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. 190700488 TYPE: SPACING ORDER NO. 407-2943 CORRECTED

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 establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 10 horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 150 feet from the east and west unit boundaries, no closer than 460 feet from the north and south unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception:

Township 7 North, Range 65 West, 6th P.M.

Section 33: S½ 

Section 34:  S½

FINDINGS

The Commission finds as follows:

1. Bayswater Exploration & Production, LLC (Operator No. 10261) (“Bayswater” 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 Rule 318A.

6. On August 20, 2012, the Commission entered Order No. 407-679, which pooled all interests in an approximate 80-acre drilling and spacing unit for the W½SW¼ of Section 33, Township 7 North, Range 65 West, 6th P.M., and granted cost recovery pursuant to Section 34-60-116(7)(b), C.R.S., against any nonconsenting owners in the Appaloosa 33-13 Well (API No. No. 05-123-33003) and Appaloosa 33-14 Well (API No. API No. 05-123-32999), for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations. The Appaloosa 33-13 Well and Appaloosa 33-14 Well are directional wells.

7. On August 20, 2012, the Commission entered Order No. 407-696, which pooled all interests in an approximate 160-acre designated wellbore spacing unit for the SW¼ of Section 33, Township 7 North, Range 65 West, 6th P.M., and granted cost recovery pursuant to Section 34-60-116(7)(b), C.R.S., against any nonconsenting owners in the Lamb 33-53 Well (API No. No. 05-123-33000), for the production of oil, gas, and associated hydrocarbons from the Codell and Niobrara Formations. The Lamb 33-53 Well (API No. No. 05-123-33000) is a vertical well.

8. There are other vertical and/or directional wells within the above-described 640-acre drilling and spacing unit producing from the Niobrara and/or Codell Formations.  Applicant requested that the Appaloosa 33-13 Well (API No. No. 05-123-33003), the Appaloosa 33-14 Well (API No. API No. 05-123-32999), the Lamb 33-53 Well (API No. No. 05-123-33000), and all other vertical and/or directional wells remain subject to their applicable Commission rules and orders such that proceeds from the sale of oil or gas from those wells shall continue to be distributed based on the applicable rules and orders.

9. On April 9, 2019, Bayswater, 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 640-acre drilling and spacing unit for the Application Lands and approve up to 10 horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 150 feet from the east and west unit boundaries, 460 feet from the north and south unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.

10. Applicant states that all horizontal wells will be drilled from no more than one multi-well pad 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 permitted wells will be drilled in a west-east orientation.

11. Bayswater 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.   

12. Land testimony and exhibits submitted in support of the Application by Tyler Hammond, Landman for Bayswater, show that Bayswater holds oil and gas interests and has a right to drill in the Application Lands.

13. Geologic testimony and exhibits submitted in support of the Application by David Brewster, Senior Vice President of Exploration for Bayswater, show that the Niobrara Formation is present throughout the Application Lands, from the Niobrara A Chalk to the Fort Hays Formation is approximately 259 to 264 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony shows that the Niobrara Formation is comprised of chalks, marlstones, and limestone. The geologic testimony also showed that there are three potentially productive zones in the Niobrara Formation, those being the Niobrara A Chalk, the Niobrara B Chalk, and the Niobrara C Chalk.  In addition, the geologic testimony shows that the Codell Formation is present throughout the Application Lands, is approximately 17 to 20 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony shows that the Codell Formation is comprised of sandstone.

14. Engineering testimony and exhibits submitted in support of the Application by John Arsenault, Reservoir Engineer for Bayswater, indicate that the Applicant may drill up to eight 10 horizontal wells for the three chalk zones in the Niobrara Formation and two three horizontal wells in the Codell Formation.   Engineering testimony also shows that the estimated drainage area for a Niobrara Formation well in the proposed unit is 68 acres. Engineering testimony also shows that the estimated drainage area for a Codell Formation well in the proposed unit is 161 acres. Accordingly, an approximate 640-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by eight ten horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation and two three horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation. The engineering testimony further showed that the proposed wells will be drilled in an east-west or west-east orientation.  The engineering testimony also showed the wells will be economical.

15. Engineering testimony also shows that the fracture half-length perpendicular to the wellbore is 440 feet for horizontal wells in both the Niobrara Formation and Codell Formation.   Engineering testimony further showed that the drainage width is 140 feet for horizontal wells in both the Niobrara Formation and Codell Formation. The engineering testimony showed that horizontal wells in both the Niobrara and Codell Formations should drain no more than 140 feet from the heels and toes of the horizontal wells. Therefore, the proposed setbacks of 150 feet from the east and west unit boundaries and 460 feet from the north and south unit boundaries are appropriate given an east-west or west-east wellbore orientation.

16. Regulatory testimony and exhibits submitted in support of the Application by Mark E. Brown, Operations Manager for Bayswater, 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. The testimony further demonstrates that in developing the Application Lands, Bayswater’s operations will reasonably 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 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. Bayswater agreed to be bound by oral order of the Commission. 

20. Based on the facts stated in the verified Application, no protests having been filed, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to establish an approximate 640-acre drilling and spacing unit for the Application Lands and approve up to 10 horizontal wells within the unit, for production from the Niobrara and Codell Formations, with the productive interval of any wellbore to be located no closer than 150 feet from the east and west unit boundaries, no closer than 460 feet from the north and south unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 640-acre drilling and spacing unit for the Application Lands is hereby established, and up to eight ten horizontal wells within the unit are approved for production from the Niobrara Formation, and up to two three horizontal wells within the unit are approved for production from the Codell Formation.  Applicant under no circumstances shall drill more than 10 wells total.

2.         The productive interval of any wellbore will be located no closer than 150 feet from the east and west unit boundaries, no closer than 460 feet from the north and south unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore within the unit, unless the Director grants an exception.

3.         All horizontal wells in the unit will be drilled in an east-west or west-east orientation.

4.         All wells permitted under this Order will be drilled from no more than one multi-well pad within the Application Lands, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless the Director grants an exception.

5.         The Appaloosa 33-13 Well (API No. No. 05-123-33003), the Appaloosa 33-14 Well (API No. API No. 05-123-32999), the Lamb 33-53 Well (API No. No. 05-123-33000), and all other vertical and/or directional wells are excluded from the unit and remain subject to their applicable Commission rules and orders such that proceeds from the sale of oil or gas from those wells shall continue to be distributed based on the applicable rules and orders.

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 7th day of November, 2019, as of October 30, 2019.          

CORRECTED this 14th day of October, as of October 30, 2019.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary