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

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE NIOBRARA AND CODELL FORMATIONS, WATTENBERG FIELD, ADAMS COUNTY, COLORADO

)

)

)

)

)

)

)

CAUSE NO. 407

 

DOCKET NO. 190600420

 

TYPE: POOLING

 

ORDER NO. 407-2889

REPORT OF THE COMMISSION

 

The Commission heard this matter on July 31, 2019, at the University of Colorado, School of Public Affairs, 1380 Lawrence Street, Second Floor Terrace Room, Denver, Colorado upon application for an order to pool all interests within an approximate 1,600-acre drilling and spacing unit established for the below-described lands (“Application Lands”), and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Kortum LD 33-162HC Well (API No. Pending); the Kortum LD 33-172HN Well (API No. Pending); the Kortum LD 33-172HNX Well (API No. Pending); the Kortum LD 33-173HC Well (API No. Pending); the Kortum LD 33-173HN Well (API No. Pending); the Kortum LD 33-175HN Well (API No. Pending); the Kortum LD 33-175HNX Well (API No. Pending); the Kortum LD 33-171HN Well (API No. Pending); the Kortum LD 33-176HC Well (API No. Pending); the Kortum LD 33-170HC Well (API No. Pending); the Kortum LD 33-176HN Well (API No. Pending); the Kortum LD 33-169HNX Well (API No. Pending); the Kortum LD 33-178HN Well (API No. Pending); the Kortum LD 33-178HNX Well (API No. Pending); the Kortum LD 33-179HC Well (API No. Pending); the Kortum LD 33-169HN Well (API No. Pending); the Kortum LD 33-179HN Well (API No. Pending); the Kortum LD 33-168HN Well (API No. Pending); the Kortum LD 33-168HC Well (API No. Pending); the Kortum LD 33-166HNX Well (API No. Pending); the Kortum LD 33-166HN Well (API No. Pending); the Kortum LD 33-165HN Well (API No. Pending); the Kortum LD 33-165HC Well (API No. Pending); the Kortum LD 33-163HNX Well (API No. Pending); and the Kortum LD 33-163HN Well (API No. Pending) (“Wells”), for the development and operation of the Niobrara and Codell Formations:  

 

Township 1 South, Range 67 West, 6th P.M.

Section 21:      All

Section 28:      All

Section 33:      N˝

 

FINDINGS

 

The Commission finds as follows:

 

1.            Great Western Operating Company, LLC (Operator No. 10110) (“Great Western” 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 April 27, 1998, the Commission adopted Rule 318A, the Greater Wattenberg Area Special Well Location, Spacing and Unit Designation Rule. The Application Lands are subject to this Rule for the Niobrara and Codell Formations.

 

5.            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 Niobrara and Codell Formations underlying certain lands, with permitted well locations in accordance with the provisions of Order No. 407-1. The Application Lands are subject to this Order for the Niobrara and Codell Formations.

 

6.            On December 12, 2016, the Commission entered Order No. 407-1839 which, among other things, established an approximate 1,279.67-acre drilling and spacing unit for Sections 21 and 28, Township 1 South, Range 67 West, 6th P.M., and approved up to 23 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara and Codell Formations, providing that the productive interval of the wellbore will be located no closer than 460 feet from the unit boundaries, and no closer than 150 feet from the productive interval of any other wellbore located in the unit, unless the Director grants an exception, and further providing that the proposed wells shall be located on no more than three multi-well pads, subject to Rule 318A, unless the Director grants an exception.

 

7.            On October 3, 2018, the Commission entered Order No. 407-2612 which, among other things, (1) amended Order No. 407-1839 to add the N˝ of Section 33, Township 1 South, Range 67 West, 6th PM., and (2) approved an additional five horizontal wells, for a total of up to 28 horizontal wells, in the approximate 1,600-acre drilling and spacing unit in order to efficiently and economically recover the oil, gas and associated hydrocarbons from the Niobrara and Codell Formations.

