BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

 

IN THE MATTER OF THE APPLICATION OF KERR-MCGEE OIL & GAS ONSHORE LP FOR AN ORDER TO POOL ALL INTERESTS IN TWO APPROXIMATE 320-ACRE DESIGNATED WELLBORE SPACING UNITS LOCATED IN SECTION 36, TOWNSHIP 3 NORTH, RANGE 67 WEST, 6TH P.M., FOR THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 1312-UP-241

 

ORDER NO. 407-906

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on December 16, 2013, at the Ralph L. Carr Colorado Judicial Center, 1300 Broadway, 1st Floor, Room 1E, Denver, Colorado, upon application for an order to pool all interests in two approximate 320-acre designated wellbore spacing units established for Section 36, Township 3 North, Range 67 West, 6th P.M., to accommodate the Wirkner-Vance 29N-36HZ Well and the Wirkner-Vance 29C-36HZ Well, for the development and operation of the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Kerr-McGee Oil & Gas Onshore LP (“Kerr-McGee” 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.         On February 19, 1992, the Commission entered 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, with the permitted well locations in accordance with the provisions of Order No. 407-1.  Section 36, Township 3 North, Range 67 West, 6th P.M. is subject to this Order for the Codell and Niobrara Formations.

 

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. Rule 318A supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of Greater Wattenberg Area wells.   On December 5, 2005, Rule 318A was amended, among other things, to allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  On August 8, 2011, Rule 318A was again amended, among other things, to address drilling of horizontal wells. Section 36, Township 3 North, Range 67 West, 6th P.M. is subject to Rule 318A for the Codell and Niobrara Formations.

 

6.         On October 17, 2013, Kerr-McGee, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified application (“Application”) for an order to pool all interests in two approximate 320-acre designated wellbore spacing units established for the below-described lands (“Application Lands”), for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the date of the Application, or the date that any of the costs specified in §34-60-116(7)(b)(II), C.R.S. were first incurred for the drilling of the Wirkner-Vance 29N-36HZ (API No. 05-123-37881) in WSU #1 to the Niobrara Formation and the Wirkner-Vance 29C-36HZ (API No. 05-123-37886) in WSU #2 to the Codell Formation (“Wells”) and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S.:

                                                                                        

Township 3 North, Range 67 West, 6th P.M.

Section 36:      W½                 (“WSU#1, Wirkner-Vance 29N-36HZ”)

 

Township 3 North, Range 67 West, 6th P.M.

Section 36:      W½                 (“WSU#2, Wirkner-Vance 29C-36HZ”)

 

7.         On November 19, 2013, Kerr-McGee, by its attorneys, 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.

 

8.         Land testimony and exhibits submitted in support of the Application by Jason Rayburn, Landman for Kerr-McGee, stated certain royalty owners have not agreed to participate in the Well.  Those parties’ oil and gas leases pre-date the widespread use of horizontal drilling and did not contemplate formation of large spacing units to accommodate long lateral wellbores.  Applicant contacted each of these royalty owners, or has made diligent efforts to do so, to obtain their consent to participate in the spacing unit for purposes of royalty payments.  Despite such diligent efforts, Applicant has not been able to contact some of these individuals, or has received no response from them.

 

9.         Applicant confirmed that Commission Rule 530 does not apply as there are no working interest owners or unleased mineral interest owners subject to the Application, and Applicant is not seeking cost recovery pursuant to §34-60-116(7), C.R.S. for either  the Wirkner-Vance 29N-36HZ Well or the Wirkner-Vance 29C-36HZ Well.

 

10.       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 hydrocarbons, and will not violate correlative rights.

 

11.       Kerr-McGee agreed to be bound by oral order of the Commission. 

 

12.       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 all interests in two approximate 320-acre designated wellbore spacing units established for Section 36, Township 3 North, Range 67 West, 6th P.M., to accommodate the Wirkner-Vance 29N-36HZ Well and the Wirkner-Vance 29C-36HZ, for the development and operation of the Codell and Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation Act, all interests in two approximate 320-acre designated wellbore spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Codell and Niobrara Formations, effective as of the earlier of the 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 Wirkner-Vance 29N-36HZ Well and the Wirkner-Vance 29C-36HZ Well:

 

Township 3 North, Range 67 West, 6th P.M.

Section 36:      W½                 (“WSU#1, Wirkner-Vance 29N-36HZ”)

 

Township 3 North, Range 67 West, 6th P.M.

Section 36:      W½                 (“WSU#2, Wirkner-Vance 29C-36HZ”)

 

2.         The production obtained from the wellbore spacing unit 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 wellbore spacing unit; each owner of an interest in the wellbore spacing unit shall be entitled to receive its share of the production of the Well located on the wellbore spacing unit applicable to its interest in the wellbore spacing unit.

 

3.         The operator of the well drilled on the above-described wellbore spacing unit 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.

 

4.         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.

 

5.         The wellbore spacing unit described above, shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.

 

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 30 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 _____ day of January, 2014, as of December 16, 2013.

           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary