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BEFORE THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO
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IN
THE MATTER OF THE PROMULGATION AND LA PLATA COUNTY, COLORADO |
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CAUSE NO. 112
ORDER NO. 112-181 |
This cause came on for hearing before the Commission at 10:00 a.m. on October 31, 2005, in the Ramada Inn & Suites, 124 West 6th Street, Glenwood Springs, Colorado, on the verified application of Samson Resources Company, for an order to allow a total of four wells to be optionally drilled in each 320-acre drilling and spacing unit for certain lands in Townships 32 through 34 North, Ranges 7 through 9 West, N.M.P.M., with the permitted well to be located no closer than 660 feet to any outer boundary of the unit with no interior section line setback, utilizing a common or expanded pad with an existing well, for production of gas from the Fruitland coal seams.
The Commission finds as follows:
1. Samson Investment Company (“Samson”), 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. On July 11, 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, including the lands described below, with the permitted well to be located in the center of the NW¼ and the SE¼ of the section and no closer than 990 feet from the boundaries of the quarter section upon which it is located, nor closer than 130 feet to any interior quarter section line.
5. On May 15, 2000, the Commission issued Order No. 112-157, which allowed an optional additional well to be drilled for the production of gas from the Fruitland coal seams for certain lands, including the lands described below, with the permitted well when north of the north line of Township 32 North to be located in the NW¼ and the SE¼ of each section and when south of the north line of Township 32 North to be located in the NE¼ and SW¼ of each section, no closer than 990 feet from the boundaries of the quarter section, nor closer than 130 feet to any interior quarter section line.
6. On September 12, 2005, Samson, by its attorney, filed with the Commission a verified application for an order to allow an optional third and fourth well to be drilled for production of gas from the Fruitland coal seams in the 320-acre drilling and spacing units described below:
Township 32 North, Range 7 West, N.M.P.M.
Section 3: S½
Section 4: All
Section 5: N½
Section 6: All
Sections 9 and 10: All
Section 16: S½
Sections 21 and 22: All
Section 23: W½
Township 33 North, Range 7 West, N.M.P.M.
Section 10: All
Section 15: All
Section 22: All
Section 23: S½
Section 25: All
Section 29: W½
Section 30: S½
Sections 31 thru 33: All
Township 33 North, Range 8 West, N.M.P.M.
Section 3: S½
Section 5: S½
Section 8: W½
Section 9: E½
Section 10: S½
Section 14: W½
Section 15: N½
Section 16: W½
Section 17: E½
Section 19: N½
Sections 22 and 23: S½
Section 24: All
Section 25: S½
Section 26: All
Sections 28 and 29: All
Section 30: W½
Sections 35 and 36: All
Township 33 North, Range 9 West, N.M.P.M.
Section 12: E½
Section 36: W½
Township 34 North, Range 7 West, N.M.P.M.
Sections 12 thru 14: All
Section 24: N½
Section 35: S½
7. On October 13, 2005, La Plata County, by right in accordance with Rule 509., filed with the Commission an intervention on the application. La Plata County stated that “this Intervention is not an Intervention as to the technical merits of the application and that it does not object to the technical case being heard administratively”.
8. On October 18, 2005, a letter in support of the application was filed with the Commission by the Bureau of Land Management after consultation with the Southern Ute Indian Tribe’s Department of Energy.
9. Testimony and exhibits presented at the administrative hearing showed that the application lands consist of approximately thirty-five (35) sections in the Ignacio-Blanco Field, the application area is located approximately fifteen (15) miles southeast of Durango, Colorado, and the entire application area is located within the Southern Ute Indian Reservation.
10. Testimony and exhibits presented at the administrative hearing showed that notification to one hundred and twenty three (123) operators and mineral owners in the buffer area was provided due to proposed setback revisions for the permitted well locations. Additional testimony showed that surface in the application area is owned by either the Southern Ute Indian Tribe or by fee owners.
11. Testimony and exhibits presented at the administrative hearing showed that Samson is the operator on all lands in the application area except for approximately four hundred and eighty (480) acres operated by Gosney and Sons and that approximately sixty (60) percent of the minerals in the area are privately owned with the remainder of the minerals owned by either the Southern Ute Indian Tribe or allottees.
12. Testimony and exhibits presented at the administrative hearing showed that Samson is requesting that each drilling and spacing unit have one drilling window with a six hundred and sixty (660) foot set back from the unit boundary.
13. Testimony and exhibits presented at the administrative hearing showed that the Fruitland coal seams lie within the Fruitland Formation and that the Fruitland Formation lies between the Kirtland Shale and the Pictured Cliffs Sandstone at a depth of approximately twenty seven hundred (2700) feet. Additional testimony showed that the application area is further from the outcrop than other areas previously approved for additional Fruitland coal seams wells.
14. Testimony and exhibits presented at the administrative hearing showed the variability of well performances in the application area and the lower cumulative production of wells in the application area when compared to other Fruitland coal seams wells in the San Juan Basin.
15. Testimony and exhibits presented at the administrative hearing showed a that coal thickness varied across the application area from less than thirty-five (35) feet to greater than seventy (70) feet with an average thickness of fifty-five (55) feet. Additional testimony showed that although the Fruitland coal seams are a common source of supply across the application area, the coals are discontinuous and are difficult to correlate.
16. Testimony and exhibits presented at the administrative hearing showed the calculated original gas-in-place for an average section in the application area is 39.7 BCF.
17. Testimony and exhibits presented at the administrative hearing showed an average recovery factor calculated using the decline curve method at thirty (30) percent for the application area using a well density of one well per 160 acres. A recovery factor of thirty-seven (37) percent using calculated recoverable reserves was estimated based on the material balance method.
18. Testimony and exhibits presented at the administrative hearing showed that economics for the proposed additional wells are positive with an internal rate of return of fifty-five (55) percent.
19. Samson Investment Company agreed to be bound by oral order of the Commission.
20. 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 to allow an optional third and fourth well to be drilled for production of gas from the Fruitland coal seams in the 320-acre drilling and spacing units.
21. Based on the technical testimony presented by the Applicant and the recommendation by the Hearing Officers, the Commission finds that the current well density will not efficiently and economically drain the drilling and spacing units previously designated by the Commission, and that based on geological and engineering data presented at the hearing, additional wells are necessary to allow the gas to be produced at its maximum efficient rate, to prevent waste and protect correlative rights, and to efficiently and economically recover gas from the Fruitland coal seams within the application area.
22. Based on the facts stated in the application and the testimony and exhibits presented, the Commission finds that the request to allow a total of four (4) wells to be optionally drilled in each 320-acre drilling and spacing unit for production of gas from the Fruitland coal seams for the lands described above in Finding #6 should be approved. The permitted well shall be located no closer than 660 feet to any outer boundary of the unit with no interior section line setback, utilizing a common or expanded pad with an existing well.
23. Based on the request by Samson and La Plata County to include conditions agreed upon in the MOU executed by the parties, the Commission should apply conditions to the order to protect the environment from significant adverse impacts and to protect the public health, safety, and welfare.
ORDER
NOW, THEREFORE, IT IS ORDERED, that Order No. 112-157 is hereby amended to allow a total of four (4) wells to be optionally drilled in each 320-acre drilling and spacing unit for the below-listed lands, with the permitted well to be located no closer than 660 feet to any outer boundary of the unit with no interior section line setback, utilizing a common or expanded pad with an existing well, for production of gas from the Fruitland coal seams:
Township 32 North, Range 7 West, N.M.P.M.
Section 3: S½
Section 4: All
Section 5: N½
Section 6: All
Sections 9 and 10: All
Section 16: S½
Sections 21 and 22: All
Section 23: W½
Township 33 North, Range 7 West, N.M.P.M.
Section 10: All
Section 15: All
Section 22: All
Section 23: S½
Section 25: All
Section 29: W½
Section 30: S½
Sections 31 thru 33: All
Township 33 North, Range 8 West, N.M.P.M.
Section 3: S½
Section 5: S½
Section 8: W½
Section 9: E½
Section 10: S½
Section 14: W½
Section 15: N½
Section 16: W½
Section 17: E½
Section 19: N½
Sections 22 and 23: S½
Section 24: All
Section 25: S½
Section 26: All
Sections 28 and 29: All
Section 30: W½
Sections 35 and 36: All
Township 33 North, Range 9 West, N.M.P.M.
Section 12: E½
Section 36: W½
Township 34 North, Range 7 West, N.M.P.M.
Sections 12 thru 14: All
Section 24: N½
Section 35: S½
IT IS FURTHER ORDERED, that wells drilled in the above-described lands shall comply with the terms and provisions of all of the Commission’s health, safety, welfare and environmental rules and regulations now or hereafter in effect.
IT IS FURTHER ORDERED, that wells drilled in the above-described lands shall comply with all applicable regulations of the BLM, Bureau of Indian Affairs and the Southern Ute Indian Tribe when conducting operations on lands subject to the respective jurisdiction of each agency.
IT IS FURTHER ORDERED, that wells drilled in the above-described lands shall comply with certain provisions of the MOU between Samson and La Plata County, and shall comply with all terms, conditions and provisions of prior Commission Orders in Cause No. 112, including without limitation, the specific provisions of Order No. 112-157 including the Rule 508.j.(3)B. conditions attached thereto, to the extent they do not duplicate the provisions of the MOU. For convenience and ease of reference, the relevant conditions of the MOU and Order No. 112-157, including Rule 508.j.(3)B conditions, are set forth below. Conflicts between the conditions of the MOU set forth herein and the terms, conditions and provisions of Order No. 112-157 shall be resolved in favor of the MOU.
IT IS FURTHER ORDERED, that the following provisions of the MOU between Samson and La Plata County found in Article V, VI and Subsections 2.1 and 2.2 shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations or orders:
Surface Density The density of Fruitland Coal Well Pads within the Infill Application Area shall not exceed four (4) within any single 640-acre governmental section of real property. Notwithstanding the foregoing, nothing contained in this provision shall be construed so as to require the closure or abandonment of any existing gas well. “Fruitland Coal Well” means a gas well drilled for the purpose of producing gas from the Fruitland coal seams under the lands described in this Order No. 112-181. “Well Pad” means the flat graveled portion of the pad area in which permanent operations for the gas well take place and shall always include, at a minimum, that portion of the pad area occupied by the drilling rig anchors. “Infill Application Area” means the lands described in this Order No. 112-181.
Well Location; Exceptions The Commission may grant a special exception allowing for a greater density of Fruitland Coal Well Pads (i.e., more than 4 per 640-acre section), at the request of Samson and after consultation with the Local Governmental Designee (“LGD”), based upon a finding by the Commission that one or more of the following factors apply in a manner such that use of an existing Well Pad is rendered impractical:
a. topographic characteristics of the site;
b. natural resource constraints (e.g., wetlands);
c. the location of utilities or similar services;
d. geologic factors or where issues concerning distances between wells are present;
e. other site conditions beyond the control of Samson; or
f. safety concerns.
Storm Water Management and Spill Prevention Containment and Control Even if not required to do so by any applicable regulation or law, Samson agrees to utilize best management practices for all pad expansions and new pads and for road and pipeline development or improvements. “Best management practices” means schedules of activities, prohibitions of practices, maintenance procedures, and other management practices intended to prevent or reduce the pollution of waters of the State of Colorado as described in the regulations of the Colorado Department of Public Health and Environment, as amended from time to time.
Water Well Monitoring If a conventional gas well exists within one quarter (¼) mile of the bottom hole location of a proposed Infill Well, then the two (2) closest water wells within a one-half (½) mile radius of a conventional gas well shall be sampled by Samson as water quality testing wells. If possible, the water wells selected shall be on opposite sides of the existing conventional gas well not exceeding one-half (½) mile radius. “Infill Well” means wells drilled pursuant to this Order No. 112-181. “Conventional gas well” means a well producing from a non-coalbed methane formation found in the San Juan Basin, such as the Mesaverde or Dakota Sandstone Formation.
If water wells on opposite sides of the conventional gas well cannot be identified, then the two (2) closest wells within one-half (½) mile radius shall be sampled. If two (2) or more conventional gas wells are located within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the conventional gas well closest to a proposed Infill Well shall be used for selecting water wells for sampling.
If no conventional gas wells are located within one quarter (¼) mile radius of the bottom hole location of the proposed Infill Well, then the selected water wells shall be within one quarter (¼) mile of the bottom hole location of the proposed Infill Well. In areas where two (2) or more water wells exist within one quarter (¼) mile of the bottom hole location of the proposed Infill Well, then the two (2) closest water wells shall be sampled by Samson. Ideally, if possible, the water wells selected shall be on opposite sides of the bottom hole location of the proposed Infill Well.
If water wells on opposite sides of the bottom hole location of the proposed Infill Well cannot be identified, then the two (2) closest wells within one quarter (¼) mile radius shall be sampled by Samson. If two (2) water wells do not exist within one quarter (¼) mile radius, then the two closest water wells within a one-half (½) mile radius shall be selected. If no water well is located within a one quarter (¼) mile radius area or if access is denied, two water wells within one-half (½) mile of the bottom hole location of the Infill Well shall be selected. If there are no water quality testing wells meeting the foregoing criteria, then sampling shall not be required. If the BLM or the Commission have already acquired data on a water well within one quarter (¼) mile of the conventional gas well, but it is not the closest water well, it shall be given preference in selecting a water quality testing well. The “initial baseline testing” described in this paragraph shall include all major cations and anions, total dissolved solids (“TDS”), iron and manganese, nutrients (nitrates and nitrites), selenium, dissolved methane, pH, presence of bacteria and specific conductance and field hydrogen sulfide.