 

8.            On March 19, 2019, which was at least 90 days before the Commission heard this matter, COPC filed a verified application (“Application”) pursuant to §34-60-116, C.R.S., for an order to pool all interests in the Application Lands, for the development and operation of the Niobrara and Codell Formations, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells.

 

9.            The Applicant filed with the Commission a written request to approve the Application based on the merits of the Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.

 

10.          On July 1, 2019, Russell N. Watterson, Trustee, submitted a 510 Statement expressing his support for the Application.

 

11.          Land testimony and exhibits submitted in support of the Application by Matthew Acree, Senior Landman for Great Western, show that the Applicant owns, or has secured the consent of the owners of, more than 45% of the mineral interest to be pooled. In addition, the land testimony and exhibits show that the owners within the unit received a reasonable offer to lease or participate at least 90 days before the hearing date, that the owners to be pooled did not elect in writing to consent to the Wells within 60 days after receiving the offer to participate, and that any unleased owners had at least 60 days to review a reasonable offer to lease but either refused it or have not yet accepted it.

 

12.          The land testimony and exhibits also demonstrate that the offers to lease were made in good faith, contained the contact information for a representative of the Applicant, and contained the Commission’s pooling brochure or a link to access it.

 

13.          In addition, the land testimony and exhibits show that the offers to participate contained the Commission’s pooling brochure or a link to access it, the particular owner’s share of the total estimated drilling and completion costs for the Wells, and also the following information for each Well: the location, measured depth, true vertical depth, and lateral length, the total estimated drilling and completion cost, and the estimated spud date.

 

14.          Land testimony showed the Applicant complied with the requirements of Rule 530 and the Act, and is entitled to the cost recovery provisions pursuant to §34-60-116(7), C.R.S., for the Wells, but did not provide testimony for any subsequent wells.

 

15.          Granting the Application is consistent with the protection of public health, safety, welfare, the environment, and wildlife resources.

 

16.          Great Western agreed to be bound by oral order of the Commission.

 

17.          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 in the Application Lands, and to subject any nonconsenting interests to the cost recovery provisions of §34-60-116(7), C.R.S., for the drilling of the Wells, for the development and operation of the Niobrara Formation.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.         Pursuant to the provisions of §34-60-116, C.R.S., all interests in the drilling and spacing unit established for the Application Lands are hereby pooled, for the development and operation of the Niobrara and Codell Formations, effective as of the date the Application was filed.

 

2.         The production obtained from the drilling and 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 drilling and spacing unit; each owner of an interest in the drilling and spacing unit shall be entitled to receive its share of the production of the Wells located on the drilling and spacing unit applicable to its interest in the drilling and spacing unit.

 

3.         The following working interest owner(s) did not elect to participate in the Well(s) or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S: Heirs or Devisees of David F. Lawrence, Raisa II, LLC, Pirtle Properties, L.P., Michael H. Poundstone, Ann E. Poundstone, Everett O. Cummings, Phillip D. Tracy, Rancho Partnership, Ltd., Heirs or Devisees of George W. Pirtle, SRC Energy, Inc., PetroShare Corp., Providence Wattenberg LP, LLC, PEO Colorado, LLC, and Verdad Resources LLC.

 

4.         Each nonconsenting working interest owner must reimburse the consenting owners for the owner’s proportionate share of the costs and risks of drilling and operating the Well(s) from the owner’s proportionate share of production, subject to non-cost bearing interests, if and to the extent that the royalty is consistent with the lease terms prevailing in the area and is not designed to avoid the recovery of costs provided for in §34-60-116(7)(b), C.R.S., until costs and penalties are recovered as set forth in §34-60-116(7), C.R.S.

 

5.         The following unleased owner(s) did not elect to participate in the Well(s) or failed to make a timely election and are hereby deemed to be nonconsenting and subject to the penalties as provided for in §34-60-116(7), C.R.S.: John T. Shannon, Troy L. Reed and Emily R. Myers, as joint tenants, Dalvir S. Gill and Rajvir K. Gill, as joint tenants, Timothy R. Post  and Kristi M. Post, as joint tenants, William T. Murphy, Eric Robert Kuba and Charlee Hayman Kuba, as joint tenants, Michael Lococo, Chris Patton and Jessica Patton, as joint tenants, Primitivo J. Rodriguez and Stacy R. Rodriguez, as joint tenants, Kelly Schippert and Kimberly A. Robinson, as joint tenants, Ian D. Clark, Dean Lutz and Shelly Ann Lutz, as joint tenants, Jorna R. Julien, Kou Kue and May Vue, as joint tenants, Barbara A. Morgan, Matthew Lloyd Gilger and Anna Lucia Gilger Rivas, as joint tenants, Robert Constable and Lindsay Constable, as joint tenants, Anders Christofer Cyrillus, Anthony W. McCutchan and Kendra L. McCutchan, as joint tenants, Ronald L. Meyers and Sandra Meyers, as joint tenants, Curt Nesmith and Catherine Nesmith, as joint tenants, Thuy Dung Thi Do, Frances L. DeVore, Christopher P. Fayles and Shelly J. Fayles, as joint tenants, Justin D. Harry, Mike Bishop and Amber Bishop, as joint tenants, John Tyler Weston and Adisa Alibasic Weston, as joint tenants, KDB Homes, Inc. (D/B/A D.R. Horton - Continental Series), DRH Energy, Inc., Melody Homes, Inc., Adams County, Colorado, City of Thornton, Debra L. Bingham, Denise S. Wright, Dianne C. Orgill, Darrell A. Damstedt, David B. Damstedt, Damstedt Eneterprises, LLP, Riverdale Peaks II Homeowners Association, Inc., Yan H. Zheng, Riverdale Peaks II Metropolitan District, Adams County, Colorado, City of Thornton, Colorado, Chad Kiefer and Jennifer Keifer, as tenants in common, Danny Fitts and Frances Shepherd, as joint tenants, Larry Miles Cluff, Staci Crum, Greg Grzegorczyk, Carl Jernberg and Saundra Jernberg, as tenants in common, Bertha M. Nelsen, Elizabeth Lyddon, Kelli K. Nemeth, Douglas M Andrews and Jane M. Andrews, as joint tenants, Jessica Lynn Haze and Roger Joseph Cruz, as joint tenants, Alejandra Valenzuela-Delgado, Ana Ramirez Ferrel, Horizon Resources II, LLC, Amber D. Garcia, MGT Properties, LLC, Carlos F. Vera and Abigail L. Vera, JT, Adam Balch and Carli Balch, as joint tenants, Luis A. Apodaca and Melissa Apodaca, as joint tenants, Allison K. Ivy and James W. Ivy, as joint tenants, Georgette V. Laws-Willis, Michael Cao and Kristen Cao, as joint tenants, Brighton School District No. 27J, a Colorado political subdivision, JPMorgan Chase Bank, NA, Dormie Mineral Holdings, LLC, Quebec Corp, William J. Stark Jr. and Carie J. Stark, as joint tenants, Kristina Zemlicka, Kellie Liewellyn and Randall Blake Parish, as joint tenants, Villages at Riverdale, LLC, Jarred Caswell, Gus W. Bordner and Debra K. Bordner, as joint tenants, Quebec Corp., a Colorado Corporation, Caitlan Marie Wilkinson and DeAngelo Chauncey Wilkinson, as joint tenants, Benjamin Cheang, The C. Stanley McClintic and Meryl H. McClintic Living Trust, dated January 20, 2011 and amended August 22, 2011, Kyle A. Waszak, Bradley Klitzke and Danya Klitzke, as joint tenants, Beth A. Carroll and Jeffrey D. Carroll, as joint tenants, Petro-Operating Company, LLC, Logan Smith and Kayla Vigil, as joint tenants, Gesardo Osnaya-Sandoval and Beatriz Lorena Licon-Sanchez, as joint tenants, Marcus A. Whitney and Ksenia V. Appel-Whitney, as joint tenants, Angela L. Kiefer as to a 50% interest, Craig S. Kiefer as to a 50% interest, and Linda M. Kiefer as to a 25% interest, Brent J. Starrett and Holly M. Starrett, as joint tenants, Douglas I. Jones and Denice L. Yeater-Jones, as joint tenants, Deborah Figueroa and Reynaldo Aponte, as joint tenants, Jason M. Korn, Brian F. Kroll and Douglas W. Kroll, as joint tenants, Jamie S. Byrd and Douglas O. Byrd Jr., Brenda Yudit Rodriguez, Baldev Nyaupane and CHinta Devi Nyaupane and Prashant Nyaupane, as joint tenants, Lawrence V. Mashaw and Aspen Freburg-Mashaw, as joint tenants, Siamouli S. Moaga and Marilyn O. Moaga, as joint tenants, Kevin R. Smith, Gabriel Sandoval and Danielle Sandoval, as joint tenants, Vong Xiong and Yangmee