BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION ) CAUSE NO. 429
AND ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN THE BRUSH CREEK ) ORDER NO. 429-7
FIELD, MESA COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on January 15, 2008, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to amend Order No. 429-4 to include the E½ NE¼ of Section 23, Township 9 South, Range 94 West, 6th P.M., and allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Mesaverde Formation including the Williams Fork, Rollins, Cozzette and Corcoran Formations, with the wells to be drilled in accordance with Order No. 429-4.
The Commission finds as follows:
1. Plains Exploration & Production Company, (“PXP”), 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. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. The E½ NE¼ of Section 23, Township 9 South, Range 94 West, 6th P.M. is subject to this Rule.
5. On June 5, 2006, the Commission issued Order No. 429-4, which among other things, allowed the equivalent of one well per 10 acres to be optionally drilled in various unspaced lands in Townships 9 and 10 South, Range 94 West, 6th P.M., including certain lands in Section 23, Township 9 South, Range 94 West, 6th P.M., with the permitted well to be located no closer than 100 feet from the boundary of the unit or lease line, for production of gas from the Mesaverde Formation. Wells shall be located downhole anywhere on the application lands, but no closer than 100 feet from the boundaries of any lease line, without exception granted by the Director. In cases where the application lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill 10-acre density Mesaverde Formation wells, wells should be located downhole no closer than 200 feet from the lease line that so abuts or corners the lands where 10-acre density downhole drilling of Mesaverde Formation wells has not been ordered by the Commission. Further, all Mesaverde Formation wells shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on any quarter quarter section unless exception is granted by the Director.
6. On November 20, 2007, PXP, by its attorney, filed with the Commission a verified application for an order to amend Order No. 429-4 to include the E½ NE¼ of Section 23, Township 9 South, Range 94 West, 6th P.M., and allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Mesaverde Formation including the Williams Fork, Rollins, Cozzette and Corcoran Formations, with the wells to be drilled in accordance with Order No. 429-4.
7. On January 3, 2008, PXP, by its attorney, 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. Testimony and exhibits submitted in support of the application showed that PXP has leased 100% of the fee mineral interests in the application lands, and that there is one surface owner within the application lands with whom PXP has negotiated a surface use agreement.
9. Testimony and exhibits submitted in support of the application showed that the Mesaverde Formation is composed of the Williams Fork Formation and the Iles Formation, which is further composed of the Rollins, Cozzette, and Corcoran Formations. Additional testimony and exhibits showed that the net sand of the Mesaverde Formation is variable in thickness, is lenticular and discontinuous in nature, and that is necessary for operators to have the ability to drill wells on a 10-acre density basis to fully develop and produce the gas from the Mesaverde Formation.
10. Testimony and exhibits submitted in support of the application showed that the estimated ultimate recovery per well on a 10-acre density basis is calculated at 0.7 BCF, that with 10-acre well density 79% of the original gas in place will be recovered, and that drilling wells on 10-acre density will be economic. Additional testimony referenced previous exhibits presented in support of 10-acre well density that resulted in the issuance of Order Nos. 429-4, 429-5 and 429-6.
11. The above-referenced testimony and exhibits show that drilling Mesaverde Formation wells on a 10-acre density basis will allow for more efficient reservoir drainage, will prevent waste, will assure the greatest ultimate recovery of gas and associated hydrocarbons, and will not violate correlative rights.
12. Plains Exploration & Production Company agreed to be bound by the 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.b., the Commission should enter an order to amend Order No. 429-4 to include the E½ NE¼ of Section 23, Township 9 South, Range 94 West, 6th P.M., and allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Mesaverde Formation including the Williams Fork, Rollins, Cozzette and Corcoran Formations, with the wells will be drilled in accordance with Order No. 429-4.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Order No. 429-4 is hereby amended to include the E½ NE¼ of Section 23, Township 9 South, Range 94 West, 6th P.M., and allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Mesaverde Formation including the Williams Fork, Rollins, Cozzette and Corcoran Formations.
IT IS FURTHER ORDERED, that wells shall be located downhole anywhere, but no closer than 100 feet from the boundaries of any unit or lease line, without exception granted by the Director. In cases where the application lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill 10-acre density Mesaverde Formation wells, wells shall be located downhole no closer than 200 feet from the unit or lease line that so abuts or corners the lands where 10-acre density downhole drilling of Mesaverde Formation wells has not been ordered by the Commission.
IT IS FURTHER ORDERED, that all Mesaverde Formation wells shall be drilled from the surface either vertically or directionally from no more than one (1) pad located on any quarter quarter section unless exception is granted by the Director.
IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.
IT IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that 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, 2008, as of January 15, 2008.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Patricia C. Beaver, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
January 23, 2008