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, ARCHULETA COUNTY, COLORADO |
) ) ) ) |
CAUSE NO. 112
ORDER NO. 112-227
|
REPORT OF COMMISSION
This cause came on for hearing before the Commission on May 16, 2011, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, for an order to: (1) vacate the existing 320-acre drilling and spacing units for Section 16, Township 32 North, Range 5 West, N.M.P.M.; (2) establish an approximate 640-acre drilling and spacing unit for said Section 16; (3) allow for the drilling of up to three horizontal wells within the unit established for said Section 16, and (4) reduce the setbacks for the proposed 640-acre drilling and spacing unit to 660 feet from any outer boundary of the unit.
FINDINGS
The Commission finds as follows:
1. Energen Resources Corporation (“Energen” or “Applicant”), 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, except that the Notice was not published in a newspaper of general circulation in the City and County of Denver 10 days prior to the hearing. Counsel for Energen will cause such publication to occur. Should there be no protest filed before the June 13, 2011 noticed protest date for the June 27, 2011 Commission meeting, this Order will take effect as if there had been no defect in Notice. If a protest is filed after republication of Notice, this Order may be amended as necessary to address the protest.
3. On December 17, 1990, the Commission entered Order No. 112-85, which among other things, established 320-acre drilling and spacing units for certain lands, including Section 16, Township 32 North, Range 5 West, N.M.P.M., for the production of gas and associated hydrocarbons from the Fruitland coal seams, with the permitted well to be no closer than 990 feet from the boundaries of the unit and no closer than 130 from any interior quarter section line.
4. On March 17, 2011, Energen, by its attorneys, filed with the Commission a verified application (the “Application”) for an order to: (a) vacate the existing 320-acre drilling and spacing units for Section 16, Township 32 North, Range 5 West, N.M.P.M. (the “Application Lands”), for the production of gas and associated hydrocarbons from the Fruitland coal seams; (b) establish an approximate 640-acre drilling and spacing unit, and (c) allow the drilling and completion of up to three horizontal wells in the Application Lands, for the production of gas and associated hydrocarbons from the Fruitland coal seams, with the producing lateral of any permitted well to be no closer than 660 feet from the boundary of the unit with no interior quarter section setbacks.
5. Insofar as the Application Lands are subject to the jurisdiction of the Southern Ute Indian Tribe, the Application was submitted to the Commission in accordance with the terms of the Memorandum of Understanding dated August 22, 1991 between the Bureau of Land Management (“BLM”) and this Commission and separate Memorandum of Understanding dated August 22, 1991 between the Bureau of Indian Affairs, the BLM, and the Southern Ute Indian Tribe.
6. Certain mineral interests under the Application Lands are owned in trust by the United States of America for the benefit of the Southern Ute Indian Tribe.
7. On May 3, 2011, Energen, 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 and exhibits were submitted in support of the Application.
8. Land testimony and exhibits submitted in support of the Application by John L. Harrington, Landman for Energen, showed: (a) the general location of the proposed horizontal wells within the Application Lands and the approximate location of the anticipated 660 foot setbacks of the drilling and spacing unit; (b) Energen owns a majority of the mineral interest in the Application Lands; (c) the Southern Ute Indian Tribe owns certain mineral interests within and adjacent to the Application Lands; (d) the surface within and adjacent to the Application Lands is owned in fee by the Southern Ute Indian Tribe and/or by the United States Bureau of Reclamation; and (e) notice was given to all interested parties and no protest to the Application was received.
9. Geologic testimony and exhibits submitted in support of the Application by Andrew Benson, Lead Geologist for Energen, showed: (a) the thickness of the Fruitland coal seams, using a 2.0 g/cc bulk density cutoff and assuming a contour interval of 5 feet, is approximately 25 to 35 feet in the general vicinity of the Application Lands; (b) the stratigraphic structure of the Fruitland coal reservoir in the Application Lands is expected to facilitate recovery of hydrocarbons from the Application Lands; and (c) the establishment of a 640-acre spacing unit with the option of drilling three (3) horizontal wells, coupled with the granting of reduced setbacks, will promote economical and efficient drainage, protect correlative rights, prevent waste, and will ensure the greatest recovery of gas and associated hydrocarbons from the Fruitland coal seams underlying the Application Lands while ensuring limited surface disturbance and environmental impact.
10. Engineering testimony and exhibits submitted in support of the Application by Rounak Collier, Reservoir Engineer for Energen, showed: (a) three horizontal wells in the proposed 640-acre drilling and spacing unit, along with the requested reduced setbacks to 660 feet, will most efficiently recover the gas in the Fruitland coal seams underlying the Application Lands, will not adversely affect correlative rights, and will have minimal surface disturbance; and (b) the proposed wells will economically recover the reserves underlying the Application Lands.
11. The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of gas and associated hydrocarbons from the Fruitland coal seams, will not violate correlative rights, and will reduce surface impacts to the Application Lands.
12. Energen agreed to be bound by oral order of the Commission.
13. 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., the Commission should enter an order to: (a) vacate the existing 320-acre drilling and spacing units for Section 16, Township 32 North, Range 5 West, N.M.P.M.; (b) establish an approximate 640-acre drilling and spacing unit for said Section 16; (c) allow for the drilling and completion of up to three horizontal wells within the unit established for said Section 16; and (d) reduce the setbacks for the proposed 640-acre drilling and spacing unit to 660 feet from any outer boundary of the unit.
ORDER
IT IS FURTHER ORDERED, that the provisions contained in the above Order shall become effective June 14, 2011.
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 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 23rd day of May, 2011, as of May 16, 2011.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By____________________________________
Robert A. Willis, Acting Secretary
Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
May 23, 2011