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 FOR THE NIOBRARA FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 150400237
ORER NO. 407-1295 |
REPORT OF THE COMMISSION
The Commission heard this matter on April 13, 2015, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests in an approximate 1280-acre drilling and spacing unit established for Sections 14 and 23, Township 5 North, Range 61 West, 6th P.M., for the development and operation of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Bonanza Creek Energy Operating Company LLC (“Bonanza” 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.
5. On August 20, 2012, the Commission entered Order No. 407-703, which among other things, approves the request for an order to establish an approximate 640-acre drilling and spacing unit consisting of Section 14, Township 5 North, Range 61 West, 6th P.M., and approve one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Applicant requested in a separate application, filed concurrently, that Order No. 407-703 be vacated.
6. On January 27, 2014, the Commission entered Order No. 407-917, which among other things, approved a total of ten horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 14, Township 5 North, Range 61 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Applicant requested in a concurrent application that Order No. 407-917 be vacated.
7. On February 12, 2015, Bonanza, by its attorneys, filed a concurrent Application (Docket No. 150400246) to, among other things, vacate Order Nos. 407-703 and 407-917 and establish an approximate 1280-acre drilling and spacing unit, and approve up to ten horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
8. On February 12, 2015, Bonanza, 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 an approximate 1280-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, effective as of the earlier of the date of the Application or the date that the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of any well to the Niobrara Formation:
Township 5 North, Range 61 West, 6th P.M.
Section 14: All
Section 23: All
9. On March 23, 2015, Bonanza, 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.
10. Land testimony and exhibits submitted in support of the Application by Caroline Heuring, Landman for Bonanza, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Pronghorn F-14-23XRLNB Well (API No. Pending), Pronghorn F21-14-23XRLNC Well (API No. Pending), Pronghorn 21-14-23XRLNB Well (API No. Pending), and Pronghorn K21-14-23XRLNC Well (API No. Pending) (“Wells”). 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 April 13, 2015 hearing date.
11. 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 Pronghorn F-14-23XRLNB Well, Pronghorn F21-14-23XRLNC Well, Pronghorn 21-14-23XRLNB Well, and Pronghorn K21-14-23XRLNC Well, but did not provide testimony for any subsequent wells.
12. 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.
13. Bonanza agreed to be bound by oral order of the Commission.
14. 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 an approximate 1280-acre drilling and spacing unit established for Sections 14 and 23, Township 5 North, Range 61 West, 6th P.M., for the development and operation of the Niobrara Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that:
1. Pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests in an approximate 1280-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, effective as of the earlier of the date of the Application or the date that the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of the Pronghorn F-14-23XRLNB Well (API No. Pending), Pronghorn F21-14-23XRLNC Well (API No. Pending), Pronghorn 21-14-23XRLNB Well (API No. Pending), and Pronghorn K21-14-23XRLNC Well:
Township 5 North, Range 61 West, 6th P.M.
Section 14: All
Section 23: All
2. The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the well(s) located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. The non-consenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the well(s) (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the drilling and spacing unit representing the cost-bearing interests of the non-consenting 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 non-consenting as to the well(s) and be subject to the penalties as provided for by §34-60-116 (7), C.R.S.
5. Each non-consenting unleased owner within the drilling and 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 non-consenting 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 non-consenting mineral owner shall then own its proportionate 8/8ths share of the well(s), surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well(s) as if it had originally agreed to the drilling.
6. The operator of the well(s) drilled on the above-described drilling and spacing unit shall furnish the non-consenting 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.
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 27th day of April, 2015, as of April 13, 2015.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Murphy, Secretary