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 IN THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD County, Colorado.

)

)

)

)

)

)

)

 

CAUSE NO. 407

 

DOCKET NO. 180300021

 

TYPE: SPACING

 

ORDER NO. 407-2473

 

           

REPORT OF THE COMMISSION

 

The Commission heard this matter on June 11, 2018, at the Lindou Auditorium Michener Library, University of Northern Colorado (UNC), 501 20th Street, Greeley, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit for portions of Section 29 and all of Section 32, Township 1 North, Range 65 West, 6th P.M., and approve up to 16 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.         Verdad Resources, LLC (Operator No. 10651) (“Verdad” or “Applicant”) 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 29 and 32, Township 1 North, Range 65 West, 6th P.M., are subject to this rule for the Niobrara and Codell Formations.

 

5.         On December 9, 2017 (Amended March 14, 2018), Verdad, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 960-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 16 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 in the unit, without exception being granted by the Director:

 

 

Township 1 North, Range 65 West, 6th P.M.
Section 29:      S½

Section 32:      All

 

6.         Applicant states that any horizontal wells to be drilled under this Application will be drilled from no more than two multi-well pads located on the unit, or on adjacent lands, subject to Rule 318A, without exception being granted by the Director.

 

7.         On June 13, 2014, the Commission approved seven (7) Form 2 Applications for Permit-to-Drill for the Sawyer 32-2 (API No. 05-123-39609), the Sawyer 32-3 (API No. 05-123-39608), Sawyer 32-4 (API No. 05-123-39606), Sawyer 32-5 (API No. 05-123-39611), Sawyer 32-6 (API No. 05-123-39607), the Sawyer 32-7 (API No. 05-123-39610), and the Sawyer 32-8 (API No. 05-123-39612) (collectively the “Sawyer Wells”). In doing so, the Commission administratively approved seven horizontal wellbore spacing units pursuant to Commission Rule 318A. The Form 2s for the Sawyer Wells expired on June 13, 2016. The Sawyer Wells were never drilled.

 

8.         On May 21, 2015, the Commission approved one (1) Form 2 Application for Permit-to-Drill for the Highland 01N-65W-29-1N Well (API 05-123-41541). In doing so, the Commission administratively approved one horizontal wellbore spacing unit consisting of the SW¼ of Section 29, Township 1 North, Range 65 West, 6th P.M., and the W½ of Section 32, Township 1 North, Range 65 West, 6th P.M. pursuant to Commission Rule 318A. The Highland 01N-65W-29-1N Well is currently producing. Applicant is the Operator of the Highland 01N-65W-29-1N Well and will continue to distribute production therefrom on the basis of the applicable horizontal wellbore spacing unit.

 

9.         On July 24, 2017, the Commission entered Order No. 407-2151, which pooled all interests in an approximate 640-acre designated wellbore spacing unit established for the W½W½ of Section 29, the E½E½ of Section 30, the E½E½ of Section 31, and the W½W½ of Section 32, Township 1 North, Range 65 West, 6th P.M. and approved cost recovery against the nonconsenting owners in the Lehl 30-8 horizontal well (API No. 05-123-41051), for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation. Order No. 407-2151 shall be maintained, and proceeds from the Lehl 30-8 horizontal well will continue to be distributed on the basis of this order.

 

10.       On April 9, 2018, Verdad, 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 testimony and exhibits were submitted in support of the Application.

 

11.       Land testimony and exhibits submitted in support of the Application by Frederick Rowe Land Manager for Verdad, showed that Verdad holds oil and gas interests and has a right to drill in the Application Lands.

 

12.       Geologic testimony and exhibits submitted in support of the Application by Andrew Jarrett, Vice President-Exploration for Verdad, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 400 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Niobrara Formation is a sequence of chalks, marls and limestones and is a common source of supply. Geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 15 feet thick, and is generally of uniform thickness throughout the Application Lands. Further testimony showed that the Codell Formation is made up of sandstone.

 

 

13.       Engineering testimony and exhibits submitted in support of the Application by L. Arthur Beecherl IV, Vice-President of Operations for Verdad, showed that the drainage area for  analogous horizontal and Codell and Niobrara Formation wells are not greater than 196 acres and 72 acres, respectively, and an approximate 960-acre unit is therefore not less than the maximum area that can be efficiently, economically, and effectively drained by four Codell horizontal wells and twelve Niobrara horizontal wells producing oil, gas and associated hydrocarbons from their respective benches.

 

14.       Engineering testimony and exhibits submitted in support of the Application by L. Arthur Beecherl IV, Vice-President of Operations for Verdad, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 72 acres, and an approximate 960-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 196 acres, and an approximate 960-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.

 

15.       The above-referenced testimony and exhibits show that granting the Application will allow for more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

 

16.       Verdad agreed to be bound by oral order of the Commission. 

 

17.       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 establish an approximate 960-acre drilling and spacing unit for the S½ of Section 29 and all of Section 32, Township 1 North Range 65 West, 6th P.M., and approve up to 16 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.            An approximate 960-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 16 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

 

Township 1 North, Range 65 West, 6th P.M.

Section 29: S½

Section 32: All

 

2.         The productive interval of the wellbore will 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 producing from the same source of supply within the unit, unless the Director grants an exception.

 

3.         All wells permitted under this Order shall be drilled from no more than two multi-well pads located on the unit, or on adjacent lands, subject to Rule 318A, unless the Director grants an exception.

 

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 30 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 2nd day of July, 2018, as of June 11, 2018

           

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

By ____________________________________      

      Julie Spence Prine, Secretary