BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND                        )                       CAUSE NO. 139

ESTABLISHMENT OF FIELD RULES TO GOVERN                     )                      

OPERATIONS IN THE HUNTER MESA AND GRASS                  )                       DOCKET NO. 0401-EX-02

MESA FEDERAL UNITS, GARFIELD COUNTY,   COLORADO     )                      

                                                                       

NOTICE OF HEARING

 

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

 

            On November 30, 1993, the Bureau of Land Management (“BLM”) approved the Hunter Mesa Unit as a federal exploratory unit and the below-listed lands are a portion of the lands that fall within the Hunter Mesa Unit:

 

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

 

            April 28, 1994, the BLM approved the Grass Mesa Unit as a federal exploratory unit and the below-listed lands are a portion of the lands that fall within the Grass Mesa Unit:

 

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.  Wells located 1200 feet or more apart will leave significant amounts of gas in the ground, resulting in waste.

 

            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 November 17, 2003, EnCana Oil & Gas (USA) Inc. (“EnCana”), by its attorney, filed with the Commission a verified application for an order to allow wells in the Grass Mesa Unit and the Hunter Mesa Unit be drilled such that surface and bottom hole locations of each well are located less than 600 feet from the common boundary between the two Units, as exceptions to Commission Rule 318.d.(3), so long as surface and bottom hole locations of each well are 600 feet or more from any lands not included in either Unit.  EnCana further requests the Commission allow surface and bottom hole locations of wells within either Unit and adjacent to the Common Unit Boundary to be located less than 600 feet from lands not included in either Unit, as exceptions to Commission Rule 318.d.(3), provided a waiver or consent is obtained in accordance with Commission Rule 318.c. only from the operator of contiguous or cornering drilling unit of unspaced offset lease outside either Unit toward whom the well is proposed to be moved.  If the operator of the proposed well is the same as the operator of the drilling unit or unspaced offset lease toward which the well is proposed to be moved, waivers must be obtained from the mineral interest owners under such drilling unit or unspaced offset lease; however, no waiver or consent shall be required from lease owners or mineral owners who own interests within either Unit.

 

            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 Colorado, pursuant to the above, has scheduled the above-entitled matter for hearing on:

 

                        Date:                                        Monday, January 5, 2004

 

                        Time:                                        10:00 a.m.

 

                        Place:                                       Suite 801, The Chancery Building

                                                                        1120 Lincoln Street

                                                                        Denver, CO 80203

 

            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 Audra Serlet at (303) 894-2100 ext. 114, prior to the hearing and arrangements will be made.

 

            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 December 22, 2003, briefly stating the basis of the protest or intervention.  Such interested party shall, at the same time, serve a copy of the protest or notice to intervene to the person filing the application.  An original and nine (9) copies shall be filed with the Commission.  Pursuant to Rule 503.e., if a party who has received notice under Rule 503.b. wishes to receive further pleadings in the above-referenced matter, that party must file a protest or intervention in accordance with these rules.  In accordance with the practices of the Commission, should no protests or interventions be filed in this matter by December 22, 2003, the Applicant may request that an administrative hearing be scheduled for the week of December 29, 2003.

                                                                                                                                            

 

                        IN THE NAME OF THE STATE OF COLORADO

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                               OF THE STATE OF COLORADO

 

 

 

                                                                                    By_________________________________

                                                                                                  Patricia C. Beaver, Secretary

 

Dated at Suite 801                                                         Attorney for Applicant:

1120 Lincoln Street                                                        Stephen J. Sullivan

Denver, Colorado 80203                                                Welborn, Sullivan, Meck & Tooley. P.C.

December 5, 2003                                                          821 17th Street, Suite 500

                                                                                    Denver, CO 80202

                                                                                    (303) 830-2500