STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re: THE APPLICATION OF Aurora Gas, LLC ) Conservation Order No. 478
for an order granting an exception to the )
spacing requirements of 20 AAC 25.055(a)(2) ) Nicolai Creek Unit Wells
and (a)(4) to provide for the drilling and testing ) No. 1B, No. 2 and No. 8
of the Nicolai Creek Unit Wells No. 1B, No. 2 ) Drilling and Testing
and No. 8 in an undefined gas pool. )
) September 5, 2002

IT APPEARING THAT:

1) Aurora Gas, LLC ("Aurora") by letter dated July 12, 2002 has requested an order from the Alaska Oil and Gas Conservation Commission ("Commission") allowing a spacing exception in accordance with 20 AAC 25.055 to drill and test the Nicolai Creek Unit No. 1B and No. 8 wells and recomplete and test the No. 2 well within 3000 feet of each other and within 1500 feet of a property line.

2) The Commission published notice of opportunity for public hearing in the Anchorage Daily News on July 17, 2002, and the Peninsula Clarion on July 19, 2002, pursuant to 20 AAC 25.540.

3) On August 5, 2002 the Alaska Mental Health Trust Land Office requested that the tentatively scheduled hearing be held.

4) On August 19, 2002 the Alaska Mental Health Trust Land Office withdrew the request for the hearing. Subsequently, the Commission decided to issue an order without a public hearing.

5) On August 26 and 28, 2002 Aurora provided a corrected exhibit and accompanying text to the July 12, 2002 application for spacing exception.

FINDINGS:

1) The surface location of the Nicolai Creek Unit Well No. 1B well is 2018' from the south line (FSL) and 195' from the west line (FWL), Section 29, T11N, R12W, Seward Meridian (SM). The top of the anticipated productive interval is 1637' FSL and 97' FWL, Section 29, T11N, R12W, SM. The projected bottom hole location for this well is 1637' FSL and 97' FWL, Section 29, T11N, R12W, SM

2) The surface location of the Nicolai Creek Unit Well No. 2 is 2018' FSL and 205' FWL, Section 29, T11N, R12W, SM. The top of the anticipated productive interval is 1176' FSL and 696' FWL, Section 29, T11N, R12W, SM. The projected bottom hole location for this well is 877' FSL and 870' FWL, Section 29, T11N, R12W SM

3) The surface location of the Nicolai Creek Unit Well No. 8 well is 2030' FSL and 245' FWL, Section 29, T11N, and R12W SM. The top of the anticipated productive interval is 2030' FSL and 245 FWL, Section 29, T11N, R12W SM. The bottom hole location is 203' FSL and 245' FWL, Section 29, T11N, R12W, SM.

4) The anticipated productive interval of Nicolai Creek Unit Wells 1B, 2 and 8 are within 1500 feet of a property line between State of Alaska and Bureau of Land Management leases.

5) Currently subsurface control in the Nicolai Creek Unit is inadequate to constrain with certainty the productive limits of the reservoir. However, Aurora's interpretation of the present well and seismic control suggests that the reservoirs and structure are complex.

6) Gas production from the Nicolai Creek Unit has come from an undefined gas pool in the Tyonek Formation. The individual sands are named sequentially by depth prefixed by the letter T.

7) The Nicolai Creek Unit Well No. 1B is proposed to be perforated in the T 2350 @ (-2557' sstvd), T3330 @ (-3074'), T3450 @ (-3162'), and T3650 @ (-3347') sands.

8) The Nicolai Creek Unit Well No. 2 is proposed to be perforated in the T1900 @ (-2070'), T2000 @ (-2242'), and T2200 @ (-2419') sands.

9) Nicolai Creek Unit Well No. 8 is proposed to be perforated in three Beluga Formation sands that have not been previously developed and overly the undefined Tyonek Formation gas pool.

10) An exception to the well spacing provisions of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (a)(4) is required for the drilling and testing of wells in a common pool within 3000 feet of each other and within 1500 feet of a property line where ownership changes.

11) Aurora sent notice of the application for spacing exception by certified mail to all offset owners, landowners, and operators of all properties within 3000 feet of the proposed productive intervals in Nicolai Creek Unit Wells No. 1B, No. 2 and No. 8.

CONCLUSIONS:

1) An exception to 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (a)(4) is necessary to allow drilling and testing of the Nicolai Creek Unit Wells No. 1B, No. 2 and No. 8.

2) Granting a spacing exception to allow drilling and testing of the Nicolai Creek Unit Wells No. 1B and No. 8 and to recomplete and test the No. 2 will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.

3) Additional control, including additional seismic data and information obtained through the drilling and production of the subject wells may improve the definition of the limits of the reservoirs.

4) Before regular production is permitted from the Nicolai Creek Unit Wells No. 1B, No. 2 and No. 8, 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 and testing of the wells as an exception, and so that drainage to the tract with respect to which the exception is granted will be prevented or minimized. AS 31.05.100(b).

NOW, THEREFORE, IT IS ORDERED:

Aurora's application for exception to the well spacing provisions of 20 AAC 25.055 (a)(2) and 20 AAC 25.055 (a)(4) for the purpose of drilling and testing the Nicolai Creek Unit No. 1B and No. 8 wells and for the purpose of recompleting and testing the No. 2 well is approved. The Nicolai Creek Unit Wells No. 1B, No. 2 and No. 8 may not be placed on regular production until the Commission takes additional action, upon petition, and after notice and hearing, to offset any advantage a landowner or owner may have by reason of the Nicolai Creek Unit Wells No. 1B, No. 2 and No. 8 having been drilled to the exception locations.

DONE at Anchorage, Alaska and dated September 5, 2002.

Cammy Oechsli Taylor, Chair
Alaska Oil and Gas Conservation Commission

Daniel T. Seamount, Jr., Commissioner
Alaska Oil and Gas Conservation Commission

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