BEFORE THE OIL AND GAS
CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION ) CAUSE NOS. 232 and 1
AND ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN THE WATTENBERG ) ORDER NOS. 232-243 and 1-123
FIELD, WELD COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on January 15, 2008, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to segregate the 320-acre drilling and spacing unit consisting of the S½ of Section 9, Township 4 North, Range 63 West, 6th P.M. into two (2) 160-acre drilling and spacing units consisting of the SW¼ and SE¼ for the production of gas and associated hydrocarbons from the “J” Sand Formation, and to establish a 160-acre drilling and spacing unit consisting of the SE¼ of Section 9, Township 4 North, Range 63 West, 6th P.M., for the production of gas and associated hydrocarbons from the Codell and Niobrara Formations.
The Commission finds as follows:
1. Bonanza Creek Energy Operating Company LLC. (“Bonanza Creek”), 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 pursuant to the Oil and Gas Conservation Act.
4. On June 18, 1971, the Commission issued Order No. 232-2, which among other things, established 320-acre drilling and spacing units for the W½ of Township 4 North, Range 63 West, 6th P.M., for production of gas and associated hydrocarbons from the “J” Sand Formation.
5. On April 27, 1998, the Commission adopted Rule 318A., which, among other things, allowed certain drilling locations to be utilized to drill or twin a well, deepen a well or recomplete a well and to commingle any or all of the Cretaceous Age Formations from the base of the Dakota Formation to the surface. On December 5, 2005, Rule 318A. was amended to, among other things, allow interior infill and boundary wells to be drilled and wellbore spacing units to be established. Section 9, Township 4 North, Range 63 West, 6th P.M. is subject to this Rule for the Codell and Niobrara Formations.
6. On November 26, 2007, amended on December 20, 2007, Bonanza Creek, by its attorney, filed with the Commission a verified application for an order to segregate the 320-acre drilling and spacing unit consisting of the S½ of Section 9, Township 4 North, Range 63 West, 6th P.M., into two (2) 160-acre drilling and spacing units consisting of the SW¼ and SE¼ for the production of gas and associated hydrocarbons from the “J” Sand Formation, and to establish a 160-acre drilling and spacing unit consisting of the SE¼ of Section 9, Township 4 North, Range 63 West, 6th P.M., for the production of gas and associated hydrocarbons from the Codell and Niobrara Formations.
7. On January 7, 2008, Bonanza Creek, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the application.
8. Testimony presented in support of the application indicated that Bonanza Creek owns leases covering the oil and gas, from the surface to the base of the “J” Sand Formation, under the SE¼ of Section 9, Township 4 North, Range 63 West, 6th. P.M., that Noble Energy, Inc. owns leases covering the oil and gas below the base of the “J” Sand Formation under the SE¼, which depths are not the subject of this application, that Kerr McGee Oil and Gas Onshore, LP owns leases covering the oil and gas in all depths under the SW¼ of said Section 9, and that Anadarko E&P Company LP owns all of the minerals underlying the S½ of Section 9.
9. Additional testimony presented in support of the application indicated that the requested 160-acre units correspond to leasehold ownership and will not be in conflict with the unit upon which royalty has been paid to date on Niobrara Formation production from the existing Bonanza Creek Champlin #1 Well, located in the SW¼ of said Section 9, that the establishment of such units will prevent or assist in preventing waste by assuring that all potential locations may be drilled without prejudice to the rights of other leasehold or mineral owners, ensuring that the pool as a whole may be efficiently and economically developed, and that the establishment of such units will protect the correlative rights of both leasehold owners and mineral owners.
10. Further testimony presented indicated that Commission orders including Order Nos. 232-89 and 407-125, have previously established that 160-acre drilling units are not less than the maximum area than can be efficiently, economically and effectively drained by a single well producing oil, gas and associated hydrocarbons from the “J” Sand, Codell and Niobrara Formations underlying the S½ of Section 9. The Commission is requested to take notice of such testimony and Orders pursuant to COGCC Rule 519.(d).
11. Bonanza Creek Energy Operating Company LLC. agreed to be bound by an oral order of the Commission.
12. Based on the facts stated in the verified application, having received no protests, and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to segregate the 320-acre drilling and spacing unit consisting of the S½ of Section 9, Township 4 North, Range 63 West, 6th P.M. into two (2) 160-acre drilling and spacing units consisting of the SW¼ and SE¼ for the production of gas and associated hydrocarbons from the “J” Sand Formation, and to establish a 160-acre drilling and spacing unit consisting of the SE¼ of Section 9, Township 4 North, Range 63 West, 6th P.M., for the production of gas and associated hydrocarbons from the Codell and Niobrara Formations.
ORDER
NOW, THEREFORE IT IS ORDERED, that the 320-acre drilling and spacing unit consisting of the S½ of Section 9, Township 4 North, Range 63 West, 6th P.M. is hereby segregated into two (2) 160-acre drilling and spacing units consisting of the SW¼ and SE¼ for the production of gas and associated hydrocarbons from the “J” Sand Formation.
IT IS FURTHER ORDERED, that a 160-acre drilling and spacing unit consisting of the SE¼ of Section 9, Township 4 North, Range 63 West, 6th P.M. is hereby established for the production of gas and associated hydrocarbons from the Codell and Niobrara Formations.
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__________day of January, 2008, as of January 15, 2008.
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
January 23, 2008