|
BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
|
||
|
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO-BLANCO FIELD, ARCHULETA AND LA PLATA COUNTIES, COLORADO |
) ) ) ) |
CAUSE NO. 112
ORDER NO. 112-204 |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on July 23, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow up to four (4) wells to be optionally drilled in the 320-acre drilling and spacing units for certain lands in Township 32 North, Ranges 5 and 6 West, N.M.P.M., for production from the Fruitland coal seams.
FINDINGS
The Commission finds as follows:
1. Energen Resources Corporation and Gosney & Sons, Inc. (collectively "Applicants"), as applicants herein are interested parties 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 and the terms of the Memorandum of Understanding ("MOU") between the Commission and the Bureau of Land Management ("BLM").
4. On June 1, 2007, Applicants filed a verified application with the Commission requesting that two (2) optional infill wells be permitted in each existing drilling and spacing unit of 320 acres for the Fruitland coal seams covering the below-described lands. Applicants further requested that either or both of such optional infill wells be permitted to be drilled and completed as directional wells. Applicants requested that they be granted the option with respect to any previously authorized but undrilled “parent” wells to drill and complete such wells as vertical, directional or horizontal wells.
Township 32 North Range 5 West, N.M.P.M.
Section 6: S½
Section 18: S½
Section 19: W½, W½ E½
Township 32 North Range 6 West, N.M.P.M.
Section 1: S½
Section 4: E½, W½
Section 5: N½
Section 14: S½
Section 15: E½
Section 22: E½ NE¼
Section 23: E½, W½
Section 24: W½ W½, E½ W½, E½
Applicants propose that optional third and fourth wells in each 320-acre drilling and spacing unit or with respect to any previously authorized undrilled parent wells, whether such wells are directional or horizontal completions, be completed or recompleted in the operator's discretion with the bottomhole no closer than 660 feet to any outer boundary of the unit and with no setback required to any interior quarter section line.
Applicants further state that the requested wells can be developed in a manner consistent with protection of public health, safety and welfare.
5. On June 3, 2007, Applicants, by their attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.
6. Testimony and exhibits submitted in support of the application showed that Energen is the majority leasehold owner in the application lands.
7. Testimony and exhibits submitted in support of the application showed that two wells previously authorized will not efficiently and economically drain each of the 320-acre drilling and spacing units in the lands described above, and that additional wells are necessary to prevent waste, protect correlative rights and to recover gas and associated hydrocarbons from the Fruitland coal seams all in accordance with the Colorado statutes, the rules and regulations of this Commission and, with respect to Tribal lands, applicable rules and regulations of the BLM.
8. Testimony and exhibits submitted in support of the application showed that the drilling of the infill wells will not impact the Fruitland outcrop.
9. Testimony and exhibits submitted in support of the application showed the optimal location of wells to be vertically drilled in order to maximize recovery of gas from a section. Additional testimony and exhibits showed the existing well locations, staked well locations and proposed locations for infill spacing that propose minimum disturbance.
10. Testimony and exhibits submitted in support of the application showed the Fruitland coal seams to have a thickness ranging from 29 feet to 51 feet in the application lands, with a density cutoff of 2.0g/cc, and showed how the coal package changes over the application lands where in the NE¼ of the application lands, the coal consists primarily of one seam.
11. Testimony and exhibits submitted in support of the application showed cumulative gas production in the application lands with a range of 0.05 – 0.81 BCF, and estimated initial bottomhole pressures in the area as 1625-1650 psi.
12. Testimony and exhibits submitted in support of the application showed that the average original gas in place (OGIP) per 320 acre spacing unit is approximately 10.2 bcf based on these values. Additional testimony and exhibits showed that the average estimated ultimate reserves (EUR) is approximately 4.2 bcf per 320 acres based on 2 wells per spacing unit. Further testimony and exhibits showed that there is a recovery factor (RF) of approximately 41%, with approximately 6 bcf per spacing unit remaining.
13. Testimony and exhibits submitted in support of the application showed the average incremental EUR is approximately 2.6 bcf per spacing unit. Additional testimony and exhibits showed that the average incremental recovery factor is approximately 25% based on simulation and history matching, which increases the total recovery factor to approximately 67% of the OGIP per 320 acre spacing unit.
14. Testimony and exhibits submitted in support of the application indicated that the current development shows a total of 24 wells, and a recovery of 4.2 bcf (41% recovery factor) per 320 acres spacing unit. Additional testimony and exhibits showed that developing each 320-acre drilling and spacing unit with 2 additional wells increases total well count to 48 wells, with a recovery to 6.8 bcf (67% recovery factor).
15. Testimony and exhibits submitted in support of the application showed the average well has a rate of return of approximately 44%. Additional testimony showed the wells will efficiently and economically recover the reserves that would not be recovered under existing rules.
16. Energen Resources Corporation and Gosney & Sons, Inc. agreed to be bound by oral order of the Commission.
17. 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.b., the Commission should enter an order to allow up to four (4) wells to be optionally drilled in the 320-acre drilling and spacing units for certain lands in Township 32 North, Ranges 5 and 6 West, N.M.P.M., for production from the Fruitland coal seams.
ORDER
NOW, THEREFORE IT IS ORDERED, that up to four (4) wells are hereby allowed to be optionally drilled in each approximate 320-acre drilling and spacing unit for the below-listed lands, whether such wells are directional or horizontal wells, (but nonetheless maintaining a well density of one (1) well per 80 acres for the irregular sections abutting the New Mexico state line):
Township 32 North, Range 5 West, N.M.P.M.
Section 6: S½
Section 18: S½
Section 19: W½, W½ E½
Township 32 North, Range 6 West, N.M.P.M.
Section 1: S½
Section 4: E½, W½
Section 5: N½
Section 14: S½
Section 15: E½
Section 22: E½ NE¼
Section 23: E½, W½
Section 24: W½ W½, E½ W½, E½
IT IS FURTHER ORDERED, that the permitted well shall be located no closer than 660 feet from the outer boundary of the unit with no interior quarter section line setback.
IT IS FURTHER ORDERED, that the surface location for each of the additional wells shall be located on a common or extended pad such that a total of four Fruitland coal surface well pads shall be authorized in each governmental section.
IT IS FURTHER ORDERED, that any previously authorized undrilled “parent” wells in the established drilling and spacing units may be drilled vertically, directionally or horizontally in the Applicants’ discretion provided that such wells comply with the setbacks to the outer boundary of the drilling and spacing unit.
IT IS FURTHER ORDERED, that wells drilled on the above-described lands shall comply with the terms and provisions of all of the Commission’s health, safety, welfare and environmental rules and regulations now or hereafter in effect.
IT IS FURTHER ORDERED, that wells drilled in the above-described lands shall comply with all applicable regulations of the BLM, Bureau of Indian Affairs and the Southern Ute Indian Tribe when conducting operations on lands subject to the respective jurisdiction of each agency.
IT IS FURTHER ORDERED, that wells drilled in the above-described lands shall comply with certain provisions of the MOU between Applicants and La Plata County, and shall comply with all terms, conditions and provisions of prior Commission Orders in Cause No. 112, including without limitation, the specific provisions of Order No. 112-157 including the Rule 508.j.(3)B. conditions attached thereto, to the extent they do not duplicate the provisions of the MOU. For convenience and ease of reference, the relevant conditions of the MOU and Order No. 112-157, including Rule 508.j.(3)B. conditions, are set forth below. Conflicts between the conditions of the MOU set forth herein and the terms, conditions and provisions of Order No. 112-157 shall be resolved in favor of the MOU.
IT IS FURTHER ORDERED, that the following provisions of the proposed MOU between Applicants and La Plata County shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations or orders:
Surface Density The density of Fruitland Coal Well Pads within the Infill Application Area shall not exceed four (4) within any single 640-acre governmental section of real property. Notwithstanding the foregoing, nothing contained in this provision shall be construed so as to require the closure or abandonment of any existing gas well.
Storm Water Management and Spill Prevention Containment and Control Even if not required to do so by any applicable regulation or law, Applicants agree to utilize best management practices for all pad expansions and new pads and for road and pipeline development or improvements.
Water Well Monitoring If a conventional gas well exists within one quarter (¼) mile of the bottom hole location of a proposed Infill Well, then the two (2) closest water wells within a one-half (½) mile radius of a conventional gas well shall be sampled by Applicants as water quality testing wells. If possible, the water wells selected shall be on opposite sides of the existing conventional gas well not exceeding one-half (½) mile radius. "Infill Well" means wells drilled pursuant to this Order No. 112-204. "Conventional gas well" means a well producing from a non-coalbed methane formation found in the San Juan Basin, such as the Mesaverde or Dakota Sandstone Formation.
If water wells on opposite sides of the conventional gas well cannot be identified, then the two (2) closest wells within one-half (½) mile radius shall be sampled. If two (2) or more conventional gas wells are located within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the conventional gas well closest to a proposed Infill Well shall be used for selecting water wells for sampling.
If no conventional gas wells are located within one quarter (¼) mile radius of the bottom hole location of the proposed Infill Well, then the selected water wells shall be within one quarter (¼) mile of the bottom hole location of the proposed Infill Well. In areas where two (2) or more water wells exist within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the two (2) closest water wells shall be sampled by Applicants. Ideally, if possible, the water wells selected shall be on opposite sides of the bottom hole location of the proposed Infill Well. If water wells on opposite sides of the bottom hole location of the proposed Infill Well cannot be identified, then the two (2) closest wells within one quarter (¼) mile radius shall be sampled by Applicants. If two (2) water wells do not exist within one quarter (¼) mile radius, then the two closest water wells within a one-half (½) mile radius shall be selected.
If no water well is located within a one quarter (¼) mile radius area or if access is denied, two water wells within one-half (½) mile of the bottom hole location of the Infill Well shall be selected. If there are no water quality testing wells meeting the foregoing criteria, then sampling shall not be required. If the BLM or the Commission have already acquired data on a water well within one quarter (¼) mile of the conventional gas well, but it is not the closest water well, it shall be given preference in selecting a water quality testing well. The "initial baseline testing" described in this paragraph shall include all major cations and anions, total dissolved solids ("TDS"), iron and manganese, nutrients (nitrates and nitrites), selenium, dissolved methane, pH, presence of bacteria and specific conductance and field hydrogen sulfide.
If free gas or a methane concentration level greater than 2 milligrams/liter ("mg/L") is detected in a water quality testing well, compositional analysis and isotopic analyses of the carbon and hydrogen of the methane shall be performed to determine gas type (thermogenic, biogenic or an intermediate mix of both). If the testing results reveal biogenic gas, no further isotopic testing shall be done. If the carbon isotope test results in a thermogenic or intermediate mix signature, annual testing shall be performed thereafter and an action plan shall be drafted by Applicants to determine the source of the gas. If the methane concentration level increases by more than 5 mg/L between sampling periods, or increases to more than 10 mg/L, an action plan shall be drafted to determine the source of the gas.
The initial baseline testing shall occur prior to the drilling of the proposed Infill Well. Within one (1) year after completion of the proposed Infill Well, a "post completion" test shall be performed for the same parameters above and repeated three (3) and six (6) years thereafter. If no significant changes from the baseline have been identified after the third test (the six year test), no further testing shall be required. The testing schedule shall restart after the drilling of a new Infill Well on an existing Well Pad if the wells to be tested include those tested for the 160-acre infill program. Additional "post completion" test(s) may be required if changes in water quality are identified during follow-up testing. The Director of the Commission may require further water well sampling, which may include water quantity monitoring, at any time in response to complaints from water well owners.
Within three (3) months of collecting the samples used for the test, copies of all test results described above shall be provided to the Commission and the County and the landowner where the water quality testing well is located.
Plugged and Abandoned Wells/Soil Gas Vapor Survey A soil gas vapor-monitoring program shall be designed to determine a possible lack of zonal isolation along wellbores of plugged and abandoned wells. Applicants shall attempt to identify any plugged and abandoned wells located within one quarter (¼) mile of the bottom hole location of any Infill Well. Any plugged and abandoned well within one quarter (¼) mile of the bottom hole of an Infill Well shall be assessed for risk, taking into account cementing practices reported in the plugged and abandoned reports. Applicants shall notify the Commission of all results of all risk assessments of plugging procedures. The Commission may appropriate funds under Rule 701. (the Environmental Response Fund) to conduct soil gas monitoring tests to further define the risks. If the monitoring reveals a possible lack of zonal isolation, the Commission may then conduct or order any necessary remediation or other authorized activities.
IT IS FURTHER ORDERED, that the following terms, conditions and provisions of Order No. 112-157 shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations:
Well Permit Limitations A Commission hearing shall be required before a drilling permit may be issued for a well site located within one and one-half (1½) miles of the outcrop contact between the Fruitland and Pictured Cliffs Formations. The purpose of the hearing shall be to address potential adverse impacts to the Fruitland outcrop.
Annual Drilling Plan The Director shall survey the operator as to its drilling plans for 2007, and annually thereafter. The survey results shall be reported to the Commission for its consideration with respect to the conditions attached to this order.
Wildlife The operator shall notify the Colorado Division of Wildlife ("CDOW") of the location of any proposed additional well site and advise the Director of the date such notice was provided. If the Director receives comments from the CDOW within ten (10) days of the date notice was provided, such comments may be considered in applying Rule 508.j.(3)B. conditions.
Emergency Preparedness Plan The operator submitting an Application for Permit-to-Drill for a proposed additional well under this order shall file and maintain a digital Emergency Preparedness Plan ("EPP") with La Plata County. The EPP shall include as-built facilities maps showing the location of wells, pipelines and other facilities, except control valve locations that which may be held confidential. The EPP shall include an emergency personnel contact list.
Gas and Oil Regulatory Team The Director shall ensure that the La Plata County Gas and Oil Regulatory Team ("GORT") continues to meet as appropriate, but no less than semiannually. GORT meetings may be scheduled more frequently if the members believe a meeting is appropriate. (GORT includes invited member representatives from La Plata County, BLM, SUIT, industry operators and Commission. Its meetings are open and typically attended by interested area residents.)
3M Mapping, Modeling and Monitoring Project The Director shall ensure that the 3M Technical Peer Review Team is invited to meet as appropriate, but no less than semiannually to review proposals and results related to the 3M Mapping, Modeling and Monitoring Project. 3M Technical Peer Review Team meetings may be scheduled more frequently if the members believe a meeting is appropriate.
Post Completion Pressure Build-Up Tests In addition to obtaining a bottom hole pressure on all wells drilled under this order, the operator shall conduct pressure build-up tests two (2) to three (3) months after initial production begins and once every three (3) years thereafter. The operator shall provide the data acquired, an evaluation of the data and the procedures utilized to conduct the pressure build-up tests to the Director within thirty (30) days of the conclusion of each test. After reviewing the quality of the pressure buildup data and the adequacy of the geographic distribution of the data, the Director may reduce the number of wells for which pressure build-up testing is required.
IT IS FURTHER ORDERED, that the following Rule 508.j.(3)B. conditions from Order No. 112-157 shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable Commission Rules and Regulations:
Prior to approving any Application for Permit-to-Drill, the Director shall conduct an onsite inspection if the surface well location is proposed to be sited within any subdivision that has been approved by La Plata County. The Director shall conduct an onsite inspection if the surface well location is within two (2) miles of the outcrop contact between the Fruitland and Pictured Cliffs Formations and an onsite inspection is requested by the surface owner, LGD, operator, or Director.
Prior to approving any Application for Permit-to-Drill, the Director shall conduct an onsite inspection if the operator and the surface owner have not entered into a surface use agreement. If the reason the surface use agreement has not been executed is related to surface owner compensation, property value diminution, or any private property contractual issues between the operator and the surface owner, then no onsite inspection shall be required.
The purpose of the onsite inspection shall be to identify any potential public health, safety and welfare or significant adverse environmental impacts within Commission jurisdiction regarding the proposed surface location that may not be adequately addressed by Commission rules or orders. The onsite inspection shall not address matters of surface owner compensation, property value diminution, or any private party contractual issues between the operator and the surface owner.
When the Director conducts onsite inspections under the conditions in described in the paragraphs above, the Director shall invite the representatives of the surface owner, the operator and LGD to attend. The Director shall attempt to select a mutually acceptable time for the representatives to attend. The inspection shall be conducted within ten (10) days, or as soon as practicable thereafter, of either the date the LGD advises the Director in writing that the proposed surface well site location falls within an approved subdivision or the date the operator advises the Director in writing that a surface use agreement has not been reached with the surface owner. If requested by the operator, the Director may delay the onsite inspection to allow for negotiation between the operator and surface owner or other parties.
Following the onsite inspection, the Director shall apply appropriate site specific drilling permit conditions if necessary to prevent or mitigate public health, safety and welfare or significant adverse environmental impacts taking into consideration cost-effectiveness and technical feasibility and relevant geologic and petroleum engineering conditions as well as prevention of waste, protection of correlative rights, and promotion of development.
Examples of the types of impacts and conditions that might be applied if determined necessary by the Director include (this list is not prescriptive or all inclusive):
visual or aesthetic impacts - moving the proposed surface well site location or access road to take advantage of natural features for screening; installing low profile artificial lift methods; constructing artificial features for screening
surface impacts – moving or reducing the size, shape, or orientation of the surface well site location or access road to avoid disturbance of natural features or to enhance the success of future reclamation activities; utilizing an existing surface well site location or access road to avoid the impacts of new construction; utilizing a closed drilling fluid system instead of reserve pits to avoid impacts to sensitive areas
noise impacts – installing electric motors where practicable; locating or orienting motors or compressors to reduce noise; installing sound barriers to achieve compliance with Commission rules; confining cavitation completion operations (excluding flaring) to the hours of 7 a.m. to 7 p.m. and notifying all area residents within one-half (½) mile at least seven (7) days before cavitation is commenced
dust impacts – watering roads as necessary to control dust during drilling and completion operations
ground water impacts – collecting and analyzing water and gas samples from existing water wells or springs; installing monitoring wells, collecting samples, and reporting water, gas and pressure data
safety impacts – soil gas sampling and analysis; residential crawl space gas sampling and analysis; installing security fencing around wellheads and production equipment
outcrop impacts – performing outcrop gas seep surveys; performing produced water quality analysis; periodic pressure transient testing of high water/gas ratio wells; limiting water production in wells with anomalously high water rates and water/gas ratios; funding investigative reservoir modeling under the Director’s supervision
wildlife impacts – limiting drilling and completion operations during certain seasonal time periods when specific site conditions warrant
If the operator objects to any of the conditions of approval applied above, the Director shall stay the issuance of the drilling permit and properly notice and set the matter for the next regularly scheduled Commission hearing at which time the Commission may determine conditions of drilling permit approval.
If the Director has reasonable cause to believe that any existing or proposed oil and gas operations are causing, or are likely to cause, public health, safety and welfare or significant adverse environmental impacts within Commission jurisdiction that may not be adequately addressed by Commission rules or orders, the Director may properly notice and set the matter for the next regularly scheduled Commission hearing to order appropriate investigative or remedial action. Reasonable cause may include, but is not limited to, information from the 3M Mapping, Modeling and Monitoring Project.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
ENTERED this ______ day of August, 2007, as of July 23, 2007.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
August 22, 2007