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. 190700504

 

TYPE: POOLING

 

ORDER NO. 407-2921

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 pool all interests in three approximate 884.198849-acre designated horizontal wellbore spacing units, two approximate 437.8335-acre designated horizontal wellbore spacing units, six approximate 876.023-acre designated horizontal wellbore spacing units, two approximate 438.1895-acre designated horizontal wellbore spacing units, and two approximate 754.569-acre designated horizontal wellbore spacing units established for the below-described lands (“Application Lands”), and to subject all nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Volt 25N-3C-L Well (API No. 05-123-50327); the Volt 25N-3A-L Well (API No. 05-123-50332); the Volt 25C-3-L Well (API No. 05-123-50351); the Volt 11N-3B-L Well (API No. 05-123-50350); the Volt 11N-3C-L Well (API No. 05-123-50342); the Volt 11C-3-L Well (API No. 05-123-50334); the Volt 23N-3B-L Well (API No. 05-123-50339); the Volt 23N-3C-L Well (API No. 05-123-50331); the Volt 23N-3A-L Well (API No. 05-123-50326); the Volt 14C-3-L Well (API No. 05-123-50337); the Volt 14N-3B-L Well (API No. 05-123-50324); the Volt 14N-3C-L Well (API No. 05-123-50343); the Volt 36N-3B-L Well (API No. 05-123-50346); the Volt 36C-3-L Well (API No. 05-123-50345); and the Volt 36N-3A-L Well (API No. 05-123-50344) (“Wells”), for the development and operation of the Niobrara and Codell Formations:    

 

Township 5 North, Range 66 West, 6th P.M.

Section 3:        S½NW¼; SW¼NE¼; N½SW¼; NW¼SE¼

Section 4:        S½N½; N½S½

Section 5:        SE¼NW¼; S½NE¼; NE¼SW¼; N½SE¼

 

Wellbore Spacing Unit (“WSU”) No 1

Volt 25N-3C-L Well – Niobrara Formation

 

WSU No. 2

Volt 25N-3A-L Well – Niobrara Formation

 

WSU No. 3

Volt 25C-3-L Well – Codell Formation

 

 

Township 5 North, Range 66 West, 6th P.M.

Section 3:        N½SW¼; NW¼SE¼

Section 4:        N½S½

Section 5:        N½SE¼; NE¼SW¼

 

WSU No. 4

Volt 11N-3B-L Well – Niobrara Formation

 

WSU No. 5

Volt 11N-3C-L Well – Niobrara Formation

 

 

Township 5 North, Range 66 West, 6th P.M.

Section 3:        W½SE¼; SW¼

Section 4:        S½

Section 5:        SE¼; E½SW¼

 

WSU No. 6

Volt 11C-3-L Well – Codell Formation

 

WSU No. 7

Volt 23N-3B-L Well – Niobrara Formation

 

WSU No. 8

Volt 23N-3C-L Well – Niobrara Formation

 

WSU No. 9

Volt 23N-3A-L Well – Niobrara Formation

 

WSU No. 10

Volt 14C-3-L Well – Codell Formation

 

WSU No. 11

Volt 14N-3B-L Well – Niobrara Formation

 

 

Township 5 North, Range 66 West, 6th P.M.

Section 3:        S½SW¼; SW¼SE¼

Section 4:        S½S½

Section 5:        S½SE¼; SE¼SW¼

 

WSU No. 12

Volt 14N-3C-L Well – Niobrara Formation

 

WSU No. 13

Volt 36N-3B-L Well – Niobrara Formation

 

 

Township 5 North, Range 66 West, 6th P.M.

Section 3:        S½SW¼

Section 4:        S½S½

Section 5:        S½SE¼; SE¼SW¼

Section 8:        N½NE¼; NE¼NW¼

Section 9:        N½N½

Section 10:      N½NW¼

 

WSU No. 14

Volt 36C-3-L Well – Codell Formation

 

WSU No. 15

Volt 36N-3A-L Well – Niobrara Formation

 

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.            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.

 

5.            On April 30, 2019, which was at least 90 days before the Commission heard this matter, SRC filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in certain designated horizontal wellbore spacing units established for the Application Lands, for the development and operation of the Niobrara and Codell Formations and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells.

