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, ADAMS COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 161200494
TYPE: POOLING
ORDER NO. 407-1843 |
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 pool all interests within an approximate 1,244.37-acre drilling and spacing unit established for portions of Sections 4 and 9, Township 1 South, Range 66 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, and the Ottesen LE 09-362HC Well, for the development and operation of 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 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 and Niobrara Formations, with permitted well locations in accordance with the provisions of Order No. 407-1. Sections 4 and 9, Township 1 South, Range 66 West, 6th P.M., are subject to this Order for the Niobrara and Codell Formations.
5. On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 4 and 9, Township 1 South, Range 66 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.
6. On December 12, 2016, the Commission entered Order No. 407-1842 which established a 1,244.37-acre drilling and spacing unit for production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, and approved up to 21 horizontal wells within the unit, and required that the productive interval of each wellbore shall be no closer than 150 feet from the productive interval of any other wellbore producing from the Niobrara or Codell Formations and no closer than 470 feet from a unit boundary. Sections 4 and 9, Township 1 South, Range 66 West, 6th P.M., are subject to this Order for the Niobrara and Codell Formations.
7. On October 13, 2016, Great Western, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in an approximate 1,244.37-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and to 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 the costs specified in § 34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, Ottesen LE 09-362HC Well, for the development and operation of the Niobrara and Codell Formations (“Wells”):
Township 1 South, Range 66 West, 6th P.M.
Section 4: All
Section 9 All
8. On November 21, 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. On November 27, 2016, a “protest” was submitted by David and Linda Diedtrich opposing “any further action involving oil and gas mining pertaining to the vicinity in which we have direct ownership . . . .” A subsequent email was submitted by the Diedtrichs on December 5, 2016. Since the “protest” and email did not comply with Commission rules for filing protests, the Diedtrich “protest” and email were treated as statements made pursuant to Commission Rule 510.
10. On November 28, 2016, Brighton Charter School Building Corporation, d.b.a. Eagle Ridge Academy Charter School (“Eagle Ridge”) filed a Protest to Great Western’s Application.
11. On November 28, 2016, Eastgate Venture Limited Partnership (“Eastgate”) filed a Notice of Opposition to Application of Great Western Operating Company.
12. Land testimony and exhibits submitted in support of the Application by Hal Writer, Land Manager for Great Western, showed that all nonconsenting interest owners 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 interest owners were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 35 days prior to the December 12, 2016 hearing date.
13. Land testimony also 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 Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, and the Ottesen LE 09-362HC Well, but did not provide testimony for any subsequent wells.
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. A prehearing conference was held on December 5, 2016. At the prehearing conference, Eagle Ridge, Eastgate, and Applicant agreed that Applicant will not apply the cost recovery provisions pursuant to §34-60-116(7), C.R.S., to the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, or the Ottesen LE 09-362HC Well to Eagle Ridge or to Eastgate until March 20, 2017, unless otherwise agreed upon between Applicant, Eagle Ridge, and Eastgate. Applicant agreed to certify to the Commission at its March 20-21, 2017 hearing, that Eagle Ridge and/or Eastgate have entered into oil and gas leases with Applicant, or that no leases have been obtained from Eagle Ridge and/or Eastgate, and Applicant will apply the cost recovery provisions of §34-60-116(7), C.R.S., to any party that has not granted an oil and gas lease.
16. Great Western agreed to be bound by oral order of the Commission.
17. Based on the facts stated in the verified Application, the protests having been resolved, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to pool all interests in an approximate 1,244.37-acre drilling and spacing unit established for portions of Sections 4 and 9, Township 1 South, Range 66 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, and the Ottesen LE 09-362HC Well, for the development and operation of the Niobrara and Codell Formation, subject to the agreement between Eagle Ridge, Eastgate, and Applicant, as set forth in paragraph 15, above.
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, all interests in an approximate 1,244.37-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, 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)(II), C.R.S., are first incurred for the drilling of the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, or the Ottesen LE 09-362HC Well:
Township 1 South, Range 66 West, 6th P.M.
Section 4: All
Section 9: All
2. The production obtained from the drilling and 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 drilling and 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 Wells located on the drilling and spacing unit applicable to its interest in the drilling and 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 drilling and 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. Except as provided in paragraph 5, below, 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. Applicant shall not apply the cost recovery provisions pursuant to §34-60-116(7), C.R.S. for the Ottesen LE 09-379HC Well, Ottesen LE 09-374HN Well, Ottesen LE 09-370HN Well, Ottesen LE 09-367HN Well, Ottesen LE 09-378HN Well, Ottesen LE 09-374HC Well, Ottesen LE 09-369HN Well, Ottesen LE 09-365HN Well, Ottesen LE 09-377HN Well, Ottesen LE 09-373HN Well, Ottesen LE 09-369HC Well, Ottesen LE 09-364HN Well, Ottesen LE 09-377HC Well, Ottesen LE 09-372HN Well, Ottesen LE 09-368HN Well, Ottesen LE 09-364HC Well, Ottesen LE 09-376HN Well, Ottesen LE 09-372HC Well, Ottesen LE 09-367HC Well, Ottesen LE 09-363HN Well, or the Ottesen LE 09-362HC Well to Eagle Ridge or to Eastgate until March 20, 2017, unless otherwise agreed upon between Applicant, Eagle Ridge and Eastgate. Applicant shall file certificate with the Commission at or before its March 20-21, 2017 hearing, that Eagle Ridge and/or Eastgate have entered into oil and gas leases with Applicant, or that no leases have been obtained from Eagle Ridge and/or Eastgate, and Applicant will apply the cost recovery provisions of §34-60-116(7), C.R.S., to any party that has not granted an oil and gas lease.
6. Each nonconsenting unleased owner within the drilling and 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.
7. The operator of the Wells drilled on the above-described drilling and spacing unit 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.
8. 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.
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 20th day of December, 2016, as of December 12, 2016.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Murphy, Secretary