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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407 DOCKET NO. 171200850 TYPE: POOLING ORDER NO. 407-2378 |
REPORT OF THE COMMISSION
The Commission heard this matter on December 11, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to pool all interests in five approximate 360-acre designated horizontal wellbore spacing units and seven approximate 720-acre designated horizontal wellbore spacing units designated for portions of Sections 9, 10, 15, 16, 21, and 22, Township 1 North, Range 65 West, 6th P.M., established for the Robin 9-2HZ Well, the Robin 9-3HZ Well, the Robin 9-4HZ Well, the Robin 9-5HZ Well, the Robin 9-6HZ Well, the Robin 9-7HZ Well, the Robin 9-8HZ Well, the Robin 9-9HZ Well, the Robin 9-10HZ Well, the Robin 9-11HZ Well, the Robin 9-12HZ Well, and the Robin 9-18HZ Well for development and operation of the Niobrara and Codell Formations.
FINDINGS
The Commission finds as follows:
1. Kerr-McGee Oil & Gas Onshore LP, Operator No. 47120 (“Kerr-McGee” 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.
5. On February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the permitted Well locations in accordance with the provisions of Order No. 407-1.
6. On October 12, 2017, Applicant, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S. for an order to pool all interests in five approximate 360-acre designated horizontal wellbore spacing units and seven approximate 720-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the date of the Application, for the drilling of the Robin 9-2HZ Well (API No. 05-123-45146), the Robin 9-3HZ Well (API No. 05-123-45153), the Robin 9-4HZ Well (API No. 05-123-45157), the Robin 9-5HZ Well (API No. 05-123-45155), the Robin 9-6HZ Well (API No. 05-123-45150), the Robin 9-7HZ Well (API No. 05-123-45154), the Robin 9-8HZ Well (API No. 05-123-45156), the Robin 9-9HZ Well (API No. 05-123-45147), the Robin 9-10HZ Well (API No. 05-123-45148), the Robin 9-11HZ Well (API No. 05-123-45149), the Robin 9-12HZ Well (API No. 05-123-45152), and the Robin 9-18HZ Well (API No. 05-123-45246) (“Wells”):
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SW¼SW¼
Section 16: W½W½
Section 21: W½W½
Wellbore Spacing Unit (“WSU”) No 1 – 360-acres
Robin 9-2HZ Well (Codell Formation)
WSU No. 2 – 360 acres
Robin 9-3HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: S½SW¼
Section 16: W½
Section 21: W½
WSU No 3 – 720-acres
Robin 9-4HZ Well (Niobrara Formation)
WSU No. 4 – 720 acres
Robin 9-5HZ Well (Codell Formation)
WSU No. 5. – 720 acres
Robin 9-6HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SW¼
Section 16: E½W½
Section 21: E½W½
WSU No. 6 – 360-acres
Robin 9-7HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SW¼, SW¼SE¼
Section 16: E½W½, W½E½
Section 21: E½W½, W½E½
WSU Nos. 7 – 720 acres
Robin 9-8HZ Well (Codell Formation)
WSU No. 8 – 720 acres
Robin 9-9HZ Well (Niobrara Formation)
WSU No. 9 – 720 acres
Robin 9-10HZ Well (Niobrara Formation)
Township 1 North, Range 67 West, 6th
P.M.
Section 9: SW¼SE¼
Section 16: W½E½
Section 21: W½E½
WSU No. 10 – 360-acres
Robin 9-11HZ Well (Codell Formation)
WSU No. 11 – 360 acres
Robin 9-12HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SE¼
Section 10: SW¼SW¼
Section 15: W½W½
Section 16: E½E½
Section 21: E½E½
Section 22: W½W½
WSU No. 12 – 720-acres
Robin 9-18HZ Well (Niobrara Formation)
7. On November 20, 2017, 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.
8. Land testimony and exhibits submitted in support of the Application by Dave Sullivan, Landman for Kerr-McGee showed that all non-consenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offer to participate in the Wells. Further testimony concluded that the AFEs sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and were received at least 35 days prior to the January 29, 2018 hearing date.
9. 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 Robin 9-2HZ Well, the Robin 9-3HZ Well, the Robin 9-4HZ Well, the Robin 9-5HZ Well, the Robin 9-6HZ Well, the Robin 9-7HZ Well, the Robin 9-8HZ Well, the Robin 9-9HZ Well, the Robin 9-10HZ Well, the Robin 9-11HZ Well, the Robin 9-12HZ Well, and the Robin 9-18HZ Well, but did not provide testimony for any subsequent wells.
