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 OPERATION FOR THE NIOBRARA, FORT HAYS, CODELL, AND CARLILE FORMATIONS, WATTENBERG FIELD, MORGAN AND WELD COUNTIES, COLORADO

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CAUSE NO. 407 & 535 DOCKET NO. 190900560 TYPE: SPACING ORDER NOS. 407-2983 &                         535-1267

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: 1) vacate Order No. 407-782 and 535-321; 2) vacate Order No. 407-783 and 535-330; and 3) establish an approximate 960-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to a total of 10 horizontal wells within the unit, for production from the Niobrara, Fort Hays, Codell, and Carlile Formations, with the productive interval of the wellbore to be located no closer than 460 feet from the boundaries of the proposed unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception:

Township 6 North, Range 60 West, 6^th P.M.

Section 6:        N½

Township 7 North, Range 60 West, 6^th P.M.

Section 31:      All

FINDINGS

The Commission finds as follows:

1.         Bison Oil & Gas II, LLC, (Operator No. 10661) (“Bison” 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. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that, on unspaced lands, wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. The Application Lands are subject to this Rule for the Niobrara, Fort Hays, Codell, and Carlile Formations. 

6. 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.

7. On July 8, 2010, the Commission entered Order No. 407-374, which, among other things, established an approximate 640-acre drilling and spacing unit for portions of the Application Lands, and approved up to two horizontal wells within the unit, for production from the Niobrara Formation, with the productive interval of the wells within the unit to be located no closer than 460 feet from the unit boundaries, unless the Director grants an exception.  

8. On May 6, 2013, the Commission entered Order No. 407-782 and 535-321, which, among other things, vacated an approximate 640-acre drilling and spacing unit established by Order No. 407-374 for portions of the Application Lands, and established an approximate 1,280-acre exploratory drilling and spacing unit for the Application Lands, and approved up to eight horizontal wells within the unit, for production from the Niobrara Formation, with the productive interval of the wells within the unit located no closer than 460 feet from the unit boundaries, unless the Director grants an exception. The Application Lands are subject to this Order.

9. Also on May 6, 2013, the Commission entered Order No. 407-783 and 535-330, which pooled all interests in an approximate 1,280-acre exploratory drilling and spacing unit established by Order No. 407-782 for the Application Lands, for production from the Niobrara Formation, effective as of the earlier date of the Application, or the date that any of the costs specified in § 34-60-116(7)(b)(II), C.R.S., are first incurred for the drilling of the Wickstrom 18-1H Well.

10.       Commission records show that the Wickstrom 18-1H Well (API No. 05-087-08174) is an abandoned location.

10. On July 16, 2019, Bison, by its attorneys, filed with the Commission a verified application (“Application”) pursuant to § 34-60-116, C.R.S., for an order to: 1) vacate Order No. 407-782 and 535-321; 2) vacate Order No. 407-783 and 535-330; and 3) establish an approximate 960-acre drilling and spacing unit for the Application Lands, and approve up to a total of 10 horizontal wells within the unit, for production from the Niobrara, Fort Hays, Codell, and Carlile Formations, with the productive interval of the wellbore to be located no closer than 460 feet from the boundaries of the proposed unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

            11.       Applicant stated that all horizontal wells will be drilled from no more than one multi-well pad located within the unit, or on lands adjacent thereto with permission of the land landowner.

12.       Bison, 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.

13.       Land testimony and exhibits submitted in support of the Application by Karsten Baker, Landman for Bison, showed that Bison owns or holds oil and gas leasehold interests and has a right to drill in the Application Lands.

15.       Geologic testimony and exhibits submitted in support of the Application by Ian Hogan, Vice President of Exploration and Geoscience for Bison, showed that the Niobrara Formation is present throughout the Application Lands, is approximately 255 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony further showed that the Niobrara Formation is made up of an alternating sequence of chalks and marls. The geologic testimony also shows that the Fort Hays Formation is present throughout the Application Lands, is approximately 40 feet thick, and is generally of uniform thickness throughout the Application Lands. The geologic testimony showed that the Fort Hays Formation is a limestone formation at the base of the Niobrara Formation. The geologic testimony also showed that the Codell Formation is present throughout the Application Lands, is approximately five feet thick, is generally of uniform thickness throughout the Application Lands, and is made up of marine sandstone. The geologic testimony further showed that the Carlile Formation is present throughout the Application Lands, is approximately 30 feet thick, and consists of non-productive silty to sandy shale. Further, the geologic testimony states that the primary targets are the Niobrara and Codell Formations, and that if a wellbore deviates into the Fort Hays Formation or Carlile Formation, it will not materially impact the drainage calculations or well economics.

16.       The geologic testimony also shows that the estimated drainage width for Niobrara wells is 446 feet and the estimated drainage width for Codell wells is 358 feet. This equates to a drainage radius of 223 feet for Niobrara wells and 179 feet for Codell wells. Therefore, the proposed setbacks of 460 feet from the unit boundaries are appropriate.  

17.       The geologic testimony further shows that Bison proposes to drill 10 horizontal wells in the Niobrara and Codell Formations. The geologic testimony showed that the drainage area for analog horizontal Niobrara Formation wells is estimated at 81 acres, that the drainage area for analog horizontal Codell Formation wells is estimated at 65 acres, and an approximate 960-acre drilling and spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by 10 horizontal wells producing oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations.

18.       Engineering testimony and exhibits submitted in support of the Application by Elizabeth Wilson, Senior Staff Reserves and Business Development Engineer for Bison, show that the proposed wells will be economic.

19.       Regulatory testimony and exhibits submitted in support of the Application by Abigail Wenk, Corporate Secretary and Manager of Compliance for Bison, showed that Morgan County is the local government agency with siting authority for the Application Lands. Morgan County has granted one or more approved siting permits for the development of the Application Lands in compliance with the requirements of § 34-60-116(1)(b)(I), C.R.S. The regulatory testimony further demonstrates that in the developing the Application Lands, Bison’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 resource resulting from oil and gas operations.

20.       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.

21.       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. 

22.       Bison agreed to be bound by oral order of the Commission. 

23.       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: 1) vacate Order No. 407-782 and 535-321; 2) vacate Order No. 407-783 and 535-330; and 3) establish an approximate 960-acre drilling and spacing unit for the Application Lands, and approve up to a total of 10 horizontal wells within the unit, for production from the Niobrara, Fort Hays, Codell, and Carlile Formations, with the productive interval of the wellbore to be located no closer than 460 feet from the boundaries of the proposed unit, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception.

ORDER

IT IS HEREBY ORDERED:

1. Order No. 407-782 and 535-321 is hereby vacated.

2. Order No. 407-783 and 535-330 is hereby vacated.

3. An approximate 960-acre drilling and spacing unit for the Application Lands is hereby established, and a total of up to 10 new horizontal wells within the unit are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara, Fort Hays, Codell, and Carlile Formations.

4.         The productive interval of the 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 located in the unit, unless the Director grants an exception.

5.         All wells approved under this Order shall be located on no more than one multi-well pad within the drilling and spacing unit, or at a legal location on adjacent lands, subject to Rule 318A, unless the Director grants an exception.

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 22nd day of November 2019, as of November 20, 2019.    

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By___________________________________           

                 Mimi C. Larsen, Secretary