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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 FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 139
ORDER NO. 139-62 |
This cause came on for hearing before the Commission at 10:00 a.m. on June 5, 2006, in the Council Chamber Room of the Ambulance Building, 304 West 3rd Street, Wray, Colorado, for an order to establish 40-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Iles Formation, allowing the equivalent of one well per 20 acres, for the N½ SW¼ of Section 3 and the E½ SE¼ of Section 4, Township 8 South, Range 96 West, 6th P.M., with the permitted well to be located 200 feet from the boundaries of the unit and no closer than 400 feet from any existing Williams Fork Formation well, without exception being granted by the Director.
FINDINGS
The Commission finds as follows:
1. EnCana Oil & Gas (USA) Inc. (“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 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 March 20, 2006, the Commission issued Order No. 139-54, which among other thing established 40-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Williams Fork Formation, for the N½ SW¼ of Section 3 and the E½ SE¼ of Section 4, Township 8 South, Range 96 West, 6th P.M., allowing the equivalent of one well per 20 acres 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.
6. On April 17, 2006, EnCana Oil & Gas (USA) Inc., by its attorney, filed with the Commission a verified application for an order to establish 40-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Iles Formation, allowing the equivalent of one well per 20 acres, for the N½ SW¼ of Section 3 and the E½ SE¼ of Section 4, Township 8 South, Range 96 West, 6th P.M. For all future Iles 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 Iles Formation wells, the well should be located downhole no closer than 200 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 Iles Formation 20-acre density wells, in which event the wells should be drilled downhole no closer than 400 feet from the unit which so abuts or corners the lands in respect of which 20-acre density downhole drilling for Iles 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, and that both the Williams Fork and Iles Formations will be reached from a single wellbore. 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.
7. Testimony and exhibits presented at the administrative hearing showed that Malcolm Jolley is the sole surface owner in the application lands, and that EnCana has a surface use agreement with Mr. Jolley specifying one well pad per 80-acre tract.
8. Testimony and exhibits presented at the administrative hearing showed that the three (3) formations within the Iles Formation are anticipated to be present underlying the application lands, and that the top of the Iles Formation is expected to be encountered at approximately 5000 feet.
9. Testimony and exhibits presented at the administrative hearing showed original gas in place in the Iles Formation of approximately 20 BCF per section in the application area, and original gas in place in the Williams Fork Formation of approximately 10 BCF per section in the application area.
10. Testimony and exhibits presented at the administrative hearing showed that production from the Iles Formation is incremental, that Iles Formation wells would not be drilled as stand alone wells, and that the estimated ultimate recovery from the Iles Formation is 0.35 BCF in ten (10) years.
11. Testimony and exhibits presented at the administrative hearing showed that allowing wells to be drilled on 20-acre density would increase estimated ultimate recovery from the Iles Formation by 5.6 BCF per section and that under Rule 318., approximately 28% of the gas in place would be recovered from the Iles Formation, but with the proposed density requested, 56% of the gas in place is expected to be recovered.
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. EnCana Oil and Gas, USA agreed to be bound by an 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 Iles Formation, allowing the equivalent of one well per 20 acres, for the N½ SW¼ of Section 3 and the E½ SE¼ of Section 4, Township 8 South, Range 96 West, 6th P.M., with the permitted well to be located 200 feet from the boundaries of the unit and no closer than 400 feet from any existing Williams Fork Formation well, without exception being granted by the Director.
ORDER
NOW, THEREFORE IT IS ORDERED, that 40-acre drilling and spacing units consisting of the N½ SW¼ of Section 3 and the E½ SE¼ of Section 4, Township 8 South, Range 96 West, 6th P.M. are hereby established for the production of gas and associated hydrocarbons from the Iles Formation, allowing the equivalent of one well per 20 acres.
IT IS FURTHER ORDERED, that for all future Iles 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 Iles Formation wells, the well shall be located downhole no closer than 200 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 Iles Formation 20-acre density wells, in which event the wells shall be drilled downhole no closer than 400 feet from the unit which so abuts or corners the lands in respect of which 20-acre density downhole drilling for Iles Formation wells has not been ordered by the Commission.
IT IS FURTHER ORDERED, that wells drilled on the application lands shall 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, and that both the Williams Fork and Iles Formations will be reached from a single wellbore.
IT IS FURTHER ORDERED, that the Commission shall authorize the Director of the Commission, without additional notice and hearing, to 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.
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