BEFORE THE OIL AND GAS CONSERVATION
COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
ORDER NO. 407-380
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REPORT OF THE COMMISSION
This cause came on for hearing before the Commission on November 29, 2010, in Suite 801, of The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to establish fifteen approximate 640-acre drilling and spacing units for various lands in Township 5 North, Ranges 61 and 62 West, 6th P.M. and Township 6 North, Range 62 West, 6th P.M., and allow one horizontal well in each of the units, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.
FINDINGS
The Commission finds as follows:
1. Bonanza Creek Energy Operating Company, LLC (“Bonanza Creek”) 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. Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that 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 below-listed lands (the “Initial Application Lands”) are subject to this Rule for the Codell and Niobrara Formations:
Township 5 North, Range 61 West 6th P. M.
Sections 3 through 10, 12, and 15 through18: All
Township 5 North, Range 62 West 6th P. M.
Sections 1 and 2, 11 through13, 15 and 24: All
Township 6 North, Range 62 West 6th P. M.
Section 36: All
Weld County, Colorado
5. 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. The Initial Application Lands are subject to this Rule for the Codell and Niobrara Formations.
6. On September 1, 2010, Bonanza Creek, by its attorney, filed with the Commission a verified application (“Application”) to establish twenty-one approximate 640-acre drilling and spacing units for the Initial Application Lands and allow one horizontal well in each of the units, with initial penetration of the Codell and Niobrara Formations, lateral, and bottomhole location not closer than 460 feet from the boundaries of the unit.
7. On October 8, 2010, Bonanza Creek, by its attorney, filed with the Commission a written request to continue the matter to the November 29, 2010 hearing to consider the withdrawal of certain lands from the Application.
8. On November 12, 2010, Bonanza Creek, by its attorney, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.
9. Also on November 12, 2010, Bonanza Creek withdrew its request to space the Codell Formation and six sections of the Initial Application Lands, resulting in the below-described lands subject to the amended Application (the “Application Lands”), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:
Township 5 North, Range 61 West 6th P. M.
Sections 4 through 7, 9, 10, 15 through 18: All
Township 5 North, Range 62 West 6th P. M.
Sections 2, 12, 13, 15 and 24: All
Weld County, Colorado
10. Testimony and exhibits submitted by Bonanza Creek in support of the Application show that Bonanza Creek owns oil and gas leasehold interests in the Niobrara Formation in all acreage contained within the Application Lands.
11. Testimony and exhibits in support of the application, including an analysis of cross-sections from Niobrara Formation wells located in the vicinity of the Application Lands, indicate that the Niobrara Formation is a common source of supply and generally is of uniform thickness throughout the entire spacing area.
12. Further testimony and exhibits submitted in support of the Application conclude that the estimated probable drainage of vertical Niobrara wells in the Application Lands is eight acres, while the estimated drainage area for two horizontal Niobrara wells is 56 acres and 116 acres, respectively. The testimony concludes that a 640-acre spacing unit is therefore not less than the maximum area than can be efficiently, economically and effectively drained by one horizontal well producing oil, gas and associated hydrocarbons from the Niobrara on the Application Lands.
13. Further Bonanza Creek testimony concludes that vertical completions in the Niobrara Formation in the Application Lands are uneconomic or marginally economic, while horizontal development provides an economic rate of return. The testimony further concludes that the establishment of the requested drilling and spacing units will prevent or assist in preventing waste by ensuring the pool as a whole may be efficiently and economically developed.
14. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
15. Bonanza Creek agreed to be bound by the oral order of the Commission.
16. 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 establish fifteen approximate 640-acre drilling and spacing units for the Application Lands, and approve one optional horizontal wellbore to be drilled in each unit from a surface location anywhere in the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, , with the horizontal leg and bottomhole location of the permitted well to be no closer than 460 feet from the boundaries of each unit.
ORDER
NOW, THEREFORE IT IS ORDERED, that fifteen approximately 640-acre drilling and spacing units are hereby established for the below-listed lands, and one optional horizontal wellbore to be drilled in each unit from a surface location anywhere in the unit is hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with a bottomhole location and the horizontal leg of any such permitted well to be no closer than 460 feet from the boundaries of the unit:
Township 5 North, Range 61 West 6th P. M.
Sections 4 through 7, 9, 10, 15 through 18: All
Township 5 North, Range 62 West 6th P. M.
Sections 2, 12, 13, 15 and 24: All
Weld County, Colorado
IT IS FURTHER ORDERED, that the provisions contained in the above Order, shall become effective immediately.
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 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 December 2010, as of November 29, 2010.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________ __
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
December 20, 2010