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. 139-113 DOCKET NO. 1105-SP-51
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REPORT OF COMMISSION
This cause came on for hearing before the Commission on June 27, 2011, at Elbert County Fairgrounds, Ag Building, 95 Ute Avenue, Kiowa, Colorado, for an order to: (1) establish approximate 40-acre drilling and spacing units for certain lands located in Section 34, Township 7 South, Range 96 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mancos, Niobrara, Frontier and Mowry Formations; (2) approve the equivalent of one well per 10 acres density for the SE¼ NW¼ of said Section 34 for the production of gas and associated hydrocarbons from the Williams Fork, Iles, Mancos, Niobrara, Frontier and Mowry Formations; and (3) approve associated setback rules for the Williams Fork, Iles, and Deep Formations.
FINDINGS
The Commission finds as follows:
1. Laramie Energy II, LLC (“Laramie” 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. 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. Section 34, Township 7 South, Range 96 West, 6th P.M. is subject to this Rule for the Mancos, Niobrara, Frontier, and Mowry Formations (the “Deep Formations”).
Section 34: |
E½ SW¼, W½ SE¼, SW¼ NE¼, and SE¼ NW¼ |
The Commission approved of the equivalent of one well per 10-acre density for the Application Lands, except the SE¼ NW¼ of said Section 34 which was approved for the equivalent of one well per 20 acres density, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formation.
The Application further requested all future Williams Fork Formation and Iles 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 the unit, or lease line in the unspaced lands, 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 the boundaries of the unit, or lease line in the unspaced lands, so abutting or cornering such lands, without exception being granted by the Commission.
The Application further requested all future Deep Formation wells to be drilled under this Application should be located no closer than 600 feet from the east and west boundaries of the unit, or lease line in the unspaced lands, and no closer than 100 feet from the north or south boundaries of the unit, or lease line in the unspaced lands, unless such north or south boundary abuts or corners lands which have not of drilling permit application been granted the right to drill 10-acre density for the Williams Fork Formation, in which case any well drilled to the Deep Formation shall be drilled downhole no closer than 200 feet from that potion of such north or south unit boundary which so abuts or corners the lands in which 10-acre density for the Williams Fork Formation wells have not been approved by the Commission, without exception being granted by the Commission.
The Application further requested all Iles Formation wells drilled under this Application should be drilled only in conjunction with the drilling of a Williams Fork Formation well.
The Application further requested 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.
7. On May 2, 2011, Encana Oil & Gas (USA) Inc. (“Encana”) filed a protest in this matter. Encana requested that the Commission retain setbacks for the Deep Formations established under Rule 318.a., and claimed there is insufficient evidence to support establishing setbacks for the Deep Formations the same as for the Mesaverde Group Formations.
8. On May 19, 2011 a prehearing conference was conducted in this matter, with both parties participating. Laramie had worked out a tentative settlement with Encana, involving an amended application that would not reduce setbacks for the Deep Formations below 600 feet unless adjacent or cornering lands had 10-acre well density for the Deep Formations, in which case the setbacks would be 100 feet.
9. On May 20, 2011, Laramie filed an amended application (the “Amended Application”) requesting 40-acre spacing units for the Deep Formations consistent with those for the Mesaverde Formation, requesting 10-acre well density for Mesaverde Group Formations and Deep Formations, and withdrew its request for setbacks less than 600 feet for the Deep Formations for the following described lands:
Township 7 South, Range 96 West, 6th P.M.
Section 34: E½ SW¼, W½ SE¼, SW¼ NE¼, and SE¼ NW¼
10. On May 31, 2011, Encana withdrew its protest in the matter.
11. On May 31, 2011, Laramie, by its attorney, filed with the Commission a written request to approve the Application based on the merits of the verified Amended Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Amended Application.
12. Land testimony and exhibits submitted in support of the Amended Application by Mark Petry, Vice President of Business Development for Laramie stated Laramie Energy holds the majority oil and gas leasehold in the Application Lands and records indicate that the Commission has approved 10-acre well density for the Mesaverde Group Formations on nearby lands in Garfield County, Colorado.
