BEFORE THE OIL AND 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 COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 171200862

 

TYPE: SPACING

 

ORDER NO. 407-2290

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on December 11, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln St., Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit for Section 4, Township 1 North, Range 65 West, 6th P.M., and approve up to 17 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Crestone Peak Resources Operating LLC (Operator No. 10633) (“Crestone Peak” 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.  Section 4, Township 1 North, Range 65 West, 6th P.M., is subject to this Rule for the Codell and Niobrara Formations.

 

5.         On December 12, 1983, the Commission entered Order No. 407-1, which established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. In Order Nos. 407-10 and 407-13, the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations.

 

6.         On April 16, 1991, the Commission entered Order No. 407-66, which established J-Sand, Codell and Niobrara Formations as common source of supply.  Section 4, Township 1 North, Range 65 West, 6th P.M. is subject to this Order for the Codell and Niobrara Formations.

 

7.         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 vertical and/or directional wells for the production of oil and/or gas from the Codell-Niobrara Formations.  Section 4, Township 1 North, Range 65 West, 6th P.M. is subject to Order No. 407-87 as it applies to the existing vertical and/or directional well development and operation of the Codell and Niobrara Formations on Section 4, Township 1 North, Range 65 West, 6th P.M.

 

8.         The Commission records reflect that there are four horizontal wells and one directional well producing from the Codell and/or Niobrara Formations on the Application Lands: Stelling 3A-4H Well (API No. 05-123-34764), Stelling 3B-4H Well (API No. 05-123-35413), Chavez 4B-4H Well (API No. 05-123-35474), and Chavez 4A-4H Well (API No. 05-123-35476) and Olin 41-4 well (API No. 05-123-20925). The wells are all operated by the Applicant.  Applicant respectfully requests that such existing wells be excluded from the proposed 640-acre drilling and spacing unit and remain subject to each respective drilling and spacing unit or designated wellbore spacing unit, and allocation of production of proceeds, established by the Commission. 

 

9.         On October 12, 2017, Crestone Peak, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), and to approve up to 17 new horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval any horizontal well shall be no closer than 460 feet from the boundaries of the unit and not less than 150 feet from the productive interval of another well within the unit, unless a waiver or consent is obtained from the operator of such well:

 

Township 1 North, Range 65 West, 6th P.M.

Section 4:        All

 

            10.       Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than three multi-well pads subject to Rule 318A, without exception being granted by the Director.

 

11.       On November 17, 2017, Crestone Peak, 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.

 

12.       Land testimony and exhibits submitted in support of the Application by Shea Kauffman, Land Manager for Crestone Peak, showed that Crestone Peak holds oil and gas leasehold interests and has a right to drill in the Application Lands.

 

13.       Geoscience testimony and exhibits submitted in support of the Application by William Rucker, Geologist for Crestone Peak, showed the Codell Formation is present throughout the Application Lands and averages approximately 18 feet thick, and the Niobrara Formation is present throughout the Application Lands and averages approximately 230 feet thick.   Further testimony showed that the Codell and Niobrara Formations are a sequence of chalks, marls, and limestones and is a common source of supply.

 

14.       Engineering testimony and exhibits submitted in support of the Application by Chris Wong, Senior Reservoir Engineer for Crestone Peak, showed that the drainage area for analog horizontal Codell Formation wells is estimated at 95.8 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas, and associated hydrocarbons from the Codell Formation.  Further engineering testimony showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 30.3 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation.

 

15.       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.

 

16.       Crestone Peak agreed to be bound by oral order of the Commission. 

 

17.       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 establish an approximate 640-acre drilling and spacing unit for Section 4, Township 1 North, Range 65 West, 6th P.M., and approve up 17 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.            An approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 17 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 65 West, 6th P.M.

Section 4:        All

 

2.            The productive interval of the wellbore will 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 producing from the same source of supply within the unit, unless the Director grans an exception.

 

3.            All wells permitted under this Order shall be drilled from no more than three well pads within the Application Lands, subject to Rule 318A, unless the Director grans an exception.  

 

 

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 10th day of January, 2018, effective as of December 11, 2017.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

By: ______________________________________ 

             Julie Spence Prine, Secretary