IN THE MATTER OF THE PROMULGATION AND
CAUSE NO. 471
AND ESTABLISHMENT OF FIELD RULES TO
GOVERN OPERATIONS IN THE JACE FIELD,
ORDER NO. 471-6
KIOWA COUNTY, COLORADO
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 8:30 a.m. on March 31,
1998 in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado,
on the application of Union Pacific Resources, Inc. for an order to add certain
lands to the provisions of Order No. 471-1 for the Jace Field which established
80-acre drilling and spacing units for the production of oil and associated
hydrocarbons from the Morrow Formation, with the permitted well to be no closer
than 600 feet from the boundaries of the unit tract and no closer than 1,200
feet from any other well producing oil from the Morrow Formation. The order
should also establish 320-acre drilling and spacing units for all such lands in
Jace Field for the producing of gas and associated hydrocarbons from the Morrow
Formation with the permitted gas well for each unit to be located no closer than
600 feet from the boundaries of the unit, and no closer than 2,000 feet from any
other well producing gas from the Morrow Formation. In addition, the Applicant
requests that the Maximum Daily Production Rate established in Order No. 471-1
be eliminated and allow the wells to be governed by statewide regulations,
except for wells in the irregular sections consisting of Sections 29-32,
Township 17 South, Range 41 West , 6th P.M., and Sections 5-8, 17 and 18 in
Township 18 South, Range 41 West , 6th P.M. Further, the applicant requests that
the Director be given the authority to approve exception locations due to
topographical or archeological conditions, irregular sections, surface use
conflicts or reservoir considerations. The Applicant also requests that the
Director be authorized to approve additional wells in a unit or to allow
location exceptions if a well proposed to be drilled for oil is capable of
producing as a gas well or a well drilled for gas is capable of producing as an
oil well, provided that production from such well is from a separate source of
supply in the Morrow Formation.
FINDINGS
The Commission finds as follows:
1. Union Pacific Resources, Inc., as applicant herein, is an interested party in
the subject matter of the above-referenced matter.
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.
4. In Order No. 471-1 issued August 21, 1989, the Commission established 80-acre
drilling and spacing units for the production of oil and associated hydrocarbons
from the Morrow Sandstone Formation for the below-listed lands. Said units
consist of the E½ and the W½ or the N½ and the S½ of a governmental quarter
section, with the permitted well to be located no closer than 600 feet from the
boundaries of the unit tract and no closer than 1,200 feet from any other
producible or drilling well when producing from or drilling into the Morrow
Sandstone Formation. Area "A" consists of lands which are irregular in shape and
do not contain 640-acres per section. In Area "A" the units are to consist of
80-acre tracts approximately 1,800 feet in width and such length as necessary to
constitute an attribution of 80 continuous acres and should be rectangular or
square in shape. The Order also established maximum daily production rates for
Area "A" and "B" based on certain calculations with testing requirements and
monthly reporting requirements to be submitted to the Director.
Area "A"
Township 18 South, Range 41 West, 6th P.M.
Section 5: All Section 8: All
Section 17
Township 17 South, Range 41 West, 6th P.M.
Section 29: All Section 32: All
Area "B"
Township 17 South, Range 41 West, 6th P.M.
Sections 30 - 31: All
Township 17 South, Range 42 West, 6th P.M.
Sections 25 - 26: All
Sections 35 - 36: All
Township 18 South, Range 41 West, 6th P.M.
Sections 6 - 7: All
Section 18: All
Township 18 South, Range 42 West, 6th P.M.
Sections 1 - 2: All
Sections 11 - 14: All
5. Union Pacific Resources filed an application with the Commission to add the
below-listed lands to the provisions of Order No. 471-1 for the Jace Field.
Township 17 South, Range 42 West, 6th P.M.
Section 27: All Section 34: All
Township 18 South, Range 42 West, 6th P.M.
