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. 180600399

 

TYPE: POOLING

 

ORDER NO. 407-2487

 

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 amend Order No. 407-1887 to reflect the as-drilled acreage for the Ehrlich 5J-243 Well (API No. 05-123-43544) (“Well”).

 

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.            On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule.  Sections 5 and 8, Township 5 North, Range 64 West, 6th P.M., are subject to this Rule for the Niobrara Formation.

5.            On February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formations, the Codell Formation, and the Niobrara Formation underlying certain lands, including Sections 5 and 8, Township 5 North, Range 64 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order 407-1.

6.            On December 15, 2014, the Commission entered Order No. 407-1182 which, among other things, pooled all nonconsenting interests in an approximate 160-acre wellbore spacing unit for the SW¼ of Section 5, Township 5 North, Range 64 West, for the LDS B05-25 Well (API No. 05-123-34204), from the Codell and Niobrara Formations.  Order No. 407-1182 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

7.            On December 12, 2016, the Commission entered Order No. 407-1837 which, among other things, pooled all nonconsenting interests in two approximate 720-acre wellbore spacing units for the W½W½ of Section 5, E½E½ of Section 6, E½E½ of Section 7, and the W½W½ of Section 8, Township 5 North, Range 64 West, 6th P.M., and the SE¼SE¼ of Section 31 and the SW¼SW¼ of Section 32, Township 6 North, Range 64 West, 6th P.M., for the J Klein 7Y-201 Well (API No. 05-123-43004) and the J Klein 7Y-341 Well (API No. 05-123-42998), from the Niobrara Formation.  Order No. 407-1837 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

8.            Also on December 12, 2016, the Commission entered Order No. 407-1838 which, among other things, pooled all nonconsenting interests in an approximate 520-acre wellbore spacing unit for the SW¼SW¼ of Section 5, E½E½ of Section 6, E½E½ of Section 7, and the W½NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., and the SE¼SE¼ of Section 31 and the SW¼SW¼ of Section 32, Township 6 North, Range 64 West, 6th P.M., for the J Klein 7Y-241 Well (API No. 05-123-43003), from the Niobrara Formation.  Order No. 407-1838 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

9.            On January 30, 2017, the Commission entered Order No. 407-1882 which, among other things, pooled all nonconsenting interests in an approximate 240-acre wellbore spacing unit for the W½W½ of Section 5 and the W½NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5E-323 Well (API No. 05-123-43543), from the Niobrara Formation.  Order No. 407-1882 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

10.          Also on January 30, 2017, the Commission entered Order No. 407-1884 which, among other things, pooled all nonconsenting interests in an approximate 240-acre wellbore spacing unit for the E½W½ of Section 5 and the E½NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5J-223 Well (API No. 05-123-43541), from the Niobrara Formation.  Order No. 407-1884 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

11.          Also on January 30, 2017, the Commission entered Order No. 407-1885 which, among other things, pooled all nonconsenting interests in an approximate 240-acre wellbore spacing unit for the E½W½ of Section 5 and the E½NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5M-343 Well (API No. 05-123-43546), from the Niobrara Formation.  Order No. 407-1885 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

12.          Also on January 30, 2017, the Commission entered Order No. 407-1886 which, among other things, pooled all nonconsenting interests in an approximate 480-acre wellbore spacing unit for the W½ of Section 5 and the NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5J-203 Well (API No. 05-123-43540), from the Niobrara Formation.  Order No. 407-1886 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

13.          Also on January 30, 2017, the Commission entered Order No. 407-1888 which, among other things, pooled all nonconsenting interests in an approximate 480-acre wellbore spacing unit for the W½ of Section 5, and the NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5J-303 Well (API No. 05-123-43545), from the Niobrara Formation.  Order No. 407-1888 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

14.          Also on January 30, 2017, the Commission entered Order No. 407-1889 which, among other things, pooled all nonconsenting interests in an approximate 480-acre wellbore spacing unit for the W½ of Section 5 and the NW¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5J-233 Well (API No. 05-123-43539), from the Niobrara Formation.  Order No. 407-1889 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

15.          Also on January 30, 2017, the Commission entered Order No. 407-1890 which, among other things, pooled all nonconsenting interests in an approximate 480-acre wellbore spacing unit for the E½W½, W½E½ of Section 5 and the E½NW¼, W½NE¼ of Section 8, Township 5 North, Range 64 West, 6th P.M., for the Ehrlich 5M-243 Well (API No. 05-123-43547), from the Niobrara Formation.  Order No. 407-1890 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

16.          On May 1, 2017, the Commission entered Order No. 407-1973 which, among other things, pooled all nonconsenting interests in three approximate 640-acre wellbore spacing units for the NE¼, E½NW¼ of Section 8, N½ of Section 9, and the W½ NW¼ of Section 10, Township 5 North, Range 64 West, 6th P.M., for the Wacker 10F-204 Well (API No. 05-123-43567), Wacker 10F-234 Well (API No. 05-123-43565), and the Wacker 10F-304 Well (API No. 05-123-43563), from the Niobrara Formation; two approximate 320-acre wellbore spacing units for the N½NE¼, NE¼NW¼ of Section 8, N½N½ of Section 9, and the NW¼NW¼ of Section 10, Township 5 North, Range 64 West, 6th P.M., for the McGlothlin 9V-314 Well (API No. 05-123-43951) and the McGlothlin 9U-234 Well (API No. 05-123-43957), from the Niobrara Formation; two 640-acre wellbore spacing units for the SW¼SW¼ of Section 3, S½S½ of Section 4, S½SE¼, SE¼SW¼ of Section 5, N½NE¼ , NE¼NW¼ of Section 8, N½N½ of Section 9, and the NW¼NW¼ Section 10, Township 5 North, Range 64 West, 6th P.M., for the McGlothlin 9U-204 Well (API No. 05-123-43948) and the McGlothlin 9U-334 Well (API No. 05-123-43950), from the Niobrara Formation; and two approximate 800-acre wellbore spacing units for the SE¼NE¼, NE¼SE¼ of Section 7, S½N½, N½S½ of Section 8, S½N½, N½S½ of Section 9, and the SW¼NW¼, NW¼SW¼ of Section 10, Township 5 North, Range 64 West, 6th P.M., for the Wacker 10G-214 Well (API No. 05-123-43568) and the Wacker 10G-304 Well (API No. 05-123-43562), from the Niobrara Formation.  Order No. 407-1973 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

