BEFORE THE OIL & GAS CONSERVATION COMMISSION

                                                  OF THE STATE OF COLORADO

 

 

IN THE MATTER OF THE APPLICATION OF CDX GAS, LLC REQUESTING THE FOLLOWING ORDER:  PARTIALLY VACATING AN EXISTING SPACING ORDER; ESTABLISHING A NEW SPACING ORDER IN LIEU THEREOF; ALLOWING AN EXCEPTION LOCATION FOR A HORIZONTAL WELL IN A NEWLY ESTABLISHED DRILLING AND SPACING UNIT; AND COMPULSORILY POOLING A NON-CONSENTING OWNER WITHIN SUCH UNIT COVERING THE FRUITLAND COAL SEAM FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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            CAUSE NO. 112

 

            Docket No. _________

 

 

 APPLICATION

            COMES NOW CDX Gas, LLC, by its attorneys Dorsey & Whitney LLP, and makes application to the Oil and Gas Conservation Commission of the State of Colorado, for an order partially vacating an existing spacing order, establishing a new spacing order and drilling and spacing unit, allowing an exception location for a horizontal well system and compulsorily pooling a non-consenting owner in such newly established spacing unit, all relating to a proposed well system located in a drilling and spacing unit for the Fruitland Coal Seam formation.  In support thereof CDX Gas, LLC ("Applicant"), states and alleges as follows: 

            1.         That the Applicant is the owner of leasehold interests in La Plata County, Colorado, located within the area requested for spacing and for an exception location. 

            2.         That lands requested have heretofore been subject to spacing orders for production from the Fruitland Coal Seam Formation pursuant to, among other orders, Order No. 112-60 and 61.  Wells are to be located in the center of the NW/4 and the SE/4 of the section and no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line. 

            3.         Applicant proposes to drill a horizontal production well system as the designated well system for Sections 11 and 14, T34N, R6W, N.U.L., N.M.P.M., comprising of approximately 939 acres more, or less and that the established 320-acre unit(s) be vacated with respect to the lands described in Paragraph 4.  Applicant proposes that the horizontal well system be permitted to be completed and produce hydrocarbons from the Fruitland Coal formation no closer than 660 feet from the outer boundary of the sections and without regard to quarter section lines within Sections 11 and 14, and without regard to the shared section line between Sections 11 and 14. 

            4.         That the Applicant is requesting the right to drill a one location horizontal production well system (the Frahm 34-6-11 #1 and  #2 Wells) and one service well (the Frahm 34-6-11-#1X).  The production well system is expected to produce from the proposed drilling and spacing unit of approximately 939 acres for the Fruitland Coal Seam formation covering the following described lands in La Plata County, Colorado, to wit:

 

                        Township 34 North, Range 6 West, N.U.L., N.M.P.M.

                        Section 11:   All (640 acres)

                        Section 14:   All (299 acres, m/l)

            Applicant anticipates that the surface location for the proposed horizontal production well system will be located in the NW/4SW/4 of Section 11 and will include multiple horizontal production legs that extend no closer than 660 feet from the exterior boundaries of Sections 11 and 14 (except for the shared section line between Section 11 and Section 14).  The service well which will not produce hydrocarbons will also be located in the NW/4SW/4 of Section 11.

            5.         Applicant wishes to establish an approximately 939-acre spacing unit for the horizontal well system.  On other lands subject to Cause No. 112, Applicant has previously drilled two 320-acre spacing horizontal Fruitland wells, is in the process of commencing a 640-acre horizontal Fruitland test and believes that the proposed well system will economically and efficiently drain the Fruitland Coal reserves underlying the application lands, will protect correlative rights and will prevent waste.

            6.         Since a portion of the mineral interests underlying Sections 11 and 14 are owned by the Bureau of Land Management, Applicant will secure a communitization agreement such that the 939-acre unit will be developed as one and the correlative rights of all interest owners will be protected.  Applicant requests that Sections 11 and 14 be designated as one 939-acre spacing unit since Applicant’s evidence is that one horizontal well as proposed herein will economically and efficiently drain the Fruitland Coal resource from said Sections 11 and 14.

            7.         That allowing the proposed horizontal well and service well within the proposed spacing unit is expected to economically and efficiently drain the Fruitland Coal Seam formation and protect the correlative rights of all parties.  The drilling of unnecessary wells will be prevented and waste will therefore be avoided, all in accordance with the Colorado statutes and the rules and regulations of this Commission and the BLM. 

            8.         That granting of the relief requested in this Application will have no adverse impacts on the public health, safety, welfare or the environment, and, if successful, will significantly reduce surface impacts by avoiding a number of vertical wells which would be necessary to drain the Fruitland Coal reserves.

            9.         Applicant has requested waivers and consents from all owners of contiguous and cornering units toward which the proposed exception location would be moved.  While Applicant believes consents will be obtained, this Application is filed in the event not all of the consents are forthcoming in a timely manner.

            10.       Exhibit B contains a list of separate unleased mineral interest owner(s) who have refused to lease on competitive terms or otherwise participate in the drilling of the proposed horizontal well by bearing their proportionate share of the costs and risks of drilling and operating the wells or by executing a lease.  By the date of the hearing, more than 30 days will have elapsed since the tender of the offers to participate and to lease.