 

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

 

7.            The Application as well as the land testimony and exhibits submitted in support of the Application by Matt Johnson, Senior Landman for SRC, show that in each designated horizontal wellbore spacing unit the Applicant owns, or has secured the consent of the owners of, more than 45% of the mineral interest to be pooled. In addition, the land testimony and exhibits show that the owners within the designated horizontal wellbore spacing units received a reasonable offer to lease or participate at least 90 days before the hearing date, that the owners to be pooled did not elect in writing to consent to the Wells within 60 days after receiving the offer to participate, and that any unleased owners had at least 60 days to review a reasonable offer to lease but either refused it or have not yet accepted it.

 

8.            The land testimony and exhibits also demonstrate that the offers to lease were made in good faith, contained the contact information for a representative of the Applicant, and contained the Commission’s pooling brochure or a link to access it.

 

9.            In addition, the land testimony and exhibits show that the offers to participate contained the Commission’s pooling brochure or a link to access it, the particular owner’s share of the total estimated drilling and completion costs for the Wells, and also the following information for each Well: the location, measured depth, true vertical depth, and lateral length, the total estimated drilling and completion cost, and the estimated spud date.

 

10.          Land testimony showed the Applicant complied with the requirements of Rule 530 and the Act, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Wells, but did not provide testimony for any subsequent wells.

 

11.          Granting the Application is consistent with the protection of public health, safety, welfare, the environment, and wildlife resources.

 

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

 

13.          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 pool all interests in the designated horizontal wellbore spacing units established for the Application Lands and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells, for the development and operation of the Niobrara and Codell Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., all interests in the designated horizontal wellbore spacing units established for the Application Lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, effective as the date the Application was filed.

 

2.         The production obtained from each designated horizontal wellbore spacing unit shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the designated horizontal wellbore spacing unit; each owner of an interest in the designated horizontal wellbore spacing unit shall be entitled to receive the owner’s share of the production of the Well located on the designated horizontal wellbore spacing unit applicable to owner’s interest in the designated horizontal wellbore spacing unit.  

 

3.         The following working interest owner(s) did not elect to participate in the Wells or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S: None.

 

4.         Each nonconsenting working interest owner must reimburse the consenting owners for the owner’s proportionate share of the costs and risks of drilling and operating the Well(s) from the owner’s proportionate share of production, subject to non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

 

