BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF AN APPLICATION BY SRC ENERGY INC. FOR AN ORDER APPROVING A COMPREHENSIVE DRILLING PLAN FOR APPROXIMATELY 23,517 ACRES IN PORTIONS OF TOWNSHIP 4 NORTH, RANGE 65 WEST, 6TH P.M., TOWNSHIP 4 NORTH, RANGE 66 WEST, 6TH P.M., TOWNSHIP 4 NORTH, RANGE 67 WEST, 6TH P.M., TOWNSHIP 5 NORTH, RANGE 66 WEST, 6TH P.M., AND TOWNSHIP 5 NORTH, RANGE 67 WEST, 6TH P.M., WATTENBERG FIELD, WELD COUNTY, COLORADO

 

 

CAUSE NO. 1

 

DOCKET NO. 190400306

 

TYPE: GENERAL ADMINISTRATIVE

 

ORDER NO. 1-233

 

REPORT OF THE COMMISSION

 

The Commission heard this matter on May 21, 2019, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, 80203, upon application for an order to stay acceptance of certain applications for permits-to-drill, Oil and Gas Location Assessments, and applications to establish drilling and spacing units in all or portions of Township 4 North, Ranges 65 through 67 West, 6th P.M. and Township 5 North, Ranges 66 and 67 West, 6th P.M., until such time as the Commission has entered an order on SRC Energy Inc.’s application for a Comprehensive Drilling Plan.

 

FINDINGS

The Commission finds as follows:

 

1.            SRC Energy Inc., (Operator No. 10311), (“Applicant” or “SRC”), 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 216. of the Rules and Regulations of the Oil and Gas Conservation Commission provides that operators may propose to the Director a Comprehensive Drilling Plan (“CDP”). CDPs provide a broad approach to identifying foreseeable oil and gas activities in a specific geographic area, concurrent with identifying measures to minimize adverse impacts to public health, safety, welfare, and the environment and wildlife resources within that area.

5.            On January 29, 2019, amended February 15, 2019, SRC filed with the Commission pursuant to § 34-60-105(1), C.R.S., a verified application (“Application”) for an order to 1) establish and approve a Rule 216. CDP for the below-described lands (“Application Lands”), for the comprehensive, efficient, and effective development and operation of the Codell and Niobrara Formations; 2) stay acceptance of applications for permits-to-drill (“APD”), Oil and Gas Location Assessments (“Form 2As”), and applications to establish drilling and spacing units in the southern portion of the Application Lands for all Owners and Operators until such time as the Commission has entered an order on the CDP; and 3) to stay acceptance of APDs, Form 2As, and applications to establish drilling and spacing units in the northern portion of the Application Lands for all Owners and Operators except Applicant, until such time as the Commission has entered an order on the CDP:

Township 4 North, Range 65 West, 6th P.M.

Section 6: S/2

Section 7: All

Section 18: All

Section 19: All

Section 30: All

 

Township 4 North, Range 66 West, 6th P.M.

Section 1: All

Section 2: All

Section 3: All

Section 4: All

Section 5: All

Section 6: N/2, SE/4

Section 10: All

Section 11: All

Section 12: All

Section 13: All

Section 14: All

Section 15: All

Section 16: S/2, NE/4

Section 17: S/2

Section 18: All

Section 19: All

Section 20: All

Section 21: All

Section 22: N/2

Section 23: All

Section 24: All

Section 25: All

 

Township 4 North, Range 67 West, 6th P.M.

Section 1: N/2

Section 2: N/2

Section 3: N/2

Section 4: NE/4

 

Township 5 North, Range 66 West, 6th P.M.

Section 31: All

Section 32: All

Section 33: All

Section 34: All

Section 35: All

Section 36: All

 

Township 5 North, Range 67 West, 6th P.M.

Section 25: All

Section 26: All

Section 35: All

Section 36: All

 

23,677 acres, more or less, Weld County, Colorado.

 

6.            On March 28, 2019, at the request of a working interest owner, SRC voluntarily withdrew the SE¼ of Section 6, Township 4 North, Range 65 West, 6th P.M. from its proposed CDP and request for stay.  This withdrawal was unopposed by interested parties.  Accordingly, the Application Lands subject to the relief requested by the Applicant now consist of approximately 23,517 acres, more or less.

