BEFORE THE OIL & GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD AND BROOMFIELD COUNTIES, COLORADO.

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CAUSE NO. 407

   

DOCKET NO. 171000749

 

TYPE: ADDITIONAL WELLS

 

ORDER NO.  407-2274

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on December 11, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order approving, among other things, a total of 20 horizontal wells in an approximate 1,600 acre drilling and spacing unit (i.e., DSU No. 2) established by Order No. 407-2256 for Sections 7, 18, and 19, Township 1 South, Range 68 West, 6th P.M., for the production of the oil 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 December 11, 2017, the Commission entered Order No. 407-2256 which, among other things, established an approximate 1,600-acre drilling and spacing unit for Sections 7, 18, and 19, Township 1 South, Range 68 West, 6th P.M., and approved the drilling of one horizontal well, for the production of the oil and associated hydrocarbons from the Codell and Niobrara Formations.

 

6.            On August 31, 2017, Extraction, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116(4), C.R.S., for an order to allow 19 additional wells within two drilling and spacing units for  the below-described lands (“Application Lands”), for a total of 20 horizontal wells, oriented in a north-south direction, 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 being 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

7.            Applicant further requested that the well location rules 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.

 

8.            On October 6, 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.

 

9.            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.

 

10.          Geologic testimony and exhibits submitted in support of the Application by Ms. Alicia Branch, Geologic Consultant and Jim Folcik, Geoscience Manager, for Extraction showed that the Niobrara and Codell Formations are present throughout DSU No. 1, 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.

 

11.          Geologic testimony and exhibits submitted in support of the Application by Ms. Alicia Branch, Geologic Consultant and Jim Folcik, Geoscience Manager, for Extraction showed that the Niobrara and Codell Formations are present throughout DSU No. 2, and are approximately 270 feet to 300 feet thick, and 14 feet to 15 feet thick, respectively from the top through the base of the formation. Geologic testimony further showed that the Niobrara Formation is made up of marls and chalks, and has three potentially productive zones or benches, the A Chalk, the B Chalk, and the C Chalk.  The Codell Formation is made up of sandstone.

 

12.          Engineering testimony and exhibits submitted in support of the Application by Neel Duncan, consultant Reservoir Petroleum Engineer for Extraction, showed that, in DSU No. 1,  the estimated drainage area is 15.2 acres for a Niobrara horizontal well and 57.4 acres for a  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 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 the requested inter-well and unit boundary setbacks.  Further testimony concluded that the project economics are sound.    

 

13.          Engineering testimony and exhibits submitted in support of the Application by Neel Duncan, consultant Reservoir Petroleum Engineer for Extraction, showed that, in DSU No. 2,  the estimated drainage area is 25.3 acres for a Niobrara horizontal well and 83.5 acres for a 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 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.  

 

14.          On October 4, 2017, Crestone Peak Resources Operating LLC filed a protest to Extraction’s Application.  Crestone Peak Resources Operating LLC’s protest was limited to this matter as it related to DSU No. 1.

 

15.          On October 6, 2017, the City and County of Broomfield filed a protest/intervention to Extraction’s Application.

 

16.          On October 6, 2017, the Wildgrass Master Association filed a protest of Extraction’s Application. 

 

17.          On October 10, 2017, the Wildgrass Oil and Gas Committee filed a protest to Extraction’s Application.

 

18.          On October 20, 2017, a final prehearing conference was held.

 

19.          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.

 

20.          On October 31, 2017, certain aspects of this matter related to Docket No. 170900596 (DSU No.1) were heard before the Commission.  At hearing, the protest of Crestone Peak Resources Operating LLC was denied, Docket No. 170900596 was approved and Docket No. 171000749 was approved, only as it pertains to Docket No. 170900596.  The matter, as it pertains to Docket No. 170900598 (DSU No. 2), was then continued to the December 11, 2017 hearing of the Commission.

 

21.          On December 1, 2017, the City and County of Broomfield withdrew its protest/intervention conditioned upon the entry of the proposed Order herein.

 

22.          On December 1, 2017, the Wildgrass Master Association and Wildgrass Oil and Gas Committee withdrew their protests.

 

23.          The above-referenced testimony and exhibits showed 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.

 

24.          Extraction agreed to be bound by oral order of the Commission.

 

25.          Based on the facts stated in the verified Application, the protests having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511,  the Commission should enter an order approving a total of 20 horizontal wells in an approximate 1,600 acre drilling and spacing unit (i.e., DSU No. 2) established by Order No. 407-2256 for Sections 7, 18, and 19, Township 1 South, Range 68 West, 6th P.M., for the production of the oil and associated hydrocarbons from the Codell and Niobrara Formations.

 

ORDER

 

            IT IS HEREBY ORDERED:

 

1.            A total of up to 20 horizontal wells within an approximate 1,600-acre drilling and spacing unit established by Order No. 407-2256 for the below described lands are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations:

 

DSU No. 2

 

Township 1 South, Range 68 West, 6th P.M.

Section 7:        S½ 

Section 18:      All

Section 19:      All

 

2.            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.

 

3.            The wells will be drilled from surface locations within the unit or at legal location(s) 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.

 

4.            All horizontal wells shall be drilled in a north-south orientation. 

 

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 22nd day of December, 2017, as of December 11, 2017.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Spence Prine, Secretary