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 NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 180400325 TYPE: SPACING ORDER NO. 407-2451

REPORT OF THE COMMISSION

The Commission heard this matter on April 30, 2018, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln St., Denver, Colorado, upon application for an order to establish an approximate 480-acre drilling and spacing unit for the E½ of Section 20 and the NE¼ of Section 29, Township 1 North, Range 67 West, 6^th P.M., and approve up to eight horizontal wells in the approximate 480-acre drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

FINDINGS

The Commission finds as follows:

1.         Crestone Peak Resources Operating LLC (Operator No. 10633), (“Crestone Peak” 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. Portions of Section 20 and Section 29, Township 1 North, Range 67 West, 6^th P.M. are subject to this Rule for the Niobrara and Codell Formations.

5.         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 vertical and/or directional wells for the production of oil and/or gas from the Codell-Niobrara Formations.  Portions of Section 20 and Section 29, Township 1 North, Range 67 West, 6^th P.M. are subject to Order No. 407-87 as it applies to the existing vertical and/or directional well development and operation of the Codell and Niobrara Formations.

6.         On March 1, 2018, Crestone Peak, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to establish an approximate 480-acre drilling and spacing unit for the below-described lands (“Application Lands”), and to approve up to eight new horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of any horizontal well shall be no closer than 460 feet from the unit boundaries, and not less than 150 feet from the productive interval of another well within the unit, unless an exception is granted by the Director:

Township 1 North, Range 67 West, 6th P.M.

Section 20:         E½

Section 29:         NE¼ 

            Applicant states that the wells permitted under this Order shall be drilled from no more than one well pad in the unit, or adjacent thereto, unless an exception is granted by the Director.

7.         On March 23, 2018, Crestone Peak, by its attorneys, filed with the Commission a written request to approve the Application 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 Shea Kauffman, Land Manager for Crestone Peak, showed that both the mineral and surface interests in the Application Lands is in majority fee ownership, and that Crestone Peak owns 58% leasehold ownership interest in the Application Lands.

9.         Geoscience testimony and exhibits submitted in support of the Application by William Rucker, Geologist for Crestone Peak, showed the Niobrara Formation is present throughout the Application Lands and averages approximately 370 feet in thickness, and the Codell Formation is present throughout the Application Lands and averages approximately 21 feet in thickness.

10.       Engineering testimony and exhibits submitted in support of the Application by Chris Wong, Senior Reservoir Engineer for Crestone Peak, demonstrated that the estimated drainage area is not greater than 36.5 acres per horizontal well within an approximate 480-acre drilling and spacing unit for the Niobrara Formation for a total of 218.9 acres in the Niobrara Formation and the estimated drainage area is not greater than 130.7 acres per horizontal well within an approximate 1,680-acre drilling and spacing unit for the Codell Formation for a total of 261.4 acres  for the Codell Formation. The proposed 480-acre drilling and spacing unit is not smaller than the maximum area that can be economically and efficiently drained by the requested eight horizontal wells drilled in the established unit for the Codell and Niobrara Formations, and the proposed 480-acre drilling and spacing unit, with the requested setbacks, for up to eight horizontal wells in the Codell and Niobrara Formations in the Application Lands, will promote efficient drainage, protect correlative rights, and prevent waste.

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.       Crestone Peak 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 Officer review of the Application under Rule 511, the Commission should establish an approximate 1680-acre drilling and spacing unit for the E½ of Section 20 and the NE¼ of Section 29, Township 1 North, Range 67 West, 6^th P.M., and approve up to eight horizontal wells in the approximate 480-acre drilling and spacing unit, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1. An approximate 480-acre drilling and spacing unit is hereby established for the below-described lands, and up to eight horizontal wells are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the productive interval of any horizontal well shall be no closer than 460 feet from the unit boundaries, and not less than 150 feet from the productive interval of another well within the unit, unless an exception is granted by the Director:

Township 1 North, Range 67 West, 6th P.M.

Section 20:         E½

Section 29:         NE¼ 

2. The wells permitted under this Order shall be located on no more than one well pad within the unit, or on adjacent lands, subject to Rule 318A, 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 21st day of May, 2018, effective as of April 30, 2018.

OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

By: ____________________________________     

     Julie Spence Prine, Secretary