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 SEAMS FORMATION, IGNACIO-BLANCO FIELD, ARCHULETA COUNTY, COLORADO

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CAUSE NO. 112 DOCKET NO. 190900606 TYPE: ADDITIONAL WELLS ORDER NO. 112-288

REPORT OF THE COMMISSION

The Commission heard this matter on October 30, 2019, at the Colorado Oil and Gas Conservation Commission, 1160 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to Amend Order Nos. 112-61 and 112-85 to: 1)  approve an additional two horizontal wells, for total of up to three horizontal wells, within an approximate 320-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for production from the Fruitland Coal Seams Formation; and 2) allow the productive interval of any permitted well to be located no closer than 660 feet from the unit boundaries of the approximate 320-acre drilling and spacing unit established for the Application Lands, and no closer than 330 feet from the productive interval of any other wellbore located in the unit:

Township 33 North, Range 5 West, N.M.P.M.

Section 16: N½

FINDINGS

The Commission finds as follows:

1.         Petrox Resources, Inc. (Operator No. 69805) (“Petrox” 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 Southern Ute Indian Tribe (“SUIT”) retains the minerals underlying the W½NW¼ of Section 16 of the Application Lands. 

4.         The Commission has jurisdiction over the subject matter addressed in this Application under the Oil and Gas Conservation Act (“Act”) (Colo. Rev. Stat. § 34-60-116), except to the extent that such jurisdiction is pre-empted by Federal law or infringes on the inherent powers of the Tribe over activities within the Reservation.  Specifically, the Act explicitly prohibits the State of Colorado or its local governments, including the Commission, Boards of County Commissioners, and municipalities, from regulating the activities of federally recognized Indian tribes, their political subdivisions, or tribally controlled affiliates, undertaken or to be undertaken with respect to mineral evaluation, exploration, or development on lands within the exterior boundaries of an Indian reservation, or activities by third parties, undertaken or to be undertaken with respect to mineral evaluation, exploration, or development on Indian Trust Lands within the exterior boundaries of an Indian reservation located within the state.  C.R.S. §34-60-105(4)(a)(I) and (II).  This regulatory prohibition specifically applies to the Application Lands.

5.         Pursuant to § 34-60-106(2.5)(a), C.R.S., the Commission shall regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources, and shall protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.

6.         On August 15, 1988, the Commission entered Order No. 112-61 (amended and corrected on December 17, 1990, under Order No. 112-85) which, among other things, established 320-acre drilling and spacing units for certain lands, including the Application Lands, as designated lay-down or stand-up by the operator, with authority to drill one well no closer than 990 feet from unit boundaries and no closer than 130 feet from any interior quarter section line, for the production of gas and associated hydrocarbons from the Fruitland Coal Seams Formation.

7.         On June 27, 2019, Petrox, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to Amend Order Nos. 112-61 and 112-85 to: 1)  approve an additional two horizontal wells, for total of up to three horizontal wells, within an approximate 320-acre drilling and spacing unit established for the Application Lands, for production from the Fruitland Coal Seams Formation; and 2) allow the productive interval of any permitted well to be located no closer than 660 feet from the unit boundaries of the approximate 320-acre drilling and spacing unit established for the Application Lands, and no closer than 330 feet from the productive interval of any other wellbore located in the unit.

8.         Applicant stated that all horizontal wells will be drilled from no more than one multi-well pad located within the unit, or on lands adjacent thereto with permission of the land landowner, unless the Director grants an exception.

9.         Applicant also stated that all horizontal wells will be drilled in an east-west orientation.

10.       Petrox, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and on supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the Application.

11.       Land testimony and exhibits submitted in support of the Application by Michael Clark, President of Petrox, showed that Petrox owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands.

12.       The testimony further demonstrated that in developing the Application Lands, Petrox’s operations will reasonably protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and will reasonably protect against adverse environmental impacts on any air, water, soil, or biological resources.

13.       Geologic testimony and exhibits submitted in support of the Application by Michael Clark, President of Petrox, showed the Fruitland Coal Formation exists under the entirety of the Application Lands, is a common source of supply, and is approximately 30 to 45 feet thick.

14.       Engineering testimony and exhibits submitted in support of the Application by Michael Clark, President of Petrox, showed that the drainage calculations for the existing horizontal well and two additional horizontal wells drilled and to be drilled in the unit are estimated at 11.44, 34.094 and 31.027 acres, respectively, for a maximum of 76.56 acres. An approximate 320-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by three horizontal wells producing oil, gas and associated hydrocarbons from the Fruitland Coal Formation. The engineering testimony also showed that the proposed wells will be economic. 

15.       Finally, the engineering testimony showed that the propped fracture half-length for the existing horizontal well and two additional horizontal wells drilled and to be drilled to the Fruitland Coal Formation are 175.96 feet, 149.85 feet and 149.16 feet.  Therefore, the proposed setbacks of 660 feet from the unit boundaries and 330 feet from the productive interval of any other wellbore located in the unit are appropriate. 

16.       The above-referenced testimony and exhibits show that granting the Application will regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and will protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.

17.       The above-referenced testimony and exhibits further 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. 

18.       Petrox agreed to be bound by oral order of the Commission. 

19.       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 Amend Order Nos. 112-61 and 112-85 to: 1)  approve an additional two horizontal wells, for total of up to three horizontal wells, within an approximate 320-acre drilling and spacing unit established for the Application Lands, for production from the Fruitland Coal Seams Formation; and 2) allow the productive interval of any permitted well to be located no closer than 660 feet from the unit boundaries of the approximate 320-acre drilling and spacing unit established for the Application Lands, and no closer than 330 feet from the productive interval of any other wellbore located in the unit

ORDER

IT IS HEREBY ORDERED:

1.         Order Nos. 112-61 and 112-85 are hereby amended to approve an additional two horizontal wells, for total of up to three horizontal wells, within an approximate 320-acre drilling and spacing unit established for the Application Lands, for production from the Fruitland Coal Seams Formation.

2.         The productive interval of the wellbore will be located no closer than 660 feet from the boundaries of the unit, and no closer than 330 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

3.         The proposed wells shall be located on one multi-well pad within the drilling and spacing unit, or at a legal location on adjacent lands, unless the Director grants an exception.

4.         All horizontal wells in the unit shall be drilled in an east-west orientation.

5.         No oil and gas operations may be conducted in the application lands without an approved Oil and Gas Location Assessment permit(s) (Form 2A) and approved Applications for Permits to Drill (Form 2). The determination of whether an oil and gas location satisfies § 34-60-106(2.5)(a), C.R.S. shall be made by Commission permitting staff in the course of its review and determination of the Form 2A.  The Commission’s approval of this drilling and spacing unit does not equate to approval of any proposed Form 2A for an oil and gas location or 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 7th day of November, 2019, as of October 30, 2019.         

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary