BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND                                 )    CAUSE NO. 1

ESTABLISHMENT OF FIELD RULES TO GOVERN                             )

OPERATIONS IN THE WATTENBERG FIELD,                                     )    ORDER NO. 1‑155

WELD COUNTY, COLORADO                                                             )   

                                                                       

REPORT OF THE COMMISSION

 

This cause came on for hearing before the Commission at 9:00 a.m. on August 12, 2010, in the Adams County Economic Development Offices, 12050 N. Pecos St., Suite 200, Westminster, Colorado, on the verified application of Treasure Resources, Inc. for an order to direct Noble Energy, Inc. and Petro-Canada Resources (USA) Inc. to pay certain amounts of past due production proceeds to Treasure Resources from the Roth 24-21 Well and the Peppler 24-32 Well, located in the W½ of Section 24, Township 6 North, Range 64 West, 6th P.M. for the production of oil and gas and associated hydrocarbons from the Codell and Niobrara Formations.

 

FINDINGS

 

                        The Commission finds as follows:

 

                        1.  Treasure Resources, Inc. (“Treasure Resources”) as applicant herein, is an interested party in the subject matter of the above‑referenced matter.

 

                        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.

 

4.  Section 34-60-118.5(2)(a), C.R.S., provides in pertinent part that, unless otherwise agreed to, payments of proceeds derived from the sale of oil, gas, or associated products shall be paid by a payor to a payee commencing not later than six months after the end of the month in which production is first sold, and, thereafter, such payments shall be made on a monthly basis not later than 60 days for oil and 90 days for gas and associated products following the end of the calendar month in which subsequent production is sold. 

 

5.  Further, § 34-60-118.5(5), C.R.S., provides that, absent a bona fide dispute over the interpretation of a contract for payment, the Commission shall have jurisdiction to determine the date on which payment of proceeds is due a payee, the existence or nonexistence of an occurrence which would justifiably cause a delay in payment, and the amount of the proceeds plus interest, if any such amounts are due a payee by a payor.

 

6.  Rule 503.b.(8) of the Oil and Gas Conservation Commission authorizes the mineral interest owner to seek a Commission hearing on provisions related to the measurement of oil, gas, and associated products pursuant to Rule 328 or 329, to include the reconciliation of sales.

 

7.  On February 19, 1992, the Commission issued Order No. 407-87 (amended August 20, 1993), which among other things, established 80-acre drilling and spacing units for the production of oil and/or gas from the Codell and Niobrara Formations underlying certain lands, including Section 24, Township 6 North, Range 64 West, 6th P.M., with the permitted well locations in accordance with the provisions of Order No. 407-1.

 

8.  On March 3, 2007, Petro-Canada Resources (USA) Inc. (“Petro-Canada”) completed the Roth #24-21 Well (API # 05-123-24578) in the NE¼ NW¼ of Section 24, Township 6 North, Range 64 West, 6th P.M. in the Codell and Niobrara Formations within the 80-acre drilling and spacing unit designated for the E½ NW¼ of said Section 24.  On October 3, 2007, Petro-Canada completed the Peppler #24-32 Well (API # 05-123-26192) in the NW¼ SW¼ of said Section 24 in the Codell and Niobrara Formations within the 80-acre drilling and spacing unit designated for the W½ SW¼ of said Section 24.  The two wells are known collectively as the “Wells.”

                       

9.  On June 18, 2010, Treasure Resources, the owner of certain mineral interests underlying Section 24, Township 6 North, Range 64 West, 6th P.M., by its attorney, filed a written request for a Commission hearing, related to the measurement of oil, gas, and associated products pursuant to Rule 328 or 329, to include the reconciliation of sales, alleging that neither Petro-Canada nor Noble Energy, Inc., the successor operator, have made any production payments to it for production taken from the Wells.

 

10.  On July 29, 2010, Noble, as the current owner and operator of the Wells, filed a timely protest to Treasure Resources’ application, alleging that the Commission did not have jurisdiction over the application because the issues are a matter of a bona fide dispute regarding the interpretation of a contract.  The protest included a motion to dismiss.

 

11.  On August 4, 2010, a pre-hearing conference was held before a COGCC Hearing Officer.  Based on a title opinion brought to the pre-hearing conference by Noble, Treasure Resources agreed that the Peppler 24-32 Well was drilled on land in which Treasure Resources did not have a lease and should be excluded from its application.

 

12.  At the pre-hearing conference, Noble argued that this matter is a bona fide dispute over contract interpretation.  Treasure Resources argued that it was a matter of statutory interpretation, not contract interpretation, and that the Commission’s Assistant Attorney General could advise the Commission about relevant estate succession laws in Colorado that pertain to this dispute.

 

13.  Based on the arguments presented at the pre-hearing conference, the Hearing Officer recommended that the Commission find this matter to be an issue of contract interpretation and, therefore, outside its jurisdiction and that the Commission deny Treasure Resources application.  The Hearing Officer also determined that the only issue for the Commission to consider at the hearing would be the Motion to Dismiss.

 

14.  On August 9, 2010, Noble filed a brief in support of its protest and motion to dismiss. 

 

15.  At the hearing on August 12, 2010, the parties made their respective arguments to the Commission on the Motion to Dismiss.

 

16.   Treasure Resources, Inc. agreed to be bound by oral order of the Commission. 

 

                        17.  Based on the facts stated in the verified application and the testimony presented at the time of hearing by the applicant and the protestant, the Commission should deny the application of Treasure Resources for lack of jurisdiction and grant the Motion to Dismiss filed by Noble. 

 

O R D E R

 

NOW, THEREFORE IT IS ORDERED, that the request of Treasure Resources, Inc. for an order to direct Noble Energy, Inc. and Petro-Canada Resources (USA) to pay certain amounts of past due production proceeds to Treasure Resources from the Roth 24-21 Well and the Peppler 24-32 Well, located in the W½ of Section 24, Township 6 North, Range 64 West, 6th P.M. for the production of oil and gas and associated hydrocarbons from the Codell and Niobrara Formations, is hereby denied.

 

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, 2010, as of August 12, 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

September 8, 2010