive responses to that. 19 At the same time as when I was working on the 20 pipeline stuff, Alaska Pipeline Project, 21 ExxonMobil /TransCanada, Denali Pipeline, 22 BP /ConocoPhillips, all supported a northern economic 23 study that looked at the in state gas markets 24 associated with those pipelines. The initial estimate 25 of propane use was something like three to 5,000 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 -243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 145 1 barrels a day within the first five years of that 2 pipeline and 20 to 30,000 barrels a day of propane 10 3 to 15 years out. And again I had nothing to do with 4 those numbers, that's their work. And I'm having a lot 5 of trouble squaring on the one side frankly a lot of 6 people including the producers, support of a big gas 7 project that seemingly offers Alaska a very large 8 volume of propane and at the same time I'm hearing a 9 very measured case that the right thing for Alaska not 10 today, but even five years, seven years, 10, 20 years 11 from now, is to use the propane for miscible injectant 12 and recover more oil. 13 And again I'm not at a point where I can sort 14 that out and I would kind of throw that one back to the 15 Commission just because ultimately the gas sales and 16 what happens or doesn't happen is your responsibility. 17 But more importantly I think there's a lot of people 18 working on the longer term implications of North Slope 19 gas to market and other things like that that need to 20 have some clarity. If MI is the greatest thing since 21 sliced bread so be it, let's figure it out and kind of 22 put it on the table. If there really is other things 23 we can do with propane then let's figure that out and 24 put that on the table and get on with it and at least 25 start towards a market. Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 146 1 Commissioner Norman, you made a statement about 2 propane right now is beneficially used and I guess the 3 way I would put it is the recovered propane, the 4 propane that is extracted in the course of going 5 through this CGF, is clearly beneficially used, that's 6 not even the start of a debate. But the opportunity to 7 do better in terms of recovering that propane is still 8 an open question. I'm sorry, as we close this hearing 9 I still can't walk away from that one, that there isn't 10 something that could be done. And that's important 11 because again it goes back to the last suggestion I 12 made to you was that you continue to look at and 13 continue to ask the Prudhoe Bay Unit and its operators 14 to look for opportunities in the propane. 15 In that same vein, you will be the entity at 16 some point that gets the pleasure of coming to grips 17 with Point Thomson. And if I've heard anything correct 18 today it's that Point Thomson may be the best source of 19 propane for Alaska, not Prudhoe Bay. And again before 20 we get all caught up in they got to take the propane 21 over to Prudhoe Bay to increase the oil recovery there 22 could we at least think about whether we could have 500 23 barrels a day. Somewhere along the way here somebody's 24 got to work this into the equation. 25 There are several items that have been raised Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 DOCKET No. OTH -11 -51 Page 147 1 in the course of the data submitted to you and again I 2 applaud that this information's hit the table, I hope 3 it will hit the table more regularly, but at least we 4 got something out there now. In the course of that it 5 becomes clear that there are issues related to the 6 state of Alaska as a commonwealth ownership of -- as 7 the leaseholder, of the royalty and other things that 8 are going on here. And it's not clear to me whether 9 that commonwealth has been represented in all that's 10 going on or not. By way of example you were just told 11 that all this is under the unit operating agreement and 12 again I'll just remind you the state of Alaska is a 13 signatory of the unit agreement, not the unit operating 14 agreement. The state of Alaska is definitely not 15 bound. Now doesn't mean there isn't some other 16 arrangement or whatever legally, I -- there could very 17 well be, but I don't know of it and it's not laying 18 around there in the easily recoverable public record. 19 So I think there are some questions there, 20 that's not your problem to worry about other than the 21 fact that DNR is an entity that has standing before you 22 and I'm certainly going to urge that they address you 23 during the period of time that you leave the record 24 open. And I would be very supportive of you leaving 25 the record open for half a month or a month even if you Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 1 DOCKET No. OTH -11 -51 Page 148 1 wanted. I don't see any rush to close the record in 2 this case and I certainly will do my very best to 3 encourage DNR to offer whatever comments they wish on 4 this. And they may after they have a chance to review 5 the transcript and everything else again. 6 And that's sort of where I'm at and I thank you 7 very much for the opportunity to appear before you 8 today and thank you very much for conducting this 9 hearing the way you did. 10 CHAIR FOERSTER: Thank you, Mr. Heinze. Do you 11 have any other questions? 12 COMMISSIONER NORMAN: I have no further 13 questions. Thank you, Mr. Heinze. 14 CHAIR FOERSTER: All right. Mr. McCutchin, 15 would Y ou like to testify? 16 MR. McCUTCHIN: Thank you. For the record my 17 name is Jerry McCutchin. 18 CHAIR FOERSTER: First we need to swear you in. 19 (Oath administered) 20 MR. McCUTCHIN: I do swear. 21 JERRY McCUTCHIN 22 called as a witness on his own behalf, stated as 23 follows on: 24 DIRECT EXAMINATION 25 CHAIR FOERSTER: And who do you represent? Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEG 6/19/2012 • DOCKET No. OTH -11 -51 Page 149 1 MR. McCUTCHIN: Me. 2 CHAIR FOERSTER: And do you desire to be 3 recognized as an expert in any subject? 4 MR. McCUTCHIN: No. 5 CHAIR FOERSTER: Okay. 6 MR. McCUTCHIN: But I would like some 7 recognition as a rather knowledgeable person, if you 8 don't mind. 9 CHAIR FOERSTER: We don't have that category of 10 acknowledgement. 11 MR. McCUTCHIN: In other words I can't tell you 12 about my start and the rest 13 CHAIR FOERSTER: You can tell us anything you 14 want as long as it's germane to this subject. 15 MR. McCUTCHIN: My first venture in that was 16 when Irene Ryan put together the leases for what became 17 Swanson River. Next there was a drawing, unlike the 18 sales we have today, a simultaneous drawing and I 19 picked out seven leases in that and I hit seven top 20 leases, but no bananas. I only came in -- the closest 21 I got was third. Later it turned out there was no 22 bananas there to be had anyway. 23 Then we came to Prudhoe Bay and the production 24 of oil and I bought lots in Valdez for $800 apiece and 25 since I figured out where the pipeline was going to go Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 150 1 and it was pretty damned obvious, all you had to do was 2 read the Gas Journal of 1963. And Irene Ryan had 3 already figured it out, all they needed was a billion 4 barrels of reserve. 5 Then we came to Exxon and Exxon came and told 6 us that Prudhoe Bay would produce 8 billion barrels of 7 oil with or without a gasline and that flew in the face 8 of all known reservoir engineering, but they ruled the 9 predecessor to the Oil & Gas Commission, they've ruled 10 everybody else in Alaska except me. I finally got 11 somebody's ear down in the east coast who got ahold of 12 Scoop Jackson who chaired the Energy Committee and 13 Scoop Jackson was known as Alaska's first senator and 14 it got a hearing on it. That hearing took place 15 October 30th, 1977. 16 I had figured out that Prudhoe Bay would 17 produce 15 billion barrels of oil, but I didn't know 18 what the OOIP was except what I had to guess at and I 19 guessed about what the Oil & Gas Conservation 20 Commission uses today, not the one that BP said it is 21 which is 32 billion barrels. 22 So anyway out of the hearing Scoop Jackson said 23 no and that ended the gasline. And because of that as 24 you know Alaska's not broke today as testimony given by 25 Cathy Foerster in 2008. An additional 6 billion Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 • DOCKET No. OTH -11 -51 Page 151 1 barrels was produced, again testimony by Cathy Foerster 2 in 2008. Prior to that the oil companies told 3 Murkowski they didn't want a gasline. Prudhoe Bay had 4 already produced 5 billion barrels more than they 5 anticipated and they don't know when the end would come 6 and they couldn't even tell them within a decade when 7 the end would come. 8 So that's my background. I have some idea of 9 what goes on. I'm not determined to have fell off the 10 turnip truck, but it doesn't leave some people happy. 11 Propane. Thanks to Mr. Harold Heinze the 12 propane availability and propane waste issues are 13 before the Commission. Hopefully Mr. Heinze's propane 14 issues will be the harbinger of a number of oil and gas 15 conservation issues that should have been addressed a 16 long time ago. Mr. Heinze's statement that propane is 17 too volatile to be shipped in TAPS makes me wonder what 18 was in TAPS -- what was TAPS shipping in TAPS that TAPS 19 had to incinerate 273,000 tons one year in Valdez, in 20 those three big incinerators they had. I've repeatedly 21 asked DNR Commissioner Tom Irwin, but to no avail. I 22 should say former Commissioner. The cone of silence is 23 in. 24 What Mr. Heinze does not understand is the fact 25 if the Prudhoe Bay operators sell propane to Mr. Heinze Computer Matrix, LLC Phone: 907 - 243 - 0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEOG 6/19/2012 410 DOCKET No. OTH -11 -51 Page 152 1 or anyone else the majors set a price and that's the 2 last thing they want to do. As of now they can say 3 whatever they want to say is the price and sometime in 4 the future they must pay the state of Alaska. 5 I heard a number -- first about BP and 2 6 billion more barrels, I believe that was with our 7 second testifier, more than -- well, they told 8 Murkowski in 2005 that they'd already produced 5 9 billion barrels more. Then we have Cathy Foerster's 10 testimony of 6 billion barrels additional because no 11 gas line was constructed. All of which comes down to 12 what I've said before, there isn't enough proven gas in 13 the North Slope to produce all the proven oil. And a 14 lot of people are being sucked in for nothing the -- a 15 number of times about the injection of lean gas into 16 the gas cap and no indication from where it came nor 17 the purpose. I presume that is on BP slide 15 and from 18 the CP -- residue gas into the gas cap. I don't know 19 what the purpose was, but whatever it was. I heard 20 over and over why gas couldn't be taken as did Mr. 21 Heinze and it seems that we have a system that's 22 inelastic and it's just a tight fit, doesn't spare, 23 nothing can be made spare. 24 If Mr. Heinze meant that propane was too 25 volatile and I'm assuming there is no testimony, was Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahiie @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • DOCKET No. OTH -11 -51 Page 153 1 too volatile to remain in the tanks in the Valdez tank 2 farm once the pipeline pressure was not present and 3 therefore the propane should not have been shipped in 4 TAPS to Valdez I would agree, propane should not have 5 been shipped to Valdez in TAPS only to be incinerated 6 in those three big incinerators in Valdez which were 7 constructed for the sole purpose of disposing of the 8 gas liquids and condensates, planned, wanton waste at 9 its finest. 10 That raises a question exactly what was in TAPS 11 that TAPS was incinerating. Did the state get paid for 12 the waste. The cost is not germane to the AOGCC. 13 The charges of interest. Has the state ever 14 been paid for the liquids and so what price compared to 15 market. There's a repeated statement by Exxon that 16 Exxon intends to ship 10,000 barrels a day of gas 17 liquids in TAPS. The AOGCC should address that 18 assertion by Exxon as it has some other things that it 19 didn't wait to do, it did it ahead of time. 20 From reports in the press TAPS has not been 21 filtering out sand and water like TAPS should have 22 been, but using TAPS for disposing of the North Slope 23 water and dirt by shipping sand and water to Valdez in 24 TAPS. Is using TAPS to ship water and sand to Valdez 25 for disposal like disposing of gas liquids in Valdez or Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 DOCKET No. OTH -11 -51 Page 154 1 did they load the water and dirt and dispose of them at 2 sea. Now BP would not do that, would they. Remember 3 the whistle blower from Virginia who bought a tanker 4 full of TAPS oil and it turned out to be water and dirt 5 and he went bankrupt because of the contaminated oil. 6 Next is the statement by Heinze that that 7 residual gas injection to the gas cap of 78,000 barrels 8 a day of propane as well as other gas, that statement 9 has been publicly confirmed by BP here today. 10 And that brings me to the fact that BP lied 11 about the life of TAPS, the voracity of the testifiers 12 here today is very important, very important. That 13 brings me to the fact that BP lied about the life of 14 TAPS, we all saw it in the newspapers, all was going to 15 -- doomsday was coming. And the oil companies have 16 been lying ever since Exxon said Prudhoe Bay would only 17 produce 8 billion barrels of oil with or without a 18 gasline in 1975. The oil companies will persist in a 19 lie even when the lie contradicts all known reservoir 20 engineering. The majors have not been credible 21 witnesses nor will a major company ever be credible 22 witnesses. Not only should the AOGCC not -- never have 23 allowed propane injection into the gas cap because a 24 lot of that propane and heavier liquids will never be 25 recovered. But also the AOGCC should have ordered the Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 155 1 production of the liquids in the gas cap in Prudhoe Bay 2 and there's where if you want miscible injection why 3 don't you just produce the gas cap and get the gas 4 liquids out of it and leave dry gas. We don't have any 5 dry gas. The cycling of dry gas for the production of 6 gas liquids and condensates, gas cap, the production of 7 the Prudhoe Bay gas cap liquids necessitate the 8 construction of a gas liquids line. But what we heard 9 today they can use it all. Good, I'd like to see that 10 gas liquids over in the heavy and viscous oil. 11 Whether the AOGCC should have ordered the 12 injection of gas or power plant gas into the gas cap to 13 fill the void and makeup for the gas liquids and 14 condensates that should have been produced or second 15 flue gas, gas or flue gas, should be used to raise the 16 pressure of the gas cap back up to discovery pressure. 1 There is an agreement between the Oil & Gas 18 Conservation Commission and the Prudhoe Bay producers 19 that the producers would not let the reservoir pressure 20 fall below 3,600 psi, it's way below that now. Because 21 of the consequent loss of producible oil that contract 22 was violated by the producers and not enforced by the 23 Oil & Gas Conservation with the consequent loss of 24 producible oil to the detriment of the state of Alaska 25 and the nation. Gas and /or flue gas should be used to Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEEIG 6/19/2012 • I DOCKET No. OTH -11 -51 Page 156 1 rebuild the Prudhoe Bay reservoir pressure immediately. 2 For every day that goes by without full pressure 3 maintenance more oil is rendered unrecoverable by the 4 failure to maintain the reservoir gas pressure. That 5 is a very costly oil and gas conservation failure. 6 There should have been a determination of how much oil 7 is being lost, rendered unrecoverable, and has been 8 lost and a bill sent to the producers by DNR, DOR. 9 May I remind you that our nation must makeup 10 for the unrecovered oil by importing foreign oil at a 11 loss to the trade of the U.S. and the nation loses 12 three times, once with it buys foreign oil, second, the 13 loss of oil from the nation's wealth and third the loss 14 of job and infrastructure that have -- would have 15 produced the oil. Failure to enforce the 3,600 psi 16 agreement leads us to the fact that there should never 17 have been a need for the 3,600 psi agreement. Prudhoe 18 Bay should have been produced at the discovery pressure 19 of 4,400 pounds per square inch. 20 Alaska Oil & Gas Conservation has failed in its 21 mission. The Prudhoe -- thus the Prudhoe Bay reservoir 22 pressure should be rebuilt as quickly as possible to 23 the discovery pressure of 4,400 psi with gas and flue 24 gas like Swanson River to minimize the loss of 25 otherwise recoverable oil, condensates and gas liquids. Computer Matrix, LLC Phone: 907 -243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 e I DOCKET No. OTH -11 -51 Page 157 1 Alaska should be the SPE model for oil and gas 2 production not of wanton waste. Exxon testified before 3 the U.S. Senate on October 30th, 1977 that Prudhoe 4 Bay's OIP was 32 billion barrels and it was 65 percent 5 producible. That's a lot of oil that's still there. 6 And that obviously 65 percent producer was with 1970s 7 technology. Lost before horizontal drilling and later 8 technology became available. Prudhoe Bay is the crown 9 jewel of North American oil reservoirs and Prudhoe Bay 10 should be the model of how to maximize oil production. 11 If Prudhoe Bay oil production is maximized, Prudhoe 12 will be producing long after we're all dead and gone. 13 Which brings me to my question, how much 14 propane is in TAPS, how many tons per year of gas 15 liquids and condensate have been incinerated in Valdez 16 throughout the years, by name propane, butane, et 17 cetera, since the incinerators were constructed in 18 Valdez to incinerate those gas liquids and condensates. 19 What is the estimated amount of venting of hydrocarbons 20 before the incinerators were constructed to incinerate 21 the gas liquids and condensates. There was a cry out 22 of Valdez by the citizens of Valdez of all that vented 23 gas down there and so they finally had to shut them up 24 by building the incinerators. 25 There should have been a gas liquids line from Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • DOCKET No. OTH -11 -51 Page 158 1 the North Slope to Cook Inlet when Exxon first planned 2 the gas liquids line to Cook Inlet. The necessary gas 3 liquids to support the gas liquids line to Cook Inlet 4 are in Prudhoe Bay gas cap without waiting for 5 resolution of the Point Thomson litigation. After the 6 testimony I heard today about how they need propane for 7 miscible injectant I'm all for it, go for it, but let's 8 produce the gas cap and we can get lots of propane, 9 lots of butane, lots of other things. 10 Commissioner Seamount -- he's not here, but 11 Commissioner Seamount after all these years of you 12 espousing deep drilling in Cook Inlet finally there are 13 going to be a number of rigs for it which are going to 14 drill deep in Cook Inlet and they will discover what 15 you said was there all these many years. 16 Thank you. 17 CHAIR FOERSTER: Thank you, Mr. McCutchin. Do 18 you have any questions? 19 COMMISSIONER NORMAN: I do not, but I thank Mr. 20 McCutchin for his always interesting testimony. 21 CHAIR FOERSTER: Thank you, Mr. McCutchin. Is 22 there anyone else who wishes to be heard? 23 (No comments) 24 CHAIR FOERSTER: All right. What do you think, 25 two weeks? Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net TRANSCRIPT OF PROCEE•G 6/19/2012 • I DOCKET No. OTH -11 -51 1 COMMISSIONER NORMAN: Well, we've had a 2 suggestion that the record be left open for 30 days so 3 perhaps 4 CHAIR FOERSTER: That's fine. 5 COMMISSIONER NORMAN: we could have a 6 response from BP on that, is there any objection to 7 leaving the record open for 30 days? 8 MS. VAZQUEZ: We have no objection. 9 CHAIR FOERSTER: Okay. All right. Well, then 10 we'll leave the record open for 30 days until July 11 18th. 12 Okay. Do I hear a motion? 13 COMMISSIONER NORMAN: Move to adjourn. 14 CHAIR FOERSTER: Second. We're adjourned. 15 (Adjourned - 2:36 p.m.) 16 (END OF PROCEEDINGS) 17 18 19 20 21 22 23 24 25 Computer Matrix, LLC Phone: 907 - 243 -0668 135 Christensen Dr., Ste. 2, Anch., AK 99501 Fax: 907 - 243 -1473 Email: sahile @gci.net • • Colombie, Jody J (DOA) Ftom: Norman, John K (DOA) Sent: Wednesday, June 20, 2012 12:54 PM Subject: Probe into propane 'waste' on North Slope targets BP Probe into propane 'waste' on North Slope targets BP Alex DeMarban I Jun 19, 2012 Why can't one of the world's largest oil companies provide a tiny amount of propane to help reduce towering energy costs in Alaska? That was the central question fielded by state oil -patch regulators on Tuesday, as the Alaska Oil and Gas Conservation Commission heard arguments in an investigation into possible propane waste at North America's largest oil field. Many Alaskans want access to the propane, which rises to the surface as a byproduct of oil before most is reinjected back into the ground. In scores of rural villages, a sliver of that propane would provide a cheaper alternative to "catastrophic" heating fuel costs that hammer family budgets each winter, said Marcia Davis, general counsel for Calista Corp., the regional Native corporation for much of Southwest Alaska. "We're looking for any and all alternatives in our region because the diesel fuel costs are going to kill us," Davis, a former deputy Revenue commissioner, told a reporter at the meeting. 'Talk to the hand' Companies poised to purchase, store and distribute that propane have approached BP Alaska about the idea, said Harold Heinze, the former head of ARCO Alaska who requested the investigation as a private citizen. But he said BP doesn't want to talk. "I encountered a 'Talk to the hand,' " Heinze told two of the three commissioners who attended. "It was very hard to find out anything. I have lot of concern as to why even minimal volumes of propane could not be made available." The Alaska market for propane is tiny. A 2009 study found that it provides about 1 percent of the state's energy needs. But advocates say that sliver is growing. The Alaska Natural Gas Development Authority, where Heinze worked for years until recently leaving, with shipping compotes and others to create a Y g, pp g p statewide distribution plan. BP officials -- at least seven of them helped fill the small hearing room -- said there's no wasted propane at Prudhoe. More than 100,000 barrels of propane are injected back into the ground each day. Around 70,000 barrels helps pressurize the reservoir. Close to another 40,000 barrels a day is used to create miscible injectant, a fluid that improves oil recovery and has helped BP suck up 2 billion barrels more oil than originally thought possible. Propane used to produce more oil Making propane available for in -state use means BP has less for making miscible injectant, and therefore recovers less of the valuable oil that fuels the state economy, Janet Weiss, BP's vice president of resources, told the commission. Compounding problems is that while the London -based oil giant is a Prudhoe Bay unit operator, they're just one voice. BP owns 26 percent, while Exxon Mobil Corp. and Conoco Phillips own 36 percent each. To free up propane, BP would need to upgrade its gas - processing facility at Prudhoe Bay. But is the market for propane substantial enough to pay for that work? The oil companies don't see how such an overhaul would pay off, Weiss said. Suppose there was a lucrative market for propane in Alaska, suggested Commissioner John Norman, who attended the hearing along with Commissioner Cathy Foerster. Daniel Seamount, another commissioner, was absent. "The owners would certainly consider that," said Weiss. Only 500 barrels needed Heinze said only 500 barrels are needed to jumpstart an effort to market propane. Making that much available for in -state use would not be difficult or costly for BP, and demand would soon rise. He believes the fuel is being wasted in the short term because it's not made being made available for Alaskans. And it's possible the gas reinjected back into the ground will never be recovered, Heinze said. 2 "I'm sitting ere today because there is an o ortunit tdo something," he said. 9 Y pp Y g "The failure to produce looks a lot to me like burning it, throwing it on the ground." The Northwest Arctic Borough has been a strong proponent of the in -state propane plan. Under it, Prudhoe Bay propane could be shipped by trucks down the haul road to Fairbanks, with distribution by river barge to dozens of villages. As demand grows, barges could cross the Arctic Ocean from Prudhoe Bay during warmer months to reach Northwest Alaska communities. The plan could also help the Bristol Bay region, said Nels Anderson, a former energy advisor to ex -Gov. Sarah Palin. He said he had come to the meeting to make sure the commission takes a serious look at the possible waste. Rural Alaska energy crisis "I want to get the propane ripped out of that oil company so we can start using it for lowering the cost of energy in Alaska," he said. "Rural Alaska is in an energy crisis, but no one really seems to care about it," said Anderson, a former Dillingham resident and the original chief executive of the Bristol Bay Native corp. The Calista Native corporation, meanwhile, believes the huge natural gas pipeline the state wants built won't bring energy to more than 50 villages in the Yukon - Kuskokwim Delta. Calista wants to build a road between the Yukon and Kuskokwim rivers, where a 72 -mile portage between Russian Mission and Lower Kalskag connects Alaska's two largest rivers. Propane that's been trucked down the haul road to reach Fairbanks could travel by river barge to reach dozens of villages, Davis said. After BP had presented its arguments, Heinze told a reporter during a break that the company is looking for reasons not to provide propane for in -state use, instead of looking for ways it can. Contact Alex DeMarban at alex(at)alaskadispatch. com In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. 3 DISCLAIMER: • • The information contained in this e-mail may be confidential, proprietary, and/or legally privileged. It is intended only for the person or entity to which it is addressed. Thank you. If you forward this e-mail, PLEASE REMOVE all e-mail addresses before you send it on, and use the BBC area when forwarding to friends. "Be kind to our e-mail friends, and eliminate valid e-mail addresses for spammers to use" 4 • Colombie, Jody J (DOA) From: Michael Agin [michael.agin @ptc- us.com] Sent: Tuesday, June 19, 2012 11:35 AM To: Colombie, Jody J (DOA) Subject: Questions - why can't BP put something back down the hole instead of propane? - has anyone done a relevant cost benefit analysis swith similar parameters? What are results and where can they be - Found? - has BP issued considered issuing a challenge to industry and academia to solve this issue economically? - How is the confidental lawsuit relevant to this issue? Sent - From the mobile device of Michael S Agin michael.aginOptc- us.com michael .aginOthatothersmaylive.org (702) 806 -3152 1 � Alaska Oil & Gas Conservation Commission Pu blic Hearing: Pru B ay Un it Propane Use Junel9,20 Prudhoe Bay Unit: Propane Use bp Introduction • BP is operator of the Prudhoe Bay Unit ( "PBU ") and holds a 26% working interest. • • The PBU is committed to working with AOGCC. • The PBU's propane use maximizes the economic recovery of Alaska's oil. • The removal of propane would have a direct and negative impact on the number of oil barrels recovered through enhanced oil recovery processes (EOR). • Propane remaining in the reservoir could be sold with an economic gas sale. 2 h Bay Unit: Pro Prudhoe y Propane Use bp p FaciIity : Topics • CGF design and operation • Limitations influencing p roduct recovery • • Propane and MGS • 3 Prudhoe Bay Unit: Propane Use bp Central Gas Facility Simplified Block Diagram 0 Residue Gas to Injection Compressors (@ CGF & CCP) to Field Fuel Gas System • Gas from Flow Stations Booster Propane Low and „,„+, Compression Refrigerated .,,,. Temperature Gathering & Cooling Chilling Separation Centers LTS Bottoms • MI Pipelines MI Ml NGL to FOR "' Compression Stabilization Injection Wells NGL to Oliktok Pipeline to Skid 50 4 Oil Blending 4 Prudhoe Bay Unit: Propane Use b y General CGF LTS /Stabilizer Process .' 0 CO2 20 - 23% C1 29 -34% To Injection Compressors • Typical Miscible Iniectant C2 19 - 22% to Compression C3 23 - 27% To Field Fuel � iO4 < 2% Gas System MI composition adjusted nC4 < 2 /o IIII CGF Residue Gas to meet MMP requirement C5+ trace 4 primarily by LTS bottoms temp. To Refrigeration ► ■ Compressors (2 trains) • -35 to T © 42F • 1 ► Low Temperature NGL Stabilizers Reflux • NNF Chillers Se (2 trains) To Propane Manufacturing (3 trains) (1 -2 % slip stream) Propane (only when required) Refrigeration r Gas from ( -45 to -50F) Booster Compressors NGL rate controlled Aftercoolers Reboil b stabilizer bottoms temp. J _ L Heat Therminol to meet TVP limit at TAPS , 4,___, Therminol _9 --c-) 7 Typical NGL C3 1 - 3% NNF 104 10 - 15% For a given feed condition, run LTS feed as Returns from ® nC4 28 - 35% cold as safely possible to maximize products Propane Manufacturing C5+ 52 - 60% (when operating) 5 Prudhoe Bay Unit: Propane Use bp CGF Propane Refrigeration System Simplified Process 0 , Air Gas Turbine & Propane Compressor (2 parallel trains) Condensers Surge Drum • I L _ Ist. 2nd. 3rd. I) Warmer ambient air limits refrigeration operation 0 • ♦ I Refrigeration temperature can n* r be operated lower than -50F (system metal design limitation) LP HP Economizer Economizer 4 je,..-1 • o • LTS Chillers (four) Suction LTS 1 & 2 - one each Scrubber LTS 3 - two Process Process Gas _ �. Gas to Gas chillers outlet temperatures Gas chillers outlet temperatures LTS for LTS 1 & 2 normally 8 to 10 F for LTS 3 is somewhat higher, approach to propane temperature. typically no less than -38 to -40F. • This means LTS 1 & 2 feed temp. is seldom less than -42F. • 6 Prudhoe Bay Unit: Propane Use bp CGF Propane Manufacturing Simplified Process A small plant that runs intermittently to supply refrigeration system makeup Light ends to return to stabilizers Air cooled • • (Ethane and lighter components condenser and some propane) Slipstream from stabilizer reflux V Propane to storage ► or refrigeration system -- 98.5+ % propane Therminol Therminol De- ethanizer De- propanizer �.� Reboiler Reboiler cri Heavy ends return to stabilizers (Butane+ and some propane) 7 Prudhoe Bay Unit: Propane Use bp Typical CGF Component Recovery & Distribution to Products To Injection Field Miscible Injectant Compressors Fuel Gas Product LTS Bottoms Component Typical Split Between MI and NGL 100% • C1 Low CO2 Feed from NGL C2 Temperature chillers Separators LTS Bottoms Stabilizers C3 -559-8:0% % ( -35 to -42 F) iC4 35 - 40% % Component in Feed Gas Recovered in LTS Bottoms* nC4 22 - 25% 75 - 78% C1 1 - 1.5% CO2 6 -8% C2 11 - 14% NGL CO 100% C3 32 -41% iC4 55 - 65% Product ' nC4 64 - 73% C5+ 90 - 95% * varies with feed & op. conditions Drawing propane from Key points: 1) LTS feed temp determines liquids recovery for a given feed condition the existing system 2) Propane & butane are "swing" components between NGL & MI reduces the MI rate 3) NGL is maximized for existing conditions up to vapor pressure limit 4) When TVP is below limit, NGL is increased by shifting swing components from MI (decreases MI). If TVP is too high, the reverse occurs. 5) Adjusting swing components to accommodate NGL TVP, requires MI composition also be adjusted to meet MMP (further affects MI volume). 