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. 490
Oil Company for an order )
granting an exception to )
spacing requirements of ) Marathon Oil Company
Title 20 AAC 25.055 to ) Beaver Creek Unit No. 3 Deepen
provide for the drilling )
of the Beaver Creek Unit ) April 29, 2003
No. 3 Deepen gas delineation )
Well. )

IT APPEARING THAT:

1. Marathon Oil Company submitted an application dated March 19, 2003 requesting exception to the well spacing provisions of Title 20 AAC 25.055(a)(2) to allow drilling the Beaver Creek Unit No. 3 Deepen, gas delineation well to a location which is within 1500 feet of a property boundary with ownership changes.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on March 28, 2003 pursuant to 20 AAC 25.540.

3. No protests to the application were received.

FINDINGS:

1. The Beaver Creek Unit No. 3 deepen (BCU 3 DPN) gas delineation well will be drilled as a deviated hole with a surface location 1400 feet from the north line and 1500 feet from the west line of Section 34, T7N R10W, Seward Meridian (SM) to a bottomhole location 2172 feet from the south line and 413 feet from the east line of Section 27 T7N R10W, SM.

2. Offset owners Cook Inlet Region Inc. and the Bureau of Land Management have been notified.

3. No protests to the spacing exception application were received.

4. The objective of the BCU 3 DPN well is to delineate Beluga Formation gas reserves in a mid structure position on the Beaver Creek anticline.

5. An exception to the well spacing provisions of Title 20 AAC 25.055 (a)(2) is necessary to allow the drilling of the BCU 3 DPN.

6. Drilling to the proposed productive interval for BCU 3 DPN is inconsistent with the spacing requirements for the Beaver Creek Unit Beluga Formation Gas Pool as defined in Conservation Order No. 237 Rule 3 (A).

CONCLUSIONS:

1. The requested spacing exception for the BCU 3 DPN well should be granted, except that the Commission must take such action as will offset any advantage which Marathon Oil Company may have over adjoining owners by reason of the drilling the BCU 3 DPN well as an exception, and so that drainage to the tract with respect to which the exception is granted will be prevented or minimized.

2. Evaluation of the lateral extent of the Beluga Formation gas reserves in the BCU 3 DPN will be required to insure protection of the correlative rights of adjoining owners.

NOW, THEREFORE, IT IS ORDERED:

1. Marathon Oil Company's application for exception to the well spacing provision of 20 AAC 25.055(a)(2) for the purpose of drilling and producing the BCU 3 DPN gas delineation well is conditionally approved.

2. The BCU 3 DPN well may not be placed on regular production until Marathon Oil Company has evaluated the lateral extent of the Beluga Formation gas reserves in the BCU 3 DPN and the Commission has been provided that evaluation and has had the opportunity to take additional action to offset any advantage Marathon may have over other owners by reason of drilling BCU 3 DPN to the exception location.

DONE at Anchorage, Alaska, this 29th day of April 2003.

Sarah Palin, Chair
Alaska Oil and Gas Conservation Commission

Randy Ruedrich, Commissioner
Alaska Oil and Gas Conservation Commission

Conservation Order Index