BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER THE PROMULGATION AND                                     )                    CAUSE NO. 489

ESTABLISHMENT OF FIELD RULES TO GOVERN                           )

OPERATIONS IN THE BUFFALO GRASS FIELD,                              )                    ORDER NO. 489-6

YUMA COUNTY, COLORADO                                                             )

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission on June 3, 2003 at 10:00 a.m. in the Conference Center, Holiday Inn Express,  2121 E. 2nd Ave, Cortez, Colorado for an order to allow up to two (2) additional wells to be drilled on the 160-acre drilling and spacing units for certain lands in the Buffalo Grass Field, for production of gas and associated hydrocarbons from the Niobrara Formation, with the additional well or wells to be located on any undrilled quarter-quarter section within the spacing unit and any wells drilled subsequent to the issuance of the order to be located no closer than 560 feet from the outer boundaries of the spacing unit.

 

FINDINGS

 

The Commission finds as follows:

 

1.  J-W Operating Company, 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.

 

            4.  On February 4, 1991, the Commission issued Order No. 489-1 establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Niobrara Formation for the below-listed lands, with the permitted well to located no closer than 900 feet from the boundaries of the drilling unit, with a tolerance of one hundred (100) feet in any direction.  In addition, any wells that were producing or capable of producing were designated as the permitted well for the unit upon which each well was located.

 

Township 4 North, Range 47 West, 6th P.M.

Sections 22 and 23: All

Sections 26 and 27: All

Sections 34 and 35: All

 

5.  On May 7, 1999, the Commission issued Order No. 489-5 which amended Order No. 489-1 to allow one (1) additional well to be drilled on each 160-acre drilling and spacing unit at the option of the operator for the production of gas and associated hydrocarbons from the Niobrara Formation, with subsequent wells to be located no closer than 560 feet from the outer boundaries of the spacing unit.

 

6. On April 11, 2003, J-W Operating Company, by its attorney, filed with the Commission a verified application for an order to allow up to two (2) additional wells to be drilled on the 160-acre drilling and spacing units for the lands described above in Finding No. 4, for production of gas and associated hydrocarbons from the Niobrara Formation, with the additional well or wells to be located on any undrilled quarter-quarter section within the spacing unit and any wells drilled subsequent to the issuance of the order to be located no closer than 560 feet from the outer boundaries of the spacing unit. 

 

7.  Testimony and exhibits presented at the administrative hearing indicated that J-W Operating has most of the application lands under lease and that the notice requirement in Rule 507 has been met. 

 

8.  Testimony and exhibits presented at the administrative hearing show the Beecher Island member of the Niobrara Formation under the application lands is approximately 28 feet thick with an average porosity of 34%.  Additional testimony showed that the average estimated ultimate recoveries are 253 million cubic feet of gas.  Further testimony indicated that the average original gas in place for eighty (80) acres is 774 million cubic feet of gas, with an average ultimate recovery of 33% and an average drainage of thirty-three (33) acres.  In addition, testimony showed that the drilling of additional wells will be economic with a gas price of $3.50 MCF, a 45% rate of return and a 1.9 year payout.

 

9.  Testimony and exhibits presented at the administrative hearing showed the production curves used to determine the ultimate recoveries of the wells in the Buffalo Grass Field.  Testimony indicated that additional wells are necessary to recover remaining reserves and to prevent waste while protecting correlative rights of mineral owners.

 

10.  At the time of the administrative hearing, J-W Operating Company agreed to be bound by an oral order of the Commission.

 

11.  Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should approve an order to allow up to two (2) additional wells to be drilled on the 160-acre drilling and spacing units for the lands described in Finding No. 4, for production of gas and associated hydrocarbons from the Niobrara Formation, with the additional well or wells to be located on any undrilled quarter-quarter section within the spacing unit and any wells drilled subsequent to the issuance of the order to be located no closer than 560 feet from the outer boundaries of the spacing unit.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that Order No. 489-5 shall be amended to allow up to two (2) additional wells to be drilled on the 160-acre drilling and spacing units for the below-listed lands for production of gas and associated hydrocarbons from the Niobrara Formation, with the additional well or wells to be located on any undrilled quarter-quarter section within the spacing unit and any wells drilled subsequent to the issuance of the order to be located no closer than 560 feet from the outer boundaries of the spacing unit:

 

Township 4 North, Range 47 West, 6th P.M.

Sections 22 and 23: All

Section 26 and 27: All

Section 34 and 35: All

 

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.

 

ENTERED this                  day of June 2003, as of June 3, 2003.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                           OF THE STATE OF COLORADO

 

 

                                                                                    By        _______________________ 

                                                                                                Patricia C. Beaver, Secretary

 

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

June 4, 2003