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 NIOBRARA FORMATION, WATTENBERG  FIELD, WELD   COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 1407-UP-208

 

ORDER NO. 407-1097

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on July 28, 2014, at the Weld County Administration Building - Events Center, 1150 “O” Street, Greeley, CO, upon application for an order to pool all interests within an approximate 200-acre designated wellbore spacing unit established for Sections 14 and 23, Township 2 North, Range 67 West, 6th P.M., to accommodate the drilling of the Mulga 3N-23HZ Well, for the development and operation of the Niobrara Formation.

 

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. Sections 14 and 23, Township 2 North, Range 67 West, 6th P.M. are subject to Rule 318A for the Niobrara Formation.

 

5.         On February 19, 1992, Order No. 407-87 established 80-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, within the permitted well locations in accordance with Order No. 407-1.  Sections 14 and 23, Township 2 North, Range 67 West, 6th P.M. are subject to this Order for the Niobrara Formation.

 

6.         On May 29, 2014, Kerr-McGee, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to pool all interests in an approximate 200-acre designated wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, and to subject all interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S. were first incurred for the drilling of the Mulga 3N-23HZ Well (API No. 05-123-39254) (“Well”):

 

 

                        Township 2 North, Range 67 West, 6th P.M.

                        Section 14:      SE¼ SW¼

                        Section 23:      E½ W½

 

7.         On July 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 Tom Yaley, Staff Landman for Kerr-McGee, showed that certain royalty owners have not agreed to participate in the Well. These parties’ oil and gas leases 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 stated 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 Well.

 

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 Unit review of the Application under Rule 511., the Commission should enter an order to pool all interests within an approximate 200-acre designated wellbore spacing unit established for Sections 14 and 23, Township 2 North, Range 67 West, 6th P.M., to accommodate the drilling of the Mulga 3N-23HZ Well, for the development and operation of the Niobrara Formation.

 

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 the approximate 200-acre designated wellbore spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Niobrara Formation, for the drilling of the Mulga 3N-23HZ Well (API No. 05-123-39254):

 

                        Township 2 North, Range 67 West, 6th P.M.

                        Section 14:      SE¼ SW¼

                        Section 23:      E½ W½

 

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.

 

4.         The wellbore spacing unit described above, shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.

 

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, c  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   13th  day of August, 2014, as of July 28, 2014.     

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary