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 FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO

)

)

)

)

)

)

)

CAUSE NO. 407

 

DOCKET NO. 190700492

 

TYPE: POOLING

 

ORDER NO. 407-2893

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 pool all interests in an approximate 680-acre designated horizontal wellbore spacing unit established for the below-described lands (“Application Lands”), and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wilmoth 5J-232 Well (API No. 05-123-45487) (“Well”) for the development and operation of the Niobrara Formation:   

 

Township 4 North, Range 64 West, 6th P.M.

Section 3:  NW¼NW¼

Section 4:  N½N½

Section 5:  N½N½

 

Township 5 North, Range 64 West, 6th P.M.

Section 32:  S½S½

Section 33:  S½S½

 

FINDINGS

 

The Commission finds as follows:

 

1.            PDC Energy, Inc. (Operator No. 69175) (“PDC” 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.            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 Formation.

 

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, the Codell Formation, and the Niobrara Formation underlying certain lands, including the Application Lands, with the permitted well locations in accordance with the provisions of Order 407-1.

 

6.            On April 18, 2012, Commission entered Order No. 407-606, which, among other things, pooled an approximate 160-acre designated wellbore spacing unit for the Burman C 05-17D Well (API No. 05-123-34340) consisting of the NE¼ of Section 5, Township 4 North, Range 64 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations, and pooled all interests in an approximate 320-acre designated wellbore spacing unit for the Burman C 05-17D Well (API No. 05-123-34340) consisting of the N½ of Section 5, Township 4 North, Range 64 West, 6th P.M., for the development and operation of the J-Sand Formation.

 

7.            Also on April 18, 2012, the Commission entered Order No. 407-608, which, among other things, pooled an approximate 160-acre designated wellbore spacing unit for the Connell C 04-31D Well (API No. 05-123-33547) consisting of the W½NW¼ of Section 4, and the E½NE¼ of Section 5, Township 4 North, Range 64 West, 6th P.M., for the development and operation of the Codell and Niobrara Formations.

 

8.            On August 20, 2018, the Commission entered Order No. 407-2565, which among other things, pooled three approximate 720.42-acre designated horizontal wellbore spacing units for the Bath-Schmier 5N Well (API No. 05-123-45067), the Bath-Schmier 6N Well (API No. 0-123-45076), and the Bath-Schmier 7N Well (API No. 05-123-45081) (“Wells”) consisting of the S½ of Section 32, the S½ of Section 33, and the SW¼SW¼ of Section 34, Township 5 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara formation.

 

9.            Also on August 20, 2018, the Commission entered Order No. 407-2566, which among other things, pooled two approximate 720.42-acre designated horizontal wellbore spacing units for the Bath-Schmier 8N Well (API No. 05-123-45084) and the Bath-Schmier 9N Well (API No. 05-123-45085) (“Wells”) consisting of the S½S½ of Section 32, the S½S½ of Section 33, and the SW¼SW¼ of Section 34, Township 5 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara formation. 

 

10.          Also on August 20, 2018, the Commission entered Order No. 407-2567, which among other things, pooled two approximate 711.78-acre designated horizontal wellbore spacing units for the Bath-Schmier 10N Well (API No. 05-123-45083) and the Bath-Schmier 11N Well (API No. 05-123-45082) (“Wells”) consisting of the NW¼NW¼ of Section 3, the N½N½ of Section 4, and the N½N½ of Section 5, Township 4 North, Range 65 West, 6th P.M., and the S½S½ of Section 32, the S½S½ of Section 33, and the SW¼SW¼ of Section 34, Township 5 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara formation. 

 

11.          On February 27, 2019, the Commission entered Order No. 407-2692, which among other things, pooled two approximate 800-acre designated horizontal wellbore spacing units for the Harold 6X-202 (API No. 05-123-45747) and the Harold 6X-302 (API No. 05-123-45749) (“Wells”) consisting of the W½W½ for Section 3, the S½ of Section 4, the S½ of Section 5, and the E½SE¼ of Section 6, Township 4 North, Range 64 West, 6th P.M., for the development and operation of the Niobrara Formation. 

 

12.          On January 4, 2019, the Commission entered Order No. 407-2709, which among other things, established an approximate 1,440-acre drilling and spacing unit for the N½, N½S½ of Section 4, the N½, N½S½ of Section 5, and the N½, N½S½ of Section 6, Township 4 North, Range 64 West, 6th P.M. for the development of up to 20 horizontal wells from the Niobrara and Codell Formations. 

 

13.          Also on January 4, 2019, the Commission entered Order No. 407-2710, which among other things, pooled an approximate 1,440-acre drilling and spacing unit for the Wilmoth 5A-202 Well (API No. 05-123-45483), the Wilmoth E 5A-232 Well (API No. 05-123-45485), the Wilmoth E 5A-302 Well (API No. 05-123-45490), the Wilmoth E 5A-312 Well (API No. 05-123-45484), the Wilmoth E 5K-312 Well (API No. 05-123-45480), the Wilmoth W 5A-204 Well (API No. 05-123-45489), the Wilmoth W 5A-214 Well (API No. 45481), the Wilmoth W 5A-304 Well (API No. 05-123-45486), the Wilmoth W 5A-314 Well (API No. 05-123-45482), the Wilmoth W 5A-334 Well (API No. 05-123-45488), the Judy 6D-212 Well (API No. 05-123-45735), the Judy 6S-202 Well (API No. 05-123-45736), the Judy 6S-204 Well (API No. 05-123-45745), the Judy 6S-212 Well (API No. 05-123-45742), the Judy 6S-214 Well (API No. 05-123-45737), the Judy 6S-234 Well (API No. 05-123-45739), the Judy 6S-302 Well (API No, 05-123-45738), the Judy 6S-314 Well (API No. 05-123-45744), the Judy 6S-332 Well (API No. 05-123-45743); and the Judy 6S-334 Well (API No. 05-123-45734) (“Wells”) consisting of the N½, N½S½ of Section 4, the N½, N½S½ of Section 5, and the N½, N½S½ of Section 6, Township 4 North, Range 64 West, 6th P.M. for the development and operation of the Niobrara formation. 

 

14.          On April 18, 2019, which was at least 90 days before the Commission heard this matter, PDC filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in a certain designated horizontal wellbore spacing unit established for the Application Lands, 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., for the drilling of the Well.

 

15.          The Applicant filed with the Commission a written request to approve the Application based on the merits of the Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.

 

16.          Land testimony and exhibits submitted in support of the Application by Daniel R. McCoy, Senior Regional Landman for PDC, show that in the designated horizontal wellbore spacing unit the Applicant owns, or has secured the consent of the owners of, more than 45% of the mineral interest to be pooled. In addition, the land testimony and exhibits show that there are no unleased mineral owners in the Application Lands. The owners within the designated horizontal wellbore spacing unit received an offer to participate at least 90 days before the hearing date and that the owners to be pooled did not elect in writing to consent to the Well within 60 days after receiving the offer to participate.

 

17.          In addition, the land testimony and exhibits show that all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE"). Further testimony concluded that the AFE sent by the Applicant to the interest owners were fair and reasonable estimates of the costs of the proposed drilling operations

 

18.          Land testimony showed the Applicant complied with the requirements of Rule 530 and the Act, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Well, but did not provide testimony for any subsequent wells.

 

19.          Granting the Application is consistent with the protection of public health, safety, welfare, the environment, and wildlife resources.

 

20.          PDC agreed to be bound by oral order of the Commission.

 

21.          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 pool all interests in the designated horizontal wellbore spacing unit established for the Application Lands and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Well, for the development and operation of the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., all interests in the designated horizontal wellbore spacing unit established for the Application Lands are hereby pooled, for the development and operation of the Niobrara Formation, effective as the date the Application was filed.

 

2.         The production obtained from the designated horizontal wellbore spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the designated horizontal wellbore spacing unit; each owner of an interest in the designated horizontal wellbore spacing unit shall be entitled to receive the owner’s share of the production of the Well located on the designated horizontal wellbore spacing unit applicable to owner’s interest in the designated horizontal wellbore spacing unit. 

 

3.         The following working interest owner(s) did not elect to participate in the Well or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S: Decalta International Corp.

 

4.         Each nonconsenting working interest owner must reimburse the consenting owners for the owner’s proportionate share of the costs and risks of drilling and operating the Well from the owner’s proportionate share of production, subject to non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

 

5.         The following unleased owner(s) did not elect to participate in the Well or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S.: None.

 

6.         Any nonconsenting unleased owner within a designated horizontal wellbore spacing unit shall be deemed to have a landowner's royalty, proportionate to each owner’s record title interest, of:

 

a.            for a gas well as defined in the Commission Regulations, 13% until the consenting owners recover, only out of each nonconsenting owner's proportionate 87% share of production, the costs specified in §34-60-116(7)(b), C.R.S.;

 

b.            for an oil well as defined in the Commission Regulations, 16% until the consenting owners recover, only out of each nonconsenting owner's proportionate 84% share of production, the costs specified in §34-60-116(7)(b), C.R.S.

 

After recovery of the costs specified in §34-60-116(7)(b), C.R.S., each unleased nonconsenting mineral owner owns its proportionate 8/8ths share of the Well, surface facilities, and production, and is liable for its proportionate share of further costs as if the nonconsenting owner had originally agreed to the drilling.

 

7.         The operator of the Well drilled on the designated horizontal wellbore spacing unit shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

 

8.         A nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the designated horizontal wellbore spacing unit.

 

9.         The operator shall not use the surface owned by a nonconsenting owner without the nonconsenting owner’s permission.

 

10.       Nothing in this order is intended to conflict with §34-60-116, C.R.S. Any conflict that may arise shall be resolved in favor of the statute.

 

11.       The designated horizontal wellbore spacing unit described above shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.

 

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