7.            SRC has a high working interest (approximately 20,550 net mineral acres, or 87.45% working interest) within the Application Lands.

8.            SRC’s Application sets forth the benefits of a CDP for the Application Lands. These benefits include:

a.            Fostering economic and efficient development of the oil and gas resources in the Application Lands while preventing waste.

b.            Location of facilities as far as possible from existing occupied dwelling units in the Application Lands.

c.            Centralization and minimization of surface facilities, such that a single production facility will be designed to service between 12 and 48 horizontal wells.

d.            Significant reduction in the use of tanks in the Application Lands, using pipelines to move oil, gas and produced water.

e.            Significantly fewer environmental impacts than would otherwise be associated with piecemeal development of the Application Lands by multiple operators.

f.             Plugging and abandonment of at least 281 vertical and directional wells in the area, with associated surface reclamation.

9.            SRC’s Application requests a two-tiered stay of APDs, Form 2As, and applications to establish drilling and spacing units. SRC’s Application explains that a stay in the Application Lands is necessary to fulfill the purpose of Rule 216.a. A two-tier stay will allow SRC and other stakeholders to meaningfully address foreseeable oil and gas activities in the Application Lands, and discuss mitigation measures for minimizing impacts from the activities. Without a stay, any Operator or Owner may still file their own APDs, Form 2As, or applications to establish drilling and spacing units, which will frustrate the purpose of a CDP. Such activities are not and will not be foreseeable to SRC, the Commission and other stakeholders, and will prohibit the stakeholders from addressing impacts from those activities within the final CDP. Moreover, allowing multiple Operators to continue to file APDs, Form 2As, and applications to establish drilling and spacing units will create additional environmental and surface impacts within the Application Lands—an outcome that the CDP process seeks to prevent. SRC also presents a robust legal argument in support of the Commission’s authority to issue a stay. Application at pages 10 – 12. Accordingly, SRC maintains a stay is necessary and proper.

Tier One Stay

 

10.          SRC’s Application requests that the Commission enter an order staying acceptance of all APDs, Form 2As, and applications to establish drilling and spacing units within the below-described lands (“Tier One Lands”) filed by any Operator or Owner, other than Applicant, until the Commission issues a final decision on the CDP at a future hearing or for eight months from the date of an order granting the stay, whichever is earlier.

The Tier One Lands lie within the northern portion of the proposed CDP, and apply to the Tier One Stay:

 

Township 4 North, Range 66 West, 6th P.M.

Section 2: All

Section 3: All

Section 4: All

Section 5: All

Section 6: N/2, SE/4

 

Township 4 North, Range 67 West, 6th P.M.

Section 1: N/2

Section 2: N/2

Section 3: N/2

Section 4: NE/4

 

Township 5 North, Range 66 West, 6th P.M.

Section 31: All

Section 32: All

Section 33: All

Section 34: All

Section 35: All

Section 36: All

 

Township 5 North, Range 67 West, 6th P.M.

Section 25: All

Section 26: All

Section 35: All

Section 36: All

 

11.          SRC’s Application showed that its current drilling schedule focuses on the Tier One Lands and that its drilling plans for the Tier One Lands are integral to its exploration and development plans through the first quarter of 2020. As such, SRC requests that it be allowed to continue submitting APDs, Form 2As, and applications to establish drilling and spacing units for the Tier One Lands pending a final Commission decision on the CDP.

Tier Two Stay

 

12.          SRC’s Application further requests that the Commission enter an order staying acceptance of all applications for APDs, Form 2As, and applications to establish drilling and spacing units within the below-described lands (“Tier Two Lands”) filed by any Operator or Owner, including Applicant, until the Commission issues a final decision on the CDP at a future hearing.

The Tier Two Lands lie within the southern portion of the proposed CDP, and apply to the Tier Two Stay:

 

Township 4 North, Range 65 West, 6th P.M.

Section 6: SW/4

Section 7: All

Section 18: All

Section 19: All

Section 30: All

 

Township 4 North, Range 66 West, 6th P.M.