            11.       That in order to prevent waste, protect correlative rights and in the best interests of conservation, the unleased interest(s) should be pooled in the Fruitland Formation in accordance with Section 34-60-116, C.R.S.

            12.       Exhibit A attached hereto and made part hereof is the list of the names of "Owners" required to be notified in accordance with Commission Rules, including within the areas covered by this application.  To the best of Applicant's knowledge and belief, Exhibit A contains the names of all such Owners. 


            WHEREFORE, Applicant respectfully requests that this matter be set for hearing, that notice thereof be given as required by law and that upon such hearing this Commission enter its order: 

            A.        Vacating existing 320-acre spacing orders under Cause No. 112 insofar as it covers the subject lands described in Paragraph 4.

            B.         Establishing an approximately 939-acre spacing unit for Fruitland Coal production composed of T34N, R6W, N.U.L., NMPM, Section 11:  All, and Section 14:  All.

            C.        Establishing that one horizontal production well system and a service well may be completed to produce from the 939-acre drilling and spacing unit for oil and/or gas from the Fruitland Coal Seam formation underlying the lands set forth in Paragraph 4 with the service well not to produce hydrocarbons.  The surface location for the permitted wells shall be in the NW/4SW/4 of Section 11 and the horizontal production legs shall be no closer than 660 feet from the outer section lines of Sections 11 and 14 (except for the shared section line between Section 11 and Section 14).

            D.        Pooling all non-consenting owners as set forth on Exhibit B and that such owners be treated as non-consenting owners under Section 34-60-116, C.R.S.

            For such other findings and orders as the Commission may deem proper or advisable in the premises. 

            DATED this 1st day of March, 2004.   

 

Respectfully submitted,

 

CDX GAS, LLC

 

 

By:                                                                                    

Michael J. Wozniak

Dorsey & Whitney LLP

Attorneys for Applicant

370 17th Street, Suite 4700

Denver, Colorado 80202

(303) 629-3400

Applicants' Address:

 

1801 Broadway, Suite 1060

Denver, CO  80202

VERIFICATION

 

 

STATE OF COLORADO                   )

                                                            ) ss.

CITY AND COUNTY OF DENVER )

 

            Alvin R. Arlian, of lawful age, being first duly sworn upon oath, deposes and says that he is the Land Manager, Western Operations for CDX Gas, LLC and that he has read the foregoing Application and that the matters therein contained are true to the best of my knowledge, information and belief. 

 

 

                                                                        _________________________________

 

           

     Subscribed and sworn to before this ____ day of March, 2004. 

 

            Witness my hand and official seal.

            My commission expires: 

 

 

                                                                                    ______________________________

                                                                                    Notary Public


                                                                     EXHIBIT A

                                                          INTERESTED PARTIES

 

IN THE MATTER OF THE APPLICATION OF CDX GAS, LLC REQUESTING THE FOLLOWING ORDER:  PARTIALLY VACATING AN EXISTING SPACING ORDER; ESTABLISHING A NEW SPACING ORDER IN LIEU THEREOF; ALLOWING AN EXCEPTION LOCATION FOR A HORIZONTAL WELL IN A NEWLY ESTABLISHED DRILLING AND SPACING UNIT; AND COMPULSORILY POOLING A NON-CONSENTING OWNER WITHIN SUCH UNIT COVERING THE FRUITLAND COAL SEAM FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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            CAUSE NO. 112

 

            Docket No. _________

 

Department of the Interior

Bureau of Land Management

15 Burnett Court

Durango, CO  81301

 

Duane Spencer

Department of the Interior

Bureau of Land Management

2850 Youngfield

Lakewood, CO  80215

 

Walt Brown

USDA Forest Service

15 Burnett Court

Durango, CO  81301

 

LaPlata County Assessor

P. O. Box 3339

Durango, CO  81302

 

BP America Production Company

501 Westlake Park Blvd.

Houston, TX  77253-3092

 

Elm Ridge Exploration Company

12225 Greenville Avenue, Suite 950

Dallas, TX 75243-9362

 

EXOK Inc.

6410B N. Santa Fe

Oklahoma City, OK 73116-9120

 

James G. Fitzgerald and

Mary T. Fitzgerald

1028 County Road 525

Bayfield, CO  81122

 

Robert Blaisdell

11194 Hickory Road

College Station, TX 77845

 

 

 

Energen Resources Corporation

2198 Bloomfield Highway

Farmington, NM  87401

 

 

                                                                     EXHIBIT B

                                                    NON-CONSENTING PARTIES

 

IN THE MATTER OF THE APPLICATION OF CDX GAS, LLC REQUESTING THE FOLLOWING ORDER:  PARTIALLY VACATING AN EXISTING SPACING ORDER; ESTABLISHING A NEW SPACING ORDER IN LIEU THEREOF; ALLOWING AN EXCEPTION LOCATION FOR A HORIZONTAL WELL IN A NEWLY ESTABLISHED DRILLING AND SPACING UNIT; AND COMPULSORILY POOLING A NON-CONSENTING OWNER WITHIN SUCH UNIT COVERING THE FRUITLAND COAL SEAM FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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            CAUSE NO. 112

 

            Docket No. _________

 

 

 

James G. Fitzgerald

Mary T. Fitzgerald

1028 County Road 525

Bayfield, CO 81122