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. 190600451
TYPE: SPACING
ORDER NO. 407-2920 |
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: 1) vacate Order No. 407-316; 2) vacate Order No. 407-326; 3) vacate Order No. 407-327; and 4) establish an approximate 960-acre drilling and spacing for the below-described lands (“Application Lands”) for production from the Niobrara and Codell Formations, and approve 17 horizontal wells within the unit, with the productive interval of the wellbore to be located no closer than 150 feet from the East and West boundaries of the unit, no closer than 460 feet from the North and South 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 65 West, 6th P.M.
Section 31: E½
Section 32: All
FINDINGS
The Commission finds as follows:
1. PDC Energy, Inc. (Operator No. 69175) (“PDC” 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 February 19, 1992, the Commission entered Order No. 407-87 (amended August 20, 1993) which, among other things, established 80-acre drilling and spacing units for the production of oil, gas, and associated hydrocarbons from the Codell-Niobrara Formations, the Codell Formation, and the Niobrara Formation underlying certain lands, including Sections 31 and 32 of Township 5 North, Range 65 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order 407-1.
7. On September 22, 2008, the Commission entered Order No. 407-316, which, among other things, established an approximate 80-acre drilling and spacing unit consisting of the E½SW¼ of Section 31, Township 5 North, Range 65 West, 6th P.M., for the production of oil and associated hydrocarbons from the Sussex, Codell, “J” Sand, and Dakota Formations, and pooled all nonconsenting interests within the approximate 80-acre drilling and spacing unit.
8. On September 22, 2008, the Commission entered Order No. 407-326, which, among other things, established an approximate 160-acre drilling and spacing unit consisting of the SE¼ of Section 31, Township 5 North, Range 65 West, 6th P.M., for the production of oil and associated hydrocarbons from the Sussex, Codell, Niobrara, “J” Sand, and Dakota Formations, and pooled all nonconsenting interests within the approximate 160-acre drilling and spacing unit.
9. Also on September 22, 2008, the Commission entered Order No. 407-327, which, among other things, established an approximate 160-acre drilling and spacing unit consisting of the SW¼ of Section 31, Township 5 North, Range 65 West, 6th P.M., for the production of oil and associated hydrocarbons from the Sussex, Codell, Niobrara, “J” Sand, and Dakota Formations, and pooled all nonconsenting interests within the approximate 160-acre drilling and spacing unit.
10. On March 19, 2019, PDC, 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. 407-316; 2) vacate Order No. 407-326; 3) vacate Order No. 407-327; and 4) establish an approximate 960-acre drilling and spacing for Application Lands for production from the Niobrara and Codell Formations, and approve 17 horizontal wells within the unit, with the productive interval of the wellbore to be located no closer than 150 feet from the East and West boundaries of the unit, no closer than 460 feet from the North and South 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. PDC excluded from the Application all existing vertical, horizontal, and directional wells located on the Application Lands, to the extent they are still producing, and requested that the production and payments from the existing vertical, horizontal, and directional wells be maintained under the authority of all applicable Commission rules and orders.
11. 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. Applicant also stated that the horizontal wells will be drilled in an east to west or west to east orientation.
12. PDC, 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.
13. Land testimony and exhibits submitted in support of the Application by Katherine Wilson, Regional Landman for PDC, showed that PDC owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands.
14. The land testimony further showed 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, PDC’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 Nathan Marolf, Development Geologist for PDC, showed that the Niobrara formation is present throughout the Application Lands, is approximately 320 to 330 feet thick, is generally of uniform thickness throughout the Application Lands, and has at least three potentially productive zones. The geologic testimony showed that the Niobrara formation is comprised of chalks, marlstones, and limestones and is a common source of supply. The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately 18 feet thick, and is generally of uniform thickness throughout the Application Lands. Further, the geologic testimony showed that the Codell formation is made up of fine-grained marine interbedded clay and sand deposits.
16. Engineering Testimony and exhibits submitted in support of the Application by John Yetkin, Reservoir Engineer for PDC, showed that PDC is planning to drill 15 horizontal wells in the Niobrara Formation and two horizontal wells in the Codell Formation. The engineering testimony further showed that showed that the drainage area for analog horizontal Niobrara Formation wells within the application lands is estimated at 79 acres for a 7,620-foot of horizontal well drilled in the Niobrara Formation, and an approximate 960-acre drilling and spacing unit is therefore not less than the maximum area that can be efficiently, economically and effectively drained by 15 horizontal wells producing oil, gas and associated hydrocarbons from three zones the Niobrara Formation. The engineering testimony also showed that the drainage area for analog horizontal Codell Formation wells within the application lands is estimated at 154 acres for a 7,620-foot horizontal well drilled in the Codell Formation, and an approximate 960-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by two horizontal wells producing oil, gas and associated hydrocarbons from the Codell formation.
17. The engineering testimony further showed that microsiesmic test results show that there is no evidence there will be hydraulic-fracture growth beyond the heels and toes of the proposed horizontal; wells. As a result, the reduced setbacks to 150 feet from the East and West boundaries of the proposed unit will not adversely affect the correlative rights of adjacent mineral owners. Therefore, the proposed setbacks of 460 feet from the North and South unit boundaries and 150 feet from the East and West unit boundaries are appropriate.
18. The drilling and spacing unit contains federal leased and/or unleased minerals. As such, PDC agreed to submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) for any existing wells within 60 days of the entry of this order. PDC also agreed to submit a CA to the BLM within 90 days from the date of first production (as defined in the Commission Rules) from the initial well drilled within the exploratory drilling unit (or drilling and spacing unit).
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. PDC agreed to be bound by oral order of the Commission.
22. Order Nos. 407-316 and 407-327 pertain to lands not included in the Application Lands, and therefore should not be vacated by this Order. Order No. 407-326 is for vertical wells and should not need to be vacated at this time.
23. 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 960-acre drilling and spacing for Application Lands for production from the Niobrara and Codell Formations, and approve 15 horizontal wells for the Niobrara Formation and two horizontal wells for the Codell Formation within the unit, with the productive interval of the wellbore to be located no closer than 150 feet from the East and West boundaries of the unit, no closer than 460 feet from the North and South 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 approximate 960-acre drilling and spacing unit for the Application Lands is hereby established, and 15 horizontal wells for the Niobrara Formation and two horizontal wells for 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 150 feet from the East and West boundaries of the unit, no closer than 460 feet from the North and South 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. The proposed wells shall be located on two multi-well pads 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. All horizontal wells in the unit shall be drilled in an east to west or west to east orientation.
5. PDC, or its successor operator, shall submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) for any existing wells within 60 days of the entry of this order. PDC, or its successor operator, shall also submit a CA to the BLM within 90 days from the date of first production (as defined in the Commission Rules) from the initial well drilled within the exploratory drilling unit (or drilling and spacing unit).
6. 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