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 FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 160700262

 

TYPE:  SPACING

 

ORDER NO. 407-1743

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on July 19, 2016, at the Glenwood Springs Community Center, 100  Wulfsohn Road, Sopris Rooms A & B, Glenwood Springs, Colorado, upon application for an order to vacate Order No. 407-535, and establish an approximate 1,280-acre drilling and spacing unit for Sections 11 and 14, Township 5 North, Range 62 West, 6th P.M., and approve up to ten horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Bonanza Creek Energy Operating Co., LLC (Operator No. 9860) (“Bonanza Creek” 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 January 23, 2012, the Commission entered Order No. 407-535 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 11, Township 5 North, Range 62 West, 6th P.M., and approved the drilling of one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 600 feet from unit boundaries.

 

5.         On January 23, 2012, the Commission entered Order No. 407-536 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 14, Township 5 North, Range 62 West, 6th P.M., and approved the drilling of one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the permitted well to be located no closer than 600 feet from unit boundaries.

 

6.         On January 26, 2015, the Commission entered Order No. 407-1213 which, among other things, vacated the approximate 640-acre drilling and spacing unit established by Order No. 407-536 for Section 14, Township 5 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

 

7.         On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule.   Sections 11 and 14, Township 5 North, Range 62 West, 6th P.M., are subject to this Rule for the Niobrara Formation.

 

8.         On May 19, 2016, Bonanza Creek, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate Order No. 407-535 which previously established an approximate 640-acre drilling and spacing unit for Section 11, Township 5 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1,280-acre drilling and spacing unit for the below described lands (“Application Lands”), and authorizing the drilling of ten horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated intervals of any horizontal well permitted under this Application located not less than 460 feet from unit boundaries and not less than 150 feet from any other well producing or drilling from the Niobrara Formation, without exception being granted by the Director, with any permitted well located on no more than four multi-well pads within the drilling and spacing unit from Rule 318A drilling windows, or on adjacent lands with surface owner consent, without exception being granted by the Director; and 3) maintain allocation of proceeds for any existing wells located within the proposed unit and producing from the Niobrara Formation:

 

Township 5 North, Range 62 West, 6th P.M.

Section 11:      All

Section 14:      All

 

9.         On June 27, 2016, Bonanza Creek, 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.

 

            10.       Land testimony and exhibits submitted in support of the Application by Alexander S. Newell, Landman II for Bonanza Creek, showed that Bonanza Creek holds oil and gas leasehold interests and has a right to drill in the Application Lands. Further testimony also showed that Bonanza Creek currently operates the State Antelope 31-11HZ Well (API No. 05-123-33487) within the Application Lands for the production of oil, gas, and associated hydrocarbons from the Niobrara formation and that the current allocation of proceeds on a 280-acre leasehold basis for the State Antelope 31-11HZ Well should be maintained.

 

11.       Geologic testimony and exhibits submitted in support of the Application by Jeffrey Schroeder, Development Geologist for Bonanza Creek, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 260 to 270 feet thick, and is generally of uniform thickness throughout the Application Lands. 

 

12.       Engineering testimony and exhibits submitted in support of the Application by Joel Dill, Engineer for Bonanza Creek, showed that Bonanza Creek is planning to drill ten horizontal wells in the Niobrara Formation.  Engineering testimony further showed that the drainage area for analog approximately two-mile-long horizontal Niobrara Formation wells is estimated at 56 acres, and 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 ten horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation.

 

13.       Applicant stated that the wells will be drilled from no more than four pads.

 

14.       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.

 

15.       Bonanza Creek agreed to be bound by oral order of the Commission.

 

16.       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 Order No. 407-535, and establish an approximate 1280-acre drilling and spacing unit for Sections 11 and 14, Township 5 North, Range 62 West, 6th P.M., and approve up to ten horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Order No. 407-535 is hereby vacated.

 

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

 

Township 5 North, Range 62 West, 6th P.M.

Section 11:      All

Section 14:      All

 

 

3.         The productive interval of each wellbore shall be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located within the unit, unless the Director grants an exception.

 

4.         The wells shall be drilled from no more than four pads, unless the Director grants an exception.

 

5.         The current allocation of proceeds on a 280-acre leasehold basis shall be maintained for the existing State Antelope 31-11HZ Well (API No. 05-123-33487) located within the proposed unit for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

 

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 22nd day of July, 2016, as of July 19, 2016.           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By__________________________________

            Julie Murphy, Secretary