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, LA PLATA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112   ORDER NO.   112-208 CORRECTED

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 allow up to four (4) wells in each of the 320-acre drilling and spacing units consisting of the N½ and S½ of Section 5 in Township 33 North, Range 10 West, N.M.P.M. for the production of gas and associated hydrocarbons from the Fruitland coal seams.

 

FINDINGS

 

The Commission finds as follows:

 

1.  Chevron USA Inc. and Four Star Oil & Gas Company (“Applicants”), as applicants herein, are 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 the production of gas and associated hydrocarbons from the Fruitland coal seams for certain lands in Townships 33 North and 34 North, Ranges 9 and 10 West, N.M.P.M.  (SUL), 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.  Subsequent Order No. 112-85 amended Order No. 112-60 to include additional field rules for the lands subject to Order No. 112-60.

 

5.  On July 1, 2000, the Commission issued Order No. 112-157 which granted, at the discretion of the operator, an additional well within certain 320-acre drilling and spacing units, including the above described units, for production from the Fruitland coal seams, with permitted wells to be located in the center of the NE¼ and SW¼ of the section, and no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line, subject to the Director approving exceptions for the permitted well location geological, topographic or surface location concerns.

 

6.  On August 9, 2007, Applicants, by their attorney, filed with the Commission a verified application for an order to allow up to 4 wells in each of the 320-acre drilling and spacing units consisting of the below-listed lands for the production of gas and associated hydrocarbons from the Fruitland coal seams, with the bottomhole of each well to be located no closer than 660 feet to any outer boundary of the unit and no closer than 130 feet to any interior section line, providing that the Director has the right to approve exceptions to the permitted well locations for geological, topographic or surface location concerns.

 

Township 33 North, Range 10 West, N.M.P.M., (SUL)

Section 5:      N½ and S½

 

Township 34 North, Range 9 West, N.M.P.M., (SUL)

Section 5U:   All

Section 6U:   All

Section 7U:   N½ and S½

Section 8U:   N½ and S½

Section 18:    N½

 

Township 34 North, Range 10 West, N.M.P.M., (SUL)

Section 12U: S½

Section 13:    N½

 

7.  On September 12, 2007, La Plata County filed with the Commission an intervention to the application.  On September 12, 2007, Mary Parnell, Molly E. Watson, Richard K. Watson, Theresa Watson, and James C. Garnand filed with the Commission a protest to the application.  On September 17, 2007, the San Juan Citizens Alliance filed with the Commission an intervention to the application.

 

8.  On September 19, 2007, Applicants amended their application to continue all the application lands except Section 5, Township 33 North, Range 10 West, N.M.P.M. to the November 2007 hearing.  On September 19, 2007, La Plata County withdrew its intervention only with respect to the amended application lands.  On September 20, 2007,  Mary Parnell, Molly E. Watson, Richard K. Watson, Theresa Watson, and James C. Garnand withdrew their protest with respect to all of the application lands.  On September 20, 2007, the San Juan Citizens Alliance withdrew its intervention only with respect to the amended application lands.

 

9.  On September 25, 2007, Chevron, by its attorney, filed with the Commission a written request to approve the amended 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.

 

10.  Testimony and exhibits submitted in support of the application showed the lands in the general vicinity of the application lands that previously have been approved for 80-acre well density for the production of gas and associated hydrocarbons from the Fruitland coal seams.  Additional testimony indicated that Applicants intend to minimize surface disturbance by drilling directionally or horizontally from existing well pads.

 

11.  Testimony and exhibits submitted in support of the application showed that the Fruitland coal seams display highly variable and heterogeneous reservoir properties in both a vertical and lateral direction, similar to the coal seams in the nearby areas where increased well density has been approved.  Additional testimony indicated that because of stratigraphic and structural barriers to vertical and horizontal flow, more wells are needed to efficiently drain the gas contained within these coal seams.

 

12.  Testimony and exhibits submitted in support of the application showed that existing wells producing from the Fruitland coal seams recover approximately 49% of the gas in place and that 160-acre infill wells recover an additional 29% of the gas in place, for a total recovery factor of 78%.  Additional testimony and exhibits indicated that 80-acre well density will recover additional reserves of approximately 3.2 BCF per well from the Fruitland coal seams on the 320-acre drilling and spacing units consisting of the application lands.

 

13.  Testimony and exhibits submitted in support of the application showed that 80-acre well density within the Fruitland coal seams on the 320-acre drilling and spacing units of the application lands will increase recovery efficiency and that increased well density is an economically viable investment.

 

14.  The above-referenced testimony and exhibits show that the proposed density and reduced setbacks will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

 

15.  Chevron USA Inc. and Four Star Oil & Gas Company agreed to be bound by oral order of the Commission.

 

16.  Based on the facts stated in the verified amended application, having received two interventions withdrawn only with respect to the amended application lands and one protest that has been withdrawn, 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 in each of the 320-acre drilling and spacing units consisting of the N½ and S½ of Section 5, Township 33 North, Range 10 West, N.M.P.M. for the production of gas and associated hydrocarbons from the Fruitland coal seams.

 

 

 

 

ORDER

 

NOW, THEREFORE, IT IS ORDERED, that up to four (4) wells are hereby allowed to be optionally drilled into and produced in each of the 320-acre drilling and spacing units consisting of the below-listed lands for the production of gas and associated hydrocarbons from the Fruitland coal seams:

 

Township 33 North, Range 10 West, N.M.P.M.

Section 5:  N½ and S½

 

IT IS FURTHER ORDERED, that the bottomhole for each well shall be located within each 320-acre drilling and spacing unit no closer than 660 feet to any outer boundary of the unit and no closer than 130 feet to any interior section line, with the Director having the right to approve exceptions to the permitted well locations for geological, topographic or surface location concerns.

 

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 filing for judicial review.

 

                        ENTERED this 16^th day of October, 2007, as of October 2, 2007.

 

                        CORRECTED this _______day of November, as of October 2, 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

November 1, 2007