STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage, Alaska 99501

Re: THE APPLICATION OF Marathon ) Conservation Order No. 481
Oil Company ("Marathon") for an order )
granting an exception to the spacing ) Ninilchik Unit
requirements of 20 AAC 25.055(a)(2) ) Abalone No. 1
to provide for the drilling and testing ) Exploratory Well
of the Abalone No. 1 exploratory well ) Drilling and Testing
in an undefined gas pool. )
) December 13, 2002

IT APPEARING THAT:

1. Marathon, by letter dated October 15, 2002 and received by the Alaska Oil and Gas Conservation Commission ("Commission") on October 17, 2002, has requested an order allowing a spacing exception in accordance with 20 AAC 25.055 to drill and test the Abalone No. 1 exploratory well. The locations of prospective intervals in this well fall within 1500 feet of a property line.

2. The Commission published notice of opportunity for public hearing in the Anchorage Daily News on October 25, 2002, and in Peninsula Clarion on October 27, 2002, pursuant to 20 AAC 25.540.

3. The Commission did not receive any protests to the application.

FINDINGS:

1. The surface location of the Abalone No. 1 well is 250' from the south line ("FSL") and 3000' from the east line ("FEL") of Section 29, T2N, R12W, Seward Meridian ("SM"). The projected bottom hole location for this well is 590' from the north line ("FNL") and 3000' FEL of Section 32, T2N, R12W, SM.

2. The prospective intervals in the Abalone No. 1 well are within 1500 feet of a number of property lines.

3. Marathon has made reasonable and diligent efforts to identify, locate and send notice of the application for spacing exception by certified mail to all offset owners, landowners, and operators of all properties within within 3000' of the proposed Abalone No. 1 well.

4. By letter dated September 17, 2002, the Division of Governmental Coordination has determined that drilling of this well is consistent with the Alaska Coastal Management Program.

CONCLUSIONS:

1. An exception to the well spacing provisions of 20 AAC 25.055 (a)(2) is necessary for the drilling and testing of the Abalone No. 1 well.

2. Granting a spacing exception to allow drilling and testing of the Abalone No. 1 exploratory well promotes efficient exploration and development, and will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.

3. Before regular production is permitted from the Abalone No. 1 well, 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 of the well 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:

Marathon's application for exception to the well spacing provisions of 20 AAC 25.055(a)(2) to drill and test the Abalone No. 1 well is approved. This well may not be placed on regular production until the Commission takes additional action, upon petition, and after notice and hearing, to offset any advantage Marathon may have over other owners by reason of drilling the well at the exception location.

DONE at Anchorage, Alaska and dated December 13, 2002.

Cammy Oechsli Taylor, Chair
Alaska Oil and Gas Conservation Commission

Michael L. Bill, Commissioner
Alaska Oil and Gas Conservation Commission

Conservation Order Index