Section 1: All

Section 10: All

Section 11: All

Section 12: All

Section 13: All

Section 14: All

Section 15: All

Section 16: S/2, NE/4

Section 17: S/2

Section 18: All

Section 19: All

Section 20: All

Section 21: All

Section 22: N/2

Section 23: All

Section 24: All

Section 25: All

 

13.          SRC agreed to be bound by oral order of the Commission.

14.          Staff gave thoughtful consideration to and review of SRC’s request for a stay. In considering SRC’s request, Staff gave particular consideration to whether a stay was consistent with the purpose of CDPs. As the Commission explained in the December 11, 2008 Statement of Basis, Specific Statutory Authority, and Purpose accompanying the promulgation of Rule 216. (“SBP”), CDPs provide more than just an efficient means of development for Operators. CDPs “encourage landscape level planning and regulatory review….” SBP at p. 24. Moreover, the Commission found that such planning will “help to better address cumulative effects, promote [efficiency], and facilitate more win-win situations.”

15.          Staff concluded that Applicant’s request for a stay is consistent with the very purpose of a CDP. Without a stay, landscape level planning within the CDP lands would be difficult, if not impossible to accomplish. The Commission would receive competing APDs, Form 2As and applications for drilling and spacing units, which would frustrate Staff’s ability to conduct a regulatory review that seeks to more effectively address cumulative impacts from development in the Application Lands. Staff would be faced with approving competing applications that would result in greater cumulative impacts in the CDP Application Lands, thereby frustrating a primary purpose of a CDP.

16.          Accordingly, the Director instructed Staff to:

a.            stay acceptance of APDs, Form 2As, and applications to establish drilling and spacing units in the southern portion of the Application Lands for all Owners and Operators, until such time as the Commission has entered an order on SRC’s stay request; and

b.            to stay acceptance of APDs, Form 2As, and applications to establish drilling and spacing units in the Tier One Lands for all Owners and Operators except Applicant, until such time as the Commission has entered an order on SRC’s stay request.

Excluding SRC’s applications in the Tier One Lands, the Director instructed Staff that all APDs, Form 2As, and applications to establish drilling and spacing units for the Application Lands submitted to the Commission prior to January 29, 2019, will be processed according to the form’s status as of January 29, 2019:

 

c.            “In Process” applications will be placed On Hold and Staff will not undertake further review of the application.

d.            “On Hold” applications will remain On Hold and Staff will not undertake further review of the application.

e.            “Draft” applications will remain in Draft. If an applicant seeks to resubmit an application in Draft, staff will return the application to Draft.

f.             Applications in “Upload” will be returned to Draft without a Completeness Review by Staff.

Excluding any SRC application in the Tier One Lands, the Director further instructed that all APD and Form 2A applications for the Application Lands submitted to the Commission after January 29, 2019, and before the date of this Order, be returned to Draft without a Completeness Review. For all drilling and spacing unit applications submitted to the Commission after January 29, 2019, and before the date of this Order, excluding any SRC applications in the Tier One Lands, the Director instructed Staff to assign a docket number to the application and stay the application indefinitely. The submission dates for all APD, Form 2A and drilling and spacing unit applications will be preserved.

 

17.          Staff recommends that the stay be effective from January 29, 2019 through January 30, 2020. If the final CDP is not approved prior to January 30, 2020, SRC may request an extension of the stay with the Commission.

18.          Based on the facts stated in the verified Application, having received no protests, and on the Hearing Officer review of the request for a stay, the Commission should order to stay acceptance of certain applications for permits-to-drill, Oil and Gas Location Assessments, and applications to establish drilling and spacing units in all or portions of Township 4 North, Range 65 West, 6th P.M., Township 4 North, Range 66 West, 6th P.M., Township 4 North, Range 67 West, 6th P.M., Township 5 North, Range 66 West, 6th P.M., and Township 5 North, Range 67 West, 6th P.M., until such time as the Commission has entered an order on SRC’s application for a Comprehensive Drilling Plan or eight months from the date of an order granting the stay, whichever is earlier.


 

ORDER

 

IT IS HEREBY ORDERED:

1.            For the below-described Tier One application lands (“Tier One Lands”) Staff will process APDs, Form 2As, and applications to establish drilling and spacing units in accordance with the direction set forth in paragraphs 1 through 7 of this Order.

