BEFORE THE OIL AND GAS
CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION ) CAUSE NO. 440
AND ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN THE PARACHUTE ) ORDER NO. 440-53
FIELD, GARFIELD COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on September 22, 2008, in the Sabin-Cleere Conference Room, Building A, Colorado Department of Public Health and Environment, 4300 Cherry Creek Drive South, Denver, Colorado, for an order to vacate the 320-acre drilling and spacing unit consisting of the W½ of Section 15, Township 7 South, Range 95 West, 6th P.M. established for the Iles Formation, and establish a 40-acre drilling and spacing unit consisting of the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M. for the Iles Formation, and allow the equivalent of one well per 10 acres for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations for said unit.
FINDINGS
The Commission finds as follows:
1. Laramie Energy II, LLC (“Laramie Energy”), 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 April 19, 1990, the Commission issued Order No. 440-12 which, among other things, established 320-acre drilling and spacing units for certain lands including the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M. for the production of gas and associated hydrocarbons from the Mesaverde Formation.
5. On July 1, 1997, the Commission issued Order No. 440-18 which, among other things, authorized up to eight (8) wells to be optionally drilled per 320-acre drilling and spacing unit for certain lands including the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M. for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, with the permitted well to be located no closer than 400 feet from the boundaries of the unit and no closer than 800 feet from any existing Williams Fork Formation well or wells.
6. On April 24, 2006, the Commission issued Order No. 440-32 which, among other things, allowed the equivalent of one (1) well per 20 acres for the 320-acre drilling and spacing unit for the W½ of Section 15, Township 7 South, Range 95 West, 6th P.M., including the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation, with the permitted well to be located no closer than 200 feet from the boundaries of the unit and no closer than 400 feet from any existing Williams Fork Formation well or wells.
7. On February 12, 2007, the Commission issued Order No. 440-42 which, among other things, vacated the 320-acre drilling and spacing unit consisting of the W½ of Section 15, Township 7 South, Range 95 West, 6th P.M. and established eight (8) 40-acre drilling and spacing units for the W½ of Section 15, Township 7 South, Range 95 West, 6th P.M., which include the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation, with the permitted well to be located no closer than 200 feet from the boundaries of the unit and no closer than 400 feet from any existing Williams Fork Formation well or wells.
8. On July 21, 2008, Laramie Energy, by its attorney, filed with the Commission a verified application for an order to vacate the 320-acre drilling and spacing unit consisting of the W½ of Section 15, Township 7 South, Range 95 West, 6th P.M. for the Iles Formation, and establish a 40-acre drilling and spacing unit for the NE¼ SW¼ of said Section 15, for the production of gas and associated hydrocarbons from the Iles Formation, and to allow the equivalent of one (1) well per 10 acres in the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
All future Williams Fork Formation and IIes Formation wells to be drilled upon the application lands should be located downhole anywhere within the application lands but no closer than 100 feet from a lease line or the boundaries of the application lands without exception being granted by the Director of the Oil and Gas Conservation Commission. In cases where the application lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation and Iles Formation wells, the well should be located downhole no closer than 200 feet from the boundary or boundaries of the application lands so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission.
Except as previously authorized by order of the Commission, wells to be drilled under this application will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Oil and Gas Conservation Commission pursuant to application made for such exception. In addition, all wells drilled to the Iles Formation will be drilled only in connection with the drilling of Williams Fork Formation wells.
9. On September 9, 2008, Laramie Energy, 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.
10. Testimony and exhibits submitted in support of the application showed that lands in the vicinity of the application lands have been approved for 10-acre well density for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
11. Testimony and exhibits submitted in support of the application showed that the geologic model of the Williams Fork Formation in the major producing areas of the Piceance Basin is well understood and consists of extensive log, completion and reservoir engineering data from wells inside current 10-acre density areas and the extremely useful and representative nearby outcrops of producing rocks. Additional testimony showed that the productive sandstones throughout the Williams Fork Formation are laterally discontinuous, naturally fractured, contain microdarcy permeability, and average porosity of 6% to 10%. Further testimony indicated that based upon outcrop studies, the majority of the sand bodies within the Williams Fork Formation are smaller than the distance between wells drilled on a 10-acre density basis, and that the mean sand width found in the outcrops and existing wells will also be present under the application lands. Testimony showed that Corcoran sands of the Iles Formation were deposited in a similar environment as the Williams Fork Formation, and that it is predicted that the Corcoran sand distribution will be similar to that of the Williams Fork Formation and that it may be gas-bearing in the area. Additional testimony indicated that 10-acre density drilling is necessary to develop the Williams Fork and Iles Formations underlying the application lands.
12. Testimony and exhibits submitted in support of the application showed that the application lands are surrounded by acreage approved for 10-acre well density, and that there are no known differences in the reservoir between the application lands and those surrounding lands. Additional testimony showed that Williams Fork Formation wells on adjacent lands have an average drainage area of 8 acres, and that Iles Formation wells in lands adjacent to the application lands are draining approximately 12.7 acres. Further testimony indicated that stand alone Iles Formation wells are not commercial. Testimony indicated that the most efficient and economic method to recover Iles Formation reserves is through joint development with the over-pressured Williams Fork Formation sands to help lift associated water and increase ultimate recoveries from both reservoirs.
13. The above-referenced testimony and exhibits show that the proposed spacing and density will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.
14. On September 16, 2008, the Bureau of Land Management (“BLM”) filed with the Commission a protest to the application. Consequently, on September 17, 2008, Laramie Energy, by its attorney, resolved the BLM protest by amending the application to withdraw the drilling and spacing and well density requests for the application lands as to the Iles Formation. Accordingly, the amended application requests an order to allow the equivalent of one well per 10 acres for the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.
15. Laramie Energy II, LLC, agreed to be bound by oral order of the Commission.
16. Based on the facts stated in the verified application, having received one protest which was resolved by Laramie Energy amending the application, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order allowing the equivalent of one well per 10 acres for the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.
ORDER
NOW, THEREFORE IT IS ORDERED, that the equivalent of one (1) well per 10 acres is hereby approved for the NE¼ SW¼ of Section 15, Township 7 South, Range 95 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork Formation.
IT IS FURTHER ORDERED, that all future Williams Fork Formation wells to be drilled upon the application lands shall be located downhole anywhere within the application lands but no closer than 100 feet from a lease line or the boundaries of the application lands without exception being granted by the Director of the Oil and Gas Conservation Commission. In cases where the application lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation wells, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of the application lands so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission.
IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled under this application shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Oil and Gas Conservation Commission pursuant to application made for such exception.
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 September, 2008, as of September 22, 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
September 23, 2008