BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD AND LARIMER COUNTIES, COLORADO |
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CAUSE NO. 407
DOCKET NO. 160300114
TYPE: SPACING
ORDER NO. 407-1653
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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 sixteen approximate 80-acre drilling and spacing units established by Order No. 407-87 for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation; 2) establish an approximate 1280-acre drilling and spacing unit for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., and approve up to twenty-four horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; 3) pool all interests in the approximate 1280-acre drilling and spacing unit established for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations; and 4) subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as 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 drilling and spacing unit established for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M.
FINDINGS
The Commission finds as follows:
1. Extraction Oil & Gas LLC, Operator No. 10459, (“Extraction” or “Applicant”) 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 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., are subject to this Rule for production of oil gas and associated hydrocarbons from the Codell and Niobrara Formations.
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. Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., are subject to this Order for production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation.
6. On January 6, 2016, Extraction, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate sixteen approximate 80-acre drilling and spacing units established by Order No. 407-87 for the below-described lands (“Application Lands”) for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation; and 2) establish an approximate 1280-acre drilling and spacing unit for the Application Lands and approve up to twenty-four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of the wellbore 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 the unit, without exception granted by the Director; 3) pool all interests in the approximate 1280-acre drilling and spacing unit established for the Application Lands for the development and operation of the Codell and Niobrara Formations; and 4) subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as 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 31: All
Township 6 North, Range 68 West, 6th P.M.
Section 36: All
7. Applicant states that the proposed wells shall be located on no more than four multi-well pads, unless the Director grants an exception.
8. On February 12, 2016, 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.
9. Land testimony and exhibits submitted in support of the Application by Adam Sarvey, Landman for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands. Land testimony further showed that Extraction has been unable to effect the voluntary pooling of interests within the 1280-acre drilling and spacing unit, and that 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.
10. Applicant confirmed that Commission Rules 530.b. and c. do 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), C.R.S.
11. Geologic testimony and exhibits submitted in support of the Application by Matt Volkmar, Petroleum Engineer for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 290 to 330 feet thick, and is generally of uniform thickness throughout the Application Lands. Geologic testimony further showed that the Codell Formation is present throughout the Application Lands, is approximately 25 to 30 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply, and that the Codell Formation is a sandstone reservoir and is a common source of supply.
12. Engineering testimony and exhibits submitted in support of the Application by John Tonello, Engineering Manager for Extraction, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 18 acres and that the drainage area for analog horizontal Codell Formation wells is estimated at 134.5 acres. Further testimony showed that eight of the wells will be drilled into the Codell Formation. An approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by eight horizontal wells producing oil, gas and associated hydrocarbons from the Codell Formation and sixteen and horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation.
13. 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.
14. Extraction agreed to be bound by oral order of the Commission.
15. 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) vacate sixteen approximate 80-acre drilling and spacing units established by Order No. 407-87 for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation; 2) establish an approximate 1280-acre drilling and spacing unit for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., and approve up to twenty-four horizontal wells within the unit (eight for the Codell formation and sixteen for the Niobrara Formation), for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 3) pool all interests in the approximate 1280-acre drilling and spacing unit established for Section 31, Township 6 North, Range 67 West, 6th P.M. and Section 36, Township 6 North, Range 68 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. Sixteen approximate 80-acre drilling and spacing units established by Order No. 407-87 for the below described lands are hereby vacated, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation:
Township 6 North, Range 67 West, 6th P.M.
Section 31: All
Township 6 North, Range 68 West, 6th P.M.
Section 36: All
2. An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to twenty-four horizontal wells (eight for the Codell formation and sixteen for the Niobrara Formation) within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:
Township 6 North, Range 67 West, 6th P.M.
Section 31: All
Township 6 North, Range 68 West, 6th P.M.
Section 36: All
3. The productive interval of the wellbore shall 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 the unit, unless the Director grants an exception.
4. The wells shall be located on no more than four multi-well pads, unless the Director grants an exception.
5. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in an 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 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 drilling and spacing unit established for the below-described lands:
Township 6 North, Range 67 West, 6th P.M.
Section 31: All
Township 6 North, Range 68 West, 6th P.M.
Section 36: All
6. 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.
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 14th day of March, 2016, as of March 7, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Murphy, Secretary