BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

 

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN THE IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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CAUSE NO.   112

 

ORDER NO.   112-168

 

                                                              REPORT OF THE COMMISSION

 

            This cause came on for hearing before the Commission on October 28, 2002 at 10:00 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado for an order to allow up to four (4) additional wells to be drilled on certain 320-acre drilling and spacing units in the Ignacio-Blanco Field for the production of gas and associated hydrocarbons from the Mesaverde Formation with the permitted well to be located no closer than 660 feet from the boundaries.  In addition, the order should stratigraphically define the Mesaverde Formation and amend the well location setbacks for the Dakota Formation to coincide with the proposed amended setbacks for the Mesaverde Formation.

 

FINDINGS

 

            The Commission finds as follows:

                       

1.   Burlington Resources Oil & Gas Company, LP (“Burlington Resources”), 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 and the terms of the Memorandum of Understanding (“MOU”) between the Commission and the Bureau of Land Management (“BLM”).

 

            4.  By Order No. 112-1 entered October 15, 1957, Order No. 112-6 entered November 9, 1959, Order No. 112-21 entered February 1963, Order No. 112-46 entered July 16, 1979, and by Addendum to Order No. 112-6 entered December 31, 1990, the Commission established 320-acre drilling and spacing units for production from the Mesaverde Formation in the Ignacio-Blanco Field with the permitted well to located no closer than 990 feet from the boundaries of the unit, including the Application Lands described below.  As to the application lands which contain full sections, Sections 9 through 16, those orders establish drilling and spacing units of 320-acres for the production of gas from the Mesaverde Formation consisting of the N½ and S½ or the E½ and W½ of the section, with two permitted wells in each drilling and spacing unit.  As to the application lands which contain fractional sections, Sections 20 through 24, these orders establish drilling and spacing units of approximately 360 acres, with two permitted wells in each drilling and spacing unit.

 

Township 32 North, Range 11 West, N.M.P.M.

Section 9: All

Section 10: All

Section 11: All

Section 12: All

Section 13: All

Section 14: All

Section 15: All

Section 16: All

Section 20: E½

Section 21: All

Section 22: All

Section 23: All

Section 24: All

 

            5.  On September 9, 2002, Burlington Resources, by its attorney, filed with the Commission a verified application for an order to allow: (1) up to four wells to be drilled or completed on each 320-acre drilling and spacing unit in the full sections of the Application Lands and each designated drilling and spacing unit in the fractional sections of the Application lands; (2) the permitted location for any well drilled to the Mesaverde Formation subsequent to the entry of such order in a 320-acre drilling and spacing unit in the Application Lands consisting of full sections to be located no closer than 660 feet to any outer boundary of said 320-acre drilling and spacing unit and no closer than 660 feet to another well producing from the same formation; (3) the permitted location for any well drilled to the Mesaverde Formation subsequent to the entry of such order in a designated drilling and spacing unit in the Application lands consisting of fractional sections to be located no closer than 660 feet to any outer boundary of said designated drilling and spacing unit, and no closer than 660 feet to another well producing from the same formation; (4) the Mesaverde Formation in the Application Lands be defined as the interval between the stratigraphic equivalent of a point 150 feet above the top of the Huerfanito Bentonite and the stratigraphic equivalent of a point 400 feet below the top of the Point Lookout Formation as found in the Dual Induction Log for the BR #2B Ute Well located in the SE¼ of Section 14, Township 32 North, Range 11 West, N.M.P.M.; and (5) the Director be authorized, without additional notice and hearing or consent, to grant an exception to the well location setbacks up to and including 100 feet, but not beyond, to avoid archaeological sites.

 

            6.  By Order No. 112-1 entered October 15, 1957, Order No. 112-6 entered November 9, 1959, Order No. 112-21 entered February 1963, Order No. 112-46 entered July 16, 1979, and by Addendum to Order No. 112-6 entered December 31, 1990, the Commission established 640-acre drilling and spacing units for production from the Dakota-Morrison Formation in the Ignacio-Blanco Field with the permitted well to be located no closer than 990 feet from the boundaries of the unit, including the Application Lands described above in Finding 4.

 

            7.  On September 9, 2002, Burlington Resources, by its attorney, filed with the Commission a verified application for an order to allow: (1) the permitted location for any well drilled to the Dakota-Morrison Formation subsequent to the entry of such order in a 640-acre drilling and spacing unit in the Application Lands consisting of full sections to be located no closer than 660 feet to any outer boundary of said 640-acre drilling and spacing unit and no closer than 660 feet to another well producing from the same formation; (2) the permitted location for any well drilled to the Dakota-Morrison Formation subsequent to the entry of such order in a designated drilling and spacing unit in the Application Lands consisting of a fractional section to be located no closer than 660 feet to any outer boundary of said designated drilling and spacing unit, and no closer than 660 feet to another well producing from the same formation; and (3) the Director be authorized, without additional notice and hearing or consent, to grant an exception up to and including 100 feet, but not beyond, to avoid archaeological sites.  The Applicant wishes to drill one or more of the proposed additional Mesaverde Formation wells to the Dakota-Morrison Formation to commingle production, which requires the permitted well locations for the formations to be identical.

 

            8.  Testimony and exhibits presented at the administrative hearing showed the location, topography and surface use of the application lands.  The Southern Ute Tribe owns approximately 98% of the surface, with the remaining 2% of the surface owned by one fee owner.  The Southern Ute Tribe also owns approximately 79% of the minerals, with the remaining 21% owned privately.  Burlington Resources has leased the majority of the minerals underlying the application lands.  Further testimony indicated that Burlington proposes to amend the permitted well location setbacks to avoid archeological interests on the application lands.

 

            9.  Testimony and exhibits presented at the administrative hearing defined the Mesaverde Formation as the interval between the stratigraphic equivalent of a point 150 feet above the top of the Huerfanito Bentonite and the stratigraphic equivalent of a point 400 feet below the top of the Point Lookout Formation as found in the Dual Induction Log for the BR #2B Ute Well located in the SE¼ of Section 14, Township 32 North, Range 11 West, N.M.P.M.  Further testimony indicated that the Point Lookout and Cliff House members are the major zones of production in this basin-centered gas accumulation.  Burlington Resources intends to drill at total of six (6) Mesaverde Formation wells in the application lands next year, with five (5) of those wells testing the Dakota Formation.  Further testimony indicated that the stratigraphy of the Mesaverde Formation in the application lands is the same as in New Mexico. 

 

            10.  Testimony and exhibits presented at the administrative hearing indicated that the existing wells are not adequately draining the Mesaverde Formation.  No interference effects have been observed in wells drilled on 320-acre units or on 160-acre unites in the application lands.  Additional testimony indicated that the average estimated ultimate production is nearly identical for the two (2) sizes of drilling units indicating no interference between wells. Further testimony indicated that additional wells are needed to adequately drain the gas from the Mesaverde Formation and that the average area drained by an existing well is 87.7 acres. 

 

            11.  Testimony and exhibits presented at the administrative hearing indicated that gas reserves would remain in the ground absent increased well density, that interference between wells would not occur with increased well density and that reserves are significant to realize an economic benefit form the drilling of additional wells in the application lands.  Further testimony indicated that additional wells are necessary to recover approximately 45 BCF of remaining Mesaverde Formation reserves and to prevent waste while protecting correlative rights of mineral owners.

 

12.  That Burlington Resources agreed to be bound by oral order of the Commission. 

 

13.  Subsequent to the administrative hearing, Burlington Resources agreed to perforate the Lewis Shale separately from the remainder of the Mesaverde Formation, to commingle production from the Lewis Shale with the Mesaverde Formation, and to allocate production separately for the Lewis Shale.  In addition, Burlington Resources will report to the Commission all of this information separately from the remainder of the Mesaverde Formation.

 

14.  Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should enter an order allowing up to four (4) additional wells to be drilled on the 320-acre drilling and spacing units described above in Finding No. 4 for the production of gas and associated hydrocarbons from the Mesaverde Formation with the permitted well to be located no closer than 660 feet from the boundaries, to stratigraphically define the Mesaverde Formation, to amend the well location setbacks for the Dakota Formation to coincide with the proposed amended setbacks for the Mesaverde Formation, and to authorize the Director, without additional notice and hearing or consent, to grant an exception to the well location setbacks up to and including 100 feet, but not beyond, to avoid archaeological sites.

 

ORDER

 

            NOW, THEREFORE IT IS ORDERED, that Order No. 112-46 is hereby amended to allow up to four (4) additional wells to be drilled on the 320-acre drilling and spacing units described below for the production of gas and associated hydrocarbons from the Mesaverde Formation.

 

Township 32 North, Range 11 West, N.M.P.M.

Section 9: All

Section 10: All

Section 11: All

Section 12: All

Section 13: All

Section 14: All

Section 15: All

Section 16: All

Section 20: E½

Section 21: All

Section 22: All

Section 23: All

Section 24: All

 

            IT IS FURTHER ORDERED, that the permitted location for any well drilled to the Mesaverde Formation subsequent to the entry of this order in a 320-acre drilling and spacing unit in the lands described herein consisting of full sections shall be located no closer than 660 feet to any outer boundary of said 320-acre drilling and spacing unit and no closer than 660 feet to another well producing from the same formation.

 

            IT IS FURTHER ORDERED, that the permitted location for any well drilled to the Mesaverde Formation subsequent to the entry of this order in a designated drilling and spacing unit in the lands described herein consisting of fractional sections shall be located no closer than 660 feet to any outer boundary of said designated drilling and spacing unit, and no closer than 660 feet to another well producing from the same formation.

 

            IT IS FURTHER ORDERED, that the Mesaverde Formation is hereby defined as the interval between the stratigraphic equivalent of a point 150 feet above the top of the Huerfanito Bentonite and the stratigraphic equivalent of a point 400 feet below the top of the Point Lookout Formation as found in the Dual Induction Log for the BR #2B Ute Well located in the SE¼ of Section 14, Township 32 North, Range 11 West, N.M.P.M.

 

            IT IS FURTHER ORDERED, that the permitted location for any well drilled to the Dakota-Morrison Formation subsequent to the entry of this order in a 640-acre drilling and spacing unit in the lands described herein consisting of full sections shall be located no closer than 660 feet to any outer boundary of said 640-acre drilling and spacing unit and no closer than 660 feet to another well producing from the same formation.

 

            IT IS FURTHER ORDERED, that the permitted location for any well drilled to the Dakota-Morrison Formation subsequent to the entry of this order in a designated drilling and spacing unit in the lands described herein consisting of a fractional section shall be located no closer than 660 feet to any outer boundary of said designated drilling and spacing unit, and no closer than 660 feet to another well producing from the same formation.

           

            IT IS FURTHER ORDERED, that the Director shall be authorized, without additional notice and hearing or consent, to grant an exception to the well location setbacks up to and including 100 feet, but not beyond, to avoid archaeological sites.

 

            IT IS FURTHER ORDERED, that perforation data and production data from the Lewis Shale shall be reported to the Commission separately from the remainder of the Mesaverde Formation data.

 

            IT IS FURTHER ORDERED, that Commission staff shall prepare a report describing drilling and production activity in the Lewis Shale for the Commission’s review by November 30, 2003.

 

            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 November 2002, as of October 28, 2002.

 

 

                                                    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

November 13, 2002