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 NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 161000437
TYPE: POOLING
ORDER NO. 407-1819 |
REPORT OF THE COMMISSION
The Commission heard this matter on October 24, 2016, at the Northeastern Junior College, Hayes Student Center Ballroom, 100 College Avenue, Sterling, Colorado, upon application for an order to subject additional parties to Order No. 407-1766, which pooled all interests in nine approximate 640-acre designated horizontal wellbore spacing units established for portions of Sections 20 and 29, Township 1 North, Range 66 West, 6th P.M, and subject the additional parties to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Dittmer KE 20-022HC Well, the Dittmer KE 20-023HN Well, the Dittmer KE 20-024HC Well, the Dittmer KE 20-024HN Well, the Dittmer KE 20-026HN Well, the Dittmer KE 20-027HC Well, the Dittmer KE 20-027HN Well, the Dittmer KE 20-028HN Well, and the Dittmer KE 20-029HC Well, for the for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
FINDINGS
The Commission finds as follows:
1. Great Western Operating Company, LLC (Operator No. 10110) (“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 20 and 29, Township 1 North, Range 66 West, 6th P.M., are subject to this Rule for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell 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, the Codell Formation, and the Niobrara Formation underlying certain lands, with the permitted well locations in accordance with the provisions of Order No. 407-1. Sections 20 and 29, Township 1 North, Range 66 West, 6th P.M., are subject to this Order for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
6. On August 29, 2016, the Commission entered Order No. 407-1766 which pooled all interests in certain lands for the development of the Codell and Niobrara Formations. Portions of Sections 20 and 29, Township 1 North, Range 66 West, 6th P.M., are subject to this Order for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
7. On August 25, 2016, Great Western, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to subject additional parties to Order No. 407-1766, which pooled all interests in nine approximate 640-acre designated horizontal wellbore spacing units established for the below described land (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and to subject the additional parties 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 the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Dittmer KE 20-022HC Well (API No. 05-123-43451), the Dittmer KE 20-023HN Well (API No. 05-123-43440), the Dittmer KE 20-024HC Well (API No. 05-123-43461), the Dittmer KE 20-024HN Well (API No. 05-123-43441), the Dittmer KE 20-026HN Well (API No. 05-123-43444), the Dittmer KE 20-027HC Well (API No. 05-123-43452), the Dittmer KE 20-027HN Well (API No. 05-123-43457), the Dittmer KE 20-028HN Well (API No. 05-123-43455), and the Dittmer KE 20-029HC Well (API No. 05-123-43448) (“Wells”):
Township 1 North, Range 66 West, 6th P.M.
Section 20: W˝
Section 29: W˝
Wellbore Spacing Units (“WSU”) No. 1
Dittmer KE 20-022HC Well – Codell Formation
WSU No. 2
Dittmer KE 20-023HN Well – Niobrara Formation
WSU No. 3
Dittmer KE 20-024HC Well – Codell Formation
WSU No. 4
Dittmer KE 20-024HN Well – Niobrara Formation
WSU No. 5
Dittmer KE 20-026HN Well – Niobrara Formation
WSU No. 6
Dittmer KE 20-027HC Well – Codell Formation
WSU No. 7
Dittmer KE 20-027HN Well – Niobrara Formation
WSU No. 8
Dittmer KE 20-028HN Well – Niobrara Formation
WSU No. 9
Dittmer KE 20-029HC Well – Codell Formation
8. On October 3, 2016, supplemented October 10, 2016, Applicant, 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, Landman for Great Western, showed that the additional parties, identified as the Heirs or Devisees of Herman F. Dreyer, were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Wells. Further testimony concluded that the AFEs sent by the Applicant to the Heirs or Devisees of Herman F. Dreyer were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 35 days prior to the October 24, 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 Dittmer KE 20-022HC Well, the Dittmer KE 20-023HN Well, the Dittmer KE 20-024HC Well, the Dittmer KE 20-024HN Well, the Dittmer KE 20-026HN Well, the Dittmer KE 20-027HC Well, the Dittmer KE 20-027HN Well, the Dittmer KE 20-028HN Well, and the Dittmer KE 20-029HC 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 pool all interests in nine approximate 640-acre designated horizontal wellbore spacing units established for portions of Sections 20 and 29, Township 1 North, Range 66 West, 6th P.M., and to subject the Heirs or Devisees of Herman F. Dreyer to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of Dittmer KE 20-022HC Well, the Dittmer KE 20-023HN Well, the Dittmer KE 20-024HC Well, the Dittmer KE 20-024HN Well, the Dittmer KE 20-026HN Well, the Dittmer KE 20-027HC Well, the Dittmer KE 20-027HN Well, the Dittmer KE 20-028HN Well, and the Dittmer KE 20-029HC Well, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.
ORDER
IT IS HEREBY ORDERED:
1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, the Heirs or Devisees of Herman F. Dreyer are hereby made subject to Order No. 407-1766, which pooled all interests in nine approximate 640-acre designated horizontal wellbore spacing units established for the below described lands for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, and the cost recovery provisions of §34-60-116(7), C.R.S., are hereby applied to the Heirs or Devisees of Herman F. Dreyer effective as of the earlier of the date of the Application, or the date that the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of the Dittmer KE 20-022HC Well (API No. 05-123-43451), the Dittmer KE 20-023HN Well (API No. 05-123-43440), the Dittmer KE 20-024HC Well (API No. 05-123-43461), the Dittmer KE 20-024HN Well (API No. 05-123-43441), the Dittmer KE 20-026HN Well (API No. 05-123-43444), the Dittmer KE 20-027HC Well (API No. 05-123-43452), the Dittmer KE 20-027HN Well (API No. 05-123-43457), the Dittmer KE 20-028HN Well (API No. 05-123-43455), and the Dittmer KE 20-029HC Well (API No. 05-123-43448):
Township 1 North, Range 66 West, 6th P.M.
Section 20: W˝
Section 29: W˝
Wellbore Spacing Units (“WSU”) No. 1
Dittmer KE 20-022HC Well – Codell Formation
WSU No. 2
Dittmer KE 20-023HN Well – Niobrara Formation
WSU No. 3
Dittmer KE 20-024HC Well – Codell Formation
WSU No. 4
Dittmer KE 20-024HN Well – Niobrara Formation
WSU No. 5
Dittmer KE 20-026HN Well – Niobrara Formation
WSU No. 6
Dittmer KE 20-027HC Well – Codell Formation
WSU No. 7
Dittmer KE 20-027HN Well – Niobrara Formation
WSU No. 8
Dittmer KE 20-028HN Well – Niobrara Formation
WSU No. 9
Dittmer KE 20-029HC Well – Codell Formation
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 designated horizontal wellbore 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 nonconsenting working interest owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating each of the Wells (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the designated horizontal wellbore spacing unit representing the cost-bearing interests of the nonconsenting 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 nonconsenting as to the Wells 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 nonconsenting unleased owner within the designated horizontal 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 §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 well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well as if it had originally agreed to the drilling.
6. The operator of the Wells drilled on the above-described designated horizontal 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.
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 designated horizontal wellbore spacing units described above shall be considered drilling and spacing units established by the Commission for purposes of Rule 530.a.
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 7th day of November, 2016, as of October 24, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary