BEFORE THE OIL AND GAS
CONSERVATION COMMISSION
OF THE STATE OF
IN THE MATTER THE PROMULGATION AND ) CAUSE NO. 334
ESTABLISHMENT OF FIELD RULES TO
GOVERN )
OPERATIONS IN THE GREAT DIVIDE
FIELD, ) ORDER NO.
334-4
REPORT OF THE
COMMISSION
This cause came on for hearing before the Commission on
March 17, 2003 in the Birch Banquet Room, Ramada Inn & Suites, 124 W. 6th
St., Glenwood Springs, Colorado on the verified application of Tom Brown, Inc.
for an order to allow additional wells to be drilled on certain 320-acre
drilling and spacing units, for production of gas and associated hydrocarbons
from the Middle Lewis Formation, with the permitted well for all subsequent
wells to be located no closer than 990 feet from another well producing or
producible from the same formation.
FINDINGS
The
Commission finds as follows:
1.
Tom Brown, Inc. (“TBI”), 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
Township 9
North, Range 93 West, 6th P.M.
Sections 2
through 11: All
Sections 14
through 23: All
Township 10
North, Range 93 West, 6th P.M.
Sections 32
through 35: All
5. On
6. On
7. On January
31, 2003, Tom Brown, Inc., by its attorney, filed with the Commission a
verified application for an order to allow up to three (3) additional wells,
for a total of four (4) wells, to be drilled on the 320-acre drilling and
spacing units for the below-listed lands, for production of gas and associated
hydrocarbons from the Middle Lewis Formation, with the permitted well for all
subsequent wells to be located 600 feet from the boundaries of the unit and no
closer than 990 feet to another well producing or producible from the same
formation. In addition, the Applicant
requested that the Director be authorized, without additional notice and
hearing or consent, to grant an exception to the well location setbacks up to
and including 100 feet, but not beyond, to avoid archeological sites and for
topographic reasons.
Township 10 North, Range 93 West, 6th P.M.
Section 32: All
Section 33: N½
8. TBI requested an alternate order, should the
testimony and exhibits not support the granting of the original application,
providing (i) that, at the option of the operator, up to four (4) wells may be
drilled to and completed in the 320-acre drilling and spacing unit consisting
of the E½ of Section 32, Township 10 North, Range 93 West, 6th P.M.,
for production from the Middle Lewis Formation as a pilot project to gather
additional geological and engineering
9. Testimony and exhibits presented at the
administrative hearing provided background information on the Middle Lewis
Formation indicating that although the Middle Lewis Formation is continuous
across the application lands the individual sands are discontinuous across the
application lands. Further testimony
indicated that there is low recovery from the existing wells, that the drainage
areas are small and that the permeability is low. The evidence presented in the administrative
hearing supports the drilling of additional wells which will allow TBI to
gather more data in the area.
10. Testimony and exhibits presented at the
administrative hearing defined the location, topography and surface use of the
application lands. The application lands
are bordered by the federal Pilgrim Unit and that there is extreme topography
in portions of the application lands. Further
testimony showed that approximately 83% of the surface of the application lands
are fee and the remaining surface lands are federal. TBI has 46% of the working interests in the
application lands. Additional testimony
showed that TBI proposes to amend the permitted well location setbacks to
provide flexibility and allow a tolerance of 100 feet to avoid archeological
sites and for topographic reasons. Further
testimony showed that there is no surface occupancy on the application lands,
that TBI has a good relationship with the surface owners, and that no protests
to the application have been filed.
11. Testimony and exhibits presented at the
administrative hearing showed the application lands located within the
boundaries of the Great Divide Field, the boundaries of the federal Pilgrim
Unit and the wells producing from the Lewis Formation. Further testimony showed the various sands
within the Lewis Formation, including the Middle Lewis Formation and that both
wet and gas saturated sands are found in the Middle Lewis Formation. Additional testimony showed that the
depositional facies of the Lewis Formation is identical to that of the Lewis
Formation in the application lands and that the Lewis Formation is an
alternating series of fine-grained sandstones and thick impermeable shales, with
extremely compartmentalized sandstones due to stratigraphy. Lithology changes between the wells are due
to differences in sandstone development and porosity.
