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

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CAUSE NO. 407

DOCKET NO. 150700441

 

ORDER NO. 407-1324

 

TYPE: POOLING

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on July 20, 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 1120-acre drilling and spacing unit for portions of Sections 15 and 16, Township 6 North, Range 67 West, 6th P.M., for the drilling of the Simpson FD 16-039HC Well, the Simpson FD 16-059HN Well, and the Simpson FD 16-062HN Well (collectively the “Wells”), for the development and operation of the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Great Western Operating Company, LLC (“Great Western” 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 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, gas and associated hydrocarbons from the Niobrara Formation underlying certain lands, including the Application Lands, with the permitted well locations in accordance with the provisions of Order No. 407-1.

 

6.         On January 7, 2013, the Commission entered Order No. 407-741 which: 1) vacated the approximate 80-acre drilling and spacing units established by Order No. 407-87 for Section 16, Township 6 North, Range 67 West, 6th P.M.; 2) established an approximate 640-acre drilling and spacing unit consisting of Section 16, Township 6 North, Range 67 West, 6th P.M., and 3) approved up to seven horizontal wells within each unit, for the development and operation of the Codell-Niobrara Formation, with the productive interval of the horizontal wellbores to be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, without exception being granted by the Director.

7.         On July 29, 2013, the Commission entered Order No. 407-848 which pooled all interests in the approximate 640-acre drilling and spacing unit established by Order No. 407-741 for Section 16, Township 6 North, Range 67 West, 6th P.M., for the development and operation of the Codell-Niobrara Formation.

 

8.         On July 29, 2013, the Commission entered Order No. 407-848, which among other things, approves the request for an order to pool all interests in an approximate 640-acre drilling and spacing unit established for Section 16, Township 6 North, Range 67 West, 6th P.M., for the development and operation of the Codell-Niobrara Formation. Order No. 407-848 does not affect the application.

 

9.         On September 15, 2014, the Commission entered Order No. 407-1107 which, among other things, applied the cost recovery provisions of C.R.S. § 34-60-116(7) to any non-consenting owners within the approximate 640-acre drilling and spacing unit established by Order No. 407-741 for Section 16, Township 6 North, Range 67 West, 6th P.M. for the DeTienne FD 16-022HC Well (API No. 05-123-39630). Order No. 407-1107 does not affect the Application.

 

10.       On May 18, 2015, the Commission entered 407-1307 which, among other things, established an approximate 1120-acre drilling and spacing unit, and allow up to 21 horizontal wells within the unit, for the development of the Codell-Niobrara Formation.

 

11.       On May 21, 2015, Great Western, 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 1120-acre drilling and spacing unit 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 the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of the Simpson FD 16-039HC Well (API No. Pending), the Simpson FD 16-059HN Well (API No. Pending), or the Simpson FD 16-062HN Well (API No. Pending) (“Wells”):

 

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

Section 15:      W½, NE¼

Section 16:      All

 

12.       On June 29, 2015, Great Western, 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.

 

13.       Land testimony and exhibits submitted in support of the Application by Hal Writer, Land Manager for Great Western, 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 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 July 20, 2015 hearing date.

 

14.       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 Simpson FD 16-039HC Well (API No. Pending), the Simpson FD 16-059HN Well (API No. Pending), or the Simpson FD 16-062HN Well (API No. Pending), but did not provide testimony for any subsequent wells.

 

15.       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.

 

15.       Great Western agreed to be bound by oral order of the Commission. 

 

16.       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 1120-acre drilling and spacing unit for portions of Sections 15 and 16, Township 6 North, Range 67 West, 6th P.M., for the drilling of the Simpson FD 16-039HC Well, the Simpson FD 16-059HN Well, and the Simpson FD 16-062HN Well, for the development and operation of the Codell and Niobrara Formations.

 

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 1120-acre drilling and spacing unit 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 the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of the Simpson FD 16-039HC Well, the Simpson FD 16-059HN Well, and the Simpson FD 16-062HN Well to the Codell and Niobrara Formations:

 

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

Section 15:      W½, NE¼

Section 16:      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 Wells 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 Wells (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 Wells 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 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 Wells, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Wells as if it had originally agreed to the drilling.

 

6.         The operator of the Wells 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 4th day of August, 2015, as of July 20, 2015.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

Julie Murphy, Secretary