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 approving regular production from three gas development wells in the Falls Creek and Susan Dionne Participating Areas of the Ninilchik Unit on the Kenai Peninsula.

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Conservation Order No. 537

Falls Creek No. 1RD Well
Falls Creek No. 3 Well
Susan Dionne No. 3 Well

October 25, 2004

IT APPEARING THAT:

1. Marathon Oil Company (“MOC”) by letter dated August 25, 2004, requested the Alaska Oil and Gas Conservation Commission to allow regular production of the Falls Creek No. 1RD, the Falls Creek No. 3 and the Susan Dionne No. 3 gas development wells;

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on September 3, 2004 pursuant to 20 AAC 25.540; and

3. No protests to the application, comments, or requests for public hearing were received.

FINDINGS:

1. The surface location of the Falls Creek #1RD well is 1898 feet from the south line and 2885 feet from the east line, Section 6, T1N, 12W, Seward Meridian (SM). The bottom hole location for this deviated well is approximately 1830 feet from the south line and 5025 feet from the east line, Sec. 6, T1N, 12W, SM.

2. The surface location of the Falls Creek Unit No. 3 well is 2846 feet from the east line and 1643 feet from the south line of Section 6, T1N R12W, SM. The bottomhole location is approximately 2725 feet from the east line and 600 feet from the south line of Section 1 T1N R13W, SM.

3. The surface location of the Susan Dionne No. 3 well is 194' from the south line and 1469 feet from the east line of Section 6, T1S, R13W, SM. The approximate bottom hole location for this well is 1964 feet from the south line and 1090 feet from the east line of Section 1, T1S, R14W, SM.

4. In Conservation Orders Nos. 468, 472 and 491, MOC was granted spacing exceptions to permit the drilling and testing of these three wells notwithstanding that their locations did not conform to statewide well spacing requirements defined in 20 AAC 25.055(a)(2). Each conservation order provided that the well could not be placed on regular production until the Commission takes additional action, upon petition, and after notice and hearing, to offset any advantage MOC may have over other owners by reason of drilling the well to the exception location and to allow affected owners to produce their just and equitable share of hydrocarbons.

5. Following a determination that each of these wells was capable of producing in paying quantities, MOC applied to the Alaska Department of Natural Resources for the formation of participating areas including each of the wells in the Ninilchik Unit. The Department approved the formation of these participating areas.

6. In the event that a person claiming to be affected by regular production from one or more of the subject wells contends that additional action by the Commission is necessary to offset any advantage MOC may have, or to allow affected owners to produce their just and equitable share of hydrocarbons, such person may seek relief from the Commission irrespective of the provisions of Conservation Order Nos. 468, 472, and 491.

CONCLUSIONS:

1. No further action by the Commission is currently required before regular production from the subject wells is permitted.

NOW, THEREFORE, IT IS ORDERED:

MOC’s application to permit regular production of the Falls Creek No. 1RD, Falls Creek No. 3, and Susan Dionne No. 3 gas development wells is granted.

DONE at Anchorage, Alaska and dated October 25, 2004.

John K. Norman, Chair
Alaska Oil and Gas Conservation Commission

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


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