5.         The following unleased owner(s) did not elect to participate in the Well(s) or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S.: Amber M. Polanco-Fiscus; Barbara B. Peverley; Brian Suhr and Shanna Suhr, JTS; C. Daniel Miller and Joyce L. Miller, JTS; Daniel W. Marcy; David A. Marquez and Sharon K. Marquez, JTS; David A. Naibauer and Bree D. Naibauer, JTS; Donald A. Morgan and Bridgette L. Morgan, JTS; Gloria L. Guzman; Jack W. Steele and Lisa M. Steele, JTS; James J. Zerby and Melissa N. Zerby, JTS; Jamie R. Russell and Noah M. Nelson, JTS; Jose A. Flores and Luz I. Flores, JTS; Jose D. Cardiel II; Joseph C. Giustino and Kimberly Ann Gasser Giustino, JTS; Justin H. Brawner and Brigette A. Brawner, JTS; Keith G. Kritzberg and Samantha J. Brinkman, JTS; Kenneth R. Robb and Khrin L. Robb, JTS; Maria Jose Valdez; Michaela L. Odenbaugh; Norma Lou Eitemiller; Raul Rodriguez Jr. and Valgerdur Rodriguez, JTS; Robert L. Foster and Lindsey Foster, JTS; Ryan A. Baxley; Tara L. Cranson; Will B. Briggs; William Mansfield and Renee Mansfield, JTS; 4934 West 9th Street Drive, LLC; 4936 West 9th Street Drive, LLC; 4957 West 9th, LLC; 5100 Estate, LLC; Aaron S. Ratzlaff; Adam Robert Michaels; Alba Y. Pineda; Alberto Sanchez and Yanet Guadalup Lopez-Gallegos, JTS; Alexis Marie Zanetell; Ambur Joy Halla; Anthony J. McCune, Darryl L. Schulz and Sandra J. Schulz, JTS; Anthony J. McCune, Stephanie D. McCune, Darryl L. Schulz and Sandra J. Schulz, JTS; Asa R. Payne and Susan M. Payne, JTS; Best Living Trust dated July 28, 2003; Blanca A. Yepes de Pineda; Bobbi Jo Kendall and Jesse W. Lantz, JTS; Boomerang 7257 LLC; Bradley D. Clarkson; Bruce E. Henderson and Kelly Z. Henderson, JTS; Bruce W. Willard and Elizabeth M. Willard, JTS; Carlos Lopez; Carlos M. Pineda-Baez; Carol Jean Lantz; Carrie A. Borders Trust Dated January 4, 2016; Casey R. Wilger and Jannifer K. Wilger, JTS; Charles Brian Freeman and Sandra Lee Freeman, JTS; Christopher E. Koplar; Christopher J. Richards; Christopher Robert Kreger Lane, Jr. and Georgina De LaGarza; Colorado Department of Transportation; Colton H. Kusmierkiewicz and Ashley D. Howell, JTS; Danny K. McEwan and Diana S. McEwan, JTS; Darrick Sean Rickard and Lisa Michelle Rickard, JTS; Dave Castillo and Irene Castillo, JTS; David A. Saenz and Michelle D. Saenz, JTS; David J. Aragon and Charity Lea Aragon, JTS; David K. Arnett and Cynthia A. Arnett, JTS; Dawn M. McConkey and Jeffrey D. McConkey, JTS; Denise R. Hill; Donald S. Graham; Douglas B. Diede; Duane M. Dilka and Sandra L. Dilka, JTS; Dustin Mitchell Bjorneboe and Miranda Elyse Raycraft, JTS; Edward J. Clarke; Elizabeth M. Beard; Eric M. Walker; Eric Varner; Federal National Mortgage Association (L16 B2 West Point); Federal National Mortgage Association (L6 B3 WestPoint); Francisco E. Pineda; Frank Paul Haworth and Julia A. Haworth, JTS; George E. Pfalzgraff and Pearl M. Pfalzgraff, JTS; George M. Hager and Elizabeth A. Hager, JTS; Gerald J. Reid and Lucille A. Reid, JTS; Glen Roger Taylor; Gloria G. Owens; Grant A. Bickford; Hailey Goddard and Nick Goddard, JTS; Heather R. Sanchez and Pedro F. Sanchez, JTS; Hernaldo Ortiz; HP Colorado I LLC, a Delaware LLC; Jack Duncan Eaton; Jacob Mauro; James C. Parker and Bonnie Parker, JTS; Jamie R. Askvig; Jared A. Correll and Andrea K. Correll, JTS; Jeremy L. Groves; Jessie L. Dunegan, also known as Jessie Louise Dunegan; John E. White and Carlene L. White, JTS; John Guild; Jonina S. Thorsteinsdottir and Peter W. Giedras, JTS; Josh K. Lima; Juan Trujillo and Patsy F. Trujillo, JTS; Judy A. Griego; Julia A. Haworth; The Julia M. Austin Revocable Living Trust dated July 14, 2015; Juventino Dominguez and Luvia Domingues, JTS; Kathy Ann Elliott and Jane K. Burke, JTS; Kenneth M. Peth and Laural Y. Peth, JTS; Leslie S. Kato and Coleen A. Kato, JTS; Lori K. Alvarado; Luis A. Munoz and Tess L. Munoz, JTS; M. Elizabeth Carlberg; Margie Trujillo; Maria Ortiz; Marie St. Gelais; Marilyn S. Osborne; Marisa L. Angell and Amy C. Butler Angell, JTS; Mark S. Roche and Lynn A. Roche, JTS; Mark Wickham; Marshall Scott Campbell and Adelaida Lopez, JTS; Martha Erives and Jose Molina Canales, JTS; Mary K. Clarke; Matthew Kerr; Matthew Scott Lilly and Molly Belle Lilly; Matthew T. Loos and Nichole D. Loos, JTS; Matthew W. McCarty and Shelly R. McCarty, JTS; Michelle Lee Dyer and Jordan Sanchez, JTS; Miriam H. Wolfe and DeeAnn Wolfe Cosner, JTS; Neil R. Carlberg; Orlando A. Chacon and Amanda J. Small, JTS; Pablo Sanchez; Pete Louis Gonzales and Rosa Linda Gonzales, JTS; Ray W. Lilienthal and Waneta Lilienthal, JTS; Richmark Mineral Partners, LLC, a Colorado limited liability company; RJZ, LP; Roci Romero-Jeronimo; Ronald Christopher Montoya, Jr. and Teryll A. Allard Zielsdorf; Ronald L. Ladd and Darice L. Knowlton, JTS; Sarah Jane Hill; School District No. 6 of the County of Weld, State of Colorado; Scott A. Richardson and Sonja J. Richardson, JTS; Scott G. Scaggs; Sidney K. Fahsholtz and E. Colleen Fahsholtz, JTS; State of Colorado Department of Highways; Stephanie D. McCune, Darryl L. Schulz and Sandra J. Schulz, JTS; The Owners of West Point Condominium Community; The Secretary of Veteran's Affairs; Therese Sullivan Carver; Trent D. Barnes and Kathryn S. Barnes Joint Revocable Trust dtd August 14, 2014; Ursel Moldenhauer; Wayne E. Colbert and Linda C. Colbert, JTS; Wells Fargo Bank, National Association; William G. Allen; 3JS & A K LLC; 6250 Condos, LLC; 6268, L.L.C.; Bluebird Energy Partners, LLC; Bruce A. Yackey; Bruce A. Yackey and Christi M. Bailey, JTs; Bruce Yackey; Bruce Yackey and Christi Yackey (JTWROS); Carol J. Kaplan; Christi M. Bailey; Darrell Ralph Haner; Estate of Clarence M. Chamberlain; Greeley Hospitality LLC; Janice L. Lohman ; Jennifer Walker and Christopher Walker (JTWROS); Jim L. Ells; Leanella McLeod; Linda G. Balcomb ; Margaret A. Rusch ; Mark J. Bengtson and Diane L. Bengston, JTs; Maureen D. Brucker; Michael Gabriel; Michael Rothe; Robert A. Grott; Rockies Minerals Acquisitions, LLC; Rudolf E. Daudert; S E Otis and Mary Ann Otis; Sandra J. Baker; Silver Spur Resources, LLC; Springbok Energy Partners LLC; State of Colorado Department of Transportation; Supercharged Investments, LLC; Terence C. Ritzman and Chedelyn H. Ritzman, tenants in common; The Snyder Living Trust; and William A. Moran.

