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. 190600471 TYPE: EXCEPTION LOCATION ORDER NO. 407-2941

REPORT OF THE COMMISSION

The Commission heard this matter on October 30, 2019, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to amend Order No. 407-2735 to allow the productive interval of the permitted wellbores to be located no closer than 150 feet from the east and west unit boundaries and no closer than 460 feet from the north and south unit boundaries of the approximate 960-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for production from the Niobrara and Codell Formations:   

Township 7 North, Range 66 West, 6^th P.M.

Section 23:  All

Section 24:  W½

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 the Application Lands, with the permitted well locations in accordance with the provisions of Order 407-1.

7. On February 25, 2019, the Commission entered Order No. 407-2735, which established an approximate 960-acre drilling and spacing unit for the Application Lands, and approved up to 16 horizontal wells within the unit for production from the Niobrara and Codell Formations, with the productive intervals of the wellbores 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.

8. On March 25, 2019, PDC filed with the Commission a verified application (“Application”) pursuant to § 34-60-116, C.R.S., for an order to amend Order No. 407-2735 to allow the productive interval of the permitted wellbores to be located no closer than 150 feet from the east and west unit boundaries and no closer than 460 feet from the north and south unit boundaries of the approximate 960-acre drilling and spacing unit established for the Application Lands for production from the Niobrara and Codell Formations.

9. Applicant states that all horizontal wells within the unit will be drilled in a west-east orientation. 

10. PDC 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.

11. On June 12, 2019, the Bureau of Land Management (“BLM”) filed a protest to the Application. On July 25, 2019, the BLM’s protest was withdrawn.

12. Land testimony and exhibits submitted in support of the Application by Tyler Sims, Senior Regional Landman for PDC, show that PDC owns a leasehold interest in the Application Lands and has the right to drill in the Application Lands.

13. Land testimony further shows 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. The testimony further demonstrates that in developing the Application Lands, PDC’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.

14. Geologic testimony and exhibits submitted in support of the Application by Nathan Marolf, Development Geologist for PDC, show that the Niobrara Formation is present throughout the Application Lands, is approximately 320 to 330 feet thick, and is comprised of chalks, marlstones, and limestones. The geologic testimony also shows that the Codell Formation is present throughout the Application Lands, is approximately 19 feet thick, and is comprised of fine-grained marine interbedded clay and sand deposits.

15. Engineering testimony and exhibits submitted in support of the Application by Jon Yetkin, Reservoir Engineer for PDC, show that the drainage area for analog horizontal Niobrara-Formation wells is estimated to be 56 acres per well, 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 11 to 13 horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation. The engineering testimony also shows that the drainage area for analog horizontal Codell-Formation wells is estimated to be 115 acres per well, 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 three to five horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation.

16. In addition, the engineering testimony shows that microseismic test data confirms that hydraulic fracture growth stops past the heel and toe of horizontal wellbores. This is aligned with the requested 150-foot setbacks on the east and west unit boundaries, given a west-east wellbore orientation. 

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

20. 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 amend Order No. 407-2735 to allow the productive interval of the permitted wellbores to be located no closer than 150 feet from the east and west unit boundaries and no closer than 460 feet from the north and south unit boundaries of the approximate 960-acre drilling and spacing unit established for the Application Lands for production from the Niobrara and Codell Formations.

ORDER

IT IS HEREBY ORDERED:

1. Order No. 407-2735 is hereby amended to allow the productive interval of the wellbores to be located no closer than 150 feet from the east and west unit boundaries and no closer than 460 feet from the north and south unit boundaries of the approximate 960-acre drilling and spacing unit established for the Application Lands for production from the Niobrara and Codell Formations.

2. All permitted wells will be located 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 horizontal wells within the unit will be drilled in a west-east orientation.   

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 21st day of November, 2019, as of October 30, 2019.       

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary