BEFORE THE OIL & 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 CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, ADAMS AND BROOMFIELD COUNTIES, COLORADO. |
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CAUSE NO. 407
DOCKET NO. 170900605
TYPE: SPACING
ORDER NO. 407-2223 |
REPORT OF THE COMMISSION
The Commission heard this matter October 30-31, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order vacating Order No. 407-1829, establishing an approximate 640-acre drilling and spacing unit for portions of Section 34, Township 1 North, Range 68 West, 6th P.M, and portions of Section 3, Township 1 South, Range 68 West, 6th P.M., and establishing well location rules for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations
The Commission finds as follows:
1. Extraction Oil and Gas, Inc., Operator No. 10459 (“Extraction” or “Applicant”) is an interested party in the subject matter of the above referenced hearing.
2. Due notice of 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 the parties interested therein, and has authority to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act.
4. On April 27, 1988, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule, which was amended on August 8, 2011 to, among other things, address the drilling of horizontal wells and requires that a horizontal wellbore spacing unit must include any governmental quarter-quarter section that is located less than 460’ from the completed interval of the wellbore lateral. The Rule does not, however, prohibit the establishment of drilling and spacing units within the Greater Wattenberg Area.
5. On October 24, 2016, the Commission entered Order No. 407-1829, which established an approximate 640-acre drilling and spacing unit for the E½ of Sections 3 and 10, Township 1 South, Range 68 West, 6th P.M., and approved up to 10 horizontal wells within the unit for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.
6. On July 13, 2017, Extraction, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to vacate Order No. 407-1829, and establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) for production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, with the treated interval of each wellbore be no closer than 150 feet from the treated interval of any other wellbore producing from the Codell and Niobrara Formations, and no closer than 460 feet from the northern and eastern unit boundaries and 150 feet from the southern and western unit boundaries, without exception being granted by the Director:
Township 1 North, Range 68 West, 6th P.M.
Section 34: E½
Township 1 South, Range 68 West, 6th P.M.
Section 3: E½
Applicants states that all horizontal wells will be drilled in a north-south orientation.
7. On August 21, 2017, Extraction, 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 testimony and exhibits were submitted in support of the Application.
8. Land testimony and exhibits submitted in support of the Application by Jason Rayburn, Landman for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands.
9. Geologic testimony and exhibits submitted in support of the Application by Ms. Alicia Branch, Geologist for Extraction showed that the Niobrara and Codell Formations are present throughout the Application Lands, are approximately 330 to 340 feet thick, and 16 to 18 feet thick, respectively, from the top through the base of the formation.
10. Engineering testimony and exhibits submitted in support of the Application by Neel Duncan, consultant Reservoir Petroleum Engineer for Extraction, showed that the estimated drainage area for horizontal Codell-Niobrara Formation wells is 15.3 acres per Niobrara horizontal well, and 63.2 acres per Codell horizontal well, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by one horizontal well producing oil, gas and associated hydrocarbons from the benches of the Codell and Niobrara Formations. Applicant’s drainage analysis and pressure/fracture data supports that the requested inter-well and unit boundary setbacks. Further testimony concluded that the project economics are sound.
11. On August 24, 2017, the City and County of Broomfield filed a Protest.
12. On August 31, 2017, Extraction filed an Amended Application to establish a 640-acre drilling and spacing unit for the Application Lands and approve up to one horizontal well for production from the Codell and Niobrara Formation with the treated interval of each wellbore be no closer than 150 feet from the treated interval of any other wellbore producing from the Codell and Niobrara Formations, and no closer than 460 feet from the northern and eastern unit boundaries and 150 feet from the southern and western unit boundaries, without exception being granted by the Director.
13. On October 20, 2017, a final prehearing conference was held.
14. Effective October 24, 2017, Extraction and the City and County of Broomfield reached a resolution of the Protest as part of a Settlement Agreement that included entering into an Amended and Restated Oil and Gas Operator Agreement dated October 24, 2017. Pursuant to the Amended and Restated Oil and Gas Operator Agreement, Extraction and the City and County of Broomfield agreed to certain surface locations within the City and County of Broomfield and the number of wells that may be drilled from each such location for the development of the Application Lands.
15. On October 26, 2017, the City and County of Broomfield withdrew its Protest. Extraction and the City and County of Broomfield jointly proposed an Order for Commission consideration and this matter was placed by Commission Staff on the consent agenda for the October 30-31, 2017 hearing.
16. At the October 30-31, 2017 hearing, the Commission removed Docket No. 170900605 from the consent agenda pursuant to Rule 520. Upon agreement by Extraction, Docket No. 170900605 was heard at the end of the remaining agenda. Following consideration and discussion, the Commission amended the language of paragraph 4 in the below Order from that proposed by Extraction and the City and County of Broomfield so that the Order would be consistent with Commission Rules and the Oil and Gas Act, 34-60-101 - 130, C.R.S. Both Extraction and the City and County of Broomfield agreed to the amended language, as is reflected below.
17. The above-referenced testimony and exhibits show that granting the Application will not render the drilling and spacing units smaller than the maximum area to be drained by the proposed wells, will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.
18. Extraction agreed to be bound by oral order of the Commission.
19. 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 vacating Order No. 407-1829 and establishing an approximate 640 -acre drilling and spacing unit for the E½ of Section 34, Township 1 North, Range 68 West, 6th P.M., and the E½ of Section 3, Township 1 South, Range 68 West, 6th P.M., with the treated interval of each wellbore to be no closer than 150 feet from the treated interval of any other wellbore producing from the Codell and Niobrara Formations, and no closer than 460 feet from the northern and eastern unit boundaries and 150 feet from the southern and western unit boundaries, without exception being granted by the Director.
ORDER
IT IS HEREBY ORDERED:
1. Order Nos. Order No. 407-1829 is hereby vacated.
2. One approximate 640-acre drilling and spacing unit is hereby established, and a horizontal well within the unit is hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:
Township 1 North, Range 68 West, 6th P.M.
Section 34: E½
Township 1 South, Range 68 West, 6th P.M.
Section 3: E½
3. The productive interval of the wellbores shall be no closer than 150 feet from the productive interval of any other wellbore producing from the Codell and Niobrara Formations, and no closer than 460 feet from the northern and eastern unit boundaries and 150 feet from the southern and western unit boundaries, unless an exception is granted by the Director.
4. The wells will be drilled from surface locations within the unit or at legal locations on adjacent lands. Any applications for Permits to Drill (Form 2) or Oil and Gas Location Assessments (Form 2A) filed by Extraction Oil & Gas, Inc. in the unit on surface lands within the City and County of Broomfield will comport with the October 24, 2017 Amended and Restated Oil and Gas Operator Agreement between Applicant and the City and County of Broomfield.
5. All horizontal wells will be drilled in a north-south orientation.
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 27th day of November, 2017, as of October 31, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary