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 IGNACIO-BLANCO

FIELD, LA PLATA COUNTY, COLORADO 

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CAUSE NO.   112

 

ORDER NO.   112-191

 

REPORT OF THE COMMISSION

 

                        This cause came on for hearing before the Commission at 9:00 a.m. on July 10, 2006, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to reduce the bottomhole setbacks for wells drilled on certain lands in Township 33 North, Range 8 West, N.M.P.M., for production of gas from the Fruitland coal seams.

           

FINDINGS

 

                        The Commission finds as follows:

 

            1.  Black Hills Exploration & Production, Inc. (“Black Hills”), 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 June 17, 1988, the Commission issued Order No. 112-60, which among other things, established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Fruitland coal seams including certain lands in Township 33 North, Range 8 West, N.M.P.M., with the units consisting of the N½ and S½ or the E½ and W½ of a full section with the permitted well located, when north of the north line of Township 32 North, in the NW¼ and SE¼ of the section, and when south of the north line of Township 32 North, in the NE¼ and SW¼ of the section, and no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line.                    

 

                        5.  On October 21, 1997, the Commission issued Order No. 112-136, which among other things allowed an optional additional well to be drilled on the 320-acre drilling and spacing units for certain lands in Sections 33 and 34, Township 33 North, Range 8 West, N.M.P.M, in the center of the NW¼ and the SE¼ of the section, no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line, for production of gas from the Fruitland coal seams.

 

                        6.  On March 20, 2006, the Commission issued Order No. 112-187, which among other things, allowed two (2) additional wells, up to a total of four (4) wells to be drilled at the option of the operator, in the 320-acre drilling and spacing units, for certain lands in Township 33 North, Range 8 West, N.M.P.M., for production from the Fruitland coal seams, with the permitted well to be located no closer than 990 feet to any outer boundary of the unit, and no closer than 130 feet to any interior quarter section line.

 

                        7.  On May 24, 2006, Black Hills, by its attorney, filed with the Commission a verified application for an order to reduce the bottomhole setbacks for wells drilled in the below-listed lands from 990 feet to 660 feet, in each 320-acre drilling and spacing unit for production of gas from the Fruitland coal seams, with no interior section line setback:  

 

Township 33 North, Range 8 West, N.M.P.M.

Section 33: E½

Section 34: All

 

                        8.  On June 26, 2006, Black Hills, by its attorney, filed with the Commission a written request to approve the application based on the merits of the verified application and the supporting exhibits.  Sworn written testimony was submitted in support of the application.

 

9.  Testimony submitted in support of the application indicated that the testimony presented in Cause No. 112, Docket No. 0603-AW-04 should be incorporated herein by reference. 

 

10.  Testimony submitted in support of the application indicated that orders have been issued in adjacent and nearby lands to allow permitted bottomhole locations no closer than 660 feet to the outer boundary of the unit with no interior section line setback.  In each of those orders, the permitted setbacks for bottomhole locations for wells permitted to be drilled to and produced from the Fruitland coal seams are the same as is being requested by the applicant for the application lands.

 

                        11. Testimony submitted in support of the application indicated that the current restrictive setbacks do not allow the operator of each 320-acre drilling and spacing unit in the application lands sufficient latitude to place the bottomholes of any additional wells drilled at optimal locations to efficiently and economically drain the reserves in place in the Fruitland coal seams.  Testimony indicated that if the setbacks for bottomhole locations are not modified, gas will be left in place.  Additional testimony indicated that the correlative rights of the mineral and working interest owners in the application lands may be affected because the present setback requirements in the 320-acre drilling and spacing units in the application lands require the operator to be a greater distance from the outer boundaries of those drilling and spacing units than the operator of some adjacent and cornering spacing units.

 

12.  Testimony submitted in support of the application indicated that in order to maximize the ultimate recovery of gas in place in the Fruitland coal seams in the application lands, to avoid the waste of leaving recoverable gas in place in the Fruitland coal seams in the application lands, and to protect the correlative rights of the mineral and working interest owners in the application lands, the setback requirements for bottomhole locations for wells drilled to and produced from the Fruitland coal seams in each 320-acre drilling and spacing unit in the application lands should be changed to 660 feet from the outer boundaries of the drilling and spacing unit, with no setbacks from interior quarter section lines.

 

                        13.  No protests to the application have been filed with the Commission or the Applicant.

 

                        14.  Based on the facts stated in the verified application, having received no protests and based on the Hearing Officer review of the application under Rule 511.b., the Commission should enter an order to reduce the bottomhole setbacks for wells drilled on certain lands in Township 33 North, Range 8 West, N.M.P.M., from 990 feet to 660 feet, in each 320-acre drilling and spacing unit for production of gas from the Fruitland coal seams, with no interior section line setback.

 

ORDER

 

                        NOW, THEREFORE, IT IS ORDERED, that the bottomhole setback distance of six hundred sixty (660) feet is hereby approved for wells drilled in the below-listed lands, in each 320-acre drilling and spacing unit for production of gas from the Fruitland coal seams, with no interior section line setback: 


Township 33 North, Range 8 West, N.M.P.M.

Section 33: E½

Section 34: All

 

                        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.

 

                        ENTERED this__________day of July, 2006, as of July 10, 2006.

                        

                                                                        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 28, 2006