July 12, 2004

 

            The Oil and Gas Conservation Commission met on July 12, 2004 at 9:00 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for a hearing in Cause Nos. 1V (4 matters), 1, 112 (2 matters), and 510.

           

            Those present were:

 

                        Peter Mueller                           Chair

                        Brian Cree                               Vice Chair

                        John Ashby                              Commissioner

                        Tom Ann Casey                       Commissioner

                        Mike Klish                                Commissioner

                        Tom Reagan                            Commissioner

                        Lynn Shook                             Commissioner

                        Carol Harmon                          Assistant Attorney General

Brian Macke                             Acting Director

                        Patricia Beaver                                    Hearings Manager

                        Morris Bell                                Operations Manager

                       

            The Commission unanimously approved the minutes from the May hearing.

                       

            Executive Director’s Report:  Shane Henry, Department of Natural Resources (“DNR”) Assistant Executive Director - The Executive Director’s Office (“EDO”) will be working to fill the vacant Director’s position.  The job announcement will be posted today for a twenty day period.  Resumes will be reviewed to determine the candidates who will then be required to take a test.  EDO will want to have input from the Commissioners and possibly have their involvement in an oral board.  Bruce McCloskey is the new Department of Wildlife Director.  The bill proposing to transfer the Colorado Geological Survey to the Colorado School of Mines has resulted in the formation of a committee to study the move.  Many people are retiring from DNR; 2 budget analysts and several others from EDO.  The meetings to discuss Senator Isgar’s concerns about unleased mineral owners in drilling and spacing units have been put on hold due to the pending hearing matters addressing these issues before the Commission.

                               

Director’s Report:  Acting Director Macke provided a written report and discussed the following:  At least 2700 Applications for Permit-to-Drill (”APD”) are expected to be approved this year.  One-third of the APDs are in Weld County.  The next Northwest Oil and Gas Forum is on August 26, 2004.  Presentations were made at the May 27th Northwest Colorado Oil and Gas Forum by EnCana, Department of Energy (“DOE”), Presco and the Bureau of Land Management (“BLM”).  Operations Manager Morris Bell presented and discussed two graphs showing production of gas, oil, water and the number of wells from January 1980 to January 2004.  Acting Director Macke gave an update on the Mamm Creek gas seep.  The surface owner complainant, COGCC staff, and EnCana staff all believe the seep has diminished.  There has no benzene in the creek since late April.  Monthly water sampling has continued.  EnCana has continued to provide drinking water to those requesting it.  EnCana continues to evaluate the soil gas resurvey of the seep area. 

 

Commissioner Ashby would like a detailed account of how the seep occurred and how the circumstance will be prohibited in the future through operational means to be addressed at the August hearing.

 

There will be a presentation by Tony Gorody and Debbie Baldwin on Southwest Colorado later today. 

 

Acting Director Macke introduced the new COGCC employees; Wendy Schultz, budget analyst, Elaine Winick, permitting technician and Dennis Ahlstrand, permitting technician.  The Commissioners received a confidential packet on the Outstanding Operations Award nominations.  They will respond to the nominations by Wednesday, July 14, 2004.  Governor Owens has appointed Acting Director Macke as the official Interstate Oil and Gas Compact Commission (“IOGCC”) representative and Chair Mueller as the associate IOGCC representative.  The Environmental Protection Agency (“EPA”) finalized the study on hydraulic fracing into coalbed methane wells.  Chair Mueller would like an executive summary provided to the Local Governmental Designees so they will be aware of the study.  The EnCana matter will be the only one heard at the August hearing.  All other matters that are docketed for August will be continued to September if they are protested.  The Joint Colorado Oil and Gas Association (“COGA”) and Colorado Counties Inc. (“CCI”) Gathering Line Regulation Workgroup has fallen by the wayside.  There were several budget requests, including the completion of the indexing project, a supplemental budget request for a permit technician, additional funds and one additional office vehicle, and a request to move some funds to another budget line.  The 2005-2006 budget requests were also described.  The COGCC will be staying at The Chancery Building for the next two years but will again have to start the building search approximately a year and a half from now.  There is a MEGA Board meeting on Thursday to discuss budget issues.  Hearings Manager Beaver presented a progress report on Rocky Mountain Operating Company.

