STATE OF ALASKA

OIL AND GAS CONSERVATION COMMISSION
3001 Porcupine Drive
Anchorage, Alaska 99501-3192

Re: The APPLICATION OF Ocean Energy Resources, Inc.   )  Disposal Injection Order No.20  
("Ocean Energy") for disposal of Class II oil field   )
wastes by underground injection in the Pioneer Unit   )  Well #1702-15DA WDW
#1702-15DA WDW well.                                  )  Pioneer Unit

                                                         August 11, 1999


IT APPEARING THAT:

1. By correspondence dated June 28, 1999, Ocean Energy requested authorization from the Alaska Oil and Gas Conservation Commission ("Commission") to dispose of Class II oil field waste fluids by underground injection into the Pioneer Unit #1702-15DA WDW well, located in Section 15, Township 17 North, Range 2 West, Seward Meridian.

2. The Commission published notice of opportunity for public hearing in the Anchorage Daily News on July 2, 1999. A second notice of opportunity for public hearing was published in the Anchorage Daily News and the Frontiersman on July 16, 1999.

3. The Commission did not receive any protest or a request for a public hearing.

4. The proposed disposal project requires an aquifer exemption under 20 AAC 25.440. The Commission issued Aquifer Exemption Order #5 on June 29, 1999, after receiving no objection from the U.S. Environmental Protection Agency.

FINDINGS:

1. Ocean Energy is the operator of the Pioneer Unit. There are no other operators within a one-quarter mile radius of the proposed disposal injection well. Ocean Energy has notified the surface owners by certified mail of the proposed disposal project.

2. Aquifer Exemption Order #5 exempts those portions of aquifers underlying the Pioneer Unit in Sections 14, 15, 22 and 23, Township 17 North, Range 2 West, which are common to and correlate with the interval below 2,790 feet in the BLT No. 1 well.

3.Ocean Energy proposes to conduct disposal injection within the proposed Pioneer Unit 1702-15DA WDW well in strata of the Tyonek Formation, which are common to and correlate with the interval below 2,790' in the BLT No. 1 well.

4. The proposed disposal zone in the BLT #1 well is confined by over 700 feet of shale between the top of the disposal interval and the base of freshwater known to be used in the area. Similar confinement is anticipated at the proposed Pioneer Unit 1702-15DA WDW well location.

5. There are currently no other wells within one-quarter mile radius of the proposed Pioneer Unit 1702-15DA WDW well that penetrate the injection zone.

6. Specific injection intervals will be identified after the Pioneer Unit 1702-15DA WDW well is drilled and logged. Ocean Energy will analyze produced water samples following completion of the well to confirm that the aquifers meet the requirements for exemption specified in 20 AAC 25.440. Copies of the water analysis will need to be submitted to the Commission for concurrence.

7. A cement bond log will be run and cement records evaluated to ensure that the #1702-15DA WDW well is cemented adequately to isolate the proposed disposal interval.

8. The well will be completed with 133/8 inch conductor set at 35 feet MD, 95/8 inch surface casing set at 700 feet MD and cemented to surface, and 7 inch production casing set at 4,100 feet MD and cemented back into the surface casing.

9. The well will be equipped with 27/8 inch tubing string and packer set 50 feet above the top of the perforations or the uppermost disposal interval, whichever is shallowest.

10.Ocean Energy intends to utilize the Pioneer Unit 1702-15DA WDW well to dispose of fluids and drilling wastes from the coalbed methane test wells described in the "Pioneer Unit Plan of Operations" and the "Pioneer Unit-Vine Extension Plan of Operations."

11.The waste stream will consist of produced formation water, drilling, completion and workover fluids, rig wash, drilling mud slurries, and other Class II fluids generated from drilling, production, workover and completion operations. Although initially predominantly produced water, constituent volumes may vary depending on drilling, workover, stimulation and maintenance activity.

12.Ocean Energy estimates that the maximum daily volume to be injected will be 2,000 barrels per day.

13.Ocean Energy estimates the average and maximum injection pressure will not exceed 900 psi.

14.Ocean Energy will conduct periodic surveillance of disposal operations through temperature surveys, pressure transient tests, step rate tests, thermal decay time logs, disposal rate and pressure monitoring, mechanical integrity tests and tagging effective depth to determine fill buildup.

15.Reservoir surveillance techniques will also be used for tracking near wellbore fluid movement, estimating dimensions of disposal fracture or disposal storage volume and detecting changes in disposal zone characteristics.

16.Evaluation of operational performance data and reservoir surveillance data will aid in preventing fracturing of the confining zones.

CONCLUSIONS:

1. The requirements of 20 AAC 25.252(c) have been met.

2. Those portions of aquifers underlying the Pioneer Unit in Sections 14, 15, 22 and 23, Township 17 North, Range 2 West, which are common to and correlate with the interval below 2,790 feet in the BLT No. 1 well, are exempt for Class II injection activities.

3. Waste fluids that are authorized for disposal in the Pioneer Unit 1702-15DA WDW well will consist exclusively of Class II waste generated from drilling, completion, workover and production operations.

4. Permeable strata, which are common to and correlate with the portion of the Tyonek Formation below 2,790 feet in the BLT No. 1, are likely to be present in the Pioneer Unit 1702-15DA WDW well. These strata can reasonably be expected to contain the total volume of disposal fluids anticipated for this project.

5. Waste fluids will be contained within appropriate receiving intervals by confining lithologies, cement isolation of the wellbore and operating conditions.

6. Disposal injection operations in the Pioneer Unit 1702-15DA WDW well will be conducted at rates and pressures below those required to fracture the confining zones.

7. Periodic surveillance of disposal material placement, daily monitoring of operating parameters when in operation, and demonstration of mechanical integrity at least every two years will ensure the waste fluids are contained within the disposal interval. Changes in baseline data may be an indication that fluid is escaping beyond the designated confining zone.

8. The mechanical integrity of the tubing, packer and production casing in the Pioneer Unit 1702-15DA WDW well must be demonstrated in accordance with 20 AAC 25.412 prior to commencing injection operations.

9. Disposal injection operations in the Pioneer Unit 1702-15DA WDW well will not cause waste, jeopardize correlative rights, or impair ultimate recovery.

NOW, THEREFORE, IT IS ORDERED THAT:

Rule 1 Authorized Injection Strata for Disposal.

Class II oil field fluids may be injected in conformance with Alaska Administrative Code Title 20, Chapter 25, for disposal into Tyonek Formation strata that are common to and correlate with the interval below 2,790 feet in the BLT No. 1 well in the #1702-15DA WDW well.

Rule 2 Authorized Fluids

This authorization is limited only to Class II fluids. The Commission must be notified immediately if any non-Class II fluids are injected into the well.

Rule 3 Demonstration of Tubing/Casing Annulus Mechanical Integrity

A schedule must be developed and coordinated with the Commission that ensures the tubing-casing annulus is pressure tested prior to initiating disposal and at least once every two years thereafter. The casing must be tested at a surface pressure of 1500 psi or 0.25 psi/ft multiplied by the true vertical depth of the packer, whichever is greater. The test pressure must show stabilizing pressure and may not decline more than 10 percent within 30 minutes. The Commission must be notified at least twenty-four (24) hours in advance to enable a representative to witness pressure tests.

Rule 4 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 5 Surveillance

Operating parameters including disposal rate, disposal pressure, annulus pressures and volume of fluids and solids pumped must be monitored and reported according to requirements of 20 AAC 25.432. An annual report evaluating the performance of the disposal operation and summary of surveillance activity and results must be submitted by July 1 of each year.

Rule 6 Administrative Action

Upon request, the Commission may administratively revise and reissue this order or any of its rules upon proper showing that the change is based on sound engineering practices, will not allow waste fluids to escape from the disposal zone, and will not cause waste.

DONE at Anchorage, Alaska and dated August 11, 1999.

Robert N. Christenson, P.E., Chairman

David W. Johnston, Commissioner

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