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 IN THE WATTENBERG FIELD, WELD COUNTY, COLORADO |
) ) ) ) |
CAUSE NOS. 232 and 407
ORDER NOS. 232-255 and 407-354 |
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on March 25, 2010, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to pool nonconsenting interests in various 160- and 320-acre drilling and spacing units in certain lands in Sections 28 and 33, Township 5 North, Range 67 West, 6th P.M., pursuant to §34-60-116, C.R.S., as amended.
FINDINGS
The Commission finds as follows:
1. Petroleum Development Corporation (“PDC”), 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. On October 19, 1981, the Commission issued Order No. 232-23, which among other things, amended Order No. 232-20 to establish additional 320-acre drilling and spacing units and allow a second well to be drilled on said units for certain lands, including the W½ of Section 28, Township 5 North, Range 67 West, 6th P.M., for the production of gas and associated hydrocarbons from the “J” Sand Formation.
5. On December 19, 1983, the Commission issued Order No. 407-1 (amended on March 29, 2000 in accordance with Order No. 407-17, entered November 18, 1985), which among other things, established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation underlying certain lands, including Sections 28 and 33, Township 5 North, Range 67 West, 6th P.M., with the drilling and spacing unit to be designated by the operator drilling the first well in the quarter section, (or the Director, if the operator fails to designate). The permitted well shall be located in the center of either 40-acre tract within the drilling and spacing unit with a tolerance of 200 feet in any direction. The operator shall have the option to drill an additional well on the undrilled 40-acre tract in each 80-acre drilling and spacing unit.
6. On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993), which among other things, established 80-acre drilling and spacing units for the production of oil and/or gas from the Codell and Niobrara Formations underlying certain lands, including Sections 28 and 33, Township 5 North, Range 67 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order No. 407-1.
7. On April 27, 1998, the Commission adopted Rule 318A., which, among other things, allowed certain drilling locations to be utilized to drill or twin a well, deepen a well or recomplete a well and to commingle any or all of the Cretaceous Age Formations from the base of the Dakota Formation to the surface. On December 5, 2005, Rule 318A. was amended to, among other things, allow interior infill and boundary wells to be drilled and wellbore spacing units to be designated by the operator. Sections 28 and 33, Township 5 North, Range 67 West, 6th P.M. are subject to this Rule for the Codell, Niobrara, and “J” Sand Formations.
8. In accordance with Rule 318A., the following existing drilling and spacing unit is the drilling and spacing unit for interior infill wells and wells within established drilling windows described below:
Township 5 North, Range 67 West, 6th P.M.
Section 28: W½ (320 acres)
For the “J” Sand Formation in the Kinzer 13-28, the Kinzer 11-28, the Kinzer 28A, and the Kinzer 28B Wells.
9. In accordance with Rule 318A., PDC designated wellbore spacing units as follows:
(a) Township 5 North, Range 67 West, 6th P.M.
Section 28: NW ¼ (160 acres)
For the Codell, Niobrara and Formations in the Kinzer 28A Well.
(b) Township 5 North, Range 67 West, 6th P.M.
Section 28: SW ¼ (160 acres)
For the Codell, Niobrara and Formations in the Kinzer 28B Well.
(c) Township 5 North, Range 67 West, 6th P.M.
Section 28: S½ NW¼, N½ SW¼ (160 acres)
For the Codell and Niobrara Formations in the Kinzer 28 KD Well.
(d) Township 5 North, Range 67 West, 6th P.M.
Section 28: S½ SW¼
Section 33: N½ NW¼ (160 acres)
For the Codell and Niobrara Formations in the Kinzer 28LD Well.
(e) Township 5 North, Range 67 West, 6th P.M.
Section 28: E½ NW¼, W½ NE¼ (160 acres)
For the Codell and Niobrara Formations in the Mellon 28-N Well.
10. On February 3, 2010, PDC, by its attorneys, filed with the Commission a verified application to:
(a) Pool all nonconsenting interests in the approximate 320-acre drilling and spacing unit consisting of the W½ of Section 28, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the “J” Sand Formation. The following wells have been drilled and are producing from the “J” Sand Formation in the unit, and pooling of nonconsenting interests for each well should be retroactive to its respective spud date as follows:
(1) The Kinzer #13-28 Well, with a bottomhole location of 2,155 feet from the south line (“FSL”) and 652 feet from the west line (“FWL”), spud July 2007;
(2) The Kinzer #11-28 Well, with a bottomhole location of 652 feet from the north line (“FNL”) and 850 feet FWL, spud November 2008;
(3) The Kinzer 28A Well, with a bottomhole location of 1,386 feet FNL and 1,191 feet FWL, spud February 2008; and
(4) The Kinzer 28B Well, with a bottomhole location of 1,721 feet FSL and 1,221 feet FWL, spud October 2008.
(b) Pool all nonconsenting interests in the approximate 160-acre wellbore spacing unit consisting of the NW¼ of Section 28, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations. The Kinzer 28A Well, with a bottomhole location of 1,386 feet FNL and 1,191 feet FWL, has been drilled and is producing from the Codell and Niobrara Formations in the unit, and pooling of nonconsenting interests should be retroactive to its spud date, February 2008.
(c) Pool all nonconsenting interests in the approximate 160-acre wellbore spacing unit consisting of the SW¼ of Section 28, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations. The Kinzer 28B Well, with a bottomhole location of 1,721 feet FSL and 1,221 feet FWL, has been drilled and is producing from the Codell and Niobrara Formations in the unit, and pooling of nonconsenting interests should be retroactive to its spud date, October 2008.
(d) Pool all nonconsenting interests in the approximate 160-acre wellbore spacing unit consisting of the S½ NW¼ and the N½ SW¼ of Section 28, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations. The Kinzer #28KD Well, with a bottomhole location of 2,533 feet FNL and 1,320 feet FWL, has been drilled and is producing from the Codell and Niobrara Formations in the unit, and pooling of nonconsenting interests should be retroactive to its spud date, November 2008.
(e) Pool all nonconsenting interests in the approximate 160-acre wellbore spacing unit consisting of the S½ SW¼ of Section 28, Township 5 North, Range 67 West, 6th P.M. and the N½ NW¼ of Section 33, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations. The Kinzer #28LD Well, with a bottomhole location of 96 feet FSL and 1,333 feet FWL of Section 28, Township 5 North, Range 67 West, 6th P.M., has been drilled and is producing from the Codell and Niobrara Formations in the unit, and pooling of nonconsenting interests should be retroactive to its spud date, October 2008.
(f) Pool all nonconsenting interests in the approximate 160-acre wellbore spacing unit consisting of the E½ NW¼ and the W½ NE¼ of Section 28, Township 5 North, Range 67 West, 6th P.M. for the development and operation of the Codell and Niobrara Formations. The Mellon #28-N Well, with a bottomhole location of 1,158 feet FNL and 2,525 feet FWL, has been drilled and is producing from the Codell and Niobrara Formations in the unit, and pooling of nonconsenting interests should be retroactive to its spud date, November 2008.
11. Furthermore, PDC requests, that where feasible, the proposed pooling of nonconsenting interests extend to future development of the formations within each of the wellbore spacing or drilling and spacing units described above.
12. On February 26, 2010, PDC, by and through its attorney, filed with the Commission a written request to approve the application based on the merits of the verified amended application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the application.
13. Testimony and exhibits submitted in support of the application showed that PDC has drilled the following wells to the specified formations as of the specified spud dates: Kinzer 13-28 Well (J-Sand only; July 2007); Kinzer 11-28 Well (J-Sand only; Nov. 2008); Kinzer 28KD Well (Codell/Niobrara only; Nov. 2008); Kinzer 28LD Well (Codell/Niobrara only; Oct. 2008); Mellon 28-N Well (Codell/Niobrara only; Nov. 2008); Kinzer 28A Well (Codell/Niobrara and J-Sand; Feb. 2008); and Kinzer 28B Well (Codell/Niobrara and J-Sand; Oct. 2008); and the wells are producing.
14. Testimony and exhibits submitted in support of the application showed a list of all consenting and nonconsenting working interest owners within each of the relevant 160-acre or 320-acre drilling and spacing or wellbore spacing units.
15. Testimony and exhibits submitted in support of the application showed that offers to participate were sent to nonconsenting working interest owners. Additional testimony submitted showed that the offers and the Authority for Expenditures were fair and reasonable, and similar to those prevailing in the area. Further testimony submitted showed the offers were sent via mail and all were received at least thirty (30) days prior to the March 25 and 26, 2010 hearing dates.
16. The testimony and exhibits submitted indicate that PDC has complied with the requirements of Rule 530.a. and §34-60-116(7)(d), C.R.S.
17. The above-referenced testimony and exhibits showed that the granting of the application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of oil and gas, and will not violate correlative rights.
18. 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 pool the nonconsenting interests in various 160- and 320-acre drilling and spacing and wellbore spacing units in certain lands and formations in Sections 28 and 33, Township 5 North, Range 67 West, 6th P.M.
ORDER
NOW, THEREFORE IT IS ORDERED, that the nonconsenting interests in the following approximate 160- and 320-acre drilling and spacing units and wellbore spacing units are hereby pooled for the development and operation of the “J” Sand Formation or Codell and Niobrara Formations, as specified, retroactive to the spud date of each well:
As to the “J” Sand Formation:
Township 5 North, Range 67 West, 6th P.M.
