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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. 139-54 |
This cause came on for hearing before the Commission at 8:30 a.m. on March 20, 2006, in the Aspen and Birch Rooms, Ramada Inn & Suites, 124 West 6th Street, Glenwood Springs, Colorado, for an order to establish 40-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Williams Fork Formation, and to allow the equivalent of one well per 20 acres, with the permitted well to be located no closer than 200 feet from the unit boundary, for certain lands in Sections 3 and 4, Township 8 South, Range 96 West, 6th P.M.
The Commission finds as follows:
1. Apollo Energy, LLC (“Apollo”), 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 two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply.
5. On January 30, 2006, Apollo, by its attorney, filed with the Commission a verified application for an order to establish 20-acre drilling and spacing units, to allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the unit boundary, for the below-described lands. For all future Williams Fork Formation wells to be drilled on these lands, where these 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 100 feet from the boundaries of the unit unless such unit abuts or corners lands in respect of which the Director of the Commission has not at the time of drilling permit application granted the right to drill Williams Fork Formation 10-acre density wells, in which event the wells should be drilled downhole no closer than 200 feet from the unit which so abuts or corners the lands in respect of which 10-acre density downhole drilling for Williams Fork Formation wells has not been ordered by the Commission. In addition, wells drilled on the application lands will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section unless exception is granted by the Colorado Oil and Gas Conservation Commission. The applicant requests the Commission authorize the Director of the Commission, without additional notice and hearing, grant exceptions to well locations for good cause shown (including but not limited to surface owner requests) provided a waiver is obtained from the lease owner toward whom the well location is proposed to be moved. If a waiver cannot be obtained, then the well operator may apply to the Commission for a variance.
Township 8 South, Range 96 West, 6th P.M.
Section 3: N½ SW¼
Section 4: E½ SE¼
6. On March 6, 2006, EnCana Oil & Gas (USA) Inc. filed with the Commission a protest to the application. On March 8, 2006, COGCC staff held a prehearing conference with the parties. On March 9, 2006, Apollo amended its application to request that 40-acre drilling and spacing units be established and to allow the equivalent of one well per 20 acres to be drilled, with the permitted wells to be located downhole anywhere in the drilling and spacing unit but no closer than 200 feet from the boundaries of the drilling and spacing unit, and no closer than 400 feet from any existing Williams Fork Formation well, without exception being granted by the Director. On March 9, 2006, EnCana withdrew its protest and an administrative hearing was held.
7. Testimony and exhibits presented at the administrative hearing showed that Apollo has approximately 50% of the leasehold in the application lands and that EnCana, Williams Production and Yates have the remaining 50% leased. Additional testimony showed that no wells have been drilled on the application lands.
8. Testimony and exhibits presented at the administrative hearing showed that wells drilled just one hundred forty-two (142) feet apart have different thicknesses of sands, resulting in difficulty in predicting reservoir thickness. Additional testimony showed diagrams of the drainage area of discontinuous fluvial sands on 40-acre and 10-acre well density, indicating that gas resources may be wasted if wells are drilled on 40-acre density and even if wells are drilled on a 10-acre basis.
9. Testimony and exhibits presented at the administrative hearing showed the discontinuity of the Williams Fork Formation and indicated that the application lands are on strike with nearby lands previously approved for 10-acre density.
10. Testimony and exhibits presented at the administrative hearing indicated that natural fractures exist in the application lands and that bottomhole locations can be adjusted to take advantage of these natural fractures.
11. Testimony and exhibits presented at the administrative hearing showed the economics for wells in the application lands estimated at 858 MMCF for each well, with payout occurring in 2.12 years for a rate of return of 38.4%.
12. The above-referenced testimony and exhibits show that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
13. Apollo Energy, LLC 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 having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to establish 40-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Williams Fork Formation, and to allow the equivalent of one well per 20 acres, with the permitted well to be located no closer than 200 feet from the unit boundary, for certain lands in Sections 3 and 4, Township 8 South, Range 96 West, 6th P.M.
ORDER
Township 8 South, Range 96 West, 6th P.M.
Section 3: N½ SW¼
Section 4: E½ SE¼
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
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 thirty (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.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203