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. 181000712
TYPE: SPACING
ORDER NO. 407-2749
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REPORT OF THE COMMISSION
The Commission heard this matter on January 28, 2019, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to: 1) modify the setbacks established by Order No. 407-1955, which pertains to an approximate 2,560-acre drilling and spacing unit established by Order 407-1961 for Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., such that for any permitted wells, the treated intervals of the wellbore should be no closer than 150 feet from the western boundary of the drilling and spacing unit, with an inter-well setback of no closer than 150 feet from the treated interval of a well producing from the Niobrara and Codell Formations; and 2) establish an approximate 2,560-acre drilling and spacing unit for Sections 25, 26, 35, and 36, Township 5 North, Range 67 West, 6th P.M., and approve up to 52 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. SRC Energy Inc. (Operator No. 10311) (“SRC” 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 February 19, 1992 (amended August 20, 1993), the Commission issued Order 407-87, 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 to be in accordance with Order No 407-1. Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., and Sections 25, 26, 35, and 36, Township 5 North, Range 67 West, 6th P.M., are subject to this Order for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
5. On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., and Sections 25, 26, 35, and 36, Township 5 North, Range 67 West, 6th P.M., are subject to this rule for the Niobrara and Codell Formations.
6. On May 1, 2017, the Commission entered Order No 407-1961 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Sections 25 and 26, Township 5 North, Range 67 West, 6th P.M., and authorized up to 13 horizontal wells for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
7. On May 1, 2017, the Commission entered Order No. 407-1955, which among other things, established an approximate 2,560-acre drilling and spacing unit covering Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., and authorizing the drilling of up to 26 horizontal wells within the proposed unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, with the treated intervals of the wellbore of any permitted wells to be located not less than 460 feet from the boundaries of the proposed unit, with an inter-well setback of not less than 150 feet from the treated interval of a well producing from the Niobrara and Codell Formations, without exception being granted by the Director.
8. On July 24, 2017, the Commission entered Order Nos. 407-2114 which, among other things, amended the inter-well setbacks for the approximate 2,560 acre drilling and spacing unit established by Docket No. 407-1955 “to allow not less than 100 feet from the productive interval of another well within the unit,” unless an exception is granted by the Director.
9. On July 30, 2018, SRC, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) modify the setbacks established by Order No. 407-1955, which pertains to an approximate 2,560-acre drilling and spacing unit established for Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., such that for any permitted wells, the treated intervals of the wellbore should be no closer than 150 feet from the western boundary of the drilling and spacing unit, with an inter-well setback of no closer than 150 feet from the treated interval of a well producing from the Niobrara and Codell Formations, without exception being granted by the Director; and 2) establish an approximate 2,560-acre drilling and spacing unit for the below-described lands (“Application Lands”) and to approve up to 52 horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the productive interval of the wellbore to be located no closer than 460 feet from the northern and southern unit boundaries, no closer than 150 feet from the eastern and western unit boundaries and no closer than 150 feet from the productive interval of any other wellbore located in the unit producing from the Niobrara and Codell formations, without exception being granted by the Director:
Township 5 North, Range 67 West, 6th P.M.
Section 25: All
Section 26: All
Section 35: All
Section 36: All
10. Applicant states that any horizontal wells to be drilled in the approximate 2,560-acre drilling and spacing unit established under this Application will be drilled from no more than five multi-well pads subject to Rule 318A, without exception being granted by the Director.
11. On November 26, 2018, supplemented on January 8, 2019, SRC, 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 Matthew Johnson, Landman for SRC, showed that SRC owns an unleased mineral interest and has a right to drill in the Application Lands, as well as the adjoining drilling and spacing unit subject to Order No. 407-1955. Furthermore, the land testimony indicated the wellbore orientation of each well drilled in the drilling and spacing unit established by this Order will be drilled in an east/west direction. Further, the land testimony showed that the other working interest owner in the drilling and spacing unit subject to Order No. 407-1955, Kerr-McGee Oil & Gas Onshore LP (Operator No. 47120), has agreed to the reduced setback of 150 feet for the common unit boundary between the drilling and spacing unit subject to Order No. 407-1955 and the Application Lands in order to maximize the amount of oil, gas, and associated hydrocarbons recoverable by wells drilled in both drilling and spacing units.
