BEFORE THE OIL & GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO- BLANCO FIELD, LA PLATA COUNTY, COLORADO |
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CAUSE NO. 112
ORDER NO. 112-207
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REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:00 a.m. on October 2, 2007, in the Public Hearing Room, Old Court House, 544 Rood Avenue, 2nd Floor, Grand Junction, Colorado, for an order to pool all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the N½ of Section 29, Township 34 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland coal seams.
FINDINGS
The Commission finds as follows:
1. BP America Production Company (“BP”) 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. On June 17, 1988, the Commission issued Order No. 112-60, which among other things, established 320-acre drilling and spacing units for certain lands including Section 29, Township 34 North, Range 7 West, N.M.P.M., for production of gas from the Fruitland coal seams, with the permitted well to be located no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line.
5. On July 11, 2000, the Commission issued Order No. 112-157, which among other things, allowed an optional second Fruitland coal seam well to be drilled in each 320-acre drilling and spacing unit for certain lands including Section 29, Township 34 North, Range 7 West, N.M.P.M., with such additional well being located no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line.
6. On September 26, 2005, the Commission issued Order No. 112-180, which among other things, amended Order No. 112-157 to allow a total of four (4) wells to be optionally drilled in each 320-acre drilling and spacing unit, including Section 29, Township 34 North, Range 7 West, N.M.P.M., for production from the Fruitland coal seams.
7. On July 6, 2007, BP, by its attorneys, filed with the Commission a verified application for an order to pool all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the N½ of Section 29, Township 34 North, Range 7 West, N.M.P.M. for the development and operation of the Fruitland coal seams. BP has drilled the Sparks GU B No. 1 Well in said Section 29. Parties have been offered the option to participate in the drilling of the well in the unit, but as of the application date one or more of such parties have refused to participate by bearing their proportionate shares of the costs and risks of drilling or operating the wells. In addition, attempts have been made to enter into leases with unleased mineral owners but have been unsuccessful to date.
8. On September 18, 2007, BP, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the application.
9. Testimony and exhibits submitted in support of the application showed that the Sparks GU B #1 Well was drilled at a surface location of 2515.6 feet FNL and 2061.0 feet FEL and a bottom hole location of 1876 feet FNL and 802 feet FEL in said Section 29. Additional testimony indicated that the well has not yet produced.
10. Testimony and exhibits submitted in support of the application showed a list of all consenting and nonconsenting parties within the 320-acre spacing unit. The exhibit reflects that BP and MFM Oil & Gas Properties, LLC. have 99.89% of the unit leased and that the nonconsenting owners located within this unit comprise approximately 0.11% of the wells which are subject to this compulsory pooling action.
11. Testimony and exhibits submitted in support of the application showed that offers to lease or to participate were sent to nonconsenting owners. Additional testimony submitted showed that the offers and the Authorizations for Expenditures were fair and reasonable, and similar to those prevailing in the area. Further testimony submitted showed the offers were sent via mail on or around May 29, 2007, and all were received at least thirty (30) days prior to the October 2, 2007 hearing date.
12. The testimony and exhibits submitted in support of the application indicate that BP has complied with the requirements of Rule 530.a. and §34-60-116(7)(d), C.R.S.
13. BP America Production Company agreed to be bound by oral order of the Commission.
14. 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 pooling all nonconsenting interests in the 320-acre drilling and spacing unit consisting of the N½ of Section 29, Township 34 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland coal seams.
ORDER
NOW, THEREFORE IT IS ORDERED that, 1. Pursuant to the provisions of §34-60-116 C.R.S. as amended, of the Oil and Gas Conservation Act of the State of Colorado, all of the nonconsenting interests in the 320-acre drilling and spacing unit consisting of the N½ of Section 29, Township 34 North, Range 7 West, N.M.P.M. are hereby pooled for the development and operation of the Fruitland coal seams.
2. The production obtained from the drilling unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within each drilling unit; each owner of an interest in each drilling unit shall be entitled to receive his/her share of the production of the well located on each drilling unit applicable to his interest in each drilling unit.
3. Said owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well(s) and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.
4. Any nonconsenting unleased mineral owner within the spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of his/her record title interest, whatever that interest may be, until such time as the consenting owner recovers, only out of the nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116 (7)(b), C.R.S. as amended. After recovery of such costs, the nonconsenting mineral owner shall then own his/her proportionate 8/8ths share of the well, surface facilities and production, and then be liable for his/her proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.
5. The operator of any well drilled on the above-described unit shall furnish all nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.
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.
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
October 16, 2007