BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF A REQUEST BY ALLEN OIL & GAS LLC                  )           CAUSE NO. 1

TO AMEND ORDER NO. 1V-170 ISSUED BY THE COLORADO               )

OIL AND GAS CONSERVATION COMMISSION,                                          )           ORDER NO. 1-79

TOW CREEK FIELD, ROUTT COUNTY, COLORADO                               )

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission at 8:30 a.m. on August 19 and 20, 1999 in Suite 801, 1120 Lincoln Street, Denver, Colorado, on the application of Allen Oil & Gas LLC for an order seeking to amend Order No. 1V-170 issued by the Colorado Oil and Gas Conservation Commission regarding nine (9) wells located in the Tow Creek Field, Routt County, Colorado.

 

FINDINGS

 

                        1.  Allen Oil & Gas LLC (“Allen”) 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.

 

                        4.  On March 25,1999 the Commission issued Order No. 1V-170, finding Allen in violation of Rule 326.b., failure to pass a mechanical integrity test for the following six (6) wells located in the NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M.: the Bradley #2, Bradley #3, Bradley #5, State #1, State #2 and the State #5; Rule Nos. 904. and 905. for the Bradley #4 Well and Rule Nos. 603.g., 906., 909.b.(2) and (5), and Rule No. 910. for the State #1 Well located in Section 18, Township 6 North, Range 86 West, 6th P.M (“Order No. IV-170”).  Order No. IV-170 further ordered that Allen plug and abandon the Bradley #1, Bradley #2, Bradley #3, Bradley #4, Bradley #5, State #1, State #2, State #3 and the State #5 Wells no later than July 1, 1999.  In addition, a fine of Twelve Thousand Dollars ($12,000.00) was assessed for the violations, payable within thirty (30) days from the date Order No. 1V-170 was issued.  Order No. IV-170 further provided that the Cease and Desist Order No. 1C-2 entered by the Commission on January 21, 1999 as of January 14, 1999, shall remain in effect until Order No. IV-170 has been fully complied with by Allen Oil & Gas LLC.

 

                        5.  The Commission entered Order No. IV-170 after notice and a full hearing on the merits.

 

                        6.  On May 24, 1999, Allen, by its attorney, filed with the Commission a verified application for an order to amend Order No. 1V-170 to allow production of oil and gas from certain wells in the Tow Creek Field located in the NW¼ of Section 18, Township 6 North, Range 86 West, 6th P.M.  The Application stated that Allen believed that two (2) and possibly as many as five (5) of the wells in the field can be produced economically in compliance with Commission rules.  The Application acknowledged that Allen could not comply with the July 1, 1999, deadline for plugging the Tow Creek wells.

 

                        7.  On July 7, 1999, pursuant to Rules 511. and 527. of COGCC Rules and Regulations a prehearing conference was held with Allen and COGCC staff to determine the proposed order of proceedings before the Commission.  A summary of the prehearing conference was prepared by Special Assistant Attorney General Bargell for the Commission and circulated for all parties’ approval on July 12, 1999.  At the prehearing conference COGCC staff requested separate representation and all parties agreed that Assistant Attorney General Enger would represent staff’s interest at the Commission hearing on the Application to Amend Order No. IV-170.

 

                        8.  On July 8, 1999, Allen, by its attorney, filed with the Commission a Request for Continuance to the August hearing.  The continuance was granted and the hearing rescheduled for August 19-20, 1999.

 

                        9.  On July 8, 1999, Mel and Mary Bradley, through their attorney, filed with the Commission a written statement under Rule 510. containing information for the Commission’s consideration in deciding whether to amend Order No. 1V-170.  The Bradley information related to the Bradley No. 3 and 4 Wells, regarding production, injection and access.

 

                        10.  At the August 19-20, 1999 hearing Allen presented testimony and exhibits to describe the work Allen performed at the Tow Creek Field and the costs incurred.  Allen further testified and presented exhibits regarding bids that Allen obtained to plug certain wells, place liners in pits, enlarge pits and convert a well for injection.

