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

 

)

)

)

)

)

)

)

CAUSE NO.  407

 

DOCKET NO.  170700447

 

TYPE: SPACING

 

ORDER NO. 407-2127

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on July 24, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon an application for an order to: (1) establish an approximate 2,560-acre drilling and spacing unit for Sections 15, 16, 21, and 22, Township 7 North, Range 67 West, 6th P.M., and approve the drilling of 44 horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, and (2) maintain allocation of proceeds for any existing wells located within the proposed 2,560-acre unit for the Application Lands and producing from the Codell and/or Niobrara Formations.

 

FINDINGS

 

            The Commission finds as follows:

 

1.            Extraction Oil & Gas, LLC (“Extraction” or “Applicant”), Operator #10459, 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 herein, 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 May 24, 2017, Extraction filed a verified amended application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1)  establish an approximate 2,560-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to 44 horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the productive intervals of any horizontal well permitted under this Application located not less than 460 feet from unit boundaries and not less than 150 feet from any other well producing or drilling from the Codell-Niobrara Formation, without exception being granted by the Director; and 2) maintain the allocation of proceeds for any existing wells located within the proposed 2,560-acre drilling and spacing unit for the Application Lands and producing from the Codell and/or Niobrara Formations:

 

Township 7 North, Range 67 West, 6th P.M.

Section 15:    All

Section 16:    All

Section 21:    All

Section 22:    All

 

6.            Applicant states that any permitted wells under this Application shall be located on no more than eight multi-well pads within the unit or on adjacent lands with landowner consent subject to Rule 318A, unless an exception is granted by the Director.

 

7.            Extraction presently operates the MSH Farms 12-15 well (API #05-123-37591), a directional well producing from the Codell Formation with its bottomhole located in the NW¼ SW¼ of Section 15, Township 7 North, Range 67 West, 6th P.M., and allocates production on an 80-acre leasehold basis designating the N½ SW¼ of said Section 15.

 

8.            Extraction presently operates the MSH Farms 13-15 well (API #05-123-37590), a directional well producing from the Niobrara Formation with its bottomhole located in the SW¼ SW¼ of Section 15, Township 7 North, Range 67 West, 6th P.M., and allocates production on an 80-acre leasehold basis designating the S½ SW¼ of said Section 15.

 

9.            Extraction presently operates the MSH Farms 34-15 well (API #05-123-39655), a directional well producing from the Codell-Niobrara Formation with its bottomhole located in the SW¼ SW¼ of Section 15, Township 7 North, Range 67 West, 6th P.M., and allocates production on a 160-acre wellbore spacing unit basis within certain portions of the Sections 15, 16, 21, 22, Township 7 North, Range 67 West, 6th P.M.

 

10.         Extraction presently operates the Gilbert 17-22 well (API #05-123-39684), a directional well producing from the Codell-Niobrara Formation with its bottomhole located in the NW¼ NE¼ of Section 22, Township 7 North, Range 67 West, 6th P.M., and allocates production on a 160-acre leasehold basis designating the NW¼ of said Section 22.

 

11.         Extraction presently operates the Ranchero 13-22 well (API #05-123-35688), a directional well producing from the Codell Formation with its bottomhole located in the SW¼ SW¼ of Section 22, Township 7 North, Range 67 West, 6th P.M., and allocates production on an 80-acre leasehold basis designating the S½ SW¼ of said Section 22.

 

12.         Extraction presently operates the Ranchero 14-22 well (API #05-123-35689), a directional well producing from the Codell-Niobrara Formation with its bottomhole located in the SE¼ SW¼ of Section 22, Township 7 North, Range 67 West, 6th P.M., and allocates production on an 80-acre leasehold basis designating the S½ SW¼ of said Section 22.

 

13.         Extraction presently operates the Nelson Farms 1 well (API #05-123-39961), a horizontal well producing from the Codell Formation with its bottomhole located in the SE¼ SW¼ of Section 22, Township 7 North, Range 67 West, 6th P.M., and allocates production on an approximate 560-acre Rule 318A.a.(4) horizontal wellbore spacing unit basis,  which includes the S½ S½ of said Section 21 and the SW¼ SE¼ of Section 22, Township 7 North, Range 67 West, 6th P.M.  On July 20, 2015, the Commission issued Order No. 407-1355 which, among other things, pooled all interests in the approximate 560-acre horizontal wellbore spacing unit established for certain lands, for the development and operation of the Codell and Niobrara Formations.

 

14.         Extraction presently operates the Nelson 2 well (API #05-123-39954), a horizontal well producing from the Niobrara Formation with its bottomhole located in the SE¼ SW¼ of Section 22, Township 7 North, Range 67 West, 6th P.M., and allocates production on an approximate 560-acre Rule 318A.a.(4) horizontal wellbore spacing unit basis, which includes the S½ S½ of said Section 21 and the SW¼ SE¼ of Section 22, Township 7 North, Range 67 West, 6th P.M.  On July 20, 2015, the Commission issued Order No. 407-1355 which, among other things, pooled all interests in the approximate 560-acre horizontal wellbore spacing unit established for certain lands, for the development and operation of the Codell and Niobrara Formations.

 

15.         On July 3, 2017, Extraction, by and through its attorneys, filed with the Commission a written request to the Application based on the merits of the verified application, written testimony and supporting exhibits.

 

16.         Land testimony and exhibits presented in support of the Application by Sean P. Flanagan, Landman for Extraction, showed Extraction owns substantial leasehold interests underlying the Application Lands, which include working interests / operating rights for the Codell and Niobrara Formations.

 

17.         Geologic testimony and exhibits in support of the Application from Alicia Branch, Consulting Geologist for Extraction, showed that both the Codell and Niobrara Formations underly the entirety of the Application Lands and are low permeability.  Further testimony showed that the Codell and Niobrara Formations underlying the Application Lands are common sources of supply.

 

18.         Engineering testimony and exhibits presented by Boyd McMaster, Petroleum Engineer for Extraction, showed that the drilling of 44 horizontal wells with the Application Lands from the Codell and Niobrara Formation will increase ultimate recoveries of oil and gas with the proposed unit, while protecting correlative rights and preventing waste of the resource by allowing for the drilling of necessary wells.  Additional testimony showed that drilling the 44 Codell and Niobrara Formation horizontal wells with the Application Lands will generate positive rates of return with conservative prices for oil and gas.  Further testimony supported the setback request that treated intervals of any horizontal well permitted under the approved Application should be located not less than 460 feet from proposed unit boundaries and not less than 150 feet from any other well producing or drilling from the Codell and Niobrara Formations.

 

19.         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.

 

20.         Extraction agrees to be bound by the oral order of the Commission.

 

21.         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) establish an approximate 2,560-acre drilling and spacing unit for Sections 15, 16, 21, and 22, Township 7 North, Range 67 West, 6th P.M., and approve up to 44 horizontal wells within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, and (2) maintain allocation of proceeds for any existing wells located within the proposed 2,560-acre unit for the Application Lands and producing from the Codell and/or Niobrara Formations.

 

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, an approximate 2560-acre drilling and spacing unit for the below-described lands, is hereby established, and 44 horizontal wells are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the productive intervals of any horizontal well permitted under this Order shall be located not less than 460 feet from the unit boundaries and not less than 150 from any other well producing or drilling from the Codell or Niobrara Formations, without exception being granted by the Director:

 

Township 7 North, Range 67 West, 6th P.M.

Section 15:    All

Section 16:    All

Section 21:    All

Section 22:    All

 

2.         The allocation of proceeds for any existing wells recited herein and located within the established 2,560-acre drilling and spacing unit shall be maintained.

 

3.         Any permitted wells drilled under this Order shall be located on no more than eight multi-well pads within the unit or on adjacent lands with landowner consent subject to Rule 318A, 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 4th day of August, 2017, as of July 24, 2017  

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By___________________________________

James Rouse, Acting Secretary