17.          On July 24, 2017, the Commission entered Order No. 407-2125 which, among other things, pooled all nonconsenting interests in an approximate 638.1225-acre wellbore spacing unit for the SW¼NW¼, NW¼SW¼ of Section 3, S½N½, N½S½ of Section 4, and the S½NE¼, N½SE¼, SE¼NW¼, NE¼SW¼ of Section 5, Township 5 North, Range 64 West, 6th P.M., for the Snowmass 10N Well (API No. 05-123-44894), from the Niobrara Formation. Order No. 407-2125 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

18.          Also on July 24, 2017, the Commission entered Order No. 407-2139 which, among other things, pooled all nonconsenting interests in four approximate 560-acre wellbore spacing units for the S½ of Section 4 and the SE¼, E½SW¼ of Section 5, Township 5 North, Range 64 West, for the McGlothlin Farms 4X-204 Well (API No. 05-123-44010), McGlothlin Farms 4X-214 Well (API No. 05-123-44005), McGlothlin Farms 4X-314 Well (API No. 05-123-44007), and the McGothlin Farms 4X-334 Well (API No. 44009); two approximate 560-acre wellbore spacing units for the S½S½ of Section 4, S½SE¼, SE¼SW¼ of Section 5, N½NE¼, NE¼NW¼ of Section 8, and the N½N½ of Section 9, Township 5 North, Range 64 West ,6th P.M., for the McGlothlin Farms 4Y-214 Well (API No. 05-123-44013) and the McGlothlin Farms 4Y-304 Well (API No. 05-123-44012), from the Niobrara Formation; and two approximate 280-acre wellbore spacing units for the S½S½ of Section 4 and the S½SE¼, SE¼SW¼ of Section 5, Township 5 North, Range 64 West, 6th P.M., for the McGlothlin Farms 4X-234 Well (API No. 05-123-44011) and the McGlothlin Farms 4Y-313 Well (API No. 05-123-44008), from the Niobrara Formation.  Order No. 407-2139 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

19.          On September 11, 2017, the Commission entered Order No. 407-2178 which, among other things, pooled all nonconsenting interests in an approximate 280-acre wellbore spacing unit for the N½S½ of Section 4 and the N½SE¼, SE¼NW¼ of Section 5, Township 5 North, Range 64 West, 6th P.M., for the McGlothlin Farms 4W-334 Well (API No. 05-123-44006), from the Niobrara Formation; and an approximate 320-acre wellbore spacing unit for the SE¼SW¼, S½NE¼ of Section 8, S½N½ of Section 9, and the SW¼NW¼ of Section 10, Township 5 North, Range 64 West, 6th P.M., for the Wacker 10G-314 Well (API No. 05-123-43569), from the Niobrara Formation.  Order No. 407-2178 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

20.          Also on September 11, 2017, the Commission entered Order No. 407-2205 which, among other things, pooled all nonconsenting interests in an approximate 560-acre wellbore spacing unit for the N½S½, S½N½ of Section 4 and the S½NE¼, N½SE¼, SE¼NW¼, NE¼SW¼ of Section 5, Township 5 North, Range 64 West, 6th P.M., for the McGlothlin Farms 4W-234 Well (API No. 05-123-44003), from the Niobrara Formation.  Order No. 407-2205 is not affected by this Application, and proceeds from any shared lands will be accounted for in the production of the Ehrlich 5J-243 Well.

21.          On April 10, 2018, PDC, by its attorneys, filed with the Commission pursuant to C.R.S. § 34-60-116, a verified application (“Application”) for an order to amend Order No. 407-1887 to reflect the as-drilled acreage for the Ehrlich 5J-243 Well (API No. 05-123-43544) (“Well”), which consists of the following lands:

 

Township 5 North, Range 64 West, 6th P.M.

Section 5:  W½NW¼, SW¼

Section 8:  NW¼

                                   

22.          On May 16, 2018, PDC, 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.

 

23.          Land testimony and exhibits submitted in support of the Application by J. Tyler Sims, Senior Regional Landman for PDC, showed that all interest owners were notified of the Application and that PDC has submitted a Sundry Notice/Form 4 to the COGCC to modify the spacing unit for the Well.

24.          Land testimony showed the Applicant complied with the requirements of Rule 530., and is entitled to the cost recovery provisions pursuant to C.R.S. § 34-60-116(7), C.R.S., for the Ehrlich 5J-243 Well, but did not provide testimony for any subsequent wells.   

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

26.          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 amend Order No. 407-1887 to reflect the as-drilled acreage for the Ehrlich 5J-243 Well (API No. 05-123-43544).

 

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. 407-1887 is hereby amended to reflect the as-drilled acreage for the Ehrlich 5J-243 Well (API No. 05-123-43544) (“Well”):

 

Township 5 North, Range 64 West, 6th P.M.

Section 5:  W½NW¼, SW¼

Section 8:  NW¼

                                                           

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 5th day of July, 2018, as of June 11, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

  Julie Spence Prine, Secretary