The below-described lands (“Tier One Lands”) lie within the northern portion of the proposed CDP, and apply to the Tier One Stay:

 

Township 4 North, Range 66 West, 6th P.M.

Section 1: All

Section 2: W/2

Section 3: All

Section 4: All

Section 5: All

Section 6: N/2, SE/4

 

Township 4 North, Range 67 West, 6th P.M.

Section 1: N/2

Section 2: N/2

Section 3: N/2

Section 4: NE/4

 

Township 5 North, Range 66 West, 6th P.M.

Section 31: All

Section 32: All

Section 33: All

Section 34: All

Section 35: All

Section 36: All

 

Township 5 North, Range 67 West, 6th P.M.

Section 25: All

Section 26: All

Section 35: All

Section 36: All

 

2.            Until the Commission issues a final Order on the CDP Application, all APD and Form 2A applications for the Tier One Lands submitted to the Commission by any Operator or Owner other than SRC, prior to January 29, 2019, will be processed according to the form’s status as of January 29, 2019:

a.            “In Process” applications will be placed On Hold and staff will not undertake further review of the application.

b.            “On Hold” applications will remain On Hold and staff will not undertake further review of the application.

c.            “Draft” applications will remain in Draft. If an applicant seeks to resubmit an application in Draft, staff will return the application to Draft.

d.            Applications in “Upload” will be returned to Draft without a Completeness Review by Staff.

The submission dates for all APD and Form 2A applications for the Tier One Lands submitted to the Commission by an Operator or Owner other than SRC prior to January 29, 2019, will be preserved.

 

3.            Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all APD and Form 2A applications for the Tier One Lands submitted by any Operator or Owner, other than SRC, to the Commission between January 29, 2019 and May 20, 2019, will be returned to Draft without a Completeness Review. The submission dates for all APD and Form 2A applications for the Tier One Lands submitted to the Commission between January 29, 2019 and May 20, 2019, will be preserved.

4.            Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all APD and Form 2A applications for the Tier One Lands submitted by any Operator or Owner, other than SRC, to the Commission after May 20, 2019, will be returned to Draft without a Completeness Review. The submission dates for all APD and Form 2A applications for the Tier One Lands submitted to the Commission after May 20, 2019, will be preserved.

5.            Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all applications to establish drilling and spacing units for Tier One Lands filed prior to January 29, 2019, by any Operator or Owner other than SRC, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier One Lands submitted to the Commission prior to January 29, 2019, will be preserved.

6.            Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all applications to establish drilling and spacing units for Tier One Lands filed between January 29, 2019 and May 20, 2019, by any Operator or Owner other than SRC, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier One Lands submitted to the Commission between January 29, 2019 and May 20, 2019, will be preserved.

7.            Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all applications to establish drilling and spacing units for Tier One Lands filed after May 19, 2019, by any Operator or Owner other than SRC, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier One Lands submitted to the Commission after May 20, 2019, will be preserved.

8.            For the below-described Tier Two application lands (“Tier Two Lands”) Staff will process applications for permits-to-drill (“APD”), Oil and Gas Location Assessments (“Form 2A”), and drilling and spacing unit applications in accordance with the direction set forth in paragraphs 8 through 14 of this Order.

The below-described Tier Two Lands lie within the southern portion of the proposed CDP:

 

Township 4 North, Range 65 West, 6th P.M.

Section 6: SW/4

Section 7: All

Section 18: All

Section 19: All

Section 30: All

 

 

Township 4 North, Range 66 West, 6th P.M.

Section 1: All

Section 10: All

Section 11: All

Section 12: All

Section 13: All

Section 14: All

Section 15: All

Section 16: S/2, NE/4

Section 17: S/2

Section 18: All

Section 19: All

Section 20: All

Section 21: All

Section 22: N/2

Section 23: All

Section 24: All

Section 25: All

 

9.            Until the Commission issues a final Order on the CDP Application for eight months from the date of an order granting the stay, whichever is earlier, all APD and Form 2A applications for the Tier Two Lands submitted to the Commission prior to January 29, 2019, will be processed according to the form’s status as of January 29, 2019:

a.            “In Process” applications will be placed On Hold and Staff will not undertake further review of the application.

b.            “On Hold” applications will remain On Hold and Staff will not undertake further review of the application.

c.            “Draft” applications will remain in Draft. If an applicant seeks to resubmit an application in Draft, Staff will return the application to Draft.

d.            Applications in “Upload” will be returned to Draft without a Completeness Review by Staff.

e.            The submission dates for all APD and Form 2A applications for the Tier Two Lands submitted to the Commission prior to January 29, 2019, will be preserved.

10.          Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all APD and Form 2A applications for the Tier Two Lands submitted to the Commission between January 29, 2019 and May 20, 2019, will be returned to Draft without a Completeness Review. The submission dates for all APD and Form 2A applications for the Tier Two Lands submitted to the Commission between January 29, 2019 and May 20, 2019, will be preserved.

11.          Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all APD and Form 2A applications for the Tier Two Lands submitted to the Commission after May 20, 2019, will be returned to Draft without a Completeness Review. The submission dates for all APD and Form 2A applications for the Tier Two Lands submitted to the Commission after May 20, 2019, will be preserved.

12.          Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting a stay, whichever is earlier, all applications to establish drilling and spacing units for Tier Two Lands filed prior to January 29, 2019, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier Two Lands submitted to the Commission prior to January 29, 2019, will be preserved.

13.          Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all applications to establish drilling and spacing units for Tier Two Lands filed between January 29, 2019 and May 20, 2019, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier Two Lands submitted to the Commission between January 29, 2019 and May 20, 2019, will be preserved.

14.          Until the Commission issues a final Order on the CDP Application or for eight months from the date of an order granting the stay, whichever is earlier, all applications to establish drilling and spacing units for Tier Two Lands filed after May 20, 2019, will be assigned a docket number and stayed indefinitely. The submission date for all drilling and spacing unit applications for the Tier Two Lands submitted to the Commission after May 20, 2019, will be preserved.

15.          If the Commission enters an Order granting SRC a CDP for the Application Lands, all APD, Form 2A, and drilling and spacing unit applications for the Application Lands filed by Operators or Owners, other than SRC or its successors or assigns, will not be acted on by Staff, and Operators and Owners will be asked to withdraw the applications. The Commission orders Staff to reject any such application not withdrawn by an Operator or Owner within 30 days of the effective date of a Commission order approving the SRC CDP Application.

16.          If the Commission denies SRC’s CDP Application, Staff will resume processing all APDs, Form 2As, and applications to establish drilling and spacing units for the Application Lands. Operators and Owners may resubmit APD and Form 2A applications for the Application Lands that were returned to Draft. Staff will proceed with the Completeness Review of such applications in accordance with its regular practice. All stays on drilling and spacing unit applications for the Application Lands will be lifted, and Staff will proceed with all such applications in accordance with its regular practice.

17.          The Commission affirms the Director’s decision to put On Hold, place in Draft, or stay all APDs, Form 2As, and applications to establish drilling and spacing units for the Tier One Lands, except those applications filed by SRC, and for Staff not to undertake a Completeness Review of such applications received prior to the date of this Order The Commission also affirms the Director’s decision to continue processing any SRC APDs, Form 2As, and applications to establish or modify drilling and spacing units for the Tier One Lands. The Commission affirms the Director’s decision to put On Hold, place in Draft, or stay all APDs, Form 2As, and applications to establish drilling and spacing units for the Tier Two Lands and for Staff not to undertake a Completeness Review of such applications received prior to the date of this Order.

18.          The stay will continue until and terminate upon the earlier of a) the Commission making a final decision on the CDP, or b) eight months from the entry of this Order. If an extension of this first stay is requested, SRC and Staff will make a presentation to the Commission in support of the request. The presentation must detail the progress being made on the CDP Application and when Staff expects that the Application will be ready for Commission hearing. Any interested party who opposes an extension of the first stay will be afforded the opportunity to bring before the Commission their objection to extending the stay


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 7th day of June, 2019, as of May 21, 2019

 

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

 

By:                                                                              

                     Mimi Larsen, Secretary