BEFORE THE OIL
AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE APPLICATION ) CAUSE NOS. 1, 369, 399, 429
OF DELTA PETROLEUM CORPORATION )
FOR AN ORDER LIMITING SURFACE DENSITY ) ORDER NOS. 1-151, 369-7,
PURSUANT TO RULES 503 AND 1202 FOR ) 399-7, 429-12
CERTAIN LANDS IN THE VEGA AND BUZZARD )
CREEK FIELDS, MESA COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission at 9:00 a.m. on June 1, 2010, at the Chancery Building, 1120 Lincoln Street, Suite 801, Denver, Colorado 80203, for an order under Rule 503.b.(9) and Rule 1202.d. limiting the number of well sites to no more than three per section on the following lands (“Application Lands”):
Township 9 South, Range 92 West, 6th P.M.
Section 6: All
Section 7: All
Township 9 South, Range 93 West, 6th P.M.
Section 12: All
Section 28: All
Section 29: All
and to no more than one wellsite on the following truncated section:
Township 8 ˝ South, Range 93 West, 6th P.M.
Section 1: All
FINDINGS
The Commission finds as follows:
1. Delta Petroleum 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. On February 25, 2008, the Commission issued Order Nos. 1-124, 369-4, and 399-4, which allow the equivalent of one well per 10 acres, with the permitted well to be located no closer than 100 feet from the unit boundary for certain lands in Townships 8 and 9 South, Range 92 West, 6th P.M., and Townships 8˝, 9 and 10 South, Range 93 West, 6th P.M., and allow wells to be located no closer than 100 feet from the exterior boundary of the Vega Federal Unit, for the production of gas and associated hydrocarbons from the Williams Fork Formation.
5. On September 22, 2008, the Commission issued Order Nos. 1-127, 369-5, and 399-5 which 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 approved changes to setbacks in federal units, for certain lands in Townships 8 and 9 South, Ranges 92 and 93 West, 6th P.M., and Townships 8˝, 9 and 10 South, Range 93 West, 6th P.M. for production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
6. On March 30, 2009, the Commission issued Orders 369-6, 399-6, and 429-11 which establish various drilling and spacing units and allow one well per 10 acres, with the permitted well to be located no closer than 100 feet to the outside boundary for certain lands in Township 9 South, Range 92 West, 6th P.M., for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations.
7. Commission Rule 306.c. sets forth certain requirements and procedures for and results of consultation with the Colorado Division of Wildlife (“DOW”) regarding oil and gas operations.
8. Commission Rule 1202 sets forth purpose, circumstances, and guidance related to consultation with the DOW on oil and gas locations in sensitive wildlife habitat and restricted surface occupancy areas. It also provides an exemption from Rule 306.c. consultation under specific circumstances.
9. Pursuant to Rule 503.b.(9) and 1202.d(5), the Commission is, upon application of the operator, authorized to issue an order providing that there will not be more than three wellsites per section, with certain associated timing restrictions on “ground disturbing activity,” depending on the species of concern, range or roosting area present. Elk winter concentration areas are the only applicable “sensitive wildlife habitat” covering portions of the Application Lands.
10. On February 3, 2010, Delta, by its attorneys, filed with the Commission an application for an order under Rule 503.b.(9) and Rule 1202.d. limiting the number of well sites to no more than three per section on the following lands:
Township 9 South, Range 92 West, 6th P.M.
Section 6: All
Section 7: All
Township 9 South, Range 93 West, 6th P.M.
Section 12: All
Section 28: All
Section 29: All
and to no more than one (1) wellsite on the following truncated section:
Township 8 ˝ South, Range 93 West, 6th P.M.
Section 1: All
.
11. On March 19, 2010, the U.S. Department of the Interior, Bureau of Land Management (“BLM”) submitted a protest pursuant to the Memorandum of Understanding (“MOU”) between the Commission and the BLM, dated August 22, 1991, and indicated concern that (a) the proposed reduction in well sites might prevent production of the federal mineral estate, (b) the purported reasons for the reduction in well sites (protection of elk and cutthroat trout habitat) could be effectively addressed under current federal lease stiputlations or conditions of approval, and (c) a need to remedy a lease transfer error. On May 21, 2010, the BLM withdrew its protest based on Delta’s commitment to communitize federal minerals underlying certain of the Application Lands.
12. On May 21, 2010, an administrative hearing was conducted by a COGCC Hearing Officer.
13. Testimony and exhibits submitted in support of Delta’s application showed that Delta owns a leasehold or working interest in 100% of the minerals underlying the Application Lands. Further testimony showed that as owner and operator, Delta has the legal ability to determine the placement of wellsites and control the conduct of oil and gas operations on the Application Lands, in accordance with applicable Commission orders and rules.
14. Additional testimony and exhibits in support of the application indicated that pursuant to the relevant Commission orders, Delta is authorized to drill the equivalent of one well per 10 acres, with no more than one wellsite per 40-acre quarter-quarter section, or equivalent aliquot parts, for the production of gas and associated hydrocarbons from the Williams Fork and Iles Formations on the Application Lands. Further testimony showed that under Commission orders, Delta could construct and utilize up to 16 well sites per section, so that the limitation requested in the verified application represents an approximate 80% reduction in the number of well sites and associated surface disturbance on the Application Lands.
15. Further testimony indicated that Delta has determined that it is feasible to directionally drill natural gas wells from the limited number of well sites on the Application Lands and be able to maximize recovery and prevent waste of the natural gas and associated hydrocarbon resources. Additional testimony showed that the special combination of surface topography, depth of targets, type of production, availability of appropriate equipment and technology makes development of the resources from a limited number of sites on the Application Lands technically and economically feasible, when it would not be in many other oil and gas field settings.
16. Further testimony and exhibits showed that Delta has conducted its own wildlife and cultural surveys in the area through its consultant, Wildlife Specialities, LLC, and is committed to continuing these types of surveys in the future on the Application Lands to locate oil and gas well sites in areas that will mitigate wildlife impacts.
17. Further testimony indicated that Delta acknowledges the requirement to comply with other applicable provisions of the Commission’s 1200-Series Rules including, without limitation, the 16 requirements set forth in Rule 1203 (General Operating Requirements in Sensitive Wildlife Habitat and Restricted Surface Occupancy Areas), Rule 1204 (Other General Operating Requirements), and Rule 1205 (Requirements in Restricted Surface Occupancy Areas).
18. Testimony and exhibits in support of the application showed that Delta has successfully drilled six “S” shaped wells with a horizontal departure of between 2,000 and 2,400 feet in the Vega and North Vega Fields. Further testimony indicated that the mountainous terrain in the Vega, North Vega, and Buzzard Creek Fields, the geology, well depth, production and reserve characteristics make development from three pads per section in the Application Lands feasible, which may not be the case in other oil and gas fields in Colorado. Additional testimony indicated that Delta’s application will allow efficient extraction of the natural gas resources in a manner that will prevent waste.
19. Based on the testimony and exhibits in support of the application, having no active protests, and based on the Hearing Officer’s review of the application under Rule 511.d, the COGCC should enter an order limiting the number of well sites on the Application Lands and excusing Delta from consultation requirements with the DOW regarding said well sites.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Delta Petroleum Corporation shall:
1. Limit the number of well sites to no more than three (3) in each of Sections 6 and 7, Township 9 South, Range 92 West, 6th P.M., and restrict ground disturbing activities to no more than one (1) well site during the period of January 1 to March 31 in any year;
2. Limit the number of well sites to no more than three (3) in each of Sections 12, 28 and 29, Township 9 South, 93 West, 6th P.M., and restrict ground disturbing activities to no more than one (1) well site during the period of January 1 to March 31 in any year;
3. Limit the number of wellsites to a single location in Section 1, Township 8.5 South, Range 93 West, 6th P.M.
4. Comply with other applicable requirements of the 1200-Series Rules including, without limitation, Rule 1203 (General Operating Requirements in Sensitive Wildlife Habitat and Restricted Surface Occupancy Areas); Rule 1204 (Other General Operating Requirements); and Rule 1205 (Requirements in Restricted Surface Occupancy Areas).
5. Utilize survey data provided by a Certified Wildlife Biologist in locating well sites on the Application Lands to avoid or minimize impacts on wildlife and cultural resources.
IT IS FURTHER ORDERED, that Delta Petroleum Corporation shall be excused from the consultation requirements with the Colorado Division of Wildlife contained in Rule 306.c with respect to its subsequently-filed Oil and Gas Location Assessments (Form 2As) for the allowed well sites on the Application Lands.
IT IS FURTHER ORDERED, that should Delta Petroleum Corporation, or a successor-in-interest, decide that additional well sites are necessary for the prevention of waste and for the maximum efficient recovery of the resource, Delta Petroleum Corporation, or its successor-in-interest, shall file an application to vacate this order, to which the U.S. Department of the Interior, Colorado State Office of the Bureau of Land Management, and the Colorado Division of Wildlife shall be granted standing as a protestant or intervenor as-of-right; and, in considering such application to vacate this order, the Commission shall give primary consideration to whether or not Delta Petroleum Corporation, or its successor-in-interest, has negotiated and executed a wildlife mitigation plan or agreement with the Colorado Division of Wildlife.
IT IS FURTHER ORDERED, that this 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 this order.
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 June, 2010, as of June 1, 2010.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Carol Harmon, Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
June 29, 2010