BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE McCLAVE FIELD, BENT COUNTY, COLORADO

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CAUSE NO. 105

 

ORDER NO. 105-43

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on February 14, 2005, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado for an order to allow an additional well to be drilled within the existing 640-acre drilling and spacing unit consisting of Section 24, Township 21 South, Range 48 West, 6th P.M., for the production of gas and associated hydrocarbons from the McClave Sand Formation.

 

FINDINGS

 

The Commission finds as follows:

 

1.      On November 19, 1979, the Commission issued Order No. 105-23, which amended Order No. 105-1, which established 640-acre drilling and spacing units for the production of gas from the McClave Sand Formation, to cover additional lands including Section 24, Township 21 South, Range 48 West, 6th P.M., with the permitted well to be located no closer than 990 feet from the boundaries of the unit.

 

2.      On November 22, 2004, Ellora Energy LLC, by its representative, filed with the Commission a verified application for an order to allow an additional well to be drilled within the existing 640-acre drilling and spacing unit consisting of Section 24, Township 21 South, Range 48 West, 6th P.M., for the production of gas and associated hydrocarbons from the McClave Sand Formation.  One producing well has been drilled in the subject spacing unit, the State G #1 Well, located in the NE¼ NE¼ of Section 24, Township 21 South, Range 48 West, 6th P.M., which was drilled and completed as a well capable of producing gas from the McClave Sand Formation.

 

3.      Testimony and exhibits presented at the administrative hearing showed the location of Section 24 in the McClave Field, the offsetting wells and the proposed location of an additional well.  Additional testimony showed that Ellora Energy, LLC and its partners are the only lease owners in the unit except for 1.875% owned by the Dixon Family Partnership.

 

4.      Testimony and exhibits presented at the administrative hearing showed the Morrow Formation structure dipping to the east in Section 24, that the proposed additional well would be up structure to the existing State G #1 Well, that the proposed additional well will encounter the same amount of sand as found in the State G #1 Well, and that the fault underlying the area does not appear to be a barrier to Morrow Formation production.  Additional testimony and exhibits presented at the administrative hearing showed that the Morrow Formation is continuous in the application area and that the Morrow bar sand runs north to south.

 

5.      Testimony and exhibits presented at the administrative hearing showed a decline curve analysis for the State G #1 Well located in the NE¼ NE¼ of Section 24 with an expected ultimate recovery of 810 MMCF of gas.  Additional testimony showed that 1,672 MMCF of recoverable gas was originally in place, and that there are 858 MMCF of remaining recoverable gas reserves in the unit.

 

6.      Testimony and exhibits presented at the administrative hearing showed the economics of the well, which would cost $323,750 to drill and complete, are very good with a before tax rate of return of over 100%, and an undiscounted before tax payout of .48 years.

 

7.      Testimony and exhibits presented at the administrative hearing showed that the drilling of an additional well is necessary to prevent waste and recover additional reserves.

 

8.      That Ellora Energy, LLC agrees to be bound by oral order of the Commission.

 

9.      Based on the facts stated in the verified application, having received no protests to the application and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to allow an additional well to be drilled within the existing 640-acre drilling and spacing unit consisting of Section 24, Township 21 South, Range 48 West, 6th P.M., for the production of gas and associated hydrocarbons from the McClave Sand Formation.

 

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 105-23 is hereby amended to allow an additional well to be drilled within the existing 640-acre drilling and spacing unit consisting of Section 24, Township 21 South, Range 48 West, 6th P.M., for the production of gas and associated hydrocarbons from the McClave Sand Formation.

 

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 24th day of February 2005, as of February 14, 2005.

 

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

February 24. 2005