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. 171000696   TYPE:  SPACING   ORDER NO. 407-2458

REPORT OF THE COMMISSION

 

            The Commission heard this matter on June 11, 2018, at the Lindou Auditorium - Michener Library, University of Northern Colorado, 501 20^th Street, Greeley, Colorado, upon amended application for an order to amend Order No. 407-1958, to add additional lands in the SE¼ of Section 18, Township 2 North, Range 68 West, 6th P.M., in the approximate 1,280-acre drilling and spacing unit (DSU No. 3), previously established by Order No. 407-1958 for the S½  of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M., while continuing to approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Extraction Oil & Gas Inc., (Operator No. 10459) (“Extraction” 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 Application Lands are subject to this Rule for the Niobrara Formations.

 

5.         On May 1, 2017, the Commission entered Order No. 407-1958 which, among other things, established an approximate 1,280-acre drilling and spacing unit (DSU No. 3) for the S½ of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M., and approved up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

6.         On May 16, 2017, the Commission entered Order No. 407-405 which, among other things, established an approximate 320-acre wellbore spacing unit for the S½ of Section 18, Township 2 North, Range 68 West, 6th P.M., and approved the drilling of one horizontal well within the unit (to accommodate the planned Williams #3A-18H Well (API No. 05-123-33423)), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the boundary of the unit, without exception being granted by the Director of the Commission.

 

            7.         On August 31, 2017, amended September 19, 2017, Extraction, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-101 C.R.S. for an order to add additional lands in the SE¼ of Section 18, Township 2 North, Range 68 West, 6th P.M., to the approximate 1,280-acre drilling and spacing unit (DSU No. 3), previously established by Order No. 407-1958 for the S½  of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M., while continuing to approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell 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 within the unit, unless an exception is granted by the Director:

 

Township 2 North, Range 68 West, 6^th P.M.

Section 6:        S½

Section 7:        All

Section 18:      N½, SE¼

 

8.         Applicant stated that any horizontal wells to be drilled under this Application will be drilled from no more than three surface locations subject to Rule 318A, unless an exception is granted by the Director.

 

9.         On October 6, 2017, Extraction, 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.       On October 16, 2017, Crestone Peak Resources Operating LLC (“Crestone” or “Protestant”), filed its Protest (“Protest”) wherein Crestone alleged, among other things, that approval of Extraction’s Spacing Application would result in waste and harm to correlative rights.  On April 5, 2018, Crestone withdrew its Protest. 

 

            11.       Land testimony and exhibits submitted in support of the Application by Jason Rayburn, Staff Landman for Extraction, showed that Extraction holds oil and gas leasehold interests and has a right to drill in the Application Lands.      

 

12.       Geologic testimony and exhibits submitted in support of the Application by Alicia Branch, Geologist for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 203 to 217 feet thick, and is generally of uniform thickness throughout the Application Lands.  The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 20 to 21 feet thick, and is generally of uniform thickness throughout the Application Lands.

 

13.       Engineering testimony and exhibits submitted in support of the Application by Neel L. Duncan, Vice President of Operations for Integrated Petroleum Technologies, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 106.2 acres, and an approximate 1,440-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.  The engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 172.1 acres, and an appropriate 1,440-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.  Additionally, the testimony and exhibits showed that increasing the size of the drilling and spacing unit by an additional 160 acres, will prevent waste and protect correlative rights, and can be done in an efficient and economic manner.

 

14.       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.

 

15.       Extraction agreed to be bound by oral order of the Commission.

 

16.       Based on the facts stated in the verified Application, all protests having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to amend Order No. 407-1958 to add additional lands in the SE¼ of Section 18, Township 2 North, Range 68 West, 6th P.M., to the approximate 1,280-acre drilling and spacing unit (DSU No. 3), previously established by Order No. 407-1958 for the S½  of Section 6, all of Section 7, and the N½ of Section 18, Township 2 North, Range 68 West, 6th P.M., while continuing to approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

                                                 

1.            Order No. 407-1958 is amended, only as to DSU No. 3, to include the SE¼ of Section 18, Township 2 North, Range 68 West, 6th P.M., in the previously established drilling and spacing unit creating an approximate 1,440-acre drilling and spacing unit for the below-described lands, while continuing to approve up to 20 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations:

 

Township 2 North, Range 68 West, 6^th P.M.

Section 6:        S½

Section 7:        All

Section 18:      N½, SE¼

 

2.         The productive interval of the wellbore shall 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 within the unit, unless an exception is granted by the Director.

 

3.         A maximum of three surface locations will be allowed for development of minerals from the Niobrara and Codell Formations within the drilling and spacing unit, without exception being 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 28th day of June, 2018, as of June 11, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________       

                Julie Spence Prine, Secretary