 

Assistant Attorney General’s Report:  AAG Harmon provided a written confidential litigation memo.  The court certified the Motion on Summary Judgment as final in the Gunnison County vs. BDS case, which can now go up for appeal.  The St. Vrain Record was filed on July 9th with the court.  An email was sent to the Commissioners regarding conflicts counsel that will advise the Commissioners at the August Order Finding Violation hearing and AAG Harmon will advise COGCC staff.  AAG Harmon discussed her IOGCC participation in a recent conference call.

 

Commissioner Comments:  Commissioner Reagan commented on the number of items appearing on the docket in which operators have violated COGCC rules.  Operations Manager Bell indicated it is more of a problem due to the high activity level.  Chair Mueller thanked AAG Harmon and Hearings Manager Beaver for meeting with the Town of Frederick on its inspection practices.

 

Audience Comments:  Ken Wonstolen, COGA, discussed the amount of media coverage regarding oil and gas activity.  He described several emerging issues such as split estates and local regulation.  He suggested press releases be sent out by the COGCC regarding some of the activity graphs.  There has been positive press on the EPA hydraulic fracing report.  July 31st is the COGA summer board meeting party at Joe Jagger’s house in Evergreen.  All of the Commissioners have been invited to the COGA/RMS-AAPG Conference.  Fraudulent reporting is subject to criminal penalties.  COGA’s general belief is that no Commissioner should attend either prehearing conferences or administrative hearings unless there are a number of procedural issues that need to be ruled on, in which case the Chair or Vice Chair should preside.  The federal rulemaking on pipeline regulation should be final by the end of the year and once this is done, the Commission may want to look at establishing rules for areas not regulated by the federal government.  COGA may recommend adopting a proposal made during the COGA/CCI workgroup for the Commissioners’ or COGCC staff’s consideration.  Garfield County’s Board of Commissioners may be considering pipeline regulations in September.  Oil and gas operators are installing enclosed flares in the Wattenberg Field to address ozone levels.  Hearings Manager Beaver thanked Mr. Wonstolen and COGA for sending two email reminders to oil and gas operators regarding LGD participation. 

 

Mike Wozniak, attorney – Mr. Wozniak agrees with COGA from an industry perspective on Commissioner participation at prehearing conferences.  He stated that many of the farmers and ranchers on his oil and gas clients’ minerals are objecting to the installation of enclosed flares because of the visual impacts.  He has three clients who have received invoices with delinquent charges for inspection fees from the Town of Frederick.

 

The presentation by Tony Gorody and COGCC Environmental Protection Specialist Debbie Baldwin showed that ground water has been sampled both before and after the increased density orders in the San Juan Basin were approved by the Commission.  Drilling of additional wells has had no detectable impact on the dissolved methane concentrations found in ground water in the San Juan Basin of Colorado.  The presentation will be placed on the COGCC website and will be given at the GORT meeting in August.

 

COGCC staff member David Dillon discussed the state statute on noise and the current COGCC regulations.  He presented Evergreen’s letter to COGCC Field Engineer John Duran.  Richard Parry’s noise complaint was also discussed.  Ken Wonstolen of COGA stated that the noise statute is a nuisance statute and COGCC enforcement comes from the public health, safety and welfare provision of COGCC regulations.  Mr. Wonstolen believes the regulations may be amendable to residential standard where a residence is located.  The COGCC staff will prepare a policy for the Commission to review at the September hearing at the earliest.

 

Cause No. 1, Docket No. 0302-UP-01, request to respond to the pending motions to dismiss the previously filed pooling application and discovery requests for the University 9-1 Well was continued to the August hearing.

 

Cause No. 112, Docket No. 0407-UP-04, request for an order to pool all non-consenting owners in the E½ of Section 9, Township 34 North, Range 9 West, N.M.P.M. for the University 9-1 Well was continued to the August hearing.

 

Cause No. 1, Docket No. 0407-EX-03, request for an order allowing an exception to the permitted location for the Duncan #B-14 Well to be located at a proposed location of 1531' FNL and 1167' FEL in Section 20, Township 12 North, Range 100 West, 6th P.M. was continued to the August hearing.

 

            Cause No. 112, Docket No. 0407-AW-06, request for an order allowing a second well to be completed in the 320-acre drilling and spacing units consisting of the W½ of Sections 6 and 7, Township 33 North, Range 6 West, N.M.P.M. at the discretion of the operator, with the permitted well to be located in the center of the quarter section with a tolerance of 200 feet in any direction was continued to the August hearing.

 

            Cause No. 334, Docket No. 0407-EX-05, request for an order allowing an exception to the permitted location for the Meyers 14-32 Well to be located at a proposed location of 995' FSL and 450' FWL in Section 32, Township 10 North, Range 93 West, 6th P.M. was continued to the August hearing.

 

            Cause No. 509, Docket No. 0407-SP-09, request to rescind the 320-acre drilling and spacing units in Sections 25-28 and 33-36, Township 16 South, Range 46 West, 6th P.M. and to allow the lands to be developed pursuant to COGCC Rule 318. was continued to the August hearing.

 

Consent Agenda:  The Commission unanimously approved all matters on the consent agenda, which included the following:

 

Cause No. 112, Docket No. 0407-GA-03, request for an order establishing that the existing permit for the Payne No. 1 Well located in the NW¼ NE¼ of Section 17, Township 32 North, Range 6 West, N.M.P.M. be clarified to authorize the operator to utilize the appropriate artificial lift device which will maximize the economic and efficient production from the Payne No. 1 Well and to conduct its operations without buried electrical lines provided it is in compliance with existing Commission sound regulations.

 

Cause No. 112, Docket No. 0407-GA-04, request for an order to eliminate the production caps for certain Fruitland coal seam wells located in certain sections of Townships 33 and 34 North, Ranges 8 and 9 West, N.M.P.M. so that the wells may produce in accordance with their capacity.

 

Cause No. 510, Docket No. 0407-SP-10, request for an order to increase well density, the equivalent of 1 well per 10 acres, and change existing well setbacks in Rule 318.a. that apply to certain lands in Townships 6 and 7 South, Ranges 96 and 97 West, 6th P.M., to allow wells to be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries, with no more than 1 multi-wellsite per governmental quarter-quarter section for production of gas and associated hydrocarbons from the Williams Fork Formation.

 

Cause No. 1, Docket No. 0407-EX-04, request for an order to amend the setback requirements of Rule 318.a. that apply to Sections 8, 17 and 20, Township 7 South, Range 92 West, 6th P.M. to allow wells drilled deeper than 2,500 feet to be located no closer than 600 feet from the outer section lines with no more than 1 multi-wellsite per governmental quarter-quarter section for production of oil, gas and associated hydrocarbons from the Mesaverde Group.

 

Cause No. 1V, Docket No. 0407-OV-23, request for an Administrative Order by Consent finding Petroleum Development Corporation in violation of Rules 301., 303.b. and §34-60-117.(1) of the Oil and Gas Conservation Act, failure to provide written notice of intention to do work, to have an approved Application for Permit-to-Drill or Application for Permit to Recomplete to the Codell Formation and to protect correlative rights of all owners in every field or pool and assessing a fine of five thousand dollars.

 

Cause No. 1V, Docket No. 0407-OV-24, request for an Administrative Order by Consent finding EnCana Oil and Gas (USA) Inc. in violation of Rule 303.b., failure to have an approved Application for Permit to Recomplete to the Williams Fork Formation and assessing a fine of ten thousand dollars.

 

Cause No. 1V, Docket No. 0407-OV-25, request for an Administrative Order by Consent finding Williams Production RMT Company in violation of Rules 317.a., 327., Order No. 139-38 and the Notice attached to the Application for Permit-to-Drill, failure to keep the PA 324-33 Well under control at all times during the drilling process, to comply with Order No. 139-38 and to notify staff of the lost circulation zones and gas kicks and assessing a fine of thirty thousand dollars.

 

Cause No. 1V, Docket No. 0407-OV-26, request for an Administrative Order by Consent finding EnCana Energy Resources Inc. in violation of Rules 301., 318A.a. and 318.c., failure to obtain Commission approval for change of surface hole location and failure to obtain Commission approval for change of bottom hole location, failure to located the Well in accordance with the Greater Wattenberg Area well location setback rules and failure to obtain a location exception for the Bangert #31-19 Well located in the NE¼ NE¼ of Section 19, Township 2 North, Range 66 West, 6th P.M. and assessing a fine of twenty thousand dollars.