 

6.         Any nonconsenting unleased owner within a designated horizontal wellbore spacing unit shall be deemed to have a landowner's royalty, proportionate to each owner’s record title interest, of:

 

a.            for a gas well as defined in the Commission Regulations, 13% until the consenting owners recover, only out of each nonconsenting owner's proportionate 87% share of production, the costs specified in §34-60-116(7)(b), C.R.S.;

 

b.            for an oil well as defined in the Commission Regulations, 16% until the consenting owners recover, only out of each nonconsenting owner's proportionate 84% share of production, the costs specified in §34-60-116(7)(b), C.R.S.

 

After recovery of the costs specified in §34-60-116(7)(b), C.R.S., each unleased nonconsenting mineral owner owns its proportionate 8/8ths share of the Wells, surface facilities, and production, and is liable for its proportionate share of further costs as if the nonconsenting owner had originally agreed to the drilling.

 

7.         The operator of the Wells drilled on the designated horizontal wellbore spacing units shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.

 

8.         A nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the designated horizontal wellbore spacing units.

 

9.         The operator shall not use the surface owned by a nonconsenting owner without the nonconsenting owner’s permission.

 

10.       Nothing in this order is intended to conflict with §34-60-116, C.R.S. Any conflict that may arise shall be resolved in favor of the statute.

 

11.       The designated horizontal wellbore spacing units described above shall be considered drilling and spacing units established by the Commission for purposes of Rule 530.a.

 

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