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 BUZZARD CREEK, SHEEP CREEK, VEGA, BRUSH CREEK, AND MIDDLETON CREEK FIELDS, MESA COUNTY, COLORADO

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CAUSE NO. 1, 369, 386, 399, and

429

 

ORDER NO. 1-127, 369-5, 386-4,

399-5, and 429-10

 

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on September 22, 2008, in the Sabin-Cleere Conference Room, Building A, Colorado Department of Public Health and Environment, 4300 Cherry Creek Drive South, Denver, Colorado, for an order to allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the lease line, for certain lands in Townships 8 and 9 South, Ranges 92 and 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

FINDINGS

 

The Commission finds as follows:

 

1. Delta Petroleum Corporation (Delta), 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. Rule 318.a. of the Rules and Regulations of the Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Certain lands in Townships 8 and 9 South, Ranges 92 and 93 West, 6th P.M. are subject to this Rule.

 

5. Rule 318.d.(3) of the Rules and Regulations of the Commission requires that no well in excess of 2,500 feet in depth shall be located less than 600 feet from the exterior or interior (if there be one) boundary of the unit area. Certain lands in Townships 8 and 9 South, Ranges 92 and 93 West, 6th P.M. are subject to this Rule.

 

6. On June 21, 1982, the Commission issued Order No. 386-1 which, among other things, established 640-acre drilling and spacing units for certain lands, including Section 17, Township 9 South, Range 92 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than 600 feet from the boundaries of the section upon which it is located. On November 27, 2006, the Commission issued Order No. 386-2 which, among other things, allowed the equivalent of one (1) well per 10 acres for Sections 20 and 21, Township 9 South, Range 92 West, 6th P.M., for the production of gas from the Mesaverde Formation.

 

                                7. On June 5, 2006, the Commission issued Order No. 429-5 which, among other things, allowed the equivalent of one (1) well per 10 acres for certain lands, including portions of Sections 31, 32 and 33 of Township 9 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than 100 feet from the boundaries of the lease line. On December 12, 2007, the Commission issued Order No. 429-6 which, among other things, allowed the equivalent of one (1) well per 10 acres for certain lands, including portions of Sections 18, 19, and 30 of Township 9 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation, with the permitted well to be located no closer than 100 feet from the boundaries of the lease line.

                                8. On February 25, 2008, the Commission issued Order Nos. 1-124, 369-4 and 399-4 which, among other things, allowed the equivalent of one (1) well per 10 acres for certain lands, including portions of Sections 6, 7, 18 and 19 of Township 9 South, Range 92 West, 6th P.M., and portions of Sections 1, 13-14, 20-22, 23-28, 29 and 33-36 of Township 9 South, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations, with the permitted well to be located no closer than 100 feet from the boundaries of the lease line.

9. On July 23, 2008, Delta Petroleum Corporation, by its attorneys, filed with the Commission a verified application for an order affecting the below-listed application lands as further described herein, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

 

Township 8 South, Range 92 West, 6th P.M.

Section 30:

That part of Tract 59 in Section 30 (80.00 acres) and

that part of Tract 60 in Section 30 (39.18 acres)

Containing 119.18 acres, more or less

 

Section 31:

That part of Tract 59 in Section 31 (80.00 acres),

that part of Tract 60 in Section 31 (4.95 acres) and

that part of Tract 62 in Section 31 (50.34 acres)

Containing 135.29 acres, more or less

 

Township 8 South, Range 93 West, 6th P.M.

Section 25:

That part of Tract 60 in Section 25 (54.72 acres)

Containing 54.72 acres, more or less

 

Section 36:

That part of Tract 58 in Section 36 (160.00 acres),

that part of Tract 60 in Section 36 (61.15 acres) and

that part of Tract 62 in Section 36 (109.66 acres)

Containing 330.81 acres, more or less

 

Township 9 South, Range 92 West, 6th P.M.

Section 17:

All

Containing 640.00 acres, more or less

 

Township 9 South, Range 93 West, 6th P.M.

Section 1:

SW, SW SE, and SE SE nka Lot 8 (21.35 acres)

Containing 221.35 acres, more or less

 

Section 2:

All: Lot 1 (40.22 acres), Lot 2 (40.27 acres), Lot 3 (40.33 acres), Lot 4 (40.38 acres), S N, SW and SE

Containing 641.20 acres, more or less

 

Section 3:

Lot 1 (40.40 acres), Lot 2 (40.40 acres), Lot 3 (40.40 acres), Lot 4 (40.40 acres), S N, and S

Containing 641.60 acres, more or less

 

Section 4:

All: Lot 1 (40.39 acres), Lot 2 (40.36 acres), Lot 3 (40.34 acres), Lot 4 (40.31 acres), S N, and S

Containing 641.40 acres, more or less

 

Section 5:

All: Lot 1 (40.42 acres), Lot 2 (40.65 acres), Lot 3 (40.89 acres), Lot 4 (41.12 acres), S N, and S

Containing 643.08 acres, more or less

 

Section 6:

All: Lot 1 (41.08 acres), Lot 2 (40.81 acres), S NE and SE

Containing 321.89 acres, more or less

 

Section 7:

E

Containing 320.00 acres, more or less

 

Section 8:

All

Containing 640.00 acres, more or less

 

Section 9:

All

Containing 640.00 acres, more or less

 

Section 10:

All: N N, SW NE, S NW, W SW, NE SW, SE SW, SE NE, NW SE, NE SE, and S SE

Containing 640.00 acres, more or less

 

Section 11:

All: N NW, NE, S NW, and S

Containing 640.00 acres, more or less

 

Section 12:

All

Containing 640.00 acres, more or less

 

Section 13:

N and N S

Containing 480.00 acres, more or less

 

Section 14:

N, SW, N SE, and SW SE

Containing 600.00 acres, more or less

 

Section 15:

All

Containing 640.00 acres, more or less

 

Section 16:

All: W NW, NE NW, NW NE, NE NE, S NE, SE NW, and S

Containing 640.00 acres, more or less

 

Section 17:

All: W, NE, and SE

Containing 640.00 acres, more or less

 

Section 18:

E

Containing 320.00 acres, more or less

 

Section 19:

All: Lot 1 (41.32 acres), Lot 2 (41.24 acres), Lot 3 (41.16 acres), NE NW, and NE

Containing 323.72 acres, more or less

 

Section 20:

W and NE

Containing 480.00 acres, more or less

 

Section 21:

N

Containing 320.00 acres, more or less

 

Section 22:

N N

Containing 160.00 acres, more or less

 

Section 29:

W W and SE SW

Containing 200.00 acres, more or less

 

Section 33:

SE NW, SW NE and NW SE

Containing a total of 120.00 acres, more or less

 

Applicant is requesting an order to allow the equivalent of one (1) well per 10 acres for the below-listed lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

 

10-ACRE DENSITY LANDS

 

Township 9 South, Range 92 West, 6th P.M.

Section 17: All

Containing 640.00 acres, more or less

 

Township 9 South, Range 93 West, 6th P.M.

Section 2: Lot 1 (40.22 acres), Lot 2 (40.27 acres), Lot 3

(40.33 acres), Lot 4 (40.38 acres), S N, SW

Containing 481.20 acres, more or less

 

Section 3: All: Lot 1 (40.40 acres), Lot 2 (40.40 acres), Lot 3

(40.40 acres), Lot 4 (40.40 acres), S NE, S NW,

SW, SE

Containing 641.60 acres, more or less

 

Section 4: All: Lot 1 (40.39 acres), Lot 2 (40.36 acres), Lot 3

(40.34 acres), Lot 4 (40.31 acres), S N, S

Containing 641.40 acres, more or less

 

Section 5: All: Lot 1 (40.42 acres), Lot 2 (40.65 acres), Lot 3

(40.89 acres), Lot 4 (41.12 acres), S N, S

Containing 643.08 acres, more or less

 

Section 6: Lot 1 (41.08 acres), Lot 2 (40.81 acres), S NE,

SE

Containing 321.89 acres, more or less

 

Section 7: E

Containing 320.00 acres, more or less

 

Section 8: All

Containing 640.00 acres, more or less

 

Section 9: All

Containing 640.00 acres, more or less

 

Section 10: N N, SW NE, S NW, W SW, NE

SW, NW SE

Containing 440.00 acres, more or less

 

Section 11: N NW

Containing 80.00 acres, more or less

 

Section 16: W NW, NE NW, NW NE

Containing 160.00 acres, more or less

 

Section 17: W, NE

Containing 480.00 acres, more or less

 

Section 18: E

Containing 320.00 acres, more or less

 

Section 19: Lot 1 (41.32 acres), Lot 2 (41.24 acres),

Lot 3 (41.16 acres), NE NW, NE

Containing 323.72 acres, more or less

 

Section 20: W

Containing 320.00 acres, more or less

 

Section 29: W W, SE SW

Containing 200.00 acres, more or less

 

Section 33: SE NW, SW NE, NW SE

Containing 120.00 acres, more or less

 

All future Williams Fork Formation and IIes Formation wells to be drilled upon the above-described lands should be located downhole anywhere within said lands but no closer than 100 feet from a lease line or the boundaries of said lands without exception being granted by the Director of the Oil and Gas Conservation Commission. In cases where the above-described lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation and Iles Formation wells, the well should be located downhole no closer than 200 feet from the boundary or boundaries of said lands so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

Except as previously authorized by order of the Commission, wells to be drilled on the above-described lands will be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Oil and Gas Conservation Commission pursuant to application made for such exception. In addition, all wells drilled to the Iles Formation will be drilled only in connection with the drilling of Williams Fork Formation wells.

 

In addition, the Applicant is requesting an order that all future permitted wells located in the Middleton Creek Federal Unit and the Buzzard Creek Federal Unit as described below, be located no closer than 100 feet from the exterior boundary of the federal units (or lease line if applicable), without exception granted by the Commission. In cases where the Middleton Creek Federal Unit lands or Buzzard Creek Federal Unit lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill 10-acre density Williams Fork Formation or Iles Formation wells, the wells should be located downhole no closer than 200 feet from the boundary or boundaries of the federal units or drilling unit abutting or cornering such lands (or lease line if applicable), without exception granted by the Commission.


MIDDLETON CREEK FEDERAL UNIT LANDS

 

Township 8 South, Range 92 West, 6th P.M.

Section 30: That part of Tract 59 in Section 30 (80.00 acres) and that part of Tract 60 in Section 30 (39.18 acres)

Containing 119.18 acres, more or less

 

Section 31: That part of Tract 59 in Section 31 (80.00 acres), that part of Tract 60 in Section 31 (4.95 acres), and that part of Tract 62 in Section 31 (50.34 acres)

Containing 135.29 acres, more or less

 

Township 8 South, Range 93 West, 6th P.M.

Section 25: That part of Tract 60 in Section 25 (54.72 acres)

Containing 54.72 acres, more or less

 

Section 36: That part of Tract 58 in Section 36 (160.00 acres), that part of Tract 60 in Section 36 (61.15 acres), and that part of Tract 62 in Section 36 (109.66 acres)

Containing 330.81 acres, more or less

 

BUZZARD CREEK FEDERAL UNIT LANDS

 

Township 9 South, Range 93 West, 6th P.M.

Section 1: SW, SW SE, SE SE nka Lot 8 (21.35 acres)

Containing 221.35 acres, more or less

 

Section 2: SE

Containing 160.00 acres, more or less

 

Section 10: SE NE, SE SW, NE SE, S SE

Containing 200.00 acres, more or less

 

Section 11: NE, S NW, S

Containing 560.00 acres, more or less

 

Section 12: All

Containing 640.00 acres, more or less

 

Section 13: N, N S

Containing 480.00 acres, more or less

 

Section 14: N, SW, N SE, SW SE

Containing 600.00 acres, more or less

 

Section 15: All

Containing 640.00 acres, more or less

 

Section 16: NE NE, S NE, SE NW, S

Containing 480.00 acres, more or less

 

Section 17: SE

Containing 160.00 acres, more or less

 

Section 20: NE

Containing 160.00 acres, more or less

 

Section 21: N

Containing 320.00 acres, more or less

 

Section 22: N N

Containing 160.00 acres, more or less

 

10. On September 9, 2008, Delta, by its attorneys, 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.

 

11. Testimony and exhibits submitted in support of the application showed that mineral interests underlying the application lands are a mixture of fee and federal and that Delta, along with EnCana Oil & Gas (USA), is the majority leasehold owner for those lands. Additional testimony showed that the application lands are adjacent to lands that have been approved for 10-acre well density.

 

12. Testimony and exhibits submitted in support of the application showed that the geologic model for the Mesaverde Group underlying the application lands has regionally extensive gas accumulation in discontinuous fluvial sandstones that are lenticular in profile with low porosity of less than 13% and low permeability of less than 0.1 millidarcy. Additional testimony showed that some of the highest gas-in-place per section found in the South Piceance Basin for the Mesaverde Group is located under the application lands. Further testimony indicated that 10-acre well density is necessary to develop the Williams Fork and Iles Formations underlying the application lands while preventing waste and that correlative rights will not be affected by increased well density.

 

13. Testimony and exhibits submitted in support of the application indicated that 10-acre well density for the Williams Fork and Iles Formations for the application lands is necessary to efficiently and economically drain the gas reserves, prevent waste, and protect correlative rights. Additional testimony showed that an additional estimated 65% of gas-in-place will be recovered by increasing well density from 20-acre to 10-acre for the Williams Fork and Iles Formations underlying the application lands. Further testimony indicated that changing the setbacks from the federal unit boundaries will result in conformance with the surrounding lands and efficient recovery of the gas reserves.

 

14. The above-referenced testimony and exhibits show that the proposed increased well density and setbacks will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas, and will not violate correlative rights.

 

15. Delta Petroleum Corporation agreed to be bound by oral order of the Commission.

 

16. 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 allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the lease line, and to allow the same setbacks from certain federal unit boundaries, for certain lands in Townships 8 and 9 South, Ranges 92 and 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.

 

ORDER

 

NOW, THEREFORE IT IS ORDERED, that the equivalent of one (1) well per 10 acres is hereby approved for the below-listed lands, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations:

 

Township 9 South, Range 92 West, 6th P.M.

Section 17: All

Containing 640.00 acres, more or less

 

Township 9 South, Range 93 West, 6th P.M.

Section 2: Lot 1 (40.22 acres), Lot 2 (40.27 acres), Lot 3

(40.33 acres), Lot 4 (40.38 acres), S N, SW

Containing 481.20 acres, more or less

 

Section 3: All: Lot 1 (40.40 acres), Lot 2 (40.40 acres), Lot 3

(40.40 acres), Lot 4 (40.40 acres), S NE, S NW,

SW, SE

Containing 641.60 acres, more or less

 

Section 4: All: Lot 1 (40.39 acres), Lot 2 (40.36 acres), Lot 3

(40.34 acres), Lot 4 (40.31 acres), S N, S

Containing 641.40 acres, more or less

 

Section 5: All: Lot 1 (40.42 acres), Lot 2 (40.65 acres), Lot 3

(40.89 acres), Lot 4 (41.12 acres), S N, S

Containing 643.08 acres, more or less

 

Section 6: Lot 1 (41.08 acres), Lot 2 (40.81 acres), S NE,

SE

Containing 321.89 acres, more or less

 

Section 7: E

Containing 320.00 acres, more or less

 

Section 8: All

Containing 640.00 acres, more or less

 

Section 9: All

Containing 640.00 acres, more or less

 

Section 10: N N, SW NE, S NW, W SW, NE

SW, NW SE

Containing 440.00 acres, more or less

 

Section 11: N NW

Containing 80.00 acres, more or less

 

Section 16: W NW, NE NW, NW NE

Containing 160.00 acres, more or less

 

Section 17: W, NE

Containing 480.00 acres, more or less

 

Section 18: E

Containing 320.00 acres, more or less

 

Section 19: Lot 1 (41.32 acres), Lot 2 (41.24 acres),

Lot 3 (41.16 acres), NE NW, NE

Containing 323.72 acres, more or less

 

Section 20: W

Containing 320.00 acres, more or less

 

Section 29: W W, SE SW

Containing 200.00 acres, more or less

 

Section 33: SE NW, SW NE, NW SE

Containing 120.00 acres, more or less

 

IT IS FURTHER ORDERED, that all future Williams Fork Formation and IIes Formation wells to be drilled upon the above-described lands shall be located downhole anywhere within said lands but no closer than 100 feet from a lease line or the boundaries of said lands without exception being granted by the Director of the Oil and Gas Conservation Commission. In cases where the above-described lands abut or corner lands in respect of which the Commission has not at the time of drilling permit application granted the right to drill 10-acre density Williams Fork Formation and Iles Formation wells, the well shall be located downhole no closer than 200 feet from the boundary or boundaries of said lands so abutting or cornering such lands without exception being granted by the Director of the Oil and Gas Conservation Commission.

 

IT IS FURTHER ORDERED, that except as previously authorized by order of the Commission, wells to be drilled on the above-described lands shall be drilled from the surface either vertically or directionally from no more than one pad located on a given quarter quarter section (or lots or parcels approximately equivalent thereto) unless exception is granted by the Director of the Oil and Gas Conservation Commission pursuant to application made for such exception. In addition, all wells drilled to the Iles Formation shall be drilled only in connection with the drilling of Williams Fork Formation wells.

 

IT IS FURTHER ORDERED, that all future permitted wells located in the Middleton Creek Federal Unit and the Buzzard Creek Federal Unit as described below, shall be located no closer than 100 feet from the exterior boundary of the federal units (or lease line if applicable), without exception granted by the Commission. In cases where the Middleton Creek Federal Unit lands or Buzzard Creek Federal Unit lands abut or corner lands where the Commission has not, at the time of the drilling permit application, granted the right to drill 10-acre density Williams Fork Formation or Iles Formation wells, the wells shall be located downhole no closer than 200 feet from the boundary or boundaries of the federal units or drilling unit abutting or cornering such lands (or lease line if applicable), without exception granted by the Commission.

 

MIDDLETON CREEK FEDERAL UNIT LANDS

 

Township 8 South, Range 92 West, 6th P.M.

Section 30: That part of Tract 59 in Section 30 (80.00 acres) and that part of Tract 60 in Section 30 (39.18 acres)

Containing 119.18 acres, more or less

 


Section 31: That part of Tract 59 in Section 31 (80.00 acres), that part of Tract 60 in Section 31 (4.95 acres), and that part of Tract 62 in Section 31 (50.34 acres)

Containing 135.29 acres, more or less

 

Township 8 South, Range 93 West, 6th P.M.

Section 25: That part of Tract 60 in Section 25 (54.72 acres)

Containing 54.72 acres, more or less

 

Section 36: That part of Tract 58 in Section 36 (160.00 acres), that part of Tract 60 in Section 36 (61.15 acres), and that part of Tract 62 in Section 36 (109.66 acres)

Containing 330.81 acres, more or less

 

BUZZARD CREEK FEDERAL UNIT LANDS

 

Township 9 South, Range 93 West, 6th P.M.

Section 1: SW, SW SE, SE SE nka Lot 8 (21.35 acres)

Containing 221.35 acres, more or less

 

Section 2: SE

Containing 160.00 acres, more or less

 

Section 10: SE NE, SE SW, NE SE, S SE

Containing 200.00 acres, more or less

 

Section 11: NE, S NW, S

Containing 560.00 acres, more or less

 

Section 12: All

Containing 640.00 acres, more or less

 

Section 13: N, N S

Containing 480.00 acres, more or less

 

Section 14: N, SW, N SE, SW SE

Containing 600.00 acres, more or less

 

Section 15: All

Containing 640.00 acres, more or less

 

Section 16: NE NE, S NE, SE NW, S

Containing 480.00 acres, more or less

 

Section 17: SE

Containing 160.00 acres, more or less

 

Section 20: NE

Containing 160.00 acres, more or less

 

Section 21: N

Containing 320.00 acres, more or less

 

Section 22: N N

Containing 160.00 acres, more or less

 

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 September, 2008, as of September 22, 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

September 25, 2008