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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 180700538 TYPE: SPACING ORDER NO. 407-2597

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 establish an approximate 640-acre drilling and spacing unit for portions of Sections 5 and 6, Township 4 North, Range 63 West, 6^th P.M., and approve up to 12 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.         Confluence DJ LLC (Operator No. 10518) (“Confluence” 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 Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 5 and 6, Township 4 North, Range 63 West, 6^th P.M. are subject to this Rule for the Niobrara and Codell Formations.

5.         On May 29, 2018, Confluence filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 12 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 located in the unit, unless the Director grants an exception:

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

Section 5:        N½ 

Section 6:        N½ 

Applicant stated that the proposed wells shall be located on no more than one multi-well pad 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.         On June 28, 2018, Confluence, 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.

7.         On July 16, 2018, Noble Energy, Inc. protested Confluence’s Application. On August 31, 2018, Noble filed an unopposed motion to withdraw its protest, which was granted on September 4, 2018.

            8          Land testimony and exhibits submitted in support of the Application by William E. Nicas, Senior Vice President of Land and Business Development for Confluence, showed that the mineral leasehold ownership of the Application Lands is owned in fee and that Confluence owns a leasehold interest and has a right to drill in the Application Lands.  

9.         Geologic testimony and exhibits submitted in support of the Application by Robert H. Sterling, Senior Vice President Geoscience for Confluence, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 220 to 295 feet thick, and is a common source of supply. Further geologic testimony showed that the Niobrara Formation is comprised of a series of limestones, chalks, and marls. The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 17 to 22 feet thick, and is a common source of supply. Further geologic testimony showed that the Codell Formation is comprised of a series of siltstones and sandstones.   

10.       Engineering testimony and exhibits submitted in support of the Application by John P. Seidle, Partner and Senior Reservoir Engineer at MHA Petroleum Consultants, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 51 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area that 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 190 acres, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by a horizontal well producing oil, gas and associated hydrocarbons from the Codell Formation.

11.       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.

12.       Confluence agreed to be bound by oral order of the Commission.

13.       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 establish an approximate 640-acre drilling and spacing unit for Sections 5 and 6, Township 4 North, Range 63 West, 6^th P.M., and approve up to 12 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 unit for the below-described lands, is hereby established, and a total of up to 12 horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:

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

Section 5:        N½ 

Section 6:        N½ 

2.         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 located in the unit, unless the Director grants an exception.

3.         The proposed wells shall be located on no more than one multi-well pad within the drilling and spacing unit, or at a legal location on adjacent lands, subject to Rule 318A, unless the Director grants an exception.

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