 

The meeting adjourned at 2:05 p.m.

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            The Secretary was therefore authorized to issue the following orders:

 

Order No. 1-106, Garfield County:  Approves the request by EnCana Oil & Gas (USA) Inc. for an order to amend the setback requirements of Rule 318.a. that apply to Sections 8, 17 and 20, Township 7 South, Range 92 West, 6th P.M. to allow wells drilled deeper than 2,500 feet to be located no closer than 600 feet from the outer section lines with no more than 1 multi-wellsite per governmental quarter-quarter section for production of oil, gas and associated hydrocarbons from the Mesaverde Group.

 

Order No. 112-174, Ignacio-Blanco Field, La Plata County:  Approves the request by McElvain Oil & Gas Properties, Inc. for an order establishing that the existing permit for the Payne No. 1 Well located in the NW¼ NE¼ of Section 17, Township 32 North, Range 6 West, N.M.P.M. be clarified to authorize the operator to utilize the appropriate artificial lift device which will maximize the economic and efficient production from the Payne No. 1 Well and to conduct its operations without buried electrical lines provided it is in compliance with existing Commission sound regulations.

 

Order No. 112-175, Ignacio-Blanco Field, La Plata County:  Approves the request by BP America Production Co. for an order to eliminate the production caps for certain Fruitland coal seam wells located in certain sections of Townships 33 and 34 North, Ranges 8 and 9 West, N.M.P.M. so that the wells may produce in accordance with their capacity.

 

Order No. 510-11, Rulison Field, Garfield County:  Approves the request by Petroleum Development Corporation for an order to increase well density, the equivalent of 1 well per 10 acres, and change existing well setbacks in Rule 318.a. that apply to certain lands in Townships 6 and 7 South, Ranges 96 and 97 West, 6th P.M., to allow wells to be located downhole anywhere in the drilling and spacing unit but no closer than 100 feet from the boundaries, with no more than 1 multi-wellsite per governmental quarter-quarter section for production of gas and associated hydrocarbons from the Williams Fork Formation.

 

Order No. 1V-272, Weld County:  Approves the Administrative Order by Consent finding Petroleum Development Corporation in violation of Rules 301., 303.b. and §34-60-117.(1) of the Oil and Gas Conservation Act, failure to provide written notice of intention to do work, to have an approved Application for Permit-to-Drill or Application for Permit to Recomplete to the Codell Formation and to protect correlative rights of all owners in every field or pool, and assesses a fine of Five Thousand ($5,000) dollars.

 

Order No. 1V-273, Rio Blanco County:  Approves the Administrative Order by Consent finding EnCana Oil and Gas (USA) Inc. in violation of Rule 303.b., failure to have an approved Application for Permit to Recomplete to the Williams Fork Formation, and assesses a fine of Ten Thousand ($10,000) dollars.

 

Order No. 1V-274, Garfield County:  Approves the Administrative Order by Consent finding Williams Production RMT Company in violation of Rules 317.a., 327., Order No. 139-38 and the Notice attached to the Application for Permit-to-Drill, failure to keep the PA 324-33 Well under control at all times during the drilling process, to comply with Order No. 139-38 and to notify staff of the lost circulation zones and gas kicks, and assesses a fine of Thirty Thousand ($30,000) dollars.

 

Order No. 1V-273, Rio Blanco County:  Approves the Administrative Order by Consent finding EnCana Energy Resources Inc. in violation of Rules 301., 318A.a. and 318.c., failure to obtain Commission approval for change of surface hole location and failure to obtain Commission approval for change of bottom hole location, failure to located the Well in accordance with the Greater Wattenberg Area well location setback rules and failure to obtain a location exception for the Bangert #31-19 Well located in the NE¼ NE¼ of Section 19, Township 2 North, Range 66 West, 6th P.M., and assesses a fine of Twenty Thousand ($20,000) dollars.

 

 

 

 

_________________________________

                                                                                                            Patricia C. Beaver, Secretary

 

Approved:

 

 

__________________________________

            Peter M. Mueller, Chair