BEFORE THE OIL & 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 AND ADAMS COUNTIES, COLORADO.

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CAUSE NO. 407

   

DOCKET NO. 171200833

 

TYPE:  SPACING

 

ORDER NO.  407-2363

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on February 12, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to:  1) vacate an approximate 921-acre drilling and spacing unit established by Order No. 407-1908 for portions of Section 3, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1,241-acre drilling and spacing unit for portions of Sections 3 and 10, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., and approve up to 24 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.            Petro Operating Company, LLC (Operator No. 10583) (“Petro” or “Applicant”), is an interested party in the subject matter of the above referenced hearing.

 

2.            Due notice of 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 3 and 10, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., are subject to this Rule for the Codell and Niobrara Formations.

 

5.            On March 20, 2017, the Commission entered Order No. 407-1908, which established an approximate 921-acre drilling and spacing unit for portions of Section 3, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations and approved up to 24 horizontal wells within the unit.  Portions of Section 3, Township 1 South, Range 66 West, 6th P.M. and Section 34, Township 1 North, Range 66 West, 6th P.M., are subject to this Order for the Codell and Niobrara Formations.

 

 

6.            In May, 2017, Verdad Resources, LLC drilled, but has not completed, eight horizontal wells in the E˝ of the unit approved by Order No. 407-1908:  the Homestead 15 Well (API No. 05-123-44638);  the Homestead 16 Well (API No. 05-123-44636); the Homestead 17 Well (API No. 05-123-44643); the Homestead 18 Well (API No. 05-123-44627); the Homestead 19 Well (API No. 05-123-44631); the Homestead 20 Well (API No. 05-123-44624); the Homestead 21 Well (API No. 05-123-44646); and the Homestead 22 Well (API No. 05-123-44644) (“Homestead Wells”).  Applicant has conferred with Verdad and the parties agree that when production is established from the Homestead Wells, production will be allocated based on the proposed 1,241-acre drilling and spacing unit

 

7.            On October 12, 2017, Petro, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to:  1) vacate an approximate 921-acre drilling and spacing unit established by Order No. 407-1908 for portions of Section 3, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1,241-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 24 horizontal wells within the 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 granted by the Director:

 

Township 1 South, Range 66 West, 6th P.M.

Section 3:    All

Section 10:  W˝

 

Township 1 North, Range 66 West, 6th P.M.

Section 34:  S˝  

 

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

 

9.            November 20, 2017, Petro, 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.          Land testimony and exhibits submitted in support of the Application by Peter K. Scott, Landman for Petro, showed that Petro holds oil and gas leasehold interests and has a right to drill in the Application Lands.

 

11.          Geologic testimony and exhibits submitted in support of the Application by Michael A. Domenick, P.G., Geologist for Petro, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 400 to 440 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 further showed that the Codell Formation is present throughout the Application Lands, is approximately 11 to 14 feet thick, is generally of uniform thickness throughout the Application Lands, and is a common source of supply underling the Application Lands.  The geologic testimony showed that the Codell Formation consists of sandstone.

 

12.          Engineering testimony and exhibits submitted in support of the Application by Andy Peterson, engineering consultant for Petro, showed that the drainage area for analog 1.5 mile horizontal Niobrara Formation wells is estimated at 5.3 acres and for analog 2.5 mile horizontal Niobrara Formation wells is estimated at 9.2 acres, the drainage area for analog 1.5 mile horizontal Codell Formation wells is estimated at 33.9 acres and for analog 2.5 mile horizontal Codell Formation wells is estimated at 58.2 acres, and an approximate 1,241-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by 24 horizontal wells producing oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

13.          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.

 

14.          Petro agreed to be bound by oral order of the Commission.

15.          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:  1) vacate an approximate 921-acre drilling and spacing unit established by Order No. 407-1908 for portions of Section 3, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 1,241-acre drilling and spacing unit for portions of Sections 3 and 10, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., and approve up to 24 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formation.

 

ORDER

 

            IT IS HEREBY ORDERED:

 

1.            An approximate 921-acred drilling and spacing unit established by Order No. 407-1908 for portions of Section 3, Township 1 South, Range 66 West, 6th P.M., and Section 34, Township 1 North, Range 66 West, 6th P.M., is hereby vacated, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

2.            An approximate 1,241-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 24 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 South, Range 66 West, 6th P.M.

Section 3:    All

Section 10:  W˝

 

Township 1 North, Range 66 West, 6th P.M.

Section 34:  S˝  

 

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 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 February 12, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By_______________________________________

      Julie Spence Prine, Secretary