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 FORMATION WATTENBERG FIELD, WELD COUNTY,      COLORADO

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CAUSE NO. 407

 

DOCKET NO. 180400331

 

TYPE: POOLING

 

ORDER NO. 407-2471

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 720-acre designated horizontal wellbore spacing unit established for portions of Sections 26, 27, and 28, Township 5 North, Range 65 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Geib 26W-304 Well, for the development and operation of the Niobrara Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.         PDC Energy, Inc. (Operator No. 69175) (“PDC” 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.         Rule 318A, as amended on August 8, 2011 addresses the drilling of horizontal wells under Rule 318A.a.(4)D.  Rule 318A was originally established on April 27, 1998 to allow for certain drilling locations to drill or twin an existing well, deepen a well, or recomplete a well.  Rule 318A also provided for the commingling of any or all of the Cretaceous Age Formations from the Dakota Formation to the surface.  Rule 318A was first amended on December 5, 2005 to allow for interior infill and boundary wells and spacing units.

 

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 Niobrara and Codell Formations underlying certain lands, including Sections 26, 27, and 28, Township 5 North, Range 65 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order No. 407-1.

 

6.         On June 27, 2011, the Commission entered Order Nos. 232-278 and 407-439, which, among other things, pooled all nonconsenting interests in an approximate 160-acre wellbore spacing unit for the W½NW¼ of Section 25 and the E½NE¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., for the Geib 41-26 Well (API No. 05-123-32111), from the Codell, Niobrara, and J-Sand Formations.  Order Nos. 232-278 and 407-439 are not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

7.         On August 8, 2011, the Commission entered Order No. 407-457, which, among other things, established an approximate 720-acre wellbore spacing unit for the N½S½, S½N½ of Section 28 and the NE¼SE¼, SE¼NE¼ of Section 29, Township 5 North, Range 65 West, for the Ikenouye F28-65HN Well (API No. 05-123-34241), from the Niobrara Formation. Order No. 407-457 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

8.         On July 9, 2012, the Commission entered Order No. 407-674, which, among other things, pooled all nonconsenting interests in an approximate 720-acre wellbore spacing unit for the N½S½, S½N½ of Section 28 and the NE¼SE¼, SE¼NE¼ of Section 29, Township 5 North, Range 65 West, for the Ikenouye F28-65HN Well (API No. 05-123-34241), from the Niobrara Formation.  Order No. 407-674 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

9.         On March 17, 2014, the Commission entered Order No. 407-973, which, among other things, pooled all nonconsenting interests in an approximate 160-acre wellbore spacing unit for the NW¼ of Section 27, Township 5 North, Range 65 West, 6th P.M., for the Boulter 2-2-27 Well (API No. 05-123-33517), from the Codell-Niobrara Formation.  Order No. 407-973 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

10.       On December 11, 2017, the Commission entered Order No. 407-2259, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½N½, N½S½ of Section 25 and the NE½SW¼, SE¼NW¼, N½SE¼, S½NE¼ of Section 26, of Township 5 North, Range 65 West, 6th P.M., and the SW¼NW¼, NW¼SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26O-102 Well (API No. 05-123-44083), from the Niobrara Formation.  Order No. 407-2259 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.  

 

11.       Also on December 11, 2017, the Commission entered Order No. 407-2260, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½N½, N½S½ of Section 25 and the NE½SW¼, SE¼NW¼, N½SE¼, S½NE¼ of Section 26, of Township 5 North, Range 65 West, 6th P.M., and the SW¼NW¼, NW¼SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26O-212 Well (API No. 05-123-45701), from the Niobrara Formation.  Order No. 407-2260 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

12.       Also on December 11, 2017, the Commission entered Order No. 407-2261, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½N½, N½S½ of Section 25 and the NE½SW¼, SE¼NW¼, N½SE¼, S½NE¼ of Section 26, of Township 5 North, Range 65 West, 6th P.M., and the SW¼NW¼, NW¼SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26O-332 Well (API No. 05-123-44091), from the Niobrara Formation.  Order No. 407-2261 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well. 

