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, FORT HAYS, CODELL, AND CARLILE FORMATIONS, UNNAMED FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 535
DOCKET NO. 180300133
TYPE: SPACING
ORDER NO. 407-2420 & 535-989 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 19, 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 960-acre drilling and spacing unit established by Order No. 535-528 for Section 26 and the N˝ of Section 35, Township 8 North, Range 61 West, 6th P.M. for production of oil, gas, and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 1,280-acre drilling and spacing unit for Section 35, Township 8 North, Range 61 West, 6th P.M. and Section 2, Township 7 North, Range 61 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, and approve up to 16 new horizontal wells within the proposed drilling and spacing unit for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.
FINDINGS
The Commission finds as follows:
1. Mallard Exploration, LLC (Operator No. 10670) (“Mallard” 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. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 2, Township 7 North, Range 61 West, 6th P.M. is subject to Rule 318.a. for the Niobrara, Fort Hays, Codell, and Carlile Formations, and Section 35, Township 8 North, Range 61 West, 6th P.M., are subject to Rule 318.a. for the Fort Hays, Codell, and Carlile Formations.
5. On September 19, 2011, the Commission entered Order No. 535-69 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 35, Township 8 North, Range 61 West, 6th P.M., and approved two horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. The 640-acre drilling and spacing unit established for Section 35, Township 8 North, Range 61 West, 6th P.M. was vacated by Order No. 535-528.
6. On January 23, 2013, the Commission entered Order No. 535-139 which, among other things, pooled all interests in the 640-acre drilling and spacing unit established for Section 35, Township 8 North, Range 61 West, 6th P.M., to accommodate the Politzer 1-35H Well (API No. 05-123-34858), and subjected any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the development and operation of the Niobrara Formation. Order No. 535-139 was vacated by Order No. 535-528.
7. On September 15, 2014, the Commission entered Order No. 535-528 which, among other things, 1) vacated the approximate 640-acre drilling and spacing unit established by Order No. 535-69 for Section 35, Township 8 North, Range 61 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) vacated Order No. 535-139 in its entirety; and 3) established an approximate 960-acre drilling and spacing unit for Section 26 and the N˝ of Section 35, Township 8 North, Range 61 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.
8. On January 11, 2018, Mallard, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate an approximate 960-acre drilling and spacing unit established by Order No. 535-528 for Section 26 and the N˝ of Section 35, Township 8 North, Range 61 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation; 2) establish an approximate 1,280-acre drilling and spacing unit for Section 35, Township 8 North, Range 61 West, 6th P.M. and Section 2, Township 7 North, Range 61 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, and approve up to 16 new horizontal wells within the proposed drilling and spacing unit for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations; 3) providing that the productive interval of any horizontal well shall be no closer than 600 feet from the unit boundaries, and not less than 150 feet from the productive interval of any other wellbore within the unit producing from the same source of supply, for the production oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, unless an exception is granted by the Director; and 4) authorizing up to four new well pads within the proposed drilling and spacing unit, or adjacent thereto, unless an exception is granted by the Director, on the below-described “Application Lands”:
Township 8 North, Range 61 West, 6th P.M.
Section 35: All
Township 7 North, Range 61 West, 6th P.M.
Section 2: All
9. On February 26, 2018, Mallard, 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 Jordan Mattson, Vice President – Land for Mallard, showed that both the mineral and surface interests in the Application Lands are owned in fee, and that Mallard owns a partial undivided leasehold ownership interest in the Application Lands.
11. Geoscience testimony and exhibits submitted in support of the Application by Peter Kubik, Vice President of Exploration and Geology for Mallard, showed the Niobrara Formation is present throughout the Application Lands and ranges from approximately 230 to 350 feet thick, the Ft. Hays Formation is present throughout the Application Lands and ranges from approximately 20 to 26 feet thick, the Codell Formation is present throughout the Application Lands and ranges from approximately 6 to 10 feet thick, and the Carlile Formation is present throughout the Application Lands and ranges from approximately 20 to 30 feet thick. Geoscience testimony further concluded that the Fort Hays and Carlile Formations are non-target formations.
12. Engineering testimony and exhibits submitted in support of the Application by Matt Volkmar, President of Mallard, demonstrated that the average estimated drainage per well in the Niobrara Formation is 37 acres and the average estimated drainage per well in the Codell Formation is 181 acres. The Engineering testimony showed that as a result of the thickness of the Codell Formation, the wells may deviate into the Carlile Formation or the Fort Hays member of the Niobrara Formation during drilling, but this does not change the effective drainage calculations, and that the drilling, completion, and production of up to 16 Niobrara, Codell, Fort Hays and Carlile Formation horizontal wells within the proposed 1280-acre drilling and spacing unit will not drain more than the requested approximate 1,280-acre drilling and spacing unit in the Codell, Fort Hays, Carlile 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. Mallard 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 960-acre drilling and spacing unit established by Order No. 535-528 for Section 26 and the N˝ of Section 35, Township 8 North, Range 61 West, 6th P.M. for production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 2) establish an approximate 1,280-acre drilling and spacing unit for Section 35, Township 8 North, Range 61 West, 6th P.M. and Section 2, Township 7 North, Range 61 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Fort Hays, Carlile, Codell and Niobrara Formations, and approve up to 16 new horizontal wells within the proposed drilling and spacing unit for the production of oil, gas and associated hydrocarbons from the Fort Hays, Carlile, Codell and Niobrara Formations.
ORDER
IT IS HEREBY ORDERED:
1. The approximate 960-acre drilling and spacing unit established by Order No. 535-528 for Section 26 and the N˝ of Section 35, Township 8 North, Range 61 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, is hereby vacated.
2. An approximate 1,280-acre drilling and spacing unit for the below-described lands is hereby established, for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations, and a total of up to 16 new horizontal wells within the unit are hereby approved, for the production of oil, gas, and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations:
Township 8 North, Range 61 West, 6th P.M.
Section 35: All
Township 7 North, Range 61 West, 6th P.M.
Section 2: All
3. The productive interval of any wellbore will be located no closer than 600 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.
4. The proposed wells shall be located on no more than four multi-well pads on the surface of the drilling unit, or on adjacent lands with consent of the landowner, unless an exception is granted by the Director.
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 16th day of April, 2018, as of March 19, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By_______________________________________
Julie Spence Prine, Secretary