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 FORMATION, WATTENBERG FIELD, WELD COUNTY,      COLORADO

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CAUSE NO. 407

 

DOCKET NO. 170600348

 

TYPE: POOLING

 

ORDER NO. 407-2065

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 640-acre designated wellbore spacing unit established for portions of Sections 13, 14, 23, and 24, Township 6 North, Range 62 West, 6th P.M., for the development and operation of the Niobrara 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 Bolin 6-62-13-0164B2B 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.  Sections 13, 14, 23, and 24, Township 6 North, Range 62 West, 6th P.M. are subject to this Rule for the Niobrara Formation.

 

5.         On February 22, 2011 (Corrected April 4, 2013), the Commission entered Order Nos. 407-779 and 535-4 which, among other things, established 74 approximate 640-acre drilling and spacing units for certain lands in Townships 4, 5 and 6 North, Ranges 61 and 62 West, 6th P.M., and allowed one horizontal well in each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Order Nos. 407-779 and 535-4 include portions of the Application Lands but do not affect this Application.

 

6.         On February 11, 2013, the Commission entered Order No. 407-753 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit for Section 24, Township 6 North, Range 62 West, 6th P.M., to accommodate the drilling of the Dutch Lake #16-24H Well, for the development and operation of the Niobrara Formation. Order No. 407-753 includes portions of the Application Lands but does not affect this Application.

 

7.         On March 25, 2013, the Commission entered Order Nos. 407-766 & 535-297 which, among other things, approved up to eight horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 23, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Order Nos. 407-766 & 535-297 contain portions of the Application Lands but do not affect this Application.

 

8.         On June 17, 2013, the Commission entered Order Nos. 407-796 & 535-337 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 13, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 11-13H Well, for the development and operation of the Niobrara Formation. Order Nos. 407-796 and 535-337 include portions of the Application Lands but do not affect this Application.

 

9.         On June 17, 2013, the Commission entered Order Nos. 407-805 and 535-359 which, among other things, pooled all interests in two approximate 640-acre drilling and spacing units established for Section 23, Township 6 North, Range 62 West, 6th P.M., to accommodate the Pappenheim 6-62-23-0164BH Well to the Niobrara Formation and the Pappenheim 6-62-23-0164CDH Well to the Codell Formation, for the development and operation of the Codell and Niobrara Formations. Order Nos. 407-805 and 535-359 include portions of the Application Lands but do not affect this Application.

 

10.       On June 17, 2013, the Commission entered Order Nos. 407-811 & 535-360 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation. Order Nos. 407-811 & 535-360 contain portions of the Application Lands but do not affect this Application.

 

11.       On July 29, 2013, the Commission entered Order Nos. 407-813 & 535-396 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 23, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation. Order Nos. 407-813 and 535-396 include portions of the Application Lands but do not affect this Application.

 

12.       On October 28, 2013, the Commission entered Order No. 407-879 which, among other things, 1) approved an additional seven horizontal wells, for a total of up to eight horizontal wells, within an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) established an approximate 640-acre drilling and spacing unit, and approve one horizontal well within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell Formation. Order No. 407-879 includes portions of the Application Lands but does not affect this Application.

 

13.       On March 17, 2014, the Commission entered Order No. 407-943 which, among other things, 1) maintained two approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing wells completed to the Niobrara Formation; 2) vacated Order No. 407-879; 3) established an approximate 1,280-acre drilling and spacing unit and approve a total of up to 16 horizontal wells within the unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 4) established an approximate 1,280-acre drilling and spacing unit and approve a total of up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation. Order No. 407-943 contains portions of the Application Lands but does not affect this Application.

 

14.       On April 28, 2014, the Commission entered Order No. 407-1004 which, among other things, 1) maintained two approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4 for Sections 13 and 24, Township 6 North, Range 62 West, 6th P.M. for existing oil, gas, and associated hydrocarbons produced from the Niobrara Formation; 2) established an approximate 1,280-acre drilling and spacing unit and approved a total of up to 16 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 3) established an approximate 1,280-acre drilling and spacing unit and approve a total of up to 4 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation. Order No. 407-1004 includes portions of the Application Lands but does not affect this Application.

 

15.       On October 26, 2015, the Commission entered Order No. 407-1457 which, among other things, 1) maintained the approximate 640-acre drilling and spacing units established by Order Nos. 407-779 and 535-4, for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 2) maintained Order Nos. 407-811 and 535-360, which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 14, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake 12-14H Well, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 3) vacated Order Nos. 407-822 and 535-382; 4) maintained Order No. 407-915 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 10, Township 6 North, Range 62 West, 6th P.M., to accommodate the Dutch Lake #08-10H, for the development and operation of the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 5) maintained an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for existing production of oil, gas and associated hydrocarbons from the Niobrara Formation, but only until such time as the unconventional resource unit is pooled by Commission Order; 6) vacated an approximate 1,280-acre drilling and spacing unit established by Order No. 407-943 for Sections 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell Formation; and 7) established an approximate 1,920-acre unconventional resource unit for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations. Order No. 407-1457 contains portions of the Application Lands but does not affect this Application.

 

16.       On June 6, 2016, the Commission entered Order No. 407-1701 which, among other things, pooled all interests in an approximate 1,920-acre unconventional resource unit established by Order No. 407-1457 for Sections 10, 11 and 14, Township 6 North, Range 62 West, 6th P.M., and subjected the nonconsenting parties 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 the costs specified in §34-60-116(7)(b), C.R.S. were first incurred for the drilling of the Ruh 6-62-11-0758B2 Well, Ruh 6-62-11-0659A2 Well, Ruh 6-62-11-0659B2 Well, and Ruh 6-62-11-0560A2 Well, for development and operation of the Codell and Niobrara Formations. Order No. 407-1701 contains portions of the Application Lands but does not affect this Application.

 

17.       On March 20, 2017, the Commission entered Order No. 407-1909 which, among other things, pooled all interests, including but not limited to, any non-consenting interests, in portions of Sections 10, 11, 14 and 15, Township 6 North, Range 62 West, 6th P.M., in the Niobrara Formation underlying an approximate 480-acre wellbore spacing unit for the drilling of the Will Trust 6-62-10-6462B2B Well. Order No. 407-1909 contains portions of the Application Lands but does not affect this Application.

 

18.       On April 13, 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 640-acre designated wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara 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 Bolin 6-62-13-0164B2B Well (API No. 05-123-44400) (“Well”):

 

Township 6 North, Range 62 West, 6th P.M.

Section 13:      W½W½

Section 14:      E½E½

Section 23:      E½E½

Section 24:      W½W½

 

19.       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.

 

20.       Land testimony and exhibits submitted in support of the Application by Bryce Doty, Landman II at 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.

                                                 

21.       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 Bolin 6-62-13-0164B2B Well, but did not provide testimony for any subsequent wells.

 

22.       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.

 

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

 

24.       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 640-acre designated wellbore spacing unit established for portions of Sections 13, 14, 23, and 24, Township 6 North, Range 62 West, 6th P.M., for the development and operation of the Niobrara 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 Bolin 6-62-13-0164B2B 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 640-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 Bolin 6-62-13-0164B2B Well (API No. 05-123-44400) (“Well”):

 

Township 6 North, Range 62 West, 6th P.M.

Section 13:      W½W½

Section 14:      E½E½

Section 23:      E½E½

Section 24:      W½W½

 

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