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, WELD COUNTY, COLORADO. |
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CAUSE NO. 407
DOCKET NO. 171000749
TYPE: ADDITIONAL WELLS
ORDER NO. 407-2245 |
REPORT OF THE COMMISSION
The Commission heard this matter on October 30-31, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to approve an additional nineteen (19) horizontal wells, for a total of twenty (20) horizontal wells, in an approximate 1,260 acre drilling and spacing unit established by Order No. 407-2216 for Sections 31 and 32, Township 1 North, Range 68 West, 6th P.M., and Sections 6 and 7, Township 1 South, Range 68 West, 6th P.M. (“DSU No. 1”), for the production of the oil and associated hydrocarbons from the Codell and Niobrara Formations.
The Commission finds as follows:
1. Crestone Peak Resources Operating LLC (“Crestone Peak”) is an interested party in the subject matter of the above-referenced hearing
2. Extraction Oil and Gas, Inc., Operator No. 10459 (“Extraction”) is an interested party in the subject matter of the above referenced hearing.
3. Due notice of time, place and purpose of the hearing has been given in all respects as required by law.
4. 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.
5. 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.
PROCEDURAL HISTORY
Docket No. 170700471
1. On October 24, 2016, the Commission entered Order No. 407-1794 which established one approximate 1,280-acre drilling and spacing unit for Sections 28 and 33, Township 1 North, Range 68 West, 6th P.M., and approved up to a total of 20 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations. Section 33, Township 1 North, Range 68 West, 6th P.M., of the Application Lands is subject to this Order.
2. On May 25, 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. 407-1794 and establish an approximate 1,000-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to twelve (12) horizontal wells within each unit, for the 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, southern, and western unit boundaries and 150 feet from the eastern unit boundary, without exception being granted by the Director:
Township 1 North, Range 68 West, 6th P.M.
Section 31: N½, N½N½S½
Section 32: N½, N½N½S½
Section 33: NW¼, N½N½SW¼
Applicant stated that all horizontal wells will be drilled in an east-west orientation.
3. On July 10, 2017, a Protest was filed by Crestone.
Docket No. 170900535
4. On July 10, 2017, Crestone, by its attorneys, filed an application in Docket No. 170900535 (“Crestone Application) for an order to establish an approximate 1,920-acre drilling and spacing and unit in the below-described lands for production of oil, gas, and associated hydrocarbons from the Codell and Niobrara formations, Wattenberg Field, and to approve up to fifty-four (54) new horizontal wells (reduced to 29 wells) in the proposed unit with the treated interval of each wellbore being no closer than 460 feet from the boundaries of the unit, unless an exception is granted by the Director and requests that there be no more than four (4) well pads in the unit, or adjacent thereto, unless an exception is granted by the Director:
Township 1 North, Range 68 West, 6th P.M.
Section 19: ALL
Section 30: ALL
Section 31: ALL
5. On September 18, 2017, Extraction filed its Protest of Crestone’s Application.
Docket No. 170900596
6. On July 13, 2017, Extraction, by its attorneys, filed a verified application in Docket No. 170900596 pursuant to §34-60-116, C.R.S., for an order to establish an approximate 1,260-acre drilling and spacing unit for the below-described lands and approve up to twenty (20) horizontal wells within each unit, for the 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 eastern and western unit boundaries and 150 feet from the northern and southern unit boundaries, without exception being granted by the Director:
Township 1 North, Range 68 West, 6th P.M.
Section 31: S½N½S½, S½S½
Section 32: SW¼SW¼, S½N½SW¼
Township 1 South, Range 68 West, 6th P.M.
Section 6: All
Section 7: N½
Applicant stated that all horizontal wells will be drilled in a north-south orientation.
7. On August 24, 2017, the City and County of Broomfield filed a protest/intervention to Extraction’s Application.
8. On August 28, 2017, the Wildgrass Oil & Gas Committee filed a protest/intervention to Extraction’s Application.
9. On August 28, 2017, Crestone Peak Resources Operating LLC filed a protest to Extraction’s Application.
10. On August 31, 2017, Extraction, by its attorneys, filed an amendment to the Application, requesting that the Commission approve one (1) horizontal well within the unit, for the development of the Codell and Niobrara formations.
