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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 170300166 TYPE: SPACING ORDER NO. 407-1928

REPORT OF THE COMMISSION

The Commission heard this matter on March 20, 2017, at the Larimer County Conference Center at The Ranch, First National Bank Building, 5280 Arena Circle, Loveland, Colorado, upon application for an order to establish an approximate 960-acre drilling and spacing unit for Sections 8 and the N½ of Section 17, Township 3 North, Range 62 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.         Verdad Oil & Gas Corporation (Operator No. 10485) (“Verdad” 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.

5.         On January 19, 2017, Verdad, by its attorneys, filed with the Commission a verified application (“Application”) for an order to establish an approximate 960-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approved up to 16 horizontal wells within the proposed unit, with the proposed intervals of the horizontal wells should be no closer than 460 feet from the unit boundaries of the drilling and spacing unit (regardless of the lease lines within the unit), and no closer than 150 feet from the proposed interval of another well producing from the same formation, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, without exception being granted by the Director.

Township 3 North, Range 62 West, 6^th P.M.
Section 8:        All

Section 17:      N½

6.         The records of the Commission reflect that no wells are currently producing from the Niobrara and Codell Formations underlying the Application Lands.

7.         The proposed horizontal wells will be oriented in a general north/south direction. The proposed intervals of the proposed horizontal wells should be no closer than 460 feet from the unit boundaries of the drilling and spacing unit (regardless of the lease lines within the unit), and no closer than 150 feet from the proposed interval of another well producing from the same formation, without exception being granted by the Director.

8.         On February 27, 2017, Verdad, 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.         Testimony and exhibits submitted in support of the Application by Philip W. Davis, Vice-President of Land for Verdad, showed that Verdad owns substantial leasehold interests in the Application Lands.

10.       Geology testimony and exhibits submitted in support of the Application by Dr. Steven M. Goolsby, a consulting Geologist for Verdad, showed that the thickness of the Niobrara Formation underlying the Application Lands ranges from approximately 255 to 282 feet thick and that the thickness of the Codell Formation underlying the Application Lands ranges from approximately 11 to 19 feet thick.  Further testimony showed that the Niobrara and Codell Formations are common sources of supply. 

11.        Engineering testimony and exhibits submitted in support of the Application by L. Arthur Beecherl, IV, Vice-President of Operations for Verdad, showed that drilling and completing horizontal wells within the Niobrara and Codell Formations underlying the Application Lands is an efficient and economic method of developing the resource.  Testimony concluded an approximate 960-acre unit would accommodate the drilling of up to total of 16 authorized horizontal wells drilled to the Niobrara and Codell Formations, while protecting correlative rights of adjacent mineral owners.

12.       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.

13.       Verdad agrees to be bound by oral order of the Commission. 

14.       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 establish an approximate 960-acre drilling and spacing unit for Sections 8 and the N½ of Section 17, Township 3 North, Range 62 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 960-acre drilling and spacing unit is hereby established for below-described lands, and up to 16 horizontal wells are hereby approved within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

Township 3 North, Range 62 West, 6^th P.M.
Section 8:        All

Section 17:      N½

2.         The proposed intervals of the horizontal wells to be no closer than 460 feet from the unit boundaries of the unit, and no closer than 150 feet from the proposed interval of another well producing from the same formation, and with the proposed wells to be located on no more than two multi-well pads, 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 the 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 27^th day of March 2017, as of March 20, 2017.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Peter Gowen, Acting Secretary