BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
|
IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
) ) ) ) ) |
CAUSE NO. 407
DOCKET NO. 1404-UP-108
ORDER NO. 407-1014 |
REPORT OF THE COMMISSION
The Commission heard this matter on April 28, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to pool all interests in two approximate 240-acre to 480-acre designated wellbore spacing units established for Section 5, Township 2 North, Range 67 West, 6th P.M. and Section 32, Township 3 North, Range 67 West, 6th P.M., for the drilling of the Scott 27N-32HZ Well and Scott 1C-32HZ Well, for the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Kerr-McGee Oil & Gas Onshore LP (“Kerr-McGee” 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 April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Section 5, Township 2 North, Range 67 West, 6th P.M. and Section 32, Township 3 North, Range 67 West, 6th P.M. are subject to Rule 318A for the Codell and Niobrara Formations.
5. On February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil and/or gas from the Codell-Niobrara Formation underlying certain lands, with the permitted well locations in accordance with the provisions of Order No. 407-1. Section 5, Township 2 North, Range 67 West, 6th P.M. and Section 32, Township 3 North, Range 67 West, 6th P.M. are subject to this Order for the Codell and Niobrara Formations.
6. On February 27, 2014, Kerr-McGee, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests, including leased mineral interest owners, in two approximate 240-acre to 480-acre designated wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in C.R.S. §34-60-116(7)(b)(II) were first incurred for the drilling of the Scott 27N-32HZ Well (API No. 05-123-38826) in WSU #1 and Scott 1C-32HZ Well (API No. 05-123-38828) in WSU #2 (“Wells”):
Township 2 North, Range 67 West, 6th P.M.
Section 5: NE¼ (“WSU#1” - 480 Acres - Niobrara Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 32: E½
Township 2 North, Range 67 West, 6th P.M.
Section 5: E½ NE¼ (“WSU#2” - 240 Acres – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 32: E½ E½
7. On April 15, 2014, Kerr-McGee, 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.
8. Land testimony and exhibits submitted in support of the Application by Gordon Palmer, Staff Landman for Kerr-McGee, showed certain royalty owners have oil and gas leases which pre-date the widespread use of horizontal drilling and did not contemplate the formation of large spacing units to accommodate long lateral wellbores. Applicant contacted each of these royalty owners, or has made diligent efforts to do so, to obtain their consent to participate in the spacing unit for purposes of royalty payments. Despite such diligent efforts, Applicant has not been able to contact some of these individuals, or has received no response from them. Applicant confirmed that Commission Rule 530 does not apply as there are no working interest owners or unleased mineral interest owners subject to the Application, and Applicant is not seeking cost recovery pursuant to §34-60-116(7) for the Wells.
9. 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.
10. Kerr-McGee agreed to be bound by oral order of the Commission.
11. 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 pool all interests in two approximate 240-acre to 480-acre designated wellbore spacing units established for Section 5, Township 2 North, Range 67 West, 6th P.M. and Section 32, Township 3 North, Range 67 West, 6th P.M., for the drilling of the Scott 27N-32HZ Well and Scott 1C-32HZ Well, for the development and operation of the Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in two approximate 240-acre to 480-acre designated wellbore spacing units established for the below-described lands, are hereby pooled, for the drilling of the Scott 27N-32HZ Well in WSU #1 and Scott 1C-32HZ Well in WSU #2, for the development and operation of the Codell and Niobrara Formations:
Township 2 North, Range 67 West, 6th P.M.
Section 5: NE¼ (“WSU#1” - 480 Acres - Niobrara Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 32: E½
Township 2 North, Range 67 West, 6th P.M.
Section 5: E½ NE¼ (“WSU#2” - 240 Acres – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 32: E½ E½
2. The production obtained from the wellbore spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the wellbore spacing unit; each owner of an interest in the wellbore spacing unit shall be entitled to receive its share of the production of the Well located on the wellbore spacing unit applicable to its interest in the wellbore spacing unit.
3. Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.
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 30 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 23rd day of May, 2014, as of April 28, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert J. Frick, Secretary