BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
|
IN THE MATTER OF THE AMENDED APPLICATION OF KERR-MCGEE OIL & GAS ONSHORE, LP FOR AN ORDER TO POOL ALL INTERESTS (INCLUDING ROYALTY INTEREST OWNERS) IN FOUR APPROXIMATE 200 TO 400-ACRE DESIGNATED WELLBORE SPACING UNITS LOCATED IN SECTIONS 7, 8, 17 AND 18, 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. 1401-UP-15
ORDER NO. 407-929 |
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 pool all interests (including royalty interest owners) in four approximate 200 to 400-acre designated wellbore spacing units established for Sections 7, 8, 17 and 18, Township 3 North, Range 67 West, 6th P.M., 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, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the permitted well locations in accordance with the provisions of Order No. 407-1. Sections 7, 8, 17 and 18, Township 3 North, Range 67 West, 6th P.M. are 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. On December 5, 2005, Rule 318A was amended 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 to, among other things, address drilling of horizontal wells. Sections 7, 8, 17 and 18, Township 3 North, Range 67 West, 6th P.M. are subject to Rule 318A for the Codell and Niobrara Formations.
6. On November 25, 2013 (Amended January 6, 2014), Kerr-McGee, by its attorneys, filed with the Commission pursuant to §34-60-116, C.R.S., a verified amended application (“Amended Application”) for an order to pool all interests (including royalty interest owners) in four approximate 200 to 400-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), C.R.S. were first incurred for the drilling of the Houston 12C-8HZ Well, the Houston 33C-8HZ Well, the Houston 33N-8HZ Well and the Houston 34N-8HZ (API Nos. Pending) (“Wells”):
Township 3 North, Range 67 West, 6th P.M.
Section 7: NE¼ SE¼
Section 8: N½ S½ (“WSU#1” – Houston 12C-8HZ – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: E½ SE¼
Section 8: S½ (“WSU#2” – Houston 33C-8HZ – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: E½ SE¼
Section 8: S½ (“WSU#3” – Houston 33N-8HZ – Niobrara Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: SE¼ SE¼
Section 8: S½ S½
Section 17: N½ N½
Section 18: NE¼ NE¼ (“WSU#4” – Houston 34N-8HZ – Niobrara Formation)
7. On January 13, 2014, 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 Gordon R. Palmer, Staff 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 Applicant is not seeking cost recovery pursuant to §34-60-116(7), C.R.S. for the Houston 12C-8HZ Well, the Houston 33C-8HZ Well, the Houston 33N-8HZ Well or the Houston 34N-8HZ 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 (including royalty interest owners) in four approximate 200 to 400-acre designated wellbore spacing units established for Sections 7, 8, 17 and 18, Township 3 North, Range 67 West, 6th P.M., 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 four approximate 200 to 400-acre designated wellbore spacing units established for the below-described lands, are hereby pooled, for the development and operation of the Codell and Niobrara Formations:
Township 3 North, Range 67 West, 6th P.M.
Section 7: NE¼ SE¼
Section 8: N½ S½ (“WSU#1” – Houston 12C-8HZ – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: E½ SE¼
Section 8: S½ (“WSU#2” – Houston 33C-8HZ – Codell Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: E½ SE¼
Section 8: S½ (“WSU#3” – Houston 33N-8HZ – Niobrara Formation)
Township 3 North, Range 67 West, 6th P.M.
Section 7: SE¼ SE¼
Section 8: S½ S½
Section 17: N½ N½
Section 18: NE¼ NE¼ (“WSU#4” – Houston 34N-8HZ – Niobrara Formation)
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. 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.
4. The wellbore spacing unit described above, shall be considered a drilling and spacing unit established by the Commission for purposes of Rule 530.a.
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