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 |
) ) ) ) ) ) ) |
CAUSE NO. 407
DOCKET NO. 180400344
TYPE: POOLING
ORDER NO. 407-2457 |
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 pool all interests in an approximate 640-acre drilling and spacing unit established for portions of Sections 10 and 15, Township 4 North, Range 63 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 drilling and operating of the 70 Ranch 10-5-1L, 70 Ranch 10-5-3L, 70 Ranch 10-6-2L, 70 Ranch 10-6-4L, 70 Ranch 10-7-1L, 70 Ranch 10-7-3L, 70 Ranch 10-8-2L or the 70 Ranch 10-8-4L Wells, for the development and operation of the Niobrara and Codell Formations.
FINDINGS
The Commission finds as follows:
1. Confluence DJ LLC (Operator No. 10518) (“Confluence” 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. The W˝ of Sections 10 and 15, Township 4 North, Range 63 West, 6th P.M. are subject to this Rule for the Niobrara and Codell Formations.
5. On December 12, 2011, the Commission entered Order Nos. 407-528 and 535-103, which, among other things, established 51 approximate 640-acre drilling and spacing units, including Section 10 of Township 4 North, Range 63 West, 6th P.M., and approved up to two horizontal wells within the unit, for production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore for the permitted well to be no closer than 460 feet from the unit boundaries.
6. On June 6, 2016, the Commission entered Order No. 407-1740 which, among other things, modified Order No. 407-528 to include the Codell Formation and approved an additional 18 horizontal wells, for a total of up to 20 horizontal wells, within the existing approximate 640-acre drilling and spacing unit established by Order No. 407-528 for Section 10 of Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
7. On January 29, 2018, the Commission entered Order No. 407-2308 which, among other things: 1) vacated an approximate 640-acre drilling and spacing unit established by Order Nos. 407-528 and 535-103 for Section 10, Township 4 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) vacated Order No. 407-1740 as to Section 10, Township 4 North, Range 63 West, 6th P.M.; 3) established an approximate 640-acre drilling and spacing units for the Application Lands, and approved a total of up to 12 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with nine horizontal wells to be drilled from the Niobrara Formation and three horizontal wells to be drilled from the Codell Formation; 4) providing that the wellbores of any horizontal wells may enter the Codell and Niobrara Formations anywhere within the unit, or on adjacent lands, subject to Rule 318A, unless an exception is granted by the Director; 5) providing that the productive interval of any horizontal well shall be no closer than 460 feet from the boundaries of the unit and not less than 150 feet from the productive interval of another well within the unit, unless an exception is granted by the Director; and 6) providing that the wells shall be drilled on no more than one well pad within the unit subject to Rule 318A or on adjacent lands, unless an exception is granted by the Director.
8. On March 1, 2018, Confluence, by its attorneys, filed with the Commission a verified application pursuant to §34-60-116, C.R.S., for an order to pool all interests, including but not limited to any non-consenting interests and any party failing to fulfill its election, in the approximate 640-acre drilling and spacing unit established by Order No. 407-2308 for the below-described lands (“Application Lands”), for the development and operation from the Codell and Niobrara Formations; and to subject all nonconsenting 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., are first incurred for the drilling of the 70 Ranch 10-5-1L, 70 Ranch 10-5-3L, 70 Ranch 10-6-2L, 70 Ranch 10-6-4L, 70 Ranch 10-7-1L, 70 Ranch 10-7-3L, 70 Ranch 10-8-2L or the 70 Ranch 10-8-4L (“Wells”):
Township 4 North, Range 63 West, 6th P.M.
Section 10: W˝
Section 15: W˝
9. On March 23, 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.
10. Land testimony and exhibits submitted in support of the Application by William E. Nicas, Senior Vice President of Land and Business Development for Confluence DJ 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.
11. 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.
12. 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.
13. Confluence agreed to be bound by oral order of the Commission.
14. 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 pool all interests in an approximate 640-acre drilling and spacing unit for the W˝ of Sections 10 and 15, Township 4 North, Range 63 West, 6th P.M., for the development and operation from the Niobrara and Codell Formations and subject all nonconsenting 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., are first incurred for the drilling of the Wells.
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, all interests within an approximate 640-acre drilling and spacing unit established for the below-described lands, are hereby pooled for the development and operation of the Codell and Niobrara 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 70 Ranch 10-5-1L, 70 Ranch 10-5-3L, 70 Ranch 10-6-2L, 70 Ranch 10-6-4L, 70 Ranch 10-7-1L, 70 Ranch 10-7-3L, 70 Ranch 10-8-2L or the 70 Ranch 10-8-4L (“Wells”):
Township 4 North, Range 63 West, 6th P.M.
Section 10: W˝
Section 15: W˝
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.
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 22nd day of May, 2018, as of April 30, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary