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 OPERATION FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 171200769 TYPE: SPACING ORDER NO. 407-2870

REPORT OF THE COMMISSION

The Commission heard this matter on July 31, 2019, at the University of Colorado, School of Public Affairs, 1380 Lawrence Street, Second Floor Terrace Room, Denver, Colorado, upon application for an order to: 1) vacate Order No. 407-1794; and 2) establish an approximate 640-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve one horizontal well within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the North, West and East boundaries of the unit, no closer than 150 feet from the South boundary of the unit, 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 1 North, Range 68 West, 6^th P.M.

Section 28:      All

FINDINGS

The Commission finds as follows:

1.         Extraction Oil & Gas, Inc., (Operator No. 10459) (“Extraction” 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.         Pursuant to § 34-60-106(2.5)(a), C.R.S., the Commission shall regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources, and shall protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.

5.         On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule.  The Application Lands are subject to this Rule for the Niobrara and Codell Formations.

6.         On October 24, 2016, the Commission issued Order No. 407-1794 which, among other things, established an approximate 1,280-acre drilling and spacing unit for Sections 28 and 33, Township 1 North, Range 68 West, 6^th P.M., and authorized the drilling of 20 horizontal wells within said unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

            7.         On September 15, 2017, Extraction, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to: 1) vacate Order No. 407-1794; and 2) establish an approximate 640-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve one horizontal well within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the North, West and East boundaries of the unit, no closer than 150 feet from the South boundary of the unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

            8.         Applicant stated that all horizontal wells will be drilled from no more than one multi-well pad located within the unit, or on lands adjacent thereto with permission of the land landowner.

9.         On October 27, 2017, Kerr-McGee Oil & Gas Onshore LP (“Kerr-McGee”) filed a Protest.  On March 11, 2019, Kerr-McGee’s motion to withdraw its Protest was granted by the Hearing Officer.

10.       Extraction, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and on 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 Jason Rayburn, Landman for Extraction, showed that Extraction owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands.  Land testimony further showed that Extraction owns the leasehold interest adjacent to the South unit boundary and consents to the 150-foot setback from the South boundary of the unit.  The testimony also showed that Kerr-McGee owns the leasehold adjacent to the North boundary of the unit and has no objection to a setback of 150 feet from the North boundary of the unit.  Extraction stated that it is now asking the Commission for a 150-foot setback from the North boundary of the unit. The testimony also showed that the proposed well will be drilled in a south to north orientation.

12.     Weld County is the local governmental agency with siting authority for the Application Lands and Weld County has waived its right to render a disposition regarding its surface permitting prior to the Commission’s approval of the proposed drilling and spacing unit. The testimony further demonstrated that in developing the Application Lands, Extraction’s operations will reasonably protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and will reasonably protect against adverse environmental impacts on any air, water, soil, or biological resources.

13.       Geologic testimony and exhibits submitted in support of the Application by Alcia Branch, Geologic Consultant for Extraction, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 290 to 328 feet thick, and is generally of uniform thickness throughout the Application Lands.  The geologic testimony showed that the Niobrara Formation is a sequence of chalks and marls; and, contains three potentially productive zones, the Niobrara A Chalk, the Niobrara B Chalk, and the Niobrara C Chalk. The geologic testimony also showed that the Codell Formation is a sandstone reservoir, is present throughout the Application Lands, is approximately 18 to 21 feet thick, and is generally of uniform thickness throughout the Application Lands.  The geologic testimony showed that the Codell Formation consists of sandstone.

 14.      Engineering testimony and exhibits submitted in support of the Application by Neel L. Duncan, Managing Director of Operations for Integrated Petroleum Technologies testifying for Extraction, showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 20.7 acres for a one-mile horizontal well, that the drainage area for analog horizontal Codell Formation wells is estimated at 27.7 acres for a one-mile horizontal well, and an approximate 640-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by one horizontal well producing oil, gas and associated hydrocarbons from the Niobrara and/or Codell Formation. The engineering testimony also showed that the proposed well will be economic.

15.       Finally, the engineering testimony showed that the propped fracture half-length for Niobrara Formation wells is 92 feet and the propped fracture half-length for Codell Formation wells is estimated at 138 feet.  The testimony also showed that fracture data from an analogous well shows an effective finite conductivity fracture half-length of 40 feet, and perpendicular distance to boundary parallel to the wellbore of 77.5 feet.  That evaluation data also shows that the lateral endcap boundary distance if 57 feet.  As a result, the reduced setbacks to 150 feet from the North and South boundaries of the proposed unit will not adversely affect the correlative rights of adjacent mineral owners. Therefore, the proposed setbacks of 460 feet from the East and West unit boundaries and 150 feet from the North and South unit boundaries are appropriate. 

16.       The above-referenced testimony and exhibits show that granting the Application will regulate oil and gas operations in a reasonable manner to protect and minimize adverse impacts to public health, safety, and welfare, the environment, and wildlife resources and will protect against adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations.

17.       The above-referenced testimony and exhibits further 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. 

18.       Extraction agreed to be bound by oral order of the Commission. 

19.       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 Order No. 407-1794; and 2) establish an approximate 640-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve one horizontal well within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the West and East boundaries of the unit, no closer than 150 feet from the North and South boundaries of the unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

ORDER

IT IS HEREBY ORDERED:

1.         Order No. 407-1794 is hereby vacated.

2.         An approximate 640-acre drilling and spacing unit for the Application Lands is hereby established, and one horizontal well within the unit is hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

3.         The productive interval of the wellbore will be located no closer than 460 feet from the West and East boundaries of the unit, no closer than 150 feet from the North and South boundaries of the unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

4.         The proposed wells shall be located on 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.

5.         All horizontal wells in the unit shall be drilled in a south to north orientation.

6.         No oil and gas operations may be conducted in the application lands without an approved Oil and Gas Location Assessment permit(s) (Form 2A) and approved Applications for Permits to Drill (Form 2). The determination of whether an oil and gas location satisfies § 34-60-106(2.5)(a), C.R.S. shall be made by Commission permitting staff in the course of its review and determination of the Form 2A.  The Commission’s approval of this drilling and spacing unit does not equate to approval of any proposed Form 2A for an oil and gas location or Form 2.

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 6th day of August, 2019, as of July 31, 2019.         

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary