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 OPERATION FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY,      COLORADO

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CAUSE NO. 407

 

DOCKET NO. 170700518

 

TYPE: POOLING

 

ORDER NO. 407-2164

CORRECTED

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on July 24, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests in two approximate 824.478-acre designated horizontal wellbore spacing units established for certain portions of Sections 28, 29, 30, 31, 32, 33, Township 6 North, Range 66 West, 6th P.M. and Sections 25, 36, Township 6 North, Range 67 West, 6th P.M., for the development and operation of the Niobrara and Codell Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Synergy Resources Corporation, doing business as SRC Energy, Inc., Operator No. 10311 (“Synergy” 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 May 25, 2017, Synergy, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to pool all interests in two approximate 824.478-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the AG 30C-31-L Well (API No. 05-123-44884) (WSU #1) and the AG 30N-31B-L Well (API No. 05-123-44882) (WSU #2) (“Wells”):

 

Township 6 North, Range 66 West, 6th P.M.

Section 28:      SW¼SW¼ 

Section 29:      S½S½  

Section 30:      S½S½

Section 31:      N½N½

Section 32:      N½N½

Section 33:      NW¼NW¼      

 

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

Section 25:      SE¼SE¼ 

Section 36:      NE¼NE¼ 

 

Wellbore Spacing Unit (“WSU”) No. 1-2

AG 30C-31-L Well (Codell Formation) (WSU #1)

AG 30N-31B-L Well (Niobrara Formation) (WSU #2)

 

6.         On July 3, 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. 

 

7.         Testimony and exhibits submitted in support of the Application by Matt Miller, Vice President of Land for Applicant, showed that all nonconsenting interest owners were notified of the Application and received Authorities for Expenditure ("AFEs") and offers to participate in the Wells.  Further testimony concluded that the AFEs sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operation and were received at least 35 days prior to the July 24, 2017 hearing date.

                                                 

8.         Land testimony 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 Wells.

 

9.         On July 10, 2017, Triple F Ent. Minerals, LLC (“Triple F”), by its attorneys, filed a Protest to the Application, among other things, on the grounds that the lease offer was not in compliance with the Rule 530.  On July 18, 2017, Triple F withdrew its Protest.

 

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.       Applicant agreed to be bound by oral order of the Commission.

 

12.       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 pool all interests in two approximate 824.478-acre designated horizontal wellbore spacing units established for certain portions Sections 28, 29, 30, 31, 32, 33, Township 6 North, Range 66 West, 6th P.M. and Sections 25, 36, Township 6 North, Range 67 West, 6th P.M., for the development and operation of the Niobrara and Codell 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, all interests in an two approximate 8404.786-acre 824.478-acre designated horizontal wellbore spacing units established for the below-described lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, 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. are first incurred for the drilling of the AG 30C-31-L Well (API No. 05-123-44884) (WSU #1) and the AG 30N-31B-L Well (API No. 05-123-44882) (WSU #2)(“Wells”):

 

Township 6 North, Range 66 West, 6th P.M.

Section 28:      SW¼SW¼ 

Section 29:      S½S½  

Section 30:      S½S½

Section 31:      N½N½

Section 32:      N½N½

Section 33:      NW¼NW¼      

 

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

Section 25:      SE¼SE¼ 

Section 36:      NE¼NE¼ 

 

Wellbore Spacing Unit (“WSU”) No. 1-2

AG 30C-31-L Well (Codell Formation) (WSU #1)

AG 30N-31B-L Well (Niobrara Formation) (WSU #2)

 

2.         The production obtained from the designated horizontal 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 designated horizontal wellbore spacing unit 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 designated horizontal wellbore spacing unit wellbore spacing unit applicable to its interest in the wellbore spacing unit.

 

3.         Any working interest owner who does not elect to participate in the Well(s) or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §34-60-116(7), C.R.S. The nonconsenting working interest owner must reimburse the consenting owners for his proportionate share of the costs and risks of drilling and operating the Well(s) from his proportionate share of production, subject to non-cost bearing interests, until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

 

4.         Any unleased owner who does not elect to participate in the Well(s) or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §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 designated horizontal wellbore spacing unit 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. 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 Wells drilled on the above-described designated horizontal wellbore spacing unit 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 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 16th day of August, 2017, as of July 24, 2017.

            CORRECTED this 14th day of June, 2018, as of July 24, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Spence Prine, Secretary