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. 180600412

 

TYPE: POOLING

 

ORDER NO. 407-2490

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 make Order 407-2064, which pooled all interests in an approximate 711-acre designated horizontal wellbore spacing unit established for portions of Sections 32 and 33, Township 5 North, Range 63 West, 6th P.M. and Sections 3, 4 and 5, Township 4 North, Range 63 West, 6th P.M., and subjected all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the CVR 5-63-32-6457B2B Well, for the development and operation of the Niobrara Formation, applicable to previously unnoticed parties.

 

FINDINGS

 

The Commission finds as follows:

 

1.         HighPoint Operating Corporation (Operator No. 10071) (“HighPoint” 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 32 and 33, Township 5 North, Range 63 West, 6th P.M., and Sections 3, 4 and 5, Township 4 North, Range 63 West, 6th P.M., are subject to this Rule for the Niobrara Formation.

5.         On June 23, 2017, the Commission entered Order No. 407-2064 which, among other things, pooled all interests within an approximate 711-acre designated horizontal wellbore spacing unit established for portions of Sections 32 and 33, Township 5 North, Range 63 West, 6th P.M.  and Sections 3, 4 and 5, Township 4 North, Range 63 West, 6th P.M., and subjected any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the CVR 5-63-32-6457B2B Well, for the development and operation of the Niobrara Formation.

 

 

6.         On April 12, 2018, HighPoint, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to make Order No. 407-2064, which pooled all interests in an approximate 711-acre designated horizontal wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation, and subjected any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the CVR 5-63-32-6457B2B Well (API No. 05-123-44254)(“Well”):

 

Township 5 North, Range 63 West, 6th P.M.

Section 32:      S½S½

Section 33:      S½S½

 

Township 4 North, Range 63 West, 6th P.M.

Section 3:        NW¼ NW¼

Section 4:        N½N½

Section 5:        N½N½

 

7.         On May 11, 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.

 

8.         Land testimony and exhibits submitted in support of the Application by Gabriel Findlay, Land Manager for HighPoint, showed that George Harris, Kari L. Lezama, Cassandra Croissant, and Christopher Croissant, previously unnoticed interest owners, were notified of the Application, received Authority for Expenditures ("AFEs"), and received offers to participate in the Well or to lease their interests.  Further testimony showed that the AFEs sent by the Applicant to the previously unnoticed interest owners were fair and reasonable estimates of the costs of the proposed drilling operations and were received at least 35 days prior to the June 11, 2018 hearing date.

           

9.         Land testimony 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 CVR 5-63-32-6457B2B Well, but did not provide testimony for any subsequent wells.

 

10.       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.

 

11.       HighPoint agreed to be bound by oral order of the Commission.

 

12.       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 make Order No. 407-2064, including the cost recovery provisions of §34-60-116(7), C.R.S., applicable to the interests of George Harris, Kari L. Lezama, Cassandra Croissant, and Christopher Croissant, previously unnoticed interest owners, in an approximate 711-acre designated horizontal wellbore spacing unit established for portions of Sections 32 and 33, Township 5 North, Range 63 West, 6th P.M. and Sections 3, 4 and 5, Township 4 North, Range 63 West, 6th P.M., for the drilling of the CVR 5-63-32-6457B2B Well, for the development and operation of the Niobrara Formationon.

 

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. 407-2064, including the cost recovery provisions of §34-60-116(7), C.R.S., is hereby made applicable to George Harris, Kari L. Lezama, Cassandra Croissant, and Christopher Croissant, and their interests in an approximate 711-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 CVR 5-63-32-6457B2B Well (API No. 05-123-44254) (“Well’):

 

Township 5 North, Range 63 West, 6th P.M.

Section 32:      S½S½

Section 33:      S½S½

 

Township 4 North, Range 63 West, 6th P.M.

Section 3:        NW¼ NW¼

Section 4:        N½N½

Section 5:        N½N½

 

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 10th day of July, 2018, as of June 11, 2018.

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

 

By____________________________________

Julie Spence Prine, Secretary