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 CODELL-NIOBRARA FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 170600361

 

TYPE:  SPACING

 

ORDER NO. 407-2071

 

 

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: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-1026 for Section 4, Township 3 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1280-acre drilling and spacing unit for Sections 3 and 4, Township 3 North, Range 63 West, 6th P.M., and approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Bonanza Creek Energy Operating Co., LLC (Operator No. 8960) (“Bonanza Creek” or “Applicant”) 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 3 and 4, Township 3 North, Range 63 West, 6th P.M., are subject to this rule for the Codell-Niobrara Formation.

 

5.         On June 17, 2014 (corrected August 19, 2014), the Commission entered Order No. 407-1026 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 4, Township 3 North, Range 63 West, 6th P.M., and approved the drilling of 14 horizontal wells within said unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

6.         On April 13, 2017, Bonanza Creek, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to:  1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-1026 for Section 4, Township 3 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 20 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the productive interval of the 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 in the unit, without exception being granted by the Director:

 

Township 3 North, Range 63 West, 6th P.M.
Section 3:        All

Section 4:        All

 

7.        Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than four multi-well pads, subject to Rule 318A, without exception being granted by the Director.

 

8.         On May 22, 2017, Bonanza Creek, 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.         The drilling and spacing unit contains federal minerals.   As such, Bonanza Creek agreed that it or its successor operator will submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) for any existing wells within 60 days of the entry of the Order, and shall submit a CA to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

 

            10.       Land testimony and exhibits submitted in support of the Application by Maxwell Faith, Land Manager for Bonanza Creek, showed that Bonanza Creek holds oil and gas leasehold interests and has a right to drill in the Application Lands.

 

11.       Geologic testimony and exhibits submitted in support of the Application by Jeffrey Schroeder, Development Geologist for Bonanza Creek, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 270 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones, and is a common source of supply.  Geologic testimony and exhibits also showed that the Codell Formation is present throughout the Application Lands, is approximately 12 to 14 feet thick, and is generally of uniform thickness throughout the Application Lands.  Further testimony showed that the Codell Formation is mainly fine-grained sandstones and silty shales, and is a common source of supply. 

 

12.       Engineering testimony and exhibits submitted in support of the Application by Joel Dill, Engineer for Bonanza Creek, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 80 acres, the drainage area for analog horizontal Codell Formation wells is estimated at 298 acres, and an approximate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

 

13.       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.

 

14.       Bonanza Creek agreed to be bound by oral order of the Commission.

 

15.       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: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-1026 for Section 4, Township 3 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1280-acre drilling and spacing unit for Sections 3 and 4, Township 3 North, Range 63 West, 6th P.M., and approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation.

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 640-acre drilling and spacing unit established by Order No. 407-1026 for Section 4, Township 3 North, Range 63 West, 6th P.M., is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

2.         An approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 20 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation:

 

Township 3 North, Range 63 West, 6th P.M.
Section 3:        All

Section 4:        All

 

3.         The productive interval of the wellbore will 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 producing from the same source of supply within the unit, unless the Director grants an exception.

 

4.         All wells permitted under this Order shall be drilled from no more than four multi-well pads within the Application Lands, subject to Rule 318A, unless the Director grants an exception.

 

5.         Bonanza Creek, or its successor operator, shall submit a Communitization Agreement to the Bureau of Land Management for any existing wells within 60 days of the entry of the Order, and shall submit a Communitization Agreement to the Bureau of Land Management at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

 

 

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 21st day of June, 2017, effective as of June 12, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

By: ____________________________________     

                                                                                    Peter Gowen, Acting Secretary