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 FOR THE FRUITLAND COAL SEAM FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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CAUSE NO. 112 DOCKET NO. 1309-AW-65 ORDER NO. 112-241

REPORT OF THE COMMISSION

The Commission heard this matter on September 15, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve two additional wells, for a total of up to four infill wells, in an approximate 320-acre drilling and spacing unit established for N½ of Section 16, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland Coal Seam Formation, with the treated interval of each wellbore located no closer than 660 feet to any outer boundary of the unit; and eliminate any interior quarter section setbacks.

FINDINGS

The Commission finds as follows:

1.         Coleman Oil and Gas, Inc. (“Coleman” 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.         On June 15, 1988, the Commission entered Order No. 112-60 which, among other things, established 320-acre drilling and spacing units for production of gas from the Fruitland Coal Seam Formations with 990 foot setbacks to the outer boundary of each unit and a 130-foot setbacks to the interior quarter section line.  Section 16, Township 33 North, Range 7 West, N.M.P.M. is subject to Order No. 112-60 for the Fruitland Coal Seam Formation.

5.         On December 17, 1990, the Commission entered Order No. 112-85 which amended Order No. 112-61 (which originally amended Order No. 112-60) and confirmed the approximate 320-acre drilling and spacing units established for the production of gas from the Fruitland Coal Seam Formation.  The units consisted of the N½ and S½ or the E½ and W½ of a full section with the one permitted well located, when north of the north line of Township 32 North, in the NW¼ and SE¼ of the section, and when south of the north line of Township 32 North, in 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.  Section 16, Township 33 North, Range 7 West, N.M.P.M. is subject to Order No. 112-85 for the Fruitland Coal Seam Formation.

6.         On July 11, 2000, the Commission entered Order No. 112-157 which amended Order Nos. 112-60, 112-61 and 112-85 to allow an additional well to be drilled within certain 320-acre drilling and spacing units, with the permitted well to be located in any undrilled quarter section no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.  Section 16, Township 33 North, Range 7 West, N.M.P.M. is subject to Order No. 112-157 for the Fruitland Coal Seam Formation.

7.         On July 18, 2013, Coleman, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to: 1) approve up to four infill wells in the below-described approximate 320-acre drilling and spacing unit (“Application Lands”); 2) reduce the previously established outer boundary setback from 990 feet to 660 feet within the Application Lands; 3) eliminate any interior quarter section setbacks; and 4) limit surface locations to no more than four pads within the Application Lands.

Township 33 North, Range 7 West, 6^th P.M.

Section 16:      N½

8.         On August 29, 2013, La Plata County (“La Plata” or “Intervenor”), by and through its attorney, filed an Intervention in this matter.

9.         On August 31, 2013, the Bureau of Land Management (“BLM”) and the Southern Ute Indian Tribe (“SUIT”) filed a protest, indicating that they did not concur within this Application.

10.       On September 3, 2013 (August 19, 2014), Coleman, by its attorneys, 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.

11.       On September 5, 2013, the parties agreed to continue this matter to the October 2013 hearing.

12.       The parties agreed to continue this matter to the September 2014 hearing.

13.       On December 17, 2013, La Plata, by its attorney, filed its conditional withdrawal of Intervention which conditions its withdrawal on the Commission approving the Memorandum of Understanding attached thereto.

14.       On July 24, 2014, SUIT submitted a letter of support stating that the concerns had been addressed.  On July 28, 2014, the BLM filed a letter of concurrence and support of the application and withdrew its Protest.

15.       Land testimony and exhibits submitted in support of the Application by Michael J. Finney, President of Finney Land Co., Contract Landman for Coleman, showed that the Applicant is an owner with the right to drill wells in the Application Lands.

16.       Geologic testimony and exhibits submitted in support of the Application by Alan P. Emmendorfer, Geologist for Applicant, showed that the Fruitland Coal Formation underlies the Application Land and that the Fruitland Coals are productive from a large area of both La Plata County and Archuleta County.

17.       Engineering testimony and exhibits submitted in support of the Application by John P. Seidle, MHA Petroleum Consultants, showed that the Application Lands are offset by acreage previously approved for 80-acre infill wells drilled to and producing from the Fruitland coals and that no known reservoir engineering differences in the Fruitland coals between the Application Lands and these nearby areas exist; that the drainage area of a well in the Fruitland formation is estimated to be no greater than 70-acres; and that a well producing from the Fruitland coals on the Application Lands is economic.

18.       The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

19.       Coleman agreed to be bound by oral order of the Commission. 

20.       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 approve two additional wells, for a total of up to four infill wells, in an approximate 320-acre drilling and spacing unit established for N½ of Section 16, Township 33 North, Range 7 West, N.M.P.M., for the development and operation of the Fruitland Coal Seam Formation, with the treated interval of each wellbore located no closer than 660 feet to any outer boundary of the unit; and eliminate any interior quarter section setbacks.

ORDER

IT IS HEREBY ORDERED:

1.         Two additional wells, for a total of up to four infill wells, within an approximate 320-acre drilling and spacing unit for the below-described lands, are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Fruitland Coal Formation:

Township 33 North, Range 7 West, N.M.P.M.

                                    Section 16:      N½

            2.         The productive interval of each wellbore within the unit shall be located no closer than 660 feet to any outer boundary of the unit; and

            3.         All interior quarter section setbacks are hereby eliminated.

            4.         All wells permitted under this Order shall be located on no more than four pads within the unit.

            5.         The Memorandum of Understanding between Coleman and La Plata County is hereby approved for any wells permitted under this Order, and any well permitted under this Order shall have those terms and conditions incorporated into the Oil and Gas Location Assessment, Form 2A, and Application for Permit-to-Drill, Form 2.

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  22^nd  day of September, 2014, as of September 15, 2014.           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary