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. 1412-UP-368
ORDER NO. 407-1189 |
REPORT OF THE COMMISSION
The Commission heard this matter on December 15, 2014 at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, CO, upon application for an order to pool all interests within two approximate 400-acre designated horizontal wellbore spacing units established for Sections 10, 11, 14 and 15, Township 2 North, Range 68 West, 6th P.M. and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Grant Salisbury 2A-14H-C268 and Grant Salisbury 2B-14H-C268 Wells, for the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Encana Oil & Gas (USA) Inc. (Operator No. 100185) (“Encana” or “Applicant”) 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 10, 11, 14 and 15, Township 2 North, Range 68 West, 6th P.M. are subject to this Rule for the Codell and Niobrara Formations.
5. On October 16, 2014, Encana, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to pool all interests in two approximate 400-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Codell and Niobrara Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the date of the Application, for the drilling of the Grant Salisbury 2A-14H-C268 (API No. 05-123-37660) and the Grant Salisbury 2B-14H-C268 (API No. 05-123-37658) (“Well”):
Township 2 North, Range 68 West, 6th P.M.
Section 10: E½ E½
Section 11: W½ W½
Section 14: NW¼ NW¼
Section 15: NE¼ NE¼
6. On November 24, 2014, Encana, 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.
7. On December 9, 2014, Encana, by its attorneys, and the Bureau of Land Management (“BLM”) agreed that the Application Lands contain federal leased minerals. As such, Encana agrees to submit individual Communitization Agreement (“CA”) to the BLM that will coincide with each wellbore spacing unit if such unit contains federal minerals within 90 days from the date of first production (as defined in the Commission Rules) of each well.
8. Land testimony and exhibits submitted in support of the Application by Lisa Hamil, Land Negotiator for Encana, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the December 15, 2014 hearing date.
9. Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Grant Salisbury 2A-14H-C268 (API No. 05-123-37660) and the Grant Salisbury 2B-14H-C268 (API No. 05-123-37658) but did not provide testimony for any subsequent wells.
10. 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.
11. Encana agreed to be bound by oral order of the Commission.
12. 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 two approximate 400-acre designated horizontal wellbore spacing units established for Sections 10, 11, 14 and 15, Township 2 North, Range 68 West, 6th P.M. and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Grant Salisbury 2A-14H-C268 and Grant Salisbury 2B-14H-C268 Wells, 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 400-acre designated horizontal wellbore spacing units established for the below-described lands, are hereby pooled, for the development and operation of the Codell and Niobrara Formations, effective as of the date of the Application, for the drilling of Grant Salisbury 2A-14H-C268 (API No. 05-123-37660) and the Grant Salisbury 2B-14H-C268 (API No. 05-123-37658) Wells:
Township 2 North, Range 68 West, 6th P.M.
Section 10: E½ E½
Section 11: W½ W½
Section 14: NW¼ NW¼
Section 15: NE¼ NE¼
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. The nonconsenting (unleased) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the wellbore spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.
4. Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well and be subject to the penalties as provided for by §34-60-116(7), C.R.S. Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).
5. Each nonconsenting unleased owner within the wellbore spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended. After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the Well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Well as if it had originally agreed to the drilling.
6. The operator of the well drilled on the above-described wellbore spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.
7. 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.
8. Any wellbore spacing unit described above shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.
9. Encana agrees to submit a Communitization Agreement (“CA”) to the BLM that will coincide with each wellbore spacing unit if such unit contains federal minerals within 90 days from the date of first production (as defined in the Commission Rules) of each well.
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, 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 8th day of January, 2015, as of December 15, 2014.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Jill Dorancy, Acting Secretary