STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

 
Re:

THE APPLICATION OF PELICAN HILL OIL AND GAS Inc. for disposal of Class II oil field wastes by underground injection in the Tyonek Formation in the Iliamna No. 1 Well, Section 31, T9N, R14W, S.M.

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Disposal Injection Order No. 27A

Tyonek Formation
Iliamna No. 1 Well

Originally Issued September 16, 2004,
Corrected and Amended

October 4, 2004

IT APPEARING THAT:

1. By correspondence dated August 6, 2004 and received by the Alaska Oil and Gas Conservation Commission (“AOGCC”) that same day, Pelican Hill Oil and Gas Inc. (“Pelican Hill”) requested the Commission issue an order authorizing underground injection of non-hazardous Class II oil field waste fluids into the Tyonek Formation within the Iliamna No. 1 (“Iliamna 1”) well bore. The Iliamna 1 well is located in Section 31, T9N, R14W, Seward Meridian (“S.M.”), on the west side of Cook Inlet, Alaska.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on August 11, 2004 in accordance with 20 AAC 25.540.

3. The Commission did not receive any public comments, protests or a request for a public hearing.

4. Pelican Hill submitted additional information to the Commission on September 3 and 10, 2004 in support of its application.

5. Disposal Injection Order No. 27 was issued on September 16, 2004.

6. In response to a letter from the applicant on September 17, 2004 reporting an error in the original order, the Commission is providing Disposal Injection Order No. 27A to supersede and replace Disposal Injection Order No. 27.

7. On September 22 and 23, 2004, Pelican Hill submitted additional information to the Commission concerning this operation.

FINDINGS:

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

There are no wells with surface locations within a one-quarter mile radius of the Iliamna 1 well. The nearest wells are Cities Service’s West Foreland State A No. 1 (“WFS A-1”) well, located about 1-1/4 miles to the south and Shell Oil Company’s Kustatan Ridge State No. 1 (“KRS 1”), about 1-1/2 miles to the north-northeast. The nearest water well registered with the Alaska Department of Natural Resources is a 273-foot deep domestic water well located about 1-1/2 miles to the southeast at Unocal’s Trading Bay Facility camp.

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

Pelican Hill is the operator of the Iliamna 1 well. There are no other operators within a one-quarter mile radius of the proposed disposal injection well. The sole surface owner within a one-quarter mile radius of the Iliamna 1 well is the Kenai Peninsula Borough. A letter of non-objection was received from the Borough on Dec. 9, 2003, in support of Pelican Hill’s original application for disposal injection within the Iliamna 1 well. The original application was dated December 8, 2003.

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

Pelican Hill proposes to conduct disposal operations in the Iliamna 1 well in the Tyonek Formation interval between 3,126’ and 3,147’ measured depth. This interval consists of sandstone, and it correlates to a silty sandstone interval between 3,472’ and 3,492’ feet in the KRS 1 well, but is difficult to correlate directly in WFS A-1.

The porosity of this target injection layer is estimated to be about 26 percent based on the sonic log from KRS 1 and the neutron-density logs recorded in Iliamna 1. Openhole well logs from KRS 1 and WFS A-1 indicate formation waters below about 2,200’ measured depth exceed 10,000 ppm total dissolved solids (“TDS”), based on the Rwa method for calculating TDS content from wireline log data endorsed in the US Environmental Protection Agency’s (“EPA”) publication “Survey of Methods to Determine Total Dissolved Solids Concentration” (KEDA Project No. 30-956). This was later confirmed when Iliamna 1 was swabbed in and formation water was recovered from the interval between 3,126’and 3,147’measured depth. Testing of the formation water for chlorides yielded a measurement of 40,000 ppm.

Upper confinement will be provided by interlayered mudstone and siltstone occurring from 2,988’ to 3,058’ and from 2,940’ to 2,978’ measured depth. Lower confinement will be provided by the mudstone and siltstone occurring from 3,182’ to 3,234’ and from 3,254’ to 3,304’ measured depth in the well.

4. Iliamna 1 Logs (20 AAC 25.252 (c)(5))

The logs of the Iliamna 1 well are on file at the AOGCC.

5. Casing Description Well Iliamna 1 (20 AAC 25.252 (c)(6)(A))

There are two strings of casing as follows:

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

A cement quality log is available for Iliamna 1, and it demonstrates the existence of adequate bonding across the upper and lower confining intervals to ensure disposed fluids are appropriately isolated.

Prior to initiating disposal operations, Pelican Hill will perform a pressure test of the tubing x casing annulus as required by 20 AAC 25.412(c).

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

The wastes planned for disposal in this well consists of drilled cuttings and freshwater-based drilling mud generated during drilling of the Iliamna 1 well. Given the relatively limited amount of fluid and cuttings to be disposed, compatibility of the fluids and cuttings with the formation waters of the storage interval is not likely to affect the storage capacity of the injection zone.

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

The operator originally estimated that average injection pressure will be 800 psig and the maximum injection pressure will be 1,000 psig. A step rate test done September 22, 2004, indicated a rate of 2 barrels per minute (2,880 barrels per day) at 860 psi using clean water as the fluid. The operator now estimates that the maximum injection pressure will exceed 1,000 psig. However, based on the step rate test, the Commission finds that the maximum injection pressure is unlikely to greatly exceed 1,000 psig.

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

Disposed wastes will be prevented from upward migration by interlayered mudstone and siltstone occurring from 2,988’ to 3,058’ and from 2,940’ to 2,978’ measured depth in Iliamna 1. These two confining intervals total 108’ gross thickness, of which 94’ (87%) is mudstone or siltstone. Downward migration will be prevented by the mudstone and siltstone occurring from 3,182’ to 3,234’ and from 3,254’ to 3,304’ measured depth in the well. The gross thickness of these two underlying confining intervals totals 104’, of which 84’ (82%) is mudstone or siltstone. The thickness of these confining zones and their high mudstone and siltstone content will be sufficient to confine injected wastes to the proposed interval.

Open hole well logs from KRS 1 and WFS A-1indicate formation waters below about 2,200’ measured depth exceed 10,000 ppm total dissolved solids, about 950’ above the target injection interval. The large vertical separation from overlying freshwater, combined with low injection pressures, low injection rates, and the limited amount of disposed fluids and cuttings ensure fractures will not propagate through the confining intervals.

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

Iliamna 1 was drilled with casing. Consequently, open hole well logs are not available. Iliamna 1 was swabbed in and formation water was recovered from the interval between 3,126’ and 3,147’ measured depth. A sample of formation water was tested for chlorides, and it measured 40,000 ppm.

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

A freshwater aquifer exemption is not required because total dissolved solids of the formation water exceed 10,000 ppm in the target injection zone.

12. Mechanical Condition of Wells Penetrating the Disposal Zone within ¼ Mile of Iliamna 1 (20 AAC 25.252 (c)(12)

There are no wells within a one-quarter mile radius of the Iliamna 1 well.

CONCLUSIONS:

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

2. A freshwater aquifer exemption is not required.

3. Waste fluids will be contained within appropriate receiving intervals by the confining lithologies in the Tyonek Formation, cement isolation of the well bore and operating conditions.

4. Disposal injection operations in the Iliamna 1 well will be conducted at rates and pressures below those that will fracture the confining zone.

5. Evaluation of surveillance and operational performance data will reasonably assure there is no fracturing of the confining zone.

6. Surveillance of disposal volumes, daily monitoring of operational parameters, and demonstration of mechanical integrity will reasonably ensure continued mechanical integrity of the well and that waste fluids are contained within the disposal interval.

7. Disposal injection of Class II wastes into well Iliamna 1 will not cause waste, jeopardize correlative rights, impair ultimate recovery, or contaminate freshwater.

NOW, THEREFORE, IT IS ORDERED: this order supersedes Disposal Injection Order No. 27, and that the following rules are adopted:

RULE 1: Authorized Injection Strata for Disposal
Injection of authorized fluids for purposes of underground disposal of oil field wastes is permitted, subject to these rules, into the Tyonek Formation between 3,126’ and 3,147’measured depth in the Iliamna 1 well.

RULE 2: Authorized Fluids
Fluids authorized for injection in the Iliamna 1 well are: 1. drilling and completion fluids 2. drilling mud 3. tank bottoms 4. rig wash 5. precipitation accumulating within containment areas 6. Other fluids suitable for disposal in a Class II well and approved by the Commission on a case-by-case basis. The total volume of disposed waste fluids and cuttings may not exceed 8,000 barrels without prior approval of the Commission.

RULE 3: Demonstration of Tubing/Casing Annulus Mechanical Integrity
The mechanical integrity of the injection well must be demonstrated before injection begins, at least once every four years thereafter (except at least once every two years in the case of a slurry injection well), and before returning a well to service following a workover affecting mechanical integrity. Unless an alternate means is approved by the Commission, mechanical integrity must be demonstrated by a tubing/casing annulus pressure test using a surface pressure of 1500 psi or 0.25 psi/ft multiplied by the vertical depth of the packer, whichever is greater, that shows stabilizing pressure and does not change more than 10 percent during a 30 minute period. The Commission must be notified at least 24 hours in advance to enable a representative to witness mechanical integrity tests.

RULE 4: Well Integrity Failure and Confinement
Whenever any pressure communication, leakage or lack of injection zone isolation is indicated by injection rate, operating pressure observation, test, survey, log, or other evidence, the operator shall immediately notify the Commission and submit a plan of corrective action on a Form 10-403 for Commission approval. The operator shall immediately shut in the well if continued operation would be unsafe or would threaten contamination of freshwater, or if so directed by the Commission. A monthly report of daily tubing and casing annuli pressures and injection rates must be provided to the Commission for the injection well indicating well integrity failure or lack of injection zone isolation.

RULE 5: Surveillance
Operating parameters including disposal rate, disposal pressure, annulus pressures, step rate test results and volume of fluids and solids pumped must be monitored and reported according to requirements of 20 AAC 25.432(1). The operator shall conduct a baseline step rate test prior to initial injection. An initial report of operations must be provided after one month of injection. The operator shall obtain a temperature log immediately after cessation of disposal injection activities. A final report of operations must be provided 30 days after completion of all disposal injection activities.

RULE 6: Notification of Improper Class II Injection
The operator shall 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 operator’s responsibility.

RULE 7: Administrative Action
Unless notice and public hearing is otherwise required, the Commission may administratively waive or amend any rule stated above 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 fluid movement outside of the authorized injection zone.

RULE 8: Other Conditions
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.

DONE at Anchorage, Alaska and dated October 4, 2004.

John K. Norman, Chair
Alaska Oil and Gas Conservation Commission

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


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