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

 

IN  THE  MATTER  OF THE  APPLICATION  OF EXTRACTION OIL & GAS, LLC FOR AN  ORDER TO VACATE AN APPROXIMATE 160-ACRE DRILLING AND SPACING UNIT ESTABLISHED BY ORDER NO. 381-17 AND ESTABLISH AN APPROXIMATE 320-ACRE DRILLING AND SPACING UNIT FOR SECTION 36, TOWNSHIP 6 NORTH,  RANGE 66 WEST,  6TH P.M., FOR THE CODELL AND NIOBRARA FORMATIONS, BRACEWELL FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 1401-SP-2001

 

ORDER NO. 407-918

 

REPORT OF THE COMMISSION

 

            The Commission heard this matter on January 27, 2014, at the Centennial Building, 1313 Sherman Street, Room 318, Denver, Colorado, upon application for an order to: 1) vacate an approximate 160-acre drilling and spacing unit established by Order No. 381-17 for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M.; and 2) establish an approximate 320-acre drilling and spacing unit for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M., and approve up to six horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Extraction Oil & Gas, LLC (“Extraction” 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 June 27, 1983, the Commission entered Order No. 381-1 which, among other things, established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Codell Formation underlying certain lands in the Bracewell Field. The N½ of Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to this Order for the Codell Formation.

            5.         On June 18, 1984, the Commission entered Order No. 381-2 which, among other things, established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Niobrara Formation.  By Order No. 381-2, the Niobrara Formation was included in the spaced area of the Bracewell Field as provided for in Order No. 381-1.  The N½ of Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to this Order for the Niobrara Formation.

            6.         On June 18, 1984, the Commission entered Order No. 381-3 which, among other things, permitted multiple completions of wells in the Codell and Niobrara Formations, and where there is no difference in ownership between formations, to commingle production from the formations in the wellbore for existing wells and wells to be drilled.  The N½ of Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to this Order for the Codell and Niobrara Formations.

            7.         On February 18, 1985, the Commission entered Order 381-5 which, among other things, approved an optional additional well on each established 80-acre drilling and spacing unit in the undrilled 40-acre tract, for the production of oil and associated hydrocarbons from the Codell and Niobrara Formations.  The additional well would be subject to the Order Nos. 381-1, 381-2, and 381-3.  The N½ of Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to this Order for the Codell and Niobrara Formations.

            8.         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 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 6 North, Range 66 West, 6th P.M. is subject to Rule 318A for the Codell and Niobrara Formations.

            9.         On February 11, 2013, the Commission entered Order No. 381-17 which, among other things, vacated two 80-acre drilling and spacing units established by Order No. 381-1 and Order No. 381-2 for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M. and established an approximate 160-acre drilling and spacing  unit for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M. for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.  The NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M. is subject to this Order for the Codell and Niobrara Formations.

10.       On November 25, 2013, Extraction, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to: 1) vacate an approximate 160-acre drilling and spacing unit established by Order No. 381-17 for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M.; 2) establish an approximate 320-acre drilling and spacing unit for the below-described lands (“Application Lands”) and approve up to six horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of the wellbore to 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, without exception being granted by the Director:  

 

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

                                    Section 36:   N½

 

Applicant states existing vertical/directional wells shall be excluded from the unit and shall continue to pay on their current spacing or leasehold status.

 

Applicant states the horizontal wells will be drilled from a multi-well pad located in the NE¼ NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M. from an authorized window pursuant to Rule 318A, or from an exception location with surface owner consent.

 

11.       On January 13, 2014, Extraction, 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.

 

            12.       Land testimony and exhibits submitted in support of the Application by Lane M. Jungers, President of Land Energy, Inc., for Extraction, showed the surface of the Application Lands is owned in fee, the minerals in the Application Lands are owned in fee, and that Extraction owns or has the right to acquire 36.3628% of the leasehold ownership in the Application Lands.  Testimony further showed that all of the interested parties received notice of the Application.

           

            13.       Geologic testimony and exhibits submitted in support of the Application by Matt Owens, President of Extraction, showed the Codell and Niobrara Formations are present throughout the Application Lands and are a common source of supply.  Testimony further showed the total thickness of the Codell Formation underlying the Application Lands ranges from 22 to 26 feet and the total thickness of the Niobrara Formation underlying the Application Lands ranges from 275 to 300 feet.

 

            14.       Engineering testimony and exhibits submitted in support of the Application by John Tonello, Production Manager for Extraction, estimated that the ultimate recovery factor of hydrocarbons under the Application Lands using horizontal drilling technology would be approximately 15.82% in the Codell Formation and 3.89% in the Niobrara Formation with an average estimated ultimate recovery (“EUR”) of 250 MBOE from each horizontal well.  Testimony further showed the proposed unit would efficiently and economically maximize reservoir drainage.

 

            15.       The Commission finds Applicant may use its existing surface blanket bond to locate the wellpads for the proposed horizontal wells at a surface location outside the applicable GWA drilling window, within the unit.  Applicant identified the 400 foot window established pursuant to Rule 318A.a.(1) located in the NW¼ NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M., to be forfeited.

 

16.       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.

 

17.       Extraction agreed to be bound by oral order of the Commission. 

 

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: 1) vacate an approximate 160-acre drilling and spacing unit established by Order No. 381-17 for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M.; and 2) establish an approximate 320-acre drilling and spacing unit for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M., and approve up to six horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         An approximate 160-acre drilling and spacing unit established by Order No. 381-17 for the NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M., is hereby vacated.

 

2.         An approximate 320-acre drilling and spacing unit for the below-described lands, is hereby established, and up to six horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the productive interval of the wellbore to 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, without exception being granted by the Director:  

 

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

                                    Section 36:   N½

 

3.         Existing vertical/directional wells shall be excluded from the unit and shall continue to pay on their current spacing or leasehold status.

 

            4.         The 400 foot window established pursuant to Rule 318A.a.(1) located in the NW¼ NE¼ of Section 36, Township 6 North, Range 66 West, 6th P.M., is hereby forfeited.

 

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   21st   day of February, 2014, as of January 27, 2014.

           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary