BEFORE THE OIL AND GAS CONSERVATION COMMISSION
STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND ) CAUSE NO. 1
ESTABLISHMENT OF FIELD RULES TO )
GOVERN OPERATIONS IN AN UNNAMED FIELD, ) ORDER NO. 1-163
MONTEZUMA COUNTY, COLORADO )
REPORT OF THE COMMISSION
This cause came on for hearing before the Commission on January 13, 2011 at 9:00 a.m. at The Chancery Building, 1120 Lincoln Street, Suite 801, Denver, Colorado, after giving Notice of Hearing as required by law, for reconsideration of an order changing the operator of the Mary Akin #2 Well located in the SE¼ SW¼ of Section 27, Township 38 North, Range 14 West, N.M.P.M.
The Commission finds as follows:
1. Gas Development Corporation (“GDC”) 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 October 30, 2009, GDC, by its attorney, filed with the Commission a verified application for an order declaring that GDC is the operator of the Mary Akin No. 2 Well (“the Well”) located at a permitted location of 660 feet FSL and 2,310 feet FWL in the SE¼ SW¼ of Section 27, Township 38 North, Range 14 West, N.M.P.M. GDC alleged that it is the owner of the Well and a mineral lease with John Akin (“GDC Lease”) on which the Well is located and that it had been unable to secure the requisite signature of the previous operator, Black Resources, Inc. (“Black”), for the Form 10.
GDC’s application sets forth a history of litigation (involving at least three lawsuits) between GDC and Black associated with the Well and GDC Lease that began in 1998 and continued through at least March 26, 2009, the date of the most recently announced decision by the Colorado Court of Appeals.
5. On March 10, 2010, Black, by its attorney, filed a protest to GDC’s application and alleged that either the Commission lacked jurisdiction to grant the application or, in the alternative, that the Commission should not exercise its jurisdiction since the matter involves an ongoing dispute between private parties and would create an unnecessary conflict with the federal government.
Black’s protest alleged that the Well is situated on and remains a part of the Mary Akin Federal Unit (“Unit”) and that the U.S. Department of Interior, Bureau of Land Management, Colorado State Office (“BLM”) continues to recognize Black as operator of the Unit and the Well.
6. On March 17, 2010, the BLM submitted a protest to GDC’s application pursuant to Section F.3 of that certain Memorandum of Understanding (“MOU”) between the Commission and the BLM, dated August 22, 1991.
In relevant part, Section F.3 of the MOU provides that matters involving federal and nonfederal minerals shall be initially submitted to the Commission for a decision; however, when matters involve federal or Indian lands, the BLM may submit its protest specifying conditions, if any, under which the BLM would accept the relief requested. The Commission must either issue its order incorporating the conditions or relinquish jurisdiction of the matter to the BLM insofar as it relates to federal or Indian lands.
The BLM’s protest under the MOU alleged that the Well is committed to the Unit and is subject to the BLM-approved Mary Akin Unit Agreement for the Development and Operation of the Mary Akin Unit Area (“Unit Agreement”). The Unit has contracted to Participating Area comprised of 409.86 acres, of which approximately 51% are federal lands. Effective November 8, 1993, BLM approved the designation of Black as the Unit operator; BLM recognizes Black as the current designated operator of the Unit.
BLM’s recommended solution to this matter was for the Commission to accept the Unit Agreement as controlling and deny the request by GDC to be declared the operator of the Well. Pursuant to the MOU, BLM requested the Commission either issue an order incorporating the recommended solution or relinquish jurisdiction over the matter to the BLM.
7. Rule 312.a. of the Rules and Regulations of the Commission requires an operator to file a Change of Operator, Form 10, within 15 days of the transfer of ownership. Section 34-60-103(6.8), C.R.S., as amended, defines “operator: as any person who exercises the right to control the conduct of oil and gas operations.” Black is the operator of the Well according to the Commission’s records.
8. On April 24, 2010, effective as of March 25, 2010, by Order 1-150 in Cause No. 1, the Commission relinquished jurisdiction of this matter to the U.S. Department of Interior, Bureau of Land Management, Colorado State Office, to resolve issues between the parties and make a determination as to the operator of the Mary Akin No. 2 Well, located in the SE¼ SW¼ of Section 27, Township 38 North, Range 14 West, N.M.P.M. A copy of Cause No. 1, Order 1-150, is attached hereto for reference.
9. By letter dated December 13, 2010, United States Department of Interior Bureau of Land Management Deputy State Director Lynn E. Rust notified the Commission BLM had been unable to resolve the issue of the operator of the Mary Akin Federal Unit, and that BLM no longer objects to the Commission determining who the Commission recognizes as operator of the Mary Akin No. 2 well. The Commission understands BLM will continue to regulate the operation of the federal Mary Akin Unit in accordance with the unit agreement.
10. Black’s mineral lease with John Akin, that includes the property on which the Mary Akin No. 2 Well is located, was judicially terminated by the Montezuma County District Court effective May 31, 2002. Application Exhibit C. In addition, to settle another lawsuit concerning the Akin property and the Mary Akin No. 2 Well, Mr. Black stipulated he would not enter upon the Akin property for any purpose. Application Exhibit D. Accordingly, it appears Black has no right under state law to enter the Akin property or operate the Mary Akin No. 2 Well. BLM asserts the Mary Akin No. 2 well is located on property that is within the boundaries of the Mary Akin Federal Unit.
11. The Commission does not have jurisdiction to determine whether the Mary Akin No. 2 Well or the GDC Lease are committed to the Mary Akin Federal Unit and finds state court decisions conflict with an Interior Board of Land Appeals decision on this question. Application Exhibits F, G, H; In re Gas Development Corporation, IBLA 2008-250, May 12, 2009, 177 IBLA 201 (attachment to Protest of Black Resources, Inc.). Similarly, the Commission does not have jurisdiction to designate the unit operator of the Mary Akin Federal Unit.
NOW, THEREFORE, IT IS ORDERED, Gas Development Corporation is the operator of the Mary Akin No. 2 Well for purposes of Commission administration of that well effective immediately. An approved Form 10 indicating the change of operator from Black Resources, Inc. to Gas Development Corporation is attached hereto.
IT IS FURTHER ORDERED, the Commission takes no position regarding unit operation of the Mary Akin Federal Unit, including who is the operator of the Unit. The Commission takes no position on whether the Mary Akin No. 2 Well or the GDC Lease with Mr. Akin is committed to the Mary Akin Federal Unit.
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 January, 2011 as of January 13, 2011.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
January 18, 2011