BEFORE THE OIL AND GAS CONSERVATION
COMMISSION
OF THE STATE OF
IN THE
MATTER OF THE PROMULGATION AND ) CAUSE
NO. 300
ESTABLISHMENT
OF FIELD RULES TO GOVERN )
OPERATIONS
IN THE BEECHER ISLAND FIELD, ) ORDER NO. 300-8
This cause came on for
hearing before the Commission at 10:00 a.m. on March 15, 2004 in Suite 801, The
Chancery Building, 1120 Lincoln Street, Denver, Colorado on the verified
application of Petroleum Development Corporation for an order to allow up to a
total of four (4) wells to be drilled within each 160-acre drilling and spacing
unit for certain lands for the production of gas and associated hydrocarbons
from the Niobrara Formation, at the option of the operator, with the permitted
location to be anywhere within the drilling and spacing unit upon which it is
drilled provided it is located no closer than 560 feet from the outer
boundaries of the unit.
The Commission finds as
follows:
1. Petroleum Development Corporation (“PDC”), 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.
5. On November 4, 1996, the Commission issued
Order No. 300-7, which allowed an additional well to be drilled on each
160-acre drilling and spacing unit in the Beecher Island Field, at the option
of the operator, for the production of gas and associated hydrocarbons from the
Niobrara Formation, with the subsequent permitted well to be located no closer
than 560 feet from the outer boundaries of said 160-acre drilling and spacing
unit. The order also allowed the
Director to grant exceptions to the permitted well locations without prior
notice or hearing upon an adequate showing by the operator that topography
makes it unreasonable to drill a second well within the 560 feet setback, but
no closer than 380 feet from the boundary of the drilling and spacing unit and
requests for any other exception location may be granted in accordance with
Rule 318.
6. On December 22, 2003, Petroleum Development
Corporation (“PDC”), by its attorney, filed
with the Commission a verified application for an order to allow up to a
total of four (4) wells to be drilled within each 160-acre drilling and spacing
unit for the below-listed lands for the production of gas and associated
hydrocarbons from the Niobrara Formation, at the option of the operator, with
the permitted location to be anywhere within the drilling and spacing unit upon
which it is drilled provided it is located no closer than 560 feet from the
outer boundaries of the unit. In
addition, PDC requested that the Director be allowed to grant an exception to
the permitted well location without prior notice or hearing upon an adequate
showing by the operator that topography makes it unreasonable to drill any
additional well within a 560 foot setback, but no closer than 380 feet from the
boundary of the drilling and spacing unit and requests that any other exception
location may be granted in accordance with Rule 318.
Township 2 South, Range 43 West, 6th P.M.
Section 6:
E½
Sections 7 through 10: All
Section 15:
All
Sections 17 and 18: All
Section 22:
All
Section 27:
All
Sections 32 and 33: All
Township 2 South, Range 44 West, 6th P.M.
Section 13:
NE¼
Sections 24 and 25: All
Section 36:
W½
Township 3 South, Range 43 West, 6th P.M.
Section 5:
All
7. At the time of the administrative hearing,
PDC amended its application to include the same provision in its application as
in the Mountain Petroleum Corporation application to allow no more than one
well productive from the Niobrara Formation to be drilled in any governmental
quarter-quarter section or, for irregular sections, the survey lot
equivalent. With respect to any existing
productive Niobrara Formation wells having a surface location in the boundary
between two 40-acre tracts, between two survey lots, or between a survey lot
and a 40-acre tract, the operator of such well should designate the 40-acre
tract or survey lot equivalent for which such well should be the permitted
well.
8. Testimony and exhibits presented at the
administrative hearing showed the outline of the application lands, which
consists of approximately 15 sections in the Beecher Island Field in
9. Testimony and exhibits presented at the
administrative hearing indicated that the application lands are located in the
10. Testimony and exhibits presented at the
administrative hearing showed the relative position of the
11. Testimony and exhibits presented at the
administrative hearing showed the current cumulative production, the estimated
ultimate recovery and the original gas in place for wells in the application
area. Additional testimony indicated that the average well in the application
area drains 46 acres and that two (2) additional wells in each 160-acre
drilling and spacing unit would recover an additional 359 MMCF of reserves.
12. Testimony presented at the administrative
hearing indicated additional wells would be economic and have rates of return
in excess of 25%.
13. At the time of the administrative hearing, Petroleum
Development Corporation agreed to be
bound by oral order of the Commission.
14. Based upon the facts stated in the verified
application, and having been heard by the Hearing Officers who recommended
approval, the Commission should enter an order to allow up to a total of four (4) wells to be drilled within
each 160-acre drilling and spacing unit for the lands described in Finding No.
6 above for the production of gas and associated hydrocarbons from the Niobrara
Formation, at the option of the operator, with the permitted location to be
anywhere within the drilling and spacing unit upon which it is drilled provided
it is located no closer than 560 feet from the outer boundaries of the
unit. In addition, the Director should
be allowed to grant an exception to the permitted well location without prior
notice or hearing upon an adequate showing by the operator that topography
makes it unreasonable to drill any additional well within a 560 foot setback,
but no closer than 380 feet from the boundary of the drilling and spacing unit
and requests for any other exception location may be granted in accordance with
Rule 318.
NOW, THEREFORE, IT IS
ORDERED, that a total of four
(4) wells are hereby allowed to
be drilled within each 160-acre
drilling and spacing unit for the below-listed lands for the production of gas
and associated hydrocarbons from the Niobrara Formation, at the option of the
operator, with the permitted location to be anywhere within the drilling and
spacing unit upon which it is drilled provided it is located no closer than 560
feet from the outer boundaries of the unit:
Township 2 South, Range 43 West, 6th P.M.
Section 6:
E½
Sections 7 through 10: All
Section 15:
All
Sections 17 and 18: All
Section 22:
All
Section 27:
All
Sections 32 and 33: All
Township 2 South, Range 44 West, 6th P.M.
Section 13:
NE¼
Sections 24 and 25: All
Section 36:
W½
Township 3 South, Range 43 West, 6th P.M.
Section 5:
All
IT IS FURTHER ORDERED, that no more than one well productive from the
Niobrara Formation shall be drilled in any governmental quarter-quarter section
or, for irregular sections, the survey lot equivalent. With respect to any existing productive
Niobrara Formation wells having a surface location in the boundary between two
40-acre tracts, between two survey lots, or between a survey lot and a 40-acre
tract, the operator of such well shall designate the 40-acre tract or survey
lot equivalent for which such well shall be the permitted well.
IT IS FURTHER ORDERED, the Director shall be allowed to grant an
exception to the permitted well location without prior notice or hearing upon
an adequate showing by the operator that topography makes it unreasonable to
drill any additional well within a 560 foot setback, but no closer than 380
feet from the boundary of the drilling and spacing unit and any other exception
location shall be granted in accordance with Rule 318.
IT IS FURTHER ORDERED, that the provisions
contained in the above order shall become effective forthwith.
IT
IS FURTHER ORDERED, that the Commission expressly reserves its right, after notice
and hearing, to alter, amend or repeal any and/or all of the above orders.
IT
IS FURTHER ORDERED, that under the State Administrative Procedure Act the
Commission considers this order to be final agency action for purposes of
judicial review within thirty (30) days after the date this order is mailed by
the Commission.
IT
IS FURTHER ORDERED, that an application for reconsideration by the Commission
of this order is not required prior to the filing for judicial review.
ENTERED this 25th day of March, 2004, as of
CORRECTED this day of March, 2004, as of
OIL
AND GAS CONSERVATION COMMISSION
OF
THE STATE OF
By:
_____________________________
Patricia
C. Beaver, Secretary
Dated at