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AOGCC grants Unocal’s request for spacing exception for Ninilchik area Albright well Well can be drilled closer than 1,500 feet to adjacent property line; opportunities to testify on potential drainage will occur before production, commission says in decision Kristen Nelson PNA Editor-in-Chief
The Alaska Oil and Gas Conservation Commission has granted Unocal Alaska’s request for a spacing exception for its Ninilchik area Albright No. 1 exploratory well — over the objections of adjacent leaseholder Marathon Oil Co.
In a July 30 order, the commission approved Unocal’s requested location for the well, but said that the well must be logged and tested, and that Unocal must obtain the commission’s approval before testing the well.
Marathon told the commission in a June 28 hearing that it disagreed with Unocal’s structural interpretation and believed that Unocal was incorrectly locating a prominent fault.
Unocal proposed the Albright well as a straight hole to a bottom hole location 2,277 feet from the west line and 550 feet from the north line of section 24, township 1 south, range 14 west, Seward Meridian. The well would be open for test production at an interval 550 feet from a lease boundary where both owners and landowners change. A spacing exception is required for a gas well closer than 1,500 feet to such a boundary. Gas reserves to be established Unocal told the commission that the proposed location for the Albright well was necessary to establish the volume of gas reserves Unocal owns in the general area in order to determine reserves that could be committed to a proposed pipeline. Unocal also said the well needed to be drilled now to meet contractual obligations for the reserves.
Unocal told the commission that, for the purpose of proving reserves, the optimal location for the well was as far as possible upstructure from an earlier well in the area, the Mobil Ninilchik Unit No. 1. The commission said that Unocal’s structural interpretation of the area indicated that the Albright well location is structurally high relative to the nearby Mobil Ninilchik Unit No. 1 well — and is near the structurally highest location possible on 100 percent Unocal leases.
Unocal also told the commission that property owners adjacent to the lease where Unocal proposed to drill the Albright well, and property owners in equivalent structural locations, had opposed Unocal’s drilling proposal. In addition, Unocal said that surface access and surface topographical conditions on the lease further restricted possible drilling locations.
Marathon told the commission that it disagreed with Unocal’s structural interpretation because it believed Unocal had incorrectly located a prominent fault and said that Marathon believes the proposed well could be located in a more advantageous structural location. Lease has limited locations The commission said that due to the size and shape of the lease, there is no location on the lease where an exploratory gas well could be open to test production 1,500 feet or more away from a property line. Due to the size and shape of other tracts in the governmental section, there is no other location in that section where an exploratory gas well could be open to test production substantially up structure from the Mobil Ninilchik Unit No. 1 and also 1,500 feet or more away from a property line.
The commission said that drilling and testing one or more wells in addition to the abandoned Mobil Ninilchik Unit No. 1 well is reasonably necessary to determine the extent of productive gas reservoirs within Unocal’s property.
Although Unocal and Marathon disagreed on structural interpretation, the commission said that existing well, seismic and topographical data “provide a reasonable basis for Unocal to conclude that the proposed well location is optimally situated within its lease and within the governmental section containing its lease for the purpose of establishing the volume of gas reserves it owns in the general area.” Spacing exception granted Spacing exception granted The commission ruled that an exception to the spacing rule was necessary to allow drilling and testing of the Albright exploratory gas well and said that the spacing exception for drilling and reasonable test production “will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.”
The commission also said that the spacing exception “is reasonably necessary to provide Unocal with a timely opportunity to establish the volume of gas reserves it owns in the general area.” And the commission said no other location on Unocal’s lease or on the governmental section containing the lease would enable Unocal to test production substantially up structure from the previously drilled well in the structure.
But, the commission said, before regular production is permitted from the Albright well, the commission “must take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling of the well as an exception, and so that drainage from developed units to the tract with respect to which the exception is granted will be prevented or minimized.” Conditions for exception The commission set three conditions for the spacing exception:
Unocal must log and test the well to determine its potential to produce hydrocarbons.
Unocal must obtain commission approval prior to testing the well.
The well may not be placed on regular production until the commission takes additional action to offset any advantage Unocal may have over other owners because of the spacing exception granted for this well.
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