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AOGCC approves rules for new gas pool Requires Hilcorp to escrow funds for uncommitted tracts in Ninilchik unit; removes well spacing restrictions except at boundaries Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission has issued pool rules for the Beluga/Tyonek gas pool in the Ninilchik unit on the Kenai Peninsula.
It has also removed well spacing restrictions, except at the unit boundary and boundaries of uncommitted tracts not in participating areas and is requiring Hilcorp to escrow monies for gas produced from uncommitted tracts with production allocations.
Hilcorp Alaska, the operator at Ninilchik and 100 percent working interest owner, applied in June to have a new gas pool (see map) defined within the Ninilchik unit, and asking that it be allowed to develop gas within the unit without spacing exceptions unless a proposed well was within 1,500 feet of a boundary where ownership changed.
The commission held a public hearing in July on Hilcorp’s Ninilchik application at the request of the Alaska Division of Oil and Gas and the legal representative for a private landowner. Division geologist Julie Houle told the commission at the hearing that the division requested the hearing because of “diverse mineral ownership of the Ninilchik unit and the surrounding acreage to the east of the unit.” Houle said a complex reservoir combined with the complex ownership made Ninilchik, “one of the more complex units in Alaska.”
Complex ownership isn’t the only issue - some of the tracts aren’t committed to the unit.
The commission said in conservation order No. 701, issued Sept. 18: “Due to the presence of uncommitted tracts within the bounds of the NU, the correlative rights of the landowners of the uncommitted tracts are potentially in jeopardy.” Protection of correlative rights - the rights of adjacent landowners - is one of the commission’s responsibilities.
Escrow required The commission said the Department of Natural Resources assigns tract allocation values to uncommitted tracts within defined participating areas. There are three participating areas in the Ninilchik unit: Falls Creek in the north, Grassim Oskolkoff in the middle of the unit and Susan Dionne Paxton in the south.
“The correlative rights of the landowners of those uncommitted tracts can be protected by establishing escrow accounts to hold revenue attributable to each uncommitted tract until such time as the tract can be committed to unit or some other agreement can be reached between the operator and the landowner,” the commission said in its order.
It required escrowing of revenue for uncommitted tracts within participating areas.
“The operator shall establish and maintain an interest-bearing escrow account for each uncommitted tract that has production allocated to it. The amount of funds to be deposited into the account each month is the total value of the production allocated to the tract.”
At the July hearing Hilcorp said the Ninilchik unit includes some 25,819 acres, 9 percent of which is federal, 77.5 percent state, 2.56 University of Alaska, 5.88 Cook Inlet Region Inc. and 13.12 patented fee lands. The company did not break out how much acreage was not committed to the unit, but the commission is requiring Hilcorp to provide a complete list of uncommitted tracts, including the landowner name and a legal description.
“If a tract is within an established Participating Area, the operator shall also indicate which Participating Area the tract lies within, what the tract-allocation value is for that tract, and how that tract-allocation value was created.”
The commission is also requiring “evidence that an escrow account was established for every uncommitted tract.”
Pool definition The commission defined the Ninilchik Beluga/Tyonek Gas Pool as gas-bearing intervals common to the interval between the measured depths of 1,489 feet in the Paxton No. 5 well and 9,600 feet in the Paxton No. 1 well. The two wells are necessary to define the pool due to lack of well logs over a portion of the pool within the Paxton No. 1 well, the commission said.
Within the Ninilchik development area, “the northeast-trending Ninilchik Anticline measures about 16 miles long and 4 miles wide and is bounded on the west by a high-angle reverse fault. Natural gas has accumulated in three separate areas along the crest of this anticline. These areas are named, from southwest to northeast, Paxton-Dionne, Grassim Oskolkoff, and Falls Creek-Bartolowits, and are separated from one another by structural saddles or faults,” the commission said.
Well spacing The commission said there would be no gas well spacing restrictions within the Ninilchik unit, except that no gas well shall be drilled or completed less than 1,500 feet from the exterior boundary of the area “unless the owner and landowner is the same on both sides of the line.”
The commission also restricted drilling close to uncommitted tracts: “No gas well shall be drilled or completed less than 1,500 feet from an uncommitted tract within the Ninilchik Unit unless the well and the uncommitted tract both lie within the same Participating Area.”
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