8 Prudhoe Bay Unit: Propane Use bp CGF Product and Propane Recovery Limitations • CGF recovers as much liquid in the LTS units from its feed as is operationally and safely possible given the conditions it faces each day • • Feed gas has continued to lean -out which results in reduced recovery of NGL and MI even with the same operating conditions • The ultimate barrier to existing LTS system recovery of liquids is the lower temperature limitations of both refrigeration and LTS systems (both -50 F) • Given heat transfer capability of existing chillers, the outlet LTS 1 & 2 feed temperatures are seldom lower than -42 F and -40 F for LTS 3 even if propane refrigerant is at -50 F • • Warmer ambient temperatures decrease refrigeration capabilities especially above 50 F • Greater recovery of liquids from the same quantity and quality of gas requires going to a lower temperature operation than current design allows or employing a new type of recovery process (i.e., cold oil absorption) 9 Prudhoe Bay Unit: Propane Use bp CGF Product and Propane Recovery Limitations (Cont.) ft) • NGL is constrained as blending with oil into TAPS is limited by vapor pressure restrictions. At a given plant feed rate and composition, when NGL is increased (as is the case when NGL is taken to Kuparuk EOR), it is at the • expense of MI rate since the additional NGL comes from propane and butane that otherwise would have ended up in the MI. • MI composition must be adjusted to meet the Minimum Miscibility Pressure. When propane and butane are shifted from MI to make more NGL, LTS bottoms temperature is raised to remove methane to a level to restore MMP. This further reduces MI rate. • Concentrating and removing a propane stream (as with a propane sale) would have a similar negative impact on MI rate. • 10 Prudhoe Bay Unit: Propane Use bp Propane Sales Implications • Removing propane from the existing system directly reduces MI production • — Example: 2500 bpd Propane reduces MI by 10 mmscfd • Propane sales from the existing plant requires plant modifications and new storage and load out facilities • Propane price needs to compensate for reduced FOR oil, incremental capital and operating expenses fb 11 Prudhoe Bay Unit: Propane Use bp Propane and MGS Considerations • Under a Major Gas Sale, higher ethane & propane content of the gas provides a positive heating value benefit, especially for Far East LNG markets • • Propane could be sold in a major gas sale pipeline at concentrations well in excess of typical CGF residue gas concentrations • Before propane would be sold in a major gas sale, the WIOs need to determine whether selling propane in a MGS or continuing to use it in FOR processes would be the most effective means to maximize the value of the • North Slope resources for the State and the producers 12 Prudhoe Bay Unit: Propane Use bp Reservoir Management: Outline 101 • Prudhoe Bay Miscible Gas Project (PBMGP) • MI EOR Opportunity on North Slope • • MI Utilization within PBU • Impact of MI Propane Sales on EOR oil • Summary • 13 r • oe •�ay . g ni . : ropane s{e bp • la . a Miscible Gas P ro j ec L . 4 y 2011 Operations: • Average Injection Rate: 131 MMCF /D - • Water- Alternating -Gas `N : y and Non - Conventional � ��. � r ` "` Injectors: 28 in 2011 i y �__ ; �----�.... r `te y �� r ,...._ , ____,_ I , ill ._, , -\_____, L -‹ .... 4..s......" .....,,, \ \ ., -- .. I:4=7 11111 , \ , _•:t.., , --- s-- -e11 -1 jo 46 -, _4 / -\ .4 1 , ,-, ..,„ :1 4 0 1 .--..... o ph..op o l 1 14 1 il lra*Tg ami lldikh. ALASKA 1 � •■••■• GOC WOC s ,,,,,, As of Feburary 2011 ti '—'IL �GGbbb/// I i +hater Only Injection Patterns (CUmI Ir . 4141 5 I I MI Injection Pattern (Cum) 14 Prudhoe Bay Unit: Propane Use bp Ml FOR O..ortunit on the North Slope ICCP Residue gas y PBU MI FOR MI CGF NGL Opportunities Separator Off Gas 4110 • Pt Mac FS /GC SLP > To TAPS • Aurora • Borealis I • Polaris Well Pads and Drill Sites • Orion RMI • Fresh MI Original Gas Cap Expanded Gas Cap FOR flood Aquifer Influx 4110 Aquifer • MI production consists of fresh MI and recaptured, returned MI (RMI) • Fresh MI from solution gas and original gas cap gas production • In addition to making fresh MI, CGF recaptures around 85% of RMI • MI use is expanded to other FOR opportunities within PBU to optimize oil recovery 15 Prudhoe Bay Unit: Propane Use _. bp I Bootstrapping CGF MI PRODUCTION RATE 700000 600000 +Total MI • Fresh MI 500000 ' • LJ ' U I v, - 400000 2 � ui I- CY_ 300000 0 d c it 0 200000 100000 0 + I 1,11987 1 '1 1992 12 31 19% 12.31 2001 11 .2007 1.1 2012 DATE • Returned MI RMI is recaptured in CGF and re-injected ( ) p J ected • Each standard cubic feet (scf) of injected MI is used more than once 16 Prudhoe Bay Unit: Propane Use bp Ml Utilization within PBU 4 • CGF MI utilization is optimized by targeting additional PBU fields for FOR — Pt. McIntyre • — Cooler temperature, Prudhoe MI MMP significantly below reservoir pressure, excellent MI efficiency — PBU Kuparuk Sand Satellites (Aurora, Borealis) — Cooler temperature & good M I efficiency — PBU Schrader Bluff Sand Satellites (Polaris, Orion) — Much cooler temperature, major oil swelling, viscosity reduction WAG, FOR significant increase over waterflood • 17 Prudhoe Bay Unit: Propane Use bp Impact on FOR Oil • Removing propane from the existing system directly reduces MI production - e.g. 2500 bpd of propane sales reduces MI by 10 mmscf /d • Impact on EOR oil (per barrel of propane sold) - fresh MI supply is reduced by 4 mcf - bootstrapping increases total MI impact by a factor of 2 to 8 mcf - at marginal MI efficiency on North Slope -10 to 14 mcf /barrel of EOR oil - about 0.7 (range from 0.6 to 0.8) barrel of EOR oil is lost per barrel of propane sold • Value of propane sold should compensate for value of lost EOR oil barrels plus cost for facility modifications & operation • 18 Prudhoe Bay Unit: Propane Use bp Reservoir Management: Summary • In addition to the PBMGP project, there is significant EOR opportunity within PBU for utilizing Prudhoe Bay MI • Removing propane from the existing system directly reduces MI 111 production • Every barrel of propane sold incurs about 0.7 barrel of EOR loss • Value of propane sold should compensate for value of lost EOR oil barrels plus cost for facility modifications & operation • 19 Prudhoe Bay Unit: Propane Use bp Commercial Considerations • Each WIO must determine for itself whether it believes that propane sales are commercially viable. Hydrocarbons are sold by individual owners, not by the operator. Each owner would need to conduct its own economic analysis. As • with any potential project, one would likely review the options, opportunity cost and trade -offs. • BP's comments regarding its commercial considerations are made in BP's capacity as a working interest owner, not as the PBU operator. Other owners' considerations may differ. • BP is committed to the sale of hydrocarbons on commercially acceptable terms. • BP has been in conversation with Mr. Heinz and others to explore whether a commercially viable opportunity exists for propane. • • The State and all stakeholders benefit from maximizing all resources. • Right now, propane has tremendous value on the North Slope in the form of MI for enhanced oil recovery. Currently, it is not commercially viable to use propane elsewhere. 20 Prudhoe Bay Propane Pro ane Use bp Conclusion • As PBU operator, BP's primary objective at Prudhoe Bay is to economically produce hydrocarbons in the reservoir, maximizing value to the State and all producers. • Production of oil at Prudhoe Bay is greatly enhanced by our MI program. • MI is distributed in accordance with AOGCC- approved pool rules and area injection orders. • To remove propane for sale would reduce the amount of available MI and therefore reduce oil recovery. • • Propane is not being wasted; It is being used in a way that efficiently develops the Prudhoe Bay resource. 21 Prudhoe Bay Unit: Propane Use by • Reference Slides • fi 22 Prudhoe Bay Unit: Propane Use bp Central Gas Plant (CGF) 0 _�- ,,, ,� • i f 4.7............. • ffrT[r r t�f wa i I . _ r ......:, q . Ith 9(1(; 1. ! � � -..�_ r � v IF , ..,...... v . . 4 ,,,... ,... . , . 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(.- ; lc " riNOr' '-,' i • I. �� M 23 Potential Propane Waste • At Prudhoe Bay AOGCC on June 19, 2012 • Harold Heinze Outline of Prope Issues Raised By Heinze on 12/07/12 • There is a local market for Prudhoe Bay propane delivered via trucking to home and automotive users in Northern & Interior Alaska • The local propane market could be supplied by an existing propane recovery facility at the Prudhoe Bay Unit (PBU) Central Gas Facility (CGF) that is only operated infrequently • • Failure to make propane commercially available to this local beneficial use will result in lost recovery and constitues "waste" within the meaning of the Alaska Oil and Gas Conservation Act (AS 31.05) Local Market for Propane • Alaskan private sector companies have offered to and will install all the facilities to store and load propane made available by the PB Unit Operator • • PB Unit Owners have indicated their willingness to sell propane commercially if available for taking from the PB Unit Operator • Companies and communitites are prepared to participate in the propane logistical chain from the North Slope (NS) • Alaskans have written about the importance of a local • in -state propane source • BPXA studied using propane in their NS truck fleet • NW Arctic Borough studies show major consumer benefits for a propane fuel alternative Operation of the CGF Based on the BPXA Letter To AOGCC on 02/06/12 • The volume of PB gas processed (6.8 BCFPD) is well below the stated gas capacity of 8.7 BCFPD • • The CGF propane recovery of 35% is extremely low compared to normal "gas plant" operations (70 %) • CGF operations maximize butane NGLs for blending in TAPS & off-lease use in the Kuparuk • Adjusting the CGF plant operational parameters to • recover an additional 0.5% (35.0% to 35.5 %) would allow 500 barrels per day (bpd) of propane to be available without impacting miscible injection operations or miscibility pressure specifications Propane Streams At PBU Central Gas Facility I I I I I I CGF Data from BPXA letter to AOGCC on 02/06/12 C3 % C3 Equiv Gas Flow C3 Flow • Stream mole % Bbls /mmscf (mmscfpd) (bpd) CGF Feed 2.45 16 6,838 109,163 Resid Gas 1.65 10.8 6,584 70,787 • Propane Recovery in CGF= 35.2% 38,376 Propane Manufacturing Capability • Full -time operation of the existing propane recovery facility (currently limited to 1.5 days /month) at its 500 bpd capacity is dwarfed compared to the • 70,000 bpd of propane (= 3,000,000 gals /day) currently being re- injected not as miscible injectant, but with the residue gas not in contact with the oil zone • Over 750 bpd of propane and over 7,500 bpd of butane currently leave the PB Unit without be made • available for the SOA to take royalty in -kind for Alaskan energy consumers satisfying the Constitutional & statutory preference for in -state un- met energy needs Butane Volumes - -- PB Unit CGF C4 Mole % Gas Flow Butane (mmscfpd) (bpd) CGF Feed 0.62 6,838 32,433 Residue Gas 0.21 6,584 10,577 Butane Recovery at CGF = 67% 21,855 M I 1.1 210 1,767 s NGL - TAPS 45.1 37 28.4 kbpd 12,808 NGL - KRU 45.1 22 17.1 kbpd 7,712 Total Uses of Butane = 22,288 Propane in Gas Uses Supplied by CGF , , , , , , , , , CGF Data from BPXA letter to AOGCC on 02/06/12 Stream C3 % C3 Eguiv Gas Flow C3 Flow mole % Bbls /mmscf (mmscfpd) (bpd) • M I 25.7 167.5 210 35,167 86.3% Refridg 25.7 167.5 0 25 0.1% TAPS NGL 1.60 10 44 454 1.1% Kup NGL 1.60 10.4 26 274 0.7% • Fuel 1.65 10.8 400 4,301 10.6% North Star 1.65 11 50 538 1.3% Total Uses = 40,758 100.0% 40 • STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION June 19, 2012 at 9:00 am NAME AFFILIATION PHONE # TESTIFY (Yes or No) - T.T41 i g 6{/kt<-- /), e / -- 11=fr Airb /C( o /,44 x p 5 11 0.a10 rnt31 C lq) (C f ,71/r',G :11 cif 7 /1li-e ;s 1' P 6 q3 di) it/turez `iclL i rv(�a, �3 ' Sa'`t % j << 9 Y 7 k tors Bern „Hohme I3 P 5 5-635 re- S --. 3C- X 50 S J f 4 ,.,,,�..�.- . 0 et, idhl &dip &re 61 5l g I" Alf) le C491-21:9ACets.o.u' ii-A/6 626 Y -6 70 7 405 -- �A" . A s s �� - 2 st( )7sS - �1icer/ 7-LL 6( i ) 37 e 59(12_ 14aS 71 k 1-1-1942(3 EA° _ In 6---9 Z Z-7-7 r() I t NY( c VuA2 t 4,,A p`l c_ l D - 606 -- 31 S rYi(chou.Q.., (LI lows AK- L Rol .2O/1 •ozso IQ .lIBC MCA, 44 Cv:\cc0eIn ''lo, 26C 49, 4 L-f No &) f ✓! siov& 6L ,1r 'a.� {"t 13 ''' e) C► .7 178 G -5 - 1 `✓o ii‘i,a mcta, 57,_)-;-7.e3. 0 - -==F 94 _ .S c- L F 54' 3-� 3 7 7 7 Am ----- p iliMAC sir Di -� L,5 G AL-f477 ‘3`( 6 3 l 6 �� S • Continuation Page NAME — AFFILIATION ADDRESS/PHONE NUMBER TESTIFY (Yes or No) (PLEASE PRINT) I& (( ()AA 7/ -5 1 Failure to Market Produced Propane Is "Lost Production" & "Waste" • Prudhoe Bay field operations will cease before all the propane in the current residue gas re- injection stream will be recovered during future gas sales • The propane in the gas residue stream (two - thirds) is being injected into an area of the PB field that may have a lower than average gas recovery factor (interference from gas cap water injection) • The current confidential lawsuit arbitration between BPXA and the State of Alaska (SOA) over lost production valuation during in -field pipeline replacement for corrosion includes similar claims Suggestions On PB Unit NGL Operations • Changed conditions (ie, decline of TAPS oil rate) since approval of the PB miscible injection project two decades ago warrant a full public review of performance and future plans • CGF performance data should be timely available under parameters similar to current well production reporting (neither confidential or proprietary) • BPXA should be ordered to present to AOGCC (publicly) a full review of additional PB Unit propane production opportunities including facility modifications and additions r • w (I ) CALISTA CORPORATION VIA EMAIL and FAX June 18, 2012 Mr. Daniel T. Seamount Jr. Chair, Commissioner Alaska Oil and Gas Commission 333 W. 7th Ave., Suite 100 Anchorage, AK 99501 -3539 Re: In the Matter of the Potential Waste of Propane in the Operation of the Prudhoe Bay Unit Dear Commissioner Seamount: Calista Corporation is a regional corporation organized under the Alaska Native Claims Settlement Act, and the majority of its shareholders and their descendants reside in a large area of Southwest Alaska between the Yukon and Kuskokwim Rivers, bordered on the west by the Bering Sea. Our region has suffered extremely high energy costs for many years and a very high priority to Calista is finding lower cost energy solutions for the people in our region. This last winter, heating fuel cost between $6.80 -$8.00 /gallon in our region. The people in our region were forced at times to choose between heating their homes and eating. We must lessen our almost total reliance upon diesel fuel. We do not expect that one energy solution will fit all circumstances; we are looking broadly for solutions, and propane is one of those solutions. We watched with great interest the efforts of the Alaska Natural Gas Development Authority (ANGDA) as they tested the feasibility of propane production and delivery within the state for many years. The Yukon - Kuskokwim Propane Demonstration Project (YKPDP) which they sponsored in 2008 -2009 resonated strongly with us. The proven ability to ship propane in containers down the Yukon River during summer months and then store that propane for year round use gives us hope that propane might provide a good solution for our rural communities along the full reach of the Yukon River. In addition Calista has been hard at work to develop a road to connect the Yukon and Kuskokwim river systems. With such a road, the transshipment of propane from the Yukon to the Kuskokwim Rivers could open a market for propane Letter to Commissioner Seamount Docket OTH -11 -51 June 18, 2012 Page 2 of 3 throughout the Kuskokwim region. This propane transport would be independent of the additional possibilities of coastal delivery of propane. It is frustrating that every time there is the possibility of commercializing gas from Alaska's North Slope, the producers have a reasonable excuse for why it cannot be done now. But some day, the gas will and must get marketed. In the beginning, the non -use was attributable to the uneconomic nature of the gas market. During the first decade, propane was merely recycled through the reservoir as everyone waited for markets to change. Then, with the advent of new EOR processes, the owners at PBU developed Miscible Injectant programs to complement their existing water flood programs and oil recovery was increased over the next thirty years to present. The owners are to be applauded for their innovation in maximizing the production of oil from the North Slope. These efforts are the antithesis of waste. But that was then and this is now. Today, Point Thomson is being readied to bring new oil and gas liquids to Badami and on to Pump Station #1, and heavy oil developments and Brooks Range shale oil plays are the horizon. Oil production at PBU is waning, and with that the volumes of NGL than can be blended are decreasing. What we know is that BP's careful balance of MI and NGL manufacturing at the PBU's Central gas Facility that it described in its response to the AOGCC's inquiry will change as TAPS vapor pressure limits are affected by new fields coming on line and changing oil volumes. In addition, new EOR technologies and MI product options are now being developed by the companies. The oil companies will bring their high level of technical expertise to bear on the optimum combinations of production and EOR technologies that will maximize revenues from production. We assume that they want to maximize total recovery and not just oil recovery. Therefore, we hope that by raising the question of propane waste and the importance of propane to solving rural Alaska's energy crisis, the oil companies will focus with renewed vigor on finding a way to produce propane for in -state use, while still optimizing oil recovery through innovative EOR processes. Calista reviewed BP's technical response to the AOGCC's specific inquiries. We do not have the technical knowledge to evaluate whether the 1.65% concentration of propane in the residue gas is in a range that would be economically producible under normal circumstances anywhere else in the world. Obviously the CGF has been currently designed to produce the 500 barrels a day of propane from the feed gas concentrations of 2.45% propane; BP has also acknowledged that such production could be increased, but at a sacrifice of their current 301 Calista Court, Suite A • Anchorage, Alaska 99518 -3028 • (907) 279 -5516 • Facsimile (907) 272 -5060 • Website: www.calistacorp.com • . Letter to Commissioner Seamount Docket OTH -11 -51 June 18, 2012 Page 3 of 3 composition and volume of MI and NGL products. Thus the CGF's current propane recovery rate of 32% must be judged from a process engineering efficiency point of view. BP's suggestion that a third party take residue gas and then further process it in a separate expensive third process facility may not be the only or the best technical solution to producing greater volumes of propane from the feed gas. The best technical and economic solution might involve modification of the initial chain of production within the CGF. However, it will take the motivated minds of the owners of the CGF to discover and implement these kinds of innovative solutions. It takes a while for things to change when sunk capital hardwires a specific mode of operation. Sometimes it takes external pressures, such as those that come from environmental regulation that dictate lower greenhouse gas emissions, and allegations of waste from citizens concerned with lack of movement on the gas commercialization front, to cause companies to break out of their comfort zones and seek innovative solutions that produce win -wins. We applaud the AOGCC for launching this inquiry and beginning the public debate. BP's answer today is not the same as it will be in another year. And for this reason, the AOGCC's inquiry needs to be revisited every year at a minimum. We would request that this question be raised at every annual update that the PBU owners provide to the AOGCC on PBU operations. Sincerely, Calista Corporation By: 74/Lliet, 7 If /t Andrew Guy, President, CEO Cc: Dan Sullivan, Commissioner, DNR Brian Butcher, Commissioner, DOR 301 Calista Court, Suite A • Anchorage, Alaska 99518 -3028 • (907) 279 -5516 • Facsimile (907) 272 -5060 • Website: www.calistacorp.com • Potential Propane Waste At Prudhoe Bay 0 AOGCC on June 19, 2012 Harold Heinze Outline of Propane Issues Raised By Heinze on 12/07/12 • There is a local market for Prudhoe Bay propane . delivered via trucking to home and automotive users in Northern & Interior Alaska • The local propane market could be supplied by an existing propane recovery facility at the Prudhoe Bay Unit (PBU) Central Gas Facility (CGF) that is • only operated infrequently • Failure to make propane commercially available to this local beneficial use will result in lost recovery and constitues "waste" within the meaning of the Alaska Oil and Gas Conservation Act (AS 31.05) Propane Streams At PBU Central Gas Facility I I I I I I I I I CGF Data from BPXA letter to AOGCC on 02/06/12 C3 % C3 Equiv Gas Flow C3 Flow Stream mole % Bbls /mmscf (mmscfpd) (bpd) CGF Feed 2.45 16 6,838 109,163 al Resid Gas 1.65 10.8 6,584 70,787 I Propane Recovery in CGF= 35.2% 38,376 Propane Manufacturing Capability • Full -time operation of the existing propane recovery facility (currently limited to 1.5 days /month) at its � 500 bpd capacity is dwarfed compared to the 70,000 bpd of propane (= 3,000,000 gals /day) currently being re- injected not as miscible injectant, but with the residue gas not in contact with the oil zone • Over 750 bpd of propane and over 7,500 bpd of • butane currently leave the PB Unit without be made available for the SOA to take royalty in -kind for Alaskan energy consumers satisfying the Constitutional & statutory preference for in -state un- met energy needs Propane in Gas Uses Supplied by CGF I I I I I I I I I CGF Data from BPXA letter to AOGCC on 02/06/12 C3 % C3 Eguiv Gas Flow C3 Flow Stream mole % Bbls /mmscf (mmscfpd) (bpd) 0 M I 25.7 167.5 210 35,167 86.3% Refridg 25.7 167.5 0 25 0.1% TAPS NGL 1.60 10 44 454 1.1% Kup NGL 1.60 10.4 26 274 0.7% 0 Fuel 1.65 10.8 400 4,301 10.6% North Star 1.65 11 50 538 1.3% Total Uses = 40,758 100.0% Butane - -- PB Unit C C4 Mole % Gas Flow Butane (mmscfpd) (bpd) o CGF Feed 0.62 6,838 32,433 Residue Gas 0.21 6,584 10,577 Butane Recovery at CGF = 67% 21,855 • M I 1.1 210 1,767 NGL - TAPS 45.1 37 28.4 kbpd 12,808 NGL - KRU 45.1 22 17.1 kbpd 7,712 Total Uses of Butane = 22,288 Local Market for Propane • Alaskan private sector companies have offered to and will install all the facilities to store and load propane O made available by the PB Unit Operator • PB Unit Owners have indicated their willingness to sell propane commercially if available for taking from the PB Unit Operator • Companies and communitites are prepared to participate in the propane logistical chain from the • North Slope (NS) • Alaskans have written about the importance of a local in -state propane source • BPXA studied using propane in their NS truck fleet • NW Arctic Borough studies show major consumer benefits for a propane fuel alternative Operation of the CGF Based on the BPXA Letter To AOGCC on 02/06/12 • The volume of PB gas processed (6.8 BCFPD) is 1 well below the stated gas capacity of 8.7 BCFPD • The CGF propane recovery of 35% is extremely low compared to normal "gas plant" operations (70 %) • CGF operations maximize butane NGLs for blending in TAPS & off-lease use in the Kuparuk • • Adjusting the CGF plant operational parameters to recover an additional 0.5% (35.0% to 35.5 %) would allow 500 barrels per day (bpd) of propane to be available without impacting miscible injection operations or miscibility pressure specifications Failure to Market Produced Propane Is "Lost Production" & "Waste" � • Prudhoe Bay field operations will cease before all the propane in the current residue gas re- injection stream will be recovered during future gas sales • The propane in the gas residue stream (two - thirds) is being injected into an area of the PB field that may have a lower than average gas recovery factor � (interference from gas cap water injection) • The current confidential lawsuit arbitration between BPXA and the State of Alaska (SOA) over lost production valuation during in -field pipeline replacement for corrosion includes similar claims Suggestions On PB Unit NGL Operations • Changed conditions (ie, decline of TAPS oil rate) since approval of the PB miscible injection � project two decades ago warrant a full public review of performance and future plans • CGF performance data should be timely available under parameters similar to current well production reporting (neither confidential or proprietary) 0 • BPXA should be ordered to present to AOGCC (publicly) a full review of additional PB Unit propane production opportunities including facility modifications and additions • Michael C. Harper A 5051 Mills Drive CE/ / `, ED JUN Anchorage, AK. 99508 18 2012 imharp @ak.net, 907 - 952 - 2124 AOG GG John Norman Chair, Oil and Gas Conservation Commission 333 W. 7 Ave. Ste 100 Anchorage, AK. 99501 June 14, 2012 Re: Propane, Potential use in Rural Alaska Dear Mr. Norman: The purpose of this letter is to inform your agency that while I was Deputy Director of Alaska Energy Authority (AEA), in early 2007, I met with several oil companies to investigate the possibility of using propane from the North Slope for energy use in villages of Rural Alaska. I was joined by two other individuals; Nels Anderson, then Energy Czar of the State of Alaska and appointed by Governor Frank Murkowski and also Harold Heinz, then Executive Director of ANGDA. I retired from AEA May 2011, Nels Anderson and Harold Heinz also have since left their positions. The goal of AEA is to find ways to make energy more affordable for all Alaskans. As Deputy for Rural Energy, it was a continuing challenge to somehow find cheaper fuel than the prevalent price of Diesel and gas which could easily be twice what most Urban Alaskans paid for comparable energy. In reading your mission, it appears that at least one of your goals also requires your quest of more affordable energy for Alaskans. I applaud your efforts to reach your above goal of finding more affordable energy for Alaska. I would be pleased to answer any questions about this and wish you well in your efforts to find more affordable energy especially for high energy cost places. Sincerely yours, * t‘ietr,L Michael C. Harper • i FROM THE DESK OF HOME PHONE - 907- 339 - -9031 NELS ANDERSON, JR. F WORK FAX PHONE RECEIVED JUN 0 4 2012 AOGCC June 1, 2012 Ms. Cathy P. Foerster, Commissioner Alaska Oil and Gas Conservation Commission 333 W 7th Avenue, Suite 100 Anchorage, Alaska 99501 -3539 Re: Meeting with British Petroleum to discuss pos- sible use of propane from North Slope operations Dear Ms. Foerster: I have learned that Harold Heinze is still involved in finding ways to use unused propane on the North Slope. Back in 2007, I was informed that there was a possibility that this unused propane could be used to lower the cost of energy in many of our communities in Alaska. It would take an agreement from the operators of the North Slope fields to release unused propane. As Alaska Energy Advisor to Governor Murkowski, I felt that it would be a good idea to pursue this possibility to help bring lower cost energy to Alas- kans. 16 01, R iM Trir C: Sr. uF NELS ANDERSON, JR. I met with Mike Harper, former Deputy Director of the Alaska Energy Authority and Harold Heinze, former CEO of the Alaska Natural Gas Develop- ment Authority to set up an appointment to meet with BP to explore the idea of using propane that was going unused on the North Slope. I am not certain of the exact date of that meeting between the three Alaska state officials and two British Petroleum executives regarding the use of unused propane from North Slope operations. I believe the meeting I refer to occurred in January, 2007. The three Alaska state officials were Mike Harper, former Deputy Director of the Alaska Energy Authority; Harold Heinze, former CEO of the Alaska Natural Gas Development Authority, and Nels Anderson, Jr., former Alaska Energy Advisor to Governor Murkowski and Governor Palin. We met with two BP executives to discuss the use of propane for in- state use of unused propane in North Slope opera- tions. I do not remember the names of the BP ex- ecutives. Alaska's villages are in crisis because of the high cost of fuel. ANGDA was looking for ways and PAGE 2 < O i WO A iRON1 iHEa,Y,CF NELS ANDERSON, JR. means to address that issue with the possible use of propane that was going unused in BP's North Slope operations. I never did learn of any results of that meeting. The two BP executives said they would get back to us. I am not sure if that ever happened. If I can pin down the date of the meeting and find the names of the two BP executives, I will pass them on. Bet regards, j els An e= . / Former Alaska Energy Advisor 726 0 Place #204 Anchorage, Alaska 99501 907- 339 -9031 ndor @gci.net cc: Harold Heinze PAGE 3 411 • • 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: Cathy Foerster, Chair 3 Daniel T. Seamount 4 John K. Norman 5 6 In the Matter of the Potential Waste ) 7 of Propane in the Operation of the 8 Prudhoe Bay Unit. 9 10 Docket No.: OTH -11 -51 11 ALASKA OIL and GAS CONSERVATION COMMISSION 12 VOLUME I 13 PUBLIC HEARING 14 Anchorage, Alaska 15 May 22, 2012 16 9:00 o'clock a.m. 17 BEFORE: Cathy Foerster, Chair 18 Daniel T. Seamount, Commissioner 19 John K. Norman, Commissioner 20 Recorded and Transcribed by: 21 Computer Matrix Court Reporters 22 135 Christensen Drive, Suite 2 23 Anchorage, Alaska 99501 24 (907) 243 - 0668 /sahile @gci.net • • 1 TABLE OF CONTENTS 2 Opening remarks by Chair Foerster 03 • • 1 P R O C E E D I N G S 2 (On record - 9:01 a.m.) 3 CHAIR FOERSTER: I'd like to call this hearing 4 to order. Today is May 22nd, it's about 9:01 a.m. We 5 are at 333 West Seventh Avenue, Suite 100, Anchorage, 6 Alaska, these are the offices of the Alaska Oil & Gas 7 Conservation Commission. left I'm Commissioner Cathy Foerster, to my le t is 9 Commissioner Dan Seamount and to my right is 10 Commissioner John Norman. 11 Computer Matrix Court Reporters will be 12 recording these proceedings and you can get a copy of 13 the transcript from Computer Matrix Court Reporting. 14 The Commissioners would like to remind people 15 who are testifying to speak into the microphones so 16 that persons in the rear of the room can hear and so 17 that the court reporter can get a clear recording. 18 Today's hearing is on Docket No. OTH- 11 -51. 19 It's a public hearing concerning whether propane is 20 being wasted in operation of the Prudhoe Bay Unit. 21 This hearing is being held in accordance with 20 AAC 22 25.540 of the Alaska Administrative Code and the 23 hearing will be recorded. 24 In a letter dated December 7th, 2011 from a 25 concerned citizen of the state of Alaska there was a 1 1 request that the AOGCC consider and investigate whether 2 propane is being wasted in the operation of the Prudhoe 3 Bay Unit. Under AS 31.05.030(b), the AOGCC is required 4 to investigate whether waste is occurring or is 5 imminent. In accordance with this statute on January 6 3rd, 2012 the AOGCC sent a letter to BP Exploration of 7 Alaska as the operator of the Prudhoe Bay Unit 8 requesting information on the volume and composition of 9 the various gas streams in the Prudhoe Bay Unit and 10 about the propane miscible injection processes used 11 within the unit. BPXA responded to the AOGCC's 12 requested by letter dated and received February 6th, 13 2012. 14 At the April 12th, 2012 AOGCC public meeting 15 and after a briefing by AOGCC staff and comments from 16 members of the public, the AOGCC decided to hold a 17 public hearing on this matter. Notice of this hearing 18 was published on April 22nd, 2012 in the Journal of 19 Commerce as well as the state of Alaska online notices 20 and the AOGCC website on April llth, 2012. The AOGCC 21 has received a request to continue this hearing from BP 22 Alaska. That request was granted on May 15th, 2012, 23 the hearing will be recessed and reconvened June 19th, 24 2012 at 9:00 a.m. 25 Any comments? • • 1 COMMISSIONER SEAMOUNT: It's appropriate to ask 2 if there's anybody that would like to testify today. 3 CHAIR FOERSTER: Sure, but any comments? 4 COMMISSIONER NORMAN: No comment. 5 CHAIR FOERSTER: Is there anyone who would like 6 to make any statements today, keeping in mind that the 7 primary hearing will be continued until June 19th? 8 (No comments) 9 CHAIR FOERSTER: Seeing no one, I look for a 10 motion to continue. 11 COMMISSIONER NORMAN: I move that we recess and 12 continue this hearing to 9:00 a.m. on June the 19th. 13 COMMISSIONER SEAMOUNT: I second. 14 CHAIR FOERSTER: All in favor. 15 IN UNISON: Aye. 16 CHAIR FOERSTER: All opposed. 17 (No opposing votes) 18 CHAIR FOERSTER: Hearing no opposition this 19 meeting is recessed and we will reconvene at 9:00 a.m. 20 on June 19th. 21 (Recessed - 9:05 a.m.) 22 (END OF PROCEEDINGS) • • 1 TRANSCRIBER'S CERTIFICATE 2 I, Salena A. Hile, hereby certify that the 3 foregoing pages numbered 02 through 06 are a true, 4 accurate, and complete transcript of proceedings in 5 Docket No.'s OTH- 11 -51, Volume I transcribed under my 6 direction from a copy of the electronic sound recording 7 to the best of our knowledge and ability. 8 9 10 Date Salena A. Hile, Transcriber 11 . • • COMMENTS BY JERRY MCCUTCHEON JUNE, 2012 PUBLIC MEETING AOGCC - 6/6/12 - Page 1 • • P R O C E E D I N G S 9:17:40 COMMISSIONER NORMAN: We will next go to the opportunity for the public to c Please remember to -- although you're well known to the Commission, please MR. MCCUTCHEON: Right. Correct. COMMISSIONER NORMAN: identify yourself. MR. MCCUTCHEON: For the record my name is Jerry MCCUTCHEON. Several issues come up, I didn't come prepared to make any statements, but c COMMISSIONER NORMAN: The gasline of the 19 MR. MCCUTCHEON: Further COMMISSIONER NORMAN: Did you say the gasline to the 1980s? MR. MCCUTCHEON: Correct. COMMISSIONER NORMAN: The gasline to the 1980s? MR. MCCUTCHEON: Yes. COMMISSIONER NORMAN: Okay. I'm not following you. MR. MCCUTCHEON: Exxon had produced documents and manipulated the public. COMMISSIONER NORMAN: I do. MR. MCCUTCHEON: Okay. He COMMISSIONER NORMAN: Of Washington, yes. We all remember him. MR. MCCUTCHEON: All right. He was known as Alaska's first senator. And hE AOGCC - 6/6/12 - Page 2 r • • Well, that sets the stage which brings me to the point. For every barrel o= COMMISSIONER NORMAN: On your 400, are you referring -- you're referring to MR. MCCUTCHEON: Yes. COMMISSIONER NORMAN: or just the Prud -- yes. Okay. MR. MCCUTCHEON: No, I'm referring to the south 48 states. COMMISSIONER NORMAN: Yeah. MR. MCCUTCHEON: I assume that was what DOE, now this is DOE's estimation. This -- well, I'll drop it at that and I'll write it out. I'm not very goo( There is a question that I stumbled into that you might want to have someboc COMMISSIONER NORMAN: Well, let me then just -- if we want to leave that on MR. MCCUTCHEON: Point Thomson is COMMISSIONER NORMAN: Yeah. MR. MCCUTCHEON: correct. COMMISSIONER NORMAN: And then your point is from Point Thomson if the prop, MR. MCCUTCHEON: If the gas -- if -- you know, if the gas liquids are insert COMMISSIONER NORMAN: Okay. AOGCC - 6/6/12 - Page 3 . 411 . MR. MCCUTCHEON: Now that's just some information and some conjecture, but Also I will write -- as I said before I'll write out to the Commission the I'd like to turn now to make some remarks about I think the Commission ought I think that covers anything I wanted to say so I think I'll just quit. I 1 COMMISSIONER NORMAN: Well, we understand and we thank you very much for ati MR. MCCUTCHEON: Thank you. 9:27:39 * * * * * * * * * * * * * * * * * * * * * * ** END OF REQUESTED PORTION * * * * * * * * * * * * * * * * * * * * * * ** AOGCC - 6/6/12 - Page 4 • STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION OTH -11 -51 WASTE INQUIRY May 22, 2012 at 9:00 am NAME AFFILIATION PHONE # TESTIFY (Yes or No) i L Va Z 1/e2,- r�- ( 1 0 ' 1 1)() k)Ait r (r)kccDc_c_. n 41 10 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, May 15, 2012 9:08 AM To: 'Vazquez, Laney' Cc: Foerster, Catherine P (DOA) Subject: RE: hearing regarding Prudhoe Bay Unit propane Laney, I apologize for the delay. The hearing will be continued to June 19, 2012 at 9:00 am. As I indicated to you, we will be going on the record on May 22, 2012 at 9:OOam to formally continue the hearing. I would appreciate it if you were at the short hearing, just in case the Commissioners have questions. Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 best 7th Avenue A nchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) From: Vazquez, Laney jmailto:Laney.Vazquez(abp.com] Sent: Monday, May 14, 2012 4:06 PM To: Colombie, Jody J (DOA) Subject: hearing regarding Prudhoe Bay Unit propane Hi, Jody: Emeka Emembolu sent a letter last week to the Commission seeking to have this hearing rescheduled to June 18 or 19. Do you happen to know whether the Commission has selected a date for the hearing? Thank you! Regards, Laney Laney M. Vazquez Senior Counsel BP Exploration (Alaska) Inc. 900 E. Benson Blvd., Office 1393 Anchorage, Alaska 99508 (Mail: PO Box 196612, Zip Code 99519 -6612) Direct: 907.564.5768 Fax: 907.564.4031 Laney.Vazduez @bp.com 1 * • I Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Wednesday, May 09, 2012 2:34 PM To: Banks, Kevin R (DNR) Subject: Per your Request Attachments: S45C- 212050914250.pdf; S45C- 212050914260.pdf Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) 1 • tt - 4 Emeka Emembolu o Manager, Base Management RECFIVr BP Exploration (Alaska) Inc. 900 East Benson Boulevard P.O. Box 196612 Anchorage, Alaska 99519 -6612 FM ri Main 907 564 5111 February 6, 2012 Akin cons. Commission Anchorage Mr. Daniel T Seamount, Jr Chair, Commissioner Alaska Oil and Gas Conservation Commission 333 W. 7 Avenue, Suite 100 Anchorage, AK 99501 -3539 RE: Request for information regarding potential waste of propane at the Prudhoe Bay Unit Dear Commissioner Seamount, Further to your letter dated January 3, 2012, BP Exploration (Alaska), Inc. ( "BP "), as operator of the Prudhoe Bay Unit ( "PBU "), is pleased to provide the attached response. Our response details facts that will come as no surprise to the AOGCC given the role it plays in oversight of our operations. For over thirty years, the PBU working interest owners have worked with the AOGCC to successfully develop and operate the PBU. Our Enhanced Oil Recovery ( "EOR ") programs — in which propane plays a critical role — have helped push cumulative PBU production well beyond the ultimate recovery that was predicted when the field began operations in the 1970's. Under approved plans of development, the PBU working interest owners have made significant investments in the PBU processing facilities to maximize the economic recovery and efficient use of propane. Our primary use for propane is as a key component of our Miscible Injection (MI) EOR process. The Prudhoe Bay MI process has been widely demonstrated across industry as one of the most effective means of increasing oil recovery from the Prudhoe Bay waterfloods. Given the significant and proven value of propane as a vital component of our approved EOR programs, the State of Alaska and the PBU owners share a common interest in seeing propane used efficiently for these purposes. Propane is also a component of Natural Gas Liquids ( "NGL "). BP extracts and blends NGLs with oil that is shipped down the Trans - Alaska Pipeline Systems ( "TAPS "). The quantity that can be blended is defined by the TAPS vapor pressure limit. Some NGLs are also shipped to other North Slope fields for use in their EOR programs. Small quantities of propane are occasionally used to top -off the inventory in the propane refrigeration system. The remnant propane in the residue gas stream that PBU facilities cannot extract is re- injected into the Prudhoe Bay gas cap for reservoir pressure support and future recovery. In summary, the PBU does not waste propane. Propane and other components of our produced gas are used to increase oil production at Prudhoe Bay. We trust that this response provides AOGCC with answers to the questions posed by its inquiry. Please contact us if you have any further questions. Yours Sincerely, Emeka Emembolu 1 • r request for information Enclosure: Detailed technical response to the AOGCC eq cc: Mr. Dave Roby (AOGCC); Mr. Mark Agnew (ExxonMobil); Mr. Steve Arbelovsky (ConocoPhiillips); Mr. Phil Ayers (Chevron) 2 S Attachment Response to the AOGCC's Request for Information in January 3, 2012 Inquiry Letter AOGCC Request #1 A brief description of the natural gas liquids extraction facilities, distribution, uses, and processes at Prudhoe Bay Response: The gas that feeds the Central Gas Facility (CGF) is the produced dry gas that is separated from well production at Prudhoe Bay's three Flow Stations (FS) and three Gathering Centers (GC). Gas from the FS /GC's is dehydrated (to -0.2 lbs. water per mmscfd), but has a relatively high hydrocarbon dew point (- 75 - 80° F at 650 psig). The feed to CGF is delivered from the FS /GC's via the gas transit pipeline system. Under normal operation, the CGF feed represents all the gas processed by the FS /GC's except that which is used as local fuel gas by some individual FS /GC's and the gas which is used for gas lift (gas lift is derived from gas lift compressors that are located at GC -1 and FS -3). Figure 1 shows a simplified CGF process diagram which will assist in understanding the plant and processing description that follows. After passing through inlet separators, the plant feed is compressed from about 560 psig to 710 psig by booster compressors (three parallel trains). The gas is then cooled with air in booster aftercoolers from 100° F to 140° F down to an average of about 70° F. From the booster aftercoolers, the gas is sent to the Low Temperature Separation (LTS) trains to be cooled to about -35 to -40° F by a series of cross exchangers and chillers, and then enters the LTS trains for separation of condensed liquid. The exact LTS feed temperature varies with rate and operating conditions, however ambient temperature has the largest impact on refrigeration capability. There are three parallel LTS units at CGF. The LTS chillers utilize a circulating closed loop of propane to provide the refrigeration required to reach final LTS process temperature. The propane refrigeration system is described in further detail below. The LTS is a large vertical tower, the primary purpose of which is to separate the condensed liquids from the gas that exits the chillers. The LTS has six trays and a reboiler, which serve as one of the main means of controlling the Miscible Injectant (MI) composition so as to meet miscibility criteria for use in the Prudhoe Bay FOR scheme. In LTS, the cold gas liquids that are separated from the gas on the LTS top tray are warmed sufficiently as the fluid flows down the column so as to control the methane content (and to a lesser degree other light ends) in the MI product composition. The bottom liquids flow from all three LTS units and are fed into two parallel stabilizer trains (fractionators) that produce NGL as a "bottoms" product and MI as an "overhead" product. What remains is termed Residue Gas. The vast majority of the LTS residue gas is routed via various gas complex pipelines to gas injection compressors located at CCP and CGF for injection into the thirty -two Prudhoe Bay Unit gas cap wells. This gas cap injection is required to maintain reservoir pressure and consequently improve oil production. A slip stream of the LTS -3 residue gas is supplied to Northstar. Additionally a slip stream (average 400 mmscfd) of the LTS -1 & LTS -2 residue gas is used to provide Prudhoe Field Fuel Gas. 3 • +� The LTS bottoms liquids are divided into approximately equal feed streams via the two parallel stabilizer trains that fractionate the feed stream into the final NGL and MI products. Each stabilizer column contains twenty four stainless -steel valve trays and a reboiler as well as feed /bottom exchangers and feed pre- heaters. Overhead vapors are partially condensed in air - cooled condensers and collected in a common reflux drum. Liquids from the overhead drum are pumped back to each stabilizer as reflux for cooling, and are run as high as permitted for sharpest and most efficient component separation (high ambient temperature limits reflux rate to less than optimum level). The reflux drum overhead vapor (MI product) is routed to MI compressors. The CGF MI compressors increase the MI stream from about 300 psig to about 3700 psig prior to discharge into the Prudhoe MI pipeline distribution system for routing to injection wells operating on an alternating water /gas EOR cycle. The MI is then distributed among PBU injection wells in accordance with AOGCC pool rules and area injection orders. After cross exchange with the column feed, the cooled NGL product is pumped at 350 psig and 90° F about 10 miles via a 10" pipeline to Skid 50 (adjacent to Pump Station 1). A portion of the NGLs are shipped to the Kuparuk River Unit (KRU) for use within that unit's EOR program. The remaining NGLs are then mixed with oil produced at the FS /GC's and shipped to Pump Station 1 (PS -1) for export via the Trans Alaska Pipeline System. Adjustment of the stabilizers' temperature control tray is varied to create a composition of NGL that after blending with the FS /GC total crude oil produces a mixture that is as close as operationally prudent to the maximum allowable vapor pressure control point at the inlet to PS1 (i.e. 14.2 psia TVP at stream temperature, 105° F minimum). The LTS trains chillers are supplied propane as a cooling medium by a closed loop refrigeration system. There are two refrigeration compressors that share a common set of high pressure and low pressure economizers, propane condensers (air cooled) and a common surge drum. The two refrigeration compressors are three -stage units driven by large gas turbines. A simplified process flow sketch of the propane system is shown in Figure 2. The propane refrigerant enters the chillers on the shell side while the process gas stream flows on the tube side. Refrigeration is provided as propane boils at the pressure that is maintained on the chiller shell side by the controls of the refrigeration compressor. Generally, the pressure on the propane side of the chillers is maintained 1 to 2 psi below atmospheric pressure at which point propane will vaporize at associated temperatures of -45 to -50° F. The refrigeration compressors increase the gaseous propane to between 150 to 200 psig (depending on the ambient temperature) and the air cooled condensers cause the pressurized propane gas to condense. The liquid propane from the condensers then is routed through the two stage economizer drums and the cooling of propane begins as pressure is lowered in each stage. From the low pressure economizer, the liquid propane then flows to the LTS chillers and the cycle repeats. The propane system also contains separate light ends and heavy ends removal units. These are not shown in the diagram. They are used to remove light ends (ethane, 02 and N2) and heavy ends (primarily seal oil) that slowly accumulate in the circulating propane over time. These units are run intermittently and process small slipstreams of the main propane flow to control contamination. The CGF was designed to produce its own propane makeup. The makeup propane is required to replace propane that is removed from the closed system when the light ends and heavy ends removal units are operated and /or when depressurization in all or parts of the refrigeration system is required to allow maintenance to be performed. This section of the plant takes a small slipstream of NGL stabilizer reflux as feed and fractionates the stream into two columns to produce high purity propane suitable for refrigeration system re- charging. Figure 3 shows a simplified process diagram of the CGF propane manufacturing system. The first column is a de- ethanizer tower that removes essentially all the ethane and lighter components from the feed stream. The de- ethanizer bottoms then feed a de- propanizer that produces high purity (98.5+ %) propane as liquid overhead product, while rejecting most of the butane -plus to the tower bottom product. The propane manufacturing unit is run intermittently in because demand for makeup propane is normally very low. CGF contains a 140,000 gallon liquid 4 • I propane storage tank which is normally maintained at or near full to ensure a supply of propane is available to the plant on short notice. 5 AOGCC Request #2 • The average volume and composition of gas /natural gas liquids streams: a. Entering the Central Gas Facility, b. Distributed for enriched hydrocarbon gas enhanced recovery processes on the North Slope, c. Blended with crude oil and sold through the Trans Alaska Pipeline System, d. Distributed gas lift or dry gas pressure maintenance injection purposes, and e. Any other uses for natural gas liquids /propane not identified above. Response: a. The feed rate of gas streams entering CGF in 2011 was 6,838 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: Feed Gas Composition (Mol %) Component Average Typical Range CO2 12.3 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 77.8 77.5 - 78.5 Ethane 5.77 5.6 - 6.0 Propane 2.45 2.3 - 2.6 iso- Butane 0.21 0.1 - 0.3 n Butane 0.41 0.3 - 0.5 iso Pentane 0.10 0.1 - 0.15 n Pentane 0.12 0.1 - 0.15 C6+ 0.29 0.2 - 0.4 b. The Miscible Injectant (Ml) produced from CGF in 2011 was 210 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: 6 110 MI Composition (Mot %) Component Average Typical Range CO2 21.4 20 - 22 N2 0.1 0.1 - 0.2 Methane 30.0 30 - 34 Ethane 21.7 19 - 22 Propane 25.7 23 - 26 iso- Butane 0.7 0.5 -1.5 n Butane 0.4 0.3 -1.2 iso Pentane <0.1 0 - 0.2 n Pentane <0.1 0 - 0.2 C6+ <0.1 0 - 0.1 c. The NGL produced from CGF and blended and sold through TAPS averaged 28.4 mbpd in 2011 on an annualized daily basis. NGL composition blended and sold through TAPS is as follows: NGL Composition (Mol %) Component Average Typical Range CO2 0 < 0.01 Methane 0 < 0.01 Ethane < 0.01 0 -0.1 Propane 1.6 0.4 - 3 iso- Butane 12.9 9 -15 n Butane 32.2 29 -35 iso Pentane 9.4 9 -11 n Pentane 12.9 12 -15 C6+ 31.0 28 -35 d. CGF does not provide the field any gas used for gas lift purposes. Rather within the PBU, gas lift is provided from compressors located at Gathering Center 1 and Flow Station 3. The source of this gas lift is FS /GC produced gas. In 2011, the annualized daily average gas lift provided from FS3 was 291 mmscfd and that provided from GC1 was 423 mmscfd. Gas lift composition falls within the normal operating range indicated above for CGF feed gas. 7 The CGF residu s that is injected back into the Prudhoei Field gas cap wells on an annualized average daily basis was 6,134 mmscfd. Typical average residue gas composition ranges during normal operation are as follows: Residue Gas Composition (Mol %) Component Average Typical Range CO2 12.0 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 80.1 79.5 - 80.5 Ethane 5.35 5.3 - 5.5 Propane 1.65 1.6 -1.8 iso- Butane 0.08 0.06 - 0.12 n Butane 0.13 0.1 - 0.15 iso Pentane 0.02 0.01 - 0.03 n Pentane 0.02 0.01 - 0.02 C6+ 0.02 0.01 - 0.04 e. CGF also produces NGLs transported via the Oliktok Pipeline to the KRU. The annualized average daily rate in 2011 was 17.1 mbpd. The NGL composition on an average basis for 2011 would be essentially identical to that shown in the table under part "c" above and certainly within the typical ranges as listed there. As necessary, NGL is diverted to FS1 and /or FS3. NGL divert normally occurs during periods of time when there is an operational upset or a reduction /curtailment of NGL flow into Skid 50. In 2011 diversion to FS1 of between 2 to 5 mbpd of NGL occurred commonly (same average composition as described above) to help mitigate effects of the increasingly lean gas that is entering that facility. The NGL diverted to FS1 was necessary to reduce the discharge temperature of the Intermediate Pressure (IP) compressor. As gas handled by the IP compressor has leaned out, the IP compressor discharge temperature has begun to approach the maximum acceptable. By injecting some NGL into the slug catcher a lower discharge temperature is achieved. The NGL that does not vaporize during this process remains in the oil that flows to PS -1. NGL diversion has been used successfully at both FS1 and FS3 in recent years and has avoided a need to reduce production rates and /or FS shutdowns particularly in warm weather. A compressor modification was made a year ago at FS3 which has eliminated IP compressor overheating at FS3. Enhancements are being evaluated for FS1 that could also mitigate the affects of leaner gas at FS1. Some of the CGF residue gas (which contains propane) is used for PBU Fuel Gas with a typical operating rate of about 380 to 400 mmscfd. Additionally, between 40 to 60 mmscfd of CGF residue gas is shipped to the Northstar facility for use as fuel gas or reservoir management as required. The composition is similar to that which is described under part "d ". As mentioned above in response to AOGCC's Request number 1, CGF does make its own high purity propane which it requires to re- inventory the propane refrigeration system loop. The makeup propane is required infrequently (normally, the small "propane 8 • manufacturing" is only operated 2 - 3 days per month). Recharge rates will vary, but on an annualized annual daily basis, an estimate is that about 25 barrels /day are used. The composition of the propane makeup is typically 98.5% propane with the remainder being split between ethane and iso- butane. All compositional data quoted in the above tables were derived from lab sample analysis. AOGCC Request #3 Discussion on the limitations, if any, that affect the amount of natural gas liquids that could be sent to enriched hydrocarbon injection processes and /or pipeline sales. Response: The CGF recovers as much liquid in the LTS units from its feed as is operationally and safely possible given the operating conditions of the time. Major factors that lead to the fluctuation in MI and NGL rates are ambient temperature, upstream production facility operational issues which affect feed gas rate and composition, and local (CGF) equipment limitations at any given time. This response focuses on fundamental system limitations. Feed gas compositions have continued to lean out through time and this been a major driving force behind declines in both MI and NGL rates through the years. Assuming a given feed rate, composition and ambient temperature, the amount of gas liquids condensed and recovered at CGF (including propane) is primarily a function of the feed gas temperature to the Low Temperature Separators. The LTS temperature limitation is a function of the design and capacity of the refrigeration system, the propane chillers' design and metallurgical temperature limits of the LTS and refrigeration equipment. First, the propane refrigeration system has a compressor power limitation that sets a maximum amount of refrigeration that can be achieved at any given ambient temperature. As ambient temperature increases, the refrigeration system heat removal capacity decreases rapidly. Secondly, there are lower temperature limitations both in the LTS vessels and refrigeration system (both have lower limits of -50° F). The LTS chillers operate with a heat transfer rate that under normal conditions results in an outlet process temperature that is generally within about an 8 to 10° F approach to propane refrigerant temperature. This is why LTS feed temperatures lower than -40 to -42° F can seldom be achieved even under winter conditions. In practice, the third LTS train, which has a slightly different design from the other two trains can seldom achieve lower than -38° F. Normally, the average annual LTS temperature is typically in the -35° F range due to seasonal effects. Greater recovery of liquids from the same quantity of feed gas would require the LTS and associated refrigeration equipment to go to colder temperatures than is possible with the current plant equipment. It is important to understand that all the recovered LTS bottoms liquids are then fractionated into either NGL or MI in the CGF Stabilizer columns. The CGF is operated to maximize NGL production and recovery. LTS bottoms liquids that are not produced as NGL are what is left over to make up the Prudhoe MI stream. With everything else held constant making more NGL will only be produced at the expense of lowered amounts of MI and vice versa. Some of the NGL is blended with oil produced from the PBU and is sold as liquid hydrocarbon via TAPS. The composition of NGL to be blended with oil is limited by vapor pressure constraints for the combined NGL and oil stream that is sold via TAPS (14.2 psia at stream temperature). Some of the NGL is provided to other unit owners for use as a component of MI to enhance oil recovery from Alaska North Slope oil reservoirs that are not within the PBU. This increases the overall NGL volume produced by the CGF. This is possible because CGF is able to adjust NGL composition by lowering stabilizer operating temperatures to allow a more volatile (higher in butane and propane) mix to provide the volume that can be added to TAPS to make up for a portion of the flow that was sent to KRU. Since the additional barrels produced are more volatile, 9 P "back blended" barrels than wa inall sent to KRU less volume can be adde� TA S as bac g y before the TAPS oil /NGL mix is back to the 14.2 psia vapor pressure limit. The added NGL volumes in this case are at the expense PBU of MI production as that is where the additional butane and propane components are derived. In summary, with the existing plant, the given gas feed rates, compositions, and a given LTS refrigeration limitation, the amount of liquids that can be recovered is fixed. NGL production is limited by TAPS liquid export vapor pressure specifications. If the quantity of NGL produced by the CGF increases (as is the case of export to KRU for use in MI), this can only be done at the expense of decreasing the quantity of MI produced for use at Prudhoe Bay. This reduction in volumes is so because the additional NGL barrels are derived from propane and butane that would have formerly remained in the Prudhoe Bay MI stream. The Prudhoe Bay available MI volume decreases more than the volume of the material directly removed to add the additional NGLs. This is because the proportions of propane and butane have a large impact on making the MI mixture miscible. As the Prudhoe Bay MI stream's propane and butane content drops, some of the methane in the resultant MI must be removed (by raising the LTS bottoms temperature) to bring the MI minimum miscibility pressure (MMP) back to the target 3100 psia. This is also true for the existing plant if propane were to be drawn out of the system as a separate sales stream. IC I 10 Figure 1 Simplified CGF Process Plant Diagram To Injection Compressors Miscible Injectant to Compression To Field Fuel Gas System Residue Gas Stabil condensers To S • tabilizer To Refrigeration Lal Overhead Compressors (2 trains) .. Drum GGX LTS _ Chillers Low Temperature t Separators Reflux Gas From FS /GCs (3 trains) To Propane . .............. Manufacturing Propane (when in use) Refrigeration Feed Pre NGL Stabilizers Heaters (2 trains) rr Air Reboiler Booster Compression • (3 trains) GLX �, Reboiler FBX NGL Product 11 Figure 2 CGF Propane Refrigeration System Simplified Process Diagram Air Gas Turbine & Propane Compressor (2 parallel trains) Condensers Surge Drum 'El 1st. 2nd. 3rd. (I I) III lir■•■• • LP HP A. Suction Economizer Economizer Scrubber MI 7 Process , / Process Gas Gas to LTS LTS Chillers (four) LTS 1 & 2 - one each A , LTS 3 - two 12 Figure 3 CGF C3 Manufacturing Simplified Process Diagram Light ends to stabilizer Air cooled oe Et and lighter condenser Some propane i • Slipstream from e ■ stabilizer reflux — Propane to storage ■ or refrigeration system 98.5% propane • Therminol Therminol De propanizer De - ethanizer 1,?5rReboiler • Reboiler ft' ► Heavy ends to stabilizer Butane and heavier and some propane 13 • • r , r . , 1 FT : I` =r tif �� °q i `� G YP ,‘ w i � ; S &q k k ht • H h G o � — _ � _ \ r A" SEAN PARNELL, GOVERNOR N a ALASKA OIL AND GAS / 333 W. 7th AVENUE, SUITE 100 CONSERVATION COMMISSION ANCHORAGE, ALASKA 99501 -3539 PHONE (907) 279 -1433 January 3, 2012 / FAX (907) 276 -7542 CERTIFIED MAIL — RETURN RECEIPT REQUESTED 7005 1160 0001 5753 9288 Mr. Emeka Emembolu Head of Base Management Alaska Resource BP Exploration (Alaska) Inc. PO Box 196612 Anchorage, AK 99508 Subject: Notice of inquiry into potential waste of propane at the Prudhoe Bay Unit and request for information Dear Mr. Emembolu: By letter (copy enclosed) dated December 7, 2011, the Alaska Oil and Gas Conservation Commission ( AOGCC) has been formally requested to consider and investigate whether propane is being wasted in the operation of Prudhoe Bay. The AOGCC has a duty under AS 31.05.030(b) to investigate whether or not waste exists or is imminent. In order to undertake this statutory requirement we request that BP Exploration (Alaska) Inc. submit the following information within 30 days of your receipt of this letter. 1) A brief description of the natural gas liquids extraction facilities, distribution, uses, and processes at Prudhoe Bay. 2) The average volume and composition of gas /natural gas liquids streams: a. Entering the Central Gas Facility, b. Distributed for enriched hydrocarbon gas enhanced recovery processes on the North Slope, c. Blended with crude oil and sold through the Trans Alaska Pipeline System, d. Distributed gas lift or dry gas pressure maintenance injection purposes, and e. Any other uses for natural gas liquids /propane not identified above. 3) Discussion on the limitations, if any, that affect the amount of natural gas liquids that could be sent to enriched hydrocarbon injection processes and/or pipeline sales. After receiving the above information the AOGCC will make a determination on how to proceed with this inquiry. If you have any questions on this matter please contact Mr. Dave Roby of my staff at (907) 793- 1232. Sincerely, Daniel T. Seamount, Jr Chair, Commissioner cc: Mr. Harold Heinze • • U.S. Postal Service, co CERTIFIED MAIL RECEIPT fu (Domestic Mail Only; No Insurance Coverage Provided) D " For delivery information visit our website at www.usps.com, 1 -n AMMAR IBC 9' Iti "n Postage $ $1.04 rq O Certified Fee ,r Return Receipt Fee / y n (Endorsement Required) $2.30 x (( O Restricted Delivery Fee ,- '1 ...0 1 ' (Endorsement Required) $0.O0 tc• �, > Total Postage & Fees $ $6,19 01/0 ■ ! a� 21 �- j N p nt o ...--. /.7.2e.: g 2., .L`i or PO Box No. City, State, ZIP+4 PS Form 380D, June` 2002 See Reverse for Instructions SENDER: COMPLETE THIS SECTION COMPLETE THIS SECTION ON DELIVERY • Complete items 1, 2, and 3. Also complete A. Signature item 4 if Restricted Delivery is desired. Agent • Print your name and address on the reverse X �%�1a( ❑ Addressee so that we can return the card to you. B. Received by (Printed Name) C. Date of Delivery • Attach this card to the back of the mailpiece, T. o� J / L 1�✓� , , D r � 1 1/�//)- or on the front if space permits. _ D. Is delivery address different from item 1? 0 Yes 1. Article Addressed to: If YES, enter delivery address below: ,ZrNo ,4ecaot O` /ease /714na f- 4, 7 / K- l'lj ace 8 /0Y-. 3. Type /' / wed Mall 0 Express Mall p /5 / 7 G 0 Registered .-i!rietum Receipt for Merchandise ./ 22 4 AliC /�9 50 t ❑ insured Mail ❑ C.O.D. C �U c 4. Restricted Deliver)? (Extra Fee) ❑ Yes 2. Article Number (Transfer from service label) 7005 1160 0001 5753 9288 PS Form 3811, February 2004 Domestic Return Receipt 102595-02-M-1540 fnSte and , ' Opporturilty • Potential Fleet Services operation on the North Slope converted to Tess expensive N.S. propane rather than trucked ULSD • Utilization of propane for new development staging facilities • Transitional development from in -state and N.S. use to longer -term export • Industrial applications, such as generation • Rural community and village opportunity for home heating Propare Bar t t the North x;04 • e • Mining operations • Cook Inlet Utilities • The Gas Company in Hawaii • Petrochemical Manufacturing Plants • Lower 48 for peak seasonal demand • Other worldwide applications and markets ANGDA's Ask of • PBU Operator to perform technical evaluations of: — CGF Process shift to increase C3 — Design concept for new C3 separation facilities — VROM Cost Estimate of modifications & new construction • PBU to consider development of a non -unit logistical facility to receive individual owner C3 sales Aciditionat considerations of PBU owners • Joint project development or single opportunity — Could be a third party operator that currently is utilized on NS operations • Funding discussions — all options on the table — ANGDA would be the single- receipt point for the wholesale propane molecules — ANGDA could serve as non - profit aggregator for in -state use ( minimal at 2500 — 3000 barrels /day) fncr sang Propane flerd from PB CGF • Adjust low temperature separators to reduce C3 in residue gas (Point B) and increase C3 feed to NGL stabilizer (Point D) • Add a larger C3 recovery module to capture the increased C3 at the reflux drum (Points A & E) PirofitaMe rnvestmerit (20% RCN BF IT) For An Assumed Propane Value & Yield Assumed Propane Value $Igal = 0.50 Yield in K BPD ($ million) ($ million) 5 $96 $192 10 $192 $383 20 $383 $767 30 $575 $1,150 Sceening Economics Calculated by Heinz& on 03/02/11 Sim UUfled rocess Diagram -- ilkU CGF Gas From Flow c : Booster It Residue Gas to Stations & Compressors Exchanger --)-11- CCP for Gathering a Chiller Reinjection Centers -40 F Low Inlet Booster , Temperature Separator Attercoolers Separators Existing g Propane Reboiler Plant Prudhoe Bay Unit �� 4 C).} - Central Gas Processing A I Miscible Injectant Compressors I I Feedteottom • c>.<, 1 ! Reflux Exch i Condenser L Drum i. Ml to Reflux Distribution G Pumps - 1 - 1 NGL Stabilizer , K. Reboiler NGL Product to �- Skid 50 Henze ANGDA 03/01/ Estimated Propane Flow In & Out of CGF Propane Volumes At PBU Central Gas Facility Point Mole Percent K Barrels 1 Bcf Gas Flow K B a r r e I s! D a v Low Huh Low HIM Bcfld Low High A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Heinze — ANGDA — 03/02/11 • Potential Aeka In-State Demand FdliPropane (Alaska Pipeline Project In-State Gas Study) Figure 25. Chances of Propane Demand, Alberta Route, Years 10-15 , 1 40,000 I I 35,000 30,000 1 ' ' - . : -.. . ' -;• 7 1 aalmi• 25,000 i 20,000 VerrATI: al I a. 1 i 15.000 ft ea 1 10,000 1 i . i 1 5 I 1 ■ 0% S% 10% 15% 20% 25% 30% 35% 40% i Source: Northern Economics, Inc. Production Facility Flow Schematic FL, To Prudhoe Bay Field Field Since 1987 Foceilies —•""- Wake i I aS121110140-EacilitY I j regAMiCILUIPMEMBAlli 1 P , i s... 1 I v I, — : --- . , ,...._ , . w is el% a Compres- Compres- ', i sion sten 1 „, Inlet Sep. , \ Tri injgg IGI- Gaseous Mixture ! 1 r 1 Dee ydraten 0 Compression Gathering Center 2 10 1 TAPS ” Pomp Stations Cmilite : t 1-4 ! Pioduclien '`"''' tit i We% t • r , 2nd Sep. 1 j 0i,.-Gos _ ,.. ' IPA 11 I Weter 3- ... ri S , ,-, sirrd FrodJeltn , A 1APS _ Crate 1! Mix 1 Produdion — Surge Shippinp TAPS W"ens Tank Pump Pump Staten el 0 te ShlaS4 Ws tali. [ ' 0 4 ' - „sett-v tri yi. . -- t r g .• (II': Vi a. w � " � 't- r / ! - Distribution -irons i �.., � Fue per gallon or mmbtu FUEL Pro_ Gasoline, Fuel /mmbtu BTU / gal 91,600 120,000 145,000 $1 gal $0.18 $0.24 $0.29 $2 $1 gal $0.46 $0.60 $0.73 $5 $ / gal $0.92 $1.20 $1.45 $10 $1 gal $1.83 $2.40 $2.90 $20 $ /gal $1.00 $1.31 $1.58 10.92 $ /gal $0.76 $1.00 $1.21 8.33 $ / gal $0.63 $0.83 $1.00 6.90 • North Slope Propane Opportunity • With no market for C CGF operational target is maximum NGL (C +) in TAPS and enough C3 for miscible injection • A petrochemical market of 20 k bpd C3 can be supplied by direct marine export due to reduced polar ice extent & thickness • ANGDA is willing to facilitate logistical & market (both in -state & export) development consistent with the PBU developing a propane delivery point GL's try 4.5 BCF /Day Gas Pipetine Com onent Mole BbIsIDa Thousand Tonnes P Percent Y Per Year C2 Ethane 7.23 206,000 4250 C3 Propane 3.76 110,250 3250 C4 Butane 0.76 26,250 900 Incremental Propane Prouction By Modifying The PBU CGF A. Screening Evaluation of Process Opportunities &. Economic indicators Submitted To The Prudhoe Bay Unit Operator and Owners By ANGDA In March 2011 DEC Q (' ��►� �f,Gfi' h Obi & ct;e V'Ui; S- we 1EPT42 2 Propane's Benefits and O - :ortunt y • Alternative clean fuel for rural Alaska • Price advantage of North Slope gas btu value • Extends reach to Alaskans that transcends gas pipeline route. • Opportunities — World class C volumes currently produced and injected in PBU — Gas pipeline is designed to transport entire C3 production stream — Current CGF configuration captures only one -third of C3 processed • I Exxon Mobil Production Company Dale Pittman P. O Box 196601 Alaska Production Manager Anchorage, Alaska 99519 6601 Joint Interest U S 907 561 5331 Telephone 907 564 3677 Facsimile RECEIVED MAY 05 2011 Production May 3, 2011 Mr. Harold Heinze Alaska Natural Gas Development Authority 411 West 4th Avenue, First Floor Anchorage, Alaska 99501 Subject: PBU Propane Extraction at Central Gas Facility Dear Mr. Heinze: ExxonMobil has received your letter dated April 8, 2011 requesting Prudhoe Bay Unit (PBU) Owners to consider further investment in the PBU Central Gas Facility (CGF) to enhance recovery of propane from PBU gas volumes and enable sales of propane at the North Slope. We appreciate you bringing the opportunity to our attention. As you have noted, additional technical definition is required in order to assess the opportunity. ExxonMobil will consult with BP, as PBU operator, to better understand the scope and cost associated with the proposed investment. ExxonMobil is committed to the communities in which we operate and appreciates opportunities to integrate community need with business opportunity. If you have any further questions, please feel free to contact Mr. Peter Velez with ExxonMobil Gas and Power Marketing at 713 -656 -9487. Sin - = ly, Pr Dale Pittman xc: J. B. Brackin M. A. Pohier P. K. Velez A DIvisson of r'> 7 - vti: - . €". • • related topics, as well as, facilitate development of third party projects to carry propane to both in -state or export markets. We greatly appreciate your time and consideration of this propane proposal that will expedite immediate benefits for in -state applications, opportunities for fleet services operations on the North Slope and eventually export opportunities. We would greatly appreciate your timely response on whether this would be a viable business consideration for your teams. Sincerely, Harold Heinze CEO cc: Scott Heyworth, Chairman ANGDA Board 2 • Ste, PARNELL, GOVERNOR 411 WEST 4 AVENUE, FIRST FLOOR ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 269 -6501 April 8, 2011 BP Alaska c/o Bruce Williams 900 East Benson Blvd. MB 11 -2 Anchorage, AK 99508 -4254 Dear Mr. Williams, One of Alaska Natural Gas Development Authority's long term objectives has focused on developing an in -state propane supply point(s) related to Prudhoe Bay gas utilization. Propane is the only North Slope sourced fuel that could be made available to many Alaskan communities as an alternative to diesel in the short term. ANGDA developed a design concept for a stand -alone plant to recover additional propane from the Prudhoe Bay Unit (PBU) Central Gas Facility (CGF) residue stream prior to reinjection. The downstream economics and benefits of separately processing this lean propane stream for the small in -state volume ( <3,000 bpd) are not sufficient to offset the risks of a prototype operation on the North Slope. The recent alignment of propane petrochemical feedstock shortages and an opportunity to tanker propane direct from the North Slope favors increasing the PBU recovery of propane by 20,000 to 30,000 bpd. This 10% increase in PBU production might be achieved with minimal modifications and the addition of modules for less than $500 million. The attached presentation summarizes ANGDA's screening analysis of the technical and economic aspects of the PBU modifying & adding to the CGF. Included are some suggestions on shifting propane for recovery at the takeoff point for the small existing propane plant and a back calculation of what might be an acceptable investment level given volumes and cost variables. ANGDA asks that the Prudhoe Bay Unit Owners consider further investment in the Unit's Central Gas Facility to make available propane at a wholesale delivery point to ANGDA as a single recipient aggregator based upon the information developed by the Unit Operator. ANGDA stands ready to work with the Unit Operator and the Owners on any of the CGF • SO PARNELL, GOVERNOR 411 WEST 4 AVENUE, FIRST FLOOR ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 257 -1393 April 28, 2010 Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 Anchorage, AK 99510 -0360 Dear Mr. Isaacson: Thank you for your letter of April 27, 2010, explaining ConocoPhillips' conclusion that the propane extraction facility ANGDA is studying would impair the Prudhoe Bay Unit miscible injectant enhanced oil recovery project. We would like to take you up on the offer to continue discussions to explore feasible technical or operational innovations in PBU facilities that would allow the development of ANGDA's proposed wholesale propane facility on the North Slope. As noted, these discussions would only be from a technical and operational perspective, with commercial discussions, if and when appropriate, in entirely different individual company meetings. A major problem in the technical discussions is a dearth of public information on process volumes and compositions associated with Prudhoe Bay gas handling, reinjection, and enhanced oil recovery. Based on decades old field composition information and gross gas volumes reported to AOGCC we estimate that 50- to 75- thousand barrels a day of propane are returned to the reservoir in the "residue gas" injection not associated with the enhanced oil recovery project. The entire defined in -state market for propane could be satisfied with only a small fraction of this residual production. We also estimate that less than 50% of the propane produced concurrent with oil operations is used in the enhanced recovery process as compared to the 75% plus propane recovery we would expect from this type of a gas handling facility. I look forward to clarifying these analyses and other parts of this potential opportunity within the Prudhoe Bay Unit at your earliest convenience. ANGDA is prepared to separately discuss your company's concerns if the scheduling with other PBU owners or the Operator proves difficult. • Sincere y, • t` ° Harold C. Heinze CEO cc: Mr. Trond -Erik Johansen, President ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. • Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 Anchorage, AK 99510 -0360 Phone 907.263.4556 Conoco Phillips Fax 907.263.4438 Alaska, Inc. April 27, 2010 Mr. Harold Heinze Ms. Mary Ann Pease Alaska Natural Gas Development Authority 411 West 4 Avenue, Suite 100 Anchorage, AK 99501 Dear Mr. Heinze and Ms. Pease: The Alaska Natural Gas Development Authority (ANGDA) met with ConocoPhillips and other Prudhoe Bay Unit (PBU) owners in February to . present a proposed propane extraction facility and distribution system. More recently, ANGDA has asked for ConocoPhillips' response to the proposal. As you know, propane is used at the PBU to create "miscible injectant," which is then used to enhance oil recovery. At our February meeting, it was explained that extraction of propane from the central gas facility (CGF) residue gas or any other location downstream of CGF low temperature separation would reduce production of miscible injectant, and impact enhanced oil recovery. In light of propane's current use within the PBU, ConocoPhillips does not see ANGDA's current proposal as viable. However, we remain willing to continue discussions to determine whether there are technical or operational innovations that are feasible but have not yet been considered. If the project does ultimately appear to be viable from a technical and operational perspective, we anticipate that commercial issues would be discussed individually between each PBU owner and ANGDA. ConocoPhillips looks forward to exploring creative ideas for putting PBU propane to its best use in Alaska. Sincerely, Erec S. Isaacson' Cc: Mr. Trond -Erik Johansen, President, ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. E.,$tirnateci Propane Flow In & Out of GGF Propane Volumes At PBU Central Gas Facility • Point Mole Percent K Barrels I Bcf Gas Flow K Barrels/Day Low High Low High Bcf!d Low High A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 :3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Henze — ANGDA — 03102/1 I e:Th n r n Pr ., , Z. q Frn willed rrocess lgram ia -,,-, P.130 Go , _ Frnm Booster ____ - ° Residue Gas to , P .. Compressors Exchanger , - ccr 'fc q.atilerrg 11111 8, Chiller 1 Reinject!cr Qenters ... . 1 i „..„, -40 F Low i , Inlet Booster Temperature II ' Separator ) Aftercoolers Separators k i Existing Propane Reboiler Plant ,____ Prudhoe Bay Unit + ( - - - - - .s - - - - Central Gas Processing " I Miscible .‘ -1-14 - ......f Injectant --- ---/ Compressors r . T i 1 i 1 I w 1 Feed/Bottom : Reflux /..-- / c>‹ \ ; Exchanger i I Drum Condenser 1 Reflux C14 Distritution - Pumps NGL 14*-- -- --, Stabilizer 15) Reboiler NGL Product to ‘ f-il' a. Skid 50 Heinze ANGDA 03/01/11 , , . • • Production Facility Flow Schematic K - y T c Prudhoe Bay Field Fie lc Since 1987 Facilities asnartmsommorea. - 0Attef ! Meter 1 Sales ana Fuel Gas Line . . -..........------ . 7 P.en*rall_One. ro.ct I ity Ppntral Compre,sor rlant .....•-• __. 1 .--............„, -' ne j - ---- . ---'`.- t . 6 • • i el f_ -a Injected 1....---- IC ' - 6.4i Ccmpres- Cu mpres- siert sicn Inlet Sep. .. , _ _ ... .. i. , . , ' 7 Miscible Injectant l';'''' NGLs 7!) EOR lijezt ol We:. Gas cc u s Mixture .,-,; Behyttration Gathering Center C c mpress lc n , 0 : r— TAPS . . Pump Static:es - i.. _ _______ .."5. 1 1 -- 0 ri II site • .... .., . . Wells ,,, ,' .........__— ,: 77.7,;a7, :- 1 6 t Sep . • .' - ' - 2nO Sep. , .. f(, 1 Nater i'G - . skid t.. Producticn TAPS ... so Freaucticn 7- .._: I j Surge Shipping TAPS Aielis - Tank Pump Pump Station #1 I u Ifiu"..4i 't. 111C Sti 1 1 ilea; • Recoverable Propane Is Potentially Being Wasted In Prudhoe Bay Unit Operations My Maior Observations Are: 1. The PBU CGF capability to recover locally marketable propane from the gas stream is not being utilized (500 BPD to 2,000 BPD). 2. Some propane is being beneficially used for FOR in the PBU, but there is an even larger volume of propane being injected as residue gas (2% of 8 BCFPD = 100,000 BPD). 3. Because of the limited production life of Prudhoe Bay, the propane that could be recovered and marketed at this time will be left in the reservoir at shut down. That future lost recovery is the preventable waste of a valuable hydrocarbon. Points I Would Like The AOGCC To Consider: 1. Does the above circumstances, if validated, describe "waste" under AS 31.05 — Alaska Oil and Gas Conservation Act ? 2. Is NGL and /or propane recovery from the PBU dealt with in any confidential studies, Commission orders, or in the PBU Field Rules? 3. Did the PBU hearings before the Commission in the 1990's on NGL's and the operation of Skid 50 contain any information relevant to propane recovery? 4. Is the attached estimated gas- component compositions and simplified process diagram representative of the current PBU gas handling and re- injection operations (3 pages attached)? 5. Is the Commission prepared to develop public information on the current PBU operating conditions affecting propane? H. Heinze 12/06/11 • %,/7; D'1 Harold Heinze IL)) ' a 1336 Staubbach Circle QEC, Anchorage, Alaska 99508 December 7, 2011 To: Alaska Oil and Gas Conservation Commission Dear Commissioners: Over the last two years I have explored several approaches to developing a wholesale propane supply point at Prudhoe Bay. While the Prudhoe Bay Unit Owners have indicated a willingness to sell propane I have been unable to discern the direction and schedule of the needed actions by the Unit Operator BP. I understand that BP is under no obligation to inform me or the public as to plans, if any, for making propane available. But as an Alaskan I am concerned that absent priority attention by BP the potential "waste ", per AS 31.05, will continue until the AOGCC formally considers the issue. Attached for your review are: • Observations on Propane Recovery in the Prudhoe Bay Unit — with 3 attached diagrams • Unsolicited Presentation Made to the Prudhoe Bay Unit Owners Earlier This Year (16 slide images) • Letter exchanges with Prudhoe Bay Unit Owners in 2010 & 2011 (4 letters) Thank you for the opportunity to bring my concerns before you and I appreciate your considerations. Copy To: DNR Commi loner Sullivan Oil & Gas Director Barron �$ i -- by • • BP Exploration (Alaska) Inc. 900 East Benson Boulevard P.O. Box 196612 Anchorage, Alaska 99519 -6612 Main 907 564 5111 Emeka Emembolu Manager, Base Management May 8, 2012 Mrs. Cathy P Foerster Chair, Commissioner Alaska Oil and Gas Conservation Commission 333 W. 7th Avenue, Suite 100 Anchorage, AK 99501 -3539 RE: AOGCC Public Hearing on propane use at PBU scheduled for Mav 22.2012 Dear Commissioner Foerster Several of our key technical personnel with knowledge of PBU operations relevant to the above hearing will be unable to attend due to previously scheduled out of state commitments. BP Exploration (Alaska) Inc., as operator of the Prudhoe Bay Unit, hereby requests that the hearing be continued to one of the following alternate dates: • June 18, 2012 • June 19, 2012 (preferred) Please advise whether you will be able to accommodate this request and, if so, what date is best for you. We look forward to the opportunity to support the Commission in bringing this matter to closure. Yours Sincerely, 1p Emeka Emembolu cc: Mrs. Jody Colombie (AOGCC); Mr. Mark Agnew (ExxonMobil); Mr. Steve Arbelovsky (ConocoPhiillips); Mr. Phil Ayers (Chevron) 7 t • • STATE OF ALASKA NOTICE TO PUBLISHER ADVERTISING ORDER NO. ADVERTISING O IN SHOWI ADVET E., /� AFFIDAVIT INV DI OF PUBLICATION TRIPLICATE (PART2 OF THIS FO R M) W ITH O RD ATTACHED R CERTIFIED COPY OF AO- 02214017 ORDER ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE SEE BOTTOM FOR ADDRESS . . F AOGCC AGENCY CONTACT DATE OF A.O. April 11, 2012 R 333 W 7th Ave, Ste 100 Jody Colombie ° Anchorage, AK 99501 PHONE PCN M (9071 793 —1221 DATES ADVERTISEMENT REQUIRED: a Alaska Journal of Commerce ASAP 301 Arctic Slope Avenue, Suite 350 Anchorage AK 99518 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Type of Advertisement SEE ATTACHED SEND INVOICE IN TRIPUCATE AOGCC, 333 W. 7th Ave., Suite 100 PAGE 1 OF TOTAL OF ° TO Anchorage, AK 99501 2 PAGES ALL PAGES$ REF TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN 2 ARD 02910 FIN AMOUNT SY CC PGM LC ACCT FY NMR DIST LID 1 12 02140100 73451 2 REQUISITIONED BY: DIVISION APPROVAL: 02 - 902 (Rev. 3/94) Publisher /Original Copies: Department Fiscal, Department, Receiving AO.FRM • 40 Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The Alaska Oil and Gas Conservation Commission (AOGCC) acting pursuant to hereby gives notice of a Public Hearing concerning whether propane is AS 31.05.030(b), y g g being wasted in operation of the Prudhoe Bay Unit (PBU). A letter dated December 7, 2011, from a concerned citizen of the State of Alaska requests that the AOGCC consider and investigate whether propane is being wasted in the operation of the PBU. Under AS 31.05.030(b) the AOGCC is required to investigate whether or waste is occurring or is imminent. In accordance with this statute on January 3, 2012, the AOGCC sent a letter to BP Exploration (Alaska), Inc. (BPXA), as operator of the PBU, requesting information on the volume and composition of the various gas streams in the PBU and about the propane /miscible injectant processes used within the unit. BPXA responded to the AOGCC's request by letter dated and received February 6, 2012. At the April 4, 2012, AOGCC Public Meeting, and after a briefing by AOGCC staff and comments from members of the public, the AOGCC decided to hold a public hearing on this matter. The AOGCC has scheduled a public hearing on this application for May 22, 2012 at 9:00 a.m. at the Alaska Oil and Gas Conservation Commission, at 333 West 7 Avenue, Suite 100, Anchorage, Alaska 99501. Written comments regarding this application may be submitted to the Alaska Oil and Gas Conservation Commission, at 333 West 7 Avenue, Suite 100, Anchorage, Alaska 99501. Comments must be received no later than 4:30 p.m. on May 21, 2012, except that, if a hearing is held, comments must be received no later than the conclusion of the May 22, 2012 hearing. If, because of a disability, special accommodations may be needed to comment or attend the hearing, contact the AOGCC's Special Assistant, Jody Colombie, at 793 -1221, no later than May 17, 2012. Cathy P. Foerster Chair, Commissioner ALASKA Journal4Commerce Alaska Oil & Gas Conservation Commission Public Notices FILE NO: AO- 02214017 Ad #: 10161912 AO- 02214017 Public Hearing AFFIDAVIT OF PUBLICATION UNITED STATES OF AMERICA, STATE OF ATTACH PROOF OF PUBLICATION HERE ALASKA, THIRD DISTRICT BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC THIS Notice of Public Hearing DAY PERSONALLY APPEARED Lara Bickford STATE OF ALASKA WHO, BEING FIRST DULY SWORN, Alaska Oil and Gas Conservation Commission ACCORDING TO THE LAW, SAYS THAT SHE IS THE Business Manager OF THE ALASKA Re: The Alaska Oil and Gas Conserva- tion Commission (AOGCC) acting pur- JOURNAL OF COMMERCE PUBLISHED AT 301 suant to AS 31.05.030(b), hereby ARTIC SLOPE AVENUE, SUITE 350, IN SAID gives notice of a Public Hearing con- cerning whether propane is being THIRD DISTRICT AND STATE OF ALASKA wasted in operation of the Prudhoe AND THAT ADVERTISEMENT, OF WHICH THE Bay Unit (PBU). ANNEXED IS A TRUE COPY, WHICH WAS A from m the State PUBLISHED IN SAID PUBLICATION of Alaska requests that the AOGCC consider and investigate whether pro - 04/22/2012 pane is being wasted in the operation of the PBU. Under AS 31.05.030(b) 22nd DAY OF APRIL 2012 the AOGCC is required to investigate whether or waste is occurring or is AND THERE AFTER FOR 1 imminent. In accordance with this statute on January 3, 2012, the CONSECUTIVE WEEK(S) AND THE AOGCC sent a letter to BP Exploration LAST PUBLICATION APPEARING ON the Inc. requesting nt as operator of the PBU, requesting information on 04/22/2012 the volume and composition of the 22nd DAY OF APRIL 2012 various gas streams in the PBU and about the propane/miscible injectant processes used within the unit. BPXA responded to the AOGCC's request by 1 letter dated and received February 6, 2012. At the April 4, 2012, AOGCC Public Meeting, and after a briefing by AOGCC staff and comments from Lara Bickford ■ members of the public, the AOGCC decided to hold a public hearing on Business Manager this matter. SUBSCRIBED AND SWORN BEFORE ME The AOGCC has scheduled a public THIS 23rd DAY OF April 2012 hearing on this application for May P 22, 2012 at 9:00 a.m. at the Alaska Oil and Gas Conservation Commission, at 333 West 7th Avenue, Suite 100, An- 1 chorage, Alaska 99501. IL\ �1 ` �» NA. ��!� Written comments regarding this ap- NOTARY PUBLIC STATE OF ALAS Alaka may be submitted to the Alaska Oil it and Gas Conservation MY COMMISSION EXPIRES 6/14/12 Commission, at 333 West 7th Ave- nue, Suite 100, Anchorage, Alaska NOTARY PUBUC 99501. Comments must be received BELINDA CUMMINGS no later than 4:30 p.m. on May 21, 2012, except that, if a hearing is held, STATE OF ALASKA comments must be received no later MY COMMISSION EXPIRES June 14, 2012 than the conclusion of the May 22, 2012 hearing. If, because of a disability, special ac- commodations may be needed to comment or attend the hearing, con- tact the AOGCC's Special Assistant, Jody Colombie, at 793 -1221, no later than May 17, 2012. By: /s /Cathy P. Foerster Chair, Commissioner Pub: 4/22/2012 Ad #10161912 • • STATE OF ALASKA NOTICE TO PUBLISHER ADVERTISING ORDER NO. ADVERTISING CATE ADVERTISING ORDER ., CERTIFIED p AFFIDAVIT INVOICE MUST OF PUBLICATION BEB IN TRIPLI (PART 2 OF SHOWING THIS FORM) WITH ATTACHED C OF NO- 02214017 ORDER ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE SEE BOTTOM FOR INVOICE ADDRESS F AOGCC AGENCY CONTACT DATE OF A.O. R 333 West 7 Avenue. Suite 100 Jody Colorable Anril 11.2012 ° Anchorage_ AK 99501 PHONE PCN M (907) 793 -1221 DATES ADVERTISEMENT REQUIRED: T 0 Alaska Journal of Commerce ASAP 301 Arctic Slope Avenue, Suite 350 Anchorage AK 99518 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: AFFIDAVIT OF PUBLICATION United states of America REMINDER State of ss INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. division. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. Before me, the undersigned, a notary public this day personally appeared ATTACH PROOF OF PUBLICATION HERE. 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 2012, and thereafter for consecutive days, the last publication appearing on the day of , 2012, 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 2012, Notary public for state of My commission expires i • Fisher, Samantha J (DOA) From: Fisher, Samantha J (DOA) Sent: Thursday, April 12, 2012 8:42 AM To: Ballantine, Tab A (LAW); Bender, Makana K (DOA); 'Brooks, Phoebe L (DOA) (phoebe.brooks @alaska.gov)'; 'Colombie, Jody J ( DOA) (jody.colombie @alaska.gov)'; 'Crisp, John H (DOA) (john.crisp @alaska.gov)'; 'Davies, Stephen F (DOA) (steve.davies @alaska.gov)'; 'Foerster, Catherine P (DOA) (cathy.foerster @alaska.gov)'; 'Grimaldi, Louis R (DOA) (lou.grimaldi @alaska.gov)'; Herrera, Matt F (DOA); 'Johnson, Elaine M (DOA) (elaine.johnson @alaska.gov); 'Jones, Jeffery B (DOA) (jeff.jones @alaska.gov)'; 'Laasch, Linda K (DOA) (linda.laasch @alaska.gov)'; 'McIver, Bren (DOA) n E (DOA) steve.mcmains alaska. ov bren.mciver alaska. ov , 'Mc Mains, Stephen ( ) ( @ g ) , ( he @ 9 ) p Mumm, Joseph (DOA sponsored); 'Noble, Robert C (DOA) (bob.noble @alaska.gov)'; 'Norman, John K (DOA) (john.norman @alaska.gov)'; 'Okland, Howard D (DOA) (howard.okland @alaska.gov)'; 'Paladijczuk, Tracie L (DOA) ( tracie .paladijczuk @alaska.gov)'; 'Pasqual, Maria (DOA) (maria.pasqual @alaska.gov)'; 'Regg, James B (DOA) (jim.regg @alaska.gov)'; 'Roby, David S (DOA) (dave.roby @alaska.gov)'; 'Scheve, Charles M (DOA) (chuck.scheve @alaska.gov); 'Schwartz, Guy L (DOA) (guy.schwartz @alaska.gov)'; 'Seamount, Dan T (DOA) (dan.seamount @alaska.gov)'; Ferguson, Victoria L (DOR); 'Aaron Gluzman'; 'Ben Greene'; 'Bruce Williams'; Bruno, Jeff J (DNR); 'CA Underwood'; 'Casey Sullivan'; 'Dale Hoffman'; 'David Lenig'; 'Donna Vukich'; 'Eric Lidji'; Franger, James M (DNR); 'Gary Orr'; 'Graham Smith'; 'Greg Mattson'; Heusser, Heather A (DNR); 'Jason Bergerson'; 'Jennifer Starck'; 'Jill McLeod'; 'Joe Longo'; 'Kim Cunningham'; King, Kathleen J (DNR); 'Lara Coates'; 'Lois Epstein'; 'Marc Kuck'; 'Marie Steele'; 'Mary Aschoff; 'Matt Gill'; 'Maurizio Grandi'; Ostrovsky, Larry Z (DNR); 'Patricia Bettis'; Perrin, Don J (DNR); 'Peter Contreras'; Pexton, Scott R (DEC); 'Richard Garrard'; 'Ryan Daniel'; 'Sandra Lemke'; 'Talib Syed'; 'Ted Rockwell'; 'Wayne Wooster'; 'Wendy Wollf; 'William Hutto'; 'William Van Dyke'; '( michael .j.nelson @conocophillips.com)'; '(Von.L .Hutchins @conocophillips.com)'; 'AKDCWeIIIntegrityCoordinator'; 'Alan Dennis'; 'alaska @petrocalc.com'; 'Anna Raff; 'Barbara F Fullmer'; 'bbritch'; 'Becky Bohrer'; 'Bill Penrose'; 'Bill Walker'; 'Bowen Roberts'; 'Brandon Gagnon'; 'Brandow, Cande (ASRC Energy Services)'; 'Brian Havelock'; 'Bruce Webb'; 'Chris Gay'; 'Claire Caldes'; 'Cliff Posey'; 'Crandall, Krissell'; 'D Lawrence'; 'dapa'; 'Daryl J. Kleppin'; 'Dave Harbour'; 'Dave Matthews'; 'David Boelens'; 'David House'; 'David Scott'; 'David Steingreaber'; 'ddonkel @cfl.rr.com'; 'Dennis Steffy'; 'Elowe, Kristin'; 'Erika Denman'; 'Francis S. Sommer'; 'Fred Steece'; 'Garland Robinson'; 'Gary Laughlin'; 'Gary Schultz (gary.schultz @aiaska.gov)'; 'ghammons'; 'Gordon Pospisil'; 'Gorney, David L.'; 'Greg Duggin'; 'Gregg Nady'; 'Gregory Geddes'; 'gspfoff; 'Jdarlington (jariington @gmail.com)'; 'Jeanne McPherren'; 'Jeff Jones'; 'Jerry McCutcheon'; 'Jill Womack'; 'Jim White'; 'Jim Winegarner'; 'Joe Nicks'; 'John Easton'; 'John Garing'; 'John Katz (john.katz @alaska.gov)'; 'John S. Haworth'; 'John Spain'; 'Jon Goltz'; Jones, Jeffrey L (GOV); 'Judy Stanek'; 'Julie Houle'; 'Kari Moriarty'; 'Kaynell Zeman'; 'Keith Wiles'; 'Kelly Sperback'; 'Kim Cunningham'; 'Larry Ostrovsky'; 'Laura Silliphant (laura.gregersen @alaska.gov)'; 'Marc Kovak'; 'Mark Dalton'; 'Mark Hanley (mark.hanley @anadarko.com)'; 'Mark P. Worcester'; 'Marguerite kremer (meg.kremer @alaska.gov)'; 'Michael Dammeyer'; 'Michael Jacobs'; 'Mike Bill'; 'Mike Mason'; 'Mike Morgan'; 'Mikel Schultz'; 'Mindy Lewis'; 'MJ Loveland'; 'mjnelson'; 'mkm7200'; 'nelson'; 'Nick W. Glover'; 'NSK Problem Well Supv'; 'Patty Alfaro'; 'Paul Decker (paul.decker @alaska.gov)'; 'Paul Figel'; 'Randall Kanady'; 'Randy L. Skillern'; 'Rena Delbridge'; 'Renan Yanish'; ' rob.g.dragnich @exxonmobil.com'; 'Robert Brelsford'; 'Robert Campbell'; 'Ryan Tunseth'; 'Scott Cranswick'; 'Scott Griffith'; 'Shannon Donnelly'; 'Sharmaine Copeland'; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); 'Sondra Stewman'; 'Steve Lambert'; 'Steve Moothart (steve.moothart@alaska.gov)'; 'Steven R. Rossberg'; 'Suzanne Gibson'; 'tablerk'; 'Tamera Sheffield'; Taylor, Cammy 0 (DNR); 'Temple Davidson'; 'Teresa Imm'; 'Terrie Hubble'; 'Thor Cutler'; 'Tim Mayers'; 'Tina Grovier'; 'Todd Durkee'; 'Tony Hopfinger'; 'trmjrl'; 'Vicki Irwin'; 'Walter Featherly'; 'Will Chinn'; Williamson, Mary J (DNR); 'Yereth Rosen' Subject: PBU Propane Waste Public Hearing Notice.pdf - Adobe Acrobat Professional Attachments: PBU Propane Waste Public Hearing Notice.pdf Samantha Fisher, Executive Secretary II Alaska Oil and Gas Conservation Commission (907)793 -1223 1 • • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 Ft. Worth, TX 76102 -6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton President 408 18 Street 6900 Arctic Blvd. Golden, CO 80401 -2433 P.O. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Bernie Karl CIRI K &K Recycling Inc. Land Department Baker Oil Tools P.O. Box 58055 P.O. Box 93330 795 E. 94 Ct. Anchorage, AK 99515 -4295 Fairbanks, AK 99711 Anchorage, AK 99503 North Slope Borough Richard Wagner Gordon Severson Planning Department P.O. Box 60868 3201 Westmar Circle P.O. Box 69 Fairbanks, AK 99706 Anchorage, AK 99508 -4336 Barrow, AK 99723 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Penny Vadla Cliff Burglin 399 West Riverview Avenue 319 Charles Street Soldotna, AK 99669 -7714 Fairbanks, AK 99701 \� \\q) � \ \ / *6 • • Colombie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Wednesday, May 09, 2012 10:35 AM To: Harold Heinze; Colombie, Jody J (DOA) Cc: Norman, John K (DOA); Seamount, Dan T (DOA); Ballantine, Tab A (LAW); Roby, David S (DOA); Nels Anderson, Jr.; Mary Ann Pease; Barron, William C (DNR) Subject: RE: BPXA Request to Continue on Waste Inquiry Harold, To answer your questions: 1. No, you do not. 2. The State does not provide legal assistance, lawyers, or legal advice to individuals appearing before state agencies — unless you need a public defender. ; -) 3. See #2. 4. I don't know. 5. Come prepared for the process to be completed on that day. As for a continuance, we'll make that determination, if necessary, at the appropriate time. From: Harold Heinze j mailto :heinze.harold(agmail.coml Sent: Tuesday, May 08, 2012 4:06 PM To: Colombie, Jody J (DOA) Cc: Foerster, Catherine P (DOA); Norman, John K (DOA); Seamount, Dan T (DOA); Ballantine, Tab A (LAW); Roby, David S (DOA); Nels Anderson, Jr.; Mary Ann Pease; Barron, William C (DNR) Subject: Re: BPXA Request to Continue on Waste Inquiry Dear Ms Colombie: I have noted that the AOGCC public hearing on potential propane waste at the Prudhoe Bay Unit has been deferred from May 22 to June 19. Some questions: 1. Do I personally have to appear at the convening of the May 22 hearing to maintain my status as a party in this matter ? 2. What is the status of my prior request for an Assistant AG to advise and explain the hearing procedures and process to me ? 3. What is the status of my prior request for an Assistant AG to help define the statutory and legal precedence of the potential waste issues raised in my complaint ? 4. Has the Department of Natural Resources and /or the Division of Oil & Gas been advised of the potential gas royalty valuation and gas royalty in- kind issues raised by BPXA's letter response to the Commission's inquiry ? 5. Am I entitled to a continuance of the hearing at the conclusion of BPXA's testimony at the June 19 hearing ? Thank Y • ou for your continued considerations ! Y Harold Heinze 2 1 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, May 08, 2012 2:25 PM To: Gene P. Therriault Cc: Foerster, Catherine P (DOA) Subject: RE: Thanks for the info. I have another question' Gene, Please contact Cathy Foerster, Chair, Commissioner of the Alaska Oil and Gas Conservation Commission with your additional questions. Her direct line is 907 - 793 -1228 or her email is cathv.foersterPalaska.gov. Jody Colombie Special Assistant AOGCC From: Gene P. Therriault jmailto:gtherriaultftgvea.coml Sent: Tuesday, May 08, 2012 1:42 PM To: Colombie, Jody J (DOA) Subject: Thanks for the info. I have another question' Jody: Thank you for the information indicating that the AOGCC hearing on the Prudhoe Bay handling of propane will be postponed until June 19. I have placed the new date on my schedule and will contact you again as that date draws near. I was going to be out -of -state for the original date. On a separate note; GVEA has been contacted about the possibility of generating electricity on the North Slope using gas that members currently think is being flared. We are going to respond with the basic information that gas flaring has been outlawed in the state for a long time. However, I anticipate there will be some confusion over the pilot flames that are part of the emergency gas relief systems on the North Slope. In addition, I have been told that there is some flaring going on at the North Star field while a compressor failure is repaired. Is there a particular person at AOGCC that we can refer members to if want additional information on the state laws that restrict gas flaring? Gene Therriault VP Resource Development and External Affairs Golden Valley Electric Association 347 -3300 1 • • Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Tuesday, May 08, 2012 11:04 AM To: 'Harold Heinze' Cc: Foerster, Catherine P (DOA); Norman, John K (DOA); Seamount, Dan T (DOA); Ballantine, Tab A (LAW); Roby, David S (DOA) Subject: BPXA Request to Continue on Waste Inquiry Attachments: S45C- 212050810450. pdf Mr. Heinze, The AOGCC has received a request from BPXA to continue the hearing currently scheduled for May 22, 2012. I have reviewed the AOGCC calendar and June 19, 2012 at 9:OOam is available. This date is acceptable to BPXA as well. We will convene the hearing on May 22, 2012 at 9:OOam, only to continue it until June 19, 2012 at 9:00 am. Jody .1. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) 1 • • Colombie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Thursday, April 26, 2012 11:35 AM To : Colombie, Jody J (DOA) Cc: Ballantine, Tab A (LAW); Seamount, Dan T (DOA); Norman, John K (DOA) Subject: Fwd: AOGCC May 22nd Public Hearing on potential waste of propane at PBU - BPXA operator Sent from my iPhone Begin forwarded message: From: Harold Heinze <heinze.harold @gmail.com> Date: April 26, 2012 2:17:02 PM CDT To: "Foerster, Catherine P (DOA)" <cathy.foerster @alaska.gov> Subject: Re: AOGCC May 22nd Public Hearing on potential waste of propane at PBU - BPXA operator understood - - -- that will make it easier in contacting some others i will let you know whom i am in contact with and how they may connect to the issue On Thu, Apr 26, 2012 at 9:39 AM, Foerster, Catherine P (DOA) <cathy.foerster @alaska.gov> wrote: Harold, The BP document is not confidential. Cathy Sent from my iPhone On Apr 26, 2012, at 11:17 AM, "Harold Heinze" <heinze.harold(aigmail.com> wrote: > *Harold Heinze* > 1336 Staubbach Circle, Anchorage, AK 99508 > heinze.harold @gmail.com (907) 903 - 3623 > April > 26, 2012 > Dear Commissioner Foerster: i .> • • > At the regular public meeting of AOGCC earlier this month you let me > verbally respond to the question of whether further proceedings in the PBU > propane waste mater should be done publicly. At the time I responded in > the affirmative. I now have had a chance to review BPXA's response to the > AOGCC inquiry letter of January 3, 2012, and I feel even more strongly that > your recent call for a public hearing on May 22, 2012, is the best course > to proceed on in getting to the bottom line of this matter. > I have treated the BPXA response as confidential and not sought review by > others. At some point I would like additional reviewers, but for now my > conclusion is that while BPXA responded, I feel there were a number of > questions they did not fully answer. In particular, their operational > narrative is mind boggling and mind numbing. I am chagrin that they offer > no diagram or schematic reference to provide clarity to their words. I > presume they wish to let my simplified process diagram stand as the only > public definitive interpretation of how the PBU's multi- billion dollar > facility functions. I also found the threads of compositional matters not > related to propane and the references to non -PBU reservoir operations > confusing, distracting, and potentially irrelevant to question of whether > propane can be made commercially available by BPXA for use in Alaska. > In preparing for the hearing I would hope that BPXA's confidential response > to your inquiry could be shared with some other State of Alaska entities > since I find several potential royalty related references in the PBU > operational explanation without any citation of authority for the > transaction. > Additionally, since I am a private citizen representing a public interest I > would like the legal assistance of an Assistant Attorney General in framing > the statutory elements of potential propane waste issue for your > consideration. > I appreciate the professional courtesy extended to me by you and your > fellow Commissioners and AOGCC staff. 2 • • > > *Copy To:* > AOGCC Commissioner Dan Seamount > AOGCC Commissioner John Norman > Jodie Colombie — Special Assistant - AOGCC > Division of Oil & Gas Director William Barron > Department of Natural Resources Commissioner Dan Sullivan > <ltr_to_foerster_on_call_of public_hearing - 042612.docx> > <PBUPropaneWasteNotice_- 052212.pdf 3 • • Colombie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Friday, March 30, 2012 11:27 AM To: Ballantine, Tab A (LAW); Roby, David S (DOA); Seamount, Dan T (DOA); Norman, John K (DOA) Cc: Colombie, Jody J (DOA) Subject: RE: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Okay, Dave, just a brief statement. And bounce it off Tab. From: Ballantine, Tab A (LAW) Sent: Friday, March 30, 2012 11:26 AM To: Foerster, Catherine P (DOA); Roby, David S (DOA); Seamount, Dan T (DOA); Norman, John K (DOA) Cc: Colombie, Jody J (DOA) Subject: RE: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Agree re making extra work, but think something should presented re the status of this, maybe have Dave make a short presentation regarding where we are & whether he thinks further follow -up is warranted, then we can hear from Heinze & the Commissioners can decide on the record whether a hearing is warranted. I can look at the legal issue when I get back, but generally believe our waste determinations are "big picture" matters, not each individual component. Which is to say I think we can look at single components, but that waste determinations should not be made component by component. From: Foerster, Catherine P (DOA) Sent: Fri 3/30/2012 11:15 AM To: Roby, David S (DOA); Seamount, Dan T (DOA); Norman, John K (DOA); Ballantine, Tab A (LAW) Cc: Colombie, Jody J (DOA) Subject: RE: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Attorney / Client Communication I don't think you need to do anything at the hearing. Let's not make extra work for ourselves. Let's just set a hearing date. However, if others disagree, I can be convinced. Tab? Original Message From: Roby, David S (DOA) Sent: Friday, March 30, 2012 11:10 AM To: Foerster, Catherine P (DOA); Seamount, Dan T (DOA); Norman, John K (DOA); Ballantine, Tab A (LAW) Subject: RE: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 After the first read through of the information BP provided I didn't see any technical basis that waste was occurring. However, there is one issue that this whole saga brings to mind that I think we might need a legal opinion on, and that is whether or not our statutes and regs even allow us to look at a single component of a complex hydrocarbon stream when investigating waste issues in the first place. I know that a federal judge has ruled that helium is a "separate but commingled" constituent of natural gas so the federal helium program has to manage helium separately from natural gas (which, is really stupid in that there are a few instances where the feds have granted leases for helium extraction to a different company than the one that has the oil and gas rights. I'm still not sure anyone figured out how one company can produce their resource with out impacting the other company's resource.) However, the judge didn't say that each hydrocarbon component of the natural gas stream was a separate but commingled product. 1 As we discussed on the phone this morning think any answer other than holding a form earing on this issue will appease Harold. Well, I guess saying waste is occurring and ordering BP to sell propane to Harold's group would probably appease him. So we should should probably go ahead and schedule a hearing. Should I put a little something together to present at the public meeting next Wednesday wherein I will recimmen i that we hold a hearing? Dave Original Message From: Foerster, Catherine P (DOA) Sent: Fri 3/30/2012 8:12 AM To: Seamount, Dan T (DOA); Norman, John K (DOA); Ballantine, Tab A (LAW); Roby, David S (DOA) Subject: FW: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Attorney - Client Communication Confidential Dan and John, FYI. Tab, if you're back on Monday, can you give Harold a call? If he sends us a demand at 11:30 Thursday night, I don't think we're required to drop everything and reply first thing Friday morning. Do you agree? Dave, status? From: Harold Heinze [mailto:heinze.harold a,gmail.com] Sent: Thursday, March 29, 2012 11:22 PM To: Foerster, Catherine P (DOA) Cc: Colombie, Jody J (DOA) Subject: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Dear Commissioner Foerster In looking at my potential participation at the AOGCC public meeting next week I would appreciate a call from your Assistant AG advising me as to the potential content at the 4/4 meeting related to the AOGCC several month old investigation into my concerns on BP's (as operator for the PBU) unwillingness to make propane available from existing facilities on the North Slope and the associated "waste" of millions of barrels of propane. While recognizing that the 3 Commissioners are limited in their personal interaction because an acitive potential violation of law is before them, I believe I have some standing as a correspondent and potential "whistle blower ", and I am entitled to some progress or status report on the AOGCC activities or non - activiities on this matter through your attorney. If no information is available, I would like to have some consultation with the Attorney Generals office as to expediting petitions I might file with AOGCC on Wednesday, information requests I can make to move information you already posess into the public record, or potential Court involvement in preventing further "waste" (if it is occuring) on an injunctive basis. Please recognize that AOGCC has not offered me any explanation or infomation for several months. I am concerned that AOGCC has had significant interactions with BP operations, technical, legal and government relations personnel, and that those conversations have been held confidentially and transcripts will not be made publicly available. My understanding is that the "waste" statute provides for intervening citizen legal actions in the court if the AOGCC is not acting in a timely and/or diligent manner. It may be that some interested legislators (before adjournment) may wish to join me in parallel pursuit of the issues raised (and potential derivative legalities) in Legislative or Judicial forums or I may have to retain legal counsel to represent the interests of citizen owners in the commonwealth of Alaska. I have made available information I have publicly and I have not seen any disclosure by BP -- I provided the correspondence that BP submitted to a ranking member of the administration that obviously had asked for some explanations. There is additional information from a former ranking executive branch 2 personnel that demonstrate BP's denial of th it pane availability stretching back several years the Murkowski administration that could be documented. Promptcontact by an Assitant AG would be appreciated at 903 -3623 and/or scheduling a phone call appointment on Friday 3/30 with your attorney. Harold Heinze 3 • • Colom bie, Jody J (DOA) From: Foerster, Catherine P (DOA) Sent: Friday, March 30, 2012 10:08 AM To: Harold Heinze Cc: Seamount, Dan T (DOA); Norman, John K (DOA); Ballantine, Tab A (LAW); Colombie, Jody J (DOA) Subject: RE: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Harold, Commission staff has completed efforts to gather and evaluate information. The next logical step is to call for a hearing. p . 9 Prior to the hearing, you will be provided with our inquiry to BP and BP's response. Our AAG is currently traveling out of state. Upon his return, he will contact you. Cathy From: Harold Heinze fmailto :heinze.harold(agmail.coml Sent: Thursday, March 29, 2012 11:22 PM To: Foerster, Catherine P (DOA) Cc: Colombie, Jody J (DOA) Subject: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903- 3623 Dear Commissioner Foerster In looking at my potential participation at the AOGCC public meeting next week I would appreciate a call from your Assistant AG advising me as to the potential content at the 4/4 meeting related to the AOGCC several month old investigation into my concerns on BP's (as operator for the PBU) unwillingness to make propane available from existing facilities on the North Slope and the associated "waste" of millions of barrels of propane. While recognizing that the 3 Commissioners are limited in their personal interaction because an acitive potential violation of law is before them, I believe I have some standing as a correspondent and potential "whistle blower ", and I am entitled to some progress or status report on the AOGCC activities or non - activiities on this matter through your attorney. If no information is available, I would like to have some consultation with the Attorney Generals office as to expediting petitions I might file with AOGCC on Wednesday, information requests I can make to move information you already posess into the public record, or potential Court involvement in preventing further "waste" (if it is occuring) on an injunctive basis. Please recognize that AOGCC has not offered me any explanation or infomation for several months. I am concerned that AOGCC has had significant interactions with BP operations, technical, legal and government relations personnel, and that those conversations have been held confidentially and transcripts will not be made publicly available. My understanding is that the "waste" statute provides for intervening citizen legal actions in the court if the AOGCC is not acting in a timely and/or diligent manner. It may be that some interested legislators (before adjournment) may wish to join me in parallel pursuit of the issues raised (and potential derivative legalities) in Legislative or Judicial forums or I may have to retain legal counsel to represent the interests of citizen owners in the commonwealth of Alaska. I have made available information I have publicly and I have not seen any disclosure by BP -- I provided the correspondence that BP submitted to a ranking member of the administration that obviously had asked for some explanations. There is additional information from a former ranking executive branch personnel that demonstrate BP's denial of the propane availability stretching back several years to the Murkowski administration that could be documented. Prompt contact by an Assitant AG would be appreciated at 903 -3623 and /or scheduling a phone call appointment on Friday 3/30 with your attorney. 1 • • Harold Heinze 2 • 'Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Friday, March 30, 2012 8:46 AM To: 'Harold Heinze' Cc: Ballantine, Tab A (LAW) Subject: FW: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903 -3623 Harold, The AOGCC's Assistant Attorney General Thomas Ballantine will be contacting you next week. Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) From: Harold Heinze f mailto:heinze.harold@ gmail.coml Sent: Thursday, March 29, 2012 11:22 PM To: Foerster, Catherine P (DOA) Cc: Colombie, Jody J (DOA) Subject: preparations for next wed public meeting and potential pbu propane waste - -- I suggest an Asst AG contact me at 903- 3623 Dear Commissioner Foerster In looking at my potential participation at the AOGCC public meeting next week I would appreciate a call from your Assistant AG advising me as to the potential content at the 4/4 meeting related to the AOGCC several month old investigation into my concerns on BP's (as operator for the PBU) unwillingness to make propane available from existing facilities on the North Slope and the associated "waste" of millions of barrels of propane. While recognizing that the 3 Commissioners are limited in their personal interaction because an acitive potential violation of law is before them, I believe I have some standing as a correspondent and potential "whistle blower ", and I am entitled to some progress or status report on the AOGCC activities or non - activiities on this matter through your attorney. If no information is available, I would like to have some consultation with the Attorney Generals office as to expediting petitions I might file with AOGCC on Wednesday, information requests I can make to move information you already posess into the public record, or potential Court involvement in preventing further "waste" (if it is occuring) on an injunctive basis. Please recognize that AOGCC has not offered me any explanation or infomation for several months. I am concerned that AOGCC has had significant interactions with BP operations, technical, legal and government relations personnel, and that those conversations have been held confidentially and transcripts will not be made publicly available. My understanding is that the "waste" statute provides for intervening citizen legal actions in the court if the AOGCC is not acting in a timely and/or diligent manner. It may be that some interested legislators (before adjournment) may wish to join me in parallel pursuit of the issues raised (and potential derivative legalities) in Legislative or Judicial forums or I may have to retain legal counsel to represent the interests of citizen owners in the commonwealth of Alaska. I have made available information I have publicly and I have not seen any disclosure by BP -- I provided the correspondence 1 that BP submitted to a ranking membeif the administration that obviously had .sked for some explanations. There is additional information from a former ranking executive branch personnel that demonstrate BP's denial of the propane availability stretching back several years to the Murkowski administration that could be documented. Prompt contact by an Assitant AG would be appreciated at 903 -3623 and/or scheduling a phone call appointment on Friday 3/30 with your attorney. Harold Heinze 2 Colombie, Jody J (DOA) From: Colombie, Jody J (DOA) Sent: Monday, February 06, 2012 11:28 AM To: 'Harold Heinze' Cc: Foerster, Catherine P (DOA); Seamount, Dan T (DOA); Norman, John K (DOA) Subject: RE: follow up on BP information See below. Jody J. Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 Wes! 7th Avenue Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) From: Harold Heinze J mailto :heinze.harold(acimail.coml Sent: Monday, February 06, 2012 9:51 AM To: Colombie, Jody 3 (DOA) Cc: Mary Ann Pease Subject: follow up on BP information Dear Jody Please express my appreciation to the Commissioners for allowing me last Wednesday to publicly share my thoughts on Prudhoe Bay propane recovery opportunity I also wish to express my appreciation to you personally for your efforts to get the meeting setup working for me I note that the AOGCC information request sent to BP (as PBU operator) provided a Feb 3 submital deadline Has BP partially or fully responded ? ?? BPXA has not yet responded. According to the UPS website they did not receive the AOGCC letter until 2 /4/12 (which was a Saturday). BP's response is due today (2/6/12). Can you make the BP response available to me ? ? ?? The AOGCC will not be able to make their response public as this is a ongoing investigation. Of course you can always request a copy from BPXA. Harold Heinze i • • Colombie, Jody J (DOA) From: Roby, David S (DOA) Sent: Thursday, February 02, 2012 7:57 PM To: Colombie, Jody J (DOA) Subject: Re: Propane Inquiry Thanks On Feb 2, 2012, at 5:36 PM, "Colombie, Jody J (DOA)" <jody.colombie@alaska.gov> wrote: Yes I agree Sent from my iPhone On Feb 2, 2012, at 4:59 PM, "Roby, David S (DOA)" <dave.roby@alaska.gov> wrote: Jody, I just got a Call from Emeka Emembolu with BP regarding theft response to the propane inquiry letter we sent and when the response is due. They had been targeting Monday for the day that they would submit it, but apparently at the monthly meeting yesterday someone said the response was due tomorrow. In the letter we sent, which was dated January 3 we gave them 30 days from receipt to respond. Mr. Emembolu said the received the letter on January 8 which if I am counting correctly would give them until February 8 to submit the response. However, according to the USPS website (see attached) the letter was delivered on the 4 of January, which I think would give them until the 6 to respond since the 4 is a weekend. Do you agree? Thanks, Dave Roby Reservoir Engineer Alaska Oil and Gas Conservation Commission (907)793 -1232 <TrackConfirmAction.pdfl 1 45 b p • • .. r ___. _____ Emeka Emembolu Manager, Base Management {{ / BP Exploration (Alaska) Inc. P7 900 East Benson Boulevard P.O. Box 196612 �' Anchorage, Alaska 99519 -6612 Fat o $k 0!i Main 907 564 5111 February 6, 2012 f ans.cmm ission Anchorage Mr. Daniel T Seamount, Jr Chair, Commissioner Alaska Oil and Gas Conservation Commission 333 W. 7 Avenue, Suite 100 Anchorage, AK 99501 -3539 RE: Request for information regarding potential waste of propane at the Prudhoe Bay Unit Dear Commissioner Seamount, Further to your letter dated January 3, 2012, BP Exploration (Alaska), Inc. ( "BP "), as operator of the Prudhoe Bay Unit ( "PBU "), is pleased to provide the attached response. Our response details facts that will come as no surprise to the AOGCC given the role it plays in oversight of our operations. For over thirty years, the PBU working interest owners have worked with the AOGCC to successfully develop and operate the PBU. Our Enhanced Oil Recovery ( "EOR ") programs — in which propane plays a critical role — have helped push cumulative PBU production well beyond the ultimate recovery that was predicted when the field began operations in the 1970's. Under approved plans of development, the PBU working interest owners have made significant investments in the PBU processing facilities to maximize the economic recovery and efficient use of propane. Our primary use for propane is as a key component of our Miscible Injection (MI) EOR process. The Prudhoe Bay MI process has been widely demonstrated across industry as one of the most effective means of increasing oil recovery from the Prudhoe Bay waterfloods. Given the significant and proven value of propane as a vital component of our approved EOR programs, the State of Alaska and the PBU owners share a common interest in seeing propane used efficiently for these purposes. Propane is also a component of Natural Gas Liquids ( "NGL "). BP extracts and blends NGLs with oil that is shipped down the Trans - Alaska Pipeline Systems ( "TAPS "). The quantity that can be blended is defined by the TAPS vapor pressure limit. Some NGLs are also shipped to other North Slope fields for use in their EOR programs. Small quantities of propane are occasionally used to top -off the inventory in the propane refrigeration system. The remnant propane in the residue gas stream that PBU facilities cannot extract is re- injected into the Prudhoe Bay gas cap for reservoir pressure support and future recovery. In summary, the PBU does not waste propane. Propane and other components of our produced gas are used to increase oil production at Prudhoe Bay. We trust that this response provides AOGCC with answers to the questions posed by its inquiry. Please contact us if you have any further questions. Yours Sincerely, - 1filYttlfit - ji _—_ Emeka Emembolu 1 Enclosure: Detailed technical response to the AOGCC request for infcirmation p q cc: Mr. Dave Roby (AOGCC); Mr. Mark Agnew (ExxonMobil); Mr. Steve Arbelovsky (ConocoPhiillips); Mr. Phil Ayers (Chevron) 2 Attachment • Response to the AOGCC's Request for Information in January 3, 2012 Inquiry Letter AOGCC Request #1 A brief description of the natural gas liquids extraction facilities, distribution, uses, and processes at Prudhoe Bay Response: The gas that feeds the Central Gas Facility (CGF) is the produced dry gas that is separated from well production at Prudhoe Bay's three Flow Stations (FS) and three Gathering Centers (GC). Gas from the FS /GC's is dehydrated (to -0.2 lbs. water per mmscfd), but has a relatively high hydrocarbon dew point (- 75 - 80° F at 650 psig). The feed to CGF is delivered from the FS /GC's via the gas transit pipeline system. Under normal operation, the CGF feed represents all the gas processed by the FS /GC's except that which is used as local fuel gas by some individual FS /GC's and the gas which is used for gas lift (gas lift is derived from gas lift compressors that are located at GC -1 and FS -3). Figure 1 shows a simplified CGF process diagram which will assist in understanding the plant and processing description that follows. After passing through inlet separators, the plant feed is compressed from about 560 psig to 710 psig by booster compressors (three parallel trains). The gas is then cooled with air in booster aftercoolers from 100° F to 140° F down to an average of about 70° F. From the booster aftercoolers, the gas is sent to the Low Temperature Separation (LTS) trains to be cooled to about -35 to -40° F by a series of cross exchangers and chillers, and then enters the LTS trains for separation of condensed liquid. The exact LTS feed temperature varies with rate and operating conditions, however ambient temperature has the largest impact on refrigeration capability. There are three parallel LTS units at CGF. The LTS chillers utilize a circulating closed loop of propane to provide the refrigeration required to reach final LTS process temperature. The propane refrigeration system is described in further detail below. The LTS is a large vertical tower, the primary purpose of which is to separate the condensed liquids from the gas that exits the chillers. The LTS has six trays and a reboiler, which serve as one of the main means of controlling the Miscible Injectant (MI) composition so as to meet miscibility criteria for use in the Prudhoe Bay FOR scheme. In LTS, the cold gas liquids that are separated from the gas on the LTS top tray are warmed sufficiently as the fluid flows down the column so as to control the methane content (and to a lesser degree other light ends) in the MI product composition. The bottom liquids flow from all three LTS units and are fed into two parallel stabilizer trains (fractionators) that produce NGL as a "bottoms" product and MI as an "overhead" product. What remains is termed Residue Gas. The vast majority of the LTS residue gas is routed via various gas complex pipelines to gas injection compressors located at CCP and CGF for injection into the thirty -two Prudhoe Bay Unit gas cap wells. This gas cap injection is required to maintain reservoir pressure and consequently improve oil production. A slip stream of the LTS -3 residue gas is supplied to Northstar. Additionally a slip stream (average 400 mmscfd) of the LTS -1 & LTS -2 residue gas is used to provide Prudhoe Field Fuel Gas. 3 • The LTS bottoms liquids are divided into approximately equal feed streams via the two parallel stabilizer trains that fractionate the feed stream into the final NGL and MI products. Each stabilizer column contains twenty four stainless -steel valve trays and a reboiler as well as feed /bottom exchangers and feed pre- heaters. Overhead vapors are partially condensed in air - cooled condensers and collected in a common reflux drum. Liquids from the overhead drum are pumped back to each stabilizer as reflux for cooling, and are run as high as permitted for sharpest and most efficient component separation (high ambient temperature limits reflux rate to less than optimum level). The reflux drum overhead vapor (MI product) is routed to MI compressors. The CGF MI compressors increase the MI stream from about 300 psig to about 3700 psig prior to discharge into the Prudhoe MI pipeline distribution system for routing to injection wells operating on an alternating water /gas EOR cycle. The MI is then distributed among PBU injection wells in accordance with AOGCC pool rules and area injection orders. After cross exchange with the column feed, the cooled NGL product is pumped at 350 psig and 90° F about 10 miles via a 10" pipeline to Skid 50 (adjacent to Pump Station 1). A portion of the NGLs are shipped to the Kuparuk River Unit (KRU) for use within that unit's EOR program. The remaining NGLs are then mixed with oil produced at the FS /GC's and shipped to Pump Station 1 (PS -1) for export via the Trans Alaska Pipeline System. Adjustment of the stabilizers' temperature control tray is varied to create a composition of NGL that after blending with the FS /GC total crude oil produces a mixture that is as close as operationally prudent to the maximum allowable vapor pressure control point at the inlet to PS1 (i.e. 14.2 psia TVP at stream temperature, 105° F minimum). The LTS trains chillers are supplied propane as a cooling medium by a closed loop refrigeration system. There are two refrigeration compressors that share a common set of high pressure and low pressure economizers, propane condensers (air cooled) and a common surge drum. The two refrigeration compressors are three -stage units driven by large gas turbines. A simplified process flow sketch of the propane system is shown in Figure 2. The propane refrigerant enters the chillers on the shell side while the process gas stream flows on the tube side. Refrigeration is provided as propane boils at the pressure that is maintained on the chiller shell side by the controls of the refrigeration compressor. Generally, the pressure on the propane side of the chillers is maintained 1 to 2 psi below atmospheric pressure at which point propane will vaporize at associated temperatures of -45 to -50° F. The refrigeration compressors increase the gaseous propane to between 150 to 200 psig (depending on the ambient temperature) and the air cooled condensers cause the pressurized propane gas to condense. The liquid propane from the condensers then is routed through the two stage economizer drums and the cooling of propane begins as pressure is lowered in each stage. From the low pressure economizer, the liquid propane then flows to the LTS chillers and the cycle repeats. The propane system also contains separate light ends and heavy ends removal units. These are not shown in the diagram. They are used to remove light ends (ethane, 02 and N2) and heavy ends (primarily seal oil) that slowly accumulate in the circulating propane over time. These units are run intermittently and process small slipstreams of the main propane flow to control contamination. The CGF was designed to produce its own propane makeup. The makeup propane is required to replace propane that is removed from the closed system when the light ends and heavy ends removal units are operated and /or when depressurization in all or parts of the refrigeration system is required to allow maintenance to be performed. This section of the plant takes a small slipstream of NGL stabilizer reflux as feed and fractionates the stream into two columns to produce high purity propane suitable for refrigeration system re- charging. Figure 3 shows a simplified process diagram of the CGF propane manufacturing system. The first column is a de- ethanizer tower that removes essentially all the ethane and lighter components from the feed stream. The de- ethanizer bottoms then feed a de- propanizer that produces high purity (98.5+ %) propane as liquid overhead product, while rejecting most of the butane -plus to the tower bottom product. The propane manufacturing unit is run intermittently in because demand for makeup propane is normally very low. CGF contains a 140,000 gallon liquid 4 • propane storage tank whic is normally maintained at or near full to ensure a supply of propane is available to the plant on short notice. 