BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
IN THE MATTER OF THE AMENDED APPLICATION OF HIGHPOINT OPERATING CORPORATION FOR A HEARING ON NINE FORM 2 APPLICATIONS FOR PERMITS TO DRILL THE GRINDE WELLS AND THREE FORM 2A OIL AND GAS LOCATIONS FOR THE DEVELOPMENT AND OPERATION OF THE CODELL AND NIOBRARA FORMATIONS IN SECTIONS 4 AND 5, TOWNSHIP 1 NORTH, RANGE 64 WEST, 6TH P.M., WATTENBERG FIELD, WELD COUNTY, COLORADO
CAUSE NO. 1
DOCKET NO. 180700493
TYPE: GENERAL ADMINISTRATIVE
ORDER NO. 1-
REPORT OF THE COMMISSION
The Commission heard this matter on September 18, 2018, at the Garfield County Sheriff's Annex – Rifle, 106 County Road 333-A, Rifle, Colorado 81650 upon exceptions to the Hearing Officer’s Order Dismissing Applications.
The Commission finds as follows:
1. HighPoint Operating Corporation (“HighPoint) (Operator No. 10071), formerly Bill Barrett Corporation (“BBC”), is an interested party in the subject matter of the above-referenced hearing.
2. Verdad Resources, LLC (“Verdad”) (Operator No. 10651) is an interested party in the subject matter of the above-referenced hearing.
3. The Director of the Commission is an interested party in the subject matter of the above-referenced hearing.
4. Due notice of time, place and purpose of the hearing has been given in all respects as required by law.
5. The Commission has jurisdiction over the subject matter embraced in said Notice and the parties interested therein, and has authority to promulgate the hereinafter prescribed order pursuant to the Oil and Gas Conservation Act (“Act”).
PROCEDURAL AND FACTUAL HISTORY
6. On December 4, 2017, Verdad submitted eight (8) Reiter Applications for Permits to Drill with a surface location in the SE¼ of Section 4, Township 1 North, Range 64 West, 6th P.M., and bottom hole locations in the S½ of Section 5, Township 1 North, Range 64 West, 6th P.M., in addition to an associated Form 2A, Oil and Gas Location Assessment, for the Reiter Pad (collectively the “Verdad Reiter Permit Applications”).
7. On December 13, 2017, BBC submitted five Grinde Applications for Permits to Drill with a surface location in the NW¼ of Section 5, Township 1 North, Range 64 West, 6th P.M., and bottomhole locations in the N½ of Section 4, Township 1 North, Range 64 West, 6th P.M., and the Grinde North Pad Form 2A, Oil and Gas Location Assessment, located in the SW¼NW¼ of Section 5, Township 1 North, Range 64 West, 6th P.M.
8. On December 19, 2017, BBC submitted a Form 2A, Oil and Gas Location Assessment, for the “Grinde South I Pad”, for a new location in the NW¼SW¼ of Section 5, Township 1 North, Range 64 West, 6th P.M.
9. On January 16, 2018, BBC submitted a Form 2A, Oil and Gas Location Assessment, for the “Grinde South II Pad” for a new location in the NW¼SW¼ of Section 5, Township 1 North, Range 64 West, 6th P.M.
10. On January 22 and January 25, 2018, BBC submitted four additional Grinde APDs. Collectively, all BBC permits are known herein as the “HighPoint Grinde Permit Applications.”
11. On April 23, 2018, HighPoint applied to the Commission for a hearing on the HighPoint Grinde Permit Applications pursuant to Rule 303.c. (“HighPoint 303.c. Application”). HighPoint subsequently amended its Application on May 7, 2018.
12. The HighPoint Grinde Permit Applications all passed completeness review more than 75 days prior to May 7, 2018.
13. On July 13, 2018, Verdad protested the HighPoint 303.c. Application.
14. This matter was heard by the Commission at its September 17-18, 2018 meeting.
15. HighPoint, Verdad, and the Director presented argument on the issues certified by the Hearing Officer in the September 11, 2018 Final Prehearing Order.
16. The Director explained that HighPoint’s Grinde APDs, which were submitted after the Verdad Reiter Permit Applications, result in an uneven distribution of 16 horizontal wellbores in the unit. When Staff is faced with competing applications, as they are in the instant matter, they will work with the operators to address a conflict.
17. Staff did not have the opportunity to confer with HighPoint on the Grinde APDs and 2A prior to the filing of the HighPoint 303.c. Application. From March 2017, through August 2018, applications to the Commission have increased exponentially. The Director argued to the Commission that an average of 702 applications are received each month, and an average of 379 applications are approved each month. To manage the backlog of pending applications, Staff has relied on operators’ priority lists to identify applications that need to be processed as soon as possible. Operators typically update their priority lists on a monthly basis, The Director argued that HighPoint had not placed the Grinde Permit Applications on its priority list. Had HighPoint placed the Grinde Permit Applications on its priority list, Staff would have addressed the conflict between HighPoint’s applications and the Verdad Reiter Permit Applications.
18. Commission deliberated following argument.
19. The Commission voted unanimously (7-0) to deny HighPoint’s request to dismiss Verdad’s Protest.
20. The Commission voted unanimously (7-0) to deny HighPoint’s 303.c. Application and instruct the parties to place any permits they wish to have processed on the Commission Staff’s priority list.
21. COGCC Rule 303.c.(2)A. provides that “[a]n operator may request a hearing before the Commission on an Application for Permit-to-Drill, Form 2, and on an Oil and Gas Location Assessment, Form 2A, that is not a Large UMA Facility if the Director has not issued a decision within 75 days following a determination that the application is complete.”
22. Rule 303.c. does not require the Commission to instruct the Director to process permit applications that were not decided upon with 75 days of the completeness determination. It is within the Commission’s discretion to determine what relief, if any, to provide to the applicant.
23. Rule 303.c. allows a permit applicant to apply to the Commission for a hearing, no matter what underlying reason the applicant has for requesting hearing.
24. The Director presented the Commission with a sufficient explanation as to why staff had not yet processed HighPoint’s Grinde Permit Applications. In addition to the fact that at least some of the Grinde Permit Applications conflicted with permit applications filed by Verdad, HighPoint had not placed the Grinde Permit Applications on the staff priority list.
25. It would be inappropriate for the Commission to instruct the Director to reach any decision on HighPoint’s Grinde Permit Applications, since the Applications must proceed through staff’s technical review process before a decision approving the Applications can be made. Staff should be allowed to conduct permit reviews in a manner that is well established and known to the public and the regulated community.
26. The priority list process created by staff is well known to the parties. The priority list allows operators to have their most time-sensitive projects addressed no matter when those permit applications were filed. Further, the priority list process allows staff to be responsive to an operator’s needs and to manage the high number of pending permit applications. It would be inappropriate to instruct staff to place a priority on certain permit applications simply because the operator has filed an application under 303.c. particularly where, as in this case, the operator does not place the application on the priority list.
27. Verdad has standing to protest in this matter. Rule 509 provides that any person who meets the Commission’s definition of a “Protestant” may file a protest. A Protestant is defined as “a person who has timely filed a protest in a relevant proceeding and has demonstrated to the Commission's satisfaction that the person filing the protest would be directly and adversely affected or aggrieved by the Commission's ruling in the proceeding, and that any injury or threat of injury sustained would be entitled to legal protection under the act.” Series-100 Rules (Definitions). This definition is consistent with the elements of standing articulated in Colorado law. See Ainscough v. Owens, 90 P.3d 851, 855 (Colo. 2004).
28. Verdad’s correlative rights, which include the ability to file for and obtain permits to drill wells, are entitled to protection under the Act. §34-60-102(1)(a)(III), C.R.S.
29. The HighPoint Grinde Applications result in an uneven distribution of 16 horizontal wellbores in the unit. The Director cannot approve both Verdad’s Reiter Permit Applications and the overlapping Grinde Permit Applications. Had the Commission instructed the Director to process the Grinde Permit Applications, Verdad’s Reiter Permit Applications would have been rejected by staff. Verdad could thus have been affected or aggrieved by the Commission’s ruling.
30. As Verdad has both a legally protected interest under the Act and could have been affected or aggrieved by the Commission’s ruling on the HighPoint 303.c. Application, Verdad is a proper Protestant under Rule 509.
IT IS HEREBY ORDERED:
2. Verdad’s Protest is ACCEPTED.
3. The parties are ORDERED to place any permit applications they identify as a priority on their priority list for staff.
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 application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this 16th day of October, 2018, as of September 18, 2018.
CORRECTED this 31st day of October, 2018, as of September 18, 2018.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
Julie Spence Prine, Secretary
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on the ___ day of November, 2018, a true and correct copy of this Order was served on the following by email and U.S. Mail, first-class postage prepaid, at the addresses shown below:
Attorneys for Complainant:
Jamie L. Jost
Kelsey H. Wasylenky
Jost Energy Law, P.C.
1401 17th Street, Suite 370
Denver, Colorado 80203
Attorneys for Verdad Resources, LLC
Joseph C. Pierzchala
Geoffrey W. Storm
Welborn Sullivan Meck & Tooley, P.C.
Attorneys for Verdad Resources, LLC