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, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 160100031

 

TYPE: SPACING

 

ORDER NO. 407-1639

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 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 27, Township 6 North, Range 61 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1280-acre drilling and spacing unit for Section 26 and 27, Township 6 North, Range 61 West, 6th P.M.; and 3) approve up to 20 horizontal wells within the unit, being 18 horizontal wells to the Niobrara Formation, and two horizontal wells to 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.         On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule.   Section 26 and 27, Township 6 North, Range 61 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.

5.         On October 31, 2011, the Commission entered Order No. 407-501 which, among other things, established 11 approximate 640-acre drilling and spacing units for certain lands, including Section 27, Township 6 North, Range 61 West, 6th P.M., and approved up to one horizontal well 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 the approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 27, Township 6 North, Range 61 West, 6th P.M., establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”), and 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 6 North, Range 61 West, 6th P.M.

Section 26:      All       

Section 27:      All       

 

7.         On January 15, 2016, Caerus, by its attorneys, and the Bureau of Land Management (“BLM”) agreed that the Application Lands contain federal leased and/or unleased minerals. As such, Caerus agrees to submit a Communitization Agreement (“CA”) to the BLM for any existing wells within 60 days of the entry of this Order. Caerus also agrees to submit a CA to the BLM within 90 days from the date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

8.         On January 11, 2016, Bonanza Creek Energy, Inc. (“Bonanza” or “Protestant”) filed a Protest to the Application (“Protest”). 

9.         On February 17, 2016, a Prehearing Conference was held to discuss the Application and Protest.

10.       On February 25, 2016, the parties reached an agreement resolving all issues in the Protest whereby Caerus would decrease the number of proposed horizontal wells to the Niobrara Formation from 24 wells to 18 wells and decrease the number of proposed horizontal wells to the Codell Formation from 4 wells to 2 wells.

11.       On February 26, 2016, Bonanza Creek withdrew its Protest to the Application.

12.       On February 26, 2016, Caerus, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application, the settlement terms 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 Jeff Grisham, Landman for Caerus, showed that Caerus holds oil and gas leasehold interests and has a right to drill in the Application Lands.  The Land testimony and exhibits submitted in support also provided confirmation that Caerus would decrease the number of proposed horizontal wells to the Niobrara Formation from 24 wells to 18 wells and decrease the number of proposed horizontal wells to the Codell Formation from 4 wells to 2 wells.

14.       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 feet thick, that the Codell Formation is approximately 8 feet thick, and that both Formations are generally of uniform thickness throughout the Application Lands.

15.       Engineering testimony and exhibits submitted in support of the Application by James Bautsch, Reservoir Engineer for Caerus, showed that the drainage area for analog horizontal Niobrara and Codell Formations wells are estimated at 76.5 acres per mile of lateral for horizontal wells drilled in the A, B, and C benches of the Niobrara Formation and the Codell Formation, 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.

16.       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.

17.       Caerus agreed to be bound by oral order of the Commission. 

18.       Based on the facts stated in the verified Application, having resolved the Protest, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 27, Township 6 North, Range 61 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1280-acre drilling and spacing unit for Section 26 and 27, Township 6 North, Range 61 West, 6th P.M.; and 3) approve up to 20 horizontal wells within the unit, being 18 horizontal wells to the Niobrara Formation, and two horizontal wells to the Codell Formation, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 27, Township 6 North, Range 61 West, 6th P.M. is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

2.         An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and up to 20 horizontal wells within the unit, being 18 horizontal wells to the Niobrara Formation, and two horizontal wells to the Codell Formation, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

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

Section 26:      All       

Section 27:      All       

3.         The productive interval of any wellbore shall be located no closer than 100 feet from any other wellbore producing from the Codell and Niobrara Formations, and no closer than 460 feet from the unit boundaries, unless an exception is granted by the Director.

4.         The proposed wells shall be located be located on no more than four wellpads within the unit or on adjacent lands, unless the Director grants an exception.

5.         Caerus agrees to submit a CA to the BLM for any existing wells within 60 days of the entry of this Order or within 90 days from the date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

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 15th day of March, 2016, as of March 7, 2016.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By:                                                                                 

Julie Murphy, Secretary