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

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD AND LARIMER COUNTIES, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 180400312

 

TYPE: POOLING

 

ORDER NO. 407-2442

REPORT OF THE COMMISSION

 

The Commission heard this matter on April 30, 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. 407-1899, which pooled all interests in an approximate 1,715.781-acre drilling and spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 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 and operating of the Raindance FC 23-232HNX, Raindance FC 23-232HN, Raindance FC 23-249HN, Raindance FC 23-272HC, Raindance FC 23-289HNX, Raindance FC 23-289HN, Raindance FC 23-312HN, Raindance FC 23-312HC, Raindance FC 23-329HNX, Raindance FC 23-352HN, Raindance FC 23-369HN, Raindance FC 23-369HC, Raindance FC 23-392HNX, Raindance FC 26-009HN, Raindance FC 26-032HN, Raindance FC 26-032HC, Raindance FC 26-049HN, Raindance FC 26-072HNX, Raindance FC 26-089HC, Raindance FC 26-089HN, Raindance FC 26-112HN, Raindance FC 26-112HNX, Raindance FC 26-129HC, Raindance FC 26-152HN, and the Raindance FC 26-169HN Wells, for the development and operation of the Niobrara and Codell Formations, applicable to previously unnoticed parties.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Great Western Operating Company, LLC (Operator No.10110) (“Great Western” 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 February 19, 1992 (amended August 20, 1993), the Commission entered Order No. 407-87 which, among other things, established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations underlying certain lands, including Sections 5 and 8, Township 5 North, Range 64 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order 407-1, which are subject to Order 407-1899, for 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 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M are subject to this Rule for the Codell and Niobrara Formations.

 

6.         On January 7, 2013, the Commission entered Order No. 407-742, as corrected, which, among other things, vacated certain 80-acre drilling and spacing units established by Order No. 407-87 for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., and established two 320-acre and 480-acre drilling and spacing units for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., approved up to four horizontal wells within each unit for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the horizontal wellbores to be no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.

 

7.         On September 16, 2013, the Commission entered Order No. 407-851 which, among other things, established an approximate 480-acre horizontal drilling and spacing unit for portions of Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M., and approved up to 12 horizontal wells within the unit for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries and no closer than 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.

 

8.         On September 15, 2014, the Commission entered Order No. 407-1104 which, among other things, vacated an approximate 320-acre drilling and spacing unit established by Order No. 407-742 for Section 30, Township 6 North, Range 67 West, 6th P.M., vacated Order No. 407-851 in its entirety, and modified Order No. 407-742 to reflect a corrected acreage of 450 acres for the drilling and spacing unit established for Sections 19 and 30, Township 6 North, Range 67 West, 6th P.M. The SE¼ of Section 19 and the E½ of Section 30, Township 6 North, Range 67 West, 6th P.M., are subject to Order No. 407-1104.

 

9.         On March 20, 2017, the Commission entered Order No. 407-1898 which, among other things, established an approximate 1,715.781-acre drilling and spacing unit for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara, Codell, Carlile, and Greenhorn Formations, and approved up to 25 horizontal wells within the unit, with the productive interval of any horizontal well 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, unless the Director grants an exception.

 

10.       On March 20, 2017, the Commission entered Order 407-1899 which, among other things, pooled all interests in an approximate 1,715.781-acre drilling and spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations, and to subject any non-consenting 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 Raindance FC 23-232HNX, Raindance FC 23-232HN, Raindance FC 23-249HN, Raindance FC 23-272HC, Raindance FC 23-289HNX, Raindance FC 23-289HN, Raindance FC 23-312HN, Raindance FC 23-312HC, Raindance FC 23-329HNX, Raindance FC 23-352HN, Raindance FC 23-369HN, Raindance FC 23-369HC, Raindance FC 23-392HNX, Raindance FC 26-009HN, Raindance FC 26-032HN, Raindance FC 26-032HC, Raindance FC 26-049HN, Raindance FC 26-072HNX, Raindance FC 26-089HC, Raindance FC 26-089HN, Raindance FC 26-112HN, Raindance FC 26-112HNX, Raindance FC 26-129HC, Raindance FC 26-152HN, and the Raindance FC 26-169HN Wells.

