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 CODELL FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 171200831
TYPE: POOLING
ORDER NO. 407-2286 |
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 to subject additional parties to Order No. 407-2242 for the development and operation of the Raindance FD 20-399HC Well (API No. 05-123-45196) in an approximate 400-acre designated horizontal wellbore spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., including the cost recovery provisions of §34-60-116(7), C.R.S., authorized thereby, as applicable, and providing that the Commission’s order subjecting additional parties to Order No. 407-2242, including the cost recovery provisions of C.R.S. §34-60-116(7), be made 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 Raindance FD 20-399HC Well (API No. 05-123-45196) to the Codell Formation.
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 April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., are subject to this Order for the Codell Formation.
5. On February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which, among other things, established 80-acre drilling and spacing units, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formations, the Codell Formation, and the Niobrara Formation underlying certain lands, including Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order No. 407-1. Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., are subject to certain aspects of this Rule for the Codell Formation.
6. On January 7, 2013, the Commission entered Order No. 407-742, as corrected, which, among other things, vacated certain 80-acre drilling and spacing units established by Order No. 407-87 for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., and established two 320-acre and 480-acre drilling and spacing units for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., approved up to four horizontal wells within each unit for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the horizontal wellbores to be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.
7. On September 16, 2013, the Commission entered Order No. 407-851 which, among other things, established an approximate 480-acre horizontal drilling and spacing unit for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., and approved up to 12 horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.
8. On September 15, 2014, the Commission entered Order No. 407-1104 which, among other things, vacated an approximate 320-acre drilling and spacing unit established by Order No. 407-472 for Section 30, Township 6 North, Range 67 West, 6th P.M., vacated Order No. 407-851 in its entirety, and modified Order No. 407-742 to reflect a corrected acreage of 450 acres for the drilling and spacing unit established for Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M. The SE¼ of Section 19 and the E½ of Section 30, Township 6 North, Range 67 West, 6th P.M., are subject to Order No. 407-1104.
9. On March 20, 2017, the Commission entered Order No. 407-1898 which, among other things, established an approximate 1,715.781-acre drilling and spacing unit for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara, Codell, Carlile, and Greenhorn Formations, and approved up to 25 horizontal wells within the unit, with the productive interval of any horizontal well to be located no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception. Order No. 407-1898 further provides that the Raindance FD #19-21HN Well (API No. 05-123-37633) shall be plugged and abandoned prior to the completion of the first horizontal well drilled in the 1,715.781-acre drilling and spacing unit established by this Order, or the first horizontal well drilled in the 771.229-acre drilling and spacing unit established by Order No. 407-1900, whichever occurs first. The current allocation of proceeds for the Raindance FD #19-21HN Well (API No. 05-123-37633) shall be maintained until the well is plugged and abandoned. Upon the plugging and abandonment of the Raindance FD #19-21HN Well (API No. 05-123-37633), Order No. 407-1104 shall be deemed vacated. Portions of the Application Lands are subject to Order No. 407-1898.
10. On March 20, 2017, the Commission entered Order No. 407-1899 which, among other things, pooled all interests in an approximate 1,715.781-acre drilling and spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Raindance FC 23-232HNX Well, Raindance FC 23-232HN Well, Raindance FC 23-249HN Well, Raindance FC 23-272HC Well, Raindance FC 23-289HNX Well, Raindance FC 23-289HN Well, Raindance FC 23-312HN Well, Raindance FC 23-312HC Well, Raindance FC 23-329HNX Well, Raindance FC 23-352HN Well, Raindance FC 23-369HN Well, Raindance FC 23-369HC Well, Raindance FC 23-392HNX Well, Raindance FC 26-009HN Well, Raindance FC 26-032HN Well, Raindance FC 26-032HC Well, Raindance FC 26-049HN Well, Raindance FC 26-072HNX Well, Raindance FC 26-089HC Well, Raindance FC 26-089HN Well, Raindance FC 26-112HN Well, Raindance FC 26-112HNX Well, Raindance FC 26-129HC Well, Raindance FC 26-152HN Well, and the Raindance FC 26-169HN Well, for the development and operation of the Niobrara and Codell Formations.
11. On October 30, 2017, the Commission entered Order No. 407-2242 which, among other things, pooled all interests in an approximate 400-acre designated horizontal wellbore spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., for the development and operation of the Codell Formation, and subjected any non-consenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., 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), C.R.S., are first incurred for the drilling of the Raindance FD 20-399HC Well (API No. 05-123-45196).
12. On October 12, 2017, Great Western filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to subject additional parties to Order No. 407-2242 for the development and operation of the Raindance FD 20-399HC Well (API No. 05-123-45196) (“Well”) on the below described lands (“Application Lands”), including the cost recovery provisions of §34-60-116(7), C.R.S., authorized thereby, as applicable, and providing that the Commission’s order subjecting additional parties to Order No. 407-2242, including the cost recovery provisions of C.R.S. §34-60-116(7), be made 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 Well:
Township 6 North, Range 67 West, 6th P.M.
Section 19: SE¼SE¼
Section 20: S½S½
Section 29: N½N½
Section 30: NE¼NE¼
13. On November 15, 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.
14. Land testimony and exhibits submitted in support of the Application by Michael Tucker, Senior Landman for Great Western, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers 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 December 11, 2017 hearing date. The land testimony further showed that Great Western is seeking to subject the following additional parties to Order No. 407-2242: Kerr McGee Oil & Gas Onshore, Apollo Operating LLC, END-IRA INC., Stonegate Apartments Ltd. Liability Co., Cory A. King, Kelly J. King, Michal Lynn McGinnis, Joyce L. Haas, and Tekton Windsor, LLC.
15. 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 Well, but did not provide testimony for any subsequent wells.
16. 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.
17. Great Western agreed to be bound by oral order of the Commission.
18. 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 to subject additional parties to Order No. 407-2242 for the development and operation of the Raindance FD 20-399HC Well (API No. 05-123-45196) in an approximate 400-acre designated horizontal wellbore spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., including the cost recovery provisions of §34-60-116(7), C.R.S., authorized thereby, as applicable, and providing that the Commission’s order subjecting additional parties to Order No. 407-2242, including the cost recovery provisions of C.R.S. §34-60-116(7), be made 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 Raindance FD 20-399HC Well (API No. 05-123-45196) to the Codell 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, additional parties Kerr McGee Oil & Gas Onshore, Apollo Operating LLC, END-IRA INC., Stonegate Apartments Ltd. Liability Co., Cory A. King, Kelly J. King, Michal Lynn McGinnis, Joyce L. Haas, and Tekton Windsor, LLC are hereby made subject to Order No. 407-2242 for the development and operation of the Raindance FD 20-399HC Well (API No. 05-123-45196) (“Well”) on the below described lands, including the cost recovery provisions of §34-60-116(7), C.R.S., authorized thereby, as applicable, 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 Raindance FD 20-399HC Well (API No. 05-123-45196):
Township 6 North, Range 67 West, 6th P.M.
Section 19: SE¼SE¼
Section 20: S½S½
Section 29: N½N½
Section 30: NE¼NE¼
2. The production obtained from the 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 Wells located on the designated horizontal wellbore spacing unit applicable to its interest in the wellbore 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 designated horizontal wellbore 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 Well(s) drilled on the above-described designated horizontal wellbore 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 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