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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 MAMM CREEK FIELD, GARFIELD COUNTY, COLORADO |
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CAUSE NO. 191
ORDER NO. 191-61 |
This cause came on for hearing before the Commission at 9:00 a.m. on February 23, 2009, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish various drilling and spacing units and allow one well per 10 acres, with the permitted well to be located no closer than 100 feet to the unit for the S˝ of Section 18 and Lot 1 of Section 19, Township 6 South, Range 92 West, 6th P.M., and the S˝ of Section 13, Township 6 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mancos Group.
FINDINGS
The Commission finds as follows:
1. Antero Resources Corporation (“Antero”), 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 October 31, 2005, the Commission issued Order No. 510-16, which among other things, established well density and setback rules for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, with the permitted well to be located no closer than 100 feet for certain lands, including portions of Section 13, Township 6 South, Range 93 West, 6th P.M. and Section 18, Township 6 South, Range 92 West, 6th P.M.
5. On January 9, 2006, corrected February 28, 2006, the Commission issued Order No. 191-13, which among other things, established a 320-drilling and spacing unit for the S˝ of Section 13, Township 6 South, Range 93 West, 6th P.M., and an approximate 260-acre drilling and spacing unit for the S˝ of Section 18, Township 6 South, Range 92 West, 6th P.M., for the production of gas from Williams Fork Formation of the Mesaverde Group.
6. On June 5, 2006, the Commission issued Order No. 191-25, which among other things, established various drilling and spacing units for certain lands, including the S˝ of Section 13, Township 6 South, Range 93 West, 6th P.M. and the S˝ of Section 18, Township 6 South, Range 92 West, 6th P.M., and allowed the equivalent of one (1) well per 10 acres, with the permitted well to be located no closer than 100 feet from the unit boundary, for the production of gas and associated hydrocarbons from the Iles Formation.
7. On October 2, 2007, the Commission issued Order No. 191-53, which among other things, established an approximate 48.55-acre drilling and spacing unit consisting of Lot 1, Section 19, Township 6 South, Range 92 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
9. On December 30, 2008, EnCana Oil & Gas (USA) Inc. (“EnCana”), by its attorney, filed a protest alleging that Antero’s application failed to provide for the economic and efficient development of resources in the Mancos Group Formations, failed to protect correlative rights, and failed to prevent waste. Consequently, on December 31, 2008, a pre-hearing conference was held wherein Antero requested a continuance of the application as it pertained to the above-listed lands, which are adjacent to leasehold interests owned by EnCana, to allow additional time for parties to negotiate a settlement of the protest.
11. On January 23, 2009, EnCana, by its attorney, filed with the Commission a written withdrawal of its protest as to the Continued Application Lands based on Antero agreeing that it would not drill any Mancos Group Formation well with a downhole location any closer than 600 feet from the boundaries of the EnCana leasehold interests described below:
Township 6 South, Range 92 West, 6th P.M.
The south boundary of the S˝ of Section 18
Township 6 South, Range 92 West, 6th P.M.
The south, west and east boundaries of Lot 1 of Section 19
Township 6 South, Range 93 West, 6th P.M.
The south boundary of the S˝ of Section 13
Township 6 South, Range 93 West, 6th P.M.
The NE corner of the SEĽ of Section 15
12. On February 9, 2009, Antero, by its attorney, renewed its request with the Commission to approve the application for the continued lands based on the merits of the verified application and the supporting exhibits and testimony, which were previously provided to the Hearing Officers during the course an administrative hearing which was convened on December 31, 2008. Sworn testimony and supporting exhibits were presented by Antero in support of the application, which included the Continued Application Lands, and were utilized by the Commission in issuing Order Nos. 191-60, 510-46 and 523-5 which pertained to lands adjacent to the Continued Application Lands. Further, Antero, by its attorney, amended its application for the Continued Application Lands, by requesting the establishment of three (3) drilling and spacing units and to allow one well per 10 acres within each drilling and spacing unit, for the below-listed lands, for the production of gas and associated hydrocarbons from the Mancos Group Formation:
Spacing Unit No. 1
Township 6 South, Range 92 West, 6th P.M.
Section 18: S˝
Spacing Unit No. 2
Township 6 South, Range 92 West, 6th P.M.
Section 19: Lot 1
Spacing Unit No. 3
Township 6 South, Range 93 West, 6th P.M.
Section 13: S˝
14. Testimony and exhibits presented at the administrative hearing showed that Antero had undertaken an extensive exploration program to determine whether the Mancos Group underlying the Williams Fork and Iles Formations contained gas which could be economically recovered in concert with the development of the Williams Fork and Iles Formations. Additional testimony showed that shale gas resources have provided major new opportunities for hydrocarbon production in North America, and that a new shale gas resource play is emerging below the traditional Mesaverde tight gas sand accumulations in the Piceance Basin which targets shale gas accumulation in the gas-prone source rocks of the Late Cretaceous Mancos Group interval. Further testimony demonstated that the Mancos interval is composed of organic bearing siliciclastic, “mudrock” lithologies that accumulated in offshore marine depositional systems, and that burial of these shales during the Late Cretaceous and Tertiary within the basinal areas moved them into the hydrocarbon generation window. Testimony showed that these shale gas reservoirs store the thermally generated gas as an adsorbed component and a free gas component, and that natural fracturing is present within these shales which help to provide permeability pathways within the shale reservoir. Further testimony showed that advances in hydraulic fracture stimulation technology have been a critical contributor to commercial development of gas from shales, and that six Mancos Group Formation wells have been drilled in the application lands with five of those wells now producing to sales. Testimony revealed that the Mancos Group Formation underlies the Continued Application Lands with reservoir characteristics being similar across the entire area, and that all lithologic intervals within said formation are gas bearing with drainage ellipse orientations for said formation being parallel to those in the shallow Williams Fork and Iles well completions.
15. Testimony and exhibits presented at the administrative hearing showed that economics for shallow Williams Fork and Iles Formation wells vary from uneconomic to moderately commercial based on commodity prices and ultimate recoveries, however, incremental Mancos Group Formation production can substantially improve economics when commingled with the production for the Williams Fork and Iles Formations. Additional testimony showed that there is significant gas-in-place in the Mancos Group Formation underlying the Continued Application Lands, and that low recovery factors, small fracture stimulations and low formation permeability support 10 acre well density while having no adverse affect on correlative rights. Further testimony showed that by developing the Mancos Group Formation underlying the Continued Application Lands on 40-acre well density would waste an estimated 132 BCF of recoverable gas per section, and that developing said formation on 20-acre well density would waste an estimated 88 BCF of recoverable gas per section.
16. The above-referenced testimony and exhibits show that the proposed spacing and proposed well density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
17. Antero Resources Corporation agreed to be bound by oral order of the Commission.
18. Based on the facts stated in the verified amended application, having received one protest as to the Continued Application Lands which was withdrawn, and the testimony and exhibits presented at the administrative hearing, the Commission should enter an order to establish three (3) drilling and spacing units and to allow one well per 10 acres within each drilling and spacing unit, for the below-listed lands, for the production of gas and associated hydrocarbons from the Mancos Group Formation:
Spacing Unit No. 1
Township 6 South, Range 92 West, 6th P.M.
Section 18: S˝
Spacing Unit No. 2
Township 6 South, Range 92 West, 6th P.M.
Section 19: Lot 1
Spacing Unit No. 3
Township 6 South, Range 93 West, 6th P.M.
Section 13: S˝
Further, any permitted Mancos Group Formation well shall be located identical to the setbacks established for the Iles Formation, no closer than 100 feet to the boundary of the unit or no closer than 400 feet from the boundary of the unit for lands not approved for 10-acre density. Furthermore, any Mancos Group Formation well shall be located no closer than 600 feet from the boundaries of the EnCana leasehold interests described below:
Township 6 South, Range 92 West, 6th P.M.
The south boundary of the S˝ of Section 18
Township 6 South, Range 92 West, 6th P.M.
The south, west and east boundaries of Lot 1 of Section 19
Township 6 South, Range 93 West, 6th P.M.
The south boundary of the S˝ of Section 13
Township 6 South, Range 93 West, 6th P.M.
The NE corner of the SEĽ of Section 15
ORDER
NOW, THEREFORE IT IS ORDERED, that three (3) drilling and spacing units are hereby established for the below-listed lands, consistent with those established for the Williams Fork and Iles Formations, for the production of gas and associated hydrocarbons from the Mancos Group Formation, which is comprised of the stratigraphic equivalent of the Mancos Shale, the Niobrara Formation and the Mowry Shale, and that the equivalent of one (1) well per 10 acres is hereby approved for said lands:
Spacing Unit No. 1
Township 6 South, Range 92 West, 6th P.M.
Section 18: S˝
Spacing Unit No. 2
Township 6 South, Range 92 West, 6th P.M.
Section 19: Lot 1
Spacing Unit No. 3
Township 6 South, Range 93 West, 6th P.M.
Section 13: S˝
IT IS FURTHER ORDERED, that for the Mancos Group Formation wells to be drilled on such drilling and spacing units, each such well may be located anywhere upon a given drilling and spacing unit but no closer than one 100 feet from the boundaries of the unit without exception being granted by the Director of the Oil and Gas Conservation Commission. It is provided however that in cases where a given unit abuts or corners lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill optional 10 acre density Mancos Group Formation wells, the Mancos Group Formation well should be located downhole no closer than 400 feet from the boundary of boundaries of the drilling unit so abutting or cornering such unit without exception being granted by the Director of the Oil and Gas Conservation Commission.
IT IS FURTHER ORDERED, that for the Mancos Group Formation wells to be drilled on application lands which are unspaced for the Williams Fork and Iles Formation but which have previously been approved for 10 acre density drilling for these formations, each such Mancos Group Formation well shall be located no closer than 100 feet from a lease line and no closer than 100 feet from the boundary or boundaries of the unspaced lands as described in a given order. It is provided however that in cases where unspaced lands as described in a given order 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 Mancos Group wells, the Mancos Group Formation well should be located downhole no closer than 400 feet from the boundary or boundaries of such described boundary or boundaries of the unspaced lands as described in a given order.
IT IS FURTHER ORDERED, that any Mancos Group Formation well shall be located no closer than 600 feet from the boundaries of the below-listed lands:
Township 6 South, Range 92 West, 6th P.M.
The south boundary of the S˝ of Section 18
Township 6 South, Range 92 West, 6th P.M.
The south, west and east boundaries of Lot 1 of Section 19
Township 6 South, Range 93 West, 6th P.M.
The south boundary of the S˝ of Section 13
Township 6 South, Range 93 West, 6t P.M.
The NE corner of the SEĽ of Section 15
IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled form the surface either vertically or directionally from no more than one (1) pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Colorado Oil and Gas Conservation Commission pursuant to application made for such exception.
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.
ENTERED this__________day of March, 2009, as of February 23, 2009.
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
March 12, 2009