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. 181200885
TYPE: SPACING
ORDER NO. 407-2896 |
REPORT OF THE COMMISSION
The Commission heard this matter on August 21, 2019, at Hotel Colorado, 526 Pine Street, Glenwood Springs, Colorado, upon application for an order to: 1) vacate Order No. 407-1943; 2) vacate Order No. 407-1944; 3) vacate Order No. 407-1945; and 4) establish an approximate 800-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 10 horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 460 feet from the 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 5 North, Range 65 West, 6th P.M.
Section 15: S½
Section 16: S½
Section 17: SE¼
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 Rule 318A.
6. On May 1, 2017, the Commission entered Order No. 407-1943, which pooled all interests in three approximate 560-acre Rule 318A horizontal wellbore spacing units covering S½N½, N½S½ of Section 16 and the SE¼NW¼, NE¼SW¼, S½NE¼, N½SE¼ of Section 17, Township 5 North, Range 65 West, 6th P.M., for the Vetting #12 Well (API #05-123-44392), the Vetting #13 Well (API #05-123-44389), and the Vetting #14 Well (API #05-123-44393) for the development and operation of the Niobrara and Codell Formations. Portions of the Application Lands are subject to Order No. 407-1943. Extraction is the operator of the Vetting #12, #13, and #14 Wells.
7. On May 1, 2017, the Commission entered Order No. 407-1944, which pooled all interests in eight approximate 560-acre Rule 318A horizontal wellbore spacing units covering S½ of Section 16 and the E½SW¼ and SE¼ of Section 17, Township 5 North, Range 65 West, 6th P.M., for the Vetting #15 Well (API #05-123-44394), the Vetting #16 Well (API #05-123-44385), the Vetting #17 Well (API #05-123-44384), the Vetting #18 Well (API #05-123-44390), the Vetting #19 Well (API #05-123-44387), the Vetting #20 Well (API #05-123-44386), the Vetting #21 Well (API #05-123-44388), and the Vetting #22 Well (API #05-123-44383) for the development and operation of the Niobrara and Codell Formations. Portions of the Application Lands are subject to Order No. 407-1944. Extraction is the operator of the Vetting #15, #16, #17, #18, #19, #20, #21, and #22 Wells.
8. On May 1, 2017, the Commission entered Order No. 407-1945, which pooled all interests in two approximate 560-acre Rule 318A horizontal wellbore spacing units covering S½S½ of Section 16, the SE¼SW¼ and S½SE¼ of Section 17, the NE¼NW¼ and N½NE¼ of Section 20 and the N½N½ of Section 21, Township 5 North, Range 65 West, 6th P.M., for the Vetting #23 Well (API #05-123-44382) and the Vetting #24 Well (API #05-123-44391) for the development and operation of the Niobrara Formation. Portions of the Application Lands are subject to Order No. 407-1945. Extraction is the operator of the Vetting #23 and #24 Wells.
9. On November 7, 2018, amended on September 12, 2019, 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. 407-1943; 2) vacate Order No. 407-1944; 3) vacate Order No. 407-1945; and 4) establish an approximate 800-acre drilling and spacing unit for the Application Lands and approve up to 10 horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 460 feet from the 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.
10. Applicant states that all horizontal wells will be drilled from no more than one multi-well pad on the surface of the drilling unit, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless the Director grants an exception.
11. Extraction 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.
12. In the sworn written testimony submitted in support of the Application, Extraction notes that it only intends to drill nine horizontal wells in the proposed drilling and spacing unit, as opposed to the 10 horizontal wells that the Application requests.
13. On September 27, 2018, Wolfhawk Energy Holdings, LLC (“Wolfhawk”) filed a protest to the Application. On December 3, 2018, PDC Energy, Inc. (“PDC”) filed a protest to the Application. On November 14, 2018, Wolfhawk withdrew its protest. On March 22, 2019, PDC withdrew its protest.
14. The proposed drilling and spacing unit contains federal minerals. As such, Extraction agrees that it, or its successor operator, will submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) at least 30 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.
15. Land testimony and exhibits submitted in support of the Application by Drew Stout, Landman for Extraction, show that Extraction holds oil and gas interests and has a right to drill in the Application Lands.
16. Land testimony also shows that Weld County is the local governmental agency with siting authority for the Application Lands. 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 land testimony further demonstrates 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 protect against adverse environmental impacts on any air, water, soil, or biological resources.
17. Geologic testimony and exhibits submitted in support of the Application by Alicia Branch, Geologist for Extraction, show that the Niobrara Formation is present throughout the Application Lands, is approximately 256 to 276 feet thick, and is a sequence of chalks and marls. In addition, the geologic testimony shows that the Codell Formation is present throughout the Application Lands, is approximately 16 to 20 feet thick, and is a sandstone.
18. Engineering testimony and exhibits submitted in support of the Application by Nell L. Duncan, Managing Director, Operations for Integrated Petroleum Technologies, on behalf of Extraction, show that the Applicant will drill up to eight 2.25-mile horizontal Niobrara Formation wells and up to one 2.25-mile horizontal Codell Formation well. In addition, engineering testimony shows that the estimated drainage area for a Niobrara Formation horizontal well in the Application Lands is 39.5 acres. Accordingly, an approximate 800-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by eight 2.25-mile horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation. Engineering testimony shows that the estimated drainage area for a Codell Formation horizontal well in the Application Lands is 185.6 acres. Accordingly, an approximate 800-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by one 2.25-mile horizontal well producing oil, gas, and associated hydrocarbons from the Codell Formation.
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. Extraction agreed to be bound by oral order of the Commission.
22. Based on the facts stated in the verified Application, the protests 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. 407-1943; 2) vacate Order No. 407-1944; 3) vacate Order No. 407-1945; and 4) establish an approximate 800-acre drilling and spacing unit for the Application Lands and approve up to nine horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 460 feet from the 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.
ORDER
IT IS HEREBY ORDERED:
1. Order No. 407-1943 is hereby vacated.
2. Order No. 407-1944 is hereby vacated.
3. Order No. 407-1945 is hereby vacated.
4. An approximate 800-acre drilling and spacing unit for the Application Lands is hereby established, and nine horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.
5. The productive interval of the wellbore will be located no closer than 460 feet from the 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.
6. The proposed wells shall be located on no more than 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.
7. Extraction, or its successor operator, shall submit a CA to the BLM at least 30 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.
8. 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 9th day of September, 2019, as of August 21, 2019.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By___________________________________
Mimi C. Larsen, Secretary