BEFORE
THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, ADAMS COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 170900540
TYPE: POOLING
ORDER NO. 407-2177 |
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 pool all interests in an approximate 1,261.6-acre drilling and spacing unit established for portions of Sections 19 and 20, Township 1 South, Range 67 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Tower LD 19-022HC Well, Tower LD 19-022HN Well, Tower LD 19-059HNX Well, Tower LD 19-062HN Well, Tower LD 19-099HC Well, Tower LD 19-099HN Well, Tower LD 19-102HNX Well, Tower LD 19-139HN Well, Tower LD 19-142HC Well, Tower LD 19-142HN Well, Tower LD 19-179HN Well, Tower LD 19-179HNX Well, Tower LD 19-182HC Well, Tower LD 19-219HN Well, Tower LD 19-222HN Well, Tower LD 19-222HNX Well, Tower LD 19-259HC Well, Tower LD 19-259HN Well, Tower LD 19-262HN Well, Tower LD 19-299HNX Well, Tower LD 19-302HC Well, Tower LD 19-302HN Well, Tower LD 19-339HN Well, Tower LD 19-342HNX Well, Tower LD 19-379HC Well, and the Tower LD 19-379HN Well, for the development and operation of the Niobrara and Codell Formations.
FINDINGS
The Commission finds as follows:
1. Great Western Operating Company, LLC (Operator No. 10110) (“Great Western” 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 February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations underlying certain lands, with permitted well locations in accordance with the provisions of Order No. 407-1. Sections 19 and 20, Township 1 South, Range 67 West, 6th P.M., are subject to this Order for 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. Sections 19 and 20, Township 1 South, Range 67 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.
6. On July 24, 2017, the Commission entered Order No. 407-2126 which established an approximate 1,261.6-acre drilling and spacing unit for the Sections 19 and 20, Township 1 South, Range 67 West, 6th P.M., and approved up to 26 horizontal wells in the unit in order to efficiently and economically develop and recover the oil, gas and associated hydrocarbons from the Niobrara and Codell Formations in the unit, providing that the productive interval any horizontal well shall be no closer than 460 feet from the boundaries of the unit and not less than 150 feet from the treated interval of another well within the unit, and approve two well pads in an adjacent unit, subject to Rule 318.A., unless an exception is granted by the Director.
7. On July 12, 2017, Great Western, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in an approximate 1,261.6-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Tower LD 19-022HC Well (API No. Pending), Tower LD 19-022HN Well (API No. Pending), Tower LD 19-059HNX Well (API No. Pending), Tower LD 19-062HN Well (API No. Pending), Tower LD 19-099HC Well (API No. Pending), Tower LD 19-099HN Well (API No. Pending), Tower LD 19-102HNX Well (API No. Pending), Tower LD 19-139HN Well (API No. Pending), Tower LD 19-142HC Well (API No. Pending), Tower LD 19-142HN Well (API No. Pending), Tower LD 19-179HN Well (API No. Pending), Tower LD 19-179HNX Well (API No. Pending), Tower LD 19-182HC Well (API No. Pending), Tower LD 19-219HN Well (API No. Pending), Tower LD 19-222HN Well (API No. Pending), Tower LD 19-222HNX Well, (API No. Pending), Tower LD 19-259HC Well (API No. Pending), Tower LD 19-259HN Well (API No. Pending), Tower LD 19-262HN Well (API No. Pending), Tower LD 19-299HNX Well (API No. Pending), Tower LD 19-302HC Well (API No. Pending), Tower LD 19-302HN Well (API No. Pending), Tower LD 19-339HN Well (API No. Pending), Tower LD 19-342HNX Well (API No. Pending), Tower LD 19-379HC Well (API No. Pending), and the Tower LD 19-379HN Well (API No. Pending) (“Wells”):
Township 1 South, Range 67 West, 6th P.M.
Section 19: All
Section 20: All
8. On August 21, 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.
9. Protests were filed by Wendy and Kurt Engelmann, Whitney M. Geenen, and Ben Murphy. A prehearing conference was held on September 5, 2017. At the prehearing conference, the parties made oral argument and Wendy Engelmann submitted additional written comments in connection with her protest. The protestants were advised by the Hearing Officer that the issues raised in their protests were not appropriate for consideration in a pooling proceeding, and the protests were converted to statements submitted pursuant to Rule 510.
10. Land testimony and exhibits submitted in support of the Application by Matthew Acree, Senior Landman for Great Western, showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the September 11, 2017 hearing date.
11. 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 Tower LD 19-022HC Well, Tower LD 19-022HN Well, Tower LD 19-059HNX Well, Tower LD 19-062HN Well, Tower LD 19-099HC Well, Tower LD 19-099HN Well, Tower LD 19-102HNX Well, Tower LD 19-139HN Well, Tower LD 19-142HC Well, Tower LD 19-142HN Well, Tower LD 19-179HN Well, Tower LD 19-179HNX Well, Tower LD 19-182HC Well, Tower LD 19-219HN Well, Tower LD 19-222HN Well, Tower LD 19-222HNX Well, Tower LD 19-259HC Well, Tower LD 19-259HN Well, Tower LD 19-262HN Well, Tower LD 19-299HNX Well, Tower LD 19-302HC Well, Tower LD 19-302HN Well, Tower LD 19-339HN Well, Tower LD 19-342HNX Well, Tower LD 19-379HC Well, and the Tower LD 19-379HN Well, but did not provide testimony for any subsequent wells.
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. Great Western agreed to be bound by oral order of the Commission.
14. Based on the facts stated in the verified Application, the protests having been converted to statements made pursuant to Rule 510, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to pool all interests in an approximate 1,261.6-acre drilling and spacing unit established for portions of Sections 19 and 20, Township 1 South, Range 67 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Tower LD 19-022HC Well, Tower LD 19-022HN Well, Tower LD 19-059HNX Well, Tower LD 19-062HN Well, Tower LD 19-099HC Well, Tower LD 19-099HN Well, Tower LD 19-102HNX Well, Tower LD 19-139HN Well, Tower LD 19-142HC Well, Tower LD 19-142HN Well, Tower LD 19-179HN Well, Tower LD 19-179HNX Well, Tower LD 19-182HC Well, Tower LD 19-219HN Well, Tower LD 19-222HN Well, Tower LD 19-222HNX Well, Tower LD 19-259HC Well, Tower LD 19-259HN Well, Tower LD 19-262HN Well, Tower LD 19-299HNX Well, Tower LD 19-302HC Well, Tower LD 19-302HN Well, Tower LD 19-339HN Well, Tower LD 19-342HNX Well, Tower LD 19-379HC Well, and the Tower LD 19-379HN Well, 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 approximate 1,261.6-acre drilling and spacing unit 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 that any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Tower LD 19-022HC Well (API No. Pending), Tower LD 19-022HN Well (API No. Pending), Tower LD 19-059HNX Well (API No. Pending), Tower LD 19-062HN Well (API No. Pending), Tower LD 19-099HC Well (API No. Pending), Tower LD 19-099HN Well (API No. Pending), Tower LD 19-102HNX Well (API No. Pending), Tower LD 19-139HN Well (API No. Pending), Tower LD 19-142HC Well (API No. Pending), Tower LD 19-142HN Well (API No. Pending), Tower LD 19-179HN Well (API No. Pending), Tower LD 19-179HNX Well (API No. Pending), Tower LD 19-182HC Well (API No. Pending), Tower LD 19-219HN Well (API No. Pending), Tower LD 19-222HN Well (API No. Pending), Tower LD 19-222HNX Well, (API No. Pending), Tower LD 19-259HC Well (API No. Pending), Tower LD 19-259HN Well (API No. Pending), Tower LD 19-262HN Well (API No. Pending), Tower LD 19-299HNX Well (API No. Pending), Tower LD 19-302HC Well (API No. Pending), Tower LD 19-302HN Well (API No. Pending), Tower LD 19-339HN Well (API No. Pending), Tower LD 19-342HNX Well (API No. Pending), Tower LD 19-379HC Well (API No. Pending), and the Tower LD 19-379HN Well (API No. Pending) (“Wells”):
Township 1 South, Range 67 West, 6th P.M.
Section 19: All
Section 20: All
2. The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well located on the drilling and spacing unit applicable to its interest in the drilling and 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 drilling and 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 drilling and 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.
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