Lor, as joint tenants, David Parks and Angela M. Parks, as joint tenants, Antonin Januska and Anna N. Lipskaya, as tenants in common, Sekou A. Diallo, Tricia Clesi and Joshua Clesi, as joint tenants, Madelyn E. Shell, Tom A. Neal and Monika N. Neal, as joint tenants, Salvador Benites Antolin and Lucia Antolin, as joint tenants, Nathaniel P. Decker and Jennifer M. Decker, as joint tenants, Frank T. Bednar and Erica R. Bednar, as joint tenants, Gregory Richards, Alvin Atkins, Jr., Robert Earl Meeks, Jr., Gustavo Avila, Kevin L. Shaw and Laurie A. Shaw, as tenants in common, Nash Steven Vigil and Nash Steven Vigil, Jr., as joint tenants, Christopher A. Hays and Rose M. Hays, as joint tenants, Cedrick A. Love, Eric Welker, Guillermo Torres and Janessa Vidal, as joint tenants, Joseph M. Lyons, Frank Esposito and Judy Esposito, as joint tenants, Norman L. West and Anita D. West, as tenants in common, Brayden Wolfe and Caitlin  Moyer, as joint tenants, Juan Nunez De La Torre, Sandra K. Pointer, Kari Hill, Cynthia Havemann and David Persyn, as joint tenants, Heather R. Rine, Diana E. Russell, Aleksey Mezentsev, Michael P. Kennedy and Jessa C. Kennedy, as joint tenants, The Linda Louise Martinez Trust dated October 27, 2014, Rubyann Martin, Lucille A. Miles and Thomas K. Miles, as joint tenants, Kevin Meredith and Heidi Meredith, as joint tenants, CSH Property One, LLC a Delaware Limited Liability Company, Jennifer E. Anderson, Amy Anetsberger, Sergy Shytuhin and Galyna Shytuhina, as joint tenants, Alice J. Ward, Robert D. Scott Jr. and Viviane E. Scott, as joint tenants, James R. Tocci, Colorado Housing and Finance Authority, Michael Powers, Clayton Properties Group II, Inc., RADO Royalties LLC, Kathleen L. Kus and Richard S. Smith, as joint tenants, Stanislaw Michalkow and Krystyna Michalkow, as joint tenants, Ian Fetyko and Suzette Fetyko, as joint tenancy, Heather Campbell, Santa M. Patafio, Dean A. Wanner, Kathy Jay Dalke, Darryl J. Anderson and Tammy L. Anderson, as joint tenants, Brighton School District No. 27J, Steven J. Wilde, Julianne S. Hazah and Joseph Ahmed Hazah, as joint tenants, Lisa M. Tatum, Jason M. Toland and Lorena Toland, as joint tenants, Souksana Sailakham, Levi J. Roberts, James J. Piperato Jr. and Betty G. Piperato, as joint tenants, Anschutz Exploration Corporation, Yu Xiao, Rafael Delgado, Peter David and Kimberly David, as joint tenants, Brian S. Routh and Nicole Routh, as joint tenants, Donna J. Heit, Armando G. Luna, Quy Minh Dinh and An Bang Nguyen, as joint tenants, Michael David Nisbet and Karla Nisbet, as joint tenants, Kenneth E. Pacheco, Douglas E. Hartleben and Nancy L. Hartleben, as joint tenants, Maricella Murillo and Mark Tapia, as joint tenants, Hermelo B. Rivera and Evelyn D. Rivera, as joint tenants, Mark A. Bross Trust and Patricia Ann Boss Trust, joint tenants, James R. Fritze and Sheila K. Fritze, joint tenants, Jack M. Nolan and Sharon L. Nolan, joint tenants, Stephen S. Woodward and Teresa L. Woodward, joint tenants, David Chavez-Molina and Lisa Bolinger, joint tenants, Clark M. Thompson and Judy A. Thompson, joint tenants, Shauna Patterson Giles, Arturo Ramirez, Julian P. Bhatt and Teresa D. Bhatt, joint tenants, The Steve and Florence Ramona Lucero Trust dated October 4, 2010, Lance Smith  and Delonna Smith, joint tenants, Michael Paul Barela and Esmeralda Barela, joint tenants, Kenneth Rathke and Yolanda Rathke, joint tenants, Joseph E. Stremel and Donna J. Stremel, joint tenants, Wolfhawk Energy Holdings, LLC, Matthew Alan Mergens and Patricia E. Mergens, joint tenants, Summit Professional Builders, Inc., Jeffrey J. Ambrose and Linda A. Ambrose, The Katie Jakoba Conrads Trust Agreement, dated 5/18/2005, Bruce Rahmani Living Trust dated June 27, 2018, Kevin Schmidt, Janelle R. Carwin, Linda M. Roth and Matthew E. Carwin, joint tenants, Gurpreet Sidhu and Mandeep Sidhu, joint tenants, Cruz Soto, Rafael Sanchez and Diana K. Villalobos Sanchez, joint tenants, Steven Lee Sharp Trust, Shoshone South Ltd, LLC, City of Thornton, Dorothy A. Nelson, Heirs or Devisees of Frances Hardaway, deceased, Shoshone South Ltd. Liability Company, Cornerstone Christian Academy, Riverdale Peaks II Metropolitan District, and Ladislav Larry Low.

 

6.         Any nonconsenting unleased owner shall be deemed to have a landowner's royalty, proportionate to each owner’s record title interest, of:

 

a.            for a gas well as defined in the Commission Regulations, 13% until the consenting owners recover, only out of each nonconsenting owner's proportionate 87% share of production, the costs specified in §34-60-116(7)(b), C.R.S.;

 

b.            for an oil well as defined in the Commission Regulations, 16% until the consenting owners recover, only out of each nonconsenting owner's proportionate 84% share of production, the costs specified in §34-60-116(7)(b), C.R.S.

 

After recovery of the costs specified in §34-60-116(7)(b), C.R.S., each unleased nonconsenting mineral owner owns its proportionate 8/8ths share of the Wells, surface facilities, and production, and is liable for its proportionate share of further costs as if the nonconsenting owner had originally agreed to the drilling.

 

7.         The operator of the Wells 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.

 

8.         A nonconsenting owner is immune from liability for costs arising from spills, releases, damage, or injury resulting from oil and gas operations on the drilling and spacing unit.

 

9.         The operator shall not use the surface owned by a nonconsenting owner without the nonconsenting owner’s permission.

 

10.       Nothing in this order is intended to conflict with §34-60-116, C.R.S. Any conflict that may arise shall be resolved in favor of the statute.

 

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 6th day of August, 2019, as of July 31, 2019

           

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By____________________________________

Mimi C. Larsen, Secretary