STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

ADMINISTRATIVE APPROVAL NO. DIO 26.003

Re: Request to Inject Approved Class II Fluids in Kustatan Field Well #1

Ms Paula Inman
Production Engineer
Forest Oil Corporation
310 K Street, Suite 700
Anchorage, AK 99501

Dear Ms. Inman:

By email dated September 23, 2004, Forest Oil Corporation (“Forest”) requested authorization to allow injection into the Kustatan Field Well #1 (“KF #1”) of class II fluids in addition to produced water from the Redoubt Unit production operation. On October 6, 2004, Forest clarified their request and specified Class II fluids to be injected included produced water, drilling mud and cuttings, completion fluids, tank bottoms, rig wash, and precipitation accumulation from containment areas from Forest’s operations at West McArthur River Unit, Redoubt Unit, West Foreland wells or facilities, and the Kustatan production facility.

DIO 26, issued April 10, 2003, concluded fracture analyses indicate any fracture should be confined to within 220 feet of the injection interval, using conservative estimates of injected fluid, pressures, and rates. Conclusion 4 specified “Disposal must be limited to produced water from the Redoubt Shoal Oil Field separated at the Kustatan Production Facility until the confinement of disposal fluids and completion performance can be demonstrated and evaluated.” Administrative Approval DIO 26.001, issued August 15, 2003, approved additional perforations, specified a baseline step rate test, temperature survey within 30 days of injection into the new intervals and placed a 2-barrel per minute (“bpm”) limitation on injection until a demonstration of disposed water was confined below the base of fresh water at 6,150 feet measured depth (“MD”).

A step rate test conducted August 21, 2003 indicates the well’s capability to take up to 4.8 bpm without indications of fracture extension. Temperature logs run on September 15, 2003 indicate injected fluids have been contained within perforated intervals between 6,270 to 6,475 feet MD.

Administrative Approval DIO 26.002, dated October 10, 2003, concluded fracture propagation was not a concern at injection rates at least to 3 bpm. The Commission approved increasing the allowable injection rate to 3 bpm and further specified Forest must contact the Commission with proposed temperature logging procedure and then, upon approval, run a warm-back temperature survey within 60 days of increasing the injection rate.

As required by the injection order, Forest submitted annual surveillance information July 1, 2004. As that information was reviewed, it was determined that the reported injection rate was in error. In response to a request for clarification, Forest examined their data and confirmed that the reported injection rate of up to 4 bpm resulted from using the incorrect operating time. Forest submitted a corrected report on October 6, 2004 and stipulated that the injection rate had never exceeded 2 bpm although approval up to 3 bpm had been approved. Evaluation of corrected surveillance data (only the rate was changed) indicates disposal has been performing consistently within the parameters observed during the step rate test of August 2003. The pressure analysis confirmed that the injection rate had not been in excess of 2 bpm.

Therefore, based on information provided by Forest and the analyses performed in compliance with DIO 26, the Commission finds under Rule 7 of DIO 26 that the requested administrative amendment, including the conditions set out below, will not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater. The Commission approves Forest’s request to inject other approved Class II fluids subject to the following conditions:

1. Forest must perform a temperature survey prior to initiating disposal of other Class II fluids, mud and cuttings into KF #1.

2. Forest must perform a follow-up temperature survey including warm-back passes after 60 days of injecting mud and cuttings into KF #1.

3. Injection must not exceed 3 barrels per minute until the Commission is satisfied the injection of mud and cuttings will not fracture through the confining intervals.

DONE at Anchorage, Alaska and dated October 8, 2004.

John Norman, Chairman
Alaska Oil and Gas Conservation Commission

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

Disposal Injection Order Index