Forcenergy to production test gas well The Alaska Oil and Gas Conservation

Petroleum News Alaska Staff

Commission said July 24 that Forcenergy can produce gas from its 1 West Foreland well prior to negotiating a compensatory royalty agreement as long as the company escrows royalties until an agreement is reached.

Forcenergy applied to the commission for an exception to state requirements that gas wells be no closer than 1,500 feet to a lease boundary.

The commission is allowing gas production through October 2001 as long as royalties are escrowed. Forcenergy can apply for a permanent order once a compensatory royalty or equivalent agreement has been reached.

Forcenergy is the sole working interest owner of both oil and gas leases, but the leases have different landowners. The 1 West Foreland well is on Cook Inlet Region Inc. land on an oil and gas lease managed by the Bureau of Land Management. That lease has a 12.5 percent royalty to the landowner and overriding royalty interests of another 5 percent. The adjacent tract, which will also be drained from the well because it is closer than 1,500 feet to the lease boundary, is on state land managed by the Department of Natural Resources. The state royalty for the lease is 5 percent, and overriding royalty interests on the lease, bring total royalties to about 17 percent.

State regulations require that a well testing or producing gas may only be within 1,500 feet of a property line only if the oil and gas lease owner is the same and the landowner is the same on both sides of the line.

The commission said Forcenergy, BLM and DNR have been negotiating a compensatory royalty agreement under which the state and owners of overriding royalty interests would receive royalties for the amount of gas estimated to come from the state lease, but that an agreement had not yet been reached.