BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF AN AMENDED APPLICATION BY CONFLUENCE DJ LLC FOR AN ORDER TO, AMONG OTHER THINGS, ESTABLISH AN APPROXIMATE 640-ACRE DRILLING AND SPACING UNIT COMPRISED OF ALL OF SECTIONS 6 AND 7, TOWNSHIP 1 SOUTH, RANGE 65 WEST, 6TH P.M., FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, ADAMS COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 170900563

 

TYPE: SPACING

 

ORDER NO. 407-2424

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on May 1, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to establish an approximate 640-acre drilling and spacing unit for Sections 6 and 7, Township 1 South, Range 65 West, 6th P.M., and approve up to ten 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.         Confluence DJ LLC, Operator No. 10518 (“Confluence” or “Applicant”) 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 February 19, 1992 (amended August 20, 1993), the Commission issued Order 407-87, which, among other things, established 80-acre drilling and spacing units for production of oil, gas and assorted hydrocarbons from the Codell and Niobrara Formations, with the permitted well locations to be in accordance with Order No 407-1.  Sections 6 and 7, Township 1 South, Range 65 West, 6th P.M., are subject to this Order for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

5.         On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule.  Sections 6 and 7, Township 1 South, Range 65 West, 6th P.M., are subject to this Rule for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

6.         On July 13, 2017, Confluence, by its attorneys, filed with the Commission a verified application (“Application”), pursuant to § 34-60-116, C.R.S., for an order to: establish an approximate 800-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 10 horizontal wells within the unit, for 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 being granted by the Director:

 

Township 1 South, Range 65 West, 6th P.M.

Section 6: E1/2

Section 7: E1/2

Section 18: NE1/4

 

7.         Confluence 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. Confluence also requests that the Commission maintain Order No. 407-87 as to the Application Lands.

 

8.         On April 12, 2018 Confluence amended its Application to exclude the NE1/4 of Section 18 from the Application Lands, and to reduce the proposed unit to an approximate 640-acre unit.

 

9.         On October 5, 2017, Verdad Resources LLC, Operator No. 10651, (“Verdad”), by its attorneys, filed with the Commission a verified application (“Northern Verdad Application”), pursuant to § 34-60-116, C.R.S., for an order to: establish an approximate 1153-acre drilling and spacing unit for the below-described lands (“Northern Verdad Application Lands”) and to approve up to 16 horizontal wells within the unit, for 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 being granted by the Director:

 

Township 1 South, Range 65 West, 6th P.M.

Section 6: All

 

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

Section 1: All

 

10.       The Northern Verdad Application Lands for the Northern Verdad Application overlap with the Application Lands in the E1/2 of Section 6, Township 1 South, Range 65 West, 6th P.M.

 

11.       The Northern Verdad Application was assigned Docket No. 171200793.

 

12.       On November 17, 2017 Confluence protested the Northern Verdad Application.

 

13.       On November 30, 2017, Verdad, by its attorneys, filed with the Commission a verified application (“Southern Verdad Application”), pursuant to § 34-60-116, C.R.S., for an order to: establish an approximate 1280-acre drilling and spacing unit for the below-described lands (“Southern Verdad Application Lands”) and to approve up to 16 horizontal wells within the unit, for 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 being granted by the Director:

 

Township 1 South, Range 65 West, 6th P.M.

Section 7: All

 

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

Section 12: All

 

14.       The Southern Verdad Application Lands for the Southern Verdad Application overlap with the Application Lands in the E1/2 of Section 7, Township 1 South, Range 65 West, 6th P.M.

 

15.       The Northern Verdad Application was assigned Docket No. 180100104.

 

16.       On January 12, 2018, Confluence protested the Southern Verdad Application.

 

17.       Verdad protested Confluence’s Application and amended Application on September 5, 2017, and April 11, 2018, respectively.

 

18.       The Hearing Officer consolidated Docket Nos. 170900563, 171200793, and 180100104 for purposes of Commission hearing and prehearing procedure.

 

19.       Docket Nos. 170900563, 171200793, and 180100104 were scheduled to be heard by the Commission at the April 30-May 1, 2018 meeting.

 

20.       On May 1, 2018, before the Commission held the hearing on Docket Nos. 170900563, 171200793, and 180100104, Verdad withdrew the Northern and Southern Verdad Applications. As a result of Verdad’s withdrawal, there was no longer any proposed unit that overlapped with the Application Lands.

 

21.       Verdad also withdrew its protest to the Application.

 

22.       On May 1, 2018, Confluence presented the merits of its uncontested Application to the Commission.

 

23.       Land testimony and exhibits filed in support of the Application, and provided at the hearing, by William E. Nicas, Senior Vice President of Land for Confluence, showed that Confluence holds oil and gas leasehold interests and has the right to drill in the Application Lands.

 

24.       Geology testimony and exhibits filed in support of the Application, and provided at the hearing, by Robert Sterling, Senior Vice President of Geoscience for Confluence, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 430-440 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 also showed that the Codell Formation is present throughout the Application Lands, is approximately 14-19 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is made up of sandstone is a common source of supply. 

 

25.       Testimony and exhibits filed in support of the Application, and provided at the Hearing, by John P. Seidle, Vice President of MHA Petroleum Consultants, showed that the drainage area for analog horizontal Niobrara Formation wells are estimated at 62 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Niobrara Formation. Engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells are estimated at 135 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Codell Formation.

 

26.       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.

 

27.       Confluence agreed to be bound by oral order of the Commission.

 

28.       Based on the facts stated in the Application, the competing Verdad Applications having been withdrawn, and the testimony and exhibits offered at the Hearing, the Commission should enter an order to: establish an approximate 640-acre drilling and spacing unit for Sections 6 and 7, Township 1 South, Range 65 West, 6th P.M., and approve up to 10 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 10 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 65 West, 6th P.M.

Section 6: E1/2

Section 7: E1/2

 

2.         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.

 

3.         Commission Order No. 407-87 is maintained as to the Application Lands.

 

4.         All wells permitted under this Order shall be drilled from no more than one multi-well pad within the Application Lands or on adjacent 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 24 day of May, 2018, as of May 1, 2018.

 

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

 

 

 

                                                            By____________________________________         

                                                                Julie Spence Prine, Secretary