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 FRUITLAND COAL FORMATION, IGNACIO-BLANCO FIELD, LA PLATA COUNTY, COLORADO

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CAUSE NO.  112 DOCKET NO. 170100084 TYPE:  SPACING ORDER NO. 112-265 CORRECTED

REPORT OF THE COMMISSION

The Commission heard this matter on January 30, 2017, at the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Suite 801, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit for Section 34, Township 35 North, Range 6 West, N.M.P.M. with up to two sidetrack wells in the unit, that overlays existing 320-acre drilling and spacing units, for the production of 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 17, 1988, the Commission entered Order No. 112-60 which established 320-acre drilling and spacing units for certain lands including the Application Lands, for the production of gas from the Fruitland coal seams, with the permitted well to be located no closer than 990 feet to any outer boundary of the unit, nor closer than 130 feet to any interior quarter section line, for the production of methane gas from the Fruitland coal seams.

5.         On August 15, 1988, the Commission entered Order No. 112-61 which amended parts of Order No. 112-60 and established rules, for the production of coalbed methane in the Fruitland coal seams for certain lands including the Application Lands, with the productive interval of the wellbore to be no closer than 990 feet to any outer boundary of the unit, and no closer than 130 feet to any interior quarter section line, without exception granted by the Director. 

6.         On December 17, 1990 (Corrected November 7, 1999), the Commission entered Order No. 112-85 which established additional field rules for certain lands including the Application Lands for the development and operation of the Fruitland coal seams.

7.         On April 25, 2000, the Commission entered Order No. 112-156 which allowed an optional additional well to be drilled in certain lands including a portion of the Application Lands, with the permitted well to be located in any undrilled quarter 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 the development and operation of the Fruitland coal seams.

8.         On December 1, 2016, Applicant, by its attorneys, filed a verified application pursuant to §34-60-116, C.R.S., for an order to establish an approximate 640-acre drilling and spacing unit that overlays existing 320-acre drilling and spacing units for the below-described lands (“Application Lands”), for the production of gas and associated hydrocarbons from the Fruitland Coal Formation with up to two sidetrack wells in the unit, with the productive interval of the proposed Yankee Federal B 1 sidetrack wellbore located no closer than 660 feet from the boundaries of the unit, approximately 1,524 feet from the productive interval of the Van Buren Federal A2 wellbore, and no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, with the exception of the wells being sidetracked, and with no internal section line setbacks, and the productive interval of the proposed Yankee Federal B 2 sidetrack wellbore shall be located no closer than 660 feet from the boundaries of the unit, approximately 888 feet from the productive interval of the Van Buren Federal A1 and A2 wellbores, no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, with the exception of the well being sidetracked, and with no internal section line setbacks, unless an exception is granted by the Director:

Township 35 North, Range 6 West, N.M.P.M.

Section 34:      All

9.         Applicant requests to exclude any existing or future wells, producing from the Fruitland Coal Formation, from the 640-acre unit such that production from existing or future wells shall be allocated according to the drilling and spacing unit in which the existing or future well is drilled.

10.       On January 9, 2016, Applicant submitted 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.

11.       Land testimony and exhibits submitted in support of the Application by Scott Hammond, Senior Landman, San Juan North, for Applicant, showed that the Applicant holds an undivided 100% leasehold interest in the Application Lands.

12.       Geologic testimony and exhibits submitted in support of the Application by David Schoderbek, Geoscientist for Applicant, showed that the Fruitland Coal Formation underlies all of the Application Lands.  Mr. Schoderbek submitted Fruitland Coal thickness maps predicting that coal thickness in the area of drilling is 59-65 feet net for 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 all the Application Lands.

13.       Engineering testimony and exhibits submitted in support of the Application by Robert L. Moore, Reservoir Engineer for Applicant, demonstrated that the requested relief will optimize resource development potential in the Application Lands, is reasonably necessary to increase the ultimate recovery of hydrocarbons in the Application Lands, and that the value of the estimated additional recovery of hydrocarbons exceeds the estimated cost incident to conducting such operations.

14.       On January 20, 2017, BP and the Bureau of Land Management (“BLM”) agreed that the drilling and spacing unit contains federal minerals.   As such, BP agrees to submit a Communitization Agreement (“CA”) to the BLM at least 90 days before the anticipated date of first production (as defined in the COGCC Rules) from the initial well drilled within the drilling and spacing unit. 

15        Applicant agreed to be bound by oral order of the Commission. 

16.       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 establish an approximate 640-acre drilling and spacing unit for Section 34, Township 35 North, Range 6 West, N.M.P.M. with up to two sidetrack wells in the unit, that overlays existing 320-acre drilling and spacing units, for the production of gas and associated hydrocarbons from the Fruitland Coal Formation.

ORDER

IT IS HEREBY ORDERED:

1.         An approximate 640-acre drilling and spacing unit that overlays existing 320-acre drilling and spacing units is hereby established for the below-described lands with up to two sidetrack wells authorized in the unit, for the production of gas and associated hydrocarbons from the Fruitland Coal Formation:

Township 35 North, Range 6 West, N.M.P.M.

Section 34:      All

2.         The established 640-acre drilling and spacing unit shall overlay existing 320-acre drilling and spacing units underlying the Application Lands.

3.         The productive interval of the proposed Yankee Federal B 2 sidetrack wellbore shall be located no closer than 660 feet from the boundaries of the unit, approximately 888 feet from the productive interval of the Van Buren Federal A1 and A2 wellbores, no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, with the exception of the well being sidetracked, and with no internal section line setbacks.

4.         The productive interval of the proposed Yankee Federal B 1 sidetrack wellbore shall be located no closer than 660 feet from the boundaries of the unit, approximately 1,524 feet from the productive interval of the Van Buren Federal A2 wellbore, no closer than 150 feet from the productive interval of any other wellbore producing from the Fruitland Coal Formation, with the exception of the well being sidetracked, and with no internal section line setbacks.

5.         Existing or future wells producing from the Fruitland Coal Formation shall be excluded from the approximate 640-acre drilling and spacing unit and production in existing or future wells shall be allocated according to the drilling and spacing unit in which the existing or future well is drilled.

5.         The drilling and spacing unit contains federal minerals.   As such, BP agrees to submit a Communitization Agreement (“CA”) to the BLM at least 90 days before the anticipated date of first production (as defined in the COGCC Rules) from the initial well drilled within the drilling and spacing unit.

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 14^th day of February, 2017, as of January 30, 2017.

CORRECTED this 9^th day of March, 2017, as of January 30, 2017.

OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

By

Julie Murphy, Secretary