Re: THE APPLICATION OF ARCO ALASKA	)	Conservation Order No.430
INC. to present testimony for classification	)
of a new pool and the establishment of rules	)	Kuparuk River Field
for development of the Tarn oil pool in the	)	Tarn Oil Pool
Kuparuk River Field.	)
		July 21, 1998

IT APPEARING THAT:

1. By letter dated March 27, 1998, ARCO Alaska, Inc. ("AAI") requested a public hearing to present testimony to define the Tarn oil pool and establish rules for development and production of the reservoir.
2. Notice of public hearing to be held on April 28, 1998 was published in the Anchorage Daily News on March 28, 1998.
3. A hearing concerning the matter of the applicant's request was convened in conformance with 20 AAC 25.540 at the Commission's offices, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 am on April 28, 1998.

1. The Tarn oil pool is located immediately adjacent to the southwest corner of the Kuparuk River Unit ("KRU") on Alaska's North Slope.
2. AAI is operator of the KRU and operator of state leases overlying the Tarn oil pool area.
3. AAI has petitioned the Alaska Department of Natural Resources to expand the KRU to include the Tarn oil pool.
4. The Tarn oil pool has not been completely delineated. Large portions of the Tarn oil pool have yet to be drilled.
5. The Tarn oil pool correlates with the stratigraphic interval between 4376 feet to 5990 feet measured depth (MD) in the AAI Bermuda #1 (KRU 36 10-7/1), which appears to contain a typical and representative stratigraphic section of the pool.
6. The Tarn oil pool is composed of five late Cretaceous aged marine sandstone and interbedded mudstone intervals that are stratigraphically within the Seabee Formation. The name and depth for each productive Tarn interval in the AAI Bermuda #1 well is as follows:

"C30" Interval	5990' - 5716' MD
"Bermuda" Interval	5608' - 5542' MD
"Cairn" Interval	5452' - 5316' MD
"Arete" Interval	5316' - 5105' MD
"Iceberg" Interval	5105' - 4376' MD

7. The Tarn intervals share a common depositional environment and have similar lithologic characteristics and fluid compositions. The five intervals are located closely adjacent,both stratigraphically and areally.
8. Available well data shows that sand distribution within the Tarn oil pool is complex, with variable gross sand percentages within each interval. The current areal delineation of the pool relies on recently acquired 3-D seismic data calibrated to wellbore data.
9. Not all of the reservoir intervals in the Tarn oil pool have been shown to be hydrocarbon bearing in existing wells. The northern and southern productive limits of the Cairn, Iceberg and Arete intervals have not yet been determined.
10. The Tarn oil pool appears to be monoclinal in structure with easterly dip ranging from three or four degrees to nearly flat. Few faults have been found.
11. Hydrocarbon distribution within the Bermuda and Cairn intervals is controlled by sand distribution, with updip stratigraphic seal along the western margin of the pool area.
12. Petrophysical information is derived from conventional cores collected from the AAI Tarn #1 through Tarn #4 wells and rotary sidewall cores from the AAI Bermuda #1 (KRU 36 10-7/1) well.
13. The Tarn oil pool is composed of heterogenious sandstone, fine to very fine-grained, with shale laminations and interbeds. Sandstone grains are principally quartz, plagioclase, zeolites, and heterolithic rock fragments. Clay content is high, ranging between 15 and 25 percent, and occurs primarily in the heterolithic framework of the sandstone.
14. Core porosity ranges from 18 to 27 percent and averages 21 percent. Air permeability ranges from 1 to 45 millidarcies and averages 10 millidarcies. Average water saturation based upon core analysis is about 40 percent.
15. Sandstone porosity is dominantly secondary with common microporosity. This condition, combined with fine-grain size and high clay content, decreases permeability and increases susceptibility to fine migration.
16. AAI requests well spacing of 10 acres to allow flexibility in locating wells because of rock properties and stratigraphic constraints.
17. AAI estimates that the likely volume of oil in the Bermuda and Cairn intervals is about 136 million barrels of original oil in place ("OOIP"). AAI did not provide a volume estimate for other intervals in the Tarn oil pool.
18. AAI plans to produce the Bermuda and Cairn interval for a short period using primary depletion methods, then initiate enhanced oil recovery ("EOR") operations. Initial EOR plans call for miscible gas injection using a 20 percent pore volume slug, followed by lean gas sweep to move miscible products to the wellbore. AAI rejected waterflood operations because of potential reservoir damage and unfavorable reservoir permeability and poor water mobility characteristics.
19. AAI estimate oil recovery in the Bermuda and Cairn intervals at 10 percent of OOIP using primary methods. With miscible and lean gas injection, AAI estimates an additional recovery of 21 percent OOIP. Total recovery from the two intervals is expected to be about 43 million barrels.
20. Solution gas-oil ratio was estimated at 710 scf/stb from a recombined separator sample.
21. The gas-oil ratio is expected to increase significantly during production life because of pressure drawdown and miscible gas or lean gas breakthrough during reservoir depletion.
22. AAI calculated original reservoir pressure of 2350 psig in Tarn #2 on the basis of a pressure build up test immediately following a 10-day flow test. The well flowed an average 1900 BOPD of 37 API gravity crude oil with a gas-oil ratio of 1200 scf/stb at a flowing tubing pressure of 550 psig. Gas-oil ratio was elevated because of reservoir pressure drawdown during the test.
23. AAI will measure reservoir pressure in producing wells and injection wells initially and within portions of the reservoir on a periodic basis to monitor reservoir performance. Other surveillance such as profile logs may be applied to wells where multiple intervals are open for production or injection.
24. Casing and cement plans will adhere to 20 AAC 25.030 with designs based on performance factors to withstand permafrost and downhole conditions.
25. AAI proposes to use well annuli in accordance with 20 AAC 25.080 to dispose of drilling wastes as part of the development operations and is also requesting authorization for an area injection order for waste disposal and EOR operations.
26. AAI proposes to commingle Tarn oil with hydrocarbons from the Kuparuk oil pool for processing in KRU production facilities. Production will be allocated back to Tarn oil pool on the basis of monthly well tests.

