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. 170700415
TYPE: SPACING
ORDER NO. 407-2308 |
REPORT OF THE COMMISSION
The Commission heard this matter on January 29, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to: 1) vacate Order Nos. 407-528 and 535-103, and 407-1740, but only as to Section 10, Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish two approximate 640-acre drilling and spacing units for portions of Sections 10 and 15, Township 4 North, Range 63 West, 6th P.M., and approve up to 12 horizontal wells within each unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.
FINDINGS
The Commission finds as follows:
1. Confluence DJ LLC (Operator No. 10518) (“Confluence” or “Applicant”) 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 10 and 15, Township 4 North, Range 63 West, 6th P.M., are subject to this Rule for the Codell and Niobrara Formations.
5. On December 12, 2011, the Commission entered Order Nos. 407-528 and 535-103 which established 51 approximate 640-acre drilling and spacing units for certain lands, including Section 10, Township 4 North, Range 63 West, 6th P.M., and approved up to two horizontal wells within each unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
6. On June 6, 2016, the Commission entered Order No. 407-1740 which amended Order No. 407-528 to include the Codell Formation and approved a total of up to 20 horizontal wells, within the existing approximate 640-acre drilling and spacing unit established by Order No. 407-528 for Section 10, Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.
7. On May 8, 2017 (amended on December 21, 2017), Confluence, by its attorneys, filed with a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-528 and 535-103 and 407-1740 for Section 10, Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish two approximate 640-acre drilling and spacing units for the below-described lands (“Application Lands”) and to approve up to 12 horizontal wells within each unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of the wellbore 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, without exception being granted by the Director:
Township 4 North, Range 63 West, 6th P.M.
Section 10: W˝
Section 15: W˝
Drilling and Spacing Unit (“DSU”) No. 1
Township 4 North, Range 63 West, 6th P.M.
Section 10: E˝
Section 15: E˝
DSU No. 2
8. Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than one multi-well pad per unit subject to Rule 318A, without exception being granted by the Director.
9. On July 10, 2017, Bonanza Creek Energy Operating Co. LLC, (“Bonanza Creek”) filed a protest to the Application. On January 5, 2018, Bonanza Creek withdrew its protest
.
10. On July 10, 2017, Kerr-McGee Oil & Gas Onshore LP (“Kerr-McGee”) filed a Protest to Confluence’s Application. On January 8, 2018, Kerr McGee withdrew its protest.
11. On January 8, 2018, Confluence, 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 William E. Nicas, Senior Vice President of Land and Business Development for Confluence DJ LLC, showed that both the mineral and surface interests in the Application Lands are owned in fee, and that Confluence owns the majority leasehold interest in DSU No. 1 of Application Lands. Bonanza owns a leasehold interest in DSU No. 2 of the Application Lands. Bonanza has authorized Confluence to submit the Amended Application for DSU #2 of the Application Lands.
13. Geologic testimony and exhibits submitted in support of the Application by Robert H. Sterling, Senior Vice President Geoscience for Confluence Resources LP, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 243 to 270 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply. Geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 13 to 16 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is sandstones and is a common source of supply.
14. Engineering testimony and exhibits submitted in support of the Application by John P. Seidle, Vice President of MHA Petroleum Consultants LLC, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 50 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by nine horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation. Further Engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 169 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by three horizontal wells producing oil, gas, and associated hydrocarbons from the Codell 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. Confluence agreed to be bound by oral order of the Commission.
17. Based on the facts stated in the verified Application, all protests having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order Nos. 407-528 and 535-103 and 407-1740 for Section 10, Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish two approximate 640-acre drilling and spacing units for the portions of Sections 10 and 15, Township 4 North, Range 63 West, 6th P.M., and approve up to 12 horizontal wells within each unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. Order Nos. 407-528 and 535-103, and 407-1740, as to Section 10, Township 4 North, Range 63 West, 6th P.M., is hereby vacated, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.
2. Two approximate 640-acre drilling and spacing units for the below-described lands, are hereby established, and a total of up to 12 horizontal wells within each unit are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations:
Township 4 North, Range 63 West, 6th P.M.
Section 10: W˝
Section 15: W˝
Drilling and Spacing Unit (“DSU”) No. 1
Township 4 North, Range 63 West, 6th P.M.
Section 10: E˝
Section 15: E˝
DSU No. 2
3. 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 grants an exception.
4. All wells permitted under this Order shall be drilled from no more than one multi-well pad per unit within the Application Lands, subject to Rule 318A, unless the Director grants 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 27th day of February, 2018, as of January 29, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By: ______________________________________
Julie Spence Prine, Secretary