BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF AN EXCEPTION TO THE

WELL LOCATION REQUIREMENTS OF THE

RULES AND REGULATIONS OF THE OIL AND

GAS CONSERVATION COMMISSION FOR         

OPERATIONS IN THE IGNACIO-BLANCO FIELD,           

LA PLATA COUNTY, COLORADO 

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CAUSE NO.   112

 

ORDER NO.   112-160

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission at 8:30 a.m. on April 23, 2001, in Suite 801, the Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of hearing as required by law, on the application of Thunderhead Investments, Inc. for an order granting a variance to permit the Neva Dove Gas Unit A #2 to be drilled at one of four alternate locations.

 

FINDINGS

 

                        The Commission finds as follow:

 

                        1.  Thunderhead Investments, Inc. (“Thunderhead”), 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 the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

 

                        4.  On December 18, 2000, Amoco Production Company (“Amoco”) submitted an Application for Permit-to-Drill (“APD”) for the Neva Dove Gas Unit A #2 Well (the “Well”) to be located in the SE¼ SW¼ of Section 1, Township 34 North, Range 7 West, N.M.P.M.  Because no surface use agreement had been executed with surface owner Thunderhead, an onsite inspection was conducted by Colorado Oil and Gas Conservation Commission (“COGCC”) staff in accordance with Commission Order No. 112-156.  During the January 27, 2001 onsite inspection, Thunderhead proposed an alternate location for the well.  COGCC staff determined that Thunderhead’s suggested location did not meet safety setback requirements.  Thunderhead proposed several other alternate locations that were turned down due to correlative rights concerns.  On March 2, 2001, Amoco’s Application for Permit-to-Drill (“APD”) the Well was approved.

 

                        5.  On March 2, 2001, Thunderhead, by its attorney, filed with the Commission an application requesting an exception location or a variance to permit the Well to be drilled on one of the following locations:

 

A)       A well location in the drilling window which is on platted open space approximately 100 feet south of the north line of the Thunderhead property and 350 feet or less from the McNew residence located to the west of the property.

 

B)        A surface well location south of the drilling window which is on platted open space approximately 785 feet or less south of the north line of the Thunderhead property and 150 feet from the west line of the property, with a bottom hole location in the drilling window.

 

C)         A surface and bottom hole well location south of the drilling window which is on platted open space approximately 785 feet or less south of the north line of the Thunderhead property and 150 feet from the west line of the property.

 

D)        A surface well location south of the drilling window which is on platted open space approximately 785 feet or less south of the north line of the Thunderhead property and 150 feet from the west line of the property, with a bottom hole location between the drilling window and the surface location determined by the Commission to mitigate the effects on correlative rights in adjacent spacing units, if any, and determined by the Commission to correctly balance surface use and operational considerations related to the drilling and production of the well.

 

                        6.  On March 13, 2001, Amoco, by its attorneys, filed a Protest and Motion to Dismiss claiming Thunderhead lacks standing to apply for an exception location, that the application is moot since the APD has been issued, and that the Commission lacks jurisdiction involving a surface owner’s private property right.

 

                       7.  On April 2, 2001, surface owners Charles and Penny McNew filed with the Commission a letter protesting the granting of a variance to the setbacks for the Well.

 

                        8.  On April 10, 2001, Thunderhead, by its attorney, filed with the Commission a Response to Amoco Production Company’s Protest and Motion to Dismiss requesting the Motion to Dismiss be denied, that Amoco be ordered to timely respond to Applicant’s discovery requests and that proper notice be given to adjacent property owners and the matter be set for a de novo hearing.

 

                        9.  On April 20, 2001, Amoco, by its attorneys, filed with the Commission an Objection and Motion for Protective Order stating its objection to Thunderhead’s requested discovery and its request for the issuance of an order requiring Thunderhead to obtain leave of the Commission prior to such discovery being propounded upon Amoco.

 

                        10.  At the hearing, Amoco’s attorney Tom Dugan provided the following background information:  Thunderhead’s 40-acre parcel is currently used to graze horses; the town of Bayfield has considered annexing the lands for a subdivision but currently the lands are under La Plata County’s jurisdiction; the Bayfield School Board has not agreed to a waiver of Rule 603.b. to locate a well less than 350 feet from the school.  Mr. Dugan stated that on or around the day the APD was approved by the COGCC and La Plata County, Amoco filed suit in federal court for a summary judgment to allow the Well to be drilled.

 

                        11.  At the hearing, Amoco argued that Thunderhead is not an owner as defined by the Oil and Gas Conservation Act and therefore does not have standing to apply for an exception location under Rule 503.b., notwithstanding the fact that the APD has been approved mooting the request for an exception location.

 

                        12.  At the hearing, Thunderhead’s attorney Bob Miller provided the following background information:  Thunderhead has received preliminary approval from the town of Bayfield for its plat and final approval can be granted once access issues are addressed.

 

                        13.  At the hearing, Thunderhead proposed yet another alternate location to move the Well fifty (50) feet to the north and then argued that such a move would not require a variance or exception location to Commission Rules.  In addition, Thunderhead argued that none of the suggested alternate locations would violate correlative rights.  It was further argued that Rules 502. and 503.b.(5) allow Thunderhead to seek relief as an aggrieved party, and that the onsite inspection constituted an adjudicatory hearing and thus the permit for the Well cannot become final until approved by the Commission.

 

14.  Pursuant to Rule 510., Ken Wonstolen, Senior Vice President and General Counsel for the Colorado Oil and Gas Association, made statements regarding his concern that Thunderhead has misinterpreted Commission rules related to standing and onsite inspections.  Mr. Wonstolen believes Thunderhead does not have the right to initiate its applications before the Commission and that onsite inspections are not adjudicatory hearings.  He believes Thunderhead’s attempt to bring surface owner compensation issues before the Commission rather than the court is another misinterpretation of Commission rules.

 

15.  Director Griebling stated that COGCC staff is opposed to the proposed locations to the south of the approved APD due to correlative rights violations and an inability to drill directionally in such shallow wells.

 

16.  The Commission finds that Thunderhead is not an owner as defined by the Oil and Gas Conservation Act and Commission Rules and therefore does not have standing to file applications for exception locations.  The Commission finds that it does not have jurisdiction over the claim of irreparable harm to surface property rights.  The Commission finds that Thunderhead’s application is a request to resolve a surface owner dispute over which the Commission has no jurisdiction.  The Commission finds that Thunderhead is not a party that could be adversely affected and aggrieved in a manner that is within the Commission’s jurisdiction to resolve.  The Commission finds that Rule 502.b. is more general than Rule 318.c. and that although Thunderhead’s application requests both an exception location and a variance, it is actually an exception location application.  The Commission finds that the Director’s approval of the APD is final and not conditioned on the Commission’s approval.  The Commission finds that onsite inspections are not adjudicatory proceedings conducted by Hearing Officers.  The Commission takes administrative notice of all the provisions in its Order No. 112-156 including, specifically, the finding pertaining to directional drilling.

 

17.  The Commission should grant the Motion to Dismiss for the reasons stated in Finding 16 above.

 

ORDER

 

                        NOW THEREFORE IT IS ORDERED, that the Motion to Dismiss the application of Thunderhead Investments, Inc. for an order granting a variance to permit the Neva Dove Gas Unit A #2 to be drilled at one of four alternate locations is hereby granted and said application is therefore denied.

 

                        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.

 

                        ENTERED this ______ day of May 2001, as of April 23, 2001.

 

                                                            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 2, 2001