Re: THE APPLICATION OF                  )                              Disposal Injection Order No. 15
MARATHON OIL COMPANY             )                              North Trading Bay Unit S-5 well
("Marathon") for an order allowing the      )                               North Trading Bay Unit S-5 well
underground disposal of Class II fluids in  )
the North Trading Bay Unit S-5 well.       )

                                                                                                                         August 31, 1998

IT APPEARING THAT:

1. By letter dated June 9, 1998, Marathon requested authorization from the Alaska Oil and Gas Conservation Commission to dispose of Class II oil field waste fluids by underground injection into the North Trading Bay Unit S-5 well, located on the Spark Platform.
2. The Commission published notice of an opportunity for public hearing in the Anchorage Daily News on June 12, 1998.
3. The Commission did not receive protest or a request for a public hearing.

1. Marathon is the operator of the North Trading Bay Unit ("NTBU"). There are no other operators within a one-quarter mile radius of the proposed disposal injection project. The State of Alaska is the surface owner.
2. Marathon and Unocal are the only working interest owners within the NTBU.
3. The U.S. Environmental Protection Agency has exempted portions of aquifers beneath the Cook Inlet described by a one-quarter mile area beyond and lying directly below the Trading Bay Field. C.F.R. § 147.102(b)(2)(iv).
4. The NTBU is within the geographical area known as the Trading Bay Field.
5. Fluids proposed for disposal will consist of Class II oil field waste fluids associated with the production of natural gas from the NTBU, and primarily will be produced water and associated natural gas condensate from the NTBU S-2rd well. The NTBU S-2rd well is currently producing less than 200 barrels of water per day.
6. The NTBU S-5 well was originally drilled as a Hemlock and "G" oil producer in 1969. The well was converted to a waterflood injector in 1974. Over 13 million barrels of water were injected into the well between December 1974 and March 1981.
7. Marathon suspended NTBU Hemlock and "G" zone oil production in 1992. At the time of shut in, the cumulative oil recovery exceeded 40% of the original oil in place. Combined with the high water cut of wells, Marathon concluded that the Hemlock and "G" zones had been fully swept and no longer had economic potential.
8. The Hemlock and "G" zones in the NTBU are common to and correlate with the 10,070¢ – 10,635¢ measured depth ("MD") interval in the Texaco-Superior TS No. 1 well as defined by Conservation Order 69.
9. The proposed waste disposal will occur in the depleted Hemlock and "G" zones through existing perforations located between 10,826¢ -11,397¢ MD in the NTBU S-5 well.
10. The depleted Hemlock and "G" zones are separated from the overlying gas productive sands of the "basal F" and "upper G" formations by an aggregate thickness of over 200¢ of shale and coal seams.
11. The NTBU S-2rd well was recompleted in 1996 to develop gas reserves from the "basal F" and "upper G" formations.
12. Produced water from the NTBU S-2rd well is currently being disposed of down the annulus of the NTBU S-4 well under the authority of Disposal Injection Order #13, however, produced water rates continue to increase and injection pressures are approaching the pressure limitations of the S-4 well.
13. The requested maximum injection rate for the NTBU S-5 well is 1000 barrels of fluid per day. The anticipated maximum and average surface injection pressures are 3000 psi and 1000 psi, respectively.
14. Model studies indicate that fracture growth out of the proposed disposal zone will not occur under the estimated injection pressures and rates.
15. The NTBU S-5 well was constructed with 13 3/8¢ ¢ , 61 lb./ft, K-55 surface casing set at 2,245¢ MD and cemented to surface, and 9 5/8¢ ¢ , 47 lb./ft BTC, N-80 and P-110 production casing set at 11, 527¢ MD and cemented to 7998¢ MD (calculated). The well is equipped with tubing and packer.
16. The NTBU S-5 well passed a mechanical integrity test of the casing-tubing annulus on June 12, 1998.

1. The requirements of 20 AAC 25.252 for authorization to dispose of Class II fluids in the NTBU S-5 well have been met.
2. Waste fluids authorized for disposal under this order will consist exclusively of Class II wastes generated from the production of natural gas from the NTBU.
3. Movement of waste fluids will be confined within appropriate receiving intervals by confining lithology, cement isolation of the perforated intervals, and operating parameters.
4. Monitoring of disposal rates and pressures will help ensure fluids are contained within the disposal interval. Abnormalities in operating conditions may be an indication that fluid is escaping beyond the authorized disposal interval.
5. Disposal injection into the NTBU S-5 well will not occur into, through, or above a non-exempt freshwater aquifer, and will not result in an increased risk of movement of fluids into a freshwater source.
6. The mechanical integrity of this well has been demonstrated in accordance with 20 AAC 25.412.
7. Disposal injection operations in the NTBU S-5 well will not cause waste nor jeopardize correlative rights, and will result in greater ultimate recovery from the NTBU.

Rule 1 Authorized Injection Strata for Disposal

Class II oil field fluids may be injected into the NTBU S-5 well in conformance with 20 AAC 25 for the purpose of disposal into strata that is common to and correlates with the 10,070¢ – 10,635¢ MD interval in the Texaco-Superior TS No. 1 well.

Rule 2 Demonstration of Tubing/Casing Annulus Mechanical Integrity

The tubing/casing annulus must be tested for mechanical integrity in accordance with 20 AAC 25.412 prior to initiating injection and at least once every four years. A test surface pressure of 1500 psi or 0.25 psi/ft. multiplied by the vertical depth of the packer, whichever is greater, but not to exceed a hoop stress greater than 70% of the minimum yield strength of the casing is to be used. The test pressure must show stabilizing pressure and a decline of less than 10% in a thirty-minute period. The Commission must be notified at least twenty-four (24) hours in advance to enable a representative to witness pressure tests.

Rule 3 Well Integrity Failure

Whenever disposal rates and/or operating pressure observations or pressure tests indicate pressure communication or leakage of any casing, tubing or packer, the operator must notify the Commission on the first working day following the observation, obtain Commission approval of a plan for corrective action and obtain Commission approval to continue injection.

Rule 4 Operational Criteria

Maximum disposal rates shall not exceed 1000 bbls/day. Maximum surface disposal pressure shall not exceed 3000 psi.

Surveillance

Operating parameters including disposal rate, disposal pressure, annulus pressure and fluid volume must be monitored and reported according to the requirements of 20 AAC 25.432. An annual report evaluating the performance of the disposal operation must be submitted on or about July 1 of each year.

Administrative Action

Upon request, the Commission may administratively revise and reissue this order upon proper showing that any changes are based on sound engineering practices and will not allow waste fluids to escape from the disposal zone.

DONE at Anchorage, Alaska and dated August 31, 1998.
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David W. Johnston, Chairman
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Robert N. Christenson, Commissioner
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Camillé Oechsli, Commissioner