BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF THE APPLICATION OF BLACK RAVEN ENERGY, INC. FOR AN INACTIVE WELL FINANCIAL ASSURANCE VARIANCE FOR THE ADENA FIELD, MORGAN COUNTY, COLORADO

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CAUSE NO.  1   DOCKET NO. 161200544   TYPE: GENERAL ADMINISTRATION   ORDER NO. 1-198

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on December 12, 2016, at the at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to modify certain requirements of Order No. 1-186 for the year 2016.

 

FINDINGS

 

The Commission finds as follows:

 

1.            Black Raven Energy, Inc., a subsidiary of EnerJex Resources, Inc. (Operator No. 10203) (“BRE” or “Applicant”), as applicant herein, is an interested party in the subject matter of the above‑referenced hearing.

 

2.            Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

 

3.            The Commission has jurisdiction over the subject matter embraced in said Notice, and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.

 

4.            Rule 326.b. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that a mechanical integrity test on each shut-in well within two years of the initial shut-in date. A mechanical integrity test shall be performed on each shut-in well on five year intervals from the date the initial mechanical integrity test was performed. If, at any time, surface equipment is removed or the well becomes incapable of production, a mechanical integrity test must be performed within thirty days.

 

5.            Rule 707.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that to the extent that an operator's inactive well count exceeds such operator's financial assurance amount divided by ten thousand dollars ($10,000) for inactive wells less than three thousand (3,000) feet in total measured depth or twenty thousand dollars ($20,000) for inactive wells greater than or equal to three thousand (3,000) feet in total measured depth, such additional wells shall be considered “excess inactive wells.” For each excess inactive well, an operator's required financial assurance amount under Rule 706 shall be increased by ten thousand dollars ($10,000) for inactive wells less than three thousand (3,000) feet in total measured depth or twenty thousand dollars ($20,000) for inactive wells greater than or equal to three thousand (3,000) feet in total measured depth. Rule 707.a requirement shall be modified or waived if the Commission approves a plan submitted by the operator for reducing such additional financial assurance requirement, for returning wells to production in a timely manner, or for plugging and abandoning such wells on an acceptable schedule.

 

6.            On March 17, 2014, the Commission entered Order No. 1-186 which, among other things, required Applicant to plug and abandon, return to production, convert to injection or otherwise complete for the purpose of enhanced oil recovery, 20 wells per calendar year starting in 2014, through 2018. If Black Raven failed to plug and abandon, return to production, convert to injection or otherwise complete for the purpose of enhanced oil recovery, 20 wells per calendar year, Black Raven would be required to increase its bond by $20,000 multiplied by the difference between 20 and the number of wells it plugged and abandoned, returned to production, converted to injection or otherwise completed for the purpose of enhanced oil recovery. If Black Raven claimed that such an extension is necessary, it will notify the COGCC staff, in writing, of the conditions that justify the extension and the date the condition commenced and ceased. COGCC Staff may, in its discretion, approve the extension requested.

 

7.            On October 26, 2015, the Commission entered Order No. 1-194 which required Applicant to perform a mechanical integrity test (“MIT”) on 28 wells during the calendar year 2015, and plug or repair any well that fails an MIT. Order No. 1-194 waived the requirement for Application to return to active status or plug twenty (20) wells for the calendar year 2015.

 

8.            Applicant is in compliance with the provisions of Order No. 1-186, as amended from by Order No. 1-194, for years 2015 and earlier.

 

9.            As acknowledged by COGCC staff in a April 14, 2016 letter, attached to the Application as Exhibit A, prevailing economic conditions render it no longer economically practicable for Applicant to comply with certain portions of Order No. 1-186, namely the requirements to perform 41 mechanical integrity tests (“MITs”) and return to active status or plug and abandon a total of 20 wells in the Adena Field, Morgan County, Colorado.

 

10.          Applicant and COGCC met to discuss the economic infeasibility of complying with Order No. 1-186.  As a result of the meeting COGCC staff recommended that Order No. 1-186 be modified for the year 2016 as follows:

 

a.            Applicant must perform mechanical integrity tests (“MIT” or “MITs”) on twenty-one (21) wells and if any well fails an MIT, the well is to be repaired or plugged, as soon as practicable;

 

b.            The requirement to return to active status or plug and abandon twenty (20) wells shall be waived for the year 2016;

 

c.            If BRE fails to successfully complete the required MITs, as outlined in subparagraph (a) above, BRE will be required to increase its financial assurance for excess inactive wells, as further outlined in Exhibit A to the Application; and

 

d.            The remaining provisions of Order No. 1-186 should remain unmodified and in full force and effect.

 

11.          On October 13, 2016, BRE, by its attorneys, filed with the Commission a verified application (“Application”) for an order to modify Order No. 1-186 per the recommendations of COGCC outlined above.  Staff recommendations and their basis were attached to the Application in support of its approval.

 

12.          On November 21, 2016, BRE, by its attorneys, filed with the Commission a written request to approve the Application, based on the merits of the verified Application and its supporting exhibits.

 

13.          The Application and materials attached in support thereof show that granting the Application will foster the mission of the Commission and the purposes of the Colorado Oil and Gas Conservation Act, §§ 34-60-101, et seq., C.R.S.

 

14.          BRE agrees to be bound by oral order of the Commission. 

 

15.          Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to modify Order No. 1-186 for the year 2016 as follows: (a) Applicant must perform MITs on twenty-one (21) wells, and if any well fails an MIT, the well is to be repaired or plugged, as soon as practicable; (b) the requirement to return to active status or plug and abandon twenty (20) wells shall be waived for the year 2016; (c) if BRE fails to successfully complete the required MITs, as outlined above, BRE will be required to increase its financial assurance for excess inactive wells; (d) the remaining provisions of Order No. 1-186 shall remain unmodified and in full force and effect.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.            Order No. 1-186 is hereby modified for the year 2016 as follows:

 

(a)          Applicant must perform mechanical integrity tests (“MIT” or “MITs”) on twenty-one (21) wells and if any well fails an MIT, the well is to be repaired or plugged, as soon as practicable;

 

(b)          The requirement to return to active status or plug and abandon twenty (20) wells is hereby be waived for the year 2016;

 

(c)          If BRE fails to successfully complete the required MITs, as outlined in subparagraph (a) above, BRE must increase its financial assurance for excess inactive wells, as outlined in Exhibit A to the Application; and

 

(d)          The remaining provisions of Order No. 1-186 should remain unmodified and in full force and effect.

 

IT IS FURTHER ORDERED:

 

1.         The provisions contained in the above order shall become effective immediately.

2.            The Commission expressly reserves the right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

 

3.            Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.

 

4.            An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

 

ENTERED this 22^nd day of December, 2016, as of December 12, 2016.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

 

By __________________________________

Julie Murphy, Secretary