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 CODELL-NIOBRARA FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 171200840
TYPE: POOLING
ORDER NO. 407-2504 |
REPORT OF THE COMMISSION
The Commission heard this matter on June 18, 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 within an approximate 1280-acre drilling and spacing unit established for Sections 29 and 32, Township 3 North, Range 68 West, 6th P.M. and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Olander No. 3 Well, the Olander No. 4 Well, the Olander No. 5 Well, the Olander No. 6 Well, the Olander No. 7 Well, the Olander No. 8 Well, the Olander No. 9 Well, the Olander No. 10 Well, the Olander No. 11 Well, the Olander No. 12 Well, the Olander No. 13 Well, the Olander No. 14 Well, the Olander No. 15 Well, the Olander No. 16 Well, the Olander No. 17 Well, the Olander No. 18 Well, the Olander No. 19 Well, the Olander No. 20 Well, the Olander No. 21 Well, and the Olander No. 22 Well for the development and operation of the Niobrara-Codell Formation.
FINDINGS
The Commission finds as follows:
1. Cub Creek Energy, LLC (Operator No. 10542) (“Cub Creek” 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 December 19, 1983, the Commission issued Order No. 407-1 (amended March 29, 2000) which, among other things, established 80-acre drilling and spacing units for production of oil, gas and associated hydrocarbons from the Codell Formation, with the unit to be designated by the operator drilling the first well in the quarter section. The permitted well shall be located in the center of either 40-acre tract within the unit with a tolerance of 200 feet in any direction. The operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit. Sections 29 and 32, Township 3 North, Range 68 West, 6th P.M. are subject to this Order for the Codell Formation.
5. On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, with the permitted well locations in accordance with the provisions of Order No. 407-1. Sections 29 and 32, Township 3 North, Range 68 West, 6th P.M. are subject to this Order for the Niobrara and Codell Formations.
6. 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 3 North, Range 68 West, 6th P.M. are subject to this Rule for the Niobrara-Codell Formation.
7. On May 1, 2017, the Commission issued Order No. 407-1958 which, among other things, established an approximate 640-acre drilling and spacing unit for Section 32, Township 3 North, Range 68 West, 6th P.M. and approved the drilling of 20 horizontal wells within the unit, for production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations (with 14 wells for the Niobrara Formation and six wells from the Codell Formation).
8. On March 19, 2018, the Commission issued Order No. 407-2377, which, among other things, vacated an approximate 640-acre drilling and spacing unit established by Order 407-1958, for Section 32, Township 3 North, Range 68 West, 6th P.M. for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, established an approximate 1,280-acre drilling and spacing unit for Sections 29 and 32, Township 3 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-Codell Formation.
9. On October 12, 2017, Cub Creek, 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 1280-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara-Codell 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 Olander No. 3 Well (API No. pending), Olander No. 4 Well (API No. pending), Olander No. 5 Well (API No. pending), Olander No. 6 Well (API No. pending), Olander No. 7 Well (API No. pending), Olander No. 8 Well (API No. pending), Olander No. 9 Well (API No. pending), Olander No. 10 Well (API No. pending), Olander No. 11 Well (API No. pending), Olander No. 12 Well (API No. pending), Olander No. 13 Well (API No. pending), Olander No. 14 Well (API No. pending), Olander No. 15 Well (API No. pending), Olander No. 16 Well (API No. pending), Olander No. 17 Well (API No. pending), Olander No. 18 Well (API No. pending), Olander No. 19 Well (API No. pending), Olander No. 20 Well (API No. pending), Olander No. 21 Well (API No. pending), and Olander No. 22 Well (API No. pending) (“Wells”):
Township 3 North, Range 68 West, 6th P.M.
Section 29: All
Section 32: All
10. On November 22, 2017, the City of Longmont filed a protest and intervention to the Application. On June 7, 2018, the City of Longmont withdrew its protest and intervention.
11. On November 20, 2017, renewed May 21, 2018, and amended June 13, 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.
12. Land testimony and exhibits submitted in support of the Application by Scott Baily, President of Cub Creek, showed that all nonconsenting interest owners were notified of the Application and received Authority for Expenditures ("AFEs") and offers to participate in the Wells. Further testimony concluded that the AFEs sent by the Applicant to the 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 18, 2018 hearing date.
13. 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 Olander No. 3 Well, the Olander No. 4 Well, the Olander No. 5 Well, the Olander No. 6 Well, the Olander No. 7 Well, the Olander No. 8 Well, the Olander No. 9 Well, the Olander No. 10 Well, the Olander No. 11 Well, the Olander No. 12 Well, the Olander No. 13 Well, the Olander No. 14 Well, the Olander No. 15 Well, the Olander No. 16 Well, the Olander No. 17 Well, the Olander No. 18 Well, the Olander No. 19 Well, the Olander No. 20 Well, the Olander No. 21 Well, and the Olander No. 22 Well. However, no testimony was provided for any subsequent wells.
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. Cub Creek 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 pool all interests in an approximate 1280-acre drilling and spacing unit established for Sections 29 and 32, Township 3 North, Range 68 West, 6th P.M. and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Olander No. 3 Well, the Olander No. 4 Well, the Olander No. 5 Well, the Olander No. 6 Well, the Olander No. 7 Well, the Olander No. 8 Well, the Olander No. 9 Well, the Olander No. 10 Well, the Olander No. 11 Well, the Olander No. 12 Well, the Olander No. 13 Well, the Olander No. 14 Well, the Olander No. 15 Well, the Olander No. 16 Well, the Olander No. 17 Well, the Olander No. 18 Well, the Olander No. 19 Well, the Olander No. 20 Well, the Olander No. 21 Well, and the Olander No. 22 Well for the development and operation of the Niobrara-Codell 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 1280-acre drilling and spacing unit established for the below-described lands are hereby pooled, for the development and operation of the Niobrara-Codell 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 Olander No. 3 Well (API No. pending), Olander No. 4 Well (API No. pending), Olander No. 5 Well (API No. pending), Olander No. 6 Well (API No. pending), Olander No. 7 Well (API No. pending), Olander No. 8 Well (API No. pending), Olander No. 9 Well (API No. pending), Olander No. 10 Well (API No. pending), Olander No. 11 Well (API No. pending), Olander No. 12 Well (API No. pending), Olander No. 13 Well (API No. pending), Olander No. 14 Well (API No. pending), Olander No. 15 Well (API No. pending), Olander No. 16 Well (API No. pending), Olander No. 17 Well (API No. pending), Olander No. 18 Well (API No. pending), Olander No. 19 Well (API No. pending), Olander No. 20 Well (API No. pending), Olander No. 21 Well (API No. pending), and Olander No. 22 Well (API No. pending) (“Wells”):
Township 3 North, Range 68 West, 6th P.M.
Section 29: All
Section 32: All
2. The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.
3. Any working interest owner who does not elect to participate in the Well(s) 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(s) 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(s) 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 drilling and 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 Wells drilled on the above-described drilling and 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.
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 29th day of June, 2018, as of June 18, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary