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. 190100022
TYPE: ADDITIONAL WELLS
ORDER NO. 407-2907 |
REPORT OF THE COMMISSION
The Commission heard this matter on August 21, 2019, at the Hotel Colorado, 526 Pine Street, Glenwood Springs, Colorado, upon application for an order to: 1) vacate an approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; 2) vacate Order No. 407-661, which authorized up to four horizontal wells within an established 640-acre drilling and spacing unit, only as to Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; and 3) amend Order No. 407-662, which established an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) for the Codell Formation to include the Niobrara Formation, and to approve an additional 12 new horizontal wells, for a total of 16 horizontal wells, and reduce the setbacks to 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations:
Township 7 North, Range 62 West, 6th P.M.
Section 2: All
FINDINGS
The Commission finds as follows:
1. Mallard Exploration, LLC, (Operator No. 10670) (“Mallard” 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 31, 2011 (Corrected on January 10, 2012), the Commission entered Order No. 407-501, which among other things, established twelve approximate 640-acre drilling and spacing units and authorized one horizontal well within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be no closer than 460 feet from the unit boundaries. Section 2, Township 7 North, Range 62 West, 6th P.M. is subject to this Order for the Niobrara Formation.
7. On July 9, 2012, the Commission entered Order No. 407-661, which authorized up to four horizontal wells within an established 640-acre drilling and spacing unit for Section 2, Township 7 North, Range 62 West, 6th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
8. On July 9, 2012, the Commission entered Order No. 407-662 which established five approximate 640-acre drilling and spacing units, including an approximate 640-acre drilling and spacing unit for Section 2, Township 7 North, Range 62 West, 6th P.M., and authorized up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Codell Formation.
9. On November 20, 2018 (Amended on December 20, 2018 and January 7, 2019), Mallard, 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 an approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; 2) vacate Order No. 407-661, which authorized up to four horizontal wells within an established 640-acre drilling and spacing unit, only as to Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; and 3) amend Order No. 407-662, which established an approximate 640-acre drilling and spacing unit for the Application Lands for the Codell Formation to include the Niobrara Formation, and to approve an additional 12 new horizontal wells, for a total of 16 horizontal wells, and reduce the setbacks to 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
10. Applicant stated that all horizontal wells will be drilled from no more than two multi-well pad located within the unit, or on lands adjacent thereto with permission of the land landowner.
11. Mallard, 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.
12. The proposed drilling and spacing unit contains federal minerals. As such, Mallard agrees that it, or its successor operator, will submit a Communitization Agreement (“CA”) to the BLM at least 90 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.
13. Land testimony and exhibits submitted in support of the Application by Michael Sobecki, Senior Landman for Mallard, showed that Mallard owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands.
14. 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.
15. Geologic testimony and exhibits submitted in support of the Application by Peter Kubik, Vice President of Exploration and Geology for Mallard, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 230 to 350 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony also showed that the Codell Formation is a sandstone reservoir, is present throughout the Application Lands, is approximately 6 to 10 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony showed that the Codell Formation consists of sandstone.
16. Engineering testimony and exhibits submitted in support of the Application by Matt Volkmar, President of Mallard, show that the estimated drainage area for analog Niobrara Formation horizontal wells is 33 acres for a one-mile horizontal well and that the estimated drainage area for a Codell Formation horizontal wells is 29 acres for a one-mile horizontal well. 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 one-mile horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation and four one-mile horizontal wells producing oil, gas and associated hydrocarbons from the Codell Formation. The engineering testimony also showed that the proposed wells will be economic.
17. Finally, the engineering testimony and exhibits showed that drainage radii have been calculated for each of the analog wells based on the associated reservoir properties and EUR’s near the Application Lands. The average drainage radii are 170 feet and 148 feet for the Niobrara and Codell, respectively. The maximum drainage radii among the analog well data set are 240 feet and 285 feet for the Niobrara and Codell, respectively. These calculations justify the reduction of the standard DSU setback from 460 feet to 300 feet as requested in the Application. As a result, the setbacks to 300 feet from the boundaries of the proposed unit will not adversely affect the correlative rights of adjacent mineral owners. Therefore, the proposed setbacks of 300 feet from the unit boundaries are appropriate.
18. 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.
19. 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.
20. Mallard agreed to be bound by oral order of the Commission.
21. 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 an approximate 640-acre drilling and spacing unit established by Order No. 407-501 for Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; 2) vacate Order No. 407-661, which authorized up to four horizontal wells within an established 640-acre drilling and spacing unit, only as to Section 2, Township 7 North, Range 62 West, 6th P.M. for the Niobrara Formation; and 3) amend Order No. 407-662, which established an approximate 640-acre drilling and spacing unit for the Application Lands for the Codell Formation to include the Niobrara Formation, and to approve an additional 12 new horizontal wells, for a total of 16 horizontal wells, and reduce the setbacks to 300 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
ORDER
IT IS HEREBY ORDERED:
1. The approximate 640-acre drilling and spacing unit for Section 2, Township 7 North, Range 62 West, 6th P.M., established by Order No. 407-501, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, is hereby vacated.
2. The four horizontal wells authorized within an approximate 640-acre drilling and spacing unit, as it relates to Section 2, Township 7 North, Range 62 West, 6th P.M., authorized by Order No. 407-661, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, are hereby vacated.
3. Order No. 407-662, which established an approximate 640-acre drilling and spacing unit for the Application Lands for the Codell Formation, is hereby amended, to include the Niobrara Formation and to approve an additional 12 new horizontal wells, for a total of up to 16 horizontal wells, within the established approximate 640-acre drilling and spacing unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.
4. The productive interval of the wellbores will be located no closer than 300 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.
5. The proposed wells shall be located on two 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.
6. Mallard, or its successor operator, shall submit a CA to the BLM at least 90 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.
7. 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 August, 2019, as of August 21, 2019.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By___________________________________
Mimi C. Larsen, Secretary