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 NIOBRARA FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 180100102
TYPE: POOLING
ORDER NO. 407-2368 |
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 make Order No. 407-2158, which pooled all interests in four approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., and subjected all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well, for the development and operation of the Niobrara Formation, applicable to previously unnoticed parties.
FINDINGS
The Commission finds as follows:
1. PDC Energy, Inc. (Operator No. 69175) (“PDC” 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 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., are subject to this Rule for the Niobrara Formation.
5. On February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993), which, among other things, established 80-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formations, the Codell Formation, and the Niobrara Formation underlying certain lands, including Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order 407-1.
6. On June 6, 2016, the Commission entered Order No. 407-1721, which pooled all interests in an approximate 480-acre, two approximate 400-acre, and an approximate 240-acre designated horizontal wellbore spacing units established for portions of Sections 17 and 18, Township 5 North, Range 64 West, 6th P.M., and Section 13, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Schaumberg 17G-214 Well (API No. 05-123-43089), the Schaumberg 17F-202 Well (API No. 05-123-43088), the Schaumberg 17F-332 Well (API No. 05-123-43087), and the Schaumberg 17G-314 Well (API No. 05-123-43090). Order No. 407-1721 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
7. Also on June 6, 2016, the Commission entered Order No. 407-1722, which pooled all interests in three approximate 480-acre designated horizontal wellbore spacing units established for portions of Sections 17 and 18, Township 5 North, Range 64 West, 6th P.M., and Section 13, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Cecil’s Kersey Farm 17K-404 Well (API No. 05-123-42904), the Cecil’s Kersey Farm 17K-204 Well (API No. 05-123-42901), and the Cecil’s Kersey Farm 17K-334 Well (API No. 05-123-42900). Order No. 407-1722 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
8. On October 24, 2016, the Commission entered Order No. 407-1820, which pooled all interests in two approximate 480-acre designated horizontal wellbore spacing units established for portions of Sections 17 and 18, Township 5 North, Range 64 West, 6th P.M., and Section 13, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Schaumberg 17F-204 Well (API No. 05-123-43091) and the Schaumberg 17F-334 Well (API No. 05-123-43092). Order No. 407-1820 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
9. Also on October 24, 2016, the Commission entered Order No. 407-1822, which pooled all interests in two approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 6 and 7, Township 5 North, Range 64 West, 6th P.M., Sections 1 and 12, Township 5 North, Range 65 West, 6th P.M., Section 31, Township 6 North, Range 64 West, 6th P.M., and Section 36, Township 6 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Dunn 7i-201 Well (API No. 05-123-42828) and the Dunn 7i-321 Well (API No. 05-123-42823). Order No. 407-1822 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
10. On June 12, 2017, the Commission entered Order No. 407-2066, which pooled all interests in three approximate 480-acre designated horizontal wellbore spacing units established for portions of Sections 17 and 18, Township 5 North, Range 64 West, 6th P.M., and Section 13, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Gillham 18X-234 Well (API (#05-123-43904), the Gillham 18X-332 Well (API No. 05-123-43908), and the Gillham 18X-104 Well (API No. 05-123-43902). Order No. 407-2066 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
11. Also on June 12, 2017, the Commission entered Order No. 407-2067, which pooled all interests in two approximate 480-acre designated horizontal wellbore spacing units established for portions of Sections 17 and 18, Township 5 North, Range 64 West, 6th P.M., and Section 13, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Cecils Kersey Farm 17B-214 Well (API No. 05-123-43895) and Cecils Kersey Farm 17B-304 Well (API No. 05-123-43894). Order No. 407-2067 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
12. On July 24, 2017, the Commission entered Order No. 407-2159, which pooled all interests in an approximate 360-acre designated horizontal wellbore spacing unit established for portions of Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Sandin 24C-221 Well (API No. 05-123-44665). Order No. 407-2159 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
13. Also on July 24, 2017, the Commission entered Order No. 407-2160, which pooled all interests in three approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Sandin 24N-241 Well (API No. 05-123-44667), Sandin 24N-301 Well (API No. 05-123-44671), and Sandin 24N-221 Well (API No. 05-123-44663). Order No. 407-2160 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
14. Also on July 24, 2017, the Commission entered Order No. 407-2161, which pooled all interests in an approximate 360-acre designated horizontal wellbore spacing unit established for portions of Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Sandin 24N-321 Well (API No. 05-123-44669). Order No. 407-2161 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
15. Also on July 24, 2017, the Commission entered Order No. 407-2162, which pooled all interests in two approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 7, 18, and 19, Township 5 North, Range 64 West, 6th P.M., and Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of the Sandin 24V-341 Well (API No. 05-123-44662) and the Sandin 24V-401 Well (API No. 05-123-44666). Order No. 407-2162 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well.
16. Also on July 24, 2017, the Commission entered Order No. 407-2158, which pooled all interests in four approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 12, 13, and 24, Township 5 North Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b), C.R.S., were first incurred for the drilling of Sandin 24C-201 Well (API No. 05-123-44668), the Sandin 24C-241 Well (API No. 05-123-44664), the Sandin 24C-301 Well (API No. 05-123-44670), and the Sandin 24C-321 Well (API No. 05-123-44661).
17. On November 30, 2017, PDC, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to make Order No. 407-2158, which pooled all interests in four approximate 720-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, and subjected any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Sandin 24C-201 Well (API No. 05-123-44668), the Sandin 24C-241 Well (API No. 05-123-44664), the Sandin 24C-301 Well (API No. 05-123-44670), and the Sandin 24C-321 Well (API No. 05-123-44661) (“Wells”) applicable to previously unnoticed interest owners:
Township 5 North, Range 65 West, 6th P.M.
Section 12: E½
Section 13: E½
Section 24: N½NE¼
18. On January 3, 2018, Applicant, 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.
19. Land testimony and exhibits submitted in support of the Application by Daniel R. McCoy, Regional Landman for PDC, showed that the Estate of Bernice Eva Knoph, a previously unnoticed interest owner, was notified of the Application and received an Authority for Expenditure (“AFE”) and offer to participate in the Well or to lease their interests. Further testimony showed that the AFE sent by the Applicant to the to the previously unnoticed interest owner was a fair and reasonable estimate of the costs of the proposed drilling operations and was received at least 35 days prior to the February 12, 2018 hearing date.
20. 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 Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well, but did not provide testimony for any subsequent wells.
21. 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.
22. PDC agreed to be bound by oral order of the Commission.
23. 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 make Order No. 407-2158, including the cost recovery provisions of §34-60-116(7), C.R.S., applicable to the interest of the Estate of Bernice Eva Knoph, a previously unnoticed interest owner, in four approximate 720-acre designated horizontal wellbore spacing units established for portions of Sections 12, 13, and 24, Township 5 North, Range 65 West, 6th P.M., for the drilling of the Sandin 24C-201 Well, the Sandin 24C-241 Well, the Sandin 24C-301 Well, and the Sandin 24C-321 Well, for the development and operation of the Niobrara Formation.
ORDER
IT IS HEREBY ORDERED:
1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, Order No. 407-2158, including the cost recovery provisions of §34-60-116(7), C.R.S., is hereby made applicable to the Estate of Bernice Eva Knoph, and its interest in four approximate 720-acre designated horizontal wellbore spacing units established for the below-described lands are hereby pooled, for the development and operation of the Niobrara Formation, effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Sandin 24C-201 Well (API No. 05-123-44668), the Sandin 24C-241 Well (API No. 05-123-44664), the Sandin 24C-301 Well (API No. 05-123-44670), and the Sandin 24C-321 Well (API No. 05-123-44661) (“Wells”):
Township 5 North, Range 65 West, 6th P.M.
Section 12: E½
Section 13: E½
Section 24: N½NE¼
2. The production obtained from the designated horizontal wellbore spacing units shall be allocated to each owner in the units on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the designated horizontal wellbore spacing units; each owner of an interest in the designated horizontal wellbore spacing units shall be entitled to receive its share of the production of the Wells located on the designated horizontal wellbore spacing units applicable to its interest in the designated horizontal wellbore spacing units.
3. Any working interest owner who does not elect to participate in the Well(s) 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), C.R.S. The nonconsenting working interest owner must reimburse the consenting owners for his proportionate share of the costs and risks of drilling and operating the Well(s) 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 Well(s) 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), 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 designated horizontal wellbore spacing units 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(s), surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well(s) as if it had originally agreed to the drilling.
6. The operator of the Wells drilled on the above-described designated horizontal wellbore spacing units 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.
8. The designated horizontal wellbore spacing units described above shall be considered drilling and spacing units established by the Commission for purposes of Rule 530.a.
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