11.       On February 28, 2018, Great Western, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to make Order No. 407-1899, which pooled all interests in an approximate 1,715.781-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and subjecting any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling and operating of the Raindance FC 23-232HNX, Raindance FC 23-232HN, Raindance FC 23-249HN, Raindance FC 23-272HC, Raindance FC 23-289HNX, Raindance FC 23-289HN, Raindance FC 23-312HN, Raindance FC 23-312HC, Raindance FC 23-329HNX, Raindance FC 23-352HN, Raindance FC 23-369HN, Raindance FC 23-369HC, Raindance FC 23-392HNX, Raindance FC 26-009HN, Raindance FC 26-032HN, Raindance FC 26-032HC, Raindance FC 26-049HN, Raindance FC 26-072HNX, Raindance FC 26-089HC, Raindance FC 26-089HN, Raindance FC 26-112HN, Raindance FC 26-112HNX, Raindance FC 26-129HC, Raindance FC 26-152HN, and the Raindance FC 26-169HN Well (together, the “Wells”), applicable to previously unnoticed interest owners:

 

Township 6 North, Range 67 West, 6th P.M.

Section 19:      S½  

Section 20:      W½SW¼

Section 29:      W½NW¼

Section 30:      N½

 

Township 6 North, Range 68 West, 6th P.M.

Section 23:      SE¼   

Section 24:      S½

Section 25:      N½

Section 26:      NE¼ 

 

Larimer County, Colorado

 

12.       On March 28, 2018, Great Western, 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.

 

13.       Land testimony and exhibits submitted in support of the Application by Michael Tucker, Senior Landman for Great Western Operating Company, LLC, showed that previously unnoticed interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Wells. Further testimony concluded that the AFE sent by the Applicant to the previously unnoticed interest owners was a fair and reasonable estimate of the costs of the proposed drilling operations and was received at least 35 days prior to the April 30, 2018 hearing date.

                                                 

14.       Land testimony also 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 Wells, but did not provide testimony for any subsequent wells.

15.       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.

 

16.       Great Western agreed to be bound by oral order of the Commission.

 

17.       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 apply Order No. 407-1899, including the cost recovery provisions of §34-60-116(7), C.R.S applicable to previously unnoticed interest owners in an approximate 1,715.781-acre drilling and spacing unit established for portions of Sections 19, 20, 29, and 30, Township 6 North, Range 67 West, 6th P.M., and Sections 23, 24, 25, and 26, Township 6 North, Range 68 West, 6th P.M., for the for the drilling and operation of the Wells, for the 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, Order No. 407-1899, including the cost recovery provisions of §34-60-116(7), C.R.S., is hereby made applicable to all previously unnoticed interest owners, and their interests in an approximate 1,715.781-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, 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., are first incurred for the drilling of the Wells:

 

Township 6 North, Range 67 West, 6th P.M.

Section 19:      S½  

Section 20:      W½SW¼

Section 29:      W½NW¼

Section 30:      N½

 

Township 6 North, Range 68 West, 6th P.M.

Section 23:      SE¼   

Section 24:      S½

Section 25:      N½

Section 26:      NE¼ 

 

Larimer County, Colorado

 

 

2.         The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Well(s) located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The nonconsenting working interest owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well(s) (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the  drilling and spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

 

4.         Any unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the Well(s) and be subject to the penalties as provided for by §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 drilling and 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 unleased owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S., as amended. After recovery of such costs, each nonconsenting unleased 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 Well(s) drilled on the above-described drilling and spacing unit 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.

 

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 17th day of May, 2018, as of April 30, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Julie Spence Prine, Secretary