STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re: THE APPLICATION OF Forest Oil Corporation for disposal of Class II oil field wastes by underground injection in the middle Tyonek Formation in the Kustatan Field No. 1 Well, Section 1, T7N, R14W, S.M. )
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Disposal Injection Order No. 26

Kustatan Field

Kustatan Field No. 1 Well

April 10, 2003

IT APPEARING THAT:

1. By correspondence to the Alaska Oil and Gas Conservation Commission (“AOGCC”) dated February 27, 2003 and received on February 28, 2003, Forest Oil Corporation (“Forest”) requested authorization to allow the underground injection of non-hazardous Class II oil field waste fluids into the middle Tyonek Formation within the Kustatan Field No. 1 (“KF 1”) well bore. The KF 1 well is located in the Kustatan Field, Seward Meridian, Alaska.

2. The Commission published notice of opportunity for public hearing was published in the Anchorage Daily News on March 6, 2003 in accordance with 20 AAC 25.540.

3. The Commission did not receive any protests to the application, comments, or requests for a public hearing.

4. Forest submitted additional information on March 5, March 10, and April 8, 2003.

FINDINGS:

1. Location of adjacent wells (20 AAC 25.252 (c)(1)

KF 1 is a vertical well that is located approximately 3443’ from the north line and 1468’ from the west line of Section 4, Township 7 North, Range 14 West, Seward Meridian. There are no oil and gas wells within Ό mile of the KF 1 well. There are two domestic source water wells drilled and operated by Forest on the gravel pad with the KF 1 well, each shallower than 500’.

2. Notification of Operators/Surface Owners (20 AAC 25.252 (c)(2) and 20 AAC 25.252 (c)(3))

Forest is the only operator within Ό mile radius of the proposed disposal operation. There are five surface owners within a Ό mile radius of the KF 1 well. Forest provided supporting evidence that a copy of their application for disposal injection in the KF 1 well was sent by certified mail to each of the five surface owners on February 28, 2003.

3. Geologic information on disposal and confining zones/ Potential impact on an adjacent producing well. (20 AAC 25.252 (c)(4))

Forest proposes to conduct disposal operations in the KF 1 well in the middle Tyonek Formation (“Tyonek”) at depths below 6500’ measured depth (“MD”) and true vertical depth (“TVD”). Perforations in the KF 1 well are currently planned between 6750’ and 6800’ MD and TVD. The Tyonek Formation is a Tertiary-aged fluvial deposit consisting of fine to medium grained sandstones with interbedded siltstones, claystones, and coals, which according to Forest, tend to be laterally continuous over several miles. Forest’s application states that sandstones within the proposed disposal interval have estimated porosities up to 20%, permeabilities in excess of 50 millidarcies, and they can be up to 100’ thick. The interbedded siltstones, claystones, and coals are considered to be over-bank deposits that will provide vertical confinement for the fluids to be injected. Approximately 40% of the 1000-foot interval overlaying the injection zone consists of these laterally continuous, confining lithologies. These confining lithologies also comprise approximately 20% of the middle Tyonek Formation underlying the proposed injection interval. KF 1 was an unsuccessful exploration well. Disposal operations in KF 1 will not impact adjacent production, as the nearest development wells are over 2.5 miles away.

4. KF 1 Well Logs (20 AAC 25.252 (c)(5))

Well and mudlogs from KF 1 are on file at the AOGCC.

5. Demonstration of Mechanical Integrity and Disposal Zone Isolation (20 AAC 25.252 (c)(6))

Drilling records show that the 9-5/8” casing cement job went reasonably well in KF 1. A well completion diagram submitted to the Commission by Forest on January 12, 2001 shows the calculated top of cement at 5,000’ MD and TVD. A formation integrity test (“FIT”) after drilling the 9-5/8” casing shoe indicated the shoe withstood an equivalent 10 ppg gradient, equivalent to a 3400 psi test of the cement and shoe. The well passed a mechanical integrity test performed by Forest. A CBL/VDL log run in the well between 5000’ and 6312’ MD (top of 7-5/8” liner) shows only a nominal 20’ to 30’ of cement bonding between 6140’ to 6225’ MD. The CBL/VDL could not be used below 6312’ in two pipe strings where the 7-5/8” liner overlaps into the 9-5/8” casing, so there are no log data to prove cement quality from the 9-5/8” shoe to 6312’ MD. Cement appears to be absent from the bottom of the 9-5/8” casing shoe, at 6500’ MD to a calculated depth of 10,150’ MD (according to a well completion diagram submitted by Forest on December 11, 2000). All permeable intervals between 6500’ and 10,150’ MD have the potential of taking disposed fluids.

6. Disposal Fluid Type, Source, Volume and Compatibility with Disposal Zone (20 AAC 25.252 (c)(7))

The primary disposal fluid planned for this well is produced water from the Redoubt Shoal Oil Field separated at the Kustatan Production Facility. Forest also requests approval for the disposal of other Class II fluids, namely drilling, completion, and workover fluids; rig wash fluids; drilling mud slurries; naturally occurring radioactive material scale slurries; tank bottoms; boiler blowdown; and other fluids brought to surface and generated in connection with oil and gas development activities. Forest estimates an average of 1500 barrels per day of fluid will be injected in KF 1. The maximum estimated daily rate according to Forest will be 5000 barrels per day.

7. Estimated Injection Pressure (20 AAC 25.252 (c)(8))

Forest estimates average surface injection pressure will be 3600 psig and the maximum surface injection pressure will be 4500 psig at an injection rate of 5 barrels per minute.

8. Evaluation of Confining Zones (20 AAC 25.252 (c)(9))

A commercial fracture model was used to evaluate the potential to fracture through the confining layer at the KF 1 well. The simulation assumed continuous injection of fluid for 370 days at a rate of 2.3 barrels per minute with a 100-mesh sand concentration of 5 pounds per gallon. The inclusion of a small solid load represents a realistic estimate for produced water disposal where small amounts of solids could tend to plug permeable layers and cause fracture growth. The fracture analysis indicates containment of the fracture propagation to within 220’ of the perforated interval. Sufficient stress differences between the sand shale layers prevent upward fracture growth.

9. Standard Laboratory Water Analysis of the Disposal Zone (20 AAC 25.252 (c)(10))

There was no sampling and laboratory analysis of the water native to the disposal zone.

10. Freshwater Exemption (20 AAC 25.252 (c)(11))

Wireline log analytical techniques consistent with EPA methodologies were used to characterize formation water salinities in the middle Tyonek Formation in the KF 1 well. Forest reports that the analysis shows a chloride concentration between 10,000 and 30,000 ppm, which equates to a total dissolved solid concentration greater than 10,000 mg/l above a measured depth of 6,150’.

11. Mechanical Condition of Wells Penetrating the Disposal Zone within Ό Mile of KF 1 (20 AAC 25.252 (c)(12)

The two domestic source water wells drilled and operated by Forest that are within a Ό mile radius of the KF 1 do not penetrate the disposal interval.

CONCLUSIONS:

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

2. No wells penetrate the disposal zone within Ό mile of the KF 1 well. The nearest offset production wells are more than 2 ½ miles from KF 1.

3. The KF 1 well is completed with tubing and packer set at 6280’ MD, more than 200’ above the injection perforations from 6750’ to 6800’ MD. The 9-5/8” shoe has been tested to 3400 psi, approximately 3000 psi less than the maximum anticipated pressure at the shoe during normal operations. There is no isolating cement between 6500’ and the TOC above the 7-5/8” liner shoe, at 10,150’ MD.

4. 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.

5. An aquifer exemption is not required because formation water salinities calculated using EPA recommended techniques reveal the top of formation waters with total dissolved solids greater than 10,000 ppm to be at approximately 6150’ MD, which is 600’ above the injection perforations and 200’ above the liner top.

6. Waste fluids should be contained within the receiving intervals by the confining lithologies above the 9-5/8” shoe (shallower than 6500’ MD) in the middle Tyonek Formation, cement isolation of the well bore and operating conditions.

7. Disposal injection operations in the KF 1 well will be conducted at rates and pressures below those estimated to fracture through the confining zones.

8. Evaluation of surveillance and operational performance data and demonstration of mechanical integrity will be necessary to ensure continued integrity of the well and that waste fluids are contained within the disposal interval.

NOW, THEREFORE, IT IS ORDERED THAT:

Operations must be conducted in accordance with AS 31.05 and Title 20, Chapter 25 of the Alaska Administrative Code unless specifically superseded by Commission order. Failure to comply with an applicable provision of AS 31.05, Title 20, Chapter 25 of the Alaska Administrative Code, or a Commission order may result in the revocation or suspension of this authorization.

RULE 1: Authorized Injection Strata for Disposal

Injection of authorized fluids for purposes of underground disposal of oil field wastes is permitted into the middle Tyonek Formation below 6500’ MD in the KF 1 well, in the Kustatan Field. The Commission may suspend, revoke, or modify this authorization if injected fluids fail to be confined within the designated injection strata.

RULE 2: Authorized Fluids

Produced water is the only fluid authorized for injection in the KF 1 well at this time. Rule 7 provides for administrative approval of other waste fluids after additional review of injection performance.

RULE 3: Demonstration of Tubing/Casing Annulus Mechanical Integrity

Mechanical integrity of the KF 1 disposal well must be demonstrated at least once every two (2) years.

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, or a lack of disposal zone isolation, the operator must immediately notify the Commission, obtain Commission approval to continue injection and submit a plan for corrective action for Commission approval.

RULE 5: Surveillance

The operator shall obtain a baseline temperature log and a baseline step rate test prior to initial injection. A subsequent temperature log must be performed 1 month after injection begins to demonstrate the receiving zone of the injected fluids. Additional temperature survey requirements will be based on the results of the initial and follow-up temperature surveys.

An annual report for the calendar year evaluating the performance of the disposal operation must be submitted by July 1 of each year.

RULE 6: Notification of Improper Class II Injection

The operator must immediately notify the Commission if it learns of any improper Class II injection. Additionally, notification requirements of any other State or Federal agency remain the operators’ responsibility.

RULE 7: Administrative Action

Unless notice and public hearing is otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change does 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.

DONE at Anchorage, Alaska and dated April 10, 2003.

/s/Sarah Palin, Chair
Alaska Oil and Gas Conservation Commission

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

/s/Randy Ruedrich, Commissioner
Alaska Oil and Gas Conservation Commission

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