BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE FINANCIAL ASSURANCE                )           CAUSE NO. 1

REQUIREMENTS OF THE RULES AND REGULATIONS         )

OF THE OIL AND GAS CONSERVATION COMMISSION         )           ORDER NO. 1-71

FOR OPERATIONS IN COLORADO                                             )

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission at 8:30 a.m. on August 4, 1997, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, on the application of Patina Oil & Gas Corporation requesting approval of the Agreement between the Director of the Commission and Patina Oil & Gas Corporation and waiving the imposition of additional financial assurance for “excess inactive wells” to the extent that such additional amounts would otherwise be required by Rule 707.

 

FINDINGS

 

                        The Commission finds as follows:

 

                        1.  Patina Oil & Gas Corporation (“Patina”), as applicant herein, is an interested party in the subject matter of the above‑referenced hearing.

 

                        2.  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.

 

                        3.  Patina’s base financial assurance requirement is One Hundred Thousand Dollars ($100,000) pursuant to Rule No. 706. since Patina is operator of more than One Hundred (100) wells in the State of Colorado.  Patina currently has a Two Hundred Fifty Thousand Dollar ($250,000) bond on deposit with the Oil and Gas Conservation Commission and proposes to maintain this bond.  Gerrity Oil & Gas Corporation, a wholly-owned subsidiary, has a separate One Hundred Seventy Thousand Dollar ($170,000) bond on deposit.  Patina proposes to cancel this bond upon submitting change of operator forms with the Commission.

 

                        4.  Patina entered into an Agreement with the Director of the Commission, effective December 5, 1996, whereby it committed to plug and abandon, perform a mechanical integrity test or return to production a list of Ninety (90) shut-in wells by the end of 1998.  The Director granted a variance whereby the Agreement substitutes for Rule No. 326.b.  The Agreement was modified, effective February 17, 1997, by the inclusion of additional wells.  In addition, the Agreement was made open-ended, whereby Patina committed to address up to Forty Five (45) additional inactive wells in subsequent calendar years.

 

                        5.  Patina has addressed Twenty Three (23) wells as of mid-year 1997, with Six (6) more approved for plugging by the Commission staff.  In addition, another Twelve (12) wells are “in progress”.  Patina anticipates adding additional shut-in wells to the Agreement periodically.  Such wells may be added before they would be classified as “inactive” and therefore subject to Rule No. 707.  Pursuant to the Agreement, shut-in wells will be addressed in a regular and orderly fashion.  The Agreement provides that it is “subject to ongoing Commission staff review and adjustment, including additional financial assurance…if the backlog of additional inactive wells grows beyond an acceptable number.”

 

                        6.  The Commission should enter an order approving the Agreement between the Director of the Commission and Patina and approve the Two Hundred Fifty Thousand Dollar ($250,000) bond as sufficient financial assurance for Patina’s inactive wells under Rule Nos. 706. and 707.  In addition, the One Hundred Seventy Thousand Dollar ($170,000) Gerrity bond should remain in place until all change of operator forms are approved by the Commission.  Further, Commission staff should continue to monitor the number of wells being plugged and advise the Commission if wells are not being plugged at an appropriate rate or if there is a significant increase in the number of wells to be plugged in order to review whether the financial assurance in place is adequate.  Commission staff should report bi-annually to the Commission on status of Patina’s shut-in wells.

 

ORDER

 

                        NOW, THEREFORE, IT IS ORDERED, that the request of Patina Oil & Gas Corporation to approve the Agreement between the Director of the Commission and Patina shall be granted and that the Two Hundred Fifty Thousand Dollar ($250,000) Patina bond is approved as sufficient financial assurance for Patina’s inactive wells under Rule Nos. 706. and 707.

 

                        IT IS FURTHER ORDERED, that the One Hundred Seventy Thousand Dollar ($170,000) Gerrity Oil & Gas Corporation bond shall remain in place until all change of operator forms are approved, at which time the bond will be released.

 

                        IT IS FURTHER ORDERED, that Commission staff shall continue to monitor the number of wells being plugged and advise the Commission if wells are not being plugged at an appropriate rate or if there is a significant increase in the number of wells to be plugged in order to review whether the financial assurance in place is adequate.  Commission staff shall report bi-annually to the Commission on status of Patina’s shut-in wells.

 

                        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 August 1997, as of August 4, 1997.

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                               OF THE STATE OF COLORADO

 

 

 

 

                                                                        By                                                                         

                                                                             Patricia C. Beaver, Secretary

 

Dated in Suite 801

1120 Lincoln Street

Denver, Colorado 80203

August 12, 1997