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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 170900534 TYPE:  SPACING ORDER NO. 407-2175

REPORT OF THE COMMISSION

            The Commission heard this matter on September 11, 2017, at the Durango Public Library, Program Room #2, 1900 E. 3rd Avenue, Durango, Colorado upon application for an order to establish an approximate 320-acre drilling and spacing unit for portions of Section 25, Township 1 North, Range 66 West, 6^th P.M., and approve up to nine horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

FINDINGS

The Commission finds as follows:

1.         Crestone Peak Resources Operating LLC (Operator No. 10633) (“Crestone Peak” 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 February 19, 1992, the Commission entered Order No. 407-87 which, among other things, established 80 acre drilling and spacing units for vertical and/or directional wells for the production of oil and/or gas from the Codell-Niobrara Formations.  Section 25, Township 1 North, Range 66 West, 6^th P.M., is subject to this Order for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

5.     On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Section 25, Township 1 North, Range 66 West, 6^th P.M., is subject to this Rule for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

6.         On July 11, 2017, Crestone Peak, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 320-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to nine horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, 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, unless an exception is granted by the Director:

Township 1 North, Range 66 West, 6^th P.M.

Section 25: S½

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

8.         On August 21, 2017, supplemented September 5, 2017, Crestone Peak, 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.         Land testimony and exhibits submitted in support of the Application by Shea Kauffman, Land Manager for Crestone Peak, showed that Crestone Peak holds oil and gas leasehold interests and has a right to drill in the Application Lands.

10.       Geologic testimony and exhibits submitted in support of the Application by William Kurt Rucker, Geologist for Crestone Peak, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 360 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 further showed that the Codell Formation is present throughout the Application Lands, is approximately 19 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is sandstone, and is a common source of supply. 

11.       Engineering testimony and exhibits submitted in support of the Application by Mark Stouffer, Reservoir Engineer Lead for Crestone Peak, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 28 acres, and the drainage area for analog horizontal Niobrara Formation wells is estimated at 81.4 acres. Engineering testimony further showed that seven horizontal wells will be drilled in the Niobrara Formation and two horizontal wells will be drilled in the Codell Formation.  The engineering testimony showed that an approximate 320-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by seven horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation, and two horizontal wells producing oil, gas and associated hydrocarbons from the Codell Formation.  

12.       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.

13.       Crestone Peak agreed to be bound by oral order of the Commission.

14.       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 establish an approximate 320-acre drilling and spacing unit for portions of Section 25, Township 1 North, Range 66 West, 6^th P.M., and approve up to nine horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 320-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to nine horizontal wells (being seven for the Niobrara Formation and two for the Codell Formation) within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

Township 1 North, Range 66 West, 6^th P.M.

Section 25: S½

2.         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.

3.         All wells permitted under this Order shall be drilled from no more than three multi-well pads within the Application Lands, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless the Director grants an exception.

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 28th day of September, 2017, as of September 11, 2017.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By____________________________________

James P. Rouse, Acting Secretary