If free gas or a methane concentration level greater than 2 milligrams/liter (“mg/L”) is detected in a water quality testing well, compositional analysis and isotopic analyses of the carbon and hydrogen of the methane shall be performed to determine gas type (thermogenic, biogenic or an intermediate mix of both). If the testing results reveal biogenic gas, no further isotopic testing shall be done. If the carbon isotope test results in a thermogenic or intermediate mix signature, annual testing shall be performed thereafter and an action plan shall be drafted by Samson to determine the source of the gas. If the methane concentration level increases by more than 5 mg/L between sampling periods, or increase to more than 10 mg/L, an action plan shall be drafted to determine the source of the gas.
The initial baseline testing shall occur prior to the drilling of the proposed Infill Well. Within one (1) year after completion of the proposed Infill Well, a “post completion” test shall be performed for the same parameters above and repeated three (3) and six (6) years thereafter. If no significant changes from the baseline have been identified after the third test (the six year test), no further testing shall be required. The testing schedule shall restart after the drilling of a new Infill Well on an existing Well Pad if the wells to be tested include those tested for the 160 acre infill program. Additional “post completion” test(s) may be required if changes in water quality are identified during follow-up testing. The Director of the Commission may require further water well sampling, which may include water quantity monitoring, at any time in response to complaints from water well owners.
Within three (3) months of collecting the samples used for the test, copies of all test results described above shall be provided to the Commission and the County and the landowner where the water quality testing well is located.
Plugged and Abandoned Wells/Soil Gas Vapor Survey A soil gas vapor-monitoring program shall be designed to determine a possible lack of zonal isolation along wellbores of plugged and abandoned wells. Samson shall attempt to identify any plugged and abandoned wells located within one quarter (¼) mile of the bottom hole location of any Infill Well. Any plugged and abandoned well within one quarter (¼) mile of the bottom hole of an Infill Well shall be assessed for risk, taking into account cementing practices reported in the plugged and abandoned reports. Samson shall notify the Commission of all results of all risk assessments of plugging procedures. The Commission may appropriate funds under Rule 701. (the Environmental Response Fund) to conduct soil gas monitoring tests to further define the risks. If the monitoring reveals a possible lack of zonal isolation, the Commission may then conduct or order any necessary remediation or other authorized activities.
IT IS FURTHER ORDERED, that the following terms, conditions and provisions of Order No. 112-157 shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable existing Commission Rules and Regulations:
Well Permit Limitations A Commission hearing shall be required before a drilling permit may be issued for a well site located within one and one-half (1½) miles of the outcrop contact between the Fruitland and Pictured Cliffs Formations. The purpose of the hearing shall be to address potential adverse impacts to the Fruitland outcrop.
Gas and Oil Regulatory Team The Director shall ensure that the La Plata County Gas and Oil Regulatory Team (“GORT”) continues to meet as appropriate, but no less than semiannually. GORT meetings may be scheduled more frequently if the members believe a meeting is appropriate. (GORT includes invited member representatives from La Plata County, BLM, SUIT, industry operators and Commission. Its meetings are open and typically attended by interested area residents.)
3M Mapping, Modeling and Monitoring Project The Director shall ensure that the 3M Technical Peer Review Team is invited to meet as appropriate, but no less than semiannually to review proposals and results related to the 3M Mapping, Modeling and Monitoring Project. 3M Technical Peer Review Team meetings may be scheduled more frequently if the members believe a meeting is appropriate.
Post Completion Pressure Build-Up Tests In addition to obtaining a bottom hole pressure on all wells drilled under this order, the operator shall conduct pressure build-up two (2) to three (3) months after initial production begins and once every three (3) years thereafter. The operator shall provide the data acquired, an evaluation of the data and the procedures utilized to conduct the pressure build-up tests to the Director within thirty (30) days of the conclusion of each test. After reviewing the quality of the pressure buildup data and the adequacy of the geographic distribution of the data, the Director may reduce the number of wells for which pressure build-up testing is required.
