BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
IN THE MATTER OF THE PROMULGATION AND AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO	) ) ) )	CAUSE NO.   112 ORDER NO.   112-137

REPORT OF THE COMMISSION

                        This cause came on for hearing before the Commission on November 25, 1997, at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado (the “November 25 Hearing”).  After giving Notice of Hearing, as required by law, the Commission considered the application filed by Petrogulf Corporation to allow an additional well to be drilled in the 320-acre drilling and spacing unit consisting of the S½ of Section 31, Township 33 North, Range 9 West, N.M.P.M., for production from the Fruitland Coal seams.

FINDINGS

                        The Commission finds as follows:

Procedural History

                        1.  Petrogulf Corporation (“Petrogulf”), 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 June 15, 1988, the Commission issued Order No. 112‑60 which established 320‑acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland Coal seams, underlying certain lands in the Ignacio‑Blanco Field, with the units to consist of a governmental half section.  The order provided for well locations in the NE¼ and the SW¼ of each section in Township 32 North, Range 9 West, N.M.P.M., and in the NW¼ and the SE¼ of each section in Township 33 North, Range 9 West, N.M.P.M., and states that wells are to be located no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.  Order No. 112-61 was subsequently adopted amending Order No. 112-60 to establish additional field rules for the Fruitland Coal seams.

                        5.  On September 9, 1997, Petrogulf Corporation, through counsel, filed with the Commission an Application requesting that one additional well be allowed in an existing 320 acre drilling and spacing unit for the Fruitland Coal embracing the S½ of Section 31, Township 33 North, Range 9 West, N.M.P.M., La Plata County, Colorado (the “Application”).

                        6.  On October 14, 1997, Mr. Carl Weston (“Weston”), through counsel, filed with the Commission a Protest to the Petrogulf application.  The Protest stated that Mr. Weston owns an interest in the surface and resides in the “southwest quarter of Section 31, Township 33 North, Range 9 West, N.M.P.M., where the well is proposed.”

                        7.  On November 20, 1997, Petrogulf Corporation filed with the Commission a Motion to Dismiss the Protest stating that the protest was not valid under Rule No. 509.a.(1) of the Rules and Regulations of the Oil and Gas Conservation Commission (the “Rules”), contending that Weston lacked standing to challenge a spacing determination  because Weston does not own an interest in the mineral estate underlying the spaced area, and stating that Weston is not the surface owner where the well is to be located.

                        8.  Weston did not attend the November 25, 1997 hearing. Weston’s counsel appeared to present Weston’s Protest. 

                        9.  After hearing oral argument, the Commission found that Weston, as a surface owner of lands included within the proposed spaced area, was not an interested party and thus lacked standing to protest in the context of the Application to allow an additional well within a spacing unit, where the Commission must determine whether an additional well is justified to efficiently and economically drain a subsurface producing horizon. 

                        10.  After being denied Protestant status, Weston’s counsel made an oral motion to amend his Protest asking the Commission to consider the Protest as an Intervention under Rule 509.b.

                        11.  The Commission denied Weston’s counsel’s oral motion to change Weston’s status at hearing.  Instead, the Commission found that that Weston’s counsel could make comments and present testimony as a member of the public at the hearing under Rule 510., and that such testimony would be part of the hearing record.

Legal Authority For Commission Determination of Drilling Units

                        12.  The legislative declaration of the Oil and Gas Conservation Act states that “[i]t is the intent of this article to permit each oil and gas pool in Colorado to produce up to its maximum efficient rate of production, subject to the prohibition of waste [and the protection of correlative rights].”  § 34-60-102 (1), C.R.S. (the “Act”).

                        13.  Accordingly, the Commission has authority under the Act to establish drilling units in order “[t]o prevent or to assist in preventing waste, to avoid the drilling of unnecessary wells, or to protect correlative rights.”  § 34-60-116 (1), C.R.S.

                        14.  After the Commission enters an order fixing drilling units for a subsurface horizon, drilling at any location other than the locations designated in the order is prohibited.  § 34-60-116 (5), C.R.S.

                        15.  To modify previously established drilling units the party seeking modification must apply to the Commission for such modification. § 34-60-116(4), C.R.S.

                        16.  Section 34-60-116 (4), C.R.S. contains the standard for allowing additional wells within established spacing units, providing as pertinent:

The commission, upon application, notice, and hearing, may decrease or increase the size of the drilling units or permit additional wells to be drilled within the established units in order to prevent or assist in preventing waste or to avoid the drilling of unnecessary wells, or to protect correlative rights,....

                        17.  Thus, a decision to allow additional wells within an established spacing area requires a scientific determination whether the additional wells will prevent waste, avoid the drilling of unnecessary wells or protect correlative rights.

Notice for Spacing Determinations

                        18.  Section 34-60-108(7), C.R.S. provides that “[a]ny interested party desiring to protest the granting of the petition shall, at least three days prior to the date of the hearing, file a written protest with the commission, which shall briefly state the basis of the protest.” 

                        19.  Rule 508.a. describes interested parties entitled to notice when the Commission considers applications for additional wells within a spacing unit to include “owners within the proposed drilling unit or within the existing drilling unit to be affected by the application.”

                        20.  Owners is defined in the Act to mean “ . . . the person who has a right to drill into and produce from a pool and to appropriate the oil and gas he produces therefrom either for himself or others or for himself and others, including the owner of a well capable of producing oil and gas, or both.”  § 34-60-103(7), C.R.S.

                        21.  Accordingly, when the Commission considers matters related to efficient drainage of a formation based on down-hole data, interested parties include those parties who own an interest in the mineral estate that may be affected by the drilling of an additional well.

Protest

                        22.  Rule 509.a. states that a pleading to protest shall, inter alia,“[d]emonstrate that the person is an interested party under these rules in order for the protest to be accepted; . . . “

                        23.  Weston stated he was an interested party because he owns an interest in the surface located in the  SW¼ of Section 31, Township 33 North, Range 9 West, 6th P.M., La Plata County, Colorado.  The Commission finds that Weston owns an interest in the surface estate to be included in the spaced area for an additional well, but owns no interest in the surface estate upon which an additional well may be located.

                        24.  Weston has made no allegation that he owns or has any interest in the mineral estate underlying the spaced area, or that he has any right to drill for oil or gas in the spaced area or that he has an interest in the correlative rights affected by the Application to allow additional wells in the spaced area.

                        25.  Because Weston is not an owner in the mineral estate nor does he have any interest in the efficient drainage of the mineral estate the Commission finds that Weston is not a valid Protestant in this context when the Commission considers whether to allow an additional well within a spacing unit.

Intervention

                        26.  Rule 509.b. provides that an application for intervention must be filed “at least three (3) business days” prior to the first hearing date on the matter and shall

Demonstrate why the person is an interested party under these rules, in which case the intervention shall be granted by right; or why the intervention will otherwise serve the public interest, in which case granting the intervention shall be at the Commission’s sole discretion,....

                        27.  Despite Weston’s attempt to change the nature of his pleading at hearing, the Commission finds that Weston did not include in his “Protest” sufficient grounds to show that the intervention will otherwise serve the public interest, nor did Weston file as an Intervenor within the timeframe required by Rule 509.b.

                        28.  Because Weston failed to establish ground to change his protest to an intervention, the Commission exercised its discretion as provided in Rule 509.b.(1). to deny intervenor status.

Weston’s Testimony Under Rule 510.

                        29.  The Commission’s findings with respect to Weston’s Protest and request for Intervention in this adjudicatory proceeding do not end the inquiry regarding Weston’s right to be heard at the November 25 Hearing.

                        30.  Rule 528. governing the conduct of adjudicatory hearings provides for public comment in the adjudicatory process by allowing parties to present statements under Rule 510.

                        31.  Rule 510. provides that the Commission has the discretion to allow any person to make an oral statement or to submit a written statement at any hearing, which statement shall be admitted into the record if made under oath and subject to cross-examination.

                        32.  At the November 25 Hearing Weston’s counsel presented testimony regarding Weston’s concerns with respect to the Commission allowing an additional well within the existing spacing unit.

                        33.  Weston’s primary concern was the effect that allowing an additional well within the spacing unit may have on the Spatter No. 1 Well, which Weston alleged and the Commission acknowledged has been a source of ground water contamination within the spaced area in the past.

                        34.  After hearing Weston’s counsel’s testimony, the Commission heard evidence presented by COGCC staff that the Spatter No. 1 Well has been plugged and abandoned by the COGCC at considerable expense.  COGCC staff further testified that the well was adequately plugged and that the Spatter No. 1 Well should have no effect on the drilling of an additional well within this spacing unit. 

Scientific Evidence Regarding Efficient Drainage

                        35.  At hearing the Commission heard testimony from representatives of Petrogulf to support a finding that one well will not efficiently and economically drain the 320‑acre drilling and spacing unit consisting of S½ of Section 31, Township 33 North, Range 9 West, N.M.P.M., and that additional well is necessary to prevent waste and protect correlative rights, and to recover gas and associated hydrocarbons from the Fruitland Coal seams.

                        36.  Based on the facts stated in the application and the testimony and exhibits presented by Petrogulf at the November 25 Hearing the Commission finds that the request to amend Order No. 112-61 to allow an additional well to be drilled 1,293 feet FSL, 1,231 feet FWL in the SW¼ SW¼ of Section 31, Township 33 North, Range 9 West, N.M.P.M., for the 320-acre drilling and spacing unit consisting of the S½ of Section 31 for production from the Fruitland Coal seams should be approved.

                        37.  This order recognizing that an additional well within the existing spacing unit will more efficiently drain the Fruitland Coal seams does not relieve Petrogulf of its obligation to apply for a permit to drill as required by the Rules, and to operate the well in accordance with Commission Rules promulgated to protect public health, safety and welfare in drilling operations. 

ORDER

                        NOW, THEREFORE, IT IS ORDERED that Order No. 112-61 is hereby amended to allow an additional well to be drilled 1,293 feet FSL, 1,231 feet FWL in the SW¼ SW¼ of Section 31, Township 33 North, Range 9 West, N.M.P.M., for the 320-acre drilling and spacing unit consisting of the S½ of Section 31 for production from the Fruitland Coal seams.

                        IT IS FURTHER ORDERED, that should a commercial well be completed at any location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

                        IT IS FURTHER ORDERED that the provisions contained in the above order shall become effective forthwith, as the party agreed to accept the verbal order of the Commission.

                        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 December, 1997, as of November 25, 1997.

                                                                        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

July 3, 2018