BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF
IN
THE MATTER OF THE PROMULGATION AND ) CAUSE NOS. 1 AND 407
ESTABLISHMENT OF FIELD
RULES TO GOVERN )
OPERATIONS IN THE
WATTENBERG FIELD, ) ORDER NOS. 1-119 AND 407-305
This cause came on for hearing before the Commission at 9:00 a.m. on July 23, 2007, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado for an order to establish a 160-acre drilling and spacing unit consisting of the SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and NW¼ SE¼ of Section 17, Township 5 North, Range 65 West, 6th P.M., as a wellbore spacing unit for production from the Sussex, Codell, Niobrara, “J” Sand or Dakota Formations, and to pool all nonconsenting interests in the 160-acre drilling and spacing unit for the development and operation of said formations.
FINDINGS
The
Commission finds as follows:
1. On November
18, 1985, the Commission issued Order No. 407-1 (amended on March 29, 2000)
which established 80-acre drilling and spacing units for the production of oil
and/or gas and associated hydrocarbons for the Codell and Niobrara Formations
underlying certain lands, including Section 17, Township 5 North, Range 65
West, 6th P.M., with the unit to be designated by the operator upon
drilling the first well in the quarter section.
The permitted well shall be located in the center of either 40-acre
tract within the unit with a tolerance of 200 feet in any direction. The
operator shall have the option to drill an additional well on the undrilled
40-acre tract in each 80-acre drilling and spacing unit.
2. Rule 318.a. of the Rules and Regulations of the
Commission requires that wells drilled in excess of two thousand five hundred
(2,500) feet in depth be located not less than six hundred (600) feet from any
lease line, and located not less than one thousand two hundred (1,200) feet
from any other producible or drilling oil or gas well when drilling to the same
common source of supply. The SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and NW¼ SE¼ of Section
17, Township 5 North, Range 65 West, 6th P.M. are subject to this
Rule for the
3. 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 17, Township 5 North, Range 65 West, 6th
P.M. was included in this Rule.
4. On June 1,
2007, Mineral Resources, Inc. (“Mineral Resources”), by its attorney, filed
with the Commission a verified application for an order to establish a 160-acre
drilling and spacing unit consisting of the SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and NW¼
SE¼ of Section 17, Township 5 North, Range 65 West, 6th P.M. as a
wellbore spacing unit for the production from the Sussex, Codell, Niobrara, “J”
Sand or Dakota Formations, and for an order to pool all nonconsenting interests
in the 160-acre drilling and spacing unit for the development and operation of
said formations.
5. On July
13, 2007, Mineral Resources, 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.
6. Testimony
and exhibits submitted in support of the application showed that Mineral Resources proposes to drill one well
directionally under the unit and that all mineral owners have been contacted
with offers to either lease or participate.
Additional testimony and exhibits submitted in support of the
application demonstrated that there are unleased mineral owners at this
time. Further testimony submitted
indicated that Mineral Resources continues to work toward obtaining leases or
participation from these unleased mineral owners.
7. Testimony
and exhibits submitted in support of the application showed that letters were
sent between June 26, 2006 and November 1, 2006 to each mineral owner offering
leases at $50 per acre with a 12½% royalty interest, or offering an opportunity
to participate as a working interest in the well. Additional testimony showed that these terms
are similar to those prevailing in the area.
None of the mineral owners have agreed to date to participate as working
interest owners.
8. Testimony
and exhibits submitted in support of the application showed that Mineral
Resources owns the drill site. Further information
showed that the City of
9. Testimony
and exhibits submitted in support of the application showed that establishing one
160-acre drilling and spacing unit will facilitate drilling and producing
multiple formations while protecting correlative rights and that waste will be
prevented and production accounting will be simplified.
10. Mineral Resources, Inc. 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
based on the Hearing Officer review of the application under Rule 511.b., the Commission should
enter an order to establish a 160-acre drilling and spacing unit consisting of
the SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and NW¼ SE¼ of Section 17, Township 5 North,
Range 65 West, 6th P.M., as a wellbore spacing unit for production
from the Sussex, Codell, Niobrara, “J” Sand or Dakota Formations, and to pool
all nonconsenting interests in the 160-acre drilling and spacing unit for the
development and operation of said formations.
ORDER
NOW,
THEREFORE IT IS ORDERED, that Order No. 407-1 is hereby amended and a 160-acre
drilling and spacing unit is hereby established for the SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and
NW¼ SE¼ of Section 17, Township 5 North, Range 65 West, 6th P.M., as
a wellbore spacing unit for production from the Sussex, Codell, Niobrara, “J”
Sand or Dakota Formations.
IT IS FURTHER ORDERED, that, 1. Pursuant to the
provisions of §34-60-116, C.R.S., as amended, of the Oil and Gas Conservation
Act of the State of Colorado, all nonconsenting
interests in the 160-acre drilling and
spacing unit consisting of the SE¼ NW¼, SW¼ NE¼, NE¼ SW¼ and NW¼ SE¼ of
Section 17, Township 5 North, Range 65 West, 6th P.M. are hereby pooled for the development and
operation of the Sussex, Codell, Niobrara, “J” Sand or Dakota
Formations.
2. The
production obtained from each drilling unit shall be allocated to each owner in
the unit on the basis of the proportion that the number of acres in such tract
bears to the total number of mineral acres within each drilling unit; each
owner of an interest in each drilling unit shall be entitled to receive his/her
share of the production of the well located on each drilling unit applicable to
his interest in each drilling unit.
3. Said
owners are hereby deemed to have elected not to participate and shall therefore
be deemed to be nonconsenting as to the well(s) and be subject to the penalties
as provided for by §34‑60‑116 (7), C.R.S.
4. Any nonconsenting unleased mineral owner within
the spacing unit shall be treated as the owner of the landowner's royalty to
the extent of 12.5% of his/her record title interest, whatever that interest
may be, until such time as the consenting owner recovers, only out of the nonconsenting
owner's proportionate 87.5% share of production, the costs specified in §34‑60‑116
(7)(b), C.R.S. as amended. After recovery
of such costs, the nonconsenting mineral owner shall then own his/her
proportionate 8/8ths share of the well, surface facilities and production, and
then be liable for his/her proportionate share of further costs incurred in
connection with the well as if he/she had originally agreed to the drilling.
5. The operator of any well drilled on the
above-described unit shall furnish all nonconsenting owners with a monthly
statement of all costs incurred, together with the quantity of oil and gas
produced, and the amount of proceeds realized from the sale of production
during the preceding month.
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 August, 2007, as of July 23, 2007.
OIL
AND GAS CONSERVATION COMMISSION
OF THE STATE OF
By
Patricia
C. Beaver, Secretary
Dated at
August
15, 2007