IT IS FURTHER ORDERED, that the following Rule 508.j.(3)B. conditions from Order No. 112-157 shall be applied to additional wells where the surface location is proposed to be sited on lands subject to Commission jurisdiction, in addition to any requirements of applicable Commission Rules and Regulations:
1.) Prior to approving any Application for Permit-to-Drill, the Director shall conduct an onsite inspection if the surface well location is proposed to be sited within any subdivision that has been approved by La Plata County. The Director shall conduct an onsite inspection if the surface well location is within two (2) miles of the outcrop contact between the Fruitland and Pictured Cliffs Formations and an onsite inspection is requested by the surface owner, LGD, operator, or Director.
2.) Prior to approving any Application for Permit-to-Drill, the Director shall conduct an onsite inspection if the operator and the surface owner have not entered into a surface use agreement. If the reason the surface use agreement has not been executed is related to surface owner compensation, property value diminution, or any private property contractual issues between the operator and the surface owner, then no onsite inspection shall be required.
3.) The purpose of the onsite inspection shall be to identify any potential public health, safety and welfare or significant adverse environmental impacts within Commission jurisdiction regarding the proposed surface location that may not be adequately addressed by Commission rules or orders. The onsite inspection shall not address matters of surface owner compensation, property value diminution, or any private party contractual issues between the operator and the surface owner.
4.) When the Director conducts onsite inspections under the conditions in 1.) and 2.) above, the Director shall invite the representatives of the surface owner, the operator and LGD to attend. The Director shall attempt to select a mutually acceptable time for the representatives to attend. The inspection shall be conducted within ten (10) days, or as soon as practicable thereafter, of either the date the LGD advises the Director in writing that the proposed surface well site location falls within an approved subdivision or the date the operator advises the Director in writing that a surface use agreement has not been reached with the surface owner. If requested by the operator, the Director may delay the onsite inspection to allow for negotiation between the operator and surface owner or other parties.
5.) Following the onsite inspection, the Director shall apply appropriate site specific drilling permit conditions if necessary to prevent or mitigate public health, safety and welfare or significant adverse environmental impacts taking into consideration cost-effectiveness and technical feasibility and relevant geologic and petroleum engineering conditions as well as prevention of waste, protection of correlative rights, and promotion of development.
6.) Examples of the types of impacts and conditions that might be applied if determined necessary by the Director in 5.) above include (this list is not prescriptive or all inclusive):
a.) visual or aesthetic impacts - moving the proposed surface well site location or access road to take advantage of natural features for screening; installing low profile artificial lift methods; constructing artificial features for screening
b.) surface impacts – moving or reducing the size, shape, or orientation of the surface well site location or access road to avoid disturbance of natural features or to enhance the success of future reclamation activities; utilizing an existing surface well site location or access road to avoid the impacts of new construction; utilizing a closed drilling fluid system instead of reserve pits to avoid impacts to sensitive areas
c.) noise impacts – installing electric motors where practicable; locating or orienting motors or compressors to reduce noise; installing sound barriers to achieve compliance with Commission rules; confining cavitation completion operations (excluding flaring) to the hours of 7 a.m. to 7 p.m. and notifying all area residents within one-half (½) mile at least seven (7) days before cavitation is commenced
d.) dust impacts – watering roads as necessary to control dust during drilling and completion operations
e.) ground water impacts – collecting and analyzing water and gas samples from existing water wells or springs; installing monitoring wells, collecting samples, and reporting water, gas and pressure data
f.) safety impacts – soil gas sampling and analysis; residential crawl space gas sampling and analysis; installing security fencing around wellheads and production equipment
g.) outcrop impacts – performing outcrop gas seep surveys; performing produced water quality analysis; periodic pressure transient testing of high water/gas ratio wells; limiting water production in wells with anomalously high water rates and water/gas ratios; funding investigative reservoir modeling under the Director’s supervision
h.) wildlife impacts – limiting drilling and completion operations during certain seasonal time periods when specific site conditions warrant
7.) If the operator objects to any of the conditions of approval applied under 6.) above, the Director shall stay the issuance of the drilling permit and properly notice and set the matter for the next regularly scheduled Commission hearing at which time the Commission may determine conditions of drilling permit approval.
8.) If the Director has reasonable cause to believe that any existing or proposed oil and gas operations are causing, or are likely to cause, public health, safety and welfare or significant adverse environmental impacts within Commission jurisdiction that may not be adequately addressed by Commission rules or orders, the Director may properly notice and set the matter for the next regularly scheduled Commission hearing to order appropriate investigative or remedial action. Reasonable cause may include, but is not limited to, information from the 3M Mapping, Modeling and Monitoring Project.
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.
IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this order to be final agency action for purposes of judicial review within thirty (30) days after the date this order is mailed by the Commission.
IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this order is not required prior to the filing for judicial review.
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