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 FOR THE WILLIAMS FORK AND ILES FORMATIONS, VEGA FIELD, MESA COUNTY, COLORADO |
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CAUSE NO. 139
DOCKET NO. 1406-SP-2073
ORDER NO. 139-119 |
REPORT OF THE COMMISSION
The Commission heard this matter on June 17, 2014, at the Rifle Branch Library, Garfield County Public Library District, 207 East Avenue, Rifle, Colorado, upon application for an order to: 1) vacate an approximate 563.1-acre drilling and spacing unit established by Order Nos. 139-116 and 440-67 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River; 2) vacate an approximate 76.1-acre drilling and spacing unit established by Order No. 510-64 for certain lands north of the center line of the Colorado River; 3) amend Order Nos. 139-117, 440-69 and 139-118; and 4) establish one approximate 560-acre drilling and spacing unit, one approximate 70-acre drilling and spacing unit and one approximate 10-acre drilling and spacing unit for the production of oil, gas, associated hydrocarbons from the Williams Fork and Iles Formations.
FINDINGS
The Commission finds as follows:
1. Caerus Piceance LLC (“Caerus” 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 17, 2013 (corrected January 9, 2014 and April 15, 2014), the Commission entered Order Nos. 139-116 and 440-67 which established an approximate 563.1-acre drilling and spacing unit for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River, and approved 10-acre bottomhole density for production of oil, gas and associated hydrocarbons from the Williams Fork Formation.
5. On October 28, 2013 (corrected January 9, 2014), the Commission entered Order 510-64 which established a 76.9-acre drilling and spacing unit for certain lands in Section 24, Township 7 South, Range 96 West, 6th P.M. located north of the center line of the Colorado River, and approved 10-acre bottomhole density for production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations
6. On July 29, 2013 (corrected January 9, 2014), the Commission entered Orders 139-117 and 440-69, which pooled all interests in the approximate 563.1-acre drilling and spacing unit established by Orders 139-116 and 440-67 for certain lands in Section 24, Township 7 South, Range 96 West, 6th P.M. for the development and operation of the Williams Fork Formation.
7. On January 27, 2014, the Commission entered Order 139-118 which subjected the cost recovery provisions of C.R.S. §34-60-116(7)(b) on non-consenting owners for the development and operation of the Williams Fork Formation from certain additional named wells in the 563.1-acre unit pooled under Orders 139-117 and 440-69.
8. On April 17, 2014 (Amended May 9, 2014), Caerus, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to: 1) vacate an approximate 563.1-acre drilling and spacing unit established by Order Nos. 139-116 and 440-67 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River; 2) vacate an approximate 76.1-acre drilling and spacing unit established by Order No. 510-64 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located north of the center line of the Colorado River; 3) Amend Order Nos. 139-117, 440-69 and 139-118; 4) establish one approximate 560-acre drilling and spacing unit, one approximate 70-acre drilling and spacing unit and one approximate 10-acre drilling and spacing unit for the below-described lands (“Application Lands”); and 5) approve the equivalent one (1) well per acres 10-acre bottomhole density within the unit, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group, without exception being granted by the Director:
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the center line of the Colorado River; and the S½ S½ NW¼ NW¼ which is DSU #3)
(DSU#1 – approximately 560-acres)
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 2, 3 and 4 (North of the center line of the Colorado River (excluding S½ S½ NW¼ NW¼ which is DSU #3).
(DSU#2 – approximately 70-acres)
Township 7 South, Range 96 West, 6th P.M.
Section 24: S½ S½ NW¼ NW¼.
(DSU #3 - approximately 10-acres)
Applicant further requests that such order provide that the authorized wells be located down hole no closer than 200 feet from the boundaries of the proposed units in cases where the Application 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, without exception being granted by the Director.
9. On June 3, 2014, Caerus, 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.
10. On June 12, 2014, the Bureau of Land Management (“BLM”) and Caerus reached an agreement wherein the operator agrees to submit a Communitization Agreement (CA) to the BLM within 90 days of the spud of the first well in any drilling and spacing unit that contains leased Federal minerals. The Application Lands contain leased minerals managed by BLM.
11. Land testimony and exhibits submitted in support of the Application by Aubree Besant, Land Manager for Caerus, showed that Caerus holds oil and gas leasehold interests in the Williams Fork and Iles Formations in the Application Lands.
12. Caerus requested the Commission take notice of the testimony of Stephen Sunnenberg, Geologist for Caerus, which was submitted in support of Docket No. 1310-SP-03, under which Order No. 510-64 was adopted.
13. Engineering testimony and exhibits submitted in support of the Application by Jeffery S. Baldauf, Production and Reservoir Engineer for Caerus, further showed that the estimated drainage areas for analogue wells to the Williams Fork Formation are not greater than 10 acres. Additional testimony concluded that granting the proposed order will prevent waste by ensuring the pool as a whole may be efficiently and economically developed.
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 hydrocarbons, and will not violate correlative rights.
13. Caerus agreed to be bound by oral order of the Commission.
14. 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 an approximate 563.1-acre drilling and spacing unit established by Order Nos. 139-116 and 440-67 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River; 2) vacate an approximate 76.1-acre drilling and spacing unit established by Order No. 510-64 for certain lands north of the center line of the Colorado River; 3) amend Order Nos. 139-117, 440-69 and 139-118; and 4) establish one approximate 560-acre drilling and spacing unit, one approximate 70-acre drilling and spacing unit and one approximate 10-acre drilling and spacing unit for the production of oil, gas, associated hydrocarbons from the Williams Fork and Iles Formations.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 563.1-acre drilling and spacing unit established by Order Nos. 139-116 and 440-67 for certain lands within Section 24, Township 7 South, Range 96 West, 6th P.M. located south of the center line of the Colorado River, is hereby vacated.
2. An approximate 76.1-acre drilling and spacing unit established by Order No. 510-64 for certain lands north of the center line of the Colorado River, is hereby vacated.
3. One approximate 560-acre drilling and spacing unit, is hereby established, for the below-described lands (“DSU #1 of Application Lands”) for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group.
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 1, 5 and 6; and adjacent lands thereto, lying up to the center line of the Colorado River, NE¼ NE¼; S½ NE¼; S½ (excluding Lots 2, 3 and 4, North of the center line of the Colorado River; and the S½ S½ NW¼ NW¼ which is DSU #3)
(DSU#1 – approximately 560-acres)
4. Order Nos. 139-117, 440-69 and 139-118 is hereby amended to conform with DSU #1 of the Application Lands.
5. One approximate 70-acre drilling and spacing unit for the below described lands (“DSU #2 of the Application Lands”) is hereby established, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group.
Township 7 South, Range 96 West, 6th P.M.
Section 24: Lots 2, 3 and 4 (North of the center line of the Colorado River (excluding S½ S½ NW¼ NW¼ which is DSU #3).
(DSU#2 – approximately 70-acres)
6. One approximate 10-acre drilling and spacing unit for the below described lands (“DSU #3 of the Application Lands”), is hereby established, for the production of oil, gas and associated hydrocarbons from the Williams Fork and Iles Formations of the Mesaverde Group.
Township 7 South, Range 96 West, 6th P.M.
Section 24: S½ S½ NW¼ NW¼.
(DSU #3 - approximately 10-acres)
7. Approve 10-acre bottomhole density within each unit.
8. The authorized wells may be located downhole anywhere within the Application Lands, but no closer than 100 feet from a lease line or the unit boundaries, without exception being granted by the Director.
9. The authorized wells may be located down hole no closer than 200 feet from the boundaries of the proposed units in cases where the Application 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, without exception being granted by the Director.
10. The operator shall submit a Communitization Agreement (CA) to the BLM within 90 days of the spud of the first well in any drilling and spacing unit that contains leased Federal minerals.
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 _8th day of July, 2014, as of June 17, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary