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. 150900539

 

TYPE: SPACING

 

ORDER NO. 407-1457

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on October 26, 2015, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to: 1) maintain the approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4, for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 2) maintain Order Nos. 407-811 and 535-360, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 3) vacate Order Nos. 407-822 and 535-382; 4) maintain Order No. 407-915 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M. to accommodate the Dutch Lake #08-10H, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 5) maintain an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 6) vacate an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; and 7) establish an approximate 1,920-acre unconventional resource unit for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Bill Barrett Corporation (“BBC” 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 22, 2011 (corrected April 4, 2013), the Commission entered Order Nos. 407-779 and 535-4 which, among other things, established 640-acre drilling and spacing units for certain lands, including Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., and approved one horizontal well for each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

6.         On June 17, 2013, the Commission entered Order Nos. 407-811 and 535-360 which, among other things, pooled all interests in the approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M.

 

7.         On July 29, 2013, the Commission entered Order Nos. 407-822 and 535-382 which, among other things, approved an additional seven horizontal wells, for a total of eight horizontal wells, within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and established an approximate 640-acre drilling and spacing unit for Section 10, Township 6 North, Range 62 West, 6th P.M. and approved up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.

 

8.         On January 27, 2014, the Commission entered Order No. 407-915 which, among other things, pooled all interests in the approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M.

 

9.         On March 17, 2014, the Commission entered Order No. 407-943 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M. and approved up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and an approximate 1,280-acre drilling and spacing unit for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M. and approved up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.

 

10.       BBC presently operates the Dutch Lake 08-10H Well (API No. 05-123-35000), spud on October 28, 2013, under Order No. 535-4 within Section 10, Township 6 North, Range 62 West, 6th P.M., with production from the Niobrara Formation.

 

11.       BBC presently operates the Dutch Lake 09-11H Well (API No. 05-123-33450), spud on October 23, 2012, under Order No. 535-4 within Section 11, Township 6 North, Range 62 West, 6th P.M., with production from the Niobrara Formation.

 

12.          BBC presently operates the Dutch Lake 12-14H Well (API No. 05-123-33954), spud on November 30, 2012, under Order No. 535-4 within Section 14, Township 6 North, Range 62 West, 6th P.M., with production from the Niobrara Formation.

 

13.          BBC presently operates the Ruh 6-62-11-0461BH2 Well (API No. 05-123-39416), spud on November 21, 2014, under Order No. 407-943 within Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., with production from the Niobrara Formation.

 

14.            The Dutch Lake 08-10H Well, the Dutch Lake 09-11H Well, the Dutch Lake 12-14H Well and the Ruh 6-62-11-0461BH2 Well are hereinafter collectively referred to as the “Existing Wells.”   

 

15.          Applicant asserts that there are no currently producing vertical or directional wells within the Application Lands. 

 

16.          On July 16, 2015 (amended August 5, 2015 and September 17, 2015), BBC, by its attorneys, filed with the Commission a verified second amended application (“Application”) for an order to: 1) maintain the approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4, for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 2) maintain Order Nos. 407-811 and 535-360, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 3) vacate Order Nos. 407-822 and 535-382; 4) maintain Order No. 407-915 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M. to accommodate the Dutch Lake #08-10H, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 5) maintain an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 6) vacate an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; and 7) establish an approximate 1,920-acre unconventional resource unit for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations and approve the appropriate number of wells within the unit, with the productive interval of the wellbores to be no closer than 460 feet from 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.

 

17.          Applicant states that any wells to be drilled within the proposed unconventional resource unit will be drilled from no more than 12 multi-well pads on the surface of the unconventional resource unit, or on adjacent lands with the consent of the landowner, subject to Rule 318A, without exception being granted by the Director.

 

18.          On August 31, 2015, Bonanza Creek Energy, Inc. (“Bonanza Creek” or “Protestant”) filed a Protest in the matter alleging, among other things, that BBC’s original request for reduced setbacks from the proposed unit boundaries would harm Protestant’s correlative rights.  Accordingly, BBC filed its second amended application on September 17, 2015 in response to the Protest, which removed its request for reduced setbacks within the proposed unconventional resource unit.  Bonanza Creek subsequently withdrew its Protest.