Section 28: W ½
to accommodate the following wells, which have been drilled and are producing from the “J” Sand Formation and, to the extent feasible, future wells producing from the “J” Sand Formation in the unit:
Kinzer #13-28 Well, with a bottomhole location of 2,155 feet FSL and 652 feet FWL, spud July 2007;
Kinzer #11-28 Well, with a bottomhole location of 652 feet FNL and 850 feet FWL, spud November 2008;
Kinzer 28A Well, with a bottomhole location of 1,386 feet FNL and 1,191 feet FWL, spud February 2008 (commingled with Codell and Niobrara Formations);
Kinzer 28B Well, with a bottomhole location of 1,721 feet FSL and 1,221 feet FWL, spud October 2008 (commingled with Codell and Niobrara Formations).
As to the Codell and Niobrara Formations:
Township 5 North, Range 67 West, 6th P.M.
Section 28: NW¼
to accommodate the Kinzer 28A Well, with a bottomhole location of 1,386 feet FNL and 1,191 feet FWL, spud February 2008, and, to the extent feasible, future wells producing from the Codell and Niobrara Formations in the unit.
Township 5 North, Range 67 West, 6th P.M.
Section 28: SW¼
to accommodate the Kinzer 28B Well, with a bottomhole location of 1,721 feet FSL and 1,221 feet FWL, spud October 2008, and, to the extent feasible, future wells producing from the Codell and Niobrara Formations in the unit.
Township 5 North, Range 67 West, 6th P.M.
Section 28: S½ NW¼, N½ SW¼
to accommodate the Kinzer #28KD Well, with a bottomhole location of 2,533 feet FNL and 1,320 feet FWL, spud November 2008 and, to the extent feasible, future wells producing from the Codell and Niobrara Formations in the unit.
Township 5 North, Range 67 West, 6th P.M.
Section 28: S½ SW¼
Section 33: N½ NW¼
to accommodate the Kinzer #28LD Well, with a bottomhole location of 96 feet FSL and 1,333 feet FWL in said Section 28, spud October 2008 and, to the extent feasible, future wells producing from the Codell and Niobrara Formations in the unit.
Township 5 North, Range 67 West, 6th P.M.
Section 28: E½ NW¼, W½ NE¼
to accommodate the Mellon #28-N Well, with a bottomhole location of 1,158 feet FNL and 2,525 feet FWL, spud November 2008 and, to the extent feasible, future wells producing from the Codell and Niobrara Formations in the unit.
1. Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, the nonconsenting owners in the approximate 160- and 320-acre drilling and spacing or wellbore spacing units described above are hereby pooled for the development and operation of the “J” Sand Formation and/or the Codell and Niobrara Formations, as specified for each unit.
2. The production obtained from the drilling and spacing unit or wellbore spacing units shall be allocated to each owner in the unit on the basis of the proportion that the number of acres in such tract bears to the total number of mineral acres within the drilling and spacing or wellbore spacing unit; each owner of an interest in the drilling and spacing or wellbore spacing unit shall be entitled to receive its share of the production of the well(s) located on the drilling and spacing or wellbore spacing unit applicable to its interest in the respective drilling and spacing or wellbore spacing unit.
3. The nonconsenting leased (working interest) owners must reimburse the consenting working interest owners that pay for the drilling and operating of the well(s) for their share of the costs and risks of drilling and operating the wells (including penalties as provided by §34-60-116 (7)(b), C.R.S.) out of production from the unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.
4. The unleased owners are hereby deemed to have elected not to participate and shall therefore be deemed to be nonconsenting as to the well and be subject to the penalties as provided for by §34-60-116 (7)(b), C.R.S.
5. Each nonconsenting unleased owner within the drilling and spacing or wellbore spacing unit shall be treated as the owner of the landowner's royalty to the extent of 12.5% of its record title interest, whatever that interest may be, until such time as the consenting owners recover, only out of each nonconsenting owner's proportionate 87.5% share of production, the costs specified in §34-60-116(7)(b), C.R.S. as amended. After recovery of such costs, each nonconsenting unleased owner shall then own its proportionate 8/8ths share of the well, surface facilities and production, and then be liable for its proportionate share of further costs incurred in connection with the well as if he/she had originally agreed to the drilling.
6. The operator of the well(s) drilled on the above-described drilling and spacing or wellbore spacing units shall furnish the nonconsenting owners with a monthly statement of all costs incurred, together with the quantity of oil and gas produced, and the amount of proceeds realized from the sale of production during the preceding month.
7. Nothing in this order is intended to conflict with §34-60-116, C.R.S., as amended. Any conflict that may arise shall be resolved in favor of the statute.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
ENTERED this__________ day of April, 2010, as of March 25, 2010.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Carol Harmon, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
April 24, 2010