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 FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 160100020 TYPE: POOLING ORDER NO. 407-1699

REPORT OF THE COMMISSION

            The Commission heard this matter on June 6, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to modify Order No. 407-1488, to pool all interests within an approximate 640-acre designated wellbore spacing unit established for Sections 23, 24, 25, and 26, Township 6 North, Range 67 West, 6^th P.M., for the drilling of the Burr FD 23-382HC Well (“Well”), for the development and operation of the Codell Formation.

FINDINGS

The Commission finds as follows:

1.         Great Western Operating Company, LLC (“Great Western” 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.  Sections 23, 24, 25, and 26, Township 6 North, Range 67 West, 6^th P.M. are subject to this Rule for the Codell Formation.

5.         On February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 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, the Codell Formation, and the Niobrara Formation underlying certain lands, including the Application Lands, with the permitted well locations in accordance with the provisions of Order No. 407-1.

6.         On October 26, 2015, the Commission entered Order No. 407-1488, which among other things, pooled all interests in an approximate 640-acre designated horizontal wellbore spacing unit for the Application Lands, for the development of the Niobrara Formation. Applicant requests Order No. 407-1488 be modified to pool the Burr FD 23-382HC Well (Formerly the Burr FD 23-382HN Well) to the Codell Formation.

7.         On November 25, 2015, Great Western, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests in an approximate 640-acre designated wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Codell Formation, effective as of the earlier of the date of the Application or the date that the costs specified in §34-60-116(7)(b), C.R.S., are first incurred, for the drilling of the Burr FD 23-382HC (API No. 05-123-40877) (Formerly the Burr FD 23-382HN) (“Well”):

Township 6 North, Range 67 West, 6^th P.M.

Section 23:      S½S½

Section 24:      S½S½

Section 25:      N½N½

Section 26:      N½N½

8.         On May 16, 2016, Great Western, 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 Hal Writer, Land Manager for Great Western, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Wells.  Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the June 6, 2016 hearing date.

10.       Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Burr FD 23-382HC Well, but did not provide testimony for any subsequent wells.

11.       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.

12.       Great Western agreed to be bound by oral order of the Commission. 

13.       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 modify Order No. 407-1488, to pool all interests within an approximate 640-acre designated wellbore spacing unit established for Sections 23, 24, 25, and 26, Township 6 North, Range 67 West, 6^th P.M., for the drilling of the Burr FD 23-382HC Well, for the development and operation of the Codell Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that:

1.         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 640-acre horizontal wellbore spacing unit, established for the below-described lands, are hereby pooled, for the development and operation of the Codell Formation, effective as of the earlier of the date of the Application or the date that the costs specified in §34-60-116(7)(b), C.R.S., are first incurred, for the drilling of the Burr FD 23-382HC Well (API No. 05-123-40877):

Township 6 North, Range 67 West, 6^th P.M.

Section 23:      S½S½

Section 24:      S½S½

Section 25:      N½N½

Section 26:      N½N½

2.         The production obtained from the designated horizontal wellbore 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 designated horizontal wellbore 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 designated horizontal wellbore spacing unit applicable to its interest in the designated horizontal wellbore spacing unit.

3.         The non-consenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the wellbore spacing unit representing the cost-bearing interests of the non-consenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

4.         Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be non-consenting as to the Well and be subject to the penalties as provided for by §34-60-116 (7), C.R.S. Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

5.         Each non-consenting unleased owner within the wellbore spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each non-consenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended.  After recovery of such costs, each unleased non-consenting mineral owner shall then own its proportionate 8/8ths share of the Well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the Application Well as if it had originally agreed to the drilling.

6.         The operator of the Well drilled on the above-described wellbore spacing unit shall furnish the non-consenting 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.

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.

8.         The wellbore spacing unit described above shall be considered drilling and spacing unit established by the Commission for purposes of Rule 530.a.

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 20^th day of June, 2016, as of June 6, 2016.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By__________________________________

Julie Murphy, Secretary