 

19.          On August 24, 2015, BBC, 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.

 

20.       Testimony and exhibits submitted in support of the Application by Colleen Kennedy, Land Manager for BBC, showed that BBC owns substantial leasehold interests in the Application Lands.

 

21.       Testimony and exhibits submitted in support of the Application by Terry R. Barrett, Senior Vice President of Geosciences for BBC, showed that the thickness of the Niobrara Formation underlying the Application Lands ranges from approximately 261 to 265 feet thick, and the thickness of the Codell Formation underlying the Application Lands is approximately 8 to 9.5 feet thick.  Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply, while the Codell Formation is a very fine sandstone/siltstone and is also a common source of supply. 

 

22.        Engineering testimony and exhibits submitted in support of the Application by Sean Stewart, Senior Reservoir Engineer for BBC, 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 showed that drilling and completing the maximum number of extended reach horizontal laterals (being 1.5 to 2 miles in length) is the most efficient method of recovering the resource. Testimony concluded an approximate 1,920-acre unconventional resource unit will maximize the number of extended reach horizontal laterals that can be drilled in the proposed unit, while minimizing the less economically efficient short lateral count.

 

23.       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.

 

24.       BBC agrees to be bound by oral order of the Commission. 

 

25.       The Commission requested that this matter be set for review by the Commission in one year and each year thereafter, unless an exception is granted by the Commission. 

 

26.       The Commission further found that production from the Existing Wells will continue to be distributed based on the underlying spacing and/or pooling orders applicable to said wells, until such time as a new well within the proposed unconventional resource unit is completed.  At such time, production from the Existing Wells will be prospectively allocated based on the unconventional resource unit, effective from the date of the completion of the first new well within the unconventional resource unit, and the underlying spacing and/or pooling orders will terminate.  BBC agreed to file a pooling application with the Commission, and other relief pertaining to the unconventional resource unit prior to the completion of the first new well within the unit.   

 

27.       Based on the facts stated in the verified Application, having resolved all protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to: 1) maintain the approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4, for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 2) maintain Order Nos. 407-811 and 535-360, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 3) vacate Order Nos. 407-822 and 535-382; 4) maintain Order No. 407-915 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake #08-10H, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 5) maintain an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 6) vacate an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; and 7) establish an approximate 1,920-acre unconventional resource unit for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

ORDER

 

            IT IS HEREBY ORDERED:

 

1.            The approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4, for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, are hereby maintained, but only until such time as the unconventional resource unit is pooled by Commission Order;

 

2.            Order Nos. 407-811 and 535-360, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation, are hereby maintained, but only until such time as the unconventional resource unit is pooled by Commission Order;

 

3.            Order Nos. 407-822 and 535-382 are hereby vacated;

 

4.            Order No. 407-915 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M. to accommodate the Dutch Lake #08-10H, for the development and operation of the Niobrara Formation, is hereby maintained, but only until such time as the unconventional resource unit is pooled by Commission Order;

 

5.            An approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, is hereby maintained, but only until such time as the unconventional resource unit is pooled by Commission Order;

 

6.            An approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., is hereby vacated, for the production of oil, gas, and associated hydrocarbons from the Codell Formation;

 

7.            An approximate 1,920-acre unconventional resource unit for the below-described lands, is hereby established, and the appropriate number of wells are hereby approved within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:

 

Township 6 North, Range 62 West, 6th P.M.
Section 10:      All

Section 11:      All

Section 14:      All

 

 

8.            The productive interval of the wellbores shall be located no closer than 460 feet from 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.

 

9.            The proposed wells shall be located on no more than 12 wellpads within the unit.

 

10.          All existing horizontal wells drilled and completed within the Application Lands will be included in the proposed unconventional resource unit upon entry of an order pooling all interests in the proposed unconventional resource unit.

 

11.          BBC shall file an application to pool all interests within the unconventional resource unit effective from the date of the completion of the first new well within the unconventional resource unit; all production from the Existing Wells will be allocated to the unconventional resource unit and the underlying spacing and pooling orders will then terminate. 

 

12.          This matter shall be set for annual review by the Commission, unless an exception is granted by the Commission. 

 

IT IS FURTHER ORDERED:

 

1.            The provisions contained in the above order shall become effective immediately.

 

2.            The Commission expressly reserves the 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 November, 2015, as of October 26, 2015.

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Julie Murphy, Secretary