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. 170300178

 

TYPE:  SPACING

 

ORDER NO. 407-1958

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on May 1, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit for Section 32, Township 3 North, Range 68 West, 6th P.M., and two approximate 1280-acre drilling and spacing units for Section 31 and the S½ of Section 30, Township 3 North, Range 68 West, 6th P.M. and the N½ of Section 6, Township 2 North, Range 68 West, 6th P.M. and the S½ of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M. and to approve up to 20 horizontal wells within each proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with 14 horizontal wells to be drilled to the Niobrara Formation and 6 horizontal wells within the Codell Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.            Cub Creek Energy, LLC, Operator # 10542 (“Cub Creek” 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 February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the permitted well locations in accordance with the provisions of Order No. 407-1.

 

6.            On April 16, 1991, the Commission entered Order No. 407-66 which allowed "J" Sand wells to be recompleted to the Codell and Niobrara Formations and subsequently to allow downhole commingling of all zones.

 

7.            On January 31, 2017, Cub Creek filed a verified application in Docket No. 170300178 (“Application”), pursuant to §34-60-116, C.R.S., for an order to establish an approximate 640-acre drilling and spacing unit and two approximate 1280-acre drilling and spacing units for the below-described lands (“Application Lands”) and approve up to 20 horizontal wells within each unit, with 14 horizontal wells to be drilled to the Niobrara Formation and 6 horizontal wells within the Codell Formation, with the productive interval of each wellbore to be located no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located within the unit, without exception being granted by the Director:

 

Township 3 North, Range 68 West, 6th P.M.
Section 32:      All

 

(Drilling and Spacing Unit (“DSU”) No. 1 – 640-acres)

 

Township 3 North, Range 68 West, 6th P.M.
Section 30:      S½
Section 31:      All

 

Township 2 North, Range 68 West, 6th P.M.
Section 6:        N½

 

(DSU No. 2 – 1280-acres)

 

Township 2 North, Range 68 West, 6th P.M.
Section 6:        S½
Section 7:        All
Section 18:      N½

 

(DSU No. 3 – 1280-acres)

 

 

8.            Applicant states that the proposed horizontal wells will be drilled from three wellpads within the Application Lands or upon adjacent lands, unless an exception is granted by the Director.

 

9.            On March 6, 2017, Extraction Oil and Gas, Inc. (“Extraction” or “Protestant”) filed a Protest to the Application alleging that Extraction planned to drill 19 horizontal wells in an east-west orientation which is perpendicular to the location and angle of the natural fracture of the Niobrara and Codell Formations under the Application Lands.  Extraction claims that Cub Creek’s development plan and north/south wellbore orientation creates waste and violates correlative rights. Additionally, Extraction had filed a competing spacing application for an approximate 1280-acre drilling and spacing unit within the Application Lands.

 

10.          A prehearing conference was held with on March 22, 2017 with Extraction and counsel for City of Longmont.  At that time, a case management order was entered and the parties were ordered to submit prehearing statements in support of their respective applications. 

 

11.          On April 7, 2017, Cub Creek, by its attorneys, filed with the Commission a prehearing statement with all of the exhibits in support of its Application.  Sworn written testimony and exhibits were submitted in support of the Application.

 

12.          On April 7, 2017, a final prehearing conference was held at which time Cub Creek, Extraction and Longmont each presented evidence in support of their respective positions. 

 

13.          On April 27, 2017, Extraction, by its attorneys, withdrew its competing application and the Protest to the Application.

 

14.          Land testimony and exhibits submitted in support of the Application by Scott Baily, Vice-President of Land and Business Development for Cub Creek, showed Cub Creek as the owner of a substantial leasehold interest in the Application Lands.

 

15.          Geologic testimony and exhibits submitted in support of the Application by Daniel J. Berberick,  Vice-President of Exploration and Geologist for Cub Creek, showed an analysis of the Codell and Niobrara Formations structure; an isopach map showing the gross thickness of the Codell and Niobrara Formations across the Application Lands; a type cross section of several wells in the vicinity of the Application Lands showing the Niobrara Formation is present across the Application Lands; and a volumetric analysis supporting horizontal wellbore density of up to 20 wells within each of the approximate 640-acre drilling and spacing unit and two approximate 1,280-acre drilling and spacing units, which is not less than the maximum area that can be efficiently, economically and effectively drained by 20 horizontal wells, with 14 horizontal wells to be drilled in the Niobrara Formation and 6 horizontal wells in the Codell Formation.

 

16.          Engineering testimony and exhibits submitted in support of the Application by Neel Duncan P.E., Vice-President of Operations at Integrated Petroleum Technologies and Contractor for Cub Creek, showed that an average Niobrara horizontal well has an average estimated ultimate recovery of 51.6 BOE/ft. and an average Codell horizontal well has an average estimated ultimate recovery of 48.6 BOE/ft. on a North-South well orientation, and that the drilling and completion of horizontal wells in the Codell and Niobrara Formations underlying the Application Lands is the most efficient and economic method to develop the resource potential of this formation and will reduce waste and surface disturbance, will promote efficient drainage, and protect correlative rights.

 

17.          The above-referenced testimony and exhibits show that granting the Application will allow efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

 

18.          Cub Creek agreed to be bound by oral order of the Commission. 

 

19.          Based on the facts stated in the verified Application, having resolved all protests, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to establish an approximate 640-acre drilling and spacing unit for Section 32, Township 3 North, Range 68 West, 6th P.M., and two approximate 1280-acre drilling and spacing units for Section 31 and the S½ of Section 30, Township 3 North, Range 68 West, 6th P.M. and the N½ of Section 6, Township 2 North, Range 68 West, 6th P.M. and the S½ of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M. and to approve up to 20 horizontal wells within each proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with 14 horizontal wells to be drilled to the Niobrara Formation and 6 horizontal wells within the Codell Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.            One approximate 640-acre drilling and spacing unit and two approximate 1280-acre drilling and spacing units for the below-described lands, are hereby established, for horizontal development, and a total of up to 20 horizontal wells within each unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with 14 horizontal wells to be drilled to the Niobrara Formation and six horizontal wells to be drilled to the Codell Formation:

 

Township 3 North, Range 68 West, 6th P.M.
Section 32:      All

 

(Drilling and Spacing Unit (“DSU”) No. 1 – 640-acres)

 

Township 3 North, Range 68 West, 6th P.M.
Section 30:      S½
Section 31:      All

 

Township 2 North, Range 68 West, 6th P.M.
Section 6:        N½

 

(DSU No. 2 – 1280-acres)

 

Township 2 North, Range 68 West, 6th P.M.
Section 6:        S½
Section 7:        All
Section 18:      N½

 

(DSU No. 3 – 1280-acres)

 

2.            The productive interval of the wellbore shall be located no closer than 460 feet from the unit boundaries, and not less than 150 feet from the productive interval of any well within the Codell and Niobrara Formations, unless an exception is granted by the Director.

 

3.            All wells permitted under this Order shall be drilled from no more than three wellpads within the unit, or from a legal location 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 12th day of May, 2017, as of May 1, 2017.        

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By__________________________________

Peter Gowen, Acting Secretary