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 FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407 DOCKET NO. 171000742 TYPE: POOLING ORDER NO. 407-2244 |
REPORT OF THE COMMISSION
The Commission heard this matter on October 30, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) amend Order No. 407-1924 insofar as it applies to the designated horizontal wellbore spacing units established for the Hilgers 8N2-34HZ Well and the Hilgers 8N-34HZ Well to reflect the as-drilled designated horizontal wellbore spacing unit configuration and 2) to pool all interests within the two approximate 520-acre designated horizontal wellbore spacing units established for portions of Sections 22, 27, and 34, Township 3 North, Range 68 West, 6th P.M., for the development and operation of the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Kerr-McGee Oil & Gas Onshore LP (Operator No. 47120) (“Kerr-McGee” 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. Sections 22, 27, and 34, Township 3 North, Range 68 West, 6th P.M., are subject to this Rule for the Niobrara Formation.
5. On February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara Formation underlying certain lands, with the permitted well locations in accordance with the provisions of Order No. 407-1. Sections 22, 27, and 34, Township 3 North, Range 68 West, 6th P.M., are subject to this Order for the Niobrara Formation.
6. On March 20, 2017, the Commission entered Order No. 407-1924, which among other things, pooled all interests within 12 designated horizontal wellbore spacing units including two approximate 560-acre wellbore spacing units designated for the Hilgers 8N2-34HZ Well in wellbore spacing unit No. 8 and the Hilgers 8N-34HZ Well in wellbore spacing unit No. 9 comprising the following lands:
Township 3 North, Range 68 West, 6th P.M.
Section
22: S½SE¼
Section 27: E½
Section 34: NE¼
Wellbore
Spacing Unit Nos. “8 and 9” – 560-acres
Hilgers 8N2-34HZ Well
(Niobrara Formation)
Hilgers 8N-34HZ Well (Niobrara Formation)
7. On August 31, 2017, Applicant, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to: 1) amend Order No. 407-1924 insofar as it applies to the designated horizontal wellbore spacing units established for the Hilgers 8N2-34HZ Well and the Hilgers 8N-34HZ Well to reflect the as-drilled designated horizontal wellbore spacing unit configuration and 2) to pool all interests within the two approximate 520-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 Hilgers 8N2-34HZ Well (API No. 05-123-43306) and the Hilgers 8N-34HZ Well (API No. 05-123-43304) (“Wells”):
Township 3 North, Range 68 West, 6th P.M.
Section
22: S½SE¼
Section 27: E½
Section 34: N½NE¼, SE¼NE¼
Wellbore
Spacing Unit Nos. “8 and 9” – 520-acres
Hilgers 8N2-34HZ Well
(Niobrara Formation)
Hilgers 8N-34HZ Well (Niobrara Formation)
8. On October 9, 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. Land testimony and exhibits submitted in support of the Application by Will Vaughan, Senior Landman for Kerr-McGee, showed that on March 20, 2017, the Commission entered Order No. 407-1924, which among other things, pooled all interests within 12 designated horizontal wellbore spacing units including two approximate 560-acre designated horizontal wellbore spacing units for the Hilgers 8N2-34HZ Well in wellbore spacing unit No. 8 and the Hilgers 8N-34HZ Well in wellbore spacing unit No. 9. In May 2017, Kerr-McGee spud the Hilgers 8N2-34HZ Well and the Hilgers 8N-34HZ Well. However, natural faulting in the Longmont Fault Zone is present in the area. Difficulties associated with drilling through this fault zone resulted in both wells being drilled shorter than initially planned. Consequently, the wellbore spacing unit description for the Wells needs to be amended to exclude one quarter-quarter section, the SW¼NE¼ of Section 34, under Rule 318A as described in the Application Lands.
10. Land testimony further showed that Kerr-McGee has been unable to effect the voluntary pooling of all interest within the two approximate 520-acre designated horizontal wellbore spacing units and that based upon an examination of relevant contracts and records, all owners of an oil and gas interests in the tracts to be pooled (who could be located by Kerr-McGee) received timely notice of the Application.
11. Applicant confirmed that Commission Rules 530.b. and c. do not apply as there are no working interest owners or unleased mineral interest owners subject to the Application, and Applicant is not seeking cost recovery pursuant to §34-60-116(7), C.R.S.
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. Kerr-McGee 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 Unit review of the Application under Rule 511., the Commission should enter an order to: 1) amend Order No. 407-1924 insofar as it applies to the designated horizontal wellbore spacing units established for the Hilgers 8N2-34HZ Well and the Hilgers 8N-34HZ Well to reflect the as-drilled designated horizontal wellbore spacing unit configuration, and 2) pool all interests within the two approximate 520-acre designated horizontal wellbore spacing units established for portions of Sections 22, 27, and 34, Township 3 North, Range 68 West, 6th P.M., for the development and operation of the Niobrara Formation.
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, Order No. 407-1924 is hereby amended to reflect the as-drilled designated horizontal wellbore spacing unit configuration of the Hilgers 8N2-34HZ Well in wellbore spacing unit No. 8 and the Hilgers 8N-34HZ Well in wellbore spacing unit No. 9 for the lands described below, and all interests in in two approximate 520-acre designated horizontal wellbore spacing units established for the below-described lands, are hereby pooled, for the development and operation of the Niobrara Formation, effective as 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., were first incurred for the drilling of the Hilgers 8N2-34HZ Well (API No. 05-123-43306) in wellbore spacing unit No. 8 and the Hilgers 8N-34HZ well (API No. 05-123-43304) in wellbore spacing unit No. 9 (“Wells”):
Township 3 North, Range 68 West, 6th P.M.
Section
22: S½SE¼
Section 27: E½
Section 34: N½NE¼, SE¼NE¼
Wellbore
Spacing Unit Nos. “8” – 520-acres
Hilgers 8N2-34HZ Well
(Niobrara Formation)
Wellbore
Spacing Unit Nos. “9” – 520-acres
Hilgers 8N-34HZ Well
(Niobrara Formation)
2. The production obtained from each 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; each owner of an interest in the designated horizontal wellbore spacing unit shall be entitled to receive its share of the production of the Well located within the designated horizontal wellbore spacing unit applicable to its interest in the designated horizontal wellbore spacing unit.
3. 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.
4. The designated horizontal wellbore spacing units described above shall be considered 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 29th day of November, 2017, as of October 30, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By_______________________________________
Julie Spence Prine, Secretary