Section 3: All Section 10: All Section 15: All
6. Testimony and evidence was presented at the administrative hearing describing
how the original Order No. 471-1 included Rules Nos. 4 through 8 which set forth
a formula for Maximum Daily Production Rates for wells producing oil and
associated hydrocarbons from the Morrow Sandstone in the Jace Field, with a
maximum daily allowable rate of 200 barrels of oil per day or 50 MCF of gas per
day, whichever occurred first. This restriction was originally set forth because
it was believed that operators had plans to unitize the Jace Field. Currently,
there are no plans to unitize the Jace Field, that the rate restriction is no
longer valid, and that Order No. 471-1 Rules Nos. 4 through 8 should be
rescinded except in the irregular sections consisting of Sections 29-32,
Township 17 South, Range 41 West , 6th P.M. and Sections 5-8, 17 and 18 in
Township 18 South, Range 41 West , 6th P.M.
7. Testimony and evidence presented shows that the Morrow Formation has multiple
reservoir sands which are fluvial channel sands encased in tight shales. The V-3
and the V-6 Sandstones are separate reservoirs, with the V-3 Sandstone being
primarily a gas reservoir, and the V-6 Sandstone being primarily an oil
reservoir.
8. Testimony and evidence was presented indicating the Morrow Formation is the
stratigraphic equivalent between the measured depths of 5,018 feet and 5,168
feet in the well bore of the UPR No. 3 Schneider 34-1 Well located in the SW¼
SE¼ of Section 1, Township 18 South, Range 42 West, 6th P.M.
9. Testimony and evidence was presented indicating that for the purposes of this
application, a gas well should be defined as a well which produces gas with a
gas-oil ratio (GOR) equal to or in excess of 10,000 standard cubic feet per
stock tank barrel of oil.
10. Testimony was presented that approval of the application is necessary to
enable gas wells in the area to economically produce supply gas for the new
helium extraction plant being constructed by Union Pacific Resources, Inc. in
the area.
11. At the time of the administrative hearing on March 25, 1998, it was
discovered that Section 15, Township 18 South, Range 42 West, 6th P.M. was
inadvertently omitted from the official notice in this matter as provided by the
Colorado Oil and Gas Conservation Commission. After testimony and evidence was
presented by the Applicant on all lands requested above and including said
Section 15, the Hearing Officer recommended approval of the application provided
the owners within said Section 15 were properly noticed. The order would become
effective twenty (20) days from the date notice is received, provided no
protests to the inclusion of Section 15 are filed by April 24, 1998. On March
31, 1998, the Commission approved the recommendation of the Hearing Officer. No
protests to the addition of Section 15 were received.
12. At the time of the administrative hearing, Union Pacific Resources, Inc.
agreed to be bound by oral order of the Commission.
13. Based on the facts stated in the application, having received no protests to
the application upon both notices, and having been heard by the Hearing Officer
who recommends approval of the application, the Commission should enter an order
to add the above-listed lands to the provisions of Order No. 471-1 for the Jace
Field which established 80-acre drilling and spacing units for the production of
oil and associated hydrocarbons from the Morrow Formation, with the permitted
well to be no closer than 600 feet from the boundaries of the unit tract and no
closer than 1,200 feet from any other well producing oil from the Morrow
Formation. The order should also establish 320-acre drilling and spacing units
for all such lands in Jace Field for the production of gas and associated
hydrocarbons from the Morrow Formation, with the permitted gas well for each
unit to be located no closer than 600 feet from the boundaries of the unit, and
no closer than 2,000 feet from any other well producing gas from the Morrow
Formation. In addition, the Applicant requests that the Maximum Daily Production
Rate established in Order No. 471-1 be eliminated and allow the wells to be
governed by statewide regulations, except for wells in the irregular sections
consisting of Sections 29-32, Township 17 South, Range 41 West , 6th P.M., and
Sections 5-8, 17 and 18 in Township 18 South, Range 41 West , 6th P.M. Further,
the applicant requests that the Director be given the authority to approve
exception locations due to topographical or archeological conditions, irregular
sections, surface use conflicts or reservoir considerations. The Applicant also
requests that the Director be authorized to approve additional wells in a unit
or to allow location exceptions if a well proposed to be drilled for oil is
capable of producing as a gas well or a well drilled for gas is capable of
producing as an oil well, provided that production from such well is from a
separate source of supply in the Morrow Formation.
