BEFORE THE OIL AND GAS CONSERVATION
COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF AN APPLICATION BY CONFLUENCE DJ LLC FOR AN ORDER TO, AMONG OTHER THINGS, ESTABLISH AN APPROXIMATE 1280-ACRE DRILLING AND SPACING UNIT AND AUTHORIZE UP TO TWENTY (20) WELLS FOR PRODUCTION FROM THE CODELL AND NIOBRARA FORMATIONS, FOR SECTIONS 4 AND 9, TOWNSHIP 1 SOUTH, RANGE 65 WEST, 6TH P.M., WATTENBERG FIELD, ADAMS COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 171000719
TYPE: SPACING
ORDER NO. 407-2425 |
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 1280-acre drilling and spacing unit for Sections 4 and 9, Township 1 South, Range 65 West, 6th P.M., and approve up to twenty 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 4 and 9, 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 4 and 9, 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 August 31, 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 1280-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 20 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 4: All
Section 9: All
7. Confluence states that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads, 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 August 31, 2017, Verdad Resources LLC, Operator No. 10651, (“Verdad”), by its attorneys, filed with the Commission a verified application (“Verdad Application”), pursuant to § 34-60-116, C.R.S., for an order to: establish an approximate 1,600-acre drilling and spacing unit for the below-described lands (“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 4: All
Section 9: All
Section 16: N1/2
9. The Verdad Application Lands overlap with the Application Lands in Sections 4 and 9, Township 1 South, Range 65 West, 6th P.M.
10. The Verdad Application was assigned Docket No. 171000666.
11. On October 16, 2017, Confluence protested the Verdad Application.
12. The Hearing Officer consolidated Docket Nos. 171000719 and 171000666.
13. Docket Nos. 171000719 and 171000666 were scheduled to be heard by the Commission at the April 30-May 1, 2018 meeting.
14. On May 1, 2018, before the Commission held the hearing on Docket Nos. 171000719 and 171000666, Verdad withdrew the Verdad Application. As a result of Verdad’s withdrawal, there was no longer any protest to the Application or proposed unit that overlapped with the Application Lands.
15. On May 1, 2018, Confluence presented the merits of its uncontested Application to the Commission.
16. 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.
17. 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 18-34 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 16-17 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.
18. 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 1280-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 1280-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.
19. 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.
20. Confluence agreed to be bound by oral order of the Commission.
21. 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 1280-acre drilling and spacing unit for Sections 4 and 9, Township 1 South, Range 65 West, 6th P.M., and approve up to 20 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 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 20 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 4: All
Section 9: All
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. 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 two multi-well pads 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