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. 190300200 TYPE: ADDITIONAL WELLS ORDER NO. 407-2918

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 approve an additional four horizontal wells, for a total of up to 44 horizontal wells, within the approximate 2,560-acre drilling and spacing unit established by Order No. 407-1954 for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, with the productive interval of the wellbores to be located no closer than 150 feet from the western boundary of the unit, no closer than 460 feet from the eastern, northern, and southern boundaries of the unit, 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 66 West, 6^th P.M.

Section 27:      All

Section 28:      All

Section 29:      All

Section 30:      All

FINDINGS

The Commission finds as follows:

1. SRC Energy Inc. (Operator No. 10311) (“SRC” 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 May 1, 2017, the Commission entered Order No. 407-1954 which, among other things, established an approximate 2,560-acre drilling and spacing unit for the Application Lands, and approved the drilling of up to 26 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

7. On July 24, 2017, the Commission entered Order No. 407-2113 which, among other things, amended Order No. 407-1954 to allow not less than 100 feet from the productive interval of another well within the unit, unless an exception is granted by the Director, for any of the allowed horizontal wells within the approximate 2,560-acre drilling and spacing unit established by Order No. 407-1954 for the Application Lands.

8. On April 30, 2018, the Commission entered Order No. 407-2436 which, among other things, increased the well density from 24 horizontal wells to 40 horizontal wells in the approximate 2,560-acre drilling and spacing unit established by Order No. 407-1954 for the Application Lands, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

9. On January 10, 2019, SRC filed with the Commission a verified application (“Application”) pursuant to § 34-60-116, C.R.S., for an order to approve an additional four horizontal wells, for a total of up to 44 horizontal wells, within the approximate 2,560-acre drilling and spacing unit established by Order No. 407-1954 for the Application Lands, for production from the Niobrara and Codell Formations, with the productive interval of the wellbores to be located no closer than 150 feet from the western boundary of the unit, no closer than 460 feet from the eastern, northern, and southern boundaries of the unit, 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 44 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. Applicant further states that all horizontal wells permitted under this order will be drilled in an east/west orientation.  

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

12. Land testimony and exhibits submitted in support of the Application by Kaitlyn Cass, Senior Landman for SRC, show that the Application Lands consist of fee mineral interests and that SRC owns mineral interests and has a right to drill in the Application Lands.

13. Geologic testimony and exhibits submitted in support of the Application by Thomas Birmingham, Vice President, Exploration for SRC, show that the Niobrara Formation is approximately 260 to 310 feet thick in the Application Lands and is a common source of supply. The geologic testimony shows that the Niobrara Formation consists of interbedded chalks, limestones, and marls. Geologic testimony further shows that the Codell Formation is approximately 18 to 25 feet thick in the Application Lands and is a common source of supply underlying the Application Lands. The geologic testimony shows that the Codell Formation consists of sandstones, siltstones, and shales. The geologic testimony also states that SRC plans to drill up to 35 wells in the Niobrara Formation and up to nine wells in the Codell Formation.

14. Engineering testimony and exhibits submitted in support of the Application by Brett Hall, Reservoir Engineer for SRC, show that, of the 35 Niobrara Formation wells, 18 wells will have laterals of approximately 7,700 feet and 17 wells will have laterals of approximately 12,500 feet. Engineering testimony further shows that the drainage area for analog horizontal Niobrara Formation wells with 7,700-foot laterals is estimated to be 53.3 acres per well, and the drainage area for analog horizontal Niobrara Formation wells with 12,500-foot laterals is estimated to be 86.5 acres. Therefore, an approximate 2,560-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically and effectively drained by 18 horizontal wells with 7,700-foot laterals and 17 horizontal wells with 12,500-foot laterals producing oil, gas, and associated hydrocarbons from the Niobrara Formation. The engineering testimony also shows that, of the nine Codell Formation wells, four wells will have laterals of approximately 7,700 feet and five wells will have laterals of approximately 12,500 feet. The drainage area for analog horizontal Codell Formation wells with 7,700-foot laterals is estimated to be 146.7 acres per well, and the drainage area for analog horizontal Codell Formation wells with 12,500-foot laterals is estimated to be 238.2 acres. Therefore, an approximate 2,560-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically and effectively drained by four horizontal wells with 7,700-foot laterals and five horizontal wells with 12,500-foot laterals producing oil, gas, and associated hydrocarbons from the Codell Formation.

15. In addition, the engineering testimony showed that the drainage distance of a horizontal well in the Application Lands is expected to be 100 feet beyond the heels and toes in both the Niobrara and Codell Formations. In addition, the drainage distance of a horizontal well in the Application Lands is expected to be 172 feet and 436 feet perpendicular to the wellbore in the Niobrara Formation and Codell Formation, respectively. Thus, the requested setbacks of 150 feet from the western boundary of the unit and no closer than 460 feet from the eastern, northern, and southern boundaries of the unit are appropriate given an east/west orientation.

16. Supplemental Land testimony and exhibits submitted in support of the Application by Kaitlyn Cass, Senior Landman for SRC, show 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. In addition, the Affidavit of Brandon Lorenz, Asset Planning Manager for SRC, demonstrates that in developing the Application Lands, SRC’s operations will be conducted in a manner that protects and minimizes 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. 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.

18. 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. 

19. SRC agreed to be bound by oral order of the Commission. 

20. 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 approve an additional four horizontal wells, for a total of up to 44 horizontal wells, within the approximate 2,560-acre drilling and spacing unit established by Order No. 407-1954 for the Application Lands, for production from the Niobrara and Codell Formations, with the productive interval of the wellbores to be located no closer than 150 feet from the western boundary of the unit, no closer than 460 feet from the eastern, northern, and southern boundaries of the unit, 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 additional four horizontal wells, for a total of up to 44 horizontal wells, in the approximate 2,560-acre drilling and spacing unit that Order No. 407-1954 established for the Application Lands, are hereby approved for production from the Niobrara and Codell Formations.

2.         The productive interval of the wellbore of any permitted well in the unit shall be located no closer than 150 feet from the western boundary of the unit, no closer than 460 feet from the eastern, northern, and southern boundaries of the unit, 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.         All 44 horizontal wells in the approximate 2,560-acre drilling and spacing unit that Order No. 407-1954 established for the Application Lands shall be drilled from no more than two multi-well pads within the unit, subject to Rule 318A, unless the Director grants an exception.

4.         All horizontal wells in the approximate 2,560-acre drilling and spacing unit that Order No. 407-1954 established for the Application Lands will be drilled in an east-west orientation. 

5.         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 23rd day of October, 2019, as of September 25, 2019.      

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary