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-CODELL FORMATION, WATTENBERG FIELD, WELD COUNTY,      COLORADO

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CAUSE NO. 407

 

DOCKET NO. 170600347

 

TYPE: POOLING

 

ORDER NO. 407-2064

REPORT OF THE COMMISSION

 

The Commission heard this matter on June 12, 2017, at the Rio Blanco County Courthouse, 555 Main Street, Meeker, Colorado, upon application for an order to pool all interests within an approximate 711-acre designated wellbore spacing unit established for the below-described lands, for the development and operation of the Niobrara-Codell Formation, and to subject any non-consenting 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 any of the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the CVR 5-63-32-6457B2B Well.

                                                                                                                                              

FINDINGS

 

The Commission finds as follows:

 

1.         Bill Barrett Corporation (“BBC” 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.  The Application Lands are subject to this Rule for the Niobrara Formation.

 

5.         On January 30, 2017, the Commission entered Order No. 407-1869 which, among other things, 1) established an approximate 640-acre drilling and spacing unit for the S½ of Sections 32 and 33, Township 5 North, Range 63 West, 6th P.M., and approved four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 2) established an approximate 640-acre drilling and spacing unit for the S½ of Sections 32 and 33, Township 5 North, Range 63 West, 6th P.M. and approved one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.  Order No. 407-1869 includes portions of the Application Lands but does not affect this Application.

 

6.         On April 13, 2017 (amended May 4, 2017), BBC, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests underlying an approximate 711-acre designated wellbore spacing unit established for the for the below-described lands (“Application Lands”), for the development and operation of the Niobrara-Codell Formation, and to subject any non-consenting 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 any of the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the (API No. 05-123-44254) (“Well”):

 

Township 5 North, Range 63 West, 6th P.M.

Section 32:      S½S½

Section 33:      S½S½

 

Township 4 North, Range 63 West, 6th P.M.

Section 3:        NW¼ NW¼

Section 4:        N½N½

Section 5:        N½N½

 

7.         On May 22, 2017, 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.

 

8.         Land testimony and exhibits submitted in support of the Application by Gabriel Findlay, Senior Landman BBC, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and an offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners is a fair and reasonable estimate of the costs of the proposed drilling operations and was received at least 35 days prior to the June 12, 2017 hearing date.

                                                 

9.         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 CVR 5-63-32-6457B2B Well, but did not provide testimony for any subsequent wells.

 

10.       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.

 

11.       BBC agreed to be bound by oral order of the Commission.

 

12.       Based on the facts stated in the verified Application, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to pool all interests within an approximate 711-acre designated wellbore spacing unit established for the Application Lands, for the development and operation of the Niobrara-Codell Formation, and to subject any non-consenting 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 any of the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the CVR 5-63-32-6457B2B Well.

 

 

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 the approximate 711-acre designated wellbore spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara Formation, and any non-consenting interests are hereby subject 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 any of the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the CVR 5-63-32-6457B2B (API No. 05-123-44254) (“Well”):

 

Township 5 North, Range 63 West, 6th P.M.

Section 32:      S½S½

Section 33:      S½S½

 

Township 4 North, Range 63 West, 6th P.M.

Section 3:        NW¼ NW¼

Section 4:        N½N½

Section 5:        N½N½

 

2.         The production obtained from the 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 wellbore spacing unit; each owner of an interest in the wellbore spacing unit shall be entitled to receive its share of the production of the Well located on the wellbore spacing unit applicable to its interest in the 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 of the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the 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 Well 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 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 Well drilled on the above-described wellbore 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.

 

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 unit described above shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.

 

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 23rd day of June, 2017, as of June 12, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Peter Gowen, Acting Secretary