11. On October 4, 2017, Wildgrass Oil & Gas Committee withdrew its protest of the Application.
12. 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. The City and County of Broomfield subsequently withdrew its protest.
Docket No. 171000749
13. On August 31, 2017, Extraction, by its attorneys, filed a verified application in Docket No. 171000749 pursuant to §34-60-116(4), C.R.S., for an order to allow nineteen (19) additional wells within two drilling and spacing units for the below-described lands (“Application Lands”), for a total of twenty (20) horizontal wells within each unit, for the 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:
DSU No. 1
Township 1 North, Range 68 West, 6th P.M.
Section 31: S½S½, S½N½S½
Section 32: SW¼SW¼, S½NW¼SW¼
Township 1 South, Range 68 West, 6th P.M.
Section 6: All
Section 7: N½
DSU No. 2
Township 1 South, Range 68 West, 6th P.M.
Section 7: S½
Section 18: All
Section 19: All
Applicant stated that all horizontal wells will be drilled in a north-south orientation.
14. Extraction further requested that the well location ruled established in orders issued in Docket Nos. 170900596 and 170900598 control, and that, for DSU No. 1, the treated interval of each wellbore be no closer than 460 feet from the eastern and western unit boundaries, and no closer than 150 feet from the northern and southern boundaries, and that, for DSU No. 2, the treated interval of each wellbore be no closer than 460 feet from the southern, eastern, and western boundaries, and no closer than 150 feet from the northern unit boundary. Applicant further requests that the wells be no closer than 150 feet from the productive interval of any other wellbore located within the Codell and/or Niobrara Formations in the drilling and spacing unit, unless an exception is granted by the Director.
15. On October 4, 2017, Crestone file a protest to Extraction’s Application.
16. On October 6, 2017, Wildgrass filed a protest to Extraction’s application in Docket No. 171000749 alleging, among other things, that it did not receive proper notice under Commission Rules 507.b(1) and Section 34-60-108(4), C.R.S.
17. On October 12, 2017, Wildgrass filed a Joint Emergency Motion to Continue Hearing in Docket Nos. 170900598 and 171000749 (“Motion for Continuance”) which requested a continuance of until “at least” the December 11-12, 2017 Commission hearing. Wildgrass also requested that Extraction be ordered to provide “proper notice” to Wildgrass, that the deadlines in the Case Management Order in Docket Nos. 170900598 and 171000749 be extended, and that Wildgrass be allowed to conduct discovery. In support of said motion, Wildgrass argued that it failed to receive proper notice of Extraction’s applications in Docket Nos. 170900598 and 171000749, that its counsel had not been served with Extraction’s applications, that Wildgrass was prejudiced by the failure to receive notice, and that Extraction would not be prejudiced by a continuance.
18. On October 20, 2017, a final prehearing conference was held in Docket Nos. 170700471, 170900535, 170900596, and 171000749.
Hearing
19. These matters were heard by the Commission at its October 30-31, 2017 meeting. For purposes of hearing, Docket Nos. 170700471, 170900535, 170900596, and 171000749 were consolidated.
20. At the October 30-31, 2017 meeting, the Commission heard testimony and accepted exhibits from Extraction and Crestone.
21. Land testimony and exhibits submitted by Extraction showed Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands applications in Docket Nos. 170700471, 170900596, and 171000749.
22. Land testimony and exhibits submitted by Crestone showed Crestone holds oil and gas leasehold interests and has a right to drill in the Application Lands applications in Docket No. 170900535.
Docket No. 170700471
23. At hearing, Geologic testimony and exhibits submitted in support of the Application by Extraction showed that the Niobrara and Codell Formations are present throughout the Application Lands, are approximately 358 to 377 feet thick from the top of the Niobrara through the base of the Codell.
24. At hearing, Engineering testimony and exhibits submitted in support of the Application by Extraction, showed that the estimated drainage area for horizontal Codell-Niobrara Formation wells is estimated at 14.3 acres and an approximate 1,000-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by twelve (12) horizontal wells producing oil, gas and associated hydrocarbons from the benches of the Codell and Niobrara Formations. Applicant’s proposed wellbore layout and pressure/fracture data supports that the requested inter-well and unit boundary setbacks. Further testimony concluded that the project economics are sound.
Docket No. 170900535
25. Geoscience testimony and exhibits submitted in support of the Application by Crestone showed the Niobrara Formation is present throughout the Application Lands and is approximately 405 feet thick. Further testimony showed the Codell Formation is present throughout the Application Lands and is approximately 18 feet thick.
26. Engineering testimony and exhibits submitted in support of the Application by Crestone demonstrated that: (a) three section lateral analog wells have an average lateral length of 14,920’ for the Niobrara Formation for a drainage per well of 77.9 acres and for the Codell Formation a drainage per well of 309.7 acres; (b) two section lateral analog wells have an average lateral length of 9,400’ for the Niobrara Formation for a drainage per well of 49.1 acres and for the Codell Formation a drainage per well of 195.1 acres; (c) one section lateral analog wells have an average lateral length of 5,500’ for the Niobrara Formation for a drainage per well of 28.7 acres and for the Codell Formation a drainage per well of 114.20 acres; (d) that based on each drilling and spacing unit area of 1,920 acres, the drainage calculations are consistent with the development of up to 23 Niobrara horizontal wells and up to 6 Codell horizontal wells (based on varying lengths) within the proposed drilling and spacing unit will increase total recovery, protect correlative rights and prevent waste.
Docket No. 170900596
27. At hearing, Geologic testimony and exhibits submitted in support of the Application by Extraction showed that the Niobrara and Codell Formations are present throughout the Application Lands, and are approximately 300 feet to 340 feet thick, and 16 feet to 19 feet thick, respectively from the top through the base of the formation.
28. At hearing, Engineering testimony and exhibits submitted in support of the Application by of Extraction, showed that the estimated drainage area for horizontal Niobrara Formation wells is 15.2 acres, and the estimated drainage area for horizontal Codell Formation wells is 57.4 acres, and an approximate 1,260-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by one (1) horizontal well producing oil, gas and associated hydrocarbons from the benches of the Codell and Niobrara Formations. Applicant’s proposed wellbore layout and pressure/fracture data supports that the requested inter-well and unit boundary setbacks. Further testimony concluded that the project economics are sound.
Docket No. 171000749
29. Geologic testimony and exhibits submitted in support of the Application by Extraction showed that the Niobrara and Codell Formations are present throughout the Application Lands, are approximately 284 to 359 feet thick from the top of the Niobrara through the base of the Codell.
30. Engineering testimony and exhibits submitted in support of the Application by Extraction, showed that, in DSU No. 1, the estimated drainage area for horizontal Codell-Niobrara Formation wells is 15.21 acres per Niobrara horizontal well, and 57.3 acres per Codell horizontal well, and an approximate 1,260-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by twenty (20) horizontal wells producing oil, gas and associated hydrocarbons from the benches of the Codell and Niobrara Formations. Applicant’s proposed wellbore layout and pressure/fracture data supports that the requested inter-well and unit boundary setbacks. Further testimony concluded that the project economics are sound.
31. Engineering testimony and exhibits submitted in support of the Application by Extraction, showed that, in DSU No. 2, the estimated drainage area for horizontal Codell-Niobrara Formation wells is 25.2 acres per Niobrara horizontal well, and 83.5 acres per Codell horizontal well, and an approximate 1,600-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by twenty (20) horizontal wells producing oil, gas and associated hydrocarbons from the benches of the Codell and Niobrara Formations. Applicant’s proposed wellbore layout and pressure/fracture data supports that the requested inter-well and unit boundary setbacks. Further testimony concluded that the project economics are sound.
32. Following testimony, presentation of exhibits and closing statements by the parties, the Commission closed the record in Docket Nos. 170700471, 170900535, 170900596, and 171000749.
COMMISSION CONCLUSIONS
1. Pursuant to Section 34-60-116(1), CRS, any spacing unit approved by the Commission must prevents waste, avoid the drilling of unnecessary wells, and protect correlative rights. These are broad discretionary considerations.
2. Section 34-60-116(2), CRS, authorizes the Commission to divide a pool in to zones, and establish drilling units for each zone, so that the pool as a whole will be efficiently and economically developed.
3. The Commission has broad authority under Section 34-60-105(1), CRS to regulate the spacing of wells and to do whatever is reasonably necessary to carry out the provisions of Section 116.
4. The Commission found that Crestone and Extraction’s applications in Docket Nos. 170700471, 170900535, 170900596, and 171000749 meet the requirements of Section 34-60-116, C.R.S. and Commission Rules, in that the proposed developments would prevent waste, protect correlative rights, and avoid the drilling of unnecessary wells. However, the applications of Crestone and Extraction may not both be granted because the proposed units conflict and overlap.
5. Evidence presented at hearing showed Extraction had negotiated with the City and County of Broomfield to plan for development of oil and gas resources on a large scale, and which culminated in an agreement for development with the City and County of Broomfield. The City and County of Broomfield had withdrawn its protests to Extraction’s Applications. The Commission thus determined that Extraction’s Applications were more likely to ensure orderly, economic, and efficient development of oil and gas resources in Broomfield and surrounding areas as a whole.
6. The Commission was not persuaded that Extraction’s Applications would strand minerals in Sections 19 and 30, Township 1 North, Range 68 West, 6th P.M., as was claimed by Crestone at hearing. Testimony at hearing showed it was technically feasible to develop Sections 19 and 30, even if Extraction’s Applications were approved. The Commission also heard testimony that depletion of resources in Sections 19 and 30 had the potential to cause dilution of the interests in Section 31. This depletion was an additional factor in favor of Extraction’s Applications.
7. The Commission continued Extraction’s application in Docket No. 1701000749 to a future meeting, but only that portion of Extraction’s Application in Docket No. 170100749 as it pertained to Docket No. 170900598 was continued. See Commission’s November 6, 2017 Order in Docket No. 1701000749. Extraction’s request in Docket No. 171000749 for an increase in the number of wells allowed in the unit proposed in Docket No. 170900596 was not continued.
ORDER
IT IS HEREBY ORDERED:
Docket No. 170700471
1. The Protest filed by Crestone is DENIED;
2. Order No. 407-1794 is hereby vacated;
3. One approximate 1,000-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 12 horizontal wells within the unit are 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 31: N½, N½N½S½
Section 32: N½, N½N½S½
Section 33: NW¼, N½N½SW¼
4. The productive interval of the wellbore 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, southern, and western unit boundaries and 150 feet from the eastern unit boundary, unless an exception is granted by the Director.
5. The wells will be drilled from no more than one well pad within the unit or at legal location on adjacent lands, unless an exception is granted by the Director.
6. All horizontal wells shall be drilled in an east-west orientation.
Docket No. 170900535
1. Crestone’s Application is DENIED.
2. Extraction’s Protest is GRANTED.
Docket No. 170900596
1. The Protest filed by Crestone is DENIED;
2. One approximate 1,260-acre drilling and spacing unit for the below-described lands, is hereby established, and one 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 31: S½N½S½, S½S½
Section 32: SW¼SW¼, S½NW¼SW¼
Township 1 South, Range 68 West, 6th P.M.
Section 6: All
Section 7: N½
3. The productive interval of the wellbore 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 eastern and western unit boundaries and 150 feet from the northern and southern 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 shall be drilled in a north-south orientation.
Docket No. 171000749
1. Crestone’s Protest is DENIED.
2. A total of up to 20 horizontal wells within the unit comprising the below described lands (“DSU No. 1”) are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:
DSU No. 1
Township 1 North, Range 68 West, 6th P.M.
Section 31: S½S½, S½N½S½
Section 32: SW¼SW¼, S½NW¼SW¼
Township 1 South, Range 68 West, 6th P.M.
Section 6: All
Section 7: N½
3. The productive interval of wellbores in DSU No. 1 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 eastern and western unit boundaries, and no closer than 150 feet from the northern and southern boundaries, unless an exception is granted by the Director.
4. The productive interval of wellbores in DSU No. 2 shall be no closer than 150 feet from the productive interval of any other wellbore producing from the Codell and Niobrara Formations, no closer than 460 feet from the southern, eastern, and western boundaries, and no closer than 150 feet from the northern unit boundary, unless an exception is granted by the Director.
5. The wells will be drilled from no more than one well pad within the unit or at legal location on adjacent lands, unless an exception is granted by the Director.
6. All horizontal wells shall 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 29th day of November, 2017, as of October 31, 2017.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By___________________________________
Julie Spence Prine, Secretary