BEFORE THE OIL AND GAS CONSERVATION COMMISSION

                                                 OF THE STATE OF COLORADO

 

IN THE MATTER OF THE APPLICATION  )

OF CFG ENERGY, INC. AND EDDY OIL               )

COMPANY, FOR AN ORDER                                  )

DECREASING THE SIZE OF                                    )           CAUSE NO. 232, 407 & 499

DRILLING AND SPACING UNITS                          )          

FOR THE PRODUCTION OF OIL AND GAS          )           ORDER NO.   232-_____

FROM THE DAKOTA, "J" SANDSTONE,                )                                   407-_____

AND ESTABLISHING DRILLING AND                   )                                   499-_____

SPACING UNITS FOR PRODUCTION OF             )

OIL AND GAS FROM THE CODELL AND )

NIOBRARA FORMATIONS UNDERLYING           )                                  

CERTAIN LANDS IN WELD COUNTY,                  )

COLORADO                                                              )

______________________________________________________________________________

 

APPLICATION

_________________________________________________________________________________

 

The Applicants, CFG Energy, Inc. (“CFG”) and Eddy Oil Company (“Eddy”), by and through their undersigned counsel, respectfully petition the Oil and Gas Conservation Commission of the State of Colorado (the “Commission”) as follows:

 

                                                                BACKGROUND

 

Existing Leasehold Interests and Wells.

 

1.  CFG owns oil and gas leases covering all of the oil and gas under the N/2SW/4, E/2NW/4, and NE/4 of Section 32, Township 5 North, Range 63 West, 6th. P.M., Weld County, Colorado.

            2.  Eddy owns oil and gas leases covering all of the oil and gas under the NE/4SE/4 of said Section 32.

            3.  Patina Oil & Gas Corporation (“Patina”) owns oil and gas leases covering the S/2SE/4, NW/4SE/4, S/2SW/4, and W/2NW/4 of said Section 32.

            4.  Spartan Energy Co. ("Spartan") also owns an oil and gas lease covering the W/2NW/4 of said Section 32.

     5.  At the time of this application, the Patina Rein BB32-13 and Rein BB32-14 wells in the S/2SW/4; and the Patina Campbell BB 32-4 and Campbell BB 32-5 wells in the W/2NW/4 of said Section 32 are producing from the Codell and/or Niobrara formations. At the time of this application, the Eddy Oil Company Hergenreder 32-9 well in the NE/4SE/4 is producing from the Codell and/or Niobrara formations, and pursuant to a segregation agreement is paying on a 40-acre tract made up of the NE/4SE4.  The Sunshine Valley Rein 11-32 well in the NE/4SW/4 produced from the Codell and Niobrara formations and has since been plugged and abandoned.  The Eddy Hergenreder 32-15 well in the SW/4SE/4 was drilled to the base of the Codell formation and was plugged and abandoned as a dry hole.

     6.  No wells have been drilled to either the Dakota formation or the "J" Sand formation in said Section 32.  Patina holds a permit for the drilling of a Dakota test in the SE/4SE/4.

 

Applicable Commission Orders and Rules

 

            7.  In Cause No. 232, by Order Nos. 232-1 and 232-3, the Commission established 320-

 

acre drilling and spacing units for the production of oil and gas from the "J" Sand formation

 

underlying said Section 32.

 

            8.  In Cause No. 499, by Order Nos. 499-1 and 499-15, the Commission established 320-

 

acre drilling and spacing units for the production of oil and gas from the Dakota formation

 

underlying said Section 32.

 

          9.  According to the records of the Commission, the S/2 and N/2 are the declared spacing units for Dakota and "J” Sand production in said Section 32.

         10.  The Commission has not established drilling and spacing units for the production of oil and gas from the Codell and Niobrara formations underlying said Section 32.

        11.  By Order Nos. 499-15, 232-89 and 407-125, the Commission determined that the Dakota, "J" Sand, Codell and Niobrara formations constitute common sources of supply of oil and gas, and authorized commingling of production from such formations, underlying said Section 32.

       12.  According to the records of the Commission, the E/2 and W/2 of the SE/4, the N/2 and S/2 of the SW/4, and the E/2 and W/2 of the NW/4 are the declared spacing units for Codell and Niobrara production in said Section 32.

       13.  By Rule 318A (the Greater Wattenberg Area Special Well Location Rule), the Commission allows up to five wells to be drilled in each governmental quarter section of Section 32, to Cretacious formations above the base of the Dakota formation, including the Codell, Niobrara, “J” Sand and Dakota formations.

                                                            SPACING REQUEST

       14.  Colorado Revised Statute Section 34-60-116 authorizes the Commission to establish drilling units, and to decrease or increase the size of drilling units, in order to prevent or assist in preventing waste, avoid the drilling of unnecessary wells, and/or protect correlative rights.

       15.  CFG and Eddy request that the Commission enter an Order establishing 80-acre drilling and spacing units for the Codell and Niobrara formations, and reducing the size of drilling and spacing units for the “J” Sand and Dakota formations in Section 32, by establishing separate 80-acre drilling and spacing units comprised of the W/2 of the SE/4, the N/2 and S/2 of the SW/4, the E/2 and W/2 of the NE/4, and the W/2 and E/2 of the NW/4 of said Section 32.

       16.  CFG and Eddy further requests that the Commission establish 40-acre drilling and spacing units consisting of the SE/4SE/4 and NE/4SE/4 of Section 32, for each well drilled in such quarter-quarter section, pursuant to Commission Rule 318(a)(1).  

       17.  The requested 80-acre and 40-acre units correspond to mineral ownership and the units upon which royalty has been paid to date on Codell and Niobrara production from the existing Eddy Oil Company Hergenreder 32-9 well in the NE/4SE/4; the Patina Rein BB32-13 and Rein BB32-14 wells in the S/2SW/4; and the Patina Campbell BB 32-4 and Campbell BB 32-5 wells in the W/2NW/4 of said Section 32.

       18.  By establishing and maintaining units of the same size for these Cretacious formations, commingling of production from two or more of the four formations through a single wellbore may be done without concern for the fair and just allocation of production from such various formations for the payment of royalties.

       19.  As testimony before the Commission has previously established, 80-acre drilling units are not less than the maximum area than can be efficiently, economically and effectively drained by a single well producing oil, gas and associated hydrocarbons from the Dakota, “J” Sand, Codell and Niobrara formations underlying said Section 32.

       20.  As testimony before the Commission has previously established, 40-acre drilling units are not less than the maximum area than can be efficiently, economically and effectively drained by a single well producing oil, gas and associated hydrocarbons from the Dakota, “J” Sand, Codell and Niobrara formations underlying the SE/4SE/4 and NE/4SE/4 of said Section 32.

       21.  The establishment of such units will prevent or assist in preventing waste by assuring that all potential locations may be drilled without prejudice to the rights of other leasehold or mineral owners, and ensuring that the pool as a whole may be efficiently and economically developed.

       22.  The establishment of such units will protect the correlative rights of both leasehold owners and mineral owners.

       23.  Nothing herein is intended to supercede or interfere with the right of any party under Commission Rule 318(A)(a)(2), to drill any well to the center of any quarter section of said Section 32, and to allocate production as in any manner authorized by the Commission’s Policy on Staff Administrative Application of the Greater Wattenberg Area Special Well Location Rule 318A.

       24.  The names and addresses of the interested parties, based upon Applicants’ information and belief, are set forth on the annexed Exhibit "A.”

                                          REQUEST FOR HEARING AND ORDER

                                 WHEREFORE, CFG and EDDY pray that this matter be set for hearing on July 14, 2003, that Notice of said Hearing be given as required by law, and that following such Hearing the Commission enter an Order under Causes 232, 407 and 499 to:

            A.  establish 80-acre drilling and spacing units comprised of the W2 of the SE4, the N2 and S2 of the SW4, the E2 and W2 of the NE4, and the W2 and E2 of the NW4 of said Section 32, Township 5 North, Range 63 West, 6th P.M., Weld County, Colorado, for the production of oil and gas from the Dakota, “J” Sandstone, Codell and Niobrara formations underlying said Section 32;

            B.  establish 40-acre drilling and spacing units consisting of the SE/4SE/4 and NE/4SE/4 of Section 32, for production of oil and gas from such formations, for each well drilled in such quarter-quarter sections pursuant to Commission Rule 318A(a)(1); and

            C.  permit multiple completion and downhole commingling of production from the Dakota, “J” Sand, Codell and Niobrara formations underlying said Section 32.

