BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 180600463
TYPE: SPACING
ORDER NO. 407-2591 |
REPORT OF THE COMMISSION
The Commission heard this matter on September 17, 2018, at the Garfield County Sheriff's Annex – Rifle, 106 County Road 333-A, Rifle, Colorado, upon application for an order to: 1) vacate an approximate 640-acre drilling and spacing units established by Order No. 407-528 for Section 28, Township 7 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 320-acre drilling and spacing unit established by Order No. 407-578 for the W˝ of Section 26, Township 7 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,600-acre drilling and spacing unit for Sections 26, 27, and 28, Township 7 North, Range 63 West, 6th P.M., and approve up to 16 new 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. Mallard Exploration, LLC (Operator No. 10670) (“Mallard” 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 Watberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 26, 27, and 28, Township 7 North, Range 63 West, 6th P.M., are subject to this Rule for the Niobrara and Codell Formations.
5. On December 12, 2011, the Commission entered Order No. 407-528 which, among other things, established 51 approximate 640-acre drilling and spacing units for lands in Townships 1, 2, 3, 4, and 7 North, Ranges 61, 62 and 63 West, 6th P.M., and approve two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation. Section 28, Township 7 North, Range 63 West, 6th P.M., is subject to this Order.
6. On April 16, 2012, the Commission entered Order No. 407-578 which established an approximate 320-acre drilling and spacing unit for the W˝ of Section 26, Township 7 North, Range 63 West, 6th P.M., and authorized one horizontal well within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
7. On April 12, 2018, Mallard, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate an approximate 640-acre drilling and spacing units established by Order No. 407-528 for Section 28, Township 7 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) vacate an approximate 320-acre drilling and spacing unit established by Order No. 407-578 for the W˝ of Section 26, Township 7 North, Range 63 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,600-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve 16 new 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 producing from the same source of supply, without exception being granted by the Director:
Township 7 North, Range 63 West, 6th P.M.
Section 26: W˝
Section 27: All
Section 28: All
Applicant stated that any horizontal wells to be drilled will be drilled from no more than two multi-well pads on the surface of the drilling unit, or on adjacent lands with consent of the landowner, unless an exception is granted by the Director.
8. On May 11, 2018, and August 31, 2018, Mallard, 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.
9. On May 25, 2018, Confluence DJ LLC (“Confluence”) filed a protest. On August 30, 2018, Confluence withdrew its protest.
10. Land testimony and exhibits submitted in support of the Application by Jordan Mattson, Vice President-Land for Mallard, showed that Mallard holds oil and gas leasehold interests and has a right to drill in the Application Lands.
11. The proposed drilling and spacing unit contains federal minerals under Section 28, Township 7 North, Range 63 West, 6th P.M. As such, Mallard Exploration, LLC agrees that it or its successor operator will submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit.
12. Geologic testimony and exhibits submitted in support of the Application by Peter Kubik, Vice President of Exploration and Geology for Mallard, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 280 to 310 feet thick and is a common source of supply underling the Application Lands. The geologic testimony showed that the Niobrara Formation consists of chalks and marls. Geologic testimony further showed that the Codell Formation is present throughout the Application Lands, is approximately 8 to 14 feet thick, is generally of uniform thickness throughout the Application Lands, and is a common source of supply underling the Application Lands. The geologic testimony showed that the Codell Formation consists of sandstone.
13. Engineering testimony and exhibits submitted in support of the Application by Matt Volkmar, President of Mallard, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 27 acres, and an approximate 1,600-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 96 acres, and an appropriate 1,600-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.
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. Mallard agreed to be bound by oral order of the Commission.
16. Based on the facts stated in the verified Application, the protest having been withdrawn, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to: 1) vacate an approximate 640-acre drilling and spacing units established by Order No. 407-528 for Section 28, Township 7 North, Range 63 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; 2) vacate Order No. 407-578 which established an approximate 320-acre drilling and spacing unit for the W˝ of Section 26, Township 7 North, Range 63 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Niobrara Formation; and 3) establish an approximate 1,600-acre drilling and spacing unit for Sections 26, 27, and 28, Township 7 North, Range 63 West, 6th P.M., and approve up to 16 new 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 640-acre drilling and spacing units established by Order No. 407-528 for Section 28, Township 7 North, Range 63 West, 6th P.M., is hereby vacated, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
2. Order No. 407-578 is hereby vacated.
3. An approximate 1,600-acre drilling and spacing unit for the below-described lands is hereby established for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations, and a total of up to 16 new horizontal wells within the unit are approved for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:
Township 7 North, Range 63 West, 6th P.M.
Section 26: W˝
Section 27: All
Section 28: All
4. 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 in the unit, without exception being granted by the Director.
5. The proposed wells shall be located on no more than two multi-well pads within the drilling and spacing unit, or at a legal location on adjacent lands, subject to Rule 318A, unless the Director grants an exception.
6. Mallard, or its successor operator, shall submit a CA to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission’s Rules) from the initial well drilled within the drilling and spacing unit.
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 12th day of October, 2018, as of September 17, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Julie Spence Prine, Secretary