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. 190900534 TYPE: SPACING ORDER NO. 407-2953

REPORT OF THE COMMISSION

The Commission heard this matter on November 20, 2019, at the University of Northern Colorado, University Center Ball Room, 2101 10^th Avenue, Greeley, Colorado, upon application for an order to establish an approximate 1,760-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to 20 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:

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

Section 18:      W½

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

Section 13:      All

Section 14:      E½, SW¼

Section 15:      S½

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 Rule 318A.

6. PDC excludes from the Application all existing wellbore spacing units located on the Application Lands and asserts that the production and payments from the existing wellbore spacing units should continue to be maintained under the applicable spacing unit or lease and pooling orders.

7. On May 9, 2019, corrected July 15, 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 establish an approximate 1,760-acre drilling and spacing unit for the Application Lands and approve up to 20 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 unit boundaries for the heels and toes of any horizontal wells, no less than 460 feet from the unit boundaries for the productive intervals of any horizontal well parallel to the unit boundary, 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 three multi-well pads 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 an east-west or west-east orientation.

9. 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.   

10. The drilling and spacing unit contains federal minerals. As such PDC, or its successor operator, agrees to submit a Communitization Agreement (“CA”) to the Bureau of Land Management (“BLM”) at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

11. Land testimony and exhibits submitted in support of the Application by Daniel R. McCoy, Senior Regional Landman for PDC, show that PDC holds oil and gas interests and has a right to drill in the Application Lands.

12. The land testimony further 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.

13. 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 generally of uniform thickness throughout the Application Lands. The geologic testimony shows that the Niobrara Formation is comprised of chalks, marlstones, and limestone, and includes the Fort Hays Limestone Member, sometimes referred to as the “Fort Hays Formation.” In addition, the geologic testimony shows that the Codell Formation is present throughout the Application Lands, is approximately 18 to 19 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony shows that the Codell Formation is comprised of fine-grained marine interbedded clay and sand deposits.

14. Engineering testimony and exhibits submitted in support of the Application by Jon Yetkin, Reservoir Engineer for PDC, indicate that the Applicant may drill up to two wells in the Niobrara A shelf, five wells in the Niobrara B shelf, and eight wells in the Niobrara C shelf, for a total of up to 15 horizontal wells in the Niobrara Formation. Engineering testimony also shows that the Applicant may drill up to five horizontal wells in the Codell Formation. The engineering testimony states that the horizontal wells will have a lateral length of 7,620 feet or 10,260 feet. Engineering testimony shows that the estimated drainage area for a Niobrara Formation well with a lateral length of 7,620 feet is 56 acres, and the estimated drainage area for a Niobrara Formation well with a lateral length of 10,260 feet is 76 acres. Accordingly, an approximate 1,760-acre drilling and spacing unit is 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 the A shelf, the B shelf, and the C shelf of the Niobrara Formation. In addition, engineering testimony shows that the estimated drainage area for a Codell Formation well with a lateral length of 7,620 feet is 115 acres, and the estimated drainage area for a Codell Formation well with a lateral length of 10,260 feet is 155 acres. Accordingly, an approximate 1,760-acre drilling and spacing unit is not less than the maximum area that can be efficiently, economically, and effectively drained by five horizontal wells producing oil, gas, and associated hydrocarbons from the Codell Formation.

15. Engineering testimony also shows that, based on microseismic data, hydraulic fracture growth does not extend past the heel and toe of the wellbores. Therefore, the proposed setbacks of 150 feet from the unit boundaries for the heels and toes of any horizontal wells in the unit are appropriate given an east-west or west-east wellbore orientation.

16. Regulatory testimony and exhibits submitted in support of the Application by Vanessa Chase, Regulatory Supervisor for PDC, show 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 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. PDC 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 1,760-acre drilling and spacing unit for the Application Lands and approve up to 20 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.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 1,760-acre drilling and spacing unit for the Application Lands is hereby established, and up to 20 horizontal wells within the unit are approved for production from the Niobrara and Codell Formations, in accordance with the above findings.

2.         The productive interval of any wellbore will 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.

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 three multi-well pads within the Application Lands, or on adjacent lands with consent of the landowner, subject to Rule 318A, unless the Director grants an exception.

5.         All existing wellbore spacing units located on the Application Lands are excluded from the 1,760-acre drilling and spacing unit established for the Application Lands, and the production and payments from the existing wellbore spacing units will continue to be distributed based on the applicable spacing unit or lease and pooling orders.

6.         PDC shall submit a Communitization Agreement (“CA”) to the BLM at least 90 days before the anticipated date of first production (as defined in the Commission Rules) from the initial well drilled within the drilling and spacing unit.

7.         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 5th day of December 2019 as of November 20, 2019.        

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________           

                 Mimi C. Larsen, Secretary