STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

THE APPLICATION OF Marathon Oil Company for an order granting an exception to spacing requirements of Title 20 AAC 25.055 to provide for the drilling of the Falls Creek Unit No. 3 gas delineation well.

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Conservation Order No. 491

Marathon Oil Company

Falls Creek Unit No. 3

June 16, 2003

IT APPEARING THAT:

1. Marathon Oil Company submitted an application dated May 1, 2003 requesting exception to the well spacing provisions of Title 20 AAC 25.055(a)(2) to allow drilling the Falls Creek Unit No. 3, 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 May 8, 2003 pursuant to 20 AAC 25.540.

3. No protests to the application were received.

FINDINGS:

1. The Falls Creek Unit No. 3 (FCU 3) gas delineation well will be drilled as a deviated hole with a surface location 2846 feet from the east line and 1643 feet from the south line of Section 6, T1N R12W, Seward Meridian (SM) to a bottomhole location 2725 feet from the east line and 600 feet from the south line of Section 1 T1N R13W, SM.

2. Offset landowners, owners and operators within 3,000 feet of the anticipated productive interval of the FCU 3 well have been notified.

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

4. The location of the FCU 3 well was selected as the most favorable structural position for Tyonek Formation gas reserves available from the existing Falls creek Unit pad. 5. An exception to the well spacing provisions of Title 20 AAC 25.055 (a)(2) is necessary to allow the drilling of the FCU 3.

CONCLUSIONS:

1. The requested spacing exception for the FCU 3 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 FCU 3 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 Tyonek Formation gas reserves in the FCU 3 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) is conditionally approved.

2. The FCU 3 well may not be placed on regular production until Marathon Oil Company has evaluated the lateral extent of the Tyonek Formation gas reserves in the FCU 3 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 FCU 3 to the exception location.

DONE at Anchorage, Alaska and dated June 16, 2003.

Sarah Palin, Chair
Alaska Oil and Gas Conservation Commission

Randy Ruedrich, Commissioner
Alaska Oil and Gas Conservation Commission

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


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