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 IN THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD County, Colorado. |
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CAUSE NO. 407
DOCKET NO. 160700283
TYPE: POOLING
ORDER NO. 407-1749
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REPORT OF THE COMMISSION
The Commission heard this matter on July 19, 2016 at Glenwood Springs Community Center, 100 Wulfsohn Road, Glenwood Springs, Colorado 81601, upon application for an order to: 1) vacate Order No. 407-1656, in part and only as it relates to the Mojack N-28HN Well, which among other things, pooled all interests in an approximate 320-acre wellbore spacing unit for portions of Sections 28 and 33, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara Formation; 2) vacate Order No. 407-1657, which pooled all interests in an approximate 640-acre wellbore spacing unit for portions of Sections 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Codell Formation; and 3) pool all interests in one approximate 320-acre wellbore spacing unit for the portions of Section 28 and 33, Township 7 North, Range 64 West, 6th P.M., and in one approximate 640-acre wellbore spacing unit for portions of Section 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and production from the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Bayswater Exploration & Production, LLC (“Bayswater” or “Applicant”), Operator No. 10261, 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, 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. The Application Lands are subject to this Rule.
5. On March 7, 2016, the Commission entered Order No. 407-1656, which pooled all interests in one approximate 320-acre wellbore spacing unit for the portions of Section 28 and Section 33, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara Formation and subjected all nonconsenting interests to the cost recovery provisions of Section 34-60-116(7), C.R.S., for the Mojack N-28HN well (API# 05-123-39842).
6. On March 7, 2016, the Commission entered Order No. 407-1657, which pooled all interests in one approximate 640-acre wellbore spacing unit for portions of Section 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Codell Formation and subjected all nonconsenting interests to the cost recovery provisions of Section 34-60-116(7), C.R.S., for the Mojack P-28HC well (API No. 05-123-39829).
7. On March 18, 2016, the Commission approved a Form 4 Sundry Notice (Doc. No. 401005079) changing the name of the Mojack N-28HN well to the Mojack N-28HC well and changed the well’s objective formation from the Niobrara Formation to the Codell Formation. As a result, Order No. 407-1656 became ineffective as it pertains to the Mojack N-28HN well n/k/a the Mojack N-28HC well.
8. On March 18, 2016, the Commission approved a Form 4 Sundry Notice (Doc No. 401005037) changing the name of the Mojack P-28HC well to the Mojack P-28HN well and changed the well’s objective formation from the Codell Formation to the Niobrara Formation. As a result, Order No. 407-1657 became ineffective.
9. On May 15, 2016, Bayswater filed with the Commission pursuant to § 34-60-116, C.R.S., a verified application (“Application”) for an order to: 1) vacate Order No. 407-1656, in part and only as it relates to the Mojack N-28HN Well, which among other things, pooled all interests in an approximate 320-acre wellbore spacing unit for portions of Sections 28 and 33, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara Formation; 2) vacate Order No. 407-1657, which pooled all interests in an approximate 640-acre wellbore spacing unit for portions of Sections 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Codell Formation; and 3) pool all interests in one approximate 320-acre wellbore spacing unit and one approximate 640-acre wellbore spacing unit for the below-described lands (“Application Lands”), for the development and production from the Codell and Niobrara Formations, and subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier 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 Mojack N-28HC Well (API No. 05-123-39842) and the Mojack P-28HN Well (API No. 05-123-39829) (“Wells”).
Wellbore Spacing Unit (WSU) #1
Mojack N-28HC Well (Codell Formation)
Township 7 North, Range 64 West, 6th P.M.
Section 28: E˝E˝
Section 33: E˝E˝
WSU #2
Mojack P-28HN Well (Niobrara Formation)
Township 7 North, Range 64 West, 6th P.M.
Section 27: W˝W˝
Section 28: E˝E˝
Section 33: E˝E˝
Section 34: W˝W˝
10. On June 27, 2016, Bayswater, 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.
11. Land testimony and exhibits submitted in support of the Application by Blake Leavitt, Certified Petroleum Landman for Bayswater, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to lease or 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 July 19, 2016, hearing date.
12. 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 Mojack N-28HC Well and the Mojack P-28HN Well.
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. Bayswater agreed to be bound by oral order of the Commission.
15. Based on the facts stated in the verified Application and having received no protests, based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to: 1) vacate Order No. 407-1656, in part and only as it relates to the Mojack N-28HN Well, which among other things, pooled all interests in an approximate 320-acre wellbore spacing unit for portions of Sections 28 and 33, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara Formation; 2) vacate Order No. 407-1657, which pooled all interests in an approximate 640-acre wellbore spacing unit for portions of Sections 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and operation of the Codell Formation; and 3) pool all interests in one approximate 320-acre wellbore spacing unit for the portions of Section 28 and 33, Township 7 North, Range 64 West, 6th P.M., and in one approximate 640-acre wellbore spacing unit for portions of Section 27, 28, 33, and 34, Township 7 North, Range 64 West, 6th P.M., for the development and production from the Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that:
1. Order No. 407-1656 is hereby vacated, as it relates to the Mojack N-28HN Well.
2. Order No. 407-1657 is hereby vacated.
3. Pursuant to the provisions of Section 34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in one approximate 320-acre wellbore spacing unit (“WSU”) and one approximate 640-acre wellbore 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 the costs specified in Section 34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Mojack N-28HC Well (API No. 05-123-39842) for the development and production from the Codell Formation (WSU #1) and the Mojack P-28HN Well (API No. 05-123-39829) for development and production from the Niobrara Formation (WSU #2)(“Wells”)
Wellbore Spacing Unit (WSU) #1
Mojack N-28HC Well (Codell Formation)
Township 7 North, Range 64 West, 6th P.M.
Section 28: E˝E˝
Section 33: E˝E˝
WSU #2
Mojack P-28HN Well (Niobrara Formation)
Township 7 North, Range 64 West, 6th P.M.
Section 27: W˝W˝
Section 28: E˝E˝
Section 33: E˝E˝
Section 34: W˝W˝
4. The production obtained from each 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 wellbore spacing unit; each owner of an interest in the wellbore spacing unit shall be entitled to receive its share of the production of the well located on the WSU applicable to its interest in the WSU.
5. The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the respective Well(s) (including penalties as provided by Section 34-60-116(7)(b), C.R.S.) out of production from the respective wellbore spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by Section 34-60-116(7)(a), C.R.S.
6. Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well(s) and be subject to the penalties as provided for by Section 34-60-116(7), C.R.S.
7. Each nonconsenting unleased owner within each respective 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 nonconsenting owner's proportionate 87.5% share of production, the costs specified in Section 34-60-116(7)(b), C.R.S., as amended. After recovery of such costs, each unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the respective Well(s), surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with each respective Well(s) as if it had originally agreed to the drilling.
8. The operator of the Wells drilled on the above-described wellbore spacing units shall furnish the nonconsenting 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.
9. Nothing in this order is intended to conflict with Section 34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.
10. The wellbore spacing units 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 25th day of July, 2016, as of July 19, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary