BEFORE THE OIL AND
GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
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IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS FOR THE FRUITLAND COAL FORMATION, TIFFANY UNIT, ARCHULETA AND LA PLATA COUNTIES, COLORADO |
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CAUSE NO. 112
DOCKET NO. 150100040
ORDER NO. 112-249 |
REPORT OF THE COMMISSION
The Commission heard this matter on March 2, 2015, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado upon application for an order to amend the Tiffany Unit to provide for primary recovery operations, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation; and approve up to four additional wells in the Tiffany Unit, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation.
FINDINGS
The Commission finds as follows:
1. BP America Production Company (“BP” 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.
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.
4. On June 15, 1988, the Commission entered Order No. 112-60 which established approximate 320-acre drilling and spacing units, for the production of gas and associated hydrocarbons from the Fruitland coal seams, underlying certain lands, including the below-described Application Lands, in the Ignacio-Blanco Field with the units to consist of a governmental half section and the permitted well to be located no closer than 990 feet from the boundaries of the quarter section.
5. On January 18, 1996, the Commission entered Order No. 112-122 which established the Tiffany Unit and approved a certain Unit Agreement and Unit Operating Agreement for the Ignacio-Blanco Field, providing for unit operations and development of the reservoir consisting of the Fruitland Coal Formation underlying certain lands in La Plata and Archuleta Counties, Colorado.
6. On November 17, 2014, BP, by its attorneys, filed with the Commission pursuant to § 34-60-116, C.R.S., a verified application (“Application”) for an order to: 1) amend the Tiffany Unit to provide for primary recovery operations; 2) approve up to four additional wells in the Tiffany Unit; and, 3) require that the productive interval of each wellbore be no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, and no closer than 660 feet from the boundaries of the Tiffany Unit, with no internal section line setbacks, for production and operation of the Fruitland Coal Formation, on the following described lands:
Township 33 North, Range 6 West, N.M.P.M
Section 17: All
Section 18: All
Section 19: All
Section 20: All
Section 21: All
Section 27: W½
Section 28: All
Section 29: All
Section 30: All
Section 31: All
Section 32: All
Section 33: All
Section 34: All
Township 33 North, Range 7 West, N.M.P.M.
Section 12: S½
Section 13: All
Section 14: E½
Section 24: All
Applicant also requested that all proposed wells be located on no more than four well pads within the unit, or the equivalent, without exception by the Director.
7. Pursuant to C.R.S. § 34-60-118(6), the relief requested in the Application affects only the rights and interest of the owners and Applicant shall not change the percentage for the allocation of oil and gas nor the percentage for the allocation of costs as established by Order No. 112-122.
8. On December 17, 2014, the Southern Ute Indian Tribe (“SUIT”) and the Bureau of Land Management each submitted a letter of concurrence and support of the Application.
9. On February 9, 2015, BP, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified amended application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.
10. Land testimony and exhibits submitted in support of the Application by Emily G. Beard, Senior Land Negotiator for BP, showed that the Applicant holds an undivided 98.12062% leasehold interest in the Application Lands; that the previously-approved 1996 Tiffany (Fruitland) Unit Agreement and 1996 Unit Operating Agreement have been appropriately amended as of January 1, 2015 and comply with C.R.S. § 34-60-118.
11. Geologic testimony and exhibits submitted in support of the Application by Mark D. Durio, Geologist for BP, showed that the Fruitland Coal Formation underlies the Application Lands. Mr. Durio submitted a Fruitland Coal Thickness Map predicting that coal thickness in the area of drilling is 40-50 feet net from the sum of all the coal seams, as well as type logs located in or around the Application Lands showing that the Fruitland Coal Formation exists under al the Application Lands.
12. Engineering testimony and exhibits submitted in support of the Application by Robert L. Moore, Reservoir Engineer for BP, summarized the development history, production history, and estimated ultimate recovery for three of the four sections within the Tiffany Unit, and demonstrated that the requested relief will optimize resource development potential and be the basis for continued infill development in the Tiffany Unit. Further testimony and exhibits established that granting the Application is reasonably necessary to increase the ultimate recovery of hydrocarbons in the Tiffany Unit and the value of the estimated additional recovery of hydrocarbons exceeds the estimated cost incident to conducting such operations.
13. The terms and conditions provided by the 1996 Tiffany (Fruitland) Unit Agreement and its January 1, 2015 Amendment and the 1996 Unit Operating Agreement and its January 1, 2015 Amendment meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, and as described herein, is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.
14. The provisions contained in said 1996 Tiffany (Fruitland) Unit Agreement and its January 1, 2015 Amendment and the 1996 Unit Operating Agreement and its January 1, 2015 Amendment are just and reasonable and include the following:
a. The description of the pool to be so operated;
b. The nature of said operation:
c. The allocation to the separately owned tracts in the Tiffany (Fruitland) Unit Area of all the oil and gas that is produced from said Unit Area and is saved;
d. The provision for the credits and charges to be made in the adjustment among the owners in the Tiffany (Fruitland) Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;
e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;
f. The provision for the supervision and conduct of the unit operations, in respect to which person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and
g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.
15. Applicant and La Plata County (“La Plata”) hereby jointly request that a Stipulation, made and agreed to by the parties, effective January 28, 2015, be made a condition of approval of this Order. A copy of this Stipulation shall be publicly available in the Colorado Oil and Gas Conservation Commission offices and in the offices of La Plata County.
16. Applicant agreed to be bound by oral order of the Commission.
18. Based on the facts stated in the verified Amended Application, having received no protests, and based on the Hearing Officer review of the Amended Application under Rule 511., the Commission should enter an order: 1) amending the Tiffany Unit to provide for primary recovery operations; 2) allowing up to four additional wells in the Tiffany Unit; and, 3) establishing that the productive interval of each wellbore shall be no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, and no closer than 660 feet from the boundaries of the Tiffany Unit, with no internal section line setbacks, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation
ORDER
IT IS HEREBY ORDERED:
1. The Tiffany Unit established for the below-described lands, is hereby amended to provide for primary recovery operations, and up to to four additional wells, are hereby authorized in the Tiffany Unit, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation:
Township 33 North, Range 6 West, N.M.P.M
Section 17: All
Section 18: All
Section 19: All
Section 20: All
Section 21: All
Section 27: W½
Section 28: All
Section 29: All
Section 30: All
Section 31: All
Section 32: All
Section 33: All
Section 34: All
Township 33 North, Range 7 West, N.M.P.M.
Section 12: S½
Section 13: All
Section 14: E½
Section 24: All
2. The productive interval of each wellbore be no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, and no closer than 660 feet from the boundaries of the Tiffany Unit, with no internal section line setbacks, for the production of oil, gas and associated hydrocarbons from the Fruitland Coal Formation.
3. The proposed wells shall be located on no more than four well pads within the unit, or the equivalent, without exception by the Director.
4. The 1996 Tiffany (Fruitland) Unit Agreement and its January 1, 2015 Amendment, and the 1996 Unit Operating Agreement and its January 1, 2015 Amendment, covering lands in the Ignacio-Blanco Field, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.
5. The provisions contained in the 1996 Tiffany (Fruitland) Unit Agreement and its January 1, 2015 Amendment, and the 1996 Unit Operating Agreement and its January 1, 2015 Amendment, as they pertain to 34-60-118, C.R.S., as amended, of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of involuntary unit operations for such lands.
IT IS FURTHER ORDERED:
1. The provisions contained in the above order shall become effective immediately.
2. The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.
3. Under the State Administrative Procedure Act, the Commission considers this Order to be final agency action for purposes of judicial review within 35 days after the date this Order is mailed by the Commission.
4. An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.
ENTERED this 16th day of March, 2015, as of March 2, 2015.
OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO
By__________________________________
Jill Dorancy, Acting Secretary