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 NIOBRARA AND CODELL FORMATIONS, UNNAMED FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 160100030

 

TYPE: SPACING

 

ORDER NO. 407-1638

REPORT OF THE COMMISSION

The Commission heard this matter on March 7, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to vacate two approximate 640-acre drilling and spacing units established by Order No. 407-374 and establish one approximate 1280-acre drilling and spacing unit for Section 36, Township 7 North, Range 61 West, 6th P.M. and Section 1, Township 6 North, Range 61 West, 6th P.M., and approve up to 24 horizontal wells from the Niobrara Formation, and four horizontal wells from the Codell Formation, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

FINDINGS

The Commission finds as follows:

1.         Caerus WashCo LLC (“Caerus” 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.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 36, Township 7 North, Range 61 West, 6th P.M. and Section 1, Township 6 North, Range 61 West, 6th P.M. are subject to this Rule for the Codell Formation.

5.         On July 8, 2010, the Commission entered Order 407-374 which, among other things, established 11 approximate 640-acre drilling and spacing units for certain lands, including the Application Lands, and approved up to two horizontal wells in each unit, with bottomhole locations of any permitted well to be no closer than 460 feet from the boundary of the unit, for the production of oil and gas and associated hydrocarbons from the Niobrara Formation.

6.         On November 25, 2015, Caerus, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to vacate two approximate 640-acre drilling and spacing units established by Order No. 407-374 and establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 24 horizontal wells from the Niobrara Formation, and four horizontal wells from the Codell Formation, the productive interval of the wellbore to be located no closer than 460 feet from the unit boundaries, no closer than 100 feet from the productive interval of any other wellbore located within the unit, without exception being granted by the Director:

Township 7 North, Range 61 West, 6th P.M.

Section 36:      All       

 

Township 6 North, Range 61 West, 6th P.M.

Section 1:        All       

 

            7.         Caerus also requested that the Frank Trust 14-36H well (API No. 05-123-33064) (the “Prior Existing Well”) a horizontal well producing from the Niobrara Formation operated by the Applicant and was permitted and drilled under Order 407-374 in Section 36, Township 7 North, Range 61 be excluded from the proposed drilling and spacing unit and that royalty proceeds from the Prior Existing Well be unaltered and distributed as they were prior to the establishment of the proposed drilling and spacing unit.

 

8.         On February 12, 2016, Caerus, 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.

9.         Land testimony and exhibits submitted in support of the Application by Jeff Grisham, Landman for Caerus, showed that Caerus holds oil and gas leasehold interests and has a right to drill in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by Lisa Gusek, Petroleum Geologist for Caerus, showed that the Niobrara and Codell Formations are present throughout the Application Lands, that the Niobrara Formation is approximately 300 to 310 feet thick, that the Codell Formation is approximately 8 feet thick, and that both Formations are generally of uniform thickness throughout the Application Lands.

11.       Engineering testimony and exhibits submitted in support of the Application by James Bautsch, Reservoir Engineering Manager for Caerus, showed that the drainage area for analog horizontal Niobrara and Codell Formations wells are estimated at 160 acres per well, and an appropriate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.  Testimony further showed that the staff’s requested 460-foot buffer around the Frank Trust 14-36H Well, which provides a 95-acre drainage area for the one mile lateral. Based on the analysis in the prior exhibits, this is sufficient to prevent any communication between wellbores.

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.       Caerus 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 vacate two approximate 640-acre drilling and spacing units established by Order No. 407-374 and establish one approximate 1280-acre drilling and spacing unit for Section 36, Township 7 North, Range 61 West, 6th P.M. and Section 1, Township 6 North, Range 61 West, 6th P.M., and approve up to 24 horizontal wells from the Niobrara Formation, and four horizontal wells from the Codell Formation, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1.         Two approximate 640-acre drilling and spacing units established by Order No. 407-374 for Section 36, Township 7 North, Range 61 West, 6th P.M. and Section 1, Township 6 North, Range 61 West, 6th P.M., for the production of oil and gas and associated hydrocarbons from the Niobrara Formation, are hereby vacated.

2.         An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and up to 24 horizontal wells from the Niobrara Formation, and four horizontal wells from the Codell Formation, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

Township 7 North, Range 61 West, 6th P.M.

Section 36:      All       

 

Township 6 North, Range 61 West, 6th P.M.

Section 1:        All       

 

3.         The productive interval of the wellbores will be located no closer than 460 feet from the unit boundaries, and no closer than 100 feet from the productive interval of any other wellbore producing from the Niobrara and/or Codell Formations, without exception being granted by the Director.

4.         The Frank Trust 14-36H is hereby excluded from the above-described drilling and spacing unit with a 460-foot buffer around the Well.

5.         The proposed wells shall be located be located on no more than four wellpads within the unit or on adjacent lands, without exception granted by the Director.

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 11th day of March, 2016, as of March 7, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

Julie Murphy, Secretary