BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF AN APPLICATION
BY SRC ENERGY INC. FOR AN ORDER APPROVING A COMPREHENSIVE DRILLING PLAN FOR
APPROXIMATELY 23,517 ACRES IN PORTIONS OF TOWNSHIP 4 NORTH, RANGE 65 WEST,
6TH P.M., TOWNSHIP 4 NORTH, RANGE 66 WEST, 6TH P.M., TOWNSHIP 4 NORTH, RANGE
67 WEST, 6TH P.M., TOWNSHIP 5 NORTH, RANGE 66 WEST, 6TH P.M., AND TOWNSHIP 5
NORTH, RANGE 67 WEST, 6TH P.M., WATTENBERG FIELD, WELD COUNTY, COLORADO
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CAUSE NO. 1
DOCKET NO. 190400306
TYPE: GENERAL ADMINISTRATIVE
ORDER NO. 1-233
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REPORT OF THE
COMMISSION
The Commission
heard this matter on May 21, 2019, at the Colorado Oil and Gas Conservation
Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, 80203, upon
application for an order to stay acceptance of certain applications for
permits-to-drill, Oil and Gas Location Assessments, and applications to
establish drilling and spacing units in all or portions of Township 4 North,
Ranges 65 through 67 West, 6th P.M. and Township 5 North, Ranges 66
and 67 West, 6th P.M., until such time as the Commission has entered
an order on SRC Energy Inc.’s application for a Comprehensive Drilling Plan.
FINDINGS
The Commission finds as follows:
1.
SRC Energy Inc., (Operator No. 10311), (“Applicant” or “SRC”), 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 216. of the Rules and Regulations of the Oil and Gas Conservation
Commission provides that operators may propose to the Director a Comprehensive
Drilling Plan (“CDP”). CDPs provide a broad approach to identifying foreseeable
oil and gas activities in a specific geographic area, concurrent with
identifying measures to minimize adverse impacts to public health, safety,
welfare, and the environment and wildlife resources within that area.
5.
On January 29, 2019, amended February 15, 2019, SRC filed with the
Commission pursuant to § 34-60-105(1), C.R.S., a verified application
(“Application”) for an order to 1) establish and approve a Rule 216. CDP for
the below-described lands (“Application Lands”), for the comprehensive,
efficient, and effective development and operation of the Codell and Niobrara
Formations; 2) stay acceptance of applications for permits-to-drill (“APD”),
Oil and Gas Location Assessments (“Form 2As”), and applications to establish
drilling and spacing units in the southern portion of the Application Lands for
all Owners and Operators until such time as the Commission has entered an order
on the CDP; and 3) to stay acceptance of APDs, Form 2As, and applications to
establish drilling and spacing units in the northern portion of the Application
Lands for all Owners and Operators except Applicant, until such time as the
Commission has entered an order on the CDP:
Township 4 North, Range 65 West, 6th P.M.
Section 6: S/2
Section 7: All
Section 18: All
Section 19: All
Section 30: All
Township 4 North, Range 66 West, 6th P.M.
Section 1: All
Section 2: All
Section 3: All
Section 4: All
Section 5: All
Section 6: N/2, SE/4
Section 10: All
Section 11: All
Section 12: All
Section 13: All
Section 14: All
Section 15: All
Section 16: S/2, NE/4
Section 17: S/2
Section 18: All
Section 19: All
Section 20: All
Section 21: All
Section 22: N/2
Section 23: All
Section 24: All
Section 25: All
Township 4 North, Range 67 West, 6th P.M.
Section 1: N/2
Section 2: N/2
Section 3: N/2
Section 4: NE/4
Township 5 North, Range 66 West, 6th P.M.
Section 31: All
Section 32: All
Section 33: All
Section 34: All
Section 35: All
Section 36: All
Township 5 North, Range 67 West, 6th P.M.
Section 25: All
Section 26: All
Section 35: All
Section 36: All
23,677 acres, more or less, Weld County,
Colorado.
6.
On March 28, 2019, at the request of a working interest owner, SRC voluntarily
withdrew the SE¼ of Section 6, Township 4 North, Range 65 West, 6th
P.M. from its proposed CDP and request for stay. This withdrawal was
unopposed by interested parties. Accordingly, the Application Lands
subject to the relief requested by the Applicant now consist of approximately
23,517 acres, more or less.
7.
SRC has a high working interest (approximately 20,550 net mineral acres,
or 87.45% working interest) within the Application Lands.
8.
SRC’s Application sets forth the benefits of a CDP for the Application
Lands. These benefits include:
a.
Fostering economic and efficient development of the oil and gas
resources in the Application Lands while preventing waste.
b.
Location of facilities as far as possible from existing occupied
dwelling units in the Application Lands.
c.
Centralization and minimization of surface facilities, such that a
single production facility will be designed to service between 12 and 48
horizontal wells.
d.
Significant reduction in the use of tanks in the Application Lands,
using pipelines to move oil, gas and produced water.
e.
Significantly fewer environmental impacts than would otherwise be
associated with piecemeal development of the Application Lands by multiple
operators.
f.
Plugging and abandonment of at least 281 vertical and directional wells
in the area, with associated surface reclamation.
9.
SRC’s Application requests a two-tiered stay of APDs, Form 2As, and applications
to establish drilling and spacing units. SRC’s Application explains that a stay
in the Application Lands is necessary to fulfill the purpose of Rule 216.a. A
two-tier stay will allow SRC and other stakeholders to meaningfully address
foreseeable oil and gas activities in the Application Lands, and discuss
mitigation measures for minimizing impacts from the activities. Without a stay,
any Operator or Owner may still file their own APDs, Form 2As, or applications
to establish drilling and spacing units, which will frustrate the purpose of a
CDP. Such activities are not and will not be foreseeable to SRC, the Commission
and other stakeholders, and will prohibit the stakeholders from addressing
impacts from those activities within the final CDP. Moreover, allowing multiple
Operators to continue to file APDs, Form 2As, and applications to establish
drilling and spacing units will create additional environmental and surface
impacts within the Application Lands—an outcome that the CDP process seeks to prevent.
SRC also presents a robust legal argument in support of the Commission’s
authority to issue a stay. Application at pages 10 – 12. Accordingly, SRC
maintains a stay is necessary and proper.
Tier One Stay
10.
SRC’s Application requests that the Commission enter an order staying
acceptance of all APDs, Form 2As, and applications to establish drilling and
spacing units within the below-described lands (“Tier One Lands”) filed by any
Operator or Owner, other than Applicant, until the Commission issues a final
decision on the CDP at a future hearing or for eight months from the date of an
order granting the stay, whichever is earlier.
The Tier One Lands lie within the northern
portion of the proposed CDP, and apply to the Tier One Stay:
Township 4 North, Range 66 West, 6th
P.M.
Section 2: All
Section 3: All
Section 4: All
Section 5: All
Section 6: N/2, SE/4
Township 4 North, Range 67 West, 6th
P.M.
Section 1: N/2
Section 2: N/2
Section 3: N/2
Section 4: NE/4
Township 5 North, Range 66 West, 6th
P.M.
Section 31: All
Section 32: All
Section 33: All
Section 34: All
Section 35: All
Section 36: All
Township 5 North, Range 67 West, 6th
P.M.
Section 25: All
Section 26: All
Section 35: All
Section 36: All
11.
SRC’s Application showed that its current drilling schedule focuses on
the Tier One Lands and that its drilling plans for the Tier One Lands are
integral to its exploration and development plans through the first quarter of
2020. As such, SRC requests that it be allowed to continue submitting APDs,
Form 2As, and applications to establish drilling and spacing units for the Tier
One Lands pending a final Commission decision on the CDP.
Tier Two Stay
12.
SRC’s Application further requests that the Commission enter an order
staying acceptance of all applications for APDs, Form 2As, and applications to
establish drilling and spacing units within the below-described lands (“Tier
Two Lands”) filed by any Operator or Owner, including Applicant, until the
Commission issues a final decision on the CDP at a future hearing.
The Tier Two Lands lie within the
southern portion of the proposed CDP, and apply to the Tier Two Stay:
Township 4 North, Range 65
West, 6th P.M.
Section 6: SW/4
Section 7: All
Section 18: All
Section 19: All
Section 30: All
Township 4 North, Range 66
West, 6th P.M.
Section 1: All
Section 10: All
Section 11: All
Section 12: All
Section 13: All
Section 14: All
Section 15: All
Section 16: S/2, NE/4
Section 17: S/2
Section 18: All
Section 19: All
Section 20: All
Section 21: All
Section 22: N/2
Section 23: All
Section 24: All
Section 25: All
13.
SRC agreed to be bound by oral order of the Commission.
14.
Staff gave thoughtful consideration to and review of SRC’s request for a
stay. In considering SRC’s request, Staff gave particular consideration to
whether a stay was consistent with the purpose of CDPs. As the Commission
explained in the December 11, 2008 Statement of Basis, Specific Statutory
Authority, and Purpose accompanying the promulgation of Rule 216. (“SBP”), CDPs
provide more than just an efficient means of development for Operators. CDPs
“encourage landscape level planning and regulatory review….” SBP at p. 24.
Moreover, the Commission found that such planning will “help to better address
cumulative effects, promote [efficiency], and facilitate more win-win
situations.”
15.
Staff concluded that Applicant’s request for a stay is consistent with the
very purpose of a CDP. Without a stay, landscape level planning within the CDP
lands would be difficult, if not impossible to accomplish. The Commission would
receive competing APDs, Form 2As and applications for drilling and spacing
units, which would frustrate Staff’s ability to conduct a regulatory review
that seeks to more effectively address cumulative impacts from development in
the Application Lands. Staff would be faced with approving competing
applications that would result in greater cumulative impacts in the CDP
Application Lands, thereby frustrating a primary purpose of a CDP.
16.
Accordingly, the Director instructed Staff to:
a.
stay acceptance of APDs, Form 2As, and applications to establish
drilling and spacing units in the southern portion of the Application Lands for
all Owners and Operators, until such time as the Commission has entered an
order on SRC’s stay request; and
b.
to stay acceptance of APDs, Form 2As, and applications to establish
drilling and spacing units in the Tier One
Lands for all Owners and Operators except Applicant, until such time as
the Commission has entered an order on SRC’s stay request.
Excluding
SRC’s applications in the Tier One Lands, the Director instructed Staff that
all APDs, Form 2As, and applications to establish drilling and spacing units
for the Application Lands submitted to the Commission prior to January 29,
2019, will be processed according to the form’s status as of January 29, 2019:
c.
“In Process” applications will be placed On Hold and Staff will not
undertake further review of the application.
d.
“On Hold” applications will remain On Hold and Staff will not undertake
further review of the application.
e.
“Draft” applications will remain in Draft. If an applicant seeks to
resubmit an application in Draft, staff will return the application to Draft.
f.
Applications in “Upload” will be returned to Draft without a
Completeness Review by Staff.
Excluding
any SRC application in the Tier One Lands, the Director further instructed that
all APD and Form 2A applications for the Application Lands submitted to the
Commission after January 29, 2019, and before the date of this Order, be
returned to Draft without a Completeness Review. For all drilling and spacing
unit applications submitted to the Commission after January 29, 2019, and
before the date of this Order, excluding any SRC applications in the Tier One
Lands, the Director instructed Staff to assign a docket number to the application
and stay the application indefinitely. The submission dates for all APD, Form
2A and drilling and spacing unit applications will be preserved.
17.
Staff recommends that the stay be effective from January 29, 2019
through January 30, 2020. If the final CDP is not approved prior to January 30,
2020, SRC may request an extension of the stay with the Commission.
18.
Based on the facts stated in the verified Application, having received
no protests, and on the Hearing Officer review of the request for a stay, the
Commission should order to stay acceptance of certain applications for
permits-to-drill, Oil and Gas Location Assessments, and applications to
establish drilling and spacing units in all or portions of Township 4 North,
Range 65 West, 6th P.M., Township 4 North, Range 66 West, 6th P.M., Township 4
North, Range 67 West, 6th P.M., Township 5 North, Range 66 West, 6th P.M., and
Township 5 North, Range 67 West, 6th P.M., until such time as the Commission
has entered an order on SRC’s application for a Comprehensive Drilling Plan or
eight months from the date of an order granting the stay, whichever is earlier.
ORDER
IT IS HEREBY ORDERED:
1.
For the below-described Tier One application lands (“Tier One Lands”) Staff
will process APDs, Form 2As, and applications to establish drilling and spacing
units in accordance with the direction set forth in paragraphs 1 through 7 of
this Order.
The below-described lands (“Tier
One Lands”) lie within the northern portion of the proposed CDP, and apply to
the Tier One Stay:
Township 4 North, Range 66 West, 6th
P.M.
Section 1: All
Section 2: W/2
Section 3: All
Section 4: All
Section 5: All
Section 6: N/2, SE/4
Township 4 North, Range 67 West, 6th
P.M.
Section 1: N/2
Section 2: N/2
Section 3: N/2
Section 4: NE/4
Township 5 North, Range 66 West, 6th
P.M.
Section 31: All
Section 32: All
Section 33: All
Section 34: All
Section 35: All
Section 36: All
Township 5 North, Range 67 West, 6th
P.M.
Section 25: All
Section 26: All
Section 35: All
Section 36: All
2.
Until the Commission issues a final Order on the CDP Application, all
APD and Form 2A applications for the Tier One Lands submitted to the Commission
by any Operator or Owner other than SRC, prior to January 29, 2019, will be
processed according to the form’s status as of January 29, 2019:
a.
“In Process” applications will be placed On Hold and staff will not
undertake further review of the application.
b.
“On Hold” applications will remain On Hold and staff will not undertake
further review of the application.
c.
“Draft” applications will remain in Draft. If an applicant seeks to
resubmit an application in Draft, staff will return the application to Draft.
d.
Applications in “Upload” will be returned to Draft without a
Completeness Review by Staff.
The
submission dates for all APD and Form 2A applications for the Tier One Lands
submitted to the Commission by an Operator or Owner other than SRC prior to January
29, 2019, will be preserved.
3.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all APD and Form 2A applications for the Tier One Lands submitted by any
Operator or Owner, other than SRC, to the Commission between January 29, 2019
and May 20, 2019, will be returned to Draft without a Completeness Review. The
submission dates for all APD and Form 2A applications for the Tier One Lands
submitted to the Commission between January 29, 2019 and May 20, 2019, will be
preserved.
4.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all APD and Form 2A applications for the Tier One Lands submitted by any
Operator or Owner, other than SRC, to the Commission after May 20, 2019, will
be returned to Draft without a Completeness Review. The submission dates for
all APD and Form 2A applications for the Tier One Lands submitted to the
Commission after May 20, 2019, will be preserved.
5.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier One Lands
filed prior to January 29, 2019, by any Operator or Owner other than SRC, will
be assigned a docket number and stayed indefinitely. The submission date for all
drilling and spacing unit applications for the Tier One Lands submitted to the
Commission prior to January 29, 2019, will be preserved.
6.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier One Lands
filed between January 29, 2019 and May 20, 2019, by any Operator or Owner other
than SRC, will be assigned a docket number and stayed indefinitely. The
submission date for all drilling and spacing unit applications for the Tier One
Lands submitted to the Commission between January 29, 2019 and May 20, 2019,
will be preserved.
7.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier One Lands
filed after May 19, 2019, by any Operator or Owner other than SRC, will be
assigned a docket number and stayed indefinitely. The submission date for all
drilling and spacing unit applications for the Tier One Lands submitted to the
Commission after May 20, 2019, will be preserved.
8.
For the below-described Tier Two application lands (“Tier Two Lands”)
Staff will process applications for permits-to-drill (“APD”), Oil and Gas
Location Assessments (“Form 2A”), and drilling and spacing unit applications in
accordance with the direction set forth in paragraphs 8 through 14 of this
Order.
The below-described Tier Two Lands lie within the
southern portion of the proposed CDP:
Township 4 North, Range 65
West, 6th P.M.
Section 6: SW/4
Section 7: All
Section 18: All
Section 19: All
Section 30: All
Township 4 North, Range 66
West, 6th P.M.
Section 1: All
Section 10: All
Section 11: All
Section 12: All
Section 13: All
Section 14: All
Section 15: All
Section 16: S/2, NE/4
Section 17: S/2
Section 18: All
Section 19: All
Section 20: All
Section 21: All
Section 22: N/2
Section 23: All
Section 24: All
Section 25: All
9.
Until the Commission issues a final Order on the CDP Application for
eight months from the date of an order granting the stay, whichever is earlier,
all APD and Form 2A applications for the Tier Two Lands submitted to the
Commission prior to January 29, 2019, will be processed according to the form’s
status as of January 29, 2019:
a.
“In Process” applications will be placed On Hold and Staff will not
undertake further review of the application.
b.
“On Hold” applications will remain On Hold and Staff will not undertake
further review of the application.
c.
“Draft” applications will remain in Draft. If an applicant seeks to
resubmit an application in Draft, Staff will return the application to Draft.
d.
Applications in “Upload” will be returned to Draft without a
Completeness Review by Staff.
e.
The submission dates for all APD and Form 2A applications for the Tier
Two Lands submitted to the Commission prior to January 29, 2019, will be
preserved.
10.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all APD and Form 2A applications for the Tier Two Lands submitted to the
Commission between January 29, 2019 and May 20, 2019, will be returned to Draft
without a Completeness Review. The submission dates for all APD and Form 2A
applications for the Tier Two Lands submitted to the Commission between January
29, 2019 and May 20, 2019, will be preserved.
11.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all APD and Form 2A applications for the Tier Two Lands submitted to the
Commission after May 20, 2019, will be returned to Draft without a Completeness
Review. The submission dates for all APD and Form 2A applications for the Tier
Two Lands submitted to the Commission after May 20, 2019, will be preserved.
12.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting a stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier Two Lands
filed prior to January 29, 2019, will be assigned a docket number and stayed
indefinitely. The submission date for all drilling and spacing unit
applications for the Tier Two Lands submitted to the Commission prior to
January 29, 2019, will be preserved.
13.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier Two Lands
filed between January 29, 2019 and May 20, 2019, will be assigned a docket
number and stayed indefinitely. The submission date for all drilling and
spacing unit applications for the Tier Two Lands submitted to the Commission
between January 29, 2019 and May 20, 2019, will be preserved.
14.
Until the Commission issues a final Order on the CDP Application or for
eight months from the date of an order granting the stay, whichever is earlier,
all applications to establish drilling and spacing units for Tier Two Lands
filed after May 20, 2019, will be assigned a docket number and stayed
indefinitely. The submission date for all drilling and spacing unit
applications for the Tier Two Lands submitted to the Commission after May 20,
2019, will be preserved.
15.
If the Commission enters an Order granting SRC a CDP for the Application
Lands, all APD, Form 2A, and drilling and spacing unit applications for the
Application Lands filed by Operators or Owners, other than SRC or its
successors or assigns, will not be acted on by Staff, and Operators and Owners
will be asked to withdraw the applications. The Commission orders Staff to
reject any such application not withdrawn by an Operator or Owner within 30
days of the effective date of a Commission order approving the SRC CDP
Application.
16.
If the Commission denies SRC’s CDP Application, Staff will resume
processing all APDs, Form 2As, and applications to establish drilling and
spacing units for the Application Lands. Operators and Owners may resubmit APD
and Form 2A applications for the Application Lands that were returned to Draft.
Staff will proceed with the Completeness Review of such applications in
accordance with its regular practice. All stays on drilling and spacing unit
applications for the Application Lands will be lifted, and Staff will proceed
with all such applications in accordance with its regular practice.
17.
The Commission affirms the Director’s decision to put On Hold, place in
Draft, or stay all APDs, Form 2As, and applications to establish drilling and
spacing units for the Tier One Lands, except those applications filed by SRC,
and for Staff not to undertake a Completeness Review of such applications
received prior to the date of this Order The Commission also affirms the Director’s
decision to continue processing any SRC APDs, Form 2As, and applications to
establish or modify drilling and spacing units for the Tier One Lands. The
Commission affirms the Director’s decision to put On Hold, place in Draft, or
stay all APDs, Form 2As, and applications to establish drilling and spacing
units for the Tier Two Lands and for Staff not to undertake a Completeness
Review of such applications received prior to the date of this Order.
18.
The stay will continue until and terminate upon the earlier of a) the
Commission making a final decision on the CDP, or b) eight months from the
entry of this Order. If an extension of this first stay is requested, SRC and
Staff will make a presentation to the Commission in support of the request. The
presentation must detail the progress being made on the CDP Application and
when Staff expects that the Application will be ready for Commission hearing.
Any interested party who opposes an extension of the first stay will be
afforded the opportunity to bring before the Commission their objection to
extending the stay
IT IS FURTHER ORDERED:
1.
The provisions contained in the above order shall become effective
immediately.
2.
The Commission expressly reserves its 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 7th day of June, 2019, as of May 21, 2019
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By:
Mimi Larsen, Secretary