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. 191000621 TYPE: SPACING ORDER NO. 407-2950

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 560-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 460 feet from the 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 66 West, 6^th P.M.

Section 35:      S½

Section 36:      SW¼, W½SE¼

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 September 16, 2013, the Commission entered Order No. 407-859, which pooled all interests in five approximate 400-acre designated horizontal wellbore spacing units for certain lands, including the SE¼ of Section 36, Township 7 North, Range 66 West, 6^th P.M., and granted cost recovery pursuant to Section 34-60-116(7)(b), C.R.S., against any nonconsenting owners in the Renfroe #32-1-36CHZ Well (API No. 05-123-37276), Renfroe #32-1-36NHZ Well (API No. 05-123-37277), Renfroe #42-1-36NHZ Well, (API No. 05-123-37292), Renfroe #C-1-36NHZ Well (API No. 05-123-37293) and Renfroe #42-1-36CHZ Well (API No. 05-123-37294) (collectively the “Renfroe Wells”), for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations. Applicant requests that the Renfroe Wells continue to be governed, and that proceeds continue to be distributed, in accordance with its applicable permits, rules, and orders. Further, Applicant intends to direct the permitted wells within the Application Lands short of the Renfroe #32-1-36NHZ Well wellbore.

7. On July 31, 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 560-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 460 feet from the 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.

8. 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.

9. 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.   

10. 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.

11. 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 232 to 268 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 18 to 22 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony shows that the Codell Formation is comprised of sandstone.

12. 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 horizontal wells for the three chalk zones in the Niobrara Formation and two 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 59 acres. Engineering testimony also shows that the estimated drainage area for a Codell Formation well in the proposed unit is 139 acres. Accordingly, an approximate 560-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by eight horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara Formation and two horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation. The engineering testimony also showed the proposed wells will be economical.

13. 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.

14. 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.’

15. 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. 

16. Bayswater agreed to be bound by oral order of the Commission. 

17. 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 560-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 460 feet from the 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 560-acre drilling and spacing unit for the Application Lands is hereby established, and up to eight horizontal wells within the unit are approved for production from the Niobrara Formation, and up to two horizontal wells within the unit are approved for production from the Codell Formation.

2.         The productive interval of any wellbore will 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 within the unit, unless the Director grants an exception.

3.         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.

4.         The Renfroe #32-1-36CHZ Well (API No. 05-123-37276), Renfroe #32-1-36NHZ Well (API No. 05-123-37277), Renfroe #42-1-36NHZ Well, (API No. 05-123-37292), Renfroe #C-1-36NHZ Well (API No. 05-123-37293) and Renfroe #42-1-36CHZ Well (API No. 05-123-37294) 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.

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

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________         

                 Mimi C. Larsen, Secretary