13. Geologic testimony and exhibits submitted in support of the Amended Application by Joan Tilden, Senior Geoscientist, Project Manager for MHA Petroleum Consultants, on behalf of Laramie stated that the Williams Fork, Iles, and Deep Formations underlie and are drilling objectives for wells drilled on the Application Lands. The testimony further stated that the Williams Fork Formation consists of sand bodies that are highly discontinuous in nature, and wells drilled on 10-acre density will therefore statistically be unlikely to encounter the same sand bodies. The testimony further stated that data collected for the Deep Formations in offset wells can be used as a geologic analogy for the Application Lands.
14. Engineering testimony and exhibits submitted in support of the Amended Application by John Seidle, Vice President of MHA Petroleum Consultants, on behalf of Laramie stated that the Application Lands are bordered by acreage previously approved by the Commission for 10-acre density drilling in the Williams Fork and Iles Formations, and there are no known differences in these Formations between the Application Lands and the areas already approved by the Commission for 10-acre density. The Seidel testimony further stated that nearby Williams Fork wells drain an average of approximately 10 acres per well. These wells are likely to be economic, and drilling at 20-acre density would leave significant undrained areas behind and create waste. The testimony further stated that wells drilled to the Iles Formation only drain an average of 20 acres, and are not likely to be economic. Therefore, the best way to recover Iles Formation reserves is through joint development with the Williams Fork sands. The Seidel testimony further stated that the Type Well in the Deep Formations drains approximately 9.9 acres. Drilling at 20-acre density in the Deep Formations would leave significant undrained areas behind and create waste. Developing the Williams Fork, Iles, and Deep Formations in common wellbores drilled on 10-acre density is the most efficient and unobtrusive method to recover these reserves, and would not result in the drilling of unnecessary wells.
15. 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.
16. Laramie agreed to be bound by oral order of the Commission.
17. Based on the facts stated in the verified Amended Application, having received no protests, and based on the Hearing Officer review of the Amended Application under Rule 511., the Commission should enter an order to: 1) establish approximate 40-acre drilling and spacing units, consisting of each governmental quarter-quarter section for the E½ SW¼, W½ SE¼, SW¼ NE¼, and SE¼ NW¼ of Section 34, Township 7 South, Range 96 West, 6th P.M., for the production of gas and associated hydrocarbons from the Deep Formations; 2) approve the equivalent of one well per 10 acres well density for the SE¼ NW¼ of said Section 34, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations; 3) approve the equivalent of one well per 10 acres density for the E½ SW¼, W½ SE¼, SW¼ NE¼, and SE¼ NW¼ of said Section 34, for the production of gas and associated hydrocarbons from the Deep Formations; and 4) retain 600 foot setbacks for the Deep Formations, except where adjacent lands have approved 10-acre well density, in which case the setbacks would be 100 feet.
ORDER
Section 34: |
E½ SW¼, W½ SE¼, SW¼ NE¼, and SE¼ NW¼ |
IT IS FURTHER ORDERED, that all future Williams Fork Formation and Iles Formation wells to be drilled under this Application shall be located downhole anywhere upon the Application Lands, but no closer than 100 feet from the boundaries of the unit, or lease line in unspaced lands, 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 10-acre density Williams Fork Formation wells, the well should be located downhole no closer than 200 feet from the boundaries of the unit, or lease line of unspaced adjacent lands, without exception being granted by the Commission.
IT IS FURTHER ORDERED, that all future Deep Formation wells to be drilled under this Application shall be located no closer than 600 feet from boundaries of the unit, or lease line of unspaced adjacent lands, unless the adjacent lands have approved 10-acre well density for the Deep Formations, in which case the setbacks shall be 100 feet, without exception being granted by the Commission.
IT IS FURTHER ORDERED, that all Iles Formation wells drilled under this Application shall be drilled only in conjunction with the drilling of a Williams Fork Formation well.
IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this Application 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 well density and location rules specified by this Order shall not apply to horizontal wells, which shall continue to be governed by existing Commission rules and orders.
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 ___30th ___ day of June, 2011, as of June 27, 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
June 30, 2011