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. 180900663
TYPE: SPACING
ORDER NO. 407-2602 |
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 480-acre drilling and spacing unit for portions of Sections 12 and 13, Township 2 North, Range 68 West, 6th P.M. and approve up to 10 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. Crestone Peak Resources Operating LLC (Operator No. 10633) (“Crestone Peak” 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 12 and 13, Township 2 North, Range 68 West, 6th P.M. are subject to this Rule for the Niobrara and Codell Formations.
5. On February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formations underlying certain lands, including Sections 12 and 13, Township 2 North, Range 68 West, 6th P.M.
6. On June 27, 2011, the Commission entered Order No. 232-281 and 407-442 which, among other things, pooled all nonconsenting interests in a designated approximate 160-acre wellbore spacing unit consisting of the E½ NW¼ and W½ NE¼ of Section 12, Township 2 North, Range 68 West, 6th P.M., to accommodate the Johnson #4-2-12 Well (API No. 05-123-29658), for the development and operation of the Niobrara, Codell, and “J” Sand Formations. Order No. 232-281 and 407-442 is wellbore specific and does not affect this Application.
7. On June 27, 2011, the Commission entered Order No. 232-283 and 407-444 which, among other things, pooled all nonconsenting interests in a designated approximate 160-acre wellbore spacing unit consisting of the SE¼ NE¼ and NE¼ SE¼ of Section 11 and the SW¼ NW¼ and NW¼ SW¼ of Section 12, Township 2 North, Range 68 West, 6th P.M. to accommodate the Johnson #0-4-12 Well (API No. 05-123-29664), for the development and operation of the Niobrara, Codell, and “J” Sand Formations. Order No. 232-283 and 407-444 is wellbore specific and does not affect this Application.
8. On October 27, 2014, the Commission entered Order No. 407-1149 which, among other things, pooled all interests in an approximate 480-acre designated horizontal wellbore spacing unit established for portions of Sections 11, 12, 13, and 14, Township 2 North, Range 68 West, 6th P.M., for the development and operation of the Niobrara Formation, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., effective as of the date of the Application, for the drilling of the Grant Hurt 1H-14H-G268 Well (API No. 05-123-38093). Order No. 407-1149 is wellbore specific and does not affect this Application.
9. On July 17, 2018, Crestone, by its attorneys, filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 480-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 10 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 north and west unit boundaries, 150 feet from the east and south 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 2 North, Range 68 West, 6th P.M.
Section 12: W½
Section 13: NW¼
Applicant stated that 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. Applicant also stated that all horizontal wells will be drilled in a north-south orientation.
10. On August 27, 2018, Crestone, 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.
11. Land testimony and exhibits submitted in support of the Application by Sheila Frazier, Land Manager for Crestone, showed that Crestone owns a leasehold interest and has a right to drill in the Application Lands.
12. Geologic testimony and exhibits submitted in support of the Application by Daniel Harrington, geologist for Crestone, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 238 feet thick, and is comprised of a sequence of chalks, marls, and limestones. The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 23 feet thick, and is a sandstone. Finally, the geologic testimony affirmed that the Niobrara and Codell Formations are common sources of supply underlying the Application Lands.
13. Engineering testimony and exhibits submitted in support of the Application by Geoffrey Tibbals, Reservoir Engineer for Crestone, showed that Crestone plans to drill seven horizontal wells in the Niobrara Formation and three horizontal wells in the Codell Formation. The engineering testimony also showed that, based on analog Niobrara Formation wells, the drainage area for horizontal wells in the Niobrara Formation underlying the Application Lands is estimated to be 36.8 acres. Thus, an approximate 480-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically and effectively drained by seven horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation. The engineering testimony also showed that, based on analog Codell Formation wells, the drainage area for horizontal wells in the Codell Formation underlying the Application Lands is estimated to be 51.5 acres. Thus, an approximate 480-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically and effectively drained by three horizontal wells 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. Crestone agreed to be bound by oral order of the Commission.
16. 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 establish an approximate 480-acre drilling and spacing unit for portions of Sections 12 and 13, Township 2 North, Range 68 West, 6th P.M. and approve up to 10 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 480-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 10 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:
Township 2 North, Range 68 West, 6th P.M.
Section 12: W½
Section 13: NW¼
2. The productive interval of the wellbores will be located no closer than 460 feet from the north and west unit boundaries, 150 feet from the east and south 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 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.
4. All wells permitted under this Order shall be drilled in a north-south orientation.
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