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. 180700494

 

TYPE: POOLING

 

ORDER NO. 407-2592

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 amend Order No. 407-2275, as it applies to Wellbore Spacing Unit No. 1, to pool all interests in the approximate 722-acre designated horizontal wellbore spacing unit established for portions of Sections 1, 2, and 3, Township 3 North, Range 65 West, 6th P.M. and Sections 34, 35, and 36, Township 4 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, rather than the Codell Formation.

FINDINGS

 

The Commission finds as follows:

 

1.         Noble Energy, Inc., (Operator No. 100322) (“Noble” 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 1, 2, and 3, Township 3 North, Range 65 West, 6th P.M., and Sections 34, 35, and 36, Township 4 North, Range 65 West, 6th P.M., are subject to this Rule for the Niobrara Formation.

 

5.         On December 22, 2017, the Commission entered Order No. 407-2275, which, among other things, pooled all interests in an approximate 722-acre designated horizontal wellbore spacing unit (“WSU No.1”) and an approximate 360-acre horizontal wellbore spacing unit established for portions of Sections 1, 2, and 3, Township 3 North, Range 65 West, 6th P.M. and Sections 34, 35, and 36, Township 4 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara and Codell Formations.

 

6.         WSU No. 1 was pooled for the development and operation of the Codell Formation; however, the Centennial State G34-612 Well (API No. 05-123-44609) was drilled to the Niobrara Formation.

 

7.         On April 23, 2018, Noble, by its attorneys, filed a verified Application (“Application”) pursuant to §34-60-116, C.R.S., for an order to amend Order No. 407-2275, as it applies to WSU No. 1, to pool all interests in the approximate 722-acre designated horizontal wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Niobrara Formation rather than the Codell Formation, effective as of the earlier of the date of Pooling Order No. 407-2275, or the date the costs specific in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Centennial State G34-612 Well (API No. 05-123-44609) (“Well”):

 

Township 3 North, Range 65 West, 6th P.M.

Section 1:        NW¼NW¼

Section 2:        N½N½

Section 3:        N½N½

 

Township 4 North, Range 65 West, 6th P.M.

Section 34:      S½S½

Section 35:      S½S½

Section 36:      SW¼SW¼

 

WSU No. 1 (722 acres, more or less)

Centennial State G34-612 – Niobrara Formation

 

8.         On July 9, 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.

 

9.         Land testimony and exhibits submitted in support of the Application by Ryan D. Antonio, Land Manager for Noble, showed that Noble did not receive any protests of the Application amending Order No. 407-2275, as it applies to WSU No. 1, to pool all interests in the approximate 722-acre designated horizontal WSU for the Centennial State G34-612 Well (API No. 05-123-44609) for the development and operation of the Niobrara Formation, rather than the Codell Formation, effective as of the earlier of the date of Pooling Order No. 407-2275, or the date the costs specific in §34-60-116(7)(b), C.R.S., are first incurred for the drilling of the Centennial State G34-612 Well.

                                                 

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.       Noble 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 amend Order No. 407-2275, as it applies to WSU No. 1, to pool all interests in the approximate 722-acre designated horizontal wellbore spacing unit established for portions of Sections 1, 2, and 3, Township 3 North, Range 65 West, 6th P.M. and Sections 34, 35, and 36, Township 4 North, Range 65 West, 6th P.M., for the development and operation of the Niobrara Formation, rather than the Codell Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Order No. 407-2275 is hereby amended as to that portion of the order which pooled all interests in an approximate 722-acre designated horizontal wellbore spacing unit for the below described lands for the Codell Formation, to reflect that it is hereby amended to pool all interests in an approximate 722-acre designated horizontal wellbore spacing unit established for the below-described lands, 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 Centennial State G34-612 Well (API No. 05-123-44609) (“Well”):

 

Township 3 North, Range 65 West, 6th P.M.

Section 1:        NW¼NW¼

Section 2:        N½N½

Section 3:        N½N½

 

Township 4 North, Range 65 West, 6th P.M.

Section 34:      S½S½

Section 35:      S½S½

Section 36:      SW¼SW¼

 

WSU No. 1 (722 acres, more or less)

Centennial State G34-612 – Niobrara Formation

 

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(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 the owner’s proportionate share of the costs and risks of drilling and operating the Well(s) from the owner’s proportionate share of production, subject to royalties or other non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., 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 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 the owner’s 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 designated horizontal wellbore spacing units 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.         In accordance with §34-60-116(7)(a)(III), C.R.S., a nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the designated horizontal wellbore spacing units.

8.         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.

9.         The designated horizontal wellbore spacing units described above shall be considered drilling and spacing units 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 2nd day of October, 2018, as of September 17, 2018.       

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By___________________________________         

                 Julie Spence Prine, Secretary