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 AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 171200841
TYPE: POOLING
ORDER NO. 407-2287 |
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 pool all interests within an approximate 1,600-acre drilling and spacing unit established by Order No. 407-1953, for Sections 11, 14 and 23, Township 2 North, Range 64 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 Waste Management Y23-720 Well, Waste Management Y23-728 Well, Waste Management Y23-736 Well, Waste Management Y23-744 Well, Waste Management Y23-752 Well, Waste Management Y23-760 Well, Waste Management Y23-768 Well, Waste Management Y23-776 Well, Waste Management Y23-784 Well, for the development and operation of the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Noble Energy, Inc. (“Noble” 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 11, 14 and 23, Township 2 North, Range 64 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.
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 and Niobrara Formations underlying certain lands, with permitted vertical and directional well locations in accordance with the provisions of Order No. 407-1. Sections 11, 14 and 23, Township 2 North, Range 64 West, 6th P.M., are subject to this Order for the Niobrara and Codell Formations.
6. On May 1, 2017 the Commission entered Order No. 407-1953 which established an approximate 1,600 acre drilling and spacing unit for Sections 11, 14 and 23, Township 2 North, Range 64 West, 6th P.M., approved up to nine horizontal wells in the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, provided that the productive interval of any horizontal well shall be no closer than 460 feet from the boundaries of the unit (however Noble has requested the Commission to correct Order No. 407-1953 to reflect the approved setbacks of 460 feet from the northern, western and eastern boundaries of the unit and no closer than 150 feet from the southern boundary of the unit), not less than 150 feet from the treated interval of another well within the unit, and approved up to three well pads, unless an exception is granted by the Director.
7. On October 12, 2017, Noble, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests, including any non-consenting interests, within the approximate 1,600-acre drilling and spacing unit for the below described lands (“Application Lands”), for the drilling of the Wells for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application or the date that the costs specified in C.R.S. § 34-60-116(7)(b) are first incurred for the drilling of the Waste Management Y23-720 Well (API No. 05-123-44842), Waste Management Y23-728 Well (API No. 05-123-44844), Waste Management Y23-736 Well (API No. 05-123-44841), Waste Management Y23-744 Well (API No. 05-123-44843), Waste Management Y23-752 Well (API No. 05-123-44846), Waste Management Y23-760 Well (API No. 05-123-44838), Waste Management Y23-768 Well (API No. 05-123-44845), Waste Management Y23-776 Well (API No. 05-123-44847), Waste Management Y23-784 Well (API No. 05-123-44839) (“Wells”):
Township 2 North, Range 64 West, 6th P.M.
Section 11: All
Section 14: All
Section 23: N˝
8. On or before November 20, 2017, Noble, 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 Ryan Antonio, Land Manager for Noble, showed that all non-consenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Wells. Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs December 11, 2017 hearing date.
10. 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 Waste Management Y23-720 Well, Waste Management Y23-728 Well, Waste Management Y23-736 Well, Waste Management Y23-744 Well, Waste Management Y23-752 Well, Waste Management Y23-760 Well, Waste Management Y23-768 Well, Waste Management Y23-776 Well, Waste Management Y23-784 Well, but did not provide testimony for any subsequent wells.
11. 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.
12. Noble agreed to be bound by oral order of the Commission.
13. 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 pool all interests within an approximate 1,600-acre drilling and spacing unit established by Order No. 407-1953, for Section 11, 14, ands 23, Township 2 North, Range 64 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 Waste Management Y23-720 Well, Waste Management Y23-728 Well, Waste Management Y23-736 Well, Waste Management Y23-744 Well, Waste Management Y23-752 Well, Waste Management Y23-760 Well, Waste Management Y23-768 Well, Waste Management Y23-776 Well, Waste Management Y23-784 Well,, for the development and operation of the Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that:
1. Pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests, including any nonconsenting interests, within the approximate 1,600-acre drilling and spacing unit for the below described lands (“Application Lands”), for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application or the date that the costs specified in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Waste Management Y23-720 Well (API No. 05-123-44842), Waste Management Y23-728 Well (API No. 05-123-44844), Waste Management Y23-736 Well (API No. 05-123-44841), Waste Management Y23-744 Well (API No. 05-123-44843), Waste Management Y23-752 Well (API No. 05-123-44846), Waste Management Y23-760 Well (API No. 05-123-44838), Waste Management Y23-768 Well (API No. 05-123-44845), Waste Management Y23-776 Well (API No. 05-123-44847), Waste Management Y23-784 Well (API No. 05-123-44839) (“Wells”):
Township 2 North, Range 64 West, 6th P.M.
Section 11: All
Section 14: All
Section 23: N˝
2. The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. Any working interest owner who does not elect to participate in the Wells 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)(b), C.R.S. The nonconsenting working interest owner must reimburse the consenting working interest owners for his proportionate share of the costs and risks of drilling and operating of the Wells 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 Wells 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)(b), 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 drilling and 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 Wells drilled on the above-described drilling and 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.
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