5 AOGCC Request #2 • • The average volume and composition of gas /natural gas liquids streams: a. Entering the Central Gas Facility, b. Distributed for enriched hydrocarbon gas enhanced recovery processes on the North Slope, c. Blended with crude oil and sold through the Trans Alaska Pipeline System, d. Distributed gas lift or dry gas pressure maintenance injection purposes, and e. Any other uses for natural gas liquids /propane not identified above. Response: a. The feed rate of gas streams entering CGF in 2011 was 6,838 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: Feed Gas Composition (Mol %) Component Average Typical Range CO2 12.3 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 77.8 77.5 - 78.5 Ethane 5.77 5.6 - 6.0 Propane 2.45 2.3 - 2.6 iso- Butane 0.21 0.1 - 0.3 n Butane 0.41 0.3 - 0.5 iso Pentane 0.10 0.1 - 0.15 n Pentane 0.12 0.1 - 0.15 C6+ 0.29 0.2 - 0.4 b. The Miscible Injectant (MI) produced from CGF in 2011 was 210 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: 6 • MI Composition (Mol %) Component Average Typical Range CO2 21.4 20 - 22 N2 0.1 0.1 - 0.2 Methane 30.0 30 - 34 Ethane 21.7 19 - 22 Propane 25.7 23 - 26 iso- Butane 0.7 0.5 -1.5 n Butane 0.4 0.3 -1.2 iso Pentane <0.1 0 - 0.2 n Pentane <0.1 0 - 0.2 C6+ <0.1 0 - 0.1 c. The NGL produced from CGF and blended and sold through TAPS averaged 28.4 mbpd in 2011 on an annualized daily basis. NGL composition blended and sold through TAPS is as follows: NGL Composition (Mol %) Component Average Typical Range CO2 0 < 0.01 Methane 0 < 0.01 Ethane < 0.01 0 - 0.1 Propane 1.6 0.4 - 3 iso- Butane 12.9 9 -15 n Butane 32.2 29 -35 iso Pentane 9.4 9 -11 n Pentane 12.9 12 -15 C6+ 31.0 28 -35 d. CGF does not provide the field any gas used for gas lift purposes. Rather within the PBU, gas lift is provided from compressors located at Gathering Center 1 and Flow Station 3. The source of this gas lift is FS /GC produced gas. In 2011, the annualized daily average gas lift provided from FS3 was 291 mmscfd and that provided from GC1 was 423 mmscfd. Gas lift composition falls within the normal operating range indicated above for CGF feed gas. 7 The CGF residu�as that is injected back into the Prudhoe�y Field gas cap wells on an annualized average daily basis was 6,134 mmscfd. Typical average residue gas composition ranges during normal operation are as follows: Residue Gas Composition (Mol %) Component Average Typical Range CO2 12.0 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 80.1 79.5 - 80.5 Ethane 5.35 5.3 - 5.5 Propane 1.65 1.6 -1.8 iso- Butane 0.08 0.06 - 0.12 n Butane 0.13 0.1 - 0.15 iso Pentane 0.02 0.01 - 0.03 n Pentane 0.02 0.01 - 0.02 C6+ 0.02 0.01 - 0.04 e. CGF also produces NGLs transported via the Oliktok Pipeline to the KRU. The annualized average daily rate in 2011 was 17.1 mbpd. The NGL composition on an average basis for 2011 would be essentially identical to that shown in the table under part "c" above and certainly within the typical ranges as listed there. As necessary, NGL is diverted to FS1 and /or FS3. NGL divert normally occurs during periods of time when there is an operational upset or a reduction /curtailment of NGL flow into Skid 50. In 2011 diversion to FS1 of between 2 to 5 mbpd of NGL occurred commonly (same average composition as described above) to help mitigate effects of the increasingly lean gas that is entering that facility. The NGL diverted to FS1 was necessary to reduce the discharge temperature of the Intermediate Pressure (IP) compressor. As gas handled by the IP compressor has leaned out, the IP compressor discharge temperature has begun to approach the maximum acceptable. By injecting some NGL into the slug catcher a lower discharge temperature is achieved. The NGL that does not vaporize during this process remains in the oil that flows to PS -1. NGL diversion has been used successfully at both FS1 and FS3 in recent years and has avoided a need to reduce production rates and /or FS shutdowns particularly in warm weather. A compressor modification was made a year ago at FS3 which has eliminated IP compressor overheating at FS3. Enhancements are being evaluated for FS1 that could also mitigate the affects of leaner gas at FS1. Some of the CGF residue gas (which contains propane) is used for PBU Fuel Gas with a typical operating rate of about 380 to 400 mmscfd. Additionally, between 40 to 60 mmscfd of CGF residue gas is shipped to the Northstar facility for use as fuel gas or reservoir management as required. The composition is similar to that which is described under part "d ". As mentioned above in response to AOGCC's Request number 1, CGF does make its own high purity propane which - it requires to re- inventory the propane refrigeration system loop. The makeup propane is required infrequently (normally, the small "propane 8 • • • manufacturing" is only operated 2 - 3 days per month). Recharge rates will vary, but on an annualized annual daily basis, an estimate is that about 25 barrels /day are used. The composition of the propane makeup is typically 98.5% propane with the remainder being split between ethane and iso- butane. All compositional data quoted in the above tables were derived from lab sample analysis. AOGCC Request #3 Discussion on the limitations, if any, that affect the amount of natural gas liquids that could be sent to enriched hydrocarbon injection processes and /or pipeline sales. Response: The CGF recovers as much liquid in the LTS units from its feed as is operationally and safely possible given the operating conditions of the time. Major factors that lead to the fluctuation in MI and NGL rates are ambient temperature, upstream production facility operational issues which affect feed gas rate and composition, and local (CGF) equipment limitations at any given time. This response focuses on fundamental system limitations. Feed gas compositions have continued to lean out through time and this been a major driving force behind declines in both MI and NGL rates through the years. Assuming a given feed rate, composition and ambient temperature, the amount of gas liquids condensed and recovered at CGF (including propane) is primarily a function of the feed gas temperature to the Low Temperature Separators. The LTS temperature limitation is a function of the design and capacity of the refrigeration system, the propane chillers' design and metallurgical temperature limits of the LTS and refrigeration equipment. First, the propane refrigeration system has a compressor power limitation that sets a maximum amount of refrigeration that can be achieved at any given ambient temperature. As ambient temperature increases, the refrigeration system heat removal capacity decreases rapidly. Secondly, there are lower temperature limitations both in the LTS vessels and refrigeration system (both have lower limits of -50° F). The LTS chillers operate with a heat transfer rate that under normal conditions results in an outlet process temperature that is generally within about an 8 to 10° F approach to propane refrigerant temperature. This is why LTS feed temperatures lower than -40 to -42° F can seldom be achieved even under winter conditions. In practice, the third LTS train, which has a slightly different design from the other two trains can seldom achieve lower than -38° F. Normally, the average annual LTS temperature is typically in the -35° F range due to seasonal effects. Greater recovery of liquids from the same quantity of feed gas would require the LTS and associated refrigeration equipment to go to colder temperatures than is possible with the current plant equipment. It is important to understand that all the recovered LTS bottoms liquids are then fractionated into either NGL or MI in the CGF Stabilizer columns. The CGF is operated to maximize NGL production and recovery. LTS bottoms liquids that are not produced as NGL are what is left over to make up the Prudhoe MI stream. With everything else held constant making more NGL will only be produced at the expense of lowered amounts of MI and vice versa. Some of the NGL is blended with oil produced from the PBU and is sold as liquid hydrocarbon via TAPS. The composition of NGL to be blended with oil is limited by vapor pressure constraints for the combined NGL and oil stream that is sold via TAPS (14.2 psia at stream temperature). Some of the NGL is provided to other unit owners for use as a component of MI to enhance oil recovery from Alaska North Slope oil reservoirs that are not within the PBU. This increases the overall NGL volume produced by the CGF. This is possible because CGF is able to adjust NGL composition by lowering stabilizer operating temperatures to allow a more volatile (higher in butane and propane) mix to provide the volume that can be added to TAPS to make up for a portion of the flow that was sent to KRU. Since the additional barrels produced are more volatile, 9 less volume can be add• TAPS as "back blended" barrels than willngmally sent to KRU before the TAPS oil /NGL mix is back to the 14.2 psia vapor pressure limit. The added NGL volumes in this case are at the expense PBU of MI production as that is where the additional butane and propane components are derived. In summary, with the existing plant, the given gas feed rates, compositions, and a given LTS refrigeration limitation, the amount of liquids that can be recovered is fixed. NGL production is limited by TAPS liquid export vapor pressure specifications. If the quantity of NGL produced by the CGF increases (as is the case of export to KRU for use in MI), this can only be done at the expense of decreasing the quantity of MI produced for use at Prudhoe Bay. This reduction in volumes is so because the additional NGL barrels are derived from propane and butane that would have formerly remained in the Prudhoe Bay MI stream. The Prudhoe Bay available MI volume decreases more than the volume of the material directly removed to add the additional NGLs. This is because the proportions of propane and butane have a large impact on making the MI mixture miscible. As the Prudhoe Bay MI stream's propane and butane content drops, some of the methane in the resultant MI must be removed (by raising the LTS bottoms temperature) to bring the MI minimum miscibility pressure (MMP) back to the target 3100 psia. This is also true for the existing plant if propane were to be drawn out of the system as a separate sales stream. 10 Figure 1 Simplified CGF Process Plant Diagram To Injection Compressors Miscible Injectant 1 — to Compression To Field Fuel • Gas System Residue Gas 4 Stabilizer • condensers ir , 1 Stabilizer To Refrigeration Overhead Compressors (2 trains) Drum GGX LTS ""--4‘ Aft Low Temperature Separators Reflux i ■ Gas From (3 trains) To Propane FS /GC's Manufacturing Propane _--- ._. (when in use) Refrigeration NGL Stabilizers '-4 ir Feed Pre- (2 trains) Heaters OV .............. Air Reboiler Booster Compression • (3 trains) r IGLX 1111. Reboiler FBX M NGL Product 11 Figure 2 CGF Propane Refrigeration System Simplified Process Diagram Air Gas Turbine & Propane Compressor (2 parallel trains) Condensers Surge Drum 1st. 2nd. 3rd. I) • • • • LP HP Suction Economizer Economizer Scrubber �— • Process Process Gas Gas to LTS LTS Chillers (four) LTS 1 & 2 - one each LTS 3 - two 12 by • • Emeka Emembolu • Manager, Base Management BP Exploration (Alaska) Inc. RECEI 900 East Benson Boulevard `� ® An o Alaska 99519 -6612 Main 907 564 5111 FEB 0 7 2012 February 6, 2012 YC - - Alaska Oil & Gas Cons. Commission Mr. Daniel T Seamount, Jr Anchorage Chair, Commissioner -- Alaska Oil and Gas Conservation Commission 333 W. 7 Avenue, Suite 100 Anchorage, AK 99501 -3539 RE: Request for information regarding potential waste of propane at the Prudhoe Bav Unit Dear Commissioner Seamount, Further to your letter dated January 3, 2012, BP Exploration (Alaska), Inc. ( "BP "), as operator of the Prudhoe Bay Unit ( "PBU "), is pleased to provide the attached response. Our response details facts that will come as no surprise to the AOGCC given the role it plays in oversight of our operations. For over thirty years, the PBU working interest owners have worked with the AOGCC to successfully develop and operate the PBU. Our Enhanced Oil Recovery ( "EOR ") programs — in which propane plays a critical role — have helped push cumulative PBU production well beyond the ultimate recovery that was predicted when the field began operations in the 1970's. Under approved plans of development, the PBU working interest owners have made significant investments in the PBU processing facilities to maximize the economic recovery and efficient use of propane. Our primary use for propane is as a key component of our Miscible Injection (MI) EOR process. The Prudhoe Bay MI process has been widely demonstrated across industry as one of the most effective means of increasing oil recovery from the Prudhoe Bay waterfloods. Given the significant and proven value of propane as a vital component of our approved EOR programs, the State of Alaska and the PBU owners share a common interest in seeing propane used efficiently for these purposes. Propane is also a component of Natural Gas Liquids ( "NGL "). BP extracts and blends NGLs with oil that is shipped down the Trans - Alaska Pipeline Systems ( "TAPS "). The quantity that can be blended is defined by the TAPS vapor pressure limit. Some NGLs are also shipped to other North Slope fields for use in their EOR programs. Small quantities of propane are occasionally used to top -off the inventory in the propane refrigeration system. The remnant propane in the residue gas stream that PBU facilities cannot extract is re- injected into the Prudhoe Bay gas cap for reservoir pressure support and future recovery. In summary, the PBU does not waste propane. Propane and other components of our produced gas are used to increase oil production at Prudhoe Bay. We trust that this response provides AOGCC with answers to the questions posed by its inquiry. Please contact us if you have any further questions. Yours Sincerely, pr. - T " if 'Will` - Eureka Emembolu 1 • • Enclosure: Detailed technical response to the AOGCC request for information cc: Mr. Dave Roby (AOGCC); Mr. Mark Agnew (ExxonMobil); Mr. Steve Arbelovsky (ConocoPhiillips); Mr. Phil Ayers (Chevron) 2 • • Attachment Response to the AOGCC's Request for Information in January 3, 2012 Inquiry Letter AOGCC Request #1 A brief description of the natural gas liquids extraction facilities, distribution, uses, and processes at Prudhoe Bay Response: The gas that feeds the Central Gas Facility (CGF) is the produced dry gas that is separated from well production at Prudhoe Bay's three Flow Stations (FS) and three Gathering Centers (GC). Gas from the FS /GC's is dehydrated (to -0.2 lbs. water per mmscfd), but has a relatively high hydrocarbon dew point (- 75 - 80° F at 650 psig). The feed to CGF is delivered from the FS /GC's via the gas transit pipeline system. Under normal operation, the CGF feed represents all the gas processed by the FS /GC's except that which is used as local fuel gas by some individual FS /GC's and the gas which is used for gas lift (gas lift is derived from gas lift compressors that are located at GC -1 and FS -3). Figure 1 shows a simplified CGF process diagram which will assist in understanding the plant and processing description that follows. After passing through inlet separators, the plant feed is compressed from about 560 psig to 710 psig by booster compressors (three parallel trains). The gas is then cooled with air in booster aftercoolers from 100° F to 140° F down to an average of about 70° F. From the booster aftercoolers, the gas is sent to the Low Temperature Separation (LTS) trains to be cooled to about -35 to -40° F by a series of cross exchangers and chillers, and then enters the LTS trains for separation of condensed liquid. The exact LTS feed temperature varies with rate and operating conditions, however ambient temperature has the largest impact on refrigeration capability. There are three parallel LTS units at CGF. The LTS chillers utilize a circulating closed loop of propane to provide the refrigeration required to reach final LTS process temperature. The propane refrigeration system is described in further detail below. The LTS is a large vertical tower, the primary purpose of which is to separate the condensed liquids from the gas that exits the chillers. The LTS has six trays and a reboiler, which serve as one of the main means of controlling the Miscible lnjectant (MI) composition so as to meet miscibility criteria for use in the Prudhoe Bay FOR scheme. In LTS, the cold gas liquids that are separated from the gas on the LTS top tray are warmed sufficiently as the fluid flows down the column so as to control the methane content (and to a lesser degree other light ends) in the MI product composition. The bottom liquids flow from all three LTS units and are fed into two parallel stabilizer trains (fractionators) that produce NGL as a "bottoms" product and MI as an "overhead" product. What remains is termed Residue Gas. The vast majority of the LTS residue gas is routed via various gas complex pipelines to gas injection compressors located at CCP and CGF for injection into the thirty -two Prudhoe Bay Unit gas cap wells. This gas cap injection is required to maintain reservoir pressure and consequently improve oil production. A slip stream of the LTS -3 residue gas is supplied to Northstar. Additionally a slip stream (average 400 mmscfd) of the LTS -1 & LTS -2 residue gas is used to provide Prudhoe Field Fuel Gas. 3 • • The LTS bottoms liquids are divided into approximately equal feed streams via the two parallel stabilizer trains that fractionate the feed stream into the final NGL and MI products. Each stabilizer column contains twenty four stainless -steel valve trays and a reboiler as well as feed /bottom exchangers and feed pre- heaters. Overhead vapors are partially condensed in air - cooled condensers and collected in a common reflux drum. Liquids from the overhead drum are pumped back to each stabilizer as reflux for cooling, and are run as high as permitted for sharpest and most efficient component separation (high ambient temperature limits reflux rate to less than optimum level). The reflux drum overhead vapor (MI product) is routed to MI compressors. The CGF MI compressors increase the MI stream from about 300 psig to about 3700 psig prior to discharge into the Prudhoe MI pipeline distribution system for routing to injection wells operating on an alternating water /gas EOR cycle. The MI is then distributed among PBU injection wells in accordance with AOGCC pool rules and area injection orders. After cross exchange with the column feed, the cooled NGL product is pumped at 350 psig and 90° F about 10 miles via a 10" pipeline to Skid 50 (adjacent to Pump Station 1). A portion of the NGLs are shipped to the Kuparuk River Unit (KRU) for use within that unit's EOR program. The remaining NGLs are then mixed with oil produced at the FS /GC's and shipped to Pump Station 1 (PS -1) for export via the Trans Alaska Pipeline System. Adjustment of the stabilizers' temperature control tray is varied to create a composition of NGL that after blending with the FS /GC total crude oil produces a mixture that is as close as operationally prudent to the maximum allowable vapor pressure control point at the inlet to PS1 (i.e. 14.2 psia TVP at stream temperature, 105° F minimum). The LTS trains chillers are supplied propane as a cooling medium by a closed loop refrigeration system. There are two refrigeration compressors that share a common set of high pressure and low pressure economizers, propane condensers (air cooled) and a common surge drum. The two refrigeration compressors are three -stage units driven by large gas turbines. A simplified process flow sketch of the propane system is shown in Figure 2. The propane refrigerant enters the chillers on the shell side while the process gas stream flows on the tube side. Refrigeration is provided as propane boils at the pressure that is maintained on the chiller shell side by the controls of the refrigeration compressor. Generally, the pressure on the propane side of the chillers is maintained 1 to 2 psi below atmospheric pressure at which point propane will vaporize at associated temperatures of -45 to -50° F. The refrigeration compressors increase the gaseous propane to between 150 to 200 psig (depending on the ambient temperature) and the air cooled condensers cause the pressurized propane gas to condense. The liquid propane from the condensers then is routed through the two stage economizer drums and the cooling of propane begins as pressure is lowered in each stage. From the low pressure economizer, the liquid propane then flows to the LTS chillers and the cycle repeats. The propane system also contains separate light ends and heavy ends removal units. These are not shown in the diagram. They are used to remove light ends (ethane, 02 and N2) and heavy ends (primarily seal oil) that slowly accumulate in the circulating propane over time. These units are run intermittently and process small slipstreams of the main propane flow to control contamination. The CGF was designed to produce its own propane makeup. The makeup propane is required to replace propane that is removed from the closed system when the light ends and heavy ends removal units are operated and /or when depressurization in all or parts of the refrigeration system is required to allow maintenance to be performed. This section of the plant takes a small slipstream of NGL stabilizer reflux as feed and fractionates the stream into two columns to produce high purity propane suitable for refrigeration system re- charging. Figure 3 shows a simplified process diagram of the CGF propane manufacturing system. The first column is a de- ethanizer tower that removes essentially all the ethane and lighter components from the feed stream. The de- ethanizer bottoms then feed a de- propanizer that produces high purity (98.5+ %) propane as liquid overhead product, while rejecting most of the butane -plus to the tower bottom product. The propane manufacturing unit is run intermittently in because demand for makeup propane is normally very low. CGF contains a 140,000 gallon liquid 4 • • propane storage tank which is normally maintained at or near full to ensure a supply of propane is available to the plant on short notice. 5 • . AOGCC Request #2 The average volume and composition of gas /natural gas liquids streams: a. Entering the Central Gas Facility, b. Distributed for enriched hydrocarbon gas enhanced recovery processes on the North Slope, c. Blended with crude oil and sold through the Trans Alaska Pipeline System, d. Distributed gas lift or dry gas pressure maintenance injection purposes, and e. Any other uses for natural gas liquids /propane not identified above. Response: a. The feed rate of gas streams entering CGF in 2011 was 6,838 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: Feed Gas Composition (Mol %) Component Average Typical Range CO2 12.3 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 77.8 77.5 - 78.5 Ethane 5.77 5.6 - 6.0 Propane 2.45 2.3 - 2.6 iso- Butane 0.21 0.1 - 0.3 n Butane 0.41 0.3 - 0.5 iso Pentane 0.10 0.1 - 0.15 n Pentane 0.12 0.1 - 0.15 C6+ 0.29 0.2 - 0.4 b. The Miscible Injectant (MI) produced from CGF in 2011 was 210 mmscfd on an average annualized daily basis. Typical average gas composition ranges during normal operation are as follows: 6 • 0 MI Composition (Mol %) Component Average Typical Range CO2 21.4 20 - 22 N2 0.1 0.1 - 0.2 Methane 30.0 30 - 34 Ethane 21.7 19 - 22 Propane 25.7 23 - 26 iso- Butane 0.7 0.5 -1.5 n Butane 0.4 0.3 -1.2 iso Pentane <0.1 0 - 0.2 n Pentane <0.1 0 - 0.2 C6+ <0.1 0 - 0.1 c. The NGL produced from CGF and blended and sold through TAPS averaged 28.4 mbpd in 2011 on an annualized daily basis. NGL composition blended and sold through TAPS is as follows: NGL Composition (Mol %) Component Average Typical Range CO2 0 < 0.01 Methane 0 < 0.01 Ethane < 0.01 0 - 0.1 Propane 1.6 0.4 - 3 iso- Butane 12.9 9 -15 n Butane 32.2 29 -35 iso Pentane 9.4 9 -11 n Pentane 12.9 12 -15 C6+ 31.0 28 -35 d. CGF does not provide the field any gas used for gas lift purposes. Rather within the PBU, gas lift is provided from compressors located at Gathering Center 1 and Flow Station 3. The source of this gas lift is FS /GC produced gas. In 2011, the annualized daily average gas lift provided from FS3 was 291 mmscfd and that provided from GC1 was 423 mmscfd. Gas lift composition falls within the normal operating range indicated above for CGF feed gas. 7 The CGF residue gas that is injected back into the Prudhoe Field gas cap wells on an annualized average daily basis was 6,134 mmscfd. Typical average residue gas composition ranges during normal operation are as follows: Residue Gas Composition (Mal %) Component Average Typical Range CO2 12.0 11.8 -12.5 N2 0.6 .58 - 0.62 Methane 80.1 79.5 - 80.5 Ethane 5.35 5.3 - 5.5 Propane 1.65 1.6 -1.8 iso- Butane 0.08 0.06 - 0.12 n Butane 0.13 0.1 - 0.15 iso Pentane 0.02 0.01 - 0.03 n Pentane 0.02 0.01 - 0.02 C6+ 0.02 0.01 - 0.04 e. CGF also produces NGLs transported via the Oliktok Pipeline to the KRU. The annualized average daily rate in 2011 was 17.1 mbpd. The NGL composition on an average basis for 2011 would be essentially identical to that shown in the table under part "c" above and certainly within the typical ranges as listed there. As necessary, NGL is diverted to FS1 and /or FS3. NGL divert normally occurs during periods of time when there is an operational upset or a reduction /curtailment of NGL flow into Skid 50. In 2011 diversion to FS1 of between 2 to 5 mbpd of NGL occurred commonly (same average composition as described above) to help mitigate effects of the increasingly lean gas that is entering that facility. The NGL diverted to FS1 was necessary to reduce the discharge temperature of the Intermediate Pressure (IP) compressor. As gas handled by the IP compressor has leaned out, the IP compressor discharge temperature has begun to approach the maximum acceptable. By injecting some NGL into the slug catcher a lower discharge temperature is achieved. The NGL that does not vaporize during this process remains in the oil that flows to PS -1. NGL diversion has been used successfully at both FS1 and FS3 in recent years and has avoided a need to reduce production rates and /or FS shutdowns particularly in warm weather. A compressor modification was made a year ago at FS3 which has eliminated IP compressor overheating at FS3. Enhancements are being evaluated for FS1 that could also mitigate the affects of leaner gas at FS1. Some of the CGF residue gas (which contains propane) is used for PBU Fuel Gas with a typical operating rate of about 380 to 400 mmscfd. Additionally, between 40 to 60 mmscfd of CGF residue gas is shipped to the Northstar facility for use as fuel gas or reservoir management as required. The composition is similar to that which is described under part "d ". As mentioned above in response to AOGCC's Request number 1, CGF does make its own high purity propane which it requires to re- inventory the propane refrigeration system loop. The makeup propane is required infrequently (normally, the small "propane 8 • manufacturing" is only operated 2 - 3 days per month). Recharge rates will vary, but on an annualized annual daily basis, an estimate is that about 25 barrels /day are used. The composition of the propane makeup is typically 98.5% propane with the remainder being split between ethane and iso- butane. All compositional data quoted in the above tables were derived from lab sample analysis. AOGCC Request #3 Discussion on the limitations, if any, that affect the amount of natural gas liquids that could be sent to enriched hydrocarbon injection processes and /or pipeline sales. Response: The CGF recovers as much liquid in the LTS units from its feed as is operationally and safely possible given the operating conditions of the time. Major factors that lead to the fluctuation in MI and NGL rates are ambient temperature, upstream production facility operational issues which affect feed gas rate and composition, and local (CGF) equipment limitations at any given time. This response focuses on fundamental system limitations. Feed gas compositions have continued to lean out through time and this been a major driving force behind declines in both MI and NGL rates through the years. Assuming a given feed rate, composition and ambient temperature, the amount of gas liquids condensed and recovered at CGF (including propane) is primarily a function of the feed gas temperature to the Low Temperature Separators. The LTS temperature limitation is a function of the design and capacity of the refrigeration system, the propane chillers' design and metallurgical temperature limits of the LTS and refrigeration equipment. First, the propane refrigeration system has a compressor power limitation that sets a maximum amount of refrigeration that can be achieved at any given ambient temperature. As ambient temperature increases, the refrigeration system heat removal capacity decreases rapidly. Secondly, there are lower temperature limitations both in the LTS vessels and refrigeration system (both have lower limits of -50° F). The LTS chillers operate with a heat transfer rate that under normal conditions results in an outlet process temperature that is generally within about an 8 to 10° F approach to propane refrigerant temperature. This is why LTS feed temperatures lower than -40 to -42° F can seldom be achieved even under winter conditions. In practice, the third LTS train, which has a slightly different design from the other two trains can seldom achieve lower than -38° F. Normally, the average annual LTS temperature is typically in the -35° F range due to seasonal effects. Greater recovery of liquids from the same quantity of feed gas would require the LTS and associated refrigeration equipment to go to colder temperatures than is possible with the current plant equ ipment. It is important to understand that all the recovered LTS bottoms liquids are then fractionated into either NGL or MI in the CGF Stabilizer columns. The CGF is operated to maximize NGL production and recovery. LTS bottoms liquids that are not produced as NGL are what is left over to make up the Prudhoe MI stream. With everything else held constant making more NGL will only be produced at the expense of lowered amounts of MI and vice versa. Some of the NGL is blended with oil produced from the PBU and is sold as liquid hydrocarbon via TAPS. The composition of NGL to be blended with oil is limited by vapor pressure constraints for the combined NGL and oil stream that is sold via TAPS (14.2 psia at stream temperature). Some of the NGL is provided to other unit owners for use as a component of MI to enhance oil recovery from Alaska North Slope oil reservoirs that are not within the PBU. This increases the overall NGL volume produced by the CGF. This is possible because CGF is able to adjust NGL composition by lowering stabilizer operating temperatures to allow a more volatile (higher in butane and propane) mix to provide the volume that can be added to TAPS to make up for a portion of the flow that was sent to KRU. Since the additional barrels produced are more volatile, 9 • less volume can be added to TAPS as "back blended" barrels than was'kinally sent to KRU before the TAPS oil /NGL mix is back to the 14.2 psia vapor pressure limit. The added NGL volumes in this case are at the expense PBU of MI production as that is where the additional butane and propane components are derived. In summary, with the existing plant, the given gas feed rates, compositions, and a given LTS refrigeration limitation, the amount of liquids that can be recovered is fixed. NGL production is limited by TAPS liquid export vapor pressure specifications. If the quantity of NGL produced by the CGF increases (as is the case of export to KRU for use in MI), this can only be done at the expense of decreasing the quantity of MI produced for use at Prudhoe Bay. This reduction in volumes is so because the additional NGL barrels are derived from propane and butane that would have formerly remained in the Prudhoe Bay MI stream. The Prudhoe Bay available MI volume decreases more than the volume of the material directly removed to add the additional NGLs. This is because the proportions of propane and butane have a large impact on making the MI mixture miscible. As the Prudhoe Bay MI stream's propane and butane content drops, some of the methane in the resultant MI must be removed (by raising the LTS bottoms temperature) to bring the MI minimum miscibility pressure (MMP) back to the target 3100 psia. This is also true for the existing plant if propane were to be drawn out of the system as a separate sales stream. 10 ■ Figure 1 Simplified CGF Process Plant Diagram To Injection Miscible lnjectant Compressors to Compression To Field Fuel • Gas System Residue Gas Stabilizer ■� • ir , condensers I Stabilizer To Refrigeration Overhead Compressors (2 trains) Drum .._041-- GGX LTS _ Chillers Low Temperature CA Reflux Separators .. Gas From (3 trains) To Propane FS/GC's Manufacturing (when in use) Propane '..: — — ..... Refrigeration NGL Stabilizers Feed Pre- 2 trains Heaters ( ) -- Air eReboiler ............. Booster Compression • (3 trains) Reboiler GLX _ FBX NGL Product 11 Figure 2 CGF Propane Refrigeration System Simplified Process Diagram Air Gas Turbine & Propane Compressor (2 parallel trains) Condensers Surge Drum st. 2nd. 3rd. (.1 • LP HP Suction Economizer Economizer Scrubber �--- • Process r _ \ Process Gas Gas to LTS LTS Chillers (four) LTS 1 & 2 - one each • LTS 3 - two 12 4 Figure 3 CGF C3 Manufacturing Simplified Process Diagram Light ends to stabilizer Air cooled Ethane and lighter p l \ condenser Some propane f� i • Slipstream from stabilizer reflux — V Propane to storage ■ or refrigeration system 98.5% propane Therminol Therminol De- propanizer De- ethanizer �� Reboiler Reboiler • cr ►Heavy ends to stabilizer Butane and heavier and some propane 13 Figure 3 CGF C3 Manufacturing Simplified Process Diagram Light ends to stabilizer Air cooled Ethane and lighter c condenser Some propane . • Slipstream from • stabilizer reflux —V Propane to storage ■ or refrigeration system — 98.5% propane Therminol Therminol De- propanizer De ethanizer j _ i ] eboiIer Reboiler • ■ fr ■ Heavy ends to stabilizer Butane and heavier and some propane 13 4 4 4 �ll'� Mto, 'f\r1 12_ 13\1 \\ \ cwo\d 0 Mr • • Prudhoe Ba y Unit Potential Propane Waste? Presentation To The Alaska Oil & Gas Conservation Commission By Harold Heinze on February 1, 2012 Background of Harold Heinze • Graduated Colorado School of Mines in Petroleum Engineering (with High Honors) • As an ARCO Alaska field engineer tested early exploratory and development wells at Prudhoe Bay • As ARCO Alaska's Reservoir Engineering Manager developed Prudhoe Bay simulation models and evaluated a range of development plans • As ARCO Alaska's Engineering Manager initialed the Prudhoe Bay Unit Operating Agreement, participated in field startup, and testified at the AOGCC Field Rules hearing • As President of ARCO Alaska was responsible for managing the PBU Eastern Operating AREA (including the gas facilities) and was ARCO's representative to the PBU Owners Committee • As President of ARCO Transportation was ARCO's TAPS Owner representative • As Commissioner of Natural Resources for Alaska (Hickel administration) reviewed North Slope fields plans of development and disposition of the State's royalty oil • Headed up ANGDA (a public corporation of the State) with focus on providing North Slope gas (which includes the propane component) to Alaskans f ` • Production Facility Flow Schematic 0 K� Prudhoe Bay Field Field -- — Oil Since 1987 Facidies water • Meter Sales and Fuel Gas Line readrAti Gas ratility Centstreitrlp.►_e E r9ant To P i c v ---- 1st 2nd I I ntectron Wens • Campres- Cornpres Inlet Sep. �� sccn iTO 1 is "GLs ilo- Gaseous Mixture Dehydration ! To Gathering Centel 1 g TTPS ComPresscn w Pump Statons fl 1114 vas 1 -e — ,y, � II Oil,Gas r , IPA v ir Water S k id P roductbn TAPS Production Mix - - -. _ -ii Prsducton Surge Sh TAPS Wells e. Tank Pump Pump Station #1 ( ' , ro'JVaY OOBO IS The Propane Situation - PBU • The PBU CGF is managed to maximize the amount of butane and butane plus components in TAPS — propane is to volatile to be shipped in TAPS • The PBU CGF also blends the gas components (including propane) into a "miscible injectant" (MI) stream needed for injection into "enhanced oil recovery" (EOR) wells • The volume and composition of the TAPS and MI streams have changed over time with declining TAPS throughput and the leaning of miscibility requirements • Conservation of the gas produced with the oil by re- injecting the "residue gas" into the gas cap has been an original field rule requirement to prevent flaring • Residue gas injection into the gas cap at 8 BCFPD with 1.5% propane (mole basis) is 78,000 barrels /day (or 3.2 million gallons /day) of propane — this volume is in excess of TAPS shipment and MI needs - -- no impact on MI oil recovery ?? • If the propane content of the CGF incoming stream is 2.5% and the residue stream is 1.5 %, that implies a 40% recovery which is half what would be expected for this type of Low Temperature Separation (LTS) - -- why not increase it ?? • The CGF has a propane separation facility used to provide plant refrigerant (approximately 500 BPD) that is operated less than 5% of the time • Simplifie Diagram -- PBU CGF Gas From Flow Booster Residue Gas to Stations & Compressors Exchanger CCP for Gathering & Chiller Reinjection Centers _ — 00 -40 F ! ; Low C Inlet 4 Booster j Temperature Separator 1 Aftercoolets Separators E Existing Propane Rebaler j Plant Prudhoe Bay Unit 4 Central Gas Processing { A 1 Miscibe +— Injectant i Co III lb —`1 / I J . I Feed/Bottom ! r� 1 Reflux Exchanger Condense .j Drum MI to Reflux Distribution j E Pumps -. I I NGL i f�_ Stabilizer i I ?:` Reboiler NGL Product to - Skid 50 Helnze ANGDA 03/01/1 Estimated Propane Flow In & Out of CGF Propane Volumes At PBU Central Gas Facili Point Mole Percent K Barrels / Bcf Gas Flow K Barrels/Day Low than Low High Bcf!d Low High A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Herne - ANGDA - 03102l1 ? • � Key Issues AOGCC Consideration • Is it a "prudent operation" to utilize the existing propane separation capability at the CGF to provide a local supply of 500 bpd of propane for use on the North Slope and by trucking to interior Alaska ? • Can CGF operational settings be changed to make larger amounts of propane available for unit and market use without reducing the MI available ? • If 500 bpd of propane where "sold" today would there be a greater ultimate recovery of propane compared to the continuing situation where propane is re- injected in the residue gas until large gas sales occurs in 10 or more years in both cases ? • Does operating under a production plan that recovers less propane than could be recovered with an alternative use of existing facilities constitute "waste" under the Conservation statute (AS 31.05) or AOGCC's regulations ? • Does AOGCC wish to order changes in the PB Field rules or the reservoir /production plan —AS 31.05.095 Waste Prohibited ? Increasing Propane Yield from the PBU CGF • Adjust low temperature separators to reduce C3 in residue gas (Point B) and increase C3 feed to NGL stabilizer (Point D) • Operate the existing propane recovery facility (downstream of Point A) on a full time basis • Allow the installation of piping, tankage, metering and loading equipment to create a commercial "wholesale" point • Add a larger C3 recovery module to capture the increased C3 at the reflux drum (Points A & E) Equivalent Fuel Val es $ per gallon or mmbtu, FUEL Propane Gasoline Fuel Oil $ /mmbtu BTU ! gal 91.600 120.000 145.000 $ /gal $0.18 $0.24 $0.29 $2 $ /gal $0.46 $0.60 $0.73 $5 $ / gal $0.92 $1.20 $1.45 $10 $ / gal $1.83 $2.40 $2.90 $20 $ /gal $1.00 $1.31 $1.58 10.92 $ /gal $0.76 $1.00 $1.21 8.33 $ / gal $0.63 $0.83 $1.00 6.90 Production Facility Flow Schematic KEY Prudhoe Bay Field F Feld -- Oil Since 1987 Facidies VValet Meter Sees and Fuel Gas Line 0 _ Central Gas Facility Central Compressor Plant 1 7c Ga s 7 ---- 1s 2nd " 0., Inte s Wells j '85 Comoros- Compres- t# Ta g Inlet Sep. sion von p t enibt e Wdb NGLe DPI Gaseous Mixture Ceh ycra tc n Gathering Center To Compression r TAPS 1 Gas Pump Stations Dntsite 1 Production . Q,'1 Wells � 11 - „1 f ' Oi.Gas 41111 ' Water y gka Production TAPS NOW Mix t i ' 017\ 00., Production Surge Shipping TAPS Wells s , Tank Pump Pump Sla bon *1 ^ W OP 1 YVA'F v� :yyu^ Cb owe Ill's, • PBU Future Considerations • PBU Operator responds publicly to AOGCC investigation information requests • PBU Operator (BP) to perform technical evaluations of: — CGF Process shift to increase C3 — Design concept for existing and new C3 separation facilities — VROM Cost Estimate of modifications & new construction • Consider development of a non -unit logistical facility to receive individual owner C3 sales Prudhoe Bay Unit • Potential Propane Waste? Presentation To The • Alaska Oil & Gas Conservation Commission By Harold Heinze on February 1, 2012 Background of Harold Heinze • Graduated Colorado School of Mines in Petroleum Engineering (with High Honors) • • As an ARCO Alaska field engineer tested early exploratory and development wells at Prudhoe Bay • As ARCO Alaska's Reservoir Engineering Manager developed Prudhoe Bay simulation models and evaluated a range of development plans • As ARCO Alaska's Engineering Manager initialed the Prudhoe Bay Unit Operating Agreement, participated in field startup, and testified at the AOGCC Field Rules hearing • As President of ARCO Alaska was responsible for managing the PBU Eastern Operating AREA (including the gas facilities) and was ARCO's representative to • the PBU Owners Committee • As President of ARCO Transportation was ARCO's TAPS Owner representative • As Commissioner of Natural Resources for Alaska (Rickel administration) reviewed North Slope fields plans of development and disposition of the State's royalty oil • Headed up ANGDA (a public corporation of the State) with focus on providing North Slope gas (which includes the propane component) to Alaskans 1 1 1 1 Production Facility Flow Schematic KEY Tc Prudhoe Bay Field Fie lc ................ s a 5 — Oil Since 1 987 Facilities — .siv 0 t e r 1sio M eter SO! es and Fuel Gas L: e qe,P. tFal_Ga! rOcil i C entral C ornpreaaor Plant Ga s • . ,... _ I N CZ ' I njec,licn :a ; - .i - - ca -- : ... i .- .. en .- '-' ..--- crnpres- ,,,crnpres- Wells . - _.... sicn sin Inlet Sep. 1 Miscible In* ctani NY' Ls To EOR Injeolkoi We 41 Gaseous Mixture Ceti yoratic n Gathering Center z T Cciripression GI T.\PS — Pump Sta lions Gas Drill site • Pre cucticn , t_ Wells . _ _, ft i ei 1 St Sep. ' / ' 2nc Sep. ).....cF Sk .., IPA C ri Hs ite Mix Pre; u ctic n 1.-----8‘aiiii(::'3°Iesr Wells 7 i , - .,,, , 1 S i . IT, ...7, p. I, , T s 4 Surge Shipping Tank Pump L...._,,, id „.... Pr3Cu,s'liC n TAPS TAPS Pump Station #1 s— - „....,:-.•_.- ...1 ii."..,. The Propane Situation - PBU • The PBU CGF is managed to maximize the amount of butane and butane plus components in TAPS — propane is to volatile to be shipped in TAPS • • The PBU CGF also blends the gas components (including propane) into a "miscible injectant" (MI) stream needed for injection into "enhanced oil recovery" (EOR) wells • The volume and composition of the TAPS and MI streams have changed over time with declining TAPS throughput and the leaning of miscibility requirements • Conservation of the as produced with the oil by re-injecting the "residue gas" into g p Y 1 g the gas cap has been an original field rule requirement to prevent flaring • Residue gas injection into the gas cap at 8 BCFPD with 1.5% propane (mole basis) is 78,000 barrels /day (or 3.2 million gallons /day) of propane — this volume is in excess of TAPS shipment and MI needs - -- no impact on MI oil recovery ?? • If the propane content of the CGF incoming stream is 2.5% and the residue stream is 1.5 %, that implies a 40% recovery which is half what would be expected for this type of Low Temperature Separation (LTS) - -- why not increase it ?? • The CGF has a propane separation facility used to provide plant refrigerant (approximately 500 BPD) that is operated less than 5% of the time AI Simplified Process Diagram -- PBU CGF . . 7 Gas From Flow , C - Booster B Residue Gas to _ Stations & ` Cor�ipressors Exchanger 1 -0----liji ' CCP for Gathering & Chiller Reinjection _� Centers L_ .. ,, i / / ,.; -.<) \, -40 40 F Low • Inlet Booster Temperature pftercoolers Separators Separator' Existing Propane Reboiler Plant Prudhoe Bay Unit ,"°J t 4 Central Gas Processing ? ; "" �y miscible __ Injectant C ompressors D 4 Feed /Bottom . l ti _ I - • Exchanger flux er f x _ _ j Drum Conde - MI to Reflux � �� Distribution E - P umps *\--_ - NGL - - _ Stabilizer ��,, Reboiler 1 z . -- - NGL Product to I- •' Skid 50 Hemze ANGDA 03/01/1 Estimated Propane Flow In & Out of CGF Propane Volumes At PBU Central Gas Facility • Point Mole Percent K Barrels ! Bcf Gas Flow K B a r r e l s / D a y Low H� Low High Bcfld Low Hi�c h A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 • C 2.50 3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Heinze — ANGDA — 03102111 Key Issues - AOGCC Consideration • Is it a "prudent operation" to utilize the existing propane separation capability at the CGF to provide a local supply of 500 bpd of propane for use on the North Slope and by trucking to interior • Alaska ? • Can CGF operational settings be changed to make larger amounts of propane available for unit and market use without reducing the MI available ? • If 500 bpd of propane where "sold" today would there be a greater ultimate recovery of propane compared to the continuing situation where propane is re- injected in the residue gas until large gas sales occurs in 10 or more years in both cases ? • • Does operating under a production plan that recovers less propane than could be recovered with an alternative use of existing facilities constitute "waste" under the Conservation statute (AS 31.05) or AOGCC's regulations ? • Does AOGCC wish to order changes in the PB Field rules or the reservoir /production plan — AS 31.05.095 Waste Prohibited ? Increasing Propane Yield from the PBU CGF • • Adjust low temperature separators to reduce C3 in residue gas (Point B) and increase C3 feed to NGL stabilizer (Point D) • Operate the existing propane recovery facility (downstream of Point A) on a full time basis • • Allow the installation of piping, tankage, metering and loading equipment to create a commercial "wholesale" point • Add a larger C3 recovery module to capture the increased C3 at the reflux drum (Points A & E) PBU Future Considerations • PBU Operator responds publicly to AOGCC • investigation information requests • PBU Operator (BP) to perform technical evaluations of: - CGF Process shift to increase C3 - Design concept for existing and new C3 separation facilities • - VROM Cost Estimate of modifications & new construction • Consider development of a non -unit logistical facility to receive individual owner C3 sales 3 i ,� Il{ ` �i I 1 'i II �� g r i9' ', i� q� 'r ;.; i� nom; i 'I i ' �> 'i I I' ! �i i` R 9 � /, _ 1111 I i , : i �,, , :' /I !�� _ �, i � \ N _ 1 SEAN PARNELL, GOVERNOR L fl \ i` J � -) k . L I J L 'L _ ," " ', fi g i I : L I ALASKA OIL AND GA.S y d 333 W. 7th AVENUE, SUITE 100 CONSERVATION COMMISSION 1 ANCHORAGE, ALASKA 99501 -3539 PHONE (907) 279 -1433 January 3, 2012 / FAx (907) 276 -7542 CERTIFIED MAIL — RETURN RECEIPT REQUESTED 7005 1160 0001 5753 9288 Mr. Emeka Emembolu Head of Base Management Alaska Resource BP Exploration (Alaska) Inc. PO Box 196612 Anchorage, AK 99508 Subject: Notice of inquiry into potential waste of propane at the Prudhoe Bay Unit and request for information Dear Mr. Emembolu: By letter (copy enclosed) dated December 7, 2011, the Alaska Oil and Gas Conservation Commission (AOGCC) has been formally requested to consider and investigate whether propane is being wasted in the operation of Prudhoe Bay. The AOGCC has a duty under AS 31.05.030(b) to investigate whether or not waste exists or is imminent. In order to undertake this statutory requirement we request that BP Exploration (Alaska) Inc. submit the following information within 30 days of your receipt of this letter. 1) A brief description of the natural gas liquids extraction facilities, distribution, uses, and processes at Prudhoe Bay. 2) The average volume and composition of gas/natural gas liquids streams: a. Entering the Central Gas Facility, b. Distributed for enriched hydrocarbon gas enhanced recovery processes on the North Slope, c. Blended with crude oil and sold through the Trans Alaska Pipeline System, d. Distributed gas lift or dry gas pressure maintenance injection purposes, and e. Any other uses for natural gas liquids /propane not identified above. 3) Discussion on the limitations, if any, that affect the amount of natural gas liquids that could be sent to enriched hydrocarbon injection processes and /or pipeline sales. After receiving the above information the AOGCC will make a determination on how to proceed with this inquiry. If you have any questions on this matter please contact Mr. Dave Roby of my staff at (907) 793- 1232. Sincerely, 4 C)" , Daniel T. Seamount, Jr Chair, Commissioner cc: Mr. Harold Heinze U.S. Postal Servicem. co CERTIFIED MAIL.- RECEIPT ru (Domestic Mail Only; No Insurance Coverage Provided) tr For delivery information visit our website at www.usps.com In t * •1: .$ :: ,d 1AL USE N to Postage $ $1,04 4555 = •1 o Certified Fee $2.85 0Z- , o Return Receipt Fee / ' i Mere/ (Endorsement Required) $2.30 i l Restricted Delivery Fee ..D (Endorsement Required) $0.00 r1 Total Postage & Fees $ $6.19 01/63/2012 ui o e /72q ---- x tf� i �.r D 0 N � ,o. /.fi Al or FO Box Cily, &tate, ZIP+4 PS Form 3800 June 2002 See Reverse for Instructions SENDER: COMPLETE THIS SECTION COMPLETE THIS SECTION ON DELIVERY • Complete eems , 2, and 3. Also complete A. � T N1�-� -� item 4 if Restricted d d Delivery is desired. X Agent • Print your name and address on the reverse ❑ Addressee so that we can return the card to you. B. Received by (Printed Name) C. Date of Delivery • Attach this card to the back of the mailpiece, � d I or on the front if space permits. d fTri41,,dr.1 1/1// / y D. Is delivery address different from item 1? ❑ Yes 1. Article Addressed to: If YES, enter delivery address below: )No t/ r. /=.�ne`'a 1i1-2 .e.crI N a oo o` /(3. �ua Cha, SP;rL� 3. type /- C ertified Mail ❑ Express Mail p ,5 / ` /' zo / ❑ Registered - -iletum Receipt for Merchandise I / CL `v / } � 6 � 4. ❑ Insured Mail ❑ C.O.D. C, C� Rid Delivery? (Extra Fee) ❑ Yes 2. Article Number (Ttansfer tom service labe0 7005 1160 0001 5753 9288 PS Form 3811, February 2004 Domestic Return Receipt 102595-02- M-1540 In -Ste and North Slope Opportunity • Potential Fleet Services operation on the North Slope converted to less expensive N.S. propane rather than trucked ULSD • Utilization of propane for new development staging facilities • Transitional development from in -state and N.S. use to longer -term export • Industrial applications, such as generation • Rural community and village opportunity for home heating Propane Barging From the North Slope • Mining operations • Cook Inlet Utilities • The Gas Company in Hawaii • Petrochemical Manufacturing Plants • Lower 48 for peak seasonal demand • Other worldwide applications and markets • • ANGDA's Ask of PBU owners • PBU Operator to perform technical evaluations of: — CGF Process shift to increase C3 — Design concept for new C3 separation facilities —VROM Cost Estimate of modifications & new construction • PBU to consider development of a non -unit logistical facility to receive individual owner C3 sales Add itional considerations of PBU owners • Joint project development or single opportunity — Could be a third party operator that currently is utilized on NS operations • Funding discussions — all options on the table — ANGDA would be the single- receipt point for the wholesale propane molecules — ANGDA could serve as non - profit aggregator for in -state use ( minimal at 2500 — 3000 barrels /day) Increasing Propane field from PBU CGF • Adjust low temperature separators to reduce C3 in residue gas (Point B) and increase C3 feed to NGL stabilizer (Point D) • Add a larger C3 recovery module to capture the increased C3 at the reflux drum (Points A & E) Profitable Investment (20% ROI BFIT) For An Assumed Propane Value & Yield Assumed Propane Value $ /gal = 0.50 1.00 Yield in K BPD ($ million) ($ million) 5 $96 $192 10 $192 $383 20 $383 $767 30 $575 $1,150 Sceening Economics Calculated by Heinze on 03/02/11 Simplifie rocess Diagram -- U CGF . , Gas From Flow C Booster Residue Gas to Stations & — C: Compressors Exchanger CCP for f. Gathering s Chiller Reinjection Centers / -40 F Low Inlet Booster ; Temperature l Separator Aftercoolers Separators Existing Propane Reboiler Plant Prudhoe Bay Unit 4 Central Gas Processing 1 A i Miscible injectant Compressors D ID i ■ Feed/Bottom ' Reflux Exchanger i Condenser L. - Drum to /�� Reflux Distribution f • 0 Pumps NGL Stabilizer , Reboiler i NGL Product to •. ___r_ -, Skid 50 HeMZe ANGDA 03/01/ Estimated Propane Flow In & Out of CGF , Propane Volumes At PBU Central Gas Facility Point Mole Percent K Barrels / Bcf Gas Flow K B a r r e l s / D a y Low PAM Low High Bcf /d Low Litt A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Heine — ANGDA — 03102/11 Potential ASka In -State Demand Fill/Propane f (Alaska Pipeline Project In -State Gas Study) Figure 25. Chances of Propane Demand, Alberta Route, Years 10-15 40,000 I 35,000 �� r ,.. . { 30,000 C" a { 25,000 2^ ' o 20,000 1 15.0 00 IMM la 10,000 ' 5,000 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: Northern Economics, Inc. E Production Facility Flow Schematic Prudhoe Bay Field F ° ,d Since 1987 FacBdies Sales and Fuel Gas line ttienlral Gas facility Central compressor Plant To 1 2nd Gas r - 111 Wells Con res- Compres- ? inset Sep. sion eon L Tre84,41%itak, it NGLs Gaseous Mixture I Denydralbn Gaa*_hering en r 1 { TAPS Co npresstn , r p Pump Stations - I 1-4 Ontsite i Produstian Shells ! _-I _.. j a 1 1si sap. ! • 01.oas r , IPA 3 Water t3ap. , skid od Prucl�an PS D7s96Aa Mix d ; 9�k ' .�• ; . � .�& � , °. Production Sh ppi TAPS Wets * Tank Pump Pump Staten #1 �R ova:,, Dtliiii auu. v `� 4 � g . r ' nS ti '? -:. 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' 2 `` - S 4 - t t '' S i , - � ^2w -� � -4,.. � it Y *� � � ', �� . do- y e t t t M * •' .. ., cb • r 44 , -' •' *ti } t om,, 'f t ', F7 - � 4. r ' ig t . w,.- ' s AMY f Y , ' 5 ' 2. 111'1 h 'L " ro. . �)� ' w j i . A R : Sr R t+.. *` - y tl � •.� f '' � ? ' + 1.1,,t," �` 1 , r4 .i" ' .; , d'yt �' 4 `. ] �¢ ,} 'f,c - ,- . -T ,,M1d . e,, " 4 , 4 9 Y. t d _ .' . ♦ sr L t 11 h ? t f "ti l , ma y ' .: � , I' ,k., s § mn ' a ,} > s -. F - 4, 4 ,,tw e. t r „t'� } , , s t r ! ' ,,` r'd� � it`..r a. x - .st'?x..d s q � :..t f t`t•a' +iri r`` -`� ,-;,5> �i�"�,'sh •� 3 - y - o f y + t. d . n ik tX �•.. z, , ::a� z 4 g' '''''C'^''' i',.,4` 6 l $s-,,I, t ' � a5 , ,� j «,+ •ut4z { , F '♦`e �g� ' i �tnr? s �'� �'Si. s �: ,��c w � ' u � - -. :_ L'' et' 4 p, r Yfr "s ,'4i t •i7 4 .' t t ' i " 4� m s �dyst?;N,�; 'i�� r- " a ii ' , R' 't . x a .., ,_.h.. a...: ... ,,... s. s,. �., �+�€Exar.,..�.." 44r4�.�:a✓k11'z +, - ,> Equivalent Fuel Values $ per gallon or mmbtu FUEL Propane Gasoline Fuel Oil $ /mmbtu BTU / gal 91,600 120,000 145,000 $1 gal $0.18 $0.24 $0.29 $2 $1 gal $0.46 $0.60 $0.73 $5 $1 gal $0.92 $1.20 $1.45 $10 $1 gal $1.83 $2.40 $2.90 $20 $ /gal $1.00 $1.31 $1.58 10.92 $ / gal $0.76 $1.00 $1.21 8.33 $ / gal $0.63 $0.83 $1.00 6.90 - North Slop• • e Propane Opportunity • With no market for C CGF operational target is maximum NGL (C +) in TAPS and enough C3 for miscible injection • A petrochemical market of 20 k bpd C3 can be supplied by direct marine export due to reduced polar ice extent & thickness • ANGDA is willing to facilitate logistical & market (both in -state & export) development consistent with the PBU developing a propane delivery point NGL's in 4.5 BCF/Day Gas Pipeline Component Mole Bbls /Day Thousand Tonnes Percent _ Per Year C2 Ethane 7.23 206,000 4250 C3 Propane 3.76 110,250 3250 C4 Butane 0.76 26,250 900 Incremental Propane Prouction By Modifying The PBU CGF A Screening Evaluation of Process Opportunities & Economic Indicators Submitted To The Prudhoe Bay Unit Operator and Owners By ANGDA In March 2011 DEC RECEIVED r Propane's Benefits and Opportunities e • Alternative clean fuel for rural Alaska • Price advantage of North Slope gas btu value • Extends reach to Alaskans that transcends gas pipeline route. • Opportunities -- World class C volumes currently produced and injected in PBU — Gas pipeline is designed to transport entire C3 production stream — Current CGF configuration captures only one -third of C3 processed • • ExxonMobil Production Company Dale Pittman P. 0 Box 196601 Alaska Production Manager Anchorage, Alaska 99519 6601 Joint Interest U S 907 561 5331 Telephone 907 564 3677 Facsimile RECEIVED x : x MAY 05 2011 Production May 3, 2011 Mr. Harold Heinze Alaska Natural Gas Development Authority 411 West 4th Avenue, First Floor Anchorage, Alaska 99501 Subject: PBU Propane Extraction at Central Gas Facility Dear Mr. Heinze: ExxonMobil has received your letter dated April 8, 2011 requesting Prudhoe Bay Unit (PBU) Owners to consider further investment in the PBU Central Gas Facility (CGF) to enhance recovery of propane from PBU gas volumes and enable sales of propane at the North Slope. We appreciate you bringing the opportunity to our attention. As you have noted, additional technical definition is required in order to assess the opportunity. ExxonMobil will consult with BP, as PBU operator, to better understand the scope and cost associated with the proposed investment. ExxonMobil is committed to the communities in which we operate and appreciates opportunities to integrate community need with business opportunity. If you have any further questions, please feel free to contact Mr. Peter Velez with ExxonMobil Gas and Power Marketing at 713- 656 -9487. Sin -iy, Dale Pittman xc: J. B. Brackin M. A. Pohler P. K. Velez A D vision of :3r,: °Gn r'.' ";e ?„ t fang ^ais.10 -- SIOPARNELL, GOVERNOR 411 WEST 4 AVENUE, FIRST FLOOR ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 269 -6501 April 8, 2011 BP Alaska c/o Bruce Williams 900 East Benson Blvd. MB 11 -2 Anchorage, AK 99508 -4254 Dear Mr. Williams, One of Alaska Natural Gas Development Authority's long term objectives has focused on developing an in -state propane supply point(s) related to Prudhoe Bay gas utilization. Propane is the only North Slope sourced fuel that could be made available to many Alaskan communities as an alternative to diesel in the short term. ANGDA developed a design concept for a stand -alone plant to recover additional propane from the Prudhoe Bay Unit (PBU) Central Gas Facility (CGF) residue stream prior to reinjection. The downstream economics and benefits of separately processing this lean propane stream for the small in -state volume ( <3,000 bpd) are not sufficient to offset the risks of a prototype operation on the North Slope. The recent alignment of propane petrochemical feedstock shortages and an opportunity to tanker propane direct from the North Slope favors increasing the PBU recovery of propane by 20,000 to 30,000 bpd. This 10% increase in PBU production might be achieved with minimal modifications and the addition of modules for less than $500 million. The attached presentation summarizes ANGDA's screening analysis of the technical and economic aspects of the PBU modifying & adding to the CGF. Included are some suggestions on shifting propane for recovery at the takeoff point for the small existing propane plant and a back calculation of what might be an acceptable investment level given volumes and cost variables. ANGDA asks that the Prudhoe Bay Unit Owners consider further investment in the Unit's Central Gas Facility to make available propane at a wholesale delivery point to ANGDA as a single recipient aggregator based upon the information developed by the Unit Operator. ANGDA stands ready to work with the Unit Operator and the Owners on any of the CGF • • related topics, as well as, facilitate development of third party projects to carry propane to both in -state or export markets. We greatly appreciate your time and consideration of this propane proposal that will expedite immediate benefits for in -state applications, opportunities for fleet services operations on the North Slope and eventually export opportunities. We would greatly appreciate your timely response on whether this would be a viable business consideration for your teams. Sincerely, Harold Heinze CEO cc: Scott Heyworth, Chairman ANGDA Board 2 • S N PARNELL, GOVERNOR 411 WEST 4 AVENUE, FIRST FLOOR ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 257 -1393 April 28, 2010 Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 Anchorage, AK 99510 -0360 Dear Mr, Isaacson: Thank you for your letter of April 27, 2010, explaining ConocoPhillips' conclusion that the propane extraction facility ANGDA is studying would impair the Prudhoe Bay Unit miscible injectant enhanced oil recovery project. We would like to take you up on the offer to continue discussions to explore feasible technical or operational innovations in PBU facilities that would allow the development of ANGDA's proposed wholesale propane facility on the North Slope. As noted, these discussions would only be from a technical and operational perspective, with commercial discussions, if and when appropriate, in entirely different individual company meetings. A major problem in the technical discussions is a dearth of public information on process volumes and compositions associated with Prudhoe Bay gas handling, reinjection, and enhanced oil recovery. Based on decades old field composition information and gross gas volumes reported to AOGCC we estimate that 50- to 75- thousand barrels a day of propane are returned to the reservoir in the "residue gas" injection not associated with the enhanced oil recovery project. The entire defined in -state market for propane could be satisfied with only a small fraction of this residual production. We also estimate that less than 50% of the propane produced concurrent with oil operations is used in the enhanced recovery process as compared to the 75% plus propane recovery we would expect from this type of a gas handling facility. look forward to clarifying these analyses and other parts of this potential opportunity within the Prudhoe Bay Unit at your earliest convenience. ANGDA is prepared to separately discuss your company's concerns if the scheduling with other PBU owners or the Operator proves difficult. Sincere y, • 44 Harold C. Heinze CEO cc: Mr. Trond -Erik Johansen, President ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. • . Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 NPV Anchorage, AK 99510 -0360 ConocoPhillips Fax 907.263.4438 6 Fax 907.263.4438 Alaska, Inc. April 27, 2010 Mr. Harold Heinze Ms. Mary Ann Pease Alaska Natural Gas Development Authority 411 West 4 Avenue, Suite 100 Anchorage, AK 99501 Dear Mr. Heinze and Ms. Pease: The Alaska Natural Gas Development Authority ( ANGDA) met with ConocoPhillips and other Prudhoe Bay Unit (PBU) owners in February to present a proposed propane ti extraction facility and distribution system. More recently, ANGDA has asked for ConocoPhillips' response to the proposal. As you know, propane is used at the PBU to create "miscible injectant," which is then used to enhance oil recovery. At our February meeting, it was explained that extraction of propane from the central gas facility (CGF) residue gas or any other location downstream of CGF low temperature separation would reduce production of miscible injectant, and impact enhanced oil recovery. In light of propane's current use within the PBU, ConocoPhillips does not see ANGDA's current proposal as viable. However, we remain willing to continue discussions to determine whether there are technical or operational innovations that are feasible but have not yet been considered. If the project does ultimately appear to be viable from a technical and operational perspective, we anticipate that commercial issues would be discussed individually between each PBU owner and ANGDA. ConocoPhillips looks forward to exploring creative ideas for putting PBU propane to its best use in Alaska. Sincerely, Erec S. Isaacson Cc: Mr. Trond -Erik Johansen, President, ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. Estimated Propane Flow In & Out of CGF Propane Volumes At PBU Central Gas Facility • Point Mole Percent K Barrels 1 Bcf Gas Flow K B a r r e I s I D a y Low High Low Hilt h Bcfld Low Hi�c h p 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 3.00 16.3 19.5 8.50 138 166 • Calculation Table Prepared by Harold Heinze — ANGDA — 03/02/11 Simplified Process 1 Diagram -- PBU C . , Gas From Flow C Booster B Residue Gas to Stations & • )- Comp Exchanger '' CCP for Gathering & Chiller Reinjection Centers �I �� ,/ C <) \, -40 F Low r Inlet \ Booster Temperature • Separator f I Aftercoolers Separators Existing Propane Reboiler Plant Prudhoe Bay Unit i''-- 4 Central Gas Processing A I Miscible \■-- _ . 1njectant ,._ _.../ Compressors D 1 Feed /Bottom � I _ t � Reflux Exchan er g ! Condenser �'--- - . Drum MI to Reflux r-l- Distribution 4 Pumps NGL .1-___ Stabilizer " Reboiler f--1/ NGL Product to j Skid 50 Heinze AMGDA 03/01/i z Production Facility Flow Schematic K EY a s Tc Prudhoe Bay Field Fief!: Y.*. SVT.Tot I*. 0 il Since 1 987 Facilities ............. wote gli Meter „-. Sales ant-. Fuel Gas Line _ 1 Central 0.05 .rticillitY ° Central Comipiessor Plant e• .... Tc. ,. -- Gas — 2nd • • I njer.:tion (1 4 , , ” ' Wells . , 0 - ( 13 Cc mpres- Cc mpres- , .„.., .. sicn sicn Inlet Sep. Miscible Injectant 14GLs D EOR hied Di WeJs Gaseous Mixture D e h yaratic n Gathering Center z Tc, C m p r e s s i 0 n GI TAPS Pump Stations 4 1 Gas 1 _I. r illa CTillsite P mow:Ale — II Wells i ijil (1,1>r) 1st i it, , r Oil,GaS 2nd Sep. il • & Water / 31t1 Sep. GIB 1F.. (. 4 2.1 Crillsite Mix L._ • -, ,-.., ,.. • - P pa udicn " — Surge Shipping — TAPS Wells es • Tank Pump Pump Station #1 I.l V 11Cliti 11NS • . Recoverable Propane Is Potentially Being Wasted In Prudhoe Bay Unit Operations My Major Observations Are: 1. The PBU CGF capability to recover locally marketable propane from the gas stream is not being utilized (500 BPD to 2,000 BPD). 2. Some propane is being beneficially used for FOR in the PBU, but there is an even larger volume of propane being injected as residue gas (2% of 8 BCFPD = 100,000 BPD). 3. Because of the limited production life of Prudhoe Bay, the propane that could be recovered and marketed at this time will be left in the reservoir at shut down. That future lost recovery is the preventable waste of a valuable hydrocarbon. Points 1 Would Like The AOGCC To Consider: 1. Does the above circumstances, if validated, describe "waste" under AS 31.05 — Alaska Oil and Gas Conservation Act ? 2. Is NGL and /or propane recovery from the PBU dealt with in any confidential studies, Commission orders, or in the PBU Field Rules? 3. Did the PBU hearings before the Commission in the 1990's on NGL's and the operation of Skid 50 contain any information relevant to propane recovery? 4. Is the attached estimated gas- component compositions and simplified process diagram representative of the current PBU gas handling and re- injection operations (3 pages attached)? 5. Is the Commission prepared to develop public information on the current PBU operating conditions affecting propane? H. Heinze 12/06/11 • S ., Harold Heinze RN 1336 Staubbach Circle ou, 0 2511 Anchorage, Alaska 99508 carois,n on c December 7, 2011 To: Alaska Oil and Gas Conservation Commission Dear Commissioners: Over the last two years I have explored several approaches to developing a wholesale propane supply point at Prudhoe Bay. While the Prudhoe Bay Unit Owners have indicated a willingness to sell propane I have been unable to discern the direction and schedule of the needed actions by the Unit Operator BP. I understand that BP is under no obligation to inform me or the public as to plans, if any, for making propane available. But as an Alaskan I am concerned that absent priority attention by BP the potential "waste ", per AS 31.05, will continue until the AOGCC formally considers the issue. Attached for your review are: • Observations on Propane Recovery in the Prudhoe Bay Unit — with 3 attached diagrams • Unsolicited Presentation Made to the Prudhoe Bay Unit Owners Earlier This Year (16 slide images) • Letter exchanges with Prudhoe Bay Unit Owners in 2010 & 2011 (4 letters) Thank you for the opportunity to bring my concerns before you and I appreciate your considerations. doy / Copy To: DNR Commi inner Sullivan Oil & Gas Director Barron r 42 Ili • • bp 0 December 21, 2011 900Exploration o Boulevard P.O. Box 196612 Anchorage, Alaska 99519.6612 (907) 561 -5111 Lt. Govemor Mead Treadwell Atwood Building 550 7 Avenue, Suite 1700 Anchorage, AK 99501 Dear t Govemor Treadwell: . G vemo T eadwell: Thanks for taking time out to meet with me. I enjoyed our conversation and wanted to follow up on our brief discussion regarding propane on the North Slope. Let me preface my note by saying that BP remains committed to the sale of hydrocarbons to any party on commercially acceptable terms. On this basis, we have been in discussion with ANGDA for over two years on this issue. However, this is not a simple subject. As you know, propane is one of a number of components that can be present in raw natural gas. The composition and volume of propane varies with each particular reservoir. While other operating North Slope fields do contain propane, their volumes are small relative to Prudhoe. Because of its large volume, Prudhoe has been and remains a key source for propane. At Prudhoe Bay, virtually all of the gas produced is routed through the Central Gas Facility (CGF). CGF recovers as many liquids from the gas feed as is operationally possible given the current ambient temperature, facilities operating, gas rate and equipment limitations. This liquid is then fractionated into two products: miscible injectant (MI) and natural gas liquid (NGL). The MI is used in the Prudhoe field as an Enhanced Oil Recovery (EOR) solvent. Much of the NGL is blended with oil for transport through TAPS, while the remainder currently goes to Kuparuk for use in making an EOR fluid. Since it maximizes oil recovery, MI is an important part of our North Slope operations and that is why we maximize its volume. Virtually all of the propane we recover at the CGF is used for MI ( >98 %) with the remainder going into the NGL stream. As you would expect, therefore, any diversion of propane from the MI flood would have a negative impact on oil production. When we met, you mentioned the propane manufacturing system on the North Slope that "only operates a few days a month." I think it is important that you have all the facts on what this facility is, what it does and what its capabilities are. • • Lt. Governor Mead Treadwell December 21, 2011 Page 2 For background, the CGF refrigerant system uses propane circulating within a continuous closed cycle that occasionally requires a small amount of "make -up" propane. In the process of fractionation described above, a side -stream of product flows into a small propane manufacturing system used to make commercial grade propane which is then added to the refrigerant system. Normally this system is shutdown except when the CGF needs to add propane to the refrigerant system. As our needs are not that great, the system operates 2 to 3 days per month on average. If we were to operate this system every day, our engineering analysis indicates it is possible to make about 500 barrels per day of commercial grade propane. The Prudhoe Bay owners are currently considering using this spare capacity to manufacture propane for use in the fleet of light vehicles used to operate the Prudhoe Bay field. This 500 barrels per day of potential spare capacity would not meet the requirements ANGDA says it has. In our conversations, ANGDA has advised that it requires 2500 barrels per day. In order to meet those needs, we have considered a couple of different options. However, they are not simple and they are relatively expensive on a per barrel of product basis. y First, would be for one or more of the Prudhoe Bay owners, acting independently in compliance with federal anti -trust legislation, to utilize some of the existing gas liquids available at CGF to provide the feed to produce liquid propane for sale. Utilizing these gas liquids for this purpose means there would be a small but real reduction in MI and thus oil production. Even if the Prudhoe Bay owners were willing to accept this oil production impact, the Alaska OiI and Gas Conservation Commission would still have to approve such an approach. Additionally, investment would be required for new propane manufacturing facilities that could fractionate additional gas liquids above the capacity of the existing system. Thus, propane sold would have to account for not only these additional capital and operating costs, but also the impact to FOR oil production. 'OA second option would be to install new process equipment that would recover more gas liquids and propane from the existing CGF feed gas so that there would be no reduction in MI and NGL produced concurrent with propane sales. This requires processing some of the existing CGF residue gas to a lower temperature level than is currently possible at CGF. Additionally, new propane manufacturing facilities that could fractionate additional gas liquids above the capacity of the existing system would be required. While, we have not developed a specific design and costs estimate for producing the 2500 barrels per day ANGDA has discussed, other projects we have explored that were focused on expanded MI volumes using similar concepts, lead us to believe the cost is quite high and is not justified by the propane sales and enhanced oil production that it would generate. We have advised ANGDA of this on a number of occasions and they have advised they are also unwilling to invest this capital. • • Lt. Governor Mead Treadwell December 21, 2011 Page 3 It's also important to note that in both options, ANGDA, as the buyer of the propane, would also need to invest in storage, handling and distribution facilities constructed at the CGF to allow the transfer and load out of propane. As you can see from the foregoing, this is significantly more complex than you might have understood. There are significant costs and trade -offs that need to be considered and accounted for in considering the economics of such an approach. I can assure you that BP remains committed to working with any party that is interested in reaching commercially reasonable terms for the sale of hydrocarbons from the North Slope. I hope this helps to answer the questions you have. Sincerely, Phil Cochrane Vice President, Extemal Affairs k1 � . • Harold Heinze RECEIVED 1336 Staubbach Circle & � Gon" � �' Anchorage, Alaska 99508 s. �, nission cie�' December 7, 2011 ��Ka� Qi! To: Alaska Oil and Gas Conservation Commission Dear Commissioners: Over the last two years I have explored several approaches to developing a wholesale propane supply point at Prudhoe Bay. While the Prudhoe Bay Unit Owners have indicated a willingness to sell propane I have been unable to discern the direction and schedule of the needed actions by the Unit Operator BR I understand that BP is under no obligation to inform me or the public as to plans, if any, for making propane available. But as an Alaskan I am concerned that absent priority attention by BP the potential "waste ", per AS 31.05, will continue until the AOGCC formally considers the issue. Attached for your review are: • Observations on Propane Recovery in the Prudhoe Bay Unit — with 3 attached diagrams • Unsolicited Presentation Made to the Prudhoe Bay Unit Owners Earlier This Year (16 slide images) • Letter exchanges with Prudhoe Bay Unit Owners in 2010 & 2011 (4 letters) Thank you for the opportunity to bring my concerns before you and I appreciate your considerations. /w, Copy To: DNR Commi loner Sullivan Oil & Gas Director Barron Recov r e ab a Propane Is Poten pally Being Wasted In Prudhoe Bay Unit Operations My Maior Observations Are: 1. The PBU CGF capability to recover locally marketable propane from the gas stream is not being utilized (500 BPD to 2,000 BPD). 2. Some propane is being beneficially used for FOR in the PBU, but there is an even larger volume of propane being injected as residue gas (2% of 8 BCFPD = 100,000 BPD). 3. Because of the limited production life of Prudhoe Bay, the propane that Y p P could be recovered and marketed at this time will be left in the reservoir at shut down. That future lost recovery is the preventable waste of a valuable hydrocarbon. Points I Would Like The AOGCC To Consider: 1. Doe* the above circumstances, if validated, describe "waste" under AS 31.05 — Alaska Oil and Gas Conservation Act ? 2. Is NGL and /or propane recovery from the PBU dealt with in any confidential studies, Commission orders, or in the PBU Field Rules? 3. Did the PBU hearings before the Commission in the 1990's on NGL's and the operation of Skid 50 contain any information relevant to propane recovery? 4. Is the attached estimated gas- component compositions and simplified process diagram representative of the current PBU gas handling and re- injection operations (3 pages attached)? 5. Is the Commission prepared to develop public information on the current PBU operating conditions affecting propane? H. Heinze 12/06/11 Production Facility Flow Schematic KEY Prudhoe Bay Fi I::: eld Fie lc — Gas ,----,- 0 a Since 1 987 Facilities — Water g Meter Sales and Fuel Gas Lin e Central 063 Facility CentratCompreaaor Plant ,--- • 1st j 2nd I nje n A 110 loi 2 —4- 1- E V A c cl.. 1 Wells Cc s a i l c p n res- Cc s m io p n res- ] , Inlet Sep. Li i NG Ls Miscible Iniectant To EOR Injechon Wells 11 Gas ec u s Mixture C eh ydratic n Gathering Center 6 Tc C c rripress lc n TAPS CFI Pump Stations Crill site , - se . 44 Gas 1 -A Prccuction i 'Neils , 1st Sep 8, "-----' - 2nd Sell 3 ,,,,. Crillsite Mix P rdducticn ------.........- Wells E ti s 1,,.,, Sure Shipping Tank Pump L..c TO 'Nato' IPA i • Prcduction . .....----........0„. TAPS TAPS Pump Station #1 injection Wee r.; 1"..4 117eS 1 Simplified Process Diagram -- PBU CGF . , Gas From Flow C Booster B Residue Gas to Stations & Com Exchanger FC )----11P ' CCP for Gathering J��, & Chiller Reinjection Centers _ `�� / i `. 40 F Low r Inlet Booster Temperature • % Aftercoolers Separators :� Separator / Existing Propane Reboiler Plant Prudhoe Bay Unit .- 4 Central Gas Processing � 41 --- A lnlectant Compressors D • ` r Feed/Bottom r- 1 _ \ Reflux Exchanger f I Drum • Condenser MI to E Reflux ri D istributior Pumps `- • NGL ___ Stabilizer r - ' Reboiler NGL Product to ` Skid 50 Heinze ANGDA 03/01/11 Estimated Propane Flow in & Out of CGF Propane Volumes At PBU Central Gas Facility • Point dole Percent K Barrels/13d Gas Flow K Bar r e I s I D a y Low High Low High Bcfld Low Hi,�c h p 20.0 25.0 130 163 0.35 46 57 6 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 3.00 16.3 19.5 8.50 138 166 • Calculation Table Prepared by Harold Heinze — ANGDA — 03/0191 • '- °' ° {{-' l l ) \ Ir y PARNELL, GOVERNOR • k (7.- j `ti / r � I � ; I ; µ > n 411 WEST 4 AVENUE, FIRST FLOOR � 1, L. \ � � � � � k.1 ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 269 -6501 April 8, 2011 BP Alaska c/o Bruce Williams 900 East Benson Blvd. MB 11 -2 Anchorage, AK 99508 -4254 Dear Mr. Williams, One of Alaska Natural Gas Development Authority's long term objectives has focused on developing an in -state propane supply point(s) related to Prudhoe Bay gas utilization. Propane is the only North Slope sourced fuel that could be made available to many Alaskan communities as an alternative to diesel in the short term. ANGDA developed a design concept for a stand -alone plant to recover additional propane from the Prudhoe Bay Unit (PBU) Central Gas Facility (CGF) residue stream prior to reinjection. The downstream economics and benefits of separately processing this lean propane stream for the small in -state volume ( <3,000 bpd) are not sufficient to offset the risks of a prototype operation on the North Slope. The recent alignment of propane petrochemical feedstock shortages and an opportunity to tanker propane direct from the North Slope favors increasing the PBU recovery of propane by 20,000 to 30,000 bpd. This 10% increase in PBU production might be achieved with minimal modifications and the addition of modules for Tess than $500 million. The attached presentation summarizes ANGDA's screening analysis of the technical and economic aspects of the PBU modifying & adding to the CGF. Included are some suggestions on shifting propane for recovery at the takeoff point for the small existing propane plant and a back calculation of what might be an acceptable investment level given volumes and cost variables. ANGDA asks that the Prudhoe Bay Unit Owners consider further investment in the Unit's Central Gas Facility to make available propane at a wholesale delivery point to ANGDA as a single recipient aggregator based upon the information developed by the Unit Operator. ANGDA stands ready to work with the Unit Operator and the Owners on any of the CGF • related topics, as well as, facilitate development of third party projects to carry propane to both in -state or export markets. We greatly appreciate your time and consideration of this propane proposal that will expedite immediate benefits for in -state applications, opportunities for fleet services operations on the North Slope and eventually export opportunities. We would greatly appreciate your timely response on whether this would be a viable business consideration for your teams. Sincerely, Harold Heinze CEO cc: Scott Heyworth, Chairman ANGDA Board 2 _ - ! ._ r':: • , ; ,� f ; AV PARNELL, GOVERNOR Y i ' I l r r . , ! - r - 1 l i , a� `� �l. 1r l f s ; I,r � , { ' ,a '` 411 WEST 4 AVENUE, FIRST FLOOR •'' ! I : i = l ' w ! : j ANCHORAGE, ALASKA 99501 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELEPHONE: (907) 257 -1393 April 28, 2010 Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 Anchorage, AK 99510 -0360 Dear Mr. Isaacson: Thank you for your letter of April 27, 2010, explaining ConocoPhillips' conclusion that the propane extraction facility ANGDA is studying would impair the Prudhoe Bay Unit miscible injectant enhanced oil recovery project. We would like to take you up on the offer to continue discussions to explore feasible technical or operational innovations in PBU facilities that would allow the development of ANGDA's proposed wholesale propane facility on the North Slope. As noted, these discussions would only be from a technical and operational perspective, with commercial discussions, if and when appropriate, in entirely different individual company meetings. A major problem in the technical discussions is a dearth of public information on process volumes and compositions associated with Prudhoe Bay gas handling, reinjection, and enhanced oil recovery. Based on decades old field composition information and gross gas volumes reported to AOGCC we estimate that 50- to 75- thousand barrels a day of propane are returned to the reservoir in the "residue gas" injection not associated with the enhanced oil recovery project. The entire defined in -state market for propane could be satisfied with only a small fraction of this residual production. We also estimate that less than 50% of the propane produced concurrent with oil operations is used in the enhanced recovery process as compared to the 75% plus propane recovery we would expect from this type of a gas handling facility. 1 look forward to clarifying these analyses and other parts of this potential opportunity within the Prudhoe Bay Unit at your earliest convenience. ANGDA is prepared to separately discuss your company's concerns if the scheduling with other PBU owners or the Operator proves difficult. Sincere y, Harold C. Heinze CEO cc: Mr. Trond -Erik Johansen, President ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. • • Erec S. Isaacson Vice President Commercial Assets P.O. Box 100360 Anchorage, AK 99510 -0360 ConocoPhillips F 9 90 6.4438 6 Fax 907.263.4438 Alaska, Inc. April 27, 2010 Mr. Harold Heinze Ms. Mary Ann Pease Alaska Natural Gas Development Authority 411 West 4 Avenue, Suite 100 Anchorage, AK 99501 Dear Mr. Heinze and Ms. Pease: The Alaska Natural Gas Development Authority (ANGDA) met with ConocoPhillips and other Prudhoe Bay Unit (PBU) owners in February to present a proposed propane extraction facility and distribution system. More recently, ANGDA has asked for ConocoPhillips' response to the proposal. As you know, propane is used at the PBU to create "miscible injectant," which is then used to enhance oil recovery. At our February meeting, it was explained that extraction of propane from the central gas facility (CGF) residue gas or any other location downstream of CGF low temperature separation would reduce production of miscible injectant, and impact enhanced oil recovery. In light of propane's current use within the PBU, ConocoPhillips does not see ANGDA's current proposal as viable. However, we remain willing to continue discussions to determine whether there are technical or operational innovations that are feasible but have not yet been considered. If the project does ultimately appear to be viable from a technical and operational perspective, we anticipate that commercial issues would be discussed individually between each PBU owner and ANGDA. ConocoPhillips looks forward to exploring creative ideas for putting PBU propane to its best use in Alaska. Sincerely, Erec S. Isaacson Cc: Mr. Trond -Erik Johansen, President, ConocoPhillips Alaska, Inc. Mr. John Minge, President, BP Exploration Alaska, Inc. Mr. Dale Pittman, Alaska Production Manager, ExxonMobil Production Co. • ExxonMobil Production Company Dale Pittman P. 0 Box 196601 Alaska Production Manager Anchorage, Alaska 99519 6601 Joint Interest U S 907 561 5331 Telephone 907 564 3677 Facsimile RECEIVED E. on Mobil MAY 05 2011 Production May 3, 2011 Mr. Harold Heinze Alaska Natural Gas Development Authority 411 West 4th Avenue, First Floor Anchorage, Alaska 99501 Subject: PBU Propane Extraction at Central Gas Facility Dear Mr. Heinze: ExxonMobil has received your letter dated April 8, 2011 requesting Prudhoe Bay Unit (PBU) Owners to consider further investment in the PBU Central Gas Facility (CGF) to enhance recovery of propane from PBU gas volumes and enable sales of propane at the North Slope. We appreciate you bringing the opportunity to our attention. As you have noted, additional technical definition is required in order to assess the opportunity. ExxonMobil will consult with BP, as PBU operator, to better understand the scope and cost associated with the proposed investment. ExxonMobil Is committed to the communities in which we operate and appreciates opportunities to integrate community need with business opportunity. If you have any further questions, please feel free to contact Mr. Peter Velez with ExxonMobil Gas and Power Marketing at 713 - 656 -9487. Sin - =1y, Dale Pittman xc: J. B. Brackin M. A. Pohter P. K. Velez A D +vision 01 Exxon Mobil Corporation Incremeal Propane Pr&luction By Modifying The PBU CGF A Screening Evaluation of Process Opportunities & Economic Indicators Submitted To The Prudhoe Bay Unit Operator and Owners By ANGDA In March 2011 RECEIVED DEC, 0 7 201 Nooks Oil & Gas Ctrs- Commission Propane's Benefits and Opportunities • Alternative clean fuel for rural Alaska • Price advantage of North Slope gas btu value • Extends reach to Alaskans that transcends gas pipeline route. • Opportunities — World class C volumes currently produced and injected in PBU — Gas pipeline is designed to transport entire C3 production stream — Current CGF configuration captures only one -third of C3 processed North Ape Propane Opportunity • With no market for C CGF operational target is maximum NGL (C +) in TAPS and enough C3 for miscible injection • A petrochemical market of 20 k bpd C3 can be supplied by direct marine export due to reduced polar ice extent & thickness • ANGDA is willing to facilitate logistical & market (both in -state & export) development consistent with the PBU developing a propane delivery point NGL's in 4.5 BCF /Day Gas Pipeline Component Mole gblsfDay Thousand Tonnes Percent Per Year C2 Ethane 7.23 206,000 4250 C3 Propane 3.76 110,250 3250 C4 Butane 0.76 26,250 900 • y • • r✓ ) , ,,r, , ....___., , , •,.•. ,. 459" t iiImpot ,p. _ " C1/4 \I . ( ..--"‘ f . i + t tt i` .pit ..1. Propane Distribution from the North Slope Equivalent Fuel Values $ per gallon or mmbtu FUEL Propane Gasoline Fuel Oil $lmmbtu BTU / gal 91.600 . _ 120,000 145,000 $ /gal $0.18 $0.24 $0,29 $2 $ /gal $0.46 $0.60 $0.73 $5 $ /gal $0.92 $1.20 $1.45 $10 $ / gal $1.83 $2.40 $2.90 $20 $ /gal $1.00 $1.31 $1.58 10.92 $ / gal $0.76 $1.00 $1.21 8.33 $ / gal $0.63 $0.83 $1.00 6.90 Potential Aka In -State Demand FOPropane • (Alaska Pipeline Project In -State Gas Study) - Figure 25. Chances of Propane Demand, Alberta Route, Years 10 -15 40,000 35.000 VII 30,000 ,imiiiimummit i c a 25000 -a , 2 20,000 0 a 15,000 , t o m i 10,000 5,000 I 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: Northern Economics, Inc. r Production Facility Flow Schemati Prudhoe Bay Field F rd Since 1987 Facilities • A Sates and Fuel Gas Line Central Gas raeility ' Centrd Compreaaor Plant r i To Gas I .„ _, — " 1 2nd Injection .5t 14 Wells Compres- Co rrpres Inlet Sep. son son Tn OF2 irar nlNdk NGLs • Gaseous Mixture I Dehydration Gathering Center 2 To Compression r TAPS a Pump Stations Cnrsite 1-4 Production 4:10 '.'-' i We1is �f i i Oil,Gas Water IPA Ddisde Mix L �_ ( � { Skid Production TAPS Pwducticn Surge Shippdng —+1 TAPS Wells x, Tank Pump Pump Station #4 To , JV4!• NerA Sim Iifieccrocess Diagram -- 03U CGF • . p g Gas From Flow C Booster Residue Gas to Stations & . Compressors Exchanger CCP for Gathering & Chiller Reinjection Centers l c -40 F Low Temperature Inlet l Booster Separator !� Aftercoolers Separators Existing Propane Reboiler I 1 Plant Prudhoe Bay Unit j 4 1 Central Gas Processing A i Miscible injectent C ompressor_ C) �\ 1 1 a Feed Bottom t>‹, \ I Reflux V Exchanger Drum Condenser �-t MI to Reflux r 1 Distribution Pumps IP NGL __ Stabilizer Retailer - - • NGL Product to Skid 50 Hetnze ANGDA 03/07/= • Estimated Propane Flow In & Out of CGF Propane Volumes At PBU Central Gas Facility Point Mole Percent K Barrels I Bcf Gas Flow K Barrels/Day Low High Low High Bcfld Low High A 20.0 25.0 130 163 0.35 46 57 B 1.50 2.00 9.8 13.0 8.00 78 104 C 2.50 :3.00 16.3 19.5 8.50 138 166 Calculation Table Prepared by Harold Henze - ANGDA - 03/02111 Incrasing Propane field fromPBUCGF • Adjust low temperature separators to reduce C3 in residue gas (Point B) and increase C3 feed to NGL stabilizer (Point D) • Add a larger C3 recovery module to capture the increased C3 at the reflux drum (Points A & E) Profitable Investment (20% ROI BFIT) For An Assumed Propane Value & Yield Assumed Propane Value $Igal = 0.50 1.00 Yield in K BPD ($ million) ($ million) 5 $96 $192 10 $192 $383 20 $383 $767 30 $575 $1,150 Sceenin • Economics Calculated b Heinze on 03/02/11 ANGDs Ask of PBU owners • PBU Operator to perform technical evaluations of: — CGF Process shift to increase C3 — Design concept for new C3 separation facilities — VROM Cost Estimate of modifications & new construction • PBU to consider development of a non -unit logistical facility to receive individual owner C3 sales Additional considerations of PBU owners • Joint project development or single opportunity — Could be a third party operator that currently is utilized on NS operations • Funding discussions — all options on the table — ANGDA wduld be the single - receipt point for the wholesale propane molecules — ANGDA could serve as non - profit aggregator for in -state use ( minimal at 2500 — 3000 barrels /day) II .i In -Slate and North atope Opportunity • Potential Fleet Services operation on the North Slope converted to less expensive N.S. propane rather than trucked ULSD • Utilization of propane for new development staging facilities • Transi#.onal development from in -state and N.S. use to longer -term export • Industrial applications, such as generation • Rural community and village opportunity for home heating Propane Barging From the North Slope • Mining operations • Cook Inlet Utilities • The Gas Company in Hawaii • Petrochemical Manufacturing Plants • Lower 48 for peak seasonal demand • Other worldwide applications and markets