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 OPERATION FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 190300170
TYPE: SPACING
ORDER NO. 407-2874 |
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 establish an approximate 480-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve ten horizontal wells within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the North and South boundaries of the unit, no closer than 150 feet from the West boundary of the unit, no closer than 75 feet from the East 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 7 North, Range 66 West, 6th P.M.
Section 30: SW¼
Township 7 North, Range 67 West, 6th P.M.
Section 25: S½
FINDINGS
The Commission finds as follows:
1. Bayswater Exploration & Production, LLC, (Operator No. 10261) (“Bayswater” 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 January 26, 2016, the Commission entered Order No. 407-1629, which, among other things, pooled all interests in two approximate 320-acre designated horizontal wellbore spacing units for the N½S½ and the S½N½ of Section 25, Township 7 North, Range 67 West, 6th P.M., and granted cost recovery pursuant to Section 34-60-116(7)(b), C.R.S., against any nonconsenting owners in the Walton K-25HC Well (API No. 05-123-41423) and the Walton L-25HN Well (API No. 05-123-41420), for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, respectivly. The Walton K-25HC Well (API No. 05-123-41423) and the Walton L-25HN Well (API No. 05-123-41420) are horizontal wells located outside of the Application Lands. Applicant requests that the Walton K-25HC Well (API No. 05-123-41423) and the Walton L-25HN Well (API No. 05-123-41420) continue to be governed, and proceeds continue to be distributed, in accordance with their applicable rules and orders.
7. On January 30, 2017, the Commission entered Order No. 407-1895, which, among other things, pooled all interests in two approximate 640-acre designated horizontal wellbore spacing units for the N½S½ and the S½N½ of Sections 29 and 30, Township 7 North, Range 66 West, 6th P.M., and granted cost recovery pursuant to Section 34-60-116(7)(b), C.R.S., against any nonconsenting owners in the Thornton K-29-30HC Well (API No. 05-123-43599) and the Thornton L-29-30HN Well (API No. 05-123-43592), for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations, respectively. The Thornton K-29-30HC Well (API No. 05-123-43599) and the Thornton L-29-30HN Well (API No. 05-123-43592) are horizontal wells located outside of the Application Lands. Applicant requests that the Thornton K-29-30HC Well (API No. 05-123-43599) and the Thornton L-29-30HN Well (API No. 05-123-43592) continue to be governed, and proceeds continue to be distributed, in accordance with their applicable rules and orders.
8. On August 5, 2015, the Commission approved two Form 2 Applications for Permits-to-Drill for the Hester Farms A-36HN (API No. 05-123-41993) and the Hester Farms B-36HC (API No. 05-123-41998), and in so doing, established 318A designated wellbore spacing units for each well. The 318A spacing units cover lands within the Application Lands. The Hester Farms A-36HN (API No. 05-123-41993) and the Hester Farms B-36HC (API No. 05-123-41998) continue to produce oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, respectively. Applicant requests that the Hester Farms A-36HN (API No. 05-123-41993) and the Hester Farms B-36HC (API No. 05-123-41998) continue to be governed, and any proceeds continue to be distributed, in accordance with their designated horizontal wellbore spacing units.
9. On July 22, 2018, the Commission approved two Form 2 Applications for Permits-to-Drill for the Hester Farms II A-31-32HN (API No. 05-123-47394) and the Hester Farms II B-31-32HN (API No. 05-123-47390), and in so doing, established 318A designated wellbore spacing units for each well. The 318A spacing units cover lands within the Application Lands. Applicant requests that the Hester Farms II A-31-32HN (API No. 05-123-47394) and the Hester Farms II B-31-32HN (API No. 05-123-47390) continue to be governed, and any proceeds continue to be distributed, in accordance with their designated horizontal wellbore spacing units.
10. There are vertical and/or directional wells within the above-described 480-acre drilling and spacing unit producing from the Niobrara and/or Codell Formations. Applicant requests that these wells remain subject to their applicable Commission rules and orders such that proceeds from the sale of oil or gas from those wells shall continue to be distributed based on the applicable rules and orders.
11. On December 14, 2018, Bayswater, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to establish an approximate 480-acre drilling and spacing for the Application Lands for production from the Niobrara and Codell Formations, and approve ten horizontal wells within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the North and South boundaries of the unit, no closer than 150 feet from the West boundary of the unit, no closer than 75 feet from the East 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.
12. 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.
13. Bayswater, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and one supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.
14. Land testimony and exhibits submitted in support of the Application by Tyler Hammond, Landman for Bayswater, showed that Bayswater owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands. Land testimony further showed that Bayswater owns the leasehold interest adjacent to the East unit boundary and consents to the 75-foot setback from the East boundary of the unit. The testimony also showed that the proposed well be drill in an east to west orientation.
15. 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, Bayswater’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.
16. Geologic testimony and exhibits submitted in support of the Application by David Brewster, Senior Vice President of Exploration for Bayswater, showed that the Niobrara Formation is present throughout the Application Lands, averages approximately 270 feet in thickness, 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, averages approximately 22 feet in thickness, and is generally of uniform thickness throughout the Application Lands. The geologic testimony showed that the Codell Formation consists of sandstone.
17. Engineering testimony and exhibits submitted in support of the Application by John Arsenault, Vice President of Bayswater, showed that the drainage area for analog horizontal Niobrara A Formation wells is estimated at 65 acres for a one and a half-mile horizontal well, for analog horizontal Niobrara B and C Formation wells is estimated at 53 acres for a one and a half-mile horizontal well, and that the drainage area for analog horizontal Codell Formation wells is estimated at 134 acres for a one and a half-mile horizontal well. Therefore, an approximate 480-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by two horizontal wells in the Niobrara A, three horizontal wells in the Niobrara B, three horizontal wells in the Niobrara C, and two horizontal wells in the Codell, producing oil, gas and associated hydrocarbons from the Niobrara and Codell Formations. The engineering testimony also showed that the proposed wells will be economic.
18. Finally, the engineering testimony showed that the propped fracture half-length for Niobrara Formation wells is 106 feet and the propped fracture half-length for Codell Formation wells is estimated at 106 feet. As a result, the reduced setbacks to 75 feet from the East boundary of Docket No. 190300170 and 75 feet from the West boundary of Docket No. 190300169, for a total of 150 feet, will not adversely affect the correlative rights of adjacent mineral owners. Therefore, the proposed setbacks of 460 feet from the North and South unit boundaries, 75 feet from the East unit boundary, and 150 feet from the West unit boundary are appropriate.
19. 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.
20. 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.
21. Bayswater agreed to be bound by oral order of the Commission.
22. 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 establish an approximate 480-acre drilling and spacing for the Application Lands for production from the Niobrara and Codell Formations, and approve ten horizontal wells within the unit, with the productive interval of the wellbore to be located no closer than 460 feet from the North and South boundaries of the unit, no closer than 150 feet from the West boundary of the unit, no closer than 75 feet from the East 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.
ORDER
IT IS HEREBY ORDERED:
1. An approximate 480-acre drilling and spacing unit for the Application Lands is hereby established, and ten horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.
2. The productive interval of the wellbore will be located no closer than 460 feet from the North and South boundaries of the unit, no closer than 150 feet from the West boundary of the unit, no closer than 75 feet from the East 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.
3. 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.
4. All horizontal wells in the unit shall be drilled in an east to west orientation.
5. 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 7th day of August, 2019, as of July 31, 2019.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By___________________________________
Mimi C. Larsen, Secretary