 

13.       On January 5, 2018, the Commission entered Order No. 407-2262, which, among other things, pooled all nonconsenting interests in an approximate 320-acre wellbore spacing unit for the N½S½ of Section 25 and the NE¼SW¼, N½SE¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., and the NW¼SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26O-232 Well (API No. 05-123-44084), from the Niobrara Formation.  Order No. 407-2262 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

14.       Also on January 5, 2018, the Commission entered Order No. 407-2263, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½ of Section 25 and the SE¼, E½SW¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., and the W½SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26P-212 Well (API No. 05-123-44092), from the Niobrara Formation.  Order No. 407-2263 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

15.       Also on January 5, 2018, the Commission entered Order No. 407-2264, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½ of Section 25 and the SE¼, E½SW¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., and the W½SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26P-232 Well (API No. 05-123-44089), from the Niobrara Formation.  Order No. 407-2264 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.  

 

16.       Also on January 5, 2018, the Commission entered Order No. 407-2269, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½ of Section 25 and the SE¼, E½SW¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., and the W½SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26P-302 Well (API No. 05-123-44086), from the Niobrara Formation.  Order No. 407-2269 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well. 

 

17.       Also on January 5, 2018, the Commission entered Order No. 407-2270, which, among other things, pooled all nonconsenting interests in an approximate 640-acre wellbore spacing unit for the S½ of Section 25 and the SE¼, E½SW¼ of Section 26, Township 5 North, Range 65 West, 6th P.M., and the W½SW¼ of Section 30, Township 5 North, Range 64 West, 6th P.M., for the Bunting 26P-312 Well (API No. 05-123-44088), from the Niobrara Formation.  Order No. 407-2270 is not affected by PDC’s application, and proceeds from any shared lands will be accounted for in the production of the Well.

 

18.       On March 1, 2018, PDC, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in an approximate 720-acre designated horizontal wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Geib 26W-304  Well (API No. 05-123-44857) (“Well”):

 

Township 5 North, Range 65 West, 6th P.M.
Section 26:      S½N½, N½ S½

Section 27:      S½N½, N½ S½

Section 28:      SE¼NE¼, NE¼ SE¼

 

Weld County, Colorado

 

19.       On April 3, 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.

 

20.       Land testimony and exhibits submitted in support of the Application by J. Tyler Sims, Senior Regional Landman for PDC Energy, Inc., showed that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditures (“AFEs”) and offer to participate in the Well.  Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 35 days prior to the April 30, 2018 hearing date.

                                                 

21.       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 Geib 26W-304 Well, but did not provide testimony for any subsequent wells.

 

22.       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.

 

23.       PDC agreed to be bound by oral order of the Commission.

 

24.       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 720-acre designated horizontal wellbore spacing unit established for designated horizontal wellbore spacing unit established for portions of Sections 26, 27, and 28, Township 5 North, Range 65 West, 6th P.M., and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Geib 26W-304 Well, for the development and operation of the Niobrara Formation.

 

 

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 in an approximate 720-acre designated horizontal wellbore spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara Formation, 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)(II), C.R.S., are first incurred for the drilling of the Geib 26W-304 Well (API No. 05-123-44857) (“Well”):

 

Township 5 North, Range 65 West, 6th P.M.
Section 26:      S½N½, N½ S½

Section 27:      S½N½, N½ S½

Section 28:      SE¼NE¼, NE¼ SE¼

 

Weld County, Colorado

 

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 located on the designated horizontal wellbore spacing unit applicable to its interest in the designated horizontal wellbore spacing unit.

 

3.         Any working interest owner who does not elect to participate in the Well or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §34-60-116(7), C.R.S. The nonconsenting working interest owner must reimburse the consenting owners for his proportionate share of the costs and risks of drilling and operating the Well from his proportionate share of production, subject to non-cost bearing interests, until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

4.         Any unleased owner who does not elect to participate in the Well or fails to make a timely election is hereby deemed to be nonconsenting and is subject to the penalties as provided for in §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. 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 Well 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.

 

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, as of April 30, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

 

By____________________________________

Julie Spence Prine, Secretary