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 AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 190600404 TYPE: SPACING ORDER NO. 407-2905

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 establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 16 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 unit boundaries and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception:

Township 7 North, Range 67 West, 6^th P.M.

Section 9:        S½

Section 10:      S½

FINDINGS

The Commission finds as follows:

1. Nickel Road Operating LLC (Operator No. 10669), together with Nickel Road Development LLC which is an affiliate of Nickel Road Operating LLC under common ownership and control (together, “Nickel Road” 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 March 18, 2019, Nickel Road, 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 640-acre drilling and spacing unit for the Application Lands and approve up to 16 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 unit boundaries and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.

7. Applicant states that all horizontal wells will be drilled from no more than two multi-well pads within the drilling unit, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless an exception is granted by the Director.

8. Nickel Road 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.   

9. Land testimony and exhibits submitted in support of the Application by Blake Leavitt, Land Manager for Nickel Road, show that both the mineral and surface interests in the Application Lands are owned in fee, and that Nickel Road owns a partial undivided leasehold ownership interest and the right to drill in the Application Lands.

10. 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 testimony further demonstrates that in developing the Application Lands, Nickel Road’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.

11. Geologic testimony and exhibits submitted in support of the Application by Christopher Tincher, Geologist and Managing Partner for Nickel Road, show that the Niobrara Formation is present throughout the Application Lands, ranges from approximately 250 to 305 feet thick, and is a sequence of chalks, marls, and limestones. Geologic testimony also shows that the Codell Formation is present is throughout the Application Lands, ranges from approximately 23 to 26 feet thick, and is a sandstone.

12. Engineering testimony and exhibits submitted in support of the Application by Andrew Haney, Reservoir Engineer and Managing Partner for Nickel Road, show that the Applicant intends to drill 12 horizontal wells targeting the Niobrara Formation and four horizontal wells targeting the Codell Formation. The engineering testimony also shows that the estimated drainage area for a horizontal Niobrara Formation well in the Application Lands is 37 acres. Accordingly, an approximate 640-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by 12 horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation. In addition, the geologic testimony shows that the estimated drainage area for a horizontal Codell Formation well in the Application Lands is 34 acres. Accordingly, an approximate 640-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by four horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation.

13. Engineering testimony also shows that the estimate drainage radius is 106 feet for Niobrara Formation wells and 99 feet for Codell Formation wells. Therefore, the proposed setbacks of 460 feet from the unit boundaries are appropriate.

14. 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.

15. 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. 

16. Nickel Road agreed to be bound by oral order of the Commission. 

17. Based on the facts stated in the verified Application, no protests having been filed, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to establish an approximate 640-acre drilling and spacing unit for the Application Lands and approve up to 16 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 unit boundaries and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 640-acre drilling and spacing unit for the Application Lands is hereby established, and up to 16 horizontal wells within the unit are approved for production from the Niobrara and Codell Formations.

2.         The productive interval of any 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 within the unit, unless the Director grants an exception.

3.         All wells permitted under this Order will be drilled from no more than two multi-well pads within the Application Lands, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless the Director grants an exception.

4.         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 10th day of September, 2019, as of August 21, 2019.        

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary