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 OPERATION FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY,      COLORADO

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CAUSE NO. 407

 

DOCKET NO. 180100083

 

ORDER NO. 407-2340

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. 407-1126 and 407-1841 in their entirety; and 2) establish an approximate 1,280-acre drilling and spacing unit for Sections 7 and 18, Township 4 North, Range 62 West, 6th P.M., and approve the drilling of up to 27 horizontal wells for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Confluence DJ LLC (Operator No. 10518) (“Confluence” 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 7 and 18, Township 4 North, Range 62 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.

 

5.         On October 27, 2014, the Commission entered Order No. 407-1126 which established an approximate 640-acre drilling and spacing unit for Section 18, Township 4 North, Range 62 West, 6th P.M.; approved up to five horizontal wells within the unit for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations with the productive interval of the wellbore to be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other well producing within the unit, without exception being granted by the Director; and establishing all wells drilled permitted under the Order shall be drilled from no more than one wellpad per quarter section within the unit.

 

6.         On December 12, 2016, the Commission entered Order No. 407-1841 which approved an additional 15 horizontal wells, for a total of 20 wells in the drilling and spacing unit established by Order No. 407-1126, with the productive interval of the wellbore to be located no closer than 460 feet from the unit boundaries without exception being granted by the Director; and establishing all wells drilled permitted under the Order shall be drilled on the surface of the unit.

 

7.         On November 30, 2017 (amended December 6, 2017 and December 22, 2017) Confluence, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order vacating Order Nos. 407-1126 and 407-1841 in their entirety, and establishing an approximate 1,280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approving the drilling of up to 21 horizontal wells for production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations:

 

Township 4 North, Range 62 West, 6th P.M.

Section 7:        All

Section 18:      All

 

8.         Applicant stated that the proposed horizontal wells will be oriented in a general north/south direction, and that the treated intervals of the proposed horizontal wells should be no closer than 460 feet from the unit boundaries of the drilling and spacing unit (regardless of the lease lines within the unit), and no closer than 150 feet from the treated interval of another well producing from the same formation, without exception being granted by the Director.

 

9.         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.

 

10.       Testimony and exhibits submitted in support of the Application by William E. Nicas, Senior Vice President of Land for Confluence, showed that Confluence holds oil and gas leasehold interests and has a right to drill in the Application Lands.

 

11.       Geology testimony and exhibits submitted in support of the Application by Robert H. Sterling, Senior Vice President of Geoscience for Confluence, showed that the thickness of the Niobrara Formation underlying the Application Lands ranges from approximately 243 to 270 feet thick and that the thickness of the Codell Formation underlying the Application Lands ranges from approximately 13 to 16 feet thick. Further testimony showed that the Niobrara Formation is a sequence of limestones, chalks and marls, that the Codell Formation consists mainly of siltstones and sandstones, and that both are common sources of supply. 

 

12.       Engineering testimony and exhibits submitted in support of the Application by John P. Seidle, Vice President of MHA Petroleum Consultants, on behalf of Confluence, showed that Confluence plans on drilling and completing 21 horizontal wells in the Niobrara Formation and six horizontal wells in the Codell Formation.  Engineering testimony also showed that the drainage area for analog two-mile-long horizontal Niobrara Formation wells is estimated at 51 acres, and an appropriate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by 21 horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation.  Engineering testimony also showed that the drainage area for analog two-mile-long horizontal Codell Formation wells are estimated at 191 acres, and an appropriate 1280-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by six horizontal wells producing oil, gas and associated hydrocarbons from the Codell Formation. Further, the engineering testimony showed that drilling and completing the proposed horizontal wells within the Niobrara and Codell Formations underlying the Application Lands is an efficient and economic method of developing the resource.

13.       The records of the Commission indicate that there is one horizontal well producing from the Niobrara Formation in Section 7 of the Application Lands (the Flaherty 18-7-10NBH Well (API No. 05-123-42435), operated by the Applicant) and one vertical well currently producing from the Niobrara and Codell Formations in Section 18 of the Application Lands (the State Seventy Holes #J-18 Well (API No. 05-123-41614), operated by Bonanza Creek Energy Operating Company LLC).  Applicant stated that each of these wells shall remain subject to applicable spacing orders and/or rules of the Commission, and shall not be affected by Applicant’s requested relief under this Application.  Proceeds from the sale of oil or gas from these wells shall continue to be distributed based on the applicable spacing orders and/or rules for these wells.  Therefore, Order No. 407-1126 should be limited to the Flaherty 18-7-10NBH Well only, and Order No. 407-1841 should be vacated in its entirety

14.       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.

 

15.       Applicant agrees to be bound by oral order of the Commission. 

 

16.       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 making Order No. 407-1126 applicable only to the Flaherty 18-7-10NBH Well (API No. 05-123-42435), vacating Order No. 407-1841 in its entirety, establishing an approximate 1,280-acre drilling and spacing unit for Sections 7 and 18, Township 4 North, Range 62 West, 6th P.M., and approving the drilling of up to 27 horizontal wells for production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Order No. 407-1841 is hereby vacated in its entirety.

 

2.         Order No. 407-1126 is hereby amended to provide that it is applicable only to the Flaherty 18-7-10NBH Well (API No. 05-123-42435). No further wells shall be drilled in the approximate 640-acre drilling and spacing unit created by Order Nos. 407-1126. The Flaherty 18-7-10NBH Well shall continue to pay to the approximate 640-acre drilling and spacing unit created by Order No. 407-1126.  Upon the plugging and abandonment of the Flaherty 18-7-10NBH Well, Order No. 407-1126 shall be deemed vacated.

 

3.         An approximate 1,280-acre drilling and spacing unit for the below described lands is hereby established, and a total of up to 21 horizontal wells within the unit are hereby approved for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, and a total of up to six horizontal wells within the unit are hereby approved for the production of oil, gas and associated hydrocarbons from the Codell Formation:

 

Township 4 North, Range 62 West, 6th P.M.

Section 7:        All

Section 18:      All

 

4.         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.

5.         Any horizontal wells to be drilled under the Order will be drilled from no more than three multi-well pads located on the surface of the drilling and spacing unit, or on adjacent lands with consent of the landowner, 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 the 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 21st day of February, 2018, as of January 29, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Spence Prine, Secretary