ORDER
NOW, THEREFORE, IT IS ORDERED that Order No. 471-1 is hereby amended to include
the below-described lands under the provisions of Cause No. 471 governing
operations in the Jace Field:
Area "A"
Township 18 South, Range 41 West, 6th P.M.
Section 5: All Section 8: All
Section 17
Township 17 South, Range 41 West, 6th P.M.
Section 29: All Section 32: All
Area "B"
Township 17 South, Range 41 West, 6th P.M.
Sections 30 - 31: All
Township 17 South, Range 42 West, 6th P.M.
Sections 25 - 27: All
Sections 34 - 36: All
Township 18 South, Range 41 West, 6th P.M.
Sections 6 - 7: All
Section 18: All
Township 18 South, Range 42 West, 6th P.M.
Sections 1 - 3: All
Sections 10 - 15: All
IT IS FURTHER ORDERED, that the Operator, in its discretion, shall designate
either the N½ and S½ or the E½ and W½ of each section as the respective drilling
units for the production of gas and associated substances, and to designate the
N½ and S½ or the E½ and W½ of each quarter section as the respective drilling
units for the production of oil and associated hydrocarbons, with spacing units
in the partial sections established as nearly as practical as 80-acre units for
oil and associated hydrocarbons and 320-acre units for gas and associated
substances.
IT IS FURTHER ORDERED, that the bottom hole location or completion interval for
the wells for the production of oil and associated hydrocarbons from the Morrow
Formation in said drilling units shall be located no less than 600 feet from the
boundary of the drilling units, irrespective of lease lines, and no less than
1,200 feet from the nearest well permitted to, drilling to, completed in or
producing oil and associated hydrocarbons from the Morrow Formation, with
existing wells approved as exception locations as necessary or required.
IT IS FURTHER ORDERED, that the bottom hole location or completion interval for
the wells for the production of gas and associated substances from the Morrow
Formation in said drilling units shall be located no less than 600 feet from the
boundary of the drilling units, irrespective of lease lines, and no less than
2,000 feet from the nearest well permitted to, drilling to, completed in or
producing gas or associated substances from the Morrow Formation, with existing
wells approved as exception locations as necessary or required.
IT IS FURTHER ORDERED, that for purposes of this Order, a gas well shall be
defined as a well which produces gas with a gas-oil ratio equal to or in excess
of 10,000 standard cubic feet per stock tank barrel of oil.
IT IS FURTHER ORDERED, that the Director shall be given authority to approve
without holding a hearing exception locations due to topographical conditions,
archeological conditions, irregular sections, surface use conflicts or reservoir
considerations, provided the Operator obtains a waiver or consent signed by the
lease owner toward whom the well is proposed to be moved, agreeing to the
proposed location. If the owner of the proposed well is also the majority owner
of the leasehold interest covering a spacing unit toward which the well is
proposed to be moved, then a waiver or consent shall be obtained from the
mineral interest owner subject to such lease.
IT IS FURTHER ORDERED, that the Director shall be authorized to allow additional
wells in a unit, or to allow location exceptions if a well proposed to be
drilled for oil is capable of producing as a gas well or a well drilled for gas
is capable of producing as an oil well, provided the owner establishes that
production from such well is from a separate source of supply in the Morrow
Formation.
IT IS FURTHER ORDERED, that the existing production limits established in Order
No. 471-1 shall be rescinded and establish a production limit for wells
producing from the partial Sections 29 and 32, Township 17 South, Range 41 West,
6th P.M. and Sections 5, 8 and 17, Township 18 South, Range 41 West, 6th P.M. to
a rate which, when divided by the maximum production rate for such well, is
equal to the quotient of the total number of acres in the spacing unit for that
well divided by either: (1) 80-acres for an oil well, or (2) 320-acres for a gas
well. The maximum production rate for each well in these five partial sections
shall be determined by an IP test upon completion of the well and annual tests
thereafter.
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.
ENTERED this 30th day of April, 1998 , as of March 31, 1998 and April 24, 1998.
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 April 30, 1998
(471-6)