BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

REPORT OF THE COMMISSION

The Commission heard this matter on December 12, 2016, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to vacate Order No. 535-24 which pooled an approximate 640-acre drilling and spacing unit established for Section 6, Township 5 North, Range 60 West, 6^th P.M., vacate an approximate 640-acre drilling and spacing unit for Section 6, Township 5 North, Range 60 West, 6^th P.M., and establish an approximate 1280-acre drilling and spacing unit for Section 6, Township 5 North, Range 60 West, 6^th P.M. and Section 1, Township 5 North, Range 61 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

FINDINGS

The Commission finds as follows:

1.         Caerus WashCo LLC (“Caerus” 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.   Section 1, Township 5 North, Range 61 West, 6^th P.M., is subject to this Rule for the Niobrara and Codell Formations.

5.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 6, Township 5 North, Range 60 West, 6^th P.M. is subject to this Rule for the Codell Formation.

6.         On May 16, 2011, the Commission entered Order No. 535-13 which established an approximate 640-acre drilling and spacing unit established for Section 6, Township 5 North, Range 60 West, 6^TH P.M. and approved up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 6, Township 5 North, Range 60 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

7.         On May 16, 2011, the Commission entered Order No. 535-24 which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 6, Township 5 North, Range 60 West, 6^th P.M., and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 6, Township 5 North, Range 60 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

8.         On May 19, 2016, Caerus, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to vacate Order No. 535-24 which pooled an approximate 640-acre drilling and spacing unit established for Section 6, Township 5 North, Range 60 West, 6^th P.M., and vacate an approximate 640-acre drilling and spacing unit for Section 6, Township 5 North, Range 60 West, 6^th P.M. and establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 28 horizontal wells within the unit, being 24 horizontal wells from the Niobrara Formation, and four horizontal wells from the Codell Formation, the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, no closer than 100 feet from the productive interval of any other wellbore located within the unit, without exception being granted by the Director:

Township 5 North, Range 61 West, 6^th P.M.

Section 1:   All

 

Township 5 North, Range 60 West, 6^th P.M.

Section 6:   All

 

8.         On September 19, 2016, the Commission granted Applicant’s verified Motion for Service by Publication to effect service on the Heirs to the estate of Frank E. Fauquier including Nina Fauquier, Pearl Fauquier Buell, Ruth Evans and Virginia Fauquier; and all unknown persons who claim any interest in the subject matter of action pursuant to C.R.C.P. 4.

9.         On November 21, 2016, Caerus, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application, the settlement terms 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 Jeff Grisham, Landman for Caerus, showed that Caerus holds oil and gas leasehold interests and has a right to drill in the Application Lands.

11.       Geologic testimony and exhibits submitted in support of the Application by Lisa Gusek, Petroleum Geologist for Caerus, showed that the Niobrara and Codell Formations are present throughout the Application Lands, that the Niobrara Formation is approximately 300 feet gross thickness, that the Codell Formation is approximately 8 feet thick, and that both Formations are generally of uniform thickness throughout the Application Lands.

12.       Engineering testimony and exhibits submitted in support of the Application by James Bautsch, Reservoir Engineer for Caerus, showed that the drainage area for analog horizontal Niobrara and Codell Formations wells are estimated at 153 acres per horizontal well drilled in the A, B, and C benches of the Niobrara Formation and the Codell Formation, and an appropriate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

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.       Caerus 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 vacate Order No. 535-24 which pooled an approximate 640-acre drilling and spacing unit established for Section 6, Township 5 North, Range 60 West, 6^th P.M., vacate an approximate 640-acre drilling and spacing unit for Section 6, Township 5 North, Range 60 West, 6^th P.M., and establish an approximate 1280-acre drilling and spacing unit for Section 6, Township 5 North, Range 60 West, 6^th P.M. and Section 1, Township 5 North, Range 61 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1.            An approximate 640-acre drilling and spacing unit established by Order No.  535-13 for Section 6, Township 5 North, Range 60 West, 6^th P.M., is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation;

2.            Order No. 535-24 which pooled all interests in an approximate 640-acre drilling and spacing unit established by Order No. 535-13 for Section 6, Township 5 North, Range 60 West, 6^th P.M., is hereby vacated, for the development and operation of the Niobrara Formation;

3.         An approximate 1280-acre drilling and spacing unit is hereby established for the below described lands, and a total of up to 28 horizontal wells within the unit, 24 horizontal wells to the Niobrara Formation, and four horizontal wells to the Codell Formation, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

Township 5 North, Range 61 West, 6^th P.M.

Section 1:   All

 

Township 5 North, Range 60 West, 6^th P.M.

Section 6:   All

 

4.         The productive interval of any wellbore shall be located no closer than 100 feet from any other wellbore producing from the Codell and Niobrara Formations, and no closer than 600 feet from the unit boundaries, unless an exception is granted by the Director.

5.         The proposed wells shall be located be located on no more than four wellpads within the unit or on adjacent lands, unless an exception is granted by the Director.

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 28^th day of December, 2016, as of December 12, 2016.

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By__________________________________

Julie Murphy, Secretary