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. 150700345 TYPE: POOLING
ORDER NO. 407-1349 |
REPORT OF THE COMMISSION
The Commission heard this matter on July 20, 2015, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to: 1) establish an approximate 1280-acre drilling and spacing unit for Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M.; 2) approve up to 25 horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 3) pool all interests within the proposed 1280-acre drilling and spacing unit, for development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Extraction Oil & Gas LLC, Operator No. 104595 (“Extraction” 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 Codell-Niobrara Formations.
6. Pursuant to Rule 318A., Applicant designated five approximate 640-acre horizontal wellbore spacing units, comprised of the S½N½, N½S½ of Sections 8 and 9 of the Application Lands, for the following horizontal wells: the Twell #1 Well (API No. 05-123-39679), the Twell # 2 Well (API No. 05-123-39668), the Twell #3 Well (API No. 05-123-39659), the Twell #4 Well (API No. 05-123-39678), and the Winder #12 Well (API No. 05-123-39583). Applicant maintains and confirms that each of the above referenced horizontal wells will be included within the approximate 1,280-acre drilling and spacing unit proposed herein, and that each horizontal wellbore spacing unit administratively approved for the above referenced wells shall be effectively vacated upon approval of the approximate 1,280-acre drilling and spacing unit proposed herein.
7. On April 28, 2014, the Commission entered Order No. 407-1005 which, among other things, established an approximate 640-acre drilling and spacing unit for the N½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., and approved up to eight horizontal wells within the unit, for production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.
8. On April 28, 2014, the Commission entered Order No. 407-1006 which, among other things, established an approximate 640-acre drilling and spacing unit for the S½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., and approved up to seven horizontal wells within the unit for production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.
9. On April 28, 2014, the Commission entered Order No. 407-1010 which, among other things, pooled all interests in the unit established by Order No. 407-1005, and subjected all non-consenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Winder #4 through #11 Wells.
10. On April 28, 2014, the Commission entered Order No. 407-1011 which, among other things, pooled all interests in the unit established by Order No. 407-1006, and subjected all non-consenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Twell #5 through #11 Wells
11. On June 8, 2015, Extraction, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) vacate the approximate 80-acre drilling and spacing units established by Order No. 407-87 for Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M.; 2) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-1005, for the N½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; 3) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-1006, for the S½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; 4) vacate Order No. 407-1010 which pooled all interests in the 640-acre drilling and spacing unit established for N½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M.; 5) vacate Order No. 407-1011 which pooled all interests in the 640-acre drilling and spacing unit established for S½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M.; 6) establish an approximate 1,280-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; 7) approve up to 25 horizontal wells within the proposed unit; with the productive interval of the wellbore of any permitted wells to be located 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 each unit; and 8) pool all interests in the approximate 1,280-acre drilling and spacing unit proposed for the Application Lands, for the development and operation of the Codell and Niobrara Formations; and subject any nonconsenting 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 initial well within the Application Lands.
Township 6 North, Range 67 West, 6th P.M.
Section 8: All
Section 9: All
12. On June 29, 2015, Extraction, 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 Allyson Vistica, Land Manager for Extraction, showed that Extraction owns leasehold interests in the Application Lands. Further testimony showed that Extraction is seeking an order to pool all interests in the approximate 1280-acre drilling and spacing unit proposed for the Application Lands and, based upon examination of relevant contracts and records, all owners of an oil and gas interest in the tracts to be pooled (who could be located by Extraction) received timely notice of the Application.
14. Further testimony confirmed that 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.
15. Geologic testimony and exhibits submitted in support of the Application by Matt Owens, President of Extraction, showed that the Niobrara Formation underlies the entirety of the Application Lands and ranges from approximately 275 to 300 feet thick, and that the Codell Formation underlies the entirety of the Application Lands and ranges from approximately 22 to 26 feet thick. Further testimony showed the Codell Formation consists of very fine sandstones, while the Niobrara Formation consists of chalks and marls.
16. Engineering testimony and exhibits submitted in support of the Application by John Tonello, Engineering Manager for Extraction, showed that drilling and completing horizontal wells within the Codell and Niobrara Formations underlying the Application Lands is the most efficient and economic method of developing the resource. Further testimony revealed the ultimate recovery of hydrocarbons under the Applications Lands by utilizing horizontal well technology would be approximately 18.65% for the Codell Formation, and 4.41% for the Niobrara Formation.
17. 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.
18. Extraction agrees to be bound by oral order of the Commission.
19. 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: 1) establish an approximate 1280-acre drilling and spacing unit for Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M.; 2) approve up to 25 horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 3) pool all interests within the proposed 1280-acre drilling and spacing unit, for development and operation of the Codell and Niobrara Formations.
ORDER
1. The approximate 80-acre drilling and spacing units established by Order No. 407-87 for Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., are hereby vacated;
2. An approximate 640-acre drilling and spacing unit established by Order No. 407-1005, for the N½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., are hereby vacated, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations;
3. An approximate 640-acre drilling and spacing unit established by Order No. 407-1006, for the S½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations;
4. Order No. 407-1010 which pooled all interests in the 640-acre drilling and spacing unit established for N½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., is hereby vacated;
5. Order No. 407-1011 which pooled all interests in the 640-acre drilling and spacing unit established for S½ of Sections 8 and 9, Township 6 North, Range 67 West, 6th P.M., is hereby vacated;
6. An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of 25 horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:
Township 6 North, Range 67 West, 6th P.M.
Section 8: All
Section 9: All
7. The productive interval of the wellbore of any permitted wells to be located 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 each unit.
8. 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 1280-acre drilling and spacing unit 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 the initial Well (No API No.) (“Well”):
Township 6 North, Range 67 West, 6th P.M.
Section 8: All
Section 9: All
9. 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 located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
10. The operator of the Wells drilled on the above-described drilling and 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.
11. 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