STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

THE APPLICATION OF FOREST OIL CORPORATION for an order granting a permanent exception to the spacing requirements of 20 AAC 25.055 to allow for production from the West Foreland #1 gas well, West Foreland Field, Cook Inlet, Alaska; and allocating production from the West Foreland #1 well to Federal lease A-035017 and State of Alaska lease ADL-359112

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Conservation Order No. 450B

West Foreland Field

West Foreland Undefined Pool

September 29, 2003

IT APPEARING THAT:

1. By letter incorrectly dated July 16, 2003, and received by the Alaska Oil and Gas Conservation Commission (“Commission”) on June 16, 2003, and supplemented by a letter dated and received June 30, 2003, Forest Oil Corporation (“Forest”) in its capacity as Operator of the West Foreland Field requested that the Commission make permanent the temporary well spacing exception for the currently producing intervals in the West Foreland #1 well, and approve an allocation of gas production between Federal Lease A-035017 and State of Alaska Lease ADL-359112.

2. Notice of a public hearing was published in the Anchorage Daily News on June 19, 2003, and an amended notice was published in the Anchorage Daily News on July 3, 2003.

3. By letter dated July 25, 2003, and received by the Commission on July 28, 2003, Forest provided supplemental information to the Commission in support of its application.

4. On August 13, 2003, the Commission received written notices of support of Forest’s recommended production allocation from overriding royalty owners John M. Robinson and Collins W. Brown.

5. The Commission held a public hearing August 14, 2003 at 9:00 AM at the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Representatives of Forest testified at the hearing. The hearing record was held open until August 22 at 5:00 PM to allow Forest’s submittal of suggested language to be included in the Commission’s order regarding disbursement of escrow funds.

6. On August 22, 2003, Forest submitted such suggested language to the Commission.

FINDINGS:

1. The record for this order includes the records for Conservation Orders Nos. 450 and 450-A.

2. West Foreland #1 has a surface location 879.5' from the south line and 670.5’ from the east line of Section 21 in T8N and R14W of the Seward Meridian. It was originally drilled during 1961 and 1962 to search for oil.

3. West Foreland #1 is a vertical well located approximately 570’ from the Cook Inlet shoreline, which forms the boundary between Federal Lease A-035017 and State Lease ADL-359112.

4. The landowners for Federal Lease A-035017 are Cook Inlet Region, Inc. (“CIRI”), and the Bureau of Land Management (“BLM”). The landowner for State Lease ADL-359112 is the Department of Natural Resources (“DNR”). BLM administers Lease A-035017 on behalf of CIRI.

5. In 1997, Forcenergy Inc. (“Forcenergy”) acquired 3D seismic data across the West Foreland Field area. Well data and 3D seismic data were used to map the West Foreland structure, including faulting that traps the gas accumulation being produced by West Foreland #1. Forcenergy is the predecessor of Forest. In this order, references to “Forest” include Forcenergy as applicable.

6. In Conservation Order No. 450 (“CO 450”), issued on July 24, 2000, as amended by Conservation Order No. 450-A (“CO 450-A”), issued on April 23, 2001, the Commission:
a. granted Forest a temporary spacing exception to allow for gas production from the West Foreland #1 well from any interval not deeper than 9527’ MD;
b. required Forest to establish an interest-bearing escrow account and deposit funds equivalent to the value of 17-1/2 % of the total gas production from the West Foreland #1 in that account;
c. required Forest to conduct appropriate production testing and provide the Commission with geological and geophysical data and the results of the production testing to support a reasonable inference as to the proportion of producible gas reserves down to 9,527 feet MD in West Foreland #1 that underlies each of the two affected leases; and
d. provided that escrowed funds would be disbursed in accordance with a compensatory royalty agreement or other allocation agreement (after all royalty owners had either executed such agreement or had an opportunity to be heard) or, in the absence of an agreement, escrowed funds would be disbursed as determined by the Commission.

7. On or about April 20, 2001, Forest established an escrow account as required by CO 450 and 450-A.

8. On April 25, 2001, Forest initiated gas production from West Foreland #1 from a Tyonek reservoir between 9336’ to 9352’ MD.

9. During January 2003, West Foreland #1 was shut-in for well maintenance work. While the well was shut-in, new down-hole pressure buildup data were gathered.

10. In July of 2003, BLM, DNR, and Forest agreed, pursuant to a previously executed compensatory royalty agreement, to an allocation of 58% to Federal lease A-035017 and 42% to State lease ADL-359112 of all gas reserves producible from any interval not deeper than 9527’ from the West Foreland #1 well.

11. Forest presented sufficient evidence that it made diligent efforts to locate all owners of royalty interests on both the federal and state leases, and that it gave written notice to all such owners for whom an address was obtained of the owner’s right to be heard on Forest’s request for Commission approval of the agreed allocation of production between the two leases. No owner opposed that allocation.

12. Forest provided evidence in support of the agreed allocation showing that material balance (P/Z analysis) incorporating pressure; gas properties and cumulative gas production data through January 2003 resulted in greater calculated original gas in place (“OGIP”) within the West Foreland structure. Volumetric estimates based on net pay isopach maps for the West Foreland structure were revised to accommodate the increase in OGIP.

13. An allocation of 58% to Federal lease A-035017 and 42% to State lease ADL-359112 represents a reasonable estimate of the respective proportions of the gas reserves producible from accumulations not deeper than 9527’ from the West Foreland #1 well that underlie the two leases.

CONCLUSIONS:

1. A permanent exception to 20 AAC 25.055(a)(2) is necessary to allow continued production of gas from the Tyonek reservoir in West Foreland #1. This spacing exception must apply to gas production from any interval not deeper than 9527’ MD in the West Foreland #1 well.

2. Allocation of production as approved by this order will protect the correlative rights of affected persons, will be fair to affected owners of royalty interests, and will accomplish the purposes of AS 31.05.100.

3. The conditions established by CO 450 and 450-A for the disbursement of escrow funds and for the termination of Forest’s obligations to maintain and pay into an escrow account have been satisfied.

NOW, THEREFORE, IT IS ORDERED:

1. A permanent spacing exception is granted to allow production of gas from the West Foreland #1 from any interval not deeper than 9527’ MD.

2. The Commission approves the allocation of 58% to Federal Lease A-035017 and 42% to State of Alaska Lease ADL-359112 of any gas production from any interval not deeper than 9527’ MD in West Foreland #1.

3. The Commission authorizes the disbursement to the persons entitled thereto, consistent with the allocation approved by the Commission, of the funds that have been placed in First National Bank of Anchorage Account No. 80-8250-00, pursuant to the First National Bank of Anchorage, West Forelands #1 Invested Escrow Agreement. In the case of escrow funds otherwise due to a royalty interest owner who has not been located despite Forest’s diligent efforts to do so, the funds may be disbursed to Forest. Such disbursement does not affect Forest’s liability to pay royalties to such royalty interest owner.

4. Subject to the disbursement of funds as authorized by this order, Forest’s obligations under CO 450 and CO 450-A to maintain and pay into an escrow account are terminated.

DONE at Anchorage, Alaska and dated September 29, 2003.

Sarah Palin, Chair
Alaska Oil and Gas Conservation Commission

Randy Ruedrich, Commissioner
Alaska Oil and Gas Conservation Commission


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