13. Geologic testimony and exhibits submitted in support of the Application by Thomas Jacaruso, Senior Staff Geologist for SRC, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 210 to 340 feet thick, is comprised of chalks and marlstones, and is generally of uniform thickness throughout the Application Lands. The testimony also showed that there are three potentially productive zones in the Niobrara Formation, those being the Niobrara A Zone, the Niobrara B Zone, and the Niobrara C Zone. The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 15 to 31 feet thick, is made up of sandstone, and is generally of uniform thickness throughout the Application Lands. The geologic testimony also showed that Applicant may drill up to 41 wells in the Niobrara Formation and up to 11 wells in the Codell Formation.
14. Engineering testimony and exhibits submitted in support of the Application by Brett Hall, Reservoir Engineer for SRC, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 61.0 acres, and an approximate 2,560-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically, and effectively drained by 41 horizontal wells producing oil, gas, and associated hydrocarbons from the three zones in the Niobrara Formation. The engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 174.4 acres, and an appropriate 2,560-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically, and effectively drained by 11 horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation.
15. The Commission takes administrative notice of its records which show that Applicant has 16 approved, but undrilled, horizontal wellbore spacing units in Sections 35 and 36, Township 5 North, Range 67 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations. These horizontal wellbore spacing units should be vacated since the approximate 2,560-acre drilling and spacing unit for the Application Lands is being created.
16. 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.
17. SRC agreed to be bound by oral order of the Commission.
18. 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: 1) modify the setbacks established by Order No. 407-1955, which pertains to an approximate 2,560-acre drilling and spacing unit established for Sections 31, 32, 33, and 34, Township 5 North, Range 66 West, 6th P.M., such that for any permitted wells, the treated intervals of the wellbore should be no closer than 150 feet from the western boundary of the drilling and spacing unit, with an inter-well setback of no closer than 150 feet from the treated interval of a well producing from the Niobrara and Codell Formations; 2) vacate Order No. 407-2114; 3) vacate Order No. 407-1961; 4) vacate the 16 approved, but undrilled, horizontal wellbore spacing units in Sections 35 and 36, Township 5 North, Range 67 West, 6th P.M., for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations; and 5) establish an approximate 2,560-acre drilling and spacing unit for Sections 25, 26, 35, and 36, Township 5 North, Range 67 West, 6th P.M., and approve up to 52 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. Order No. 407-1955 is amended to provide that for the approximate 2,560 acre drilling and spacing unit for the below described lands, for the production of oil, gas, and associated hydrocarbons form the Niobrara and Codell Formations, is hereby amended such that for any permitted wells, the treated intervals of the wellbore should be no closer than 460 feet from the north, east, and south boundaries of the unit, no closer than 150 feet from the western boundary of the drilling and spacing unit, and no closer than 150 feet from the treated interval of any other well in the unit, and that all permitted wells will be drilled in an east/west orientation, without exception being granted by the Director:
Township 5 North, Range 66 West, 6th P.M.
Section 31: All
Section 32: All
Section 33: All
Section 34: All
2. Order No. 407-2114 is hereby vacated.
3. Order No. 407-1961 is hereby vacated.
4. The sixteen horizontal wellbore spacing units previously established for Sections 35 and 36, Township 5 North, Range 67 West, 6th P.M., are hereby vacated for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
5. An approximate 2,560-acre drilling and spacing unit for the below-described lands, is hereby established, and a total of up to 52 horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations:
Township 5 North, Range 67 West, 6th P.M.
Section 25: All
Section 26: All
Section 35: All
Section 36: All
6. The productive interval of the wellbore will be located no closer than 460 feet from the northern and southern unit boundaries, no closer than 150 feet from the eastern and western 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.
7. All wells drilled with in the unit established by this order shall be drilled in an east/west orientation.
8. All wells permitted for the drilling and spacing unit established under this Order shall be drilled from no more than five multi-well pads within the Application Lands, or on lands adjacent thereto with land-owner consent, 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 25th day of February, 2019, as of January 28, 2019.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Mimi C. Larsen, Secretary