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 for an order granting an exception to spacing requirements of Title 20 AAC 25.055 to and regular production of the Happy Valley No. 2 gas development Well.

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Conservation Order No. 493

Happy Valley No. 2

July 30, 2003

IT APPEARING THAT:

1. Union Oil Company of California (UNOCAL) submitted an application dated June 23, 2003 requesting exception to the well spacing provisions of Title 20 AAC 25.055(a)(4) to allow drilling the Happy Valley No. 2, gas development well to a location which is within 3000 feet, and within the same governmental section as the Happy Valley No. 1 gas well.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on June 26, 2003 pursuant to 20 AAC 25.540.

3. No protests to the application were received.

FINDINGS:

1. The Happy Valley No. 2 gas development well will be drilled as a deviated hole with a surface location 1165 feet from the east line and 1234 feet from the south line of Section 22, T2S R13W, Seward Meridian (SM) to a bottomhole location 3438 feet from the east line and 2956 feet from the south line of Section 22, T2S R13W, SM.

2. Offset landowners, owners and operators within 3,000 feet of the anticipated productive interval of the Happy Valley No. 2 well have been notified.

3. No protests to the spacing exception application were received.

4. The location of the Happy Valley No. 2 well was selected as the most favorable structural position for Tyonek Formation gas reserves available from the existing Happy Valley pad.

5. An exception to the well spacing provisions of Title 20 AAC 25.055 (a)(4) is necessary to allow the drilling of the Happy Valley No. 2 gas development well.

CONCLUSIONS:

1. The requested spacing exception for the Happy Valley No. 2 well should be granted, except that the Commission must take such action as will offset any advantage which UNOCAL may have over adjoining owners by reason of the drilling the Happy Valley No. 2 well as an exception, and so that drainage to the tract with respect to which the exception is granted will be prevented or minimized.

2. Evaluation of the lateral extent of the Tyonek Formation gas reserves in the Happy Valley No. 2 well will be required to insure protection of the correlative rights of adjoining owners.

NOW, THEREFORE, IT IS ORDERED:

1. UNOCALís application for exception to the well spacing provision of 20 AAC 25.055(a)(4) is conditionally approved.

2. The Happy Valley No. 2 well may not be placed on regular production until UNOCAL has evaluated the lateral extent of the Tyonek Formation gas reserves in the Happy Valley No. 2 and the Commission has been provided that evaluation and has had the opportunity to take additional action to offset any advantage UNOCAL may have over other owners by reason of drilling Happy Valley No. 2 to the exception location.

DONE at Anchorage, Alaska and dated July 30, 2003.

Sarah Palin, Chair
Alaska Oil and Gas Conservation Commission

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


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