STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

THE APPLICATION OF Union Oil Company of California (“UNOCAL”) for an order granting an exception to the spacing requirements of 20 AAC 25.055(a)(2) and (4) to provide for the drilling and producing of the Happy Valley 11 gas development well

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Conservation Order No. 543

Happy Valley No. 11
Deep Creek Unit
Drilling and Producing

December 22, 2004

IT APPEARING THAT:

1. UNOCAL by letter dated October 19, 2004 has requested an order allowing a spacing exception to drill and operate the Happy Valley No. 11 well in accordance with 20 AAC 25.055;

2. The Commission published notice of opportunity for public hearing in the Anchorage Daily News on October 25, 2004, pursuant to 20 AAC 25.540; and

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

FINDINGS:

1.The surface location of this well is 1271 feet from the south line (“FSL”) and 1263 feet from the east line (“FEL”) of Section 22, T2S, R13W, Seward Meridian (“S.M.”). The projected bottom hole location for this well is 2763 feet FSL, 2934 feet FEL, Section 22, T2S, R13W, S.M.

2. An exception to the well spacing provisions of 20 AAC 25.055 (a)(2) is necessary for the drilling and production of this well. The anticipated productive interval in the Beluga and Tyonek Formations of the Happy Valley No. 11 gas development well, if successful, will be within 1,500 feet of a property line between two landowners.

3. An exception to the well spacing provisions of 20 AAC 25.055 (a)(4) is necessary for the drilling and production of this well. The anticipated productive interval in the Beluga and Tyonek Formations of the Happy Valley No. 11 gas development well, if successful, will be within 3,000 feet and in the same pool as the productive interval in the Happy Valley No. 2, 3 and 10 gas development wells.

4. UNOCAL sent notice of the application for spacing exception by certified mail to all offset owners, landowners, and operators of all properties within 3,000 feet of the proposed Happy Valley 11 well.

5. The location of the Happy Valley No. 11 well was selected on the basis of a favorable structural position for recovery of gas reserves from the Beluga and Tyonek Formations that are not believed to recoverable from the Happy Valley No. 2, 3 and 10 wells or from a location greater than 1500 feet from a property line between two landowners.

6. Happy Valley Wells No. 2, 3, 10 and 11 are located within the Happy Valley Participating Area in the Deep Creek Unit.

7. The anticipated productive interval of the Happy Valley 11 well is more than 1500 feet from the external boundary of the Deep Creek Unit.

CONCLUSIONS:

1. An exception to 20 AAC 25.055(a)(2) and (4) is necessary to allow drilling and production of the Happy Valley No. 11 gas development well.

2. Granting a spacing exception to allow drilling and production of the Happy Valley No. 11 well will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.

NOW, THEREFORE, IT IS ORDERED:

UNOCAL’s application for exception to the well spacing provisions of 20 AAC 25.055(a)(2) and (4) for the purpose of drilling and producing the Happy Valley No. 11 gas development well is granted.

DONE at Anchorage, Alaska and dated December 22, 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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