12. Testimony and exhibits presented at the
administrative hearing showed the wells on which Agarwal
Gardner analyses were performed. The
wells had poor reservoir rocks and poor stimulations which caused low gas
recoveries ranging from 2% to 12% in the Great Divide Field. Further testimony indicated that the wells
have an average drainage area of 43 acres. Additional testimony
showed that the model that was created is a close match to
the actual rate vs. time and the actual cum vs. time. These plots show that the model used is valid
for predicting the EUR, gas in place and drainage area of the existing wells.
13. Testimony and exhibits presented at the
administrative hearing showed the range of drainage areas from
17 acres to 85 acres in the Great Divide Field.
Further testimony indicated the estimated well life for one well on a
320-acre drilling and spacing unit ranges from 27 years to 71 years, and that
the long well lives are due to low permeability and poor completion
techniques. Due to the quality of the
well logs and other well data, some calculations may be even more conservative than
the calculations reflect. Additional testimony
indicated that in 2003 TBI plans to drill two (2) wells in the Great Divide
Field, complete the wells with fracture stimulation non-damaging fluid, gather
core pressure and production data, and analyze the data and well results to
determine future activity.
14.
Testimony and exhibits presented at the administrative hearing showed the
rate of return will be economic for wells drilled on 80-acre density. Further testimony indicated that up to four
(4) additional wells are necessary to recover remaining reserves in the Middle
Lewis Formation, that mineral owners’ correlative rights will be protected and
that waste will be prevented if additional wells are allowed. TBI should provide the Commission with initial
reservoir pressure data and production data analysis acquired from any new well
drilled in the application lands to evaluate the affects of increased well
density no later than
15.
A discussion was held regarding a telephone conversation between COGCC
Deputy Director Brian Macke and Wes McStay, a rancher involved with the Sage
Grouse Working Group. Mr. McStay
expressed concerns about how TBI’s application might affect the sage grouse
population. TBI proposed to the Hearing
Officers specific language to address these concerns to be included in any
order the Commission may enter. The
Hearing Officers agreed to recommend the language to the Commission for
inclusion which would require TBI to notify the Colorado Division of Wildlife (“CDOW”)
if any wells are proposed to be drilled between March 1 and June 30 so that
CDOW may provide comments regarding protection of sage grouse leks to the
Director for consideration in permit issuance.
16. At the time of the administrative hearing, Tom Brown, Inc. agreed to be bound by
oral order of the Commission.
17. 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 enter an order allowing up to four (4) additional wells to be
drilled on the 320-acre drilling and spacing units described above in Finding
No. 7 for the production of gas and associated hydrocarbons from the Middle
Lewis Formation, with the permitted well for all subsequent wells to be located
no closer than 600 feet from the boundaries of the unit and 990 feet from
another well producing or producible from the same formation. In addition, the order should allow the Director,
without additional notice and hearing or consent, to grant an exception to the
well location setbacks up to and including 100 feet, but not beyond, to avoid
archaeological sites and for topographic reasons.
ORDER
NOW, THEREFORE IT IS
ORDERED, that an order shall be approved to allow up to four (4) additional wells to be drilled on the 320-acre drilling
and spacing units described below for the production of gas and associated
hydrocarbons from the Middle Lewis Formation, with the permitted well for all
subsequent wells to be located no closer than 600 feet from the boundaries of
the unit and 990 feet from another well producing or producible from the same
formation.
Township 10 North, Range 93 West, 6th P.M.
Section 32: All
Section 33: N½
IT IS FURTHER ORDERED, that
the Director shall be allowed,
without additional notice and hearing or consent, to grant an exception to the
well location setbacks up to and including 100 feet, but not beyond, to avoid
archaeological sites and for topographic reasons.
IT IS FURTHER ORDERED, that Tom Brown,
Inc. shall provide the Commission with initial reservoir pressure data and
production data analysis acquired from any new well drilled in the application
lands no later than June 30, 2005.
IT IS FURTHER ORDERED, that if the operator intends to construct a
wellsite for any well to be drilled in the lands affected by this order between
March 1 and June 30 of any year, the operator shall notify the Colorado
Division of Wildlife (“CDOW”) of the location of such proposed wellsite, and
advise the Director of the date such notice was provided. If the Director receives comments from the
CDOW within ten (10) days of the date the notice was provided, such comments
may be considered by the Commission in determining whether any conditions
related to protection of sage grouse leks are to be attached to any application
for permit to drill such well approved by the Commission.
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 April 2003, as of
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF
By
Patricia C. Beaver, Secretary
Dated at