1. Pool rules for the initial development and delineation of the Tarn oil pool are appropriate at this time.
2. Initial pool development will be conducted on leases that are not participating in the KRU.
3. AAI, the operator of the KRU and the leased portion of the Tarn oil pool area, can properly undertake concurrent operations in both the Kuparuk and Tarn oil pools.
4. Minimum well spacing of 10 acres will allow the operator to deal effectively with difficult rock properties and stratigraphic constraints in locating wells, and should not cause waste, compromise ultimate recovery or jeopardize correlative rights.
5. Early implementation of miscible gas injection to mobilize oil followed by lean gas injection to sweep the reservoir and support pressure will preserve reservoir energy and enhance ultimate recovery from the pool.
6. Remedial measures may be required in some areas of the reservoir to control placement of injectant, and improve the ability of the injectant to sweep the rock and maintain reservoir pressure.
7. Annular disposal of drilling wastes can occur in an environmental safe manner if conducted in accordance with 20 AAC 25.080, but will require subsequent Commission review on a well-by-well basis to ensure that the provisions of 20 AAC 25.080(c) are met. The area injection order for the Tarn oil pool can provide a partial basis for any subsequent Commission determinations concerning annular disposal.
8. Reservoir pressure will be measured in wells using standard industry practices on a regular basis to manage production and monitor reservoir performance.
9. Exception from the gas-oil-ratio limitations of 20 AAC 25.240 is appropriate provided a pressure maintenance project starts within six months of the start of regular production.
10. Commingling Tarn and Kuparuk production streams on the surface is appropriate provided that there is adequate individual well testing to assure production allocation quality.
11. Two well tests per month has been a minimum standard for commingled pools with the advent of commingling pools in surface facilities prior to custody transfer and severance from leases.
12. An allocation factor of 1.0 for the Tarn Pool is acceptable during the first year of production to evaluate multiphase well test equipment and allocation quality.

Umiat Meridian
 

T11N	R7E	25, 26, 34, 35
T11N	R8E	30, 31
T10N	R7E	1, 2, 3, 4, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36
T10N	R8E	6, 7, 18, 19, 30, 31
T9N	R7E	1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 32, 33, 34, 35, 36
T8N	R7E	1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18

Rule 1 Field and Pool Name

The pool is in a geographic area known as the Kuparuk River Field and will be contained within the Kuparuk River Unit. Hydrocarbons underlying the affected area and within the referenced intervals of the Seabee Formation constitute a single oil and gas reservoir called the Tarn oil pool.

Rule 2 Pool Definition

The Tarn oil pool is defined as the accumulation of hydrocarbons common to and correlating with the intervals between the measured depths of 4376 feet and 5990 feet (MD) interval in the Bermuda #1 well (KRU 36 10-7/1).

Rule 3 Spacing Units

Nominal spacing units within the pool will be 10 acres. The pool shall not be opened in any well closer than 300 feet to an external boundary where ownership changes.

Rule 4 Casing and Cementing Practices

1. Conductor casing must be set at least 75 feet below ground level and cemented to surface.
2. Where required for annular disposal, surface casing must be set at least 500 feet below the permafrost and be cemented to surface.

1. Injection wells may be completed with tapered casing provided a sealbore assembly, packer, or other isolation device is positioned not over 200 feet above the top of the injection or perforated interval.
2. A sealbore assembly, packer, or other isolation device may be positioned within 200 feet of a secondary target interval within the defined pool where potential reserves are reasonably expected and will be evaluated or exploited.

1. All wells capable of unassisted flow of hydrocarbons will be equipped with a fail-safe automatic surface safety valve.
2. Injection wells will be equipped with a double check valve arrangement.
3. Surface safety valves will be tested at six-month intervals.

1. Production from the Tarn oil pool may be commingled with production from the Kuparuk oil pool in surface facilities prior to custody transfer.
2. The allocation factor for the Tarn oil pool will be 1.00 for the first year of production to evaluate the allocation method, testing frequency and quality.
3. Each producing well will be tested a minimum of two times per month during the first year of regular production.
4. The Commission may require more frequent or longer tests if the allocation quality deteriorates.
5. The operator shall submit a monthly file(s) containing daily allocation data and daily test data for agency surveillance and evaluation.
6. The operator shall provide the Commission with a well test and allocation review report after six months and after one year of commingled production. Subsequent report frequency and necessity will be determined after the first year of regular production.
7. After one year of regular production, an evaluation of test frequency and allocation quality must be done to support extension of the 1.00 allocation factor or consideration of alternatives.

1. Prior to regular production or injection an initial pressure survey shall be taken in each well.
2. A minimum of one bottom-hole pressure survey per producing or injecting governmental section shall be measured annually. Bottom-hole surveys in paragraph (a) may fulfill the minimum requirement.
3. The reservoir pressure datum will be 5200 feet subsea.
4. Pressure surveys may consist of stabilized static pressure measurements at bottom-hole or extrapolated from surface, pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole formation tests.
5. Data and results from pressure surveys shall be reported quarterly on Form 10-412, Reservoir Pressure Report. All data necessary for analysis of each survey need not be submitted with the Form 10-412 but must be available to the Commission upon request.
6. Results and data from special reservoir pressure monitoring tests or surveys shall also be submitted in accordance with part (e) of this rule.

Wells producing from the Tarn oil pool are exempt from the gas-oil-ratio limits of 20 AAC 25.240(b) so long as the provisions of 20 AAC 25.240(c) apply.

Rule 10 Pressure Maintenance Project

A pressure maintenance miscible gas injection project must be initiated within six months after the start of regular production from the Tarn oil pool.

Rule 11 Reservoir Surveillance Report

A surveillance report will be required after one year of regular production and annually thereafter. The report shall include but is not limited to the following:

1. Progress of enhanced recovery project(s) implementation and reservoir management summary including engineering and geotechnical parameters.
2. Voidage balance, by month, of produced fluids and injected fluids.
3. Analysis of reservoir pressure surveys within the pool.
4. Results and where appropriate, analysis of production logs, tracer surveys and observation well surveys.
5. Results of well allocation and test evaluation for Rule 7(f) and any other special monitoring.
6. Future development plans.

In the event of oil production capacity restrictions at or from the Kuparuk facilities, all commingled reservoirs produced through the Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage.

Rule 13 Administrative Action

Upon proper application, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles.

DONE at Anchorage, Alaska and dated July 21, 1998.

David W. Johnston,
Chairman

Camillé Oechsli
Commissioner