BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF APPLICATIONS BY  EXTRACTION OIL & GAS INC. FOR ORDERS POOLING INTERESTS IN CERTAIN DESIGNATED HORIZONTAL WELLBORE SPACING UNITS FOR CERTAIN PORTIONS OF LAND SET FORTH THEREIN, FOR THE DEVELOPMENT AND OPERATION OF THE CODELL AND NIOBRARA FORMATIONS, WATTENBERG FIELD, LARIMER AND WELD COUNTIES, COLORADO

Cause No. 407

 

Docket NoS. 180600431           

                       

TYPE:  POOLING

 

ORDER No. 1-114 214

CORRECTED

 

 

 

COMMISSION ORDER DENYING

EXTRACTION OIL & GAS, INC.’S MOTION FOR RECONSIDERATION (CORRECTED)

 

The Commission heard this matter on July 30, 2018, at the Colorado Oil and Gas Conservation Commission (“Commission” or “COGCC”), 1120 Lincoln Street, Suite 801, Denver, Colorado, upon a Motion for Reconsideration of Hearing Officer’s Continuance by Extraction Oil & Gas, Inc. (“Extraction”).

 

The Commission finds as follows:

 

1.                   Extraction Oil & Gas Inc. (Operator No. 10459) (“Extraction”), as movant herein, is an interested party in the subject matter of the above-referenced hearing.

 

2.                   Ivar W. Larson, Donna M. Larson, and Larson Front Range Farms, as respondents herein, are interested parties in the subject matter of the above-referenced hearing. Mr. Larson, Mrs. Larson, and LFRF are collectively referred to herein as “Larson.”

 

3.                   Due notice of time, place, and purpose of the hearing has been given in all respects are required by law.

 

4.                   The Commission has jurisdiction over the subject matter embraced in said matter and the parties interested therein, and has authority to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act (“Act”), §34-60-101, et seq.

 

PROCEDURAL AND FACTUAL HISTORY

 

5.         This matter arises out of pooling Applications submitted by Extraction in the above referenced docket and other dockets (“Pooling Applications”). Larson protested the Pooling Applications.

 

6.         On July 20, 2018, the parties appeared at a Final Prehearing Conference (“Final PHC”) for the Pooling Applications at the Commission’s offices. Larson and its counsel appeared personally at that Final PHC. Counsel for Extraction appeared telephonically. No representative for Extraction attended the Final PHC in person. 

 

7.         Before the Final PHC, Larson submitted a motion to continue the Pooling Applications until the litigation between Larson, Extraction, and the COGCC regarding wellbore spacing units concluded (18CV31404, Denver District Court). Extraction opposed the continuance. The Hearing Officer orally denied Larson’s motion for continuance. No party took exception to this denial. 

 

8.         At the Final PHC, the Hearing Officer orally continued the Pooling Applications to the Commission’s September 17-18, 2018 meeting in Rifle, Colorado. One of the Hearing Officer’s reasons for continuing the Pooling Applications was that the parties were not prepared to go to hearing. The Hearing Officer determined that documentation of nearby leases was not sufficiently clear to be submitted to the Commission. Extraction objected to the Hearing Officer’s continuance. Larson did not object.

 

9.         On July 23, 2018, the Hearing Officer issued a written order setting out grounds for continuing the Pooling Applications to the September 17-18, 2018 Commission meeting. The Hearing Officer stated that: a) under the Case Management Order a joint proposed final prehearing order was due on July 18, 2018, and no joint proposed final prehearing order was submitted before the Final PHC; b) Extraction submitted a proposed final prehearing order, without consulting Larson’s counsel, eleven (11) minutes before the Final PHC; and c) counsel for Extraction did not abide by the Hearing Officer’s direction to appear in person at the Final PHC. The Hearing Officer thus found good cause to continue the Pooling Applications.

 

10.       On July 23, 2018, Extraction filed a Motion for Reconsideration of Hearing Officer’s Continuance (“Motion”). Larson responded in opposition to the Motion on July 24, 2018 (“Response”).   

 

11.       Extraction argued in the Motion that it would be prejudiced by a continuance because Extraction had contracted with a service company and completion crews to complete the wells drilling in the lands covered by the Pooling Applications, and the continuance would cause Extraction economic hardship and require Extraction to demobilize the completions crew. Motion, p. 2. Extraction also admitted that it failed to timely prepare and circulate a joint proposed final prehearing order. Id.

 

12.       Larson argued in its response that they had stopped preparing for hearing after the Hearing Officer orally continued the Pooling Applications on July 20, 2018, and that it would be prejudicial to require to Larson to go to hearing at the July 30-August 1, 2018 Commission Meeting. Response, p. 3. Larson also argued that the parties had not, at that point, conferred regarding a joint proposed final prehearing order and argued that the documentation regarding nearby leases had not been improved since the Final PHC. Id.

 

13.       On July 25, 2018, the Hearing Officer issued an order setting the Motion for oral argument at the July 30-August 1, 2018 Commission meeting.

 

HEARING

 

1.            On July 30, 2018, the Commission heard argument from both parties solely on the Motion. 

 

2.            Extraction and Larson were present at hearing, and through counsel, presented the arguments stated in their respective pleadings.

 

3.            Extraction argued that it would be prejudiced by a continuance for the same reasons stated in its Motion. Extraction agreed that a pooling order was not required under Commission regulations to complete the wells, but Extraction preferred to obtain a pooling order to avoid potential mineral trespass issues. Extraction also argued that waste could result if drilling did not proceed as scheduled.

 

4.            Larson argued that nothing had changed since the Hearing Officer set oral argument on the Motion. No joint final prehearing order had been discussed and the parties had not yet resolved the lease documentation issues that arose at the Final PHC. Larson also argued that it would be prejudiced if the Pooling Applications were not continued, as stated in their Response.

 

COMMISSION DELIBERATIONS

 

5.            Commissioner Randall stated that prehearing deadlines are necessary for the Commission to prepare for hearing. He stated that the Commission did not have adequate time to prepare for a hearing on the merits at the end of the agenda. He also did not agree that waste of the resource would occur as a result of delay.

 

6.            Commissioner Overturf found that the delay was the result of Extraction’s failure to comply with the Case Management Order and timely submit a joint proposed final prehearing order.

 

7.            Commission Hawkins recognized that there may be a substantial economic impact to Extraction, but that any impact was not the fault of the Commission or its Staff. He stressed the need to be supportive of the Hearing Officers and their prehearing procedures.

 

8.            In response to a question from Co-Vice Chair Boigon, the Hearing Officer stated that he continued the Pooling Applications to the September 17-18, 2018 Commission Meeting because there was no final prehearing order in place and because there was not adequate documentation of the location of leases. Therefore, the Hearing Officer found that the Pooling Applications was not ready to be heard by the Commission at the July 30-August 1, 2018 Commission meeting.

 

9.            Following deliberations, the Commission unanimously denied the Motion.

 

COMMISSION FINDINGS AND CONCLUSIONS

 

10.          Commission Rule 506.c. provides that a hearing officer “may for good cause cancel or continue any hearing to another date.” The Hearing Officer thus had the discretion to continue the Pooling Applications.

 

11.           In deciding whether to continue a matter, the Hearing Officer should consider the particular circumstances of a particular case and weigh the rights of the parties to a fair hearing against any prejudice that may result from a delay. See Bithell v. Western Care Corp., 762 P. 2d 708 (Colo. App. 1998).

 

12.          The Commission concludes that the Hearing Officer had good cause to continue the Pooling Applications. Due to the lack of a final prehearing order, as well as the lack of reliable supporting documentation, the Pooling Applications was not ready to be heard by the Commission.

 

13.          The Commission also concludes that any economic harm to Extraction was the result of Extraction’s failure to follow the Commission’s prehearing procedures, and that there was not convincing evidence that any waste would occur as a result of the continuance.

 

ORDER

 

IT IS HEREBY ORDERED:

 

1.            Extraction’s Motion to Reconsider the Hearing Officer Continuance is hereby DENIED.

 

IT IS FURTHER ORDERED:

 

1.         The provisions contained in the above order shall become effective immediately.

 

2.         The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

 

3.         Under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.

 

4.         An Applications for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

 

            ENTERED this 28th day of August, 2018, as of July 30, 2018.

            CORRECTED this 25th day of September, 2018, as of July 30, 2018.    

           

 

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

 

 

                                                                        By____________________________________       

                                                                                    Julie Spence Prine, Secretary

 

 


 

CERTIFICATE OF SERVICE

On September 25th, 2018, a true and correct copy of the foregoing was sent by electronic mail to the following:

 

Jillian Fulcher

James Parrot

Jobediah Rittenhouse

Attorneys for Extraction Oil & Gas Inc.

jfulcher@bwenergylaw.com

jparrot@bwenergylaw.com

jrittenhouse@bwenergylaw.com

 

Thomas J. Wolf

Mark E. Lacis

John E. Jennings

Attorneys for Ivar W. Larson, Donna M. Larson, and Larson Front Range Farms, LLC

twolf@irelandstapleton.com

mlacis@irelandstapleton.com

jjennings@irelandstapleton.com

 

 

 

 

 

 

 

_____________________________________

                                                                            James P. Rouse, Hearing Officer