 

                        11.  At the August 19-20, 1999 hearing Allen presented three independent engineering reports through Allen’s expert engineer and engineering testimony regarding reserve and cash flow estimates, lease operating costs and economic viability of certain wells in the Tow Creek Field.

 

                        12.  At the August 19-20, 1999 hearing COGCC staff presented testimony and exhibits to show that no work had been performed at Tow Creek Field subsequent to the issuance of Order No. 1V-170 and that the engineering reports presented did not include numerous lease operating costs.  COGCC staff testified that the oil price calculations Allen presented were unreasonably optimistic.  In addition, COGCC staff declined to support the Application to Amend Order No. 1V-170.

 

                        13.  At the August 19-20, 1999 hearing John Eilts, a nearby landowner made a statement under Rule 510. that Eilts has given Allen permission to place contaminated soils on his property.

 

                        14.  At the August 19-20, 1999 hearing Mark Davis, Minerals Director of the Board of Land Commissioners, made a statement under Rule 510. regarding past operations of the field, the costs charged by the Land Board for injection and the Land Board’s concern for the Commission to allow operations to continue when revenue is less than the cost of compliance.

 

                        15.  At the August 19-20, 1999 hearing Rod Peck, attorney representing landowners Mel and Mary Bradley made a statement under Rule 510. that his clients do not believe Allen has the right under the Bradley lease to convert a well for injection, and asking the Commission to deny any amendment to Order No. IV-170.

 

Order No. IV-170

 

                        16.  The Commission finds that it had jurisdiction to enter Order No. 1V-170 after the full hearing on the alleged violations conducted March 25, 1999.  The Commission finds that the March, 1999 hearing was noticed and conducted in accordance with the Colorado Oil and Gas Conservation Act §§34-60-101 to 124, applicable Commission Rules and Regulations, and applicable portions of the State Administrative Procedures Act §§24-4-101 to -108, C.R.S. (the "APA"), and that Order No. 1V-170 is supported by the evidence presented at the March 1999 hearing.

 

                        17.  The Commission finds that Allen did not seek judicial review of Order No. 1V-170 within thirty (30) days after it was entered as required by Rule 514. and §24-4-106, C.R.S.

 

                        18.  The Commission finds that Order No. 1V-170 remains a final order of the Commission entered effective March 25, 1999, and that the Order is binding.

 

Application to Amend Order IV-170

 

                        19.  The Commission finds that the bulk of the expenditures made by Allen to improve conditions at Tow Creek Field were made prior to the Commission entering Order No. IV-170.

 

                        20.  The Commission finds that Allen has not completed the remedial work required by Order No. IV-170 and that operations in Tow Creek Field continue to be out of compliance with Commission Rules and Regulations.

 

                        21.  The Commission finds that Allen has not paid the fine due pursuant to Order No. IV-170.

 

                        22.  In accordance with §24-14-105(7), C.R.S., Allen, as the proponent of the application has the burden of proof.

 

                        23.  The Commission finds that Allen did not demonstrate sufficient cause for the Commission to amend Order No. 1V-170 which was entered after notice and a full hearing on the merits.

 

                        24.  The Commission finds that Allen’s Application to Amend Order No. 1V-170 does not extend or otherwise reopen the period to appeal the Commission’s final findings and determination contained in Order No. 1V-170.

 

ORDER

 

                        NOW, THEREFORE, IT IS ORDERED, that the Application to Amend Order No. 1V-170 filed by Allen Oil & Gas LLC is hereby denied.

 

                        IT IS FURTHER ORDERED, that the provisions of Order No. 1V-170 shall remain in effect.

 

                        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.

 

                        ENTERED this             day of September, 1999, as of August 20, 1999.

 

                                                                                    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

September 3, 1999