10. The designated horizontal wellbore spacing units contain Colorado State Board of Land Commissioners (State Land Board) leased and/or unleased minerals. A Communitization Agreement with the State Land Board will be required for all wells drilled under the terms of this order. The Communitization Agreement must be submitted prior to drilling operations for a well within the designated horizontal wellbore spacing units.
11. 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.
12. Applicant agreed to be bound by oral order of the Commission.
13 Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Unit review of the Application under Rule 511., the Commission should enter an order to pool all interests in five approximate 360-acre designated horizontal wellbore spacing units and seven approximate 720-acre designated horizontal wellbore spacing units designated for portions of Sections 9, 10, 15, 16, 21, and 22, Township 1 North, Range 65 West, 6th P.M., established for the Robin 9-2HZ Well, the Robin 9-3HZ Well, the Robin 9-4HZ Well, the Robin 9-5HZ Well, the Robin 9-6HZ Well, the Robin 9-7HZ Well, the Robin 9-8HZ Well, the Robin 9-9HZ Well, the Robin 9-10HZ Well, the Robin 9-11HZ Well, the Robin 9-12HZ Well, and the Robin 9-18HZ Well for development and operation of the Niobrara and Codell Formations.
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, all interests in five approximate 360-acre designate horizontal wellbore spacing units and seven 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 and Codell Formations, effective as of the date of the Application, for the drilling of the Robin 9-2HZ Well (API No. 05-123-45146), the Robin 9-3HZ Well (API No. 05-123-45153), the Robin 9-4HZ Well (API No. 05-123-45157), the Robin 9-5HZ Well (API No. 05-123-45155), the Robin 9-6HZ Well (API No. 05-123-45150), the Robin 9-7HZ Well (API No. 05-123-45154), the Robin 9-8HZ Well (API No. 05-123-45156), the Robin 9-9HZ Well (API No. 05-123-45147), the Robin 9-10HZ Well (API No. 05-123-45148), the Robin 9-11HZ Well (API No. 05-123-45149), the Robin 9-12HZ Well (API No. 05-123-45152), and the Robin 9-18HZ Well (API No. 05-123-45246) (“Wells”):
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SW¼SW¼
Section 16: W½W½
Section 21: W½W½
Wellbore Spacing Unit (“WSU”) No 1 – 360-acres
Robin 9-2HZ Well (Codell Formation)
WSU No. 2 – 360 acres
Robin 9-3HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: S½SW¼
Section 16: W½
Section 21: W½
WSU No 3 – 720-acres
Robin 9-4HZ Well (Niobrara Formation)
WSU No. 4 – 720 acres
Robin 9-5HZ Well (Codell Formation)
WSU No. 5. – 720 acres
Robin 9-6HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SW¼
Section 16: E½W½
Section 21: E½W½
WSU No. 6 – 360-acres
Robin 9-7HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SW¼, SW¼SE¼
Section 16: E½W½, W½E½
Section 21: E½W½, W½E½
WSU Nos. 7 – 720 acres
Robin 9-8HZ Well (Codell Formation)
WSU No. 8 – 720 acres
Robin 9-9HZ Well (Niobrara Formation)
WSU No. 9 – 720 acres
Robin 9-10HZ Well (Niobrara Formation)
Township 1 North, Range 67 West, 6th
P.M.
Section 9: SW¼SE¼
Section 16: W½E½
Section 21: W½E½
WSU No. 10 – 360-acres
Robin 9-11HZ Well (Codell Formation)
WSU No. 11 – 360 acres
Robin 9-12HZ Well (Niobrara Formation)
Township 1 North, Range 65 West, 6th
P.M.
Section 9: SE¼SE¼
Section 10: SW¼SW¼
Section 15: W½W½
Section 16: E½E½
Section 21: E½E½
Section 22: W½W½
WSU No. 12 – 720-acres
Robin 9-18HZ Well (Niobrara Formation)
2. The production obtained from the designated horizontal wellbore spacing unit shall be allocated to each owner in the unit 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 unit; each owner of an interest in the designated horizontal wellbore spacing unit shall be entitled to receive its share of the production of the well located on the designated horizontal wellbore spacing unit applicable to its interest in the designated horizontal wellbore spacing unit.
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 unit 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, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well 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.
9. A Communitization Agreement with the State Land Board will be required for all wells drilled under the terms of this order. The Communitization Agreement must be submitted prior to drilling operations for a well within the designated horizontal wellbore spacing units.
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 3rd day of April, 2018, as of March 19, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Julie Spence Prine, Secretary