 

Respectfully submitted this _____ day of May, 2003.

 

LOHF SHAIMAN JACOBS & HYMAN, P.C.

 

 

By _______________________________

J, Michael Morgan #7279

950 South Cherry Street, Suite 900

Denver, CO 80246

(303) 753-9000

(303) 753-9997 (fax)

mmorgan@lohfshaiman.com

 

 

                                         

Robert D. Hoehn

                                                                        ROTHGERBER JOHNSON & LYONS LLP

1200 17th Street, Ste. 3000

Denver, CO  80202-5855

(303)623-9000

(303)623-9222 (fax)

rhoehn@rothgerber.com

 

Address of Applicants

 

CFG Energy, Inc., 1846 Frontier Road, Greeley, CO 80634

 

Eddy Oil Company, 1875 South Marshall Circle, Lakewood, CO 80232

 

EXHIBIT "A"

                                     Interested Parties in Section 32, Township 5 North, Range 63 West, 6th P.M.

 

MINERAL OWNERS

 

Clarence D. Ehrlich

2529 53rd Avenue

Greeley, CO 80634

 

Elda Kopp

4620 W. 4th Street

Greeley, CO 80634

 

J. Larry Ehrlich

3137 Cathy Circle

Aurora, CO 80013

 

Paul Ehrlich

2719 W. 22nd  Street

Loveland, CO 80537

 

Russell Ehrlich

1706 Childs Road East

Bellevue, NE 68005

 

Sandy Kenney

2808 Arthur Drive

Lee’s Summit, MO 64082

 

Jonathan Ehrlich

2309 SW Crown Drive

Lee’s Summit, MO 64082

 

Reuben Ehrlich

2733 8th Avenue

Greeley, CO 80631

 

Walter Ehrlich

4747 Greenfield Drive

Barrien Springs, MI 49103-9507

 

Carl & Anna L. Hergenreder

1927 27th Avenue

Greeley, CO 80631

 

Rachel Kaveny

2122 Club House Drive

Greeley, CO 80631

 

Edna Kopp

2643 Buena Vista Drive

Greeley, CO 80631

 

Linda Dianne Weingardt

1923 34th Avenue

Greeley, CO 80631

 

Johnny R. & Shirley A. Rein

31019 WCR 50

Kersey, CO 80644

 

Centennial Valley Ranch, LLC

Attn: Edward Giles, Esq.

1225 17th Street, 29th Floor

Denver, CO 80202

 

Susan K. Smith as Trustee of the

Fred W. Schauppner Testamentary Trust

2201 So. Moline Court

Aurora, CO 80014

 

 

Elma Jean Leitzman

2417 15th Avenue

Greeley, CO 80631

 

Rolland K. Hart

4313 University Avenue

Des Moines, IA 50311

 

Donald E. Van Wyke

3575 E. Vassar

Denver, CO 80210

 

William Van Wyke

3175 S. Newport

Denver, CO 80224

 

James E. Van Wyke

2495 S. Clayton

Denver, CO 80210

 

Janice L. Hyenhuis

7900 Cinthia St.

La Mesa, CA 92041

 

Susanne M. Jensen

2168 Orin Lane

Pleasant Hill, CA 94523

                                               

Jerrald J. & Norma Jean Van Wyke

12649 Dunrobin Ave.

Downey, CA 90242

 

OVERRIDING ROYALTY OWNERS

 

Thomas B. Croke, III and Laura L. Croke

1846 Frontier Rd.

Greeley, CO 80634

 

Lois J. Rothe

1900 26th Ave. Ct.

Greeley, CO 80634

 

Henry Clay

200 DeVille

Ore City, TX 75683

 

LEASEHOLD INTEREST OWNERS

 

CFG Energy, Inc.

1846 Frontier Rd.

Greeley, CO 80634.

 

Eddy Oil Company

1875 So. Marshall Circle

Lakewood, CO 80232.

 

Patina Oil & Gas Corp.

1625 Broadway, Suite 2000

Denver, CO  80202

 

Spartan Energy Co.

1625 Broadway, Suite 2000

Denver, CO  80202