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 OPERATION FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407 DOCKET NO. 181000716 TYPE: SPACING ORDER NO. 407-2910

REPORT OF THE COMMISSION

The Commission heard this matter on September 25, 2019, at the Margaret Carpenter Recreation Center, 11151 Colorado Blvd, Thornton, Colorado, upon application for an order to establish an approximate 600-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve nine horizontal wells within the unit, with the productive interval of the 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 6 North, Range 65 West, 6^th P.M.

Section 27:      SW¼, W½SE¼, NE¼SE¼

Section 28:      S½

FINDINGS

The Commission finds as follows:

1.         Incline Operating, LLC (Operator No. 10689) (“Incline” 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 August 17, 2018, Incline, 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 600-acre drilling and spacing for the Application Lands for production from the Niobrara and Codell Formations, and approve nine horizontal wells within the unit, with the productive interval of the 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.

            7.         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.

8.         On October 2, 2018, Noble Energy, Inc. (“Noble”) filed a Protest.  On March 28, 2019, the Noble’s withdrawal of its Protest was approved by the Hearing Officer.  

9.         Incline, 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.

10.       Land testimony and exhibits submitted in support of the Application by Juliann Friday, Acquisition Lead for Incline, showed that Incline owns a leasehold interest and has a right to drill in the Application Lands.

11.       Geologic testimony and exhibits submitted in support of the Application by Michael A. Domenick, Consulting Geologist for Incline, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 300 feet thick, and is generally of uniform thickness throughout the Application Lands.  The geologic testimony showed that the Niobrara Formation is a sequence of chalk, marl, and limestone; 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, is approximately 15 to 17 feet thick, and is generally of uniform thickness throughout the Application Lands.  The geologic testimony showed that the Codell Formation consists of sandstone.

 12.      Engineering testimony and exhibits submitted in support of the Application by Kent B. Lina, Petroleum Engineer Consultant for Incline, showed that Incline plans to drill eight Niobrara-Formation wells and one Codell-Formation well.  The engineering testimony further showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 59 acres, and an approximate 600-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by eight horizontal wells producing oil, gas and associated hydrocarbons from the Niobrara Formation. The engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells is estimated at 169 acres, and an approximate 600-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by one horizontal well producing oil, gas and associated hydrocarbons from the Codell Formation. The engineering testimony also showed that the proposed wells will be economic.

13.     Regulatory testimony and exhibits submitted in support of the Application by Juliann Friday, Acquisition Lead for Incline, show that 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, Incline’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.

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.       Incline agreed to be bound by oral order of the Commission. 

17.       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 600-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve nine horizontal wells within the unit, with the productive interval of the 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.         An approximate 600-acre drilling and spacing unit for the Application Lands is hereby established, and eight horizontal wells in the Niobrara Formation and one horizontal well in the Codell Formation 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 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.

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.         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 October, 2019, as of September 25, 2019.      

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary