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

 

IN THE MATTER OF THE APPLICATION OF NOBLE ENERGY, INC. FOR AN ORDER TO POOL ALL INTERESTS IN THREE APPROXIMATE 402-ACRE DESIGNATED WELLBORE SPACING UNITS ESTABLISHED FOR SECTIONS 24 AND 25, TOWNSHIP 6 NORTH, RANGE 65 WEST, 6TH P.M., FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, WELD COUNTY, COLORADO

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CAUSE NO. 407

 

DOCKET NO. 1403-UP-93

 

ORDER NO. 407-937

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on March 17, 2014, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon an application for an order to pool all interests within three approximate 402-acre designated wellbore spacing units established for Sections 24 and 25, Township 6 North, Range 65 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Storis E24-75HN Well, the Storis E24-75-1HN Well and the the Storis E24-75-1HC Well, for the development and operation of the Codell and Niobrara Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1.         Noble Energy Inc. (“Noble” 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 Niobrara Formation underlying certain lands, with the permitted well locations in accordance with the provisions of Order No. 407-1 and allowed downhole commingling of production from the Codell and Niobrara Formations. Sections 24 and 25, Township 6 North, Range 65 West, 6th P.M. are subject to this Order for the Codell and Niobrara Formations.

 

5.         On April 27, 1998 (As of February 1, 2014), the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 24 and 25, Township 6 North, Range 65 West, 6th P.M. are subject to Rule 318A for the Codell and Niobrara Formations.

 

6.         On August 8, 2011, the Commission entered Order No. 407-462 which, among other things, established an approximate 320-acre designated wellbore spacing unit for the W½ of Section 24, Township 6 North, Range 65 West, 6th P.M. and approved one horizontal well within the unit, for the production of oil and gas, and associated hydrocarbons from the Niobrara Formation. Order No. 407-462 does not affect this Application.

 

7.         On February 13, 2014, Noble, 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 three approximate 402-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 Storis E24-75HN Well (API No. 05-123-38152) in DWSU No. 1, the Storis E24-75-1HN Well (API No. 05-123-38154) in DWSU No. 2 and the Storis E24-75-1HC Well (API No. 05-123-38144) in DWSU No. 3 (“Wells”), and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S.:

 

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                              

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #1, Storis E24-75HN, Niobrara)         

 

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                  

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #2, Storis E24-75-1HN, Niobrara)

                       

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                              

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #3, Storis E24-75-1HC, Codell)

 

8.         On March 4, 2014, Noble, 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.

 

9.         Land testimony and exhibits submitted in support of the Application by Julie T. Jenkins, Land Manager for Noble, showed that for each of the Wells, all nonconsenting interest owners were notified of the Application and received an Authority for Expenditure ("AFE") and offer to participate in the Well.  Further testimony concluded that the AFE sent by the Applicant to the interest owners was a fair and reasonable estimate of the costs of the proposed drilling operation and was received at least 30 days prior to the March 17, 2014 hearing date.

 

10.       Land testimony showed the Applicant complied with the requirements of Rule 530, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the the Storis E24-75HN Well, the Storis E24-75-1HN Well and the the Storis E24-75-1HC Well.

 

11.       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.

 

12.       Noble agreed to be bound by oral order of the Commission. 

 

13.       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 within three approximate 402-acre designated wellbore spacing units established for Sections 24 and 25, Township 6 North, Range 65 West, 6th P.M., and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S. for the Storis E24-75HN Well, the Storis E24-75-1HN Well and the the Storis E24-75-1HC Well, 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 three approximate 402-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, 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. are first incurred for drilling each of the following wells: the Storis E24-75HN Well, the Storis E24-75-1HN Well and the the Storis E24-75-1HC Well:

 

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                              

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #1, Storis E24-75HN, Niobrara)                     

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                  

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #2, Storis E24-75-1HN, Niobrara)

                       

Township 6 North, Range 65 West, 6th P.M. 

Section 24:      E½ W½, W½ E½                              

Section 25:      NE¼ NW¼, NW¼ NE¼        (WSU #3, Storis E24-75-1HC, Codell)

 

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 nonconsenting leased (working interest) owners must reimburse the consenting working interest owners for their share of the costs and risks of drilling and operating the Well (including penalties as provided by §34-60-116(7)(b), C.R.S.) out of production from the wellbore spacing unit representing the cost-bearing interests of the nonconsenting working interest owners as provided by §34-60-116(7)(a), C.R.S.

 

4.         Any 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), C.R.S.  Any party seeking the cost recovery provisions of §34-60-116(7), C.R.S., shall first comply with subsection (d) for any subsequent well(s).

 

5.         Each nonconsenting unleased owner within the 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 unleased nonconsenting mineral 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 it had originally agreed to the drilling.

 

6.         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.

 

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.

 

8.         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 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   11th   day of April, 2014, as of March 17, 2014.    

 

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary