BEFORE THE OIL AND 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 RULISON FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 139
ORDER NO. 139-112
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REPORT OF COMMISSION
This cause came on for hearing before the Commission on May 16, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to approve the equivalent of one well per 10-acre well density for certain lands located in Sections 1, 2, 10, 13, and 24, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.
The Commission finds as follows:
1. EnCana Oil and Gas (USA) Inc. (“Applicant” or “EnCana”), 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. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Sections 1, 2, 10, 13 and 24, Township 7 South, Range 94 West, 6th P.M. are subject to this Rule for the production of gas and associated hydrocarbons from the Williams Fork Formation.
5. On February 22, 1994, the Commission issued Order No. 139-26, which among other things, established 640-acre drilling and spacing units, and allowed the drilling of up to eight wells within each spacing unit, for certain lands, including Sections 1, 2, and 10, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, with permitted wells no closer than 600 feet from lease lines, nor any closer than 1,200 feet from other producing wells in the Williams Fork Formation.
6. On February 21, 1995, (amended April 26, 1995 and corrected February 21, 2000) the Commission issued Order No. 139-28, which among other things, established 640-acre drilling and spacing units, and allowed the drilling of up to sixteen wells within each spacing unit, for certain lands, including Sections 1, 2, and 10, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, with permitted wells no closer than 400 feet from lease lines, nor any closer than 800 feet from other producing wells in the Williams Fork Formation.
7. On August 18, 2001, the Commission entered Order No. 139-39, which among other things, approved the equivalent of one well per 20 acre well density for the 640-acre drilling and spacing units established for Sections 1 and 2, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation, with permitted wells to be located no closer than 200 feet from the boundaries of the drilling unit, and no closer than 400 feet from any existing Williams Fork Formation Well.
8. On September 25, 2005, the Commission issued Order No. 139-50. which among other things, approved the equivalent of one well per 20 acre well density for the 640-acre drilling and spacing units established for Sections 1, 2 and 10, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations, with permitted wells to be located no closer than 200 feet from the boundaries of the drilling unit, and no closer than 400 feet from any existing Williams Fork and Iles Formation well.
All future Williams Fork Formation wells to be drilled under this Application should be located downhole anywhere upon the Application Lands, but no closer than 100 feet from the boundaries of any leaseline without exception being granted by the Director of the Commission. It is provided however that in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation wells, the well should be located downhole no closer than 200 feet from any leaseline so abutting or cornering such lands without exception being granted by the Director.
Except as previously authorized by order of the Commission, wells to be drilled under this Application should be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Commission pursuant to application made for such exception.
10. On May 3, 2011, EnCana, 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.
13. Engineering testimony and exhibits submitted in support of the Application by Eric Bridgford, Petroleum Engineer for EnCana, showed that the average EUR in most of the Rulison Field is approximately 1.2 Bcf per Williams Fork well, based on a 30-year well life. However, reservoir volumetric calculations using the average EUR value for a Rulison Williams Fork well indicate drainage areas at approximately 10-acres. An average gas in place of 100 Bcf per section was used to estimate the recoveries per well. The results indicate that, when compared to the 20-acre, the 10-acre density increases the recovery factor from 38% to 67% of the original gas in place. The additional reserves realized by the increased density are estimated to be around 26 Bcfe per section. Based on current capital cost structures and commodity prices for the area, the proposed infill wells are economic. Based on EnCana’s cost structure and projected commodity prices for infill development in the Application area, the expected after tax rate of return is in the order of 25%-36%. The expected after tax payout period is approximately 3.5 years, which demonstrates the 10-acre drilling density will result in positive returns to EnCana.
14. 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 gas, and will not violate correlative rights.
15. EnCana agreed to be bound by oral order of the Commission.
16. 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 approving the equivalent of one well per 10-acre well density for certain lands located in Sections 1, 2, 10, 13, and 24, Township 7 South, Range 94 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.
ORDER
IT IS FURTHER ORDERED, that all future Williams Fork Formation wells to be drilled upon under this Order shall be located downhole anywhere upon the Application Lands but no closer than 100 feet from the boundaries of any lease line without exception being granted by the Director of the Commission. It is provided however that in cases where the lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork wells, the well shall be located downhole no closer than 200 feet from the boundaries of any lease line so abutting or cornering such lands without exception being granted by the Director of the Commission.
IT IS FURTHER ORDERED, that, except as previously authorized by order of the Commission, wells to be drilled under this order shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter-quarter section (or lots or parcels approximately equivalent thereto), unless exception is granted by the Commission pursuant to application made for such exception.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.
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 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.
ENTERED this 23rd day of May, 2011, as of May 16, 2011.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
May 23, 2011