BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION                                             )                     CAUSE NO. 1

AND ESTABLISHMENT OF FIELD RULES TO                                        )

GOVERN OPERATIONS IN THE VEGA UNIT,                                          )                     ORDER NO. 1-222

MESA COUNTY, COLORADO                                                                     )

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission at 9:00 a.m. on April 24, 2006, Suite 801, in The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to allow a reduction of the setback from the external unit boundary for wells located within the Vega Unit from 600 feet, as provided in Rules 318.a. and 318.d.(3) of the Rules and Regulations of the Commission, to 200 feet for wells producing from the Mesaverde Formation for certain lands in Townships 9 and 10, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

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 two thousand five hundred (2,500) feet in depth be located not less than six hundred (600) feet from any lease line, and located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing. Rule 318.d.(3) provides that no well in excess of 2,500 feet in depth shall be located less that 600 feet from the exterior boundary of a federal unit unless authorized by the Commission after notice to owners outside the federal unit area. The following lands are subject to Rules 318.a. and 318.d.(3):

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

Section 33: E E

Section 34: All

Section 35: W, SE, S NE

 

Township 10 South, Range 93 West, 6th P.M.

Section 3: Lots 1 through 4 (N N), S SW, SW SE

Section 4: SE SW, S SE

Section 9: NE, E NW, NE SE

Section 10: N, N SW, SE SW, SE

                        5. On April 11, 1977, the Bureau of Land Management approved the Vega Unit as a federal exploratory unit. The Vega Unit has been contracted to the following lands:

NORTH PARTICIPATING AREA

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

Section 33: E E

Section 34: All

Section 35: W, SE, S NE

 

Township 10 South, Range 93 West, 6th P. M.

Section 3: Lots 1, 2, 3, 4 (N N)

 

SOUTH PARTICIPATING AREA

 

Township 10 South, Range 93 West, 6th P. M.

Section 3: S SW, SW SE

Section 4: SE SW, S SE

Section 9: NE, E NW, NE SE

Section 10: N, N SW, SE SW, SE

                        6. On March 6, 2006, Delta Petroleum Corporation, by its attorney, filed with the Commission a verified application for an order to reduce the bottomhole setback distance of wells located within the Vega Unit from 600 feet to 200 feet from the exterior boundaries for the below-listed lands:

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

Section 33: E E

Section 34: All

Section 35: W, SE, S NE

 

Township 10 South, Range 93 West, 6th P.M.

Section 3: Lots 1 through 4 (N N), S SW, SW SE

Section 4: SE SW, S SE

Section 9: NE, E NW, NE SE

Section 10: N, N SW, SE SW, SE

                        7. Testimony and exhibits presented at the administrative hearing showed a letter from the Bureau of Land Management ("BLM"), stating that the BLM does not oppose the application. Additional testimony showed the proximity of the Vega Unit to other fields in the Piceance Basin.

                        8. Testimony and exhibits presented at the administrative hearing showed the depositional model for the Mesaverde Group indicating the similarities to other fields in the Piceance Basin.

                        9. Testimony and exhibits presented at the administrative hearing indicated that in order to maintain similar setbacks for wells located inside the Vega Unit and to prevent waste and protect correlative rights the application should be approved.

                        10. Testimony and exhibits presented at the administrative hearing showed a master plan of development for the Vega Unit presented to the BLM, to show Deltas plans for the Vega Unit.

                        11. No protests to the application have been filed with the Commission or the Applicant.

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

                        13. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order to allow a reduction of the setback from the external unit boundary for wells located within the Vega Unit from 600 feet, as provided in Rules 318.a. and 318.d.(3) of the Rules and Regulations of the Commission, to 200 feet for wells producing from the Mesaverde Formation for certain lands in Townships 9 and 10, Range 93 West, 6th P.M., for the production of gas and associated hydrocarbons from the Mesaverde Formation.

ORDER

                        NOW, THEREFORE, IT IS ORDERED, that a bottomhole setback distance of 200 feet from the exterior boundaries of the Vega Unit is hereby approved for wells drilled in the below-listed lands:

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

Section 33: E E

Section 34: All

Section 35: W, SE, S NE

 

Township 10 South, Range 93 West, 6th P.M.

Section 3: Lots 1 through 4 (N N), S SW, SW SE

Section 4: SE SW, S SE

Section 9: NE, E NW, NE SE

Section 10: N, N SW, SE SW, SE

                        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 May, 2006, as of April 24, 2006.

                                                                    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

May 11, 2006