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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 180400335
TYPE: POOLING
ORDER NO. 407-2456 |
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 subject all additional parties to Order No. 407-2324 which pooled all interests in eight approximate 1440-acre designated horizontal wellbore spacing units established for Sections 9 and 10 and for portions of Section 11, Township 3 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 of the Postle IC 09-259HN in WSU #1, Postle IC 09-299HN in WSU #2, Postle IC 09-299HNX in WSU #3, Postle IC 09-302HC in WSU #4, Postle IC 09-302HN in WSU #5, Postle IC 09-342HN in WSU #6, Postle IC 09-342HNX in WSU #7, and Postle IC 09-379HC in WSU #8, 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 April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 9 and 10 and for portions of Section 11, Township 3 North, Range 68 West, 6th 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 the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations underlying certain lands, with permitted well locations in accordance with the provisions of Order No. 407-1. Sections 9 and 10 and for portions of Section 11, Township 3 North, Range 68 West, 6th P.M., are subject to this Order for the Niobrara and Codell Formation.
6. On July 29, 2013, the Commission entered Order No. 407-833 which established an approximate 640-acre drilling and spacing unit and approved up to 12 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formation. Section 11, Township 3 North, Range 68 West, 6th P.M. is subject to this Order for the Niobrara Formation.
7. On July 28, 2014, the Commission entered Order No. 407-1091 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 11, Township 3 North, Range 68 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Postle IC 11-342HC Well, for the development and operation of the Codell Formation.
8. On July 28, 2014, the Commission entered Order No. 407-1091 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 11, Township 3 North, Range 68 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Postle IC 11-302HN Well, for the development and operation of the Niobrara Formation.
9. On July 28, 2014, the Commission entered Order No. 407-1092 which pooled all interests within an approximate 640-acre drilling and spacing unit established for Section 11, Township 3 North, Range 68 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Postle IC 11-302HN Well, for the development and operation of the Niobrara Formation.
10. On July 28, 2014, the Commission entered Order No. 407-1093, which pooled all interests in an approximate 640-acre drilling and spacing unit, for the development and operation of the Niobrara Formation.
11. On October 27, 2014, the Commission entered Order No. 407-1145, which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 11, Township 3 North, Range 68 West, 6th P.M., for the development and operation of the Niobrara and Codell Formations.
12. On January 29, 2018, the Commission entered Order No. 407-2324 which, among other things, pooled all interests in eight approximate 1,440-acre designated horizontal wellbore spacing units established for the Application Lands, for the development and operation of the Niobrara and Codell 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 October 12, 2017, 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 eight Postle Wells.
13. On March 1, 2018, Great Western, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to subject additional parties to Order No. 407-2324 which pooled all interests within eight approximate 1440-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara and Codell Formations, and subjecting any additional nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Postle IC 09-259HN in WSU #1 (API No. 05-123-46038), Postle IC 09-299HN in WSU #2 (API No. 05-123-46041), Postle IC 09-299HNX in WSU #3 (API No. 05-123-46040), Postle IC 09-302HC in WSU #4 (API No. 05-123-46043), Postle IC 09-302HN in WSU #5 (API No. 05-123-46044), Postle IC 09-342HN in WSU #6 (API No. 05-123-46039), Postle IC 09-342HNX in WSU #7 (API No. 05-123-46037) and Postle IC 09-379HC in WSU #8 (API No. 05-123-46042) (“Wells”) applicable to previously unnoticed interest owners:
Township 3 North, Range 68 West, 6th P.M.
Section 9: All
Section 10: All
Section 11: W˝W˝
Wellbore Spacing Unit Nos. 1 – 8 (1440 acres)
Postle IC 09-259HN Well (Niobrara Formation)
Postle IC 09-299HN Well (Niobrara Formation)
Postle IC 09-299HNX Well (Niobrara Formation)
Postle IC 09-302HC Well (Codell Formation)
Postle IC 09-302HN Well (Niobrara Formation)
Postle IC 09-342HN Well (Niobrara Formation)
Postle IC 09-342HNX Well (Niobrara Formation)
Postle IC 09-379HC Well (Codell Formation)
14. On March 28, 2018, Applicant, 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.
15. Land testimony and exhibits submitted in support of the Application by Santiago Rodriguez, Senior Landman for Great Western Operating Company, LLC, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures (“AFEs”) and offers to participate in the Wells. Further testimony concluded that the AFE sent by the Applicant to the interest owners was 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.
16. 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.
17. 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.
18. Great Western agreed to be bound by oral order of the Commission.
19. 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. 407-2324, including the cost recovery provisions of §34-60-116(7), C.R.S applicable to previously unnoticed interest owners in eight approximate 1440-acre designated horizontal wellbore spacing units established for Sections 9 and 10 and portions of Section 11, Township 3 North, Range 68 West, 6th P.M., for the drilling 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. 407-2324, 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 eight approximate 1440-acre designated horizontal wellbore spacing units 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 Postle IC 09-259HN in WSU #1 (API No. 05-123-46038), Postle IC 09-299HN in WSU #2 (API No. 05-123-46041), Postle IC 09-299HNX in WSU #3 (API No. 05-123-46040), Postle IC 09-302HC in WSU #4 (API No. 05-123-46043), Postle IC 09-302HN in WSU #5 (API No. 05-123-46044), Postle IC 09-342HN in WSU #6 (API No. 05-123-46039), Postle IC 09-342HNX in WSU #7 (API No. 05-123-46037) and Postle IC 09-379HC in WSU #8 (API No. 05-123-46042) (“Wells”):
Township 3 North, Range 68 West, 6th P.M.
Section 9: All
Section 10: All
Section 11: W˝W˝
Wellbore Spacing Unit Nos. 1 – 8 (1440 acres)
Postle IC 09-259HN Well (Niobrara Formation)
Postle IC 09-299HN Well (Niobrara Formation)
Postle IC 09-299HNX Well (Niobrara Formation)
Postle IC 09-302HC Well (Codell Formation)
Postle IC 09-302HN Well (Niobrara Formation)
Postle IC 09-342HN Well (Niobrara Formation)
Postle IC 09-342HNX Well (Niobrara Formation)
Postle IC 09-379HC Well (Codell Formation)
2. The production obtained from the designated horizontal wellbore 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 designated horizontal wellbore spacing unit; each owner of an interest in the designated horizontal wellbore spacing unit shall be entitled to receive its share of the production of the Well(s) located on the designated horizontal wellbore spacing unit applicable to its interest in the designated horizontal wellbore 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 Well(s) 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 designated horizontal wellbore 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 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 unleased nonconsenting mineral owner shall then own its proportionate 8/8ths share of the well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well as if it had originally agreed to the drilling.
6. The operator of the Wells drilled on the above-described designated horizontal wellbore 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.
8. The designated horizontal wellbore spacing unit described above shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.
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, as of April 30, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary