BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF
IN THE
MATTER OF THE PROMULGATION AND ) CAUSE
NO. 139
ESTABLISHMENT
OF FIELD RULES TO GOVERN )
OPERATIONS
IN THE
TO ALL
INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:
On
Township 7 South, Range 92 West, 6th P.M.
Sections 4 through 6: All
Township 7 South, Range 92 West, 6th P.M.
Sections 1 through 4: All
Township 6 South, Range 92 West, 6th P.M.
Sections 31 and 32: All
Section 33: N½, SE¼
Township 6 South, Range 93 West 6th P.M.
Sections 33 through 36: All
Grass
Mesa Unit and Hunter Mesa Unit share a common boundary extending from the northwest
corner of Section 4, Township 7 South, Range 93 West, 6th P.M. to
the northeast corner of Section 4, Township 7 South, Range 92 West, 6th
P.M. (the “Common Unit Boundary”). All
lands north of this boundary, except the southwest of Section 33, Township 6
South, Range 92 West, 6th P.M. are committed to the Grass Mesa
Unit. All lands south of this boundary
are committed to the Hunter Mesa Unit.
EnCana
Oil & Gas (USA) Inc. has drilled, completed and currently operates multiple
wells in both Hunter Mesa Unit and Grass Mesa Unit (the “Unit(s)”). Wells in both Units produce oil, gas and
associated hydrocarbons from the Mesaverde Formation, which is the unitized
formation for both Units and is located at depths of greater than 2500 feet
throughout both Units. Under the terms
of both unit agreements, EnCana is obligated to produce unitized substances in
the most economic and efficient manner, without waste. Information obtained from current and past
operations in both Units indicated the most economic and efficient development
of gas from the Mesaverde Formation in both Units requires wells to be located
less than 1200 feet from an adjacent well producing from the same
formation.
Colorado
Oil & Gas Conservation Commission (“Commission”) Rule 318.d.(3) provides
that no well in excess of 2,500 feet in depth shall be located less than 600
feet from the exterior boundary of a federal unit unless authorized by the
Commission after notice to owners outside the federal unit area.
On
EnCana proposes two (2) alternate
requests regarding the exception locations.
EnCana requests that the Commission approve both alternatives. In the first alternative, to protect
correlative rights, EnCana proposes establishing a communitized area pursuant
to 43 C.F.R. §3105.2-2 consisting of all land within both Units located within
330 feet of the Common Unit Boundary.
Wells within the communitized area would be drilled only on lands
included in a Unit participating area prior to the time the well is
drilled. No production would be
allocated from wells drilled in the communitized area until the communitization
agreement is approved by the BLM. Once
approved by the BLM, all production from the communitized area would be
allocated 50% to Hunter Mesa Unit and 50% to Grass Mesa Unit. All Unit wells would be drilled in compliance
with Unit plans of development after consideration of reservoir drainage, well
performance and other reservoir engineering factors. Each well would be drilled in conformity with
a well spacing program approved by the BLM at a surveyed well location in
accordance with 43 C.F.R. §3162.3-1. After
considering the location of existing wells in both Units approximately 600 feet
from the Common Unit Boundary, EnCana believes use of a communitization
agreement would provide for the most efficient and economic recovery of oil,
gas and associated substances, would not be prejudicial to any party, and would
most effectively prevent waste and protect the correlative rights of all
parties.
In the second alternative, to protect
correlative rights, EnCana proposes the Commission allow the BLM to determine
the proper locations of each well adjacent to the Common Unit Boundary, either
(1) by establishing the minimum distance which each well must be located from
the Common Unit Boundary and allocating production from each well to the Unit
in which it is located, or (2) by permitting wells on the Common Unit Boundary
and allocating production from the boundary wells between the Units. All Unit wells would be drilled in compliance
with a Unit plan of development approved by the BLM after consideration of
reservoir drainage, well performance and other reservoir engineering
factors. Each well would be drilled in
conformity with a well spacing program approved by the BLM at a surveyed well
location in accordance with 43 C.F.R. §3162.3-1. Discussions with BLM officials indicate that
setbacks of 200 to 300 feet may be acceptable to BLM. EnCana’s analysis at this time indicates
that, because existing wells are located approximately 600 feet from the Common
Unit Boundary, setbacks of 200 to 300 feet may not allow for an optimum well
spacing pattern, may cause waste and may not allow the most efficient and
economic recovery of oil, gas and associated substances. EnCana recognizes, however, that terms of
August 22, 1991 Memorandum of Understanding between the BLM and the Commission
require the Commission to incorporate conditions of any BLM protest in a
Commission order insofar as it relates to federal lands.
EnCana believes that entering an
order approving the exception locations requested in this Application would (1)
not be prejudicial to lessees, mineral interest owners or royalty owners; (2)
maintain and protect the correlative rights of all parties; (3) prevent or
assist in preventing waste; (4) not result in an owner obtaining more than its
just and equitable share of production; and (5) ensure that gas and associated
hydrocarbons from the Mesaverde Formation are efficiently and economically
developed.
NOTICE
IS HEREBY GIVEN, that the Oil and Gas Conservation Commission of the State of
Date:
Time:
Place:
In
accordance with the Americans with Disabilities Act, if any party requires
special accommodations as a result of a disability for this hearing, please
contact
Pursuant
to said hearing in the above-entitled matter at the time and place aforesaid,
or at any adjourned meeting, the Commission will enter such orders as it deems
appropriate and necessary to protect the health, safety and welfare of the
public and to prevent the waste of oil and gas, either or both, in the
operations of said field, and to carry out the purposes of the statute.
In accordance with Rule 509., any
interested party desiring to protest the granting of the application or to
intervene should file with the Commission a written protest or a notice to
intervene no later than
IN THE NAME OF
THE STATE OF
OIL
AND GAS CONSERVATION COMMISSION
OF THE STATE OF
By_________________________________
Patricia C. Beaver, Secretary
Dated at
December 5,