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 FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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CAUSE NO. 112   DOCKET NO. 1409-SP-2105   ORDER NO. 112-242

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on October 27, 2014, at the Durango Public Library, 1900 E. 3^rd Avenue, Durango, CO 81301, upon application for an order to: 1) vacate two 320-acre drilling and spacing units established by Order No. 112-60 for Sections 19, 20 and 21 Township 32 North, Range 7 West, N.M.P.M., for the production of methane gas from the Fruitland Coal Formation; and 2) establish an approximate 607.19-acre exploratory drilling and spacing unit for Sections 20 and 21, Township 32 North, Range 7 West, N.M.P.M., and approve up to one horizontal well within the unit, for the production of oil, gas, and associated hydrocarbons from the Fruitland Coal Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Burlington Resources Oil & Gas Company LP, a subsidiary of ConocoPhillips Company (“Burlington” 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 October 15, 1957, the Commission entered Order No. 112-1 which, among other things, established 320 acre drilling and spacing units for the production of gas from the Mesaverde pool of the Ignacio-Blanco Field and established 990’ setbacks from the boundaries of the unit.  E½E½ of Section 19 and W½ of Section 20, Township 32 North, Range 7 West, N.M.P.M. and E ½ of Section 20 and W½W½ of Section 21, Township 32 North, Range 7 West, N.M.P.M. are subject to Order No. 112-1

 

5.         On November 9, 1959, the Commission entered Order No. 112-6 which, among other things, established 320-acre drilling and spacing units for the production of gas from the Fruitland-Pictured Cliffs formation, each unit being the N½ and the S½  of each section with the permitted well for each unit located in the NW¼  and the SE¼  of the section and no closer than 990 feet from the boundaries of the quarter section upon which it is located. Sections 19, 20 and 21, Township 32 North, Range 7 West, N.M.P.M. are subject to this Order for the Fruitland Coal Formation.

                                                           

6.         On July 16, 1979, the Commission entered Order No. 112-46 which amended Order No. 112-6 and approved an additional well for an approximate 320-acre drilling and spacing unit, for the production of oil, gas, and associated hydrocarbons from the Fruitland-Pictured Cliffs, Dakota-Morrison, and Mesaverde Formations. Order No. 112-46 does not affect this Application.

 

7.         On June 17, 1988, the Commission entered Order No. 112-60 which established 320-acre drilling and spacing units 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, including certain lands in Townships 32 through 34 North, Ranges 7 and 9 through 11 West, N.M.P.M., for the production of methane gas from the Fruitland coal seams. Sections 19, 20, and 21, Township 32 North, Range 7 West, N.M.P.M. are subject to this Order for the Fruitland Coal Formation.

 

            8.         On August 15, 1988, the Commission entered Order No. 112-61 which, among other things, amended parts of Order No. 112-60 and established additional rules, for the production of coalbed methane gas from the Fruitland coal seams. Sections 19, 20, and 21, Township 32 North, Range 7 West, N.M.P.M. are subject to this Order for the Fruitland Coal Formation.

 

            9.         On May 15, 2000, the Commission entered Order No. 112-157 which allowed an optional second Fruitland coal seam well to be drilled in each 320-acre drilling and spacing unit 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, including certain lands in Townships 32 through 34 North, Ranges 7 and 9 through 11 West, N.M.P.M., for the production of methane gas from the Fruitland coal seams. Sections 19, 20, and 21, Township 32 North, Range 7 West, N.M.P.M.  are subject to this Order for the Fruitland Coal Formation.

 

            10.       On October 31, 2005, the Commission entered Order No. 112-181, which, among other things, approved the request for an order to establish up to four wells in each approximate 320-acre drilling and spacing unit in certain lands in Townships 32 through 34 North, Ranges 7 through 9 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams. 

 

11.       On November 27, 2006, the Commission entered Order No. 112-197 which allowed an optional third or fourth well, for a total of up to four wells, to be drilled in each 320-acre drilling and spacing unit for certain lands in Townships 32 through 34 North, Ranges 7 and 9 through 11 West, N.M.P.M., for the production of methane gas from the Fruitland coal seams. Sections 19, 20, and 21, Township 32 North, Range 7 West, N.M.P.M. are subject to this Order for the Fruitland Coal Formation.

 

12.       On July 17, 2014 (amended September 29, 2014), Burlington, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116 C.R.S. for an order to: 1) vacate three approximate 320-acre drilling and spacing units established by Order No. 112-60; and 2) establish an approximate 607.19-acre exploratory drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation, with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director:

 

Township 32 North, Range 7 West, N.M.P.M.
            Section 20:      All

Section 21:      W½ NW¼ (a/k/a W½ W½)

 

            Applicant requests that there will be no well pads located within the unit for the development of the initial horizontal well within the unit, as the surface location is in Section 19, Township 32 North, Range 7 West, N.M.P.M.  However, Applicant reserves the right to locate no more than four well pads within the unit for future development.

 

13.       This Application concerns lands within the jurisdiction of the Southern Ute Indian Tribe (“SUIT”), in accordance with the terms of the Memorandum of Understanding dated August 22, 1991 between the Bureau of Land Management (“BLM”) and this Commission and separate Memorandum of Understanding dated August 22, 1991 between the Bureau of Indian Affairs, the BLM and the SUIT. The SUIT owns surface interests, mineral interests and leasehold interests underlying or adjacent to the Application Lands. 

 

14.       On October 14, 2014, the BLM, on behalf of SUIT, submitted a letter of concurrence in support of the establishment of the proposed 607.19-acre drilling and spacing unit, for the production of the Fruitland Coal Seam Formation.

 

15.       On October 14, 2014 (amended October 20, 2014), Burlington, 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.

 

            16.       Land testimony and exhibits submitted in support of the Application by Ashley Thayer, Senior Landman for Burlington, showed that Burlington holds oil and gas leasehold interests and has a right to drill in the Application Lands.       The land testimony further showed that only two approximate 320-acre drilling and spacing units were to be vacated pursuant to Applicant’s request based on Order Nos. 112-1 and 112-6, and that the E½E½ of Section 19, Township 32 North, Range 7 West, N.M.P.M. will revert to Rule 318.a. 

 

17.       Geologic testimony and exhibits submitted in support of the Application by Dave Johnson, Senior Geologist for Burlington, showed that the Fruitland Coal Formation is present and productive throughout the Application Lands, is approximately 14 feet thick, and is generally of uniform thickness throughout the Application Lands.

 

18.       Engineering testimony and exhibits submitted in support of the Application by Ethan Plunkett, Reservoir Engineer for Burlington, showed that the drainage area for a horizontal wells in the Fruitland Coal Formation having a wellbore lateral of approximately 4,000 feet in length is estimated at no greater than 607.19-acres, and an approximate 607.19-acre exploratory drilling and spacing unit is not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Fruitland Coal Formation.

 

19.       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.

 

20.       Burlington agreed to be bound by oral order of the Commission.

 

21.       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: 1) vacate two 320-acre drilling and spacing units established by Order No. 112-60 for Sections 19, 20, and 21, Township 32 North, Range 7 West, N.M.P.M., for the production of methane gas from the Fruitland Coal Formation; and 2) establish an approximate 607.19-acre exploratory drilling and spacing unit for Sections 20 and 21, Township 32 North, Range 7 West, N.M.P.M., and approve up to one horizontal well within the unit, for the production of oil, gas, and associated hydrocarbons from the Fruitland Coal Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Two approximate 320-acre drilling and spacing units established by Order No. 112-60 for the below-described lands, are hereby vacated:

 

            Township 32 North, Range 7 West, N.M.P.M.
            Section 19:      E½ E½

Section 20:      W½  

 

Township 32 North, Range 7 West, N.M.P.M.

Section 20:      E½ 

Section 21:      W½ W½

 

2.         An approximate 607.19-acre exploratory drilling and spacing unit for the below-described lands, is hereby established, and a total of up to one horizontal well within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation:

 

Township 32 North, Range 7 West, N.M.P.M.
            Section 20:      All

Section 21:      W½ NW¼ (a/k/a W½ W½)

 

3.         Upon the vacation of the two approximate drilling and spacing units established by Order No. 112-60, the E½E½ of Section 19, Township 32 North, Range 7 West, N.M.P.M. will be unspaced and will revert to Rule 318.a. 

 

4.         The productive interval of the wellbore will be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the treated interval of another well producing from the same source of supply within the unit, without exception being granted by the Director.

 

5.         No well pads will be located within the unit for the development of the initial horizontal well within the unit, as the surface location is in Section 19, Township 32 North, Range 7 West, N.M.P.M. 

 

6.         The Applicant shall have the right to locate no more than four well pads within the unit for future development.

 

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 19^th day of November, 2014, as of October 27, 2014.        

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary