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 AN APPROXIMATE 400-ACRE DESIGNATED WELLBORE SPACING UNIT LOCATED IN SECTIONS 5 AND 8, TOWNSHIP 2 NORTH, RANGE 67 WEST, 6TH P.M., FOR THE CODELL FORMATION, WATTENBERG FIELD, WELD COUNTY, COLORADO |
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CAUSE NO. 407
DOCKET NO. 1403-UP-56
ORDER NO. 407-965 |
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, Suite 801, Denver, Colorado, upon application for an order to pool all interests, including leased mineral interests, in an approximate 400-acre designated wellbore spacing unit established for Sections 5 and 8, Township 2 North, Range 67 West, 6th P.M., for the development and operation of the Codell Formation.
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 5 and 8, Township 2 North, Range 67 West, 6th P.M. are subject to this Order for the Codell Formation.
5. On April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. Sections 5 and 8, Township 2 North, Range 67 West, 6th P.M. are subject to Rule 318A for the Codell Formation.
6. On January 16, 2014, 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, including leased mineral interests, in an approximate 400-acre designated wellbore spacing unit established for the below-described lands (“Application Lands”), for the development and operation of the Codell Formation, 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 Sater 25C-5HZ Well (API No. 05-123-38326) (“Well”) and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S.:
Township 2 North, Range 67 West, 6th P.M.
Section 5: SE¼ NW¼, SW¼ NE¼, E½ SW¼, W½ SE¼
Section 8: E½ NW¼, W½ NE¼
7. On February 28, 2014, Prominence Royalties, LLC (“Prominence” or “Protestant”), by their attorneys, filed a protest with the Commission. The letter was included in the record as a Rule 510 statement.
8. On March 4, 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.
9. Land testimony and exhibits submitted in support of the Application by Jason Rayburn, Landman for Kerr-McGee, stated that certain royalty owners have not agreed to participate in the Well. These 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. Applicant confirms that the cost recovery provisions shall not apply to these leased interest owners.
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 resolved all 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 leased mineral interests, in an approximate 400-acre designated wellbore spacing units established for Sections 5 and 8, Township 2 North, Range 67 West, 6th P.M. are subject to this Order for the Niobrara Formation.
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 an approximate 400-acre designated wellbore spacing unit established for the below-described lands, are hereby pooled, for the development and operation of the Codell Formation:
Township 2 North, Range 67 West, 6th P.M.
Section 5: SE¼ NW¼, SW¼ NE¼, E½ SW¼, W½ SE¼
